Perma-Fix Environmental Services, Inc. (PESI)

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Perma-Fix Environmental Services (PESI)

Q2 2013 Earnings Call

August 07, 2013 11:00 am ET

Executives

David Waldman

Louis F. Centofanti - Chairman, Chief Executive Officer and President

Ben Naccarato - Chief Financial Officer, Chief Accounting Officer, Vice President and Secretary

Analysts

Steve Shaw - Sidoti & Company, LLC

Doug Dyer - Heartland Advisors, Inc.

Michael David Potter - Monarch Capital Group, LLC

Igor Novgorodtsev

Gregory Allen Weaver - Invicta Capital Management, LLC

Walter Schenker

Presentation

Operator

Greetings, and welcome to the Perma-Fix Environmental Services Second Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman, of Crescendo Communications. Thank you. Mr. Waldman, you may now begin.

David Waldman

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services Second Quarter Conference Call. On the call with us this morning are Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer.

The company issued a press release this morning containing second quarter 2013 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 in this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this conference call, other than 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. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements.

I'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Louis F. Centofanti

Thank you, David. Now this has been, by far, one of the most challenging fiscal environments in the company's history. And yet, I am happy to say our gross margin increased to 17.7% from 11.7% same period last year, and we achieved nearly $2 million of adjusted EBITDA for the quarter. I think it's also important to point out, in addition, if you exclude the goodwill write-off, our net income would have been positive. This indicates that the financial and operational measures we took in the fourth quarter and first quarter this year are beginning to show some positive results.

And in addition, we believe the funding environment is starting to improve. Within the Service segment, they've been awarded several small initial contracts, and we're actively bidding on a number of very sizable projects. As I've mentioned previously, our Service pipeline is significant and is, in most cases, just a case of waiting for the projects to be issued.

Back to the Treatment segment, what we see, there's a pent-up demand due to delayed treatment at a number of DOE sites, and funding for these projects have slowly begun to return. With our streamlined operational structure, we stand to benefit from higher-margin waste and improved profitability as we increase throughput at our Fix facilities.

And as we all know, in addition, we see a number of very exciting opportunities, treating more complex and higher activity waste streams. As most of our investors know, the most substantial opportunity for our Treatment segment is in addressing the tank waste at Hanford. We're not yet at the stage of responding to RFPs, but the DOE has issued a request for an expression of interest to retrieve and process TRU waste from Hanford tanks. I'd like to point out something, we have both met the Department of Energy and officials at the congressional level. That said, exactly how and when DOE would move forward on this project is yet to be determined.

Demonstrating our capability to treat tank waste at Hanford, even on a small scale, would open the door to larger opportunities. And I'd like to point out that our facility at Hanford, with its permits and licenses, allows us to accept a lot of these waste streams today. If DOE were able to ship, we could bring those materials into our facility today. As you already know, we've already handled transuranic waste, and we're the only commercial facility who can handle these high-priority Hanford waste streams.

Back to the macro picture, as I've discussed in the past, we're not alone on macro funding challenges that have plagued the entire industry. This was illustrated by the DOE spending reductions on the Plateau contract which led CH2M Hill to change their strategy and self-perform certain tasks on the project that were formerly subcontracted. We have lost revenue margin associated with this project, but believe our cost-saving initiatives on these projects will more than overcome this shortfall next year. I'd like to point out, CH2M Hill remains one of our largest and most supportive customers, and we continue to pursue a variety of opportunities as strategic partners.

Outside of DOE, we've increased our sales and marketing effort, in particular on the international front. We're working aggressively on a number of opportunities in North America, Europe and Asia. And we're somewhat positive we're beginning to see some fruit from that, and we believe we will continue to.

I'd like to -- we have not had a lot of discussion about the medical isotope project since we've been in a -- we turn back internally on that to solve some problems. But I would like to discuss a little bit on this call and give you a quick update.

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