Greetings, Welcome to Perma-Fix Environmental second quarter 2020 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator or technical assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Alexandra Bode, investor relations. Thank you. You may begin.
Thank you. Good morning, everyone, and Welcome to Perma-Fix Environmental Services second quarter 2020 conference call. On the call with us this morning are Mark Duff, President and 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 second quarter 2020 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 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 material 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 revision 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 measure 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.
All right. Thanks, Ally, and good morning, everyone. We achieved profitability in the second quarter of 2020, reflecting the resilience of our employees and managers to stay focused on the implementation of our corporate safety plan to minimize the impact of the COVID-19 virus. Revenue increased 29% over Q2 of 2019, and we achieved adjusted EBITDA of approximately $847,000, despite several negative impacts on waste receipts associated with generator shutdowns. We're realizing sustainable revenue in our services segment, with waste receipts beginning to increase, although a bit slower than anticipated due to the continued impact of COVID on our clients. Our sales pipeline for the services segment remains robust, with a number of ongoing and significant bidding opportunities, and a backlog approaching $50 million for the remainder of 2020.
In addition, there are several larger bids we're pursuing to support sustainable revenues, and we've submitted over $40 million in proposal values in the past several months. This flurry of proposal activity in the services sector will support revenue opportunities over the next several quarters if we're successful in these competitions. As recently announced, we're especially pleased that our team, led by Jacobs, was selected by the DOE Office of Environmental Management to participate in a sizable, 10-year, multiple award IDIQ contract to provide nationwide deactivation, decommissioning, and removal of facilities and waste management program support. I will now take a moment to address a few financial highlights from the second quarter relative to the same quarter in 2019, and later Ben will discuss the financial results in a little more detail. Overall revenue increased 29% to $22 million. Our services segment revenue increased 102% to $14.2 million.
The treatment segment revenue was $7.8 million, compared to $10.1 million for the same period last year, due to the impact of COVID, which I'll discuss further in a moment. We generated adjusted EBITDA of approximately $850,000, compared to $1 million for the same period last year. Lastly, we achieved net income attributable to common shareholders of $204,000 or $0.02 a share for the second quarter of 2020, compared to $289,000 or $0.02 a share for the same period last year. Before COVID-19 was beginning to unfold in Q1 of this year, we were energetic and enthusiastic about our growth strategy for 2020, which included continued expansion of our plants and broadening our base for nuclear services as well.
The impact of working from home for a few months and the limited communications with our clients threw a significant wrench into our strategy and required adjustments that subsequently demanded real creativity and innovation by our team. I am very pleased to say that Perma-Fix succeeded in not only sustaining our business, but identifying new initiatives and opportunities to further expand and increase our market share in the coming quarters. These initiatives include developing a broader offering to the commercial sector, through several permit modifications and treatment approaches that increase value, deployment and expansion of our soil sorter technology throughout Q2, and continuing operations on several time-sensitive cleanup projects in the field during the height of the pandemic.
This was all accomplished while our internal COVID-19 safety committee drove the implementation of rigid requirements into all our operations, both in the field and in our business side functions to ensure that the health of our staff remained our highest priority. We're very pleased to confirm that Perma-Fix has had only one COVID-19 case to date within our company, and we continue to monitor, isolate, and manage potential cases to limit impacts to our workforce and families. By limiting the potential cases of COVID within the company, we've been able to continue with our project work and processing of our waste backlogs. As with most firms, Q2 saw changes in our working environment on a daily basis that made it difficult to plan and communicate with the effectiveness that we're accustomed to in the waste management business.
We were fortunate, however, that we had several clients that continued to ship waste to our plants from essential operations, including within DOD and at the Hanford Site, and we had several projects that continued to be supported, ongoing operations in the field, and cleanup operations, which underscored the trust of our clients in our project leadership and in our safety program in the field. These relationships had a positive impact on our Q2 results and have provided the opportunity to generate tangible value to our clients during this difficult period in our country when most field service operations were shut down due to COVID. As discussed in the last quarterly call, Perma-Fix was successful in securing a promissory note through PNC Bank in excess of $5 million under the Paycheck Protection Program.
These funds allow Perma-Fix to recall all our staff, avoid future furloughs and layoffs, and assist in maintaining stability through Q2. The availability of this PPP loan allowed Perma-Fix to continue the implementation of our strategic plan for growth by holding onto all our trained workforce, who are highly trained, experienced in complex nuclear operations, and radiological environments. While we continue to remain optimistic about our ability to get through the pandemic, we are beginning to see the impacts from increases in the COVID cases in our primary states of operations, including Florida, Tennessee, Washington, and California, all of which have resulted in slower waste generation, slower procurement actions, and limited communications with the generators and our clients. This is particularly applicable on the waste treatment operations. Yet we have seen a modest increase in receipts through the month of July, with anticipated increases in August and September.
Our nuclear services segment completed most of our remobilization activities before the end of Q2, which should result in increased revenue in Q3 with sustainable revenue through the next two quarters at least. We will continue to position Perma-Fix for upcoming procurements anticipated to be published over the next few months as the fiscal year closes. Meanwhile, we continue to identify new opportunities to reduce costs and schedule and safety risks that radioactive waste present to our clients through the application of innovative engineering and the use of technology in a cost-effective manner. Last quarter, we discussed the launch of our newest technology, the Perma-Sort system, which has been deployed in San Diego through Q2. This latest technology has been developed to segregate radioactive soils following dewater operations and dredging applications.
The performance of this system has exceeded expectation and has provided tremendous value to our clients, processing nearly 9,000 cubic yards a week and over 18,000 tons in just a few months. Our engineering team is moving quickly to fabricate and deploy a second Perma-Sort system in the coming months to support increasing demand. Our growth strategy has not only involved our services segment as we continue to realize strategic progress in our treatment segment as well. While we've discussed increasing delays in shipments, our waste management team has increased our attention to the commercial sector to resolve several unique challenges in the utility industry and broaden our offering during the quarter. Overall, we've added over 10 new clients during this period, in both the services and the treatment sectors together. When you take a step back and really evaluate the quarter, I couldn't be more proud of our team.
We've delivered and advanced our strategy rather than just sitting back while at home and waiting for the storm to subside during this unprecedented period. Achieving all this while increasing revenue over 2019, and teeing up Q3 with positive momentum underscores the strength of our company and our ability to adjust our vision to meet the market needs and changes. On that note, I'll turn the call over to Ben, who will discuss the financial results in a little more detail. Ben.
Thank you, Mark. I'll start with revenue. Our total revenue from continuing operations for the second quarter was $22 million compared to our year-over-year of $17.1 million, or an increase of 28.8%. This increase of $4.9 million was driven by our service segment, where revenue increased from $7 million in the second quarter of 2019 to $14.2 million in the second quarter of 2020. That's an increase of 101.8%. Year-over-year improvement in project activity, of course, is the main driver for this improvement. In the treatment segment, our revenue decreased $2.3 million or 22.3% as the COVID-related closures of our customers impacted waste receipts in the quarter, with most customer sites either restricted or closed throughout most of the quarter.
For the six months ended June 30th, 2020, our revenue is at $46.9 million compared to $28.8 million, or an increase of $18.1 million or 62.6% growth from prior year. Looking at cost of sales in the quarter, they were $18.7 million compared to $13.9 million in prior year, an increase of $4.9 million. The increased revenue from the service segment was the main driver of this increase, which accounted for $5.7 million increase in direct costs related to project work, while fixed indirect costs also went up about $509,000. These increases were partially offset by a drop in our cost of sales in the treatment segment, where lower revenue resulted in a reduction of $1.4 million of variable expenses, while the fixed facility costs went up marginally. As mentioned in our revenue discussion, the treatment segment saw a significant negative impact on our waste receipts due to the COVID-19.
As a result of the Paycheck Protection Program loan, the company was able to avoid layoffs and keep all employees employed despite a significant productivity drop. Since we will recognize the benefit of the PPP loan if or when it is forgiven, it should be recognized that the quarter includes payroll costs incurred totaling about $800,000 that would likely have been cut without the loan. Turning to our gross profit, the gross profit for the quarter was $3.3 million, or 15% of revenue, compared to prior year gross profit, which was also $3.3 million, but 19.1% of revenue. Gross profit in the service segment increased about $971,000, but that was offset by a similar drop in the treatment segment.
The gross margin decrease was impacted by the lower mix of treatment revenue as compared to service revenue, as well as the $800,000 I just mentioned for maintaining labor made possible by the PPP loan. Excluding these additional labor costs, margins year-over-year for the second quarter would have been comparable. For the six months ended June 30th, our gross profit is at $8 million, or 16.9%, compared to $5.8 million or 20% in prior year. Looking at our G&A costs for the quarter, we were at $2.7 million, which is in line with prior year. We saw lower subcontract expense, lower travel, and lower bad debt expense within the sales and admin groups. That was offset by higher salaries in the corporate and admin departments.
For the six months ended June 30th, our current year's SG&A expenses are at $5.6 million, or 12% of revenue, which is consistent with prior year, $5.6 million, which was 19.4% of revenue. Our income from continuing operations net of taxes for the quarter is $260,000, compared to $373,000 in the prior year. Year to date, income from continuing operations net of taxes sits at $1.6 million, compared to a loss in the prior year of $177,000. We had net income attributable to common shareholders of $204,000 compared to last year's net income of $289,000. Year to date, net income attributable to common shareholders is at $1.4 million, compared to a loss in the prior year of $383,000. Our net income per share for the quarter is $0.02, which is consistent with prior year.
Net income per share for the year-to-date sits at 12%, as compared to a loss of $0.03 per share for prior year. Our adjusted EBITDA from continuing operations for the quarter, as defined in this morning's press release, was $847,000 compared to $1 million in the prior year. On a year-to-date basis, our adjusted EBITDA is $2.7 million compared to $1.1 million in the year-to-date prior year. Turning to a few balance sheet items as compared to December 31st, 2019. Our cash balance at the end of the year, or I'm sorry, at the end of the second quarter was $5.6 million, which is up from $390,000 at year-end. This increase is entirely due to the PPP loan we received in April. Our accounts receivable and unbilled receivables cumulatively are up about $700,000, reflecting increased revenue at the end of the quarter.
Our current liabilities were up approximately $524,000, reflecting timing of payments. Our backlog of waste at the end of the quarter was approximately $6.4 million, which is down from $8.5 million at year-end and down from $9.4 million at the end of the second quarter of 2019. Our services backlog at the end of June was approximately $48 million.
Our total debt, excluding debt issuance and debt discount costs at the end of the quarter, was $9.4 million. This is made up of $1.7 million owed to our primary lender, PNC Bank, $5.7 million due to PNC Bank for the PPP loan received in April, $1.2 million owed to our private shareholder on our private shareholder loan, and $845,000 for other finance leases. I'll now summarize quickly our cash flow activity for the first six months of 2020. Cash provided by continuing operations was $3 million. Cash used in discontinued operations was $259,000. Our cash used in investing of continuing operations is $1.4 million. Cash provided by investing of discontinued operations was $13,000.
Cash provided by the financing was $4 million, representing the receipt of the PPP loan of $5.7 million, offset by our monthly payments to the term loan of $212,000 net payments to the revolver of $321,000, payments on the shareholder loan of $832,000 and other lease financing payments of $301,000. With that, operator, I'll now turn the call over to questions.
At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. The first question comes from the line of Howard Brous with Wellington Shields. You may proceed with your question.
Thank you. Mark, I just want to come back to some of the contracts we talked about in the past. The EPA contract with Jacobs as a prime and you as a sub for the remediation of the Navajo mines. Have you heard anything new about that?
Well, Howard, as you and I have talked, it went silent for a good year. We did actually see something in the press recently that said they planned on making an announcement before the end of this quarter. That's the first we've heard anything, and that was like a week ago, that they made a commitment to make that award. That's all we've heard at this point.
Have they put out any other RFPs for additional contracts?
No, they haven't, Howard. We do expect some for different components of scope, but right now we've seen nothing. The whole program had a lot of fanfare and hype and then went quiet for like 18 months to two years. It looks like it's kicking back up.
Glad to hear it. Secondly, the Navy contract, has that been expanded or are you still just working on a few sites?
Well, we have several Navy contracts. One, we're a subcontractor at both, but one is in San Diego with the soil sorter. We have other contracts in the San Francisco Bay area that are also getting rolling. They're all rolling pretty well. They're all growing and seem to be doing pretty good. Whether there'll be significant contract mods, that still remains to be seen at this point, but they're going very well.
All right. I want to address one issue. Jacobs lost the tank closure contract to BWX Technologies, and the other bidder was AECOM. Am I correct on that?
The other bidder was Atkins, was the prime. AECOM was on their team.
Right. Okay. The DOE Office of General Counsel wrote a letter July 22nd, and I'm quoting from the letter, "Following our investigation and addressing other issues as appropriate, DOE will make a new award determination," and it goes on. Can you comment, if you can, about, one, what that status is in terms of I know the appeals were all canceled, but do you have any comments about that?
No. That's actually all the information we have too, Howard, at this point. DOE did say in another meeting, informally, that they said they would notify all the proposal offerors once the corrective actions were completed, with no indication of schedules or anything. So far, our team has not been notified of any of those corrective actions. We're all just anxiously waiting to hear what the phrase, as you stated, new award determination means. We're just standing by. Yeah, we have no other information besides what's public in that letter.
All right. Fair enough. Let me continue, just if we can comment further on this. From my understanding of the DOE, historically, they would not give to, say, Atkins, the large contract that they got from last year and an additional $10 billion-$13 billion this year. That's usually not done. Is that a fair comment based on your knowledge?
I don't know if it is a fair comment, Howard. It is not traditionally done. Keep in mind that the Plateau was awarded to AECOM, and Atkins was a minority member, and this was led by Atkins with AECOM as a minority member. I sincerely think that they will award to the best proposal at this point. I would hate to speculate on any other objective on behalf of DOE at this point.
Gee, I thought yours was the best proposal.
We'd like to think that, too. Unfortunately, we haven't seen the other proposals, so we'd be speculating.
All right. I appreciate it. I'll go back into queue. Thank you.
Okay. Thanks, Howard.
My pleasure.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. One moment while we poll for questions. Our next question comes from the line of Stephen Levenson with Big Rock Research. You may proceed with your question.
Thanks. Good morning, everybody.
Morning, Stephen.
Morning.
Just a question on the revenue that was delayed. Has all the work been performed? Is there product going out, or is this something that'll take a few quarters to ultimately be able to recognize?
Well, Stephen, this is Ben. I guess the way we recognize revenue is in a three-phase, upon receipt of revenue, upon processing, upon disposal. What we saw in the second quarter was a pretty significant drop in the receipt portion. We did have a backlog that was recognized. The way we operate is we're kind of constantly replenishing that backlog, that's why you saw a bit of a drop in our backlog. The work that we recognize as revenue is actually work done.
Okay
If we see a pickup in those receipts in the third quarter, then ideally we'll have the receipt portion and additional processing that will catch up the year.
Okay. Got it. Thanks. On the soil treatment, it sounds like your equipment is successful. They want another one. Does that give you an opportunity to show it off at all? Are there other people looking at it? I think I asked once before, but I'll ask again if this is something you plan to continue to own and operate, or if it's something you could sell as a turnkey device. Are you thinking differently about that?
Yes, Stephen. Right now, it's a second client that we're building it for and second application. We're very confident that we've been able to identify some other opportunities as well. We see being able to turn these things over and keep them working. Until we get to three or four, we kind of see ourselves at with three of them and maybe a backup or something like that in the next 18 months or so. We don't foresee leasing these out to anyone. At this point in time, we see us operating them with some of the expertise we have. It does take quite a bit of engineering skill to keep these things moving. The software is proprietary. That's really the trick of the whole thing is the software and the radioactive source that runs the gate system on the conveyor.
I really would doubt we would lease it out and not just run it ourselves.
I guess three to four over the next 18 months is better than one or two now. I guess, is this something where you see dozens of them out there at some point? Do you think there's?
No, there's only so much going on in this industry overall.
Okay.
There's a limit to applications. It doesn't sort everything. It only sorts a certain source term. We've been doing some R&D, actually, Steve, to broaden that so we can sort new, even non-radiological contaminants. If we can break through on that, then it'll expand further.
Okay. At the very least, you see a continued revenue stream over the long term.
Absolutely
From the product.
Yeah.
Okay. Thanks very much.
Thanks, Stephen.
Our next question comes from the line of Howard Landis. You may proceed with your question.
Thank you. Mark, it looks like you're in the $100 million run rate range, give or take a little bit. Just trying to get a sense of is this a 10% EBITDA business after everything, or do you think you can do better than that over time?
Howard, that really depends on if our waste treatment segment can catch up. We believe it can. We're expanding it rapidly to the extent of adding a lot more commercial waste, and expanding what we can take and process on the DOE and the DOD side as well. To answer your question, yeah. 10% is our goal. We're probably going to be a little short of that because we don't make the same margin on the services, and services right now is such a high percentage of total revenue, that's going to be tough to get to 10%. 10% certainly is our goal. As we can increase the waste treatment segment, we'll get closer to it.
Okay. On the services side, what percentage of those revenues would be either fixed price or time and materials not to exceed, where there's some risk to the margins?
Yeah. Right now, we have a few fixed unit rate contracts where we're getting paid on, for example, a cubic yard of soil removed and disposed of. Overall, I think we're probably, for just the services segment of, let's say it's around 70% of our total revenue, we're probably in the 90%-95% T&M. All of our California projects, our Seattle project, and all of our smaller projects are all T&M. The risk is less than usual. We do have a few small demolition jobs for the corps, and some of our cleanup work in Canada are fixed unit rate or fixed price. I would say total revenue this year would be in the $5 million-$7 million range total at most, for the fixed price component as a range. Would you agree with that, Ben?
Yeah. For this year, yeah.
Yeah.
Is there much in the way of T&M not to exceed, which at some point that gets hard to differentiate from the fixed price? Is that an issue or is most of your T&M just T&M?
Just T&M, yeah. We don't have a lot of hard dates, because the remediation business, there's so many surprises. You find things as you're chugging along or you're doing demolition. Those dates typically slip with change notices. You work with your clients through those. We don't have a lot of not to exceed hammers on our projects.
Great. Thank you.
You bet.
Our next question comes from the line of Steven Fine. You may proceed with your question.
Hi, guys.
Steven.
Congratulations. I think, with the world as challenging as it is, I was shocked to see you did that well. What's even more fantastic is when you guys say you got a $48 million-$50 million service backlog, that means you're talking almost $100 million this year when you did $70 million last year. I understand service has different issues, but that's quite impressive. Ben made a comment that you have a backlog of $48 million in service. What's the backlog in treatment? Understanding, but is there a backlog in treatment, presuming flows were coming right?
Yeah. Steven, it's about six point. What did I say? $6.4 million.
Four?
Yeah. That's a quarterly number we monitor all the time, and that is down a little bit, and that's reflective of the slowdown in the receipts.
All right. All right. Fair. I presume you're in a rare environment because of COVID. The $5 million that you got from the government, how much of that has been used?
It's all used.
Okay. All right. My question is: If you didn't have the $5 million, how would that have impacted the financials?
If we didn't have the $5 million, we would've had a lot harder decisions to make with labor. I mentioned just the cost of sales number of $800,000. That's conservative. That's really reflective of the significant slowdown in the treatment side. We would've also had a lot of decisions, and we had talked about a lot of decisions from a corporate standpoint, to maintain. Easily between $1 million and $1.5 million impact on the quarter.
All right. You had it, and you deserve it, and hopefully you won't have to pay it back.
Right.
One other thing that I saw in the financials going through, there was $140 million for medical. What's that for?
Not $140 million.
$140,000, I mean.
Yeah. That's just the medical segment is still active. It's in somewhat of a mothball mode right now, but there are costs of maintaining. A lot of that cost is internal, for efforts by some of the folks in our shop here to maintain a public company. It's pretty minimal. It's probably, from a cash standpoint, costing us about $6,000 a month.
Okay. All right, good. Thanks. All right. One of the first question, I think, was from Howard, when he talked about the How do I express it? The new hope, the new chance, the new chance of fresh air at Hanford, where they're reevaluating the contract. I'll just throw this out to Howard, and I won't ask the question, but I've read that one of the reasons that they throw out the appeals is because the award company had an employee who supposedly worked for DOE, and that's, let's put it this way, created some questions. For me, my feeling is, that makes things even more positive that happens. To me, what you guys are doing is fabulous. You're building a diversified company, and if that happens, it happens. When you talk about this Perma-Sort, and you talk about more machines.
What are you estimating that, let's say I had three machines, that would generate a year in revenue?
Steven, it's probably a good estimate, and again, this is just an estimate, that these things will run $5 million-$7 million a year in revenue each, depending on how long your cycle is that they're in the field for. If they're running all year long, it'll be higher than that, but typically they wouldn't be. I think we could assume at this point that $5 million revenue per unit is a pretty good guess at this point. I think the important thing is on these things, Steven, is that this is a real solution to a very common problem, and that is it minimizes waste that's going to a very expensive landfill. In other words, you can put a lot of the soil back because you've characterized it very quickly as opposed to shipping it to an offsite landfill.
It's more exciting to us even than $5 million a year in that it's a solution that would allow us to bid on remediation projects very aggressively. Put us in a preferred position for teaming with some of our partners in solving problems on larger projects. There'll be not just the $5 million revenue from those, but services that go along with that as well.
For example, how much do one of these things cost?
Well, we can't get into that. It's proprietary at this point, but it's a lot less than $5 million. A lot less.
Right. In other words, your payback on this thing, your payback on the investment is quite quick and so forth relative to success. Okay.
That is correct.
Yeah. Okay. All right. What about the TBI? Where is that?
The TBI continues to be supported by DOE and Hanford and headquarters. It's kind of slowed down a little bit with all the TCC issues. It still is in the TCC scope of the contract. DOE right now is still working with the incumbent contractor, WRPS, who runs the tank farm. They're continuing to project extraction of waste for the TBI with the $10 million that was set aside for this project in 2020. We're still, at this point until further notice till we get more information, still anticipating receiving that 2,000 gallons by the end of this year. Again, it could take a lot of twists and turns, Steven, but right now, that's the guidance we've gotten from the folks on the project.
Basically, you're painting a picture that you're expanding service. You have a backlog of service of $48 million. You have this relationship with Jacobs where you'll be able to bid, and then that was another question. Are you bidding on that? Are you bidding with Jacobs as one of the nine bidders on new things now already?
We do have that relationship with them. DOE announced recently that they anticipated a number of task orders to come out between now and the end of the calendar year. We're anxiously awaiting those. They also stated they're going to publish the forecast or some type of schedule of task orders. We don't have that yet, so we don't know what that looks like. All indications from DOE procurement at headquarters is that there's a number of task orders being readied to go through that contract, and we'll work with Jacobs to pursue each one of them.
You have said in past things, the GeoMelt business could be $100 million. Where is that?
We're waiting for the final permit modification from the treatability study that we did over the last year or two, year and a half with Veolia. We melted a significant amount of sodium up there that we received from INL in Idaho. Once you do that run and you resubmit, or you submit a treatability study permit mod, we're waiting for that to come back from the state now. We anticipate seeing that sometime before the end of this year. Once we receive that, we'll be able to process sodium, that $100 million that you mentioned, very rapidly after that at a full production rate once we receive that mod. We're in permitting space right now, Steven.
Okay. All right. When I look at Hanford, so please correct me. With Hanford running whatever is, you have business there from Hanford as a subcontractor from somebody. Is that correct? Under normal conditions?
Yeah. We get a significant amount of waste on a sustained basis from the plateau and a smaller amount from the tank operations. We anticipate all those to continue on the current trajectory that they are, irrespective of contract change. We'll likely maybe take a month or two hit for receipts once transition is in full swing. It's all part of the overall cleanup strategy to be shipping some of that waste to our facility there at Hanford. We don't expect that to change, irrespective of who's running the contract.
Right. In other words, there is the hope and maybe the icing on the cake of another chance with the tank closure contract. Even if that doesn't happen, you have business at Hanford, you have the potential of the TBI, and the way I'm reading, as a technical person, is that in theory, you could be doing the TBI with a completed vitrification plant, and you could be saving money. The vitrification plant could be running, and you could be running, and from what I've read, if the vitrification plant, when it's finished, it's still going to take decades to do that. Therefore, a TBI initiative would really save money and get things done faster. You're in great shape, is what I'm trying to say.
We would have to agree. We think so, Steven. We refer to the TBI as a supplemental treatment to-
Yes
the waste treatment plant mission. Yes. Yes to all your statements.
All right. I'm presuming that in our very challenging world that you've mapped out scenarios relative to different things happening so that you're going to cope and so forth. My last question is, I read somewhere that DOE has extra money. My question is, it hasn't been used. Is that money being pushed into the new fiscal year, and will that affect budgeting, or is that just going to supplement budgeting? Could that then also push towards greater opportunities?
I do think there's great opportunities, Steven, with that. Talking to friends of mine at different sites, not all of them, but several of them, it's difficult to understand where they are in their spending overall because of just the unusual nature of the last three or four months. I think they're trying to figure out where they are in spending and what they're trying to get done before the end of the fiscal year. Yes, to answer your question, we're anticipating opportunities. We're anticipating a surge in waste shipments at the end of September to support trying to get waste off-site. As opposed to spending extra dollars on labor, it's usually easier to accelerate spending by shipping waste off-site. We do expect that to carry over into our fourth quarter, Q1 of the government fiscal year.
Yeah. Again, I'm saying this very calmly. I truly applaud the effort. In the midst of what we're going through, I'm living this, and I have a wife who, she gets it, she's dead, so I'm living it. You guys are out there, and you had a good quarter. You have all these opportunities, which is amazing that you've been this creative, and you've gotten yourself to be this diversified, and you have dreams beyond that. Congratulations. Thank you.
Thanks, Steve. We appreciate that, and we appreciate your support. I just want to note along that line is, as a company that's basically 360 people or so right now, we've got almost 130 people in the field away from home over the last several months during the pandemic. Hats off to our staff who've been willing to travel and live in hotels and live in apartments, and support the field operations, which made this a great quarter. I wouldn't have predicted that we'd have such an enormous support within the team, but everybody stepped up during a time where there's extra risk. They're out there working in the field and making things happen while a lot of sites are shut down. It's been our team that's stepped up. Thanks for your support.
I'll make one final comment since I didn't get a chance to talk the last thing. I was a chemical manufacturer, and I've got very interested in this area, looking for a nuance relative to the virus. After my work, I've really come down to the point that the key is ventilation. Please tell your people that when they're in these hotels, to be very careful and to check on the air conditioning system because I've read many articles that this can be transmitted in a poorly run air conditioning system. Ventilation is so important aside from other things. All right.
All right.
Thank you so much.
Thanks.
Again, congratulations.
Thank you.
Thanks, Steve.
Our next question comes from the line of Tristan Barr with MTB Asset Management. You may proceed with your question.
Hey, guys. Kind of funny, as you know I typically avoid commenting on calls at the risk of sounding like a cheerleader, but I just have to say that the turn that you guys have shown in the services business within this pandemic is nothing short of extraordinary. That backlog number is incredibly impressive. That $100 million run rate, which seemed like a bit of a reach, is now all of a sudden not necessarily a reality yet, but certainly looks like it's going to come to pass, and I just wanted to say congratulations on that.
Thanks, Tristan. Our Executive Vice President for Services, Andrew Lombardo, is largely responsible for that, and there's not a day that goes by where he and I don't marvel at how fortunate we are to have such a good backlog during such a difficult time. We feel like we're really fortunate because of that as well. Thank you, Tristan. We appreciate your support.
Now I'm going to switch and ask the what have you done for me lately question, which is, given the extraordinary turn in the services side, obviously COVID is going to have an impact on the treatment segment. I think that's to be expected and I certainly understand, but I was really kind of encouraged to hear at several different times during this call, it seems like you have an incredible amount of opportunities to now expand the treatment segment, which is, of course, your higher margin business. I'd like to kind of tease those out a little bit and kind of get it in one spot. You obviously have the TBI. It's encouraging to hear that you're now in permitting stage with Veolia, and then you mentioned you'd be able to turn that pretty quickly. What does pretty quickly look like in your mind?
How much longer do you think you'll be in a permitting standpoint, and then once that goes into production, what does that flow through look like on the P&L?
Right now, our General Manager, or actually our Executive Vice President for Waste Treatment, Richard Grondin, has run our Hanford facility for many years. He's leading that effort. He tells me that due to the good relationship they have with the state, that we should see operations begin around the first of the year at the latest, and begin to burn almost a weekly basis with the GeoMelt once we get through that permitting phase. That waste is sitting in Idaho, ready to go. We're excited about that. I'd like to be able to think we could get between $10 million-$15 million a year in revenue on that, along with our partners at Veolia. We have a great working relationship with them, a really good operating agreement, and that should be very doable.
We are getting other sodium waste from INL now here in Oak Ridge facility as well. Not to the extent we expect to be rolling up in Hanford. I'm not sure if I answered the other component, Tristan, is on the commercial sector. We've spent about a year now focusing on getting our foot in the commercial segment and the utility market, power market, along with oil and gas pipeline sludges as well, that have significant amounts of NORM in it. That's something that we just traditionally haven't done a large volume on, and we've spent a lot of time and effort to increase that. We're starting to get some real traction now, getting some wins, and building those relationships, which take a year or two to do.
We're going to see that increase as well, along with the DOE sustained waste shipments along with that.
The $10 million-$15 million on the GeoMelt, is that inclusive of Veolia's take, or is that Perma-Fix's revenue alone?
That would be the total revenue, I believe, Tristan, at this point, between us.
Okay. This increased commercial business. Obviously, that takes longer but is also more stable and usually, if my research is correct, kind of a more steady revenue stream and a little less dependent on budget vicissitudes. How big do you think that can get say, for 2021?
Well, that's a tough question. Our goal is to try to get it to 10% or 20% in the next two years. It's really tough because you start out with a drum here and a drum there, and hopefully you're getting up to a rail car here and a rail car there. It all depends if you're getting operational waste or waste that's coming from maybe a demolition project or a contamination event or something like that. I would think a good gauge, and again, this is speculation, Tristan, is 10%- 20% of our waste segment total. That would be $5 million- $7 million a year would be a good goal for 2021.
I'm going to apologize in advance because I think you guys have been pretty careful to be conservative. I understand that COVID throws a wrench and waste shipments were uncertain pre-COVID, and so would be exponentially more so after COVID or during COVID. You kind of touched on something there towards the end that I think is quite material, which is, so you have this rather impressive services backlog. You acknowledge that so far into Q3, the treatment backlog isn't what you would like it to be. You have this year-end budget flush coming up, which would seem to indicate that you expect a fair amount of waste to be shipped towards the end of Q3, which should, again, I don't want to put words in your mouth, but sounds like Q4 could be quite exciting.
Yeah, we would agree with that. We are, as I said in the script, a little disappointed Q3 hasn't accelerated more. I think the whole country seems to be a little surprised at how this is dragging on. Most of our friends at the DOE sites are moving very cautiously. We haven't had the receipts that we'd hoped for in July. They are increasing, as we said. Once that starts to look a little better, we know there's backlog out there that has to go. We're hoping that we start seeing that end of August, early September, and then see a great Q4 for us.
Okay. Well, that was it on my end. Again, congratulations, and that's a heck of a turn in the service sector, and congratulations on a job well done.
Great. Thanks, Tristan.
Thank you.
Our next question comes from the line of Stephen Levenson with Big Rock Research. You may proceed with your question.
Thanks again. Just wanted to hit you with a follow-up on water treatment in Florida. Did COVID have an impact there? What's the outlook for that? Just an update looking forward for the rest of the year.
Steve, we have a couple of exciting bids out for water down there that has been held up because of COVID-19. We haven't seen it awarded yet. We're not processing a significant amount of water today. We have had some the last two quarters. It is coming in, not in dramatic quantities, but we're bidding on some big quantities. We're hoping that when we have this call in another quarter, we can tell you that it's running at a pretty sustained rate.
Got it. Thanks very much.
All right.
Our next question comes from the line of James Godfrey with Godfrey Consulting Group. You may proceed with your question.
Hi, fellas. Congratulations on a great quarter and equally, if not more important, just a fantastic turnaround over the last 12- 18 months. It's exciting. I look back, I think, Mark, you mentioned there's now 360 employees. I'm just wondering if you can recall how many there were there when you took the helm here a little while back.
James, we track that every quarter for our board meeting. I want to say it was in the 220- 240 range, something like in that range altogether.
Sure.
I think we've gotten up to the 380 before COVID hit. Yeah, it's been good. It's been really good. These new services projects have really helped that.
Great. Seeing the forest through the trees, that's a really important number. Of course, that workforce is highly talented, very specialized, and of extreme value. You've done a nice job of building value for all shareholders. Again, I can't thank you enough for that. I'm looking here, a couple of comments that you made, one of them, 10 new clients that you were able to say. That's significant. Can you give a little more color on kind of the mix of that client base and as far as that's concerned, what kind of potential future opportunities those new clients might theoretically bring to the table?
Well, I'm glad you picked up on that, James, because I kind of ripped through that, and that's a real nugget to get 10 new clients during COVID-19, during that period when you can't get out of your office or your house.
You bet.
I was particularly excited about that. I have to tell you, looking through the list, they're all really confidential for the most part, so I can't give you names. Most of them are commercial. There's some small ones and some ones that have potential for real growth. Most of it's characterization on characterizing things or areas or components. Our health physics arm of the company, which again, Andrew Lombardo manages out of the New Brighton, Pennsylvania office has done very well at marketing the oil and gas industry, as well as the mining industry, scrap metal industries, as well as power, utility and power. What we're starting to see is some word of mouth, some new relationships being built, and some real payoff from those marketing initiatives. It is an exciting component.
If we can grow that much during a pandemic, you'd think we could do really well when we're back to normal.
Well, there you go. Again, congratulations, because I view that as a very meaningful accomplishment and can't be more thrilled to hear 10. That really did surprise me. As far as just a couple of other points, Hanford TBI back on as soon as they can start shipping it, we're standing ready and pretty much ready to roll there. Is all the permitting now in place and so once we start receiving product, we can just crank treatment up just as soon as possible? Where does that stand?
Yeah. There's limitations on volumes. Right now we have the ability and we're permitted to receive that waste under our current permit. We're ready to go. When that 2,000 gallons comes, we're ready for that, and we have limitations that are much higher than that. We're good to go when they start pumping it out of the tank.
Great. That's exciting. Just kind of, again, the big picture at Hanford is still pretty much the same 56.7 million gallons, of which roughly 50 million is low-level waste. It's well documented that the vitrification plant was never designed to treat all of that waste, and really, from everything that I understand, we're the only other solution there right now. Once they start to ramp processing, certainly we're going to get some of that. The question is how much and how quickly we get that. Is that a pretty fair assessment of where Hanford stands right now?
Yeah, I would like to think that, James. That's certainly our position. It's hard to speculate what'll happen with DOE at Hanford, but that's our view of it as well.
Right. Yeah, and the vitrification plant, it's also well documented, isn't to be fully operational right now until 2036, and of course, they're already, what, 15 or 20 years overdue on that schedule, so who knows what the real number is there, is my conclusion.
Yeah.
The longer it waits, the more tanks that are going to be leaking, and the more necessity it is to seek out alternative solutions. We have the cost-saving solution that's far superior. I think Hanford is in fabulous shape, and just over time is going to work into our hand beautifully. Then one other just question, as far as our self-bonding is concerned, I know we got the $5 million back a year ago. Looking forward, how much is still available to us there in kind of that off-balance sheet situation? Can we just talk at where that stands today? Maybe Ben wants to grab that.
Yeah, James, just to clarify, are you asking how much of the self-bonding we have right now on the balance sheet?
Yeah. It's, in effect, restricted cash, right?
Right. Yeah.
We theoretically could access that. We could go out and purchase bonding and access that cash. Just to understand how much real liquidity the company has that isn't quite apparent when looking at the balance sheet.
Correct. It's about $11 million or $12 million. Yeah, $11.4 million.
Great. $11.4. You bet. There's really a lot of cash there, and the balance sheet is in fine shape when taking that into consideration. You bet.
Right.
Well, I'll let you go. I see we've exceeded the hour mark. I sure just couldn't be more thrilled with the progress over the quarter, over the last year and a half. It's been a wonderful transition and the future looks very bright to me. Again, I compliment you all and can't thank you enough. Thank you.
Thank you, James.
Our next question comes from the line of Steven Fine. You may proceed with your question.
I got two quick things. You set up that plant in the middle of the country to assemble stuff, which you wrote about last year. What has happened with that? In other words, where you bring big things in and so forth. You pad stuff out on that earlier in the year. Do you have business there now or what?
Yeah. Steven, that's called the Environmental Waste Operations Center, or the EWOC. It's located here in Oak Ridge. We have, I want to say, six procurements out right now we're waiting to hear on. We bid a lot of things for that facility in the February, January timeframe in anticipation of receiving waste and material in Q2, COVID hit and everything just kind of stopped. We did win one job, a small job doing some decontamination of equipment, that's kind of getting us going. It's a very limited revenue at this point. We're waiting to hear on these other bids. Hopefully by next quarter, we'll have some good sustainable revenue for that. It's been very limited. Very limited spend on it.
All right, I have one more.
Go ahead.
Good. All right. One more quick question. Is it reasonable to say that as you explode in service, with the understanding of service, that service could lead to treatment business? In other words, you have a customer that you would service, and that could end up bringing in treatment business?
Absolutely. That's the model we're trying to implement, Steve. On each of these large DOE bids that we're participating or trying to participate in, that's kind of the sell. That's right.
Even in the non-DOE, that could be applicable.
Yeah. As well. Yeah, exactly.
All right.
That's been our strategy since the very beginning that we started making the changes, is to integrate both those sectors together more.
Yeah. All right. Thank you again.
Thank you.
Ladies and gentlemen, we have reached the end of the question- and- answer session. I would like to turn this call back over to Mr. Mark Duff for closing remarks.
All right, thank you. I'd like to thank everyone for participating in our second quarter conference call. As I mentioned earlier, we successfully navigated what could have been a much more challenging environment due to COVID-19, and we are well-positioned heading into the third quarter. Based on our current sales pipeline, accelerating bidding activity and backlog, we remain highly encouraged by our outlook for the business. Again, thank you everyone for participating.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.