Greetings, welcome to the Perma-Fix Environmental Services first quarter 2017 earnings 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 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 the conference over to your host, Mr. David Waldman of Crescendo Communications. Thank you, Mr. Waldman, you may begin.
Thank you. Good morning, everyone, welcome to Perma-Fix Environmental Services' first quarter 2017 conference call. On the call with us this morning are Dr. Lou Centofanti, CEO, Ben Naccarato, Chief Financial Officer, and Mark Duff, COO and Executive Vice President. The company issued a press release this morning containing first quarter 2017 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1021. I'd 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 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 and on our website.
I'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.
Thank you, David, and welcome everyone. I am very pleased to report solid year-over-year improvement in the first quarter. Overall revenue increased 27% to $12.7 million, compared to $10 million for the same period last year. Also achieved $835,000 of adjusted EBITDA, an increase of $3.1 million from the same period last year. We achieved these results despite severe winter weather in the Pacific Northwest, which impacted waste shipments despite the fact first quarters typically, seasonally, are our weakest period. The most dramatic is the balance sheet. You cannot really see it in the issued earnings, but because of the 8-K event issued last week, today we sit with over $3 million in cash, no revolver debt, also entering the strongest period of the year.
Over the last two years, we worked very hard to reduce operating costs and reposition the company, you are now seeing the effects of that. As I said, our balance sheet is in the strongest position we have been in a long time, in addition to the positive cash flow, the change is also a result of freeing up $5.9 million in cash by replacing the closure policy at our Perma-Fix Northwest Richland facility with a new bonding mechanism. We used the cash to pay off our entire revolver line of credit, we are very good. We also think the balance sheet should continue to improve. Within the treatment segment, we experienced a 39% year-over-year increase in sales, we expect this trend to continue as evidenced by the improvement in our backlog.
As we indicated on our last call, a lot of the delays that impacted 2016 have been resolved following the election. We are also encouraged by the 2017 budget within Department of Energy's Office of Environmental Management, which oversees the remediation of nuclear waste at the various DOE sites around the country. Current budget for 2017 is more than $6 billion, a significant increase over last year. In the past, increased budgets has usually led to an increase in discretionary spending for waste treatment, especially at the end of the government's fiscal year, which coincides with our fiscal third quarter. We continue to pursue a variety of major initiatives associated with expansion of our market base and look forward to discussing them further as they materialize. Within the service segment, this was a very active quarter for new project bids and we continue to grow our sales pipeline.
We are also focused on improving our win ratio as a result of the recent initiatives that Mark Duff has put in place, which should begin to bear fruit later this year. Mark will provide some additional color on our service pipeline and new business opportunities in this segment later in the call. Turning to our P&L, we continue to carefully manage expense, identify new areas for cost savings. We are on track to complete the closure of our M&EC facility by January of 2018, after which we believe we will save an estimated $4 million-$5 million in fixed costs annually. Given the growth in revenue, improved liquidity, the strength of our balance sheet, we believe that the company is dramatically undervalued and well positioned to move forward.
We are continuing to work towards trying to finalize a definitive agreement with a private investor to fund our medical subsidiary and hope to have an update in the near future. Let me turn the call over to Mark, our Executive Vice President. Mark?
Thanks, Lou. I'm very pleased to report that Perma-Fix has made meaningful progress this quarter in the implementation of improvements needed to strengthen our offering in both the waste treatment and the nuclear services segments. These improvements are reflected in increased receipts of waste at our treatment plants throughout the past five months, which has resulted in significant backlog and high productivity rates in our processing facilities. This increase will support our goals for the planned expansion opportunities and the addition of new capabilities and capacity for the treatment of new waste streams we plan to implement within the next three quarters. We continue to see increases in our waste receipts through continued focus on innovative approaches that allow our clients to realize new value in using our waste treatment services versus the direct disposal approaches of our competitors.
First quarter sales receipts were just below $10 million, which is about two and a half million above both prior year and this year's expectations. As we enter the midpoint of the second quarter today, we remain encouraged by this indicator relative to the sustained growth for the year. While our nuclear services division realized lower than anticipated revenue in the first quarter, our success for the quarter was defined more by creating a foundation for future sustainable growth. The enhancement of our business development organization identify and position us for more opportunities and generate high-quality submittals to increase our win rate as the success of the quarter, and that resulted in 11 wins this quarter out of a total of 14 proposals that were announced during that same period. This is an unprecedented win rate for the company.
The full impact of these improvements may not be recognized for a few quarters while proposals are under review. That's the part of the process. With 17 additional bids submitted during the quarter that have not been announced yet, that represent over $30 million of potential annual revenue, we're encouraged by the volume of bids that directly align with our core competencies. We continue to expand our geographic reach through these recent wins in Canada, including new opportunities in both the services and the treatment segments. This growth will be realized through the third quarter, and provide additional stability to our overall services organization as we continue to build critical experience in Canada. Based on our current market expectations and the strength of both sectors, we remain confident that 2017 will be a strong year for the company and set the stage for sustainable growth for the foreseeable future.
With that, I'll turn the call over now to Ben Naccarato, our CFO.
Thank you, Mark. I'll begin with revenue. Our total revenue from continuing operations for the first quarter was $12.7 million compared to last year's first quarter of $10 million, an increase of $2.7 million or 26.6%. The increase was primarily from the treatment segment, where increased waste volume resulted in a revenue increase of $2.8 million compared to last year. This increase more than offset the small $161,000 reduction in revenue in our services segment. Turning to cost of goods sold, our total cost of sales was $10 million, which was equal to last year's cost of sales even though we did have increased revenue. Our treatment segment's variable cost of sales were down $263,000 as the waste mix provided for lower treatment and disposal costs even with the higher revenue.
This variance was offset by higher fixed costs at the treatment facilities as we have increased our depreciation expense as a result of shortening the depreciable lives at our M&EC facility, which as you know, is scheduled for closure in January of 2018. Our total costs in the service segment were relatively flat despite a small reduction in revenue. Turning to gross profit for the quarter, it was $2.7 million compared to just $34,000 in 2016. The improvement was entirely from the treatment segment, where gross profit increased by $2.8 million due to both increased volume and increased margin brought about by more profitable waste mix. This was offset slightly by a drop in the gross profit in the service segment of $140,000 resulting from the lower revenue. Our total G&A costs for the quarter were $2.9 million, down a little bit from the $3.1 million last year.
Our lower costs related to salaries and bidding proposal spending were as the primary drivers for this reduction. Loss from continuing operations for the quarter was $675,000 compared to a loss of $3.8 million last year. Included in this loss are approximately $200,000 and $438,000 related to our medical segment for Q1 2017 and 2016 respectively. Our loss applicable to common shareholders was $727,000 compared to last year's net loss of $3.8 million. The loss per share for the quarter was $0.06 compared to a loss of $0.33 in the prior year. Our adjusted EBITDA from continuing operations, as we defined in this morning's press release, was $835,000 compared to a loss of $2.3 million last year, a year-over-year improvement of $3.1 million. I'll now discuss a few changes in the balance sheet compared to year-end.
Our current receivables, both billed and unbilled, were down $778,000, which reflected improved collections. Our other current assets were up $6.6 million, primarily reflected by the current finite risk receivable of $5.9 million related to the replacement of our bonding mechanism at the Northwest facility. This receivable, as Lou mentioned, was collected on May 1st of 2017. The remaining $700,000 increase was from normal operating prepaid expenses. Our intangibles and other assets decreased by $6.1 million, primarily from reclassifying the $5.9 million finite risk sinking fund from long-term to current, as we just discussed. Our waste backlog was up. It was $5.9 million compared to $5.2 million at year-end, and higher than the $4.9 million in March of last year. Our current closure accrual increased $729,000, which was the result of reclassifying the final piece of the closure accrual at M&EC to current from long-term.
Our current debt is $1.2 million, which is consistent with year-end, and lower than a year ago by about $642,000. Our total debt at the quarter end stood at $7.1 million, all due to the primary lender, PNC Bank, $4.9 million representing our term loan and $2.2 million representing the revolver balance. Finally, I'll give you a quick summary of our cash flow. Our cash provided by continuing operations for the quarter was $2 million. Our cash used by discontinued operations was $139,000. Our cash used for investing was $57,000, of which $22,000 was for capital. Finally, our cash used for financing was $1.9 million, $1.6 million of which was to reduce our revolver balance. With that, operator, I'll now turn the call over to questions.
Thank you. At this time, we will 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, and 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 to pick up your handset before pressing the star key. One moment please while we poll for questions. Our first question comes from the line of Sam Rebotsky of SER Asset Management. Please proceed with your question.
Good morning, gentlemen. Lou, one of the things you didn't address is the Hanford accident that happened. Could you sort of address what capability you could handle relative to Hanford, and what's your thoughts about this tragic event?
Well, as you know, there's a tremendous amount of opportunity there at Hanford. The event yesterday was the roof collapsed on several rail cars that probably have sat there for 70 years. We continue to see a great opportunity in working at Hanford. It's a major source of waste for us. In fact, in the first quarter, as we've mentioned, it somewhat hurt us because of the weather, but we still did fairly well, and we expect that waste then to come in the remainder of the year. There's just a tremendous opportunity at Hanford, as we've talked in the past. That event, I think it was a dramatic event short-term. Don't see at this point a lot of repercussions coming out from it at this point. There was no release, no major event.
I think it's still, as to Mark, that there's still a lot of investigation has to occur.
Right
before they come up with a remedy or any type of understanding of the next steps for recovery, if there is any in the near term.
Right.
It would appear that this would be encourage, create funds to treat the waste sooner than later. If this did occur, how much more waste can you treat in increasing your revenue relative to Hanford?
We see a lot of opportunity and a lot of initiatives we have going on there in terms of different waste streams. At this point, we're not sure much will come out of that event for us in the short run, because it will be more a recovery effort on the part of the contractors. It continues to be our main focus and our Northwest facility continues to evolve really into our flagship facility as we continue to reposition the company.
Okay.
It's hard to give you any real numbers at this point, because like Mark had said, they're still trying to figure out what really happened.
Yeah. No, I understand. It appears to be a catastrophic event, from my judgment, it would appear unfortunately, this creates the desire and ability to create funds to do something where if this didn't happen, they'd be waiting longer. That's just my judgment. As far as the medical, we expect the event to happen in the next quarter, or what is the timetable for the medical event to happen, financing, et cetera?
Again, I'd hate to give any direction.
Okay
predictions up to this point. It is progressing, and we've made a lot of progress. We'll just see how it evolves.
All right.
You'll be the first to know if we can reach some sort of agreement.
All right. Good luck, guys.
I would like to remind our participants, if you would like to ask a question at this time, please press star one on your telephone keypad. Our next question comes from the line of Bill Nasgovitz of Heartland Advisors, Inc. Please proceed with your question.
Yes, good morning.
Good morning, Bill.
I also had a question on Hanford. We have a high radioactive test going on there.
Yes
High-level radioactivity. What's the status of that?
I'm really still restricted on my ability to talk about it. I guess, though, there have been several reports come out recently on it. There's a major GAO report that's available if anyone would like to read it. It's a couple hundred-page document, but it does focus on Hanford and various options there. I really can't talk much more about where we are or what we're doing there at this point, under a very strict lockup.
Just to refresh our memory, the issue there is well over 1 million gallons of high-level radioactive waste. Is that the issue?
We see a great opportunity if the project goes forward, I really can't talk about numbers or anything at this point.
Okay.
Our next question comes from the line of Anthony Marchese, of Private Investor. Please proceed with your question.
Hi, guys. It's nice to see a turnaround. My question revolves around regulatory climate that you see. I guess you mentioned in your press release. Could you just maybe, and I missed the very first part of the call, so I apologize if you've mentioned it already. Lou, could you talk a little bit about what you see at the EPA or whoever regulates your segment in terms of budget opportunity?
What we see, and this has been a theme I've talked about over and over again, is that our regulations governing our business are all in place. So, number one, the changes at EPA do affect the regulations, but we see little or no effort at trying to change the regulations that exist today. In my experience with the Republicans, I've always said this, is they actually do a better job of managing the existing regulations which control us. That's number one. Number two, that's more on the EPA side.
When you look at Department of Energy, when you look at all the comments that have been made by the incoming people, and the discussions we've had with the transition team and with the people now in, they're very focused on nuclear, and they're very focused on improving the process for cleaning up the waste at Department of Energy. The initial budget, the proposed budget that came out of the White House for 2018, was fairly aggressive on accelerating work in the nuclear cleanup field. Now, there weren't a lot of details, so it's a little hard to judge it. The top-line number, if it holds, will be one of the largest budgets the environmental cleanup has had over the years.
Everything we're hearing and seeing, and also their approach is much more on a commercial approach, looking for better ways to do things more efficiently and not following the same old past lines that you've heard. From a big picture point of view, we're optimistic in terms of where our programs are going.
Okay.
We don't see lots of changes on the regulatory side.
My second question relates to competition. Again, obviously, I'm preaching to the converted, but obviously, I feel the stock is significantly undervalued. In the past, you've mentioned there's been movement or activity in the private area in terms of acquisition. Have you seen any further consolidation or activity in that respect?
Over the last three months, there's not been a lot of activity. The two big events were the EnergySolutions attempting to buy WCS, which is now in court. Justice Department has filed legal action against them. The second has been the Veolia acquisition of Kurion, a small technology company. We see a lot of interest, a lot of people right now, much more focused on nuclear, especially on the decommissioning side. We see that as a very large opportunity going forward. We have some very strong assets there in terms of our facilities, in terms of past work we've done in decommissioning, both small reactors and sites. We see a lot of activity going on, and as Mark mentioned, a lot of effort going on in Canada, where we've had a pretty good success in both treating waste and in providing services.
The competition side, we continue to see ourselves as having a very unique niche, very unique facility that can just about do anything and dramatically save costs at DOE or at various clients, Department of Defense and the commercial sector. Mark has put in place a program to really go after a lot of these new programs, and we're very excited about that because we see opportunities on the commercial side that we haven't been able to touch in the past. We see opportunities in all the areas. Right now, we're very excited about where we are, where we're going, and our position. Now with a stronger balance sheet, it will have a very significant effect in helping us bidding and partnering and working with some of the larger clients here.
Final question, Lou, and I appreciate the time. You mentioned earlier a GAO report. Could you be a little more specific? If I'm on a Google page, what am I looking for?
The GAO report on options at Hanford.
Okay. Very good.
On the Hanford tanks. It's a GAO report on the Hanford tanks.
Great. All right. Thank you very much.
Our next question comes from the line of Jim Brown, a private investor. Please proceed with your question.
I have a couple of questions. First of all, I don't know if I missed this, but what's going on with your isotope project? One thing I'm confused about, you referred to it as a majority-owned medical. That's the isotope project.
Correct. Yeah.
You don't have a majority interest anymore. You have a minority interest, right? Like 25% or something?
No. We have, at this point, a majority ownership. If we raise the amount of money we've been pursuing here, we will no longer have a majority, but it'll be very close.
Okay.
So-
Go ahead.
We have not yet completed a placement, so it's still a majority-owned company, depending how you add it up, somewhere between 60% and 68%, depending how you add it up. Yeah.
I'm a little confused about this. You started off selling stock in the Polish market, and that was a certain percentage of that operation. The company put its own money in, and then you found another company that was going to take it over, and then I think last quarter you said that they had stopped investing, and you were talking to them. This is a really confusing issue here.
No. Well, the series of events was we raised money in Poland.
Yeah.
The company, Environmental, has partially funded it through just receivables that are owned, because we do most of the research, continue doing the research on it. That's where it stands. At this point, we have another investor who's looking at coming in.
Okay.
We're in the process of trying to complete a definitive agreement. That's been going on for quite a while now. We are optimistic it will work, but until it's done, it's not done. That's where we are.
Okay. The last that I heard about this was you were on a certain scale, you were able to create this product, but then you had to scale it up to a higher level. In other words, you were able to I don't know all the technical details, but it worked up to a certain level, and you had to get it going, crank it up to a higher level. Whatever happened with that? Did you ever prove the thing out totally, that it was totally capable of doing the isotopes that it needs to do?
What we've demonstrated is that our process, without using uranium, can produce commercial quantities of technetium-99 for use in medical systems. What we've got to do.
Right
is then the next step is really finalized, and this is where we ran out of money, so we have stopped most of the work. The next stage is really to build a generator that could be used commercially and that would then be submitted to FDA for FDA approval as a device. We're still at that same point. We need to finalize a design, a size for the system, and then build that unit and run it through various tests that the FDA will require, and then submit that data to FDA for approval. That's.
Let me ask you?
That same place we were about a year ago. We've made a little bit of progress in the little bit of work we've been doing, but it stalled at that point because you need significant money to go to.
How much are we talking about to build a generator like that? What does that take?
Well, the cost to build and do that work would be about $10 million.
Considering the size of the market and the opportunities, that wouldn't seem to be a lot of money for most companies. I can understand if you have something that's really viable, okay, it seems like there's a lot of people that would come forward with $10 million. That isn't a lot of money for any normal-sized company.
Yeah.
If you were really able to prove out the viability to this design in the way you envisioned it, I don't see why you-
It's venture capital. At this point, you're talking about venture capital, it's because you have to build a device, you have to prove it to FDA. You do have a lot of steps in between, in this industry, the major players have other focuses that their focus paths they're going down.
How about somebody outside? What about a General Electric or somebody outside the industry? That's chump change for most companies, $10 million.
I've raised a lot of money, I can tell you, We're in a spot that it's very difficult.
Okay. This is basically you haven't really moved forward from here?
Oh, we have
You're staying in the land. You've been negotiating with this company for, it seems like forever, right?
Correct. Yeah.
Yeah. Okay. I wanted to ask you about, okay, your EBITDA was positive. Okay, maybe I missed this, but what are your projections? We're in the middle of May now. What are your projections? Do you expect to become profitable or cash flow positive in the next quarter or two?
Well, we have been. We had a positive EBITDA.
Your profitability, I'm talking about.
Well, one, remember, you've got the cost from the medical and other things in there. If it continues to go as we expect, yes, you should see us turn profitable from an earnings point of view later in the year.
Okay. Another thing I'm curious about is, have any of your people, has anybody in management there bought stock on their own in your company?
Yeah.
Normally, when insiders buy stock, it reflects a level of confidence.
You could see the filings that during the periods when we're allowed, we've been buying stock, yes.
You have been in recent months?
Yes.
Late March.
Late March, when we had an open period, you saw buying going on. You could see it in the filing.
All right. The other thing I was going to ask you about, you had this closure of this plant. Was that like half of your capacity? Was that like 50% of your capacity?
Remember-
The one you're closing in January.
Our plants are redundant. What we've done is moved technologies into the other facilities. We'll basically lose very little capacity and yet dramatically drop our costs. We basically will go from four facilities to three facilities with pretty much the same capacity. In fact, what we're really focused on is expanding the capacity beyond where we are today of the existing facilities into new waste streams.
I see.
You'll see an expanding opportunity here in terms of the type of services we will offer through three facilities instead of four. That facility was an extremely expensive facility. Removing it will dramatically reduce our operating costs.
Okay. The other thing I was going to ask you about is your employment. I was just wondering, You mentioned something about personnel reduction there. I just wondered, what is your level of personnel currently versus, say, a year ago? I just wondered.
No, we have not reduced over the last year, personnel. In fact, if anything, we're growing.
You are adding people?
Yeah, we've been adding people over the last year.
We've pretty flat over the year.
Yeah.
280 or so.
Yeah. Around 280 people.
Yeah. In a field like yours, it doesn't seem like you can readily pick up people that have this kind of expertise.
No. It's actually the opposite, is that Perma-Fix is at the cutting edge of the business. We're a highly technical industry, highly technical company. The technical people, almost no one ever leaves. If you want to work in a highly technical, cutting edge business, you don't have a lot of opportunities in the nuclear business. We're the exception. No, we don't have any problems adding people.
Okay. I guess that's all of my questions. That's fine. That's all I was going to say.
Appreciate it. No, your interest.
We have our next question comes from the line of Sam Rubatsky of SER Asset Management. Please proceed with your question.
Yeah. Lou, and Mark, as far as we did $12 million sales, with the facilities we have, how much waste in dollar value, what percentage of capacity are we working at, and how much can we do at the facilities we're having? Could we do $100 million, or how much can we do?
On the waste treatment side, we have a tremendous capacity that's easily expandable if the volumes are there. Even by closing the one facility, the other facilities could readily expand with almost little or no capital. The technologies are readily adaptable to expansion, multiple shifts. You've seen it at times when we ramp up. If we could bring in another $10 million or $20 million in revenue on the treatment side, and we're hoping to do that with these new markets we're going after, is it will dramatically affect the bottom line, since our incremental margin is, as I've said in the past, 70%-80%.
Yeah. I would say, and generally describe our productivity, is we're working our standard shift, and we're pretty much at just about 80% or 90% capacity when it comes to labor. Same if you look at the gram quantities of nuclear material as well. We're pretty much right up near the edge, and juggling that all the time. As Lou said, our next step would be to add additional hours, and expand our shifts, at the plants to accommodate more volume. We're pretty close. If we can sustain this through the year, then we'll have a great third and fourth quarter, because right now our backlog is very good.
You say you're working at 80%-90% on one shift. If you went to three shifts, you're talking about $30 million-$40 million a quarter sales?
If it was proportional, or I should say if it was linear, yes. I don't know if it'd be that linear overall because I haven't experienced going to a third shift, particularly in the second shifts. You'd have to look at, as Lou mentioned, we'll be down to three plants. While they are largely redundant, they do have different expertise and capability at each plant. It would not be that linear. Yes, if you were to just simplistically say that you went to two shifts, at each of the three plants that are remaining, you could certainly double your revenue. You could be in a position to double your revenue. Every waste stream received, they're so unique, and they have different processing times and different cost of goods sold, different operating costs.
It's very difficult to say, because we have such a diverse waste receipt recognition with regards to what type of waste we're actually receiving.
Also on this technical project that you're doing the research at Hanford, do you think that it's appropriate to talk to partners with significantly more capital, to have a plan if you are fortunate that things work out to sort of be ready to go to expand further? What are your thoughts on that, and how long does it take to sort of ramp up if this project that you're working on comes to fruition and the government likes what you're doing?
Well, we're always looking for partners of substance. Ramping up our facilities, though, is the technologies require very low capital. Any ramp up of any facility and any waste stream in general is not really expensive. It's adding tanks, mixers. Very simple off-the-shelf equipment. When we ramp up our facilities for a waste stream, we can usually do it very inexpensively.
With an existing capital budget.
Yes, even with our existing capital budget. We've always put in our capital budget for unforeseen conditions like that.
Well, let's hope that you get the opportunity to find a Veolia or somebody who acquired Kurion at a very healthy price to increase your valuation and set the world on fire, guys. Good luck.
Well, thank you. We think with the way we're going and the waste streams we anticipate seeing here, the first way to do that is to just improve our numbers and improve revenue and income. That's our main focus.
Okay. Good luck.
Yes. Thank you.
Our next follow-up question is from the line of Bill Maskovich of Heartland Advisors Incorporated. Please proceed with your question.
Yes. It's encouraging to hear Mark talk about, I think you said unprecedented win rates and solid activity in terms of bids in the first quarter, something about 17 bids and maybe $30 million in revenue. In what particular areas is that, and what is our competitive advantage there, Mark?
That's a great question. Basically, there's a pretty wide range of procurements we submitted last quarter. A number of bids in Canada that were successful. We won a number of projects at universities. There's a number of other subcontracts we have in place through the Corps. There's a pretty wide range between international and U.S. government and commercial. We continue to see good growth or sustained growth, sustainability, excuse me, at Department of Energy, with a couple of projects there. Our discriminators and defining our discriminators were very important to do in rebranding the last several months. That basically is to focus on what we really do best. Our discriminators are clearly, our number 1 discriminator is our treatment facilities with very high barriers to entry.
They're very successful with staff, with engineers that are very unique in the industry and can solve waste problems that other people can't. We can take a lot of what we call orphan waste streams, which typically yield very high margins and are sought after. Those waste facilities are clear, our biggest discriminator. Secondly, we've really built a very sound reputation and experience base in the rad protection arena. We have five certified health physicists, which are very difficult to find. They're very field-oriented as opposed to research-oriented. We're able to solve a lot of problems for our clients with a strong, experienced group of health physicists that can provide solutions to contamination issues. We've branched that out into different markets. For example, we just really started pushing on the scrap metal market.
We had a large commercial scrap metal job last year and are now applying what we learned with that scrap company to other scrap companies nationally and are seeing a real market open up for us there that when scrap yards receive radioactive material on accident and get contamination spread. Those are the kinds of things that we're expanding off. Those are our two core competencies, which represent our discriminators, waste management, and rad protection.
Okay, that's helpful. Today, what are we doing in high level in terms of sales? Are we doing over $1 million of high-level radioactive waste?
No. Again, I'd call it high activity. We do a lot of high activity waste, with transuranics and other things.
High level, by definition, we're not receiving.
Yeah, we're not receiving any high-level waste. What we receive.
Okay
is high activity waste.
All right.
That's a fairly significant market for us today.
What's the size of that?
Yeah.
What are we doing there, and what is the size of the market?
About $500,000 a month, maybe, in terms of both.
Yeah.
Yeah. About $7 million-$8 million a year, I would say, total. We receive liquids and some solids that have higher levels of activity, as Lou mentioned, from fissile material to high gram quantities of special nuclear material.
Okay. Thank you. Just switching back to the Tc-99m. Lou, you've talked about a possible shortage in 2017 and an increased price. Has that happened because of these plant closures?
Yeah. The Canadian reactor has closed. What has happened is you've seen Tc-99m being shipped in from Australia, from South Africa, Europe.
My question was price. What's happened to the price of Tc-99m?
Price is dramatically going up because you also have a much more insecure chain. The price has continued to go up fairly significantly and will continue to do so as there's changes that are going on the requirements to make the material.
Okay. That's interesting. How much is this nuclear medicine costing us this year? How much is it going to cost shareholders this year?
Oh, what did we spend, Ben?
About $100.
Roughly.
Net of minority interest, about $110,000 for the quarter.
About half a million dollars for the year.
If this trend continues, yes.
Well, as a long-term shareholder, we sure would like to see resolution here. You've been talking about this for years, and we're dead in the water, and it looks as if the market is moving. If there's a buyer for this product, let's sell it. Let's focus on our key market, our core market, where we've yet to make any money. Thank you.
Yeah, we'll work very hard to do that.
Our next question comes from the line of Anthony Marchese of Private Investor. Please proceed with your question.
Hi, Lou. Just a small follow-up question on the GAO report, which I found while we were waiting for this. For anybody on the call, it's GAO-17-306. I guess that's the May report, Lou, that you're referring to. Is your approach the, again, very minor point, but just trying to understand what you guys are doing. Is your approach the grouting approach that they refer to in this document?
That's what they call it. Yes. That word is disallowed at Perma-Fix because we treat waste, we don't grout waste.
I understand that.
Yeah.
When they refer to grouting something, they're referring to your process?
Yes.
Okay, great. Thank you very much.
There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.
I'd like to thank everyone for participating in our first quarter conference call. As I mentioned earlier, we achieved solid year-over-year growth despite harsh weather conditions. Even though the first quarter tends to be a seasonally weak period, we generated $835,000 of adjusted EBITDA. Heading into the second quarter and balance of 2017, we anticipate continued growth in revenue and improved profitability. As I mentioned earlier, we see a better macro environment as illustrated by the increased budget for DOE's Office of Environmental Management. We see very significant opportunities in both treatment and service. On the treatment side, we look forward to implementing new waste stream treatment processes, which represent very sizable market opportunities. On the service side, as Mark discussed, we're actively bidding on a variety of large contracts and continue to make progress in our win rate for new bids.
At the same time, we can carefully manage expenses, including the planned closure of M&EC facility. Our balance sheet is as strong as it's been in a long time, having paid off our revolver and with over $3 million of cash as we head into our stronger quarters. We appreciate everyone's continued support and look forward to providing additional updates in the future. Thank you all.
This concludes today's conference. Thank you for your participation. You may disconnect your line at this time. Have a wonderful rest of your day.