Greetings, welcome to the Perma-Fix Environmental Services third quarter 2015 conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, David Waldman, with Crescendo Communications. Thank you, sir. You may begin.
Thank you. Good morning, everyone, welcome to Perma-Fix Environmental Services third quarter 2015 conference call. On the call with us this morning are Dr. Louis Centofanti, CEO, and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing third quarter 2015 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.
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. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after the date hereof that bear upon forward-looking statements. I'd now like to turn the call over to Dr. Louis Centofanti. Please go ahead, Lou.
Thank you, David, welcome everyone. We've achieved another quarter of profitability and remain on target to hit our guidance of $6 million-$7 million of adjusted EBITDA. Very pleased with how it is evolving with the business and the company. Now that we've streamlined and stabilized the business, our focus now is almost entirely on growth, and we are encouraged by the outlook for both treatment and services. Turning first to the service segment, happy to report revenue increased 53.4% compared to the same period last year. This growth indicates that we're winning more work. Contract awards appears to be picking up. As an example, we were recently awarded a contract valued at approximately $1 million for demolition and decommissioning services at a technology development lab in Knoxville. This is an example of one of the smaller contracts we've been on and were awarded.
Many of the smaller contracts we don't announce. As I mentioned in the past, we're also bidding on a variety of larger contracts that could have a significant impact on the business and hope to be able to talk about those more in the near future. Within the treatment segment, revenue declined to $10.9 million from $12.7 million for the same period last year. This does not reflect a weak third quarter of 2015, but rather an extraordinary one in 2014, as we received and processed waste from a project acquired a rapid turnaround, resulting in higher revenue in that one quarter. Nevertheless, our sales pipeline remains healthy as we head into 2016. The opportunities outside of DOE continue to be encouraging as we continue to focus on commercial, international, that will help us diversify our revenue from DOE.
I'm pleased to report some very positive developments on the medical side. As you know, we recently completed another successful scale-up of our process, which confirmed our proprietary resin could withstand high radiation levels up to six curies. We believe we're now very close to overcoming nearly all technical hurdles related to the resin. We have received positive feedback from the industry and are in active discussions with many of the key players. As previously announced, we finalized our agreement with Digirad, whereas Digirad invested $1 million into our subsidiary, Perma-Fix Medical, which is listed on the Warsaw Stock Exchange. I would point out that they invested at a significant premium to the current market price, which is further illustration of our growing interest in our process from within the industry.
That we do not believe the price on the Warsaw Stock Exchange really represents the true value of the technology. As part of the agreement with Digirad, they will purchase agreed-upon quantities of Tc-99m for its nuclear imaging operation upon successful completion and development of the process. We are currently in discussions with a number of prominent companies involved in other areas of the supply chain for Tc-99m. Our main goal now is really finalizing our strategy for the U.S. FDA and European medical agencies and are now accelerating our testing for FDA requirements. We'll provide further updates on this in the near future. We remain very confident in our prior guidance for the full year.
While we are pleased with the results, we are far from satisfied and will continue to focus on growth opportunities in 2016 based on the sales pipeline within the service segment and opportunities within treatment. As we look ahead, it's still early, but when you look from 2014 to projected 2015, we have seen our EBITDA and adjusted EBITDA grow approximately 100%. In 2016, we expect to see a 50% further growth in adjusted EBITDA on continued revenue growth in 2016. With that, I'd like to turn the call over to Ben, who will go into more details on the numbers, then I'll be back to answer any questions at the conclusion of the formal remarks. Please go ahead, Ben.
Thank you, Lou. Beginning with revenue, our total revenue from continuing operations for the third quarter was $17.3 million compared to last year's third quarter of $16.9 million, an increase of $404,000 or 2.4%. Revenue in our services segment improved by $2.2 million as a result of increased commercial work. This was mostly offset by the reduction in the treatment segment of $1.8 million, as waste received in the third quarter of 2014 had a short processing deadline, which resulted in more waste being processed in the quarter. When you look at year-to-date, our revenue is greater than prior year by $7.2 million or 17.8%, as both of our segments have increased compared to prior year. Turning to our cost of goods sold, total cost of sales was $12.4 million in the third quarter versus $11.3 million in the prior year.
Our treatment segment cost of sales decreased by $592,000 or 7.6% compared to prior year. While our fixed facility costs remained relatively constant, variable costs went down as a result of the lower revenue. In our service segment, our cost of sales were up $1.6 million as the variable costs related to the increased revenue increased, and our fixed overhead expenses were down slightly. Our gross profit for the quarter was $4.9 million compared to $5.6 million in 2014, a decrease of approximately $635,000. Gross profit in the service segment increased by $612,000 compared to prior year as a result of the increased revenue. Of course, the increase was offset by a drop in the treatment segment of $1.2 million as a result in the drop of revenue there.
Again, year-to-date, our gross profit as of September 30th, 2015, is higher than the prior year by $3.2 million or 44.6%. Both segments have achieved increased revenue while maintaining their fixed operating costs, which has contributed to the improvement in the gross profit and the gross margins. The G&A for the quarter was $2.9 million compared to $2.7 million last year. Higher marketing costs, primarily related to increased bidding activity, is the main reason for this increase in the third quarter. Again, when we look at year-to-date, our G&A expenses were $8.7 million compared to $8.9 million in the prior year. Lower payroll expense has been primarily offset by higher third-party consulting costs accounting for this variance. Our income from continuing operations for the quarter was $1.3 million compared to $2.4 million last year, and these results include $527,000 spending by our medical isotope and $229,000 in prior year.
Net income attributable to common shareholders was $1.1 million compared to last year's net income of $1.9 million. Income from the quarter includes $364,000, again, which represents our portion of Perma-Fix Medical expenses. Our earnings per share from continuing operations was $0.12 per share compared to $0.20 per share last year. At the year-to-date level, our earnings is currently at $0.01 per share, but this compares positively to the loss per share of $0.32 last year. Adjusted EBITDA from continuing operations for the quarter, as defined in this morning's press release, was $2.9 million compared to $3.8 million last year. Year-to-date adjusted EBITDA from continuing operations currently sits at $4.5 million compared to $1.2 million in 2014, an improvement of $3.3 million.
On the balance sheet, compared to our year end, cash is down $1.7 million, primarily due to the operating cash requirements from losses incurred in the first quarter. Offset by positive cash generated in the second and third. $1 million raised by our Perma-Fix Medical facility. Our total receivables, including unbilled, are down $1.3 million, mostly due to improved billing of unbilled and improved collections. Our waste backlog is at $5 million compared to $9.2 million at the end of the year and $10.7 million a year ago. Current debt sits at $3.6 million consistent with the $3.7 million at year end. Our total debt is $8.9 million compared to $11.4 million at year end. It's made up of $7.5 million from our credit facility at PNC, our shareholder loan of $1.3 million and miscellaneous loans of $29,000.
Finally, I'll summarize our year-to-date cash flow as of September 30th. Cash provided from continuing operations is $1.5 million. Our cash used by discontinued operations is $1.2 million. Cash used for investing is $291,000, of which $338,000 is actual capital spending. We had some proceeds from equipment and the final escrow from a facility sale last year. Cash used for financing was $1.6 million. Of this $1.6 million, this includes debt payments of approximately $2.6 million. That's offset by the equity raise at our Perma-Fix Medical facility of about $970,000. With that, I'll now turn the call over to the operator for questions.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 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 keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Al Kashian with Wedbush. Please proceed with your question.
Hey, good morning, guys.
Morning, Al.
Morning, Al.
On the medical side, Lou, you gave us sort of the progress to date. What's the next, in the near term, next 3-6 months, sort of the commercial visibility or progress, should we say, to getting at the next couple of steps? Any adjustments need to be made, trials, et cetera? Thanks.
The main is we're very focused today on, there's a variety of smaller tests that will be required for FDA submittal in terms of very basic data that they will ask for. We're going through a variety of tests today with our FDA consultants in terms of what is needed and preparing really for what'll be our first sit down with the FDA in probably the first of the year to go over our process, our data, and how it should be submitted and considered. Right now, it's basically continue to develop the data needed, and two, looking at ways to further focus the technology in terms of for a commercial unit. We're real excited right now. We see a path forward. The data has been very good, and we're very pleased with the results.
That's our main internal goal right now is looking at data generation for what will be needed and a path forward with the regulatory agencies.
Yeah. On this path forward, is there further strategic partners, or when do we take another step on that regard in terms of either announcement or is Digirad that partner and we're
Digirad was a general advisor on the industry in helping us focus.
Right.
We're in discussions with a variety of potential partners, and several of those would involve assisting us from the regulatory point of view. Can't really say at this point when we'll have more to say about that, but those discussions are very active right now going on.
Okay. On the treatment side, we had a tough comp, still seems a little bit lower than maybe where things would like. What have you seen in terms of with the fiscal year-end for the government, the September push, why is backlog sort of where $5 million level as opposed to a bit higher?
Al, the push probably wasn't as aggressive as we've seen in the past, the backlog's got sort of a different twist to it than what you normally see. We've talked about, the fact we've given guidance is because we have some visibility on some waste streams and projects, and our backlog is actually somewhat managed by our license right now. We've got a pretty good visibility for some things coming hopefully into next year. Because of our license, we have to manage when that comes in. Believe it or not, for once, we're actually telling them to hold on, that's reflected in the lower backlog. That just means we're anticipating more sort of a flatter receipt schedule than we've usually had in the past where, as you know, kind of fourth quarter, first quarter falls right off the table.
Yeah.
We're not overly concerned because we have some sort of commitments that will sort of make up for that lower backlog.
Okay, that gives you confidence on the 2015 number, therefore, given this timing and managing the process, you're able to, for lack of a better word, slot for 50% growth in EBITDA for 2016. I assume the majority of that is because of this backlog or composition.
Well, the service growth has a lot to do with it too, but yes, that gives us a lot more confidence in our treatment numbers. Which, as you know, our treatment numbers is the profitability, the service numbers is the revenue side growth.
Just a broader comment, Lou. A lot of the industrial companies are, I won't say inconsistent, but there's certainly some spotty growth and some less constructive comments about waste streams. Despite the diversification efforts, are you seeing more opportunities or more customers delaying projects that diversification process may not be as robust in the near term?
We have suffered over the last three, four years with seeing, because of the problems the nuclear industry had, both at DOE and then on the commercial side. What I see is that there's a lot of now pent-up demand. You can only avoid following the rules for so long, and then you have to start moving waste. What we're seeing, I think, is we went through that back two, three years ago, and we're now past it, and the pent-up demand is there, and there's a lot of projects that are developing, and there are a lot of opportunities. What we're really seeing right now is a lot of new issues cropping up in the nuclear field that are requiring our efforts and technology and services. We think we've seen that happen in the past.
When that happens, they may talk about, we can delay this for a while, but it's usually about a year or two, and then it catches up with the companies.
Right. Okay. Very good. We'll look forward to it.
Yep.
Thanks, Al.
As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Vernon McCrary with Stockbroker Club. Please proceed with your question.
Hello, thank you for letting me on the call. I'm quite new to the company, I'm phoning from Toronto and one of the questions we have in Canada is a concern with chemotherapy, with the isotopes at Chalk River being sort of stalled and stopped from time to time. I'm wondering if you'd care to talk about how soon you can get to that market, what do you think the size of the market might be?
We see a fairly dramatic market. I wish I could tell you we will be available by the time Chalk River closes, but from a realistic point of view, don't see that being possible because you're probably going to see Chalk River dropping off either next year or under the best scenario, in 2018. I think what we see is that in the interim, the industry has done a variety of things to have backups. You'll see a supply. With respect to ours, is that we're really looking at probably being realistic, getting to FDA sometime next year, and then a year after that with a commercial product. Canada would be an ideal market for us because it is a very diffuse market, and we see some advantages there. The market size is immense.
The product we would be selling, you're talking about a $several hundred million market in Europe and the U.S., when you look at it very simplistically from just if we only sold Tc-99m. We're very excited about our technology. I think we could play a major role. Our technology just brings with it sort of ideal conditions from a big picture point of view, and that's the real advantage we have, and now we just need to fill in all the little details to try to get it approved through the regulatory agencies and then figure out how to distribute it. We're real excited about the technology.
Can I just ask an add-on then?
Sure.
You mentioned that if you just produce the basic item, market might be $a few hundred million. Do you have plans to do something like a value add-on or market it in a way where there's quite a larger revenue stream?
Well, the advantage of this technology that I've always seen is that it's a disruptive technology, that it could totally change how the industry behaves and what it does. That is very possible The market itself around the world is a $6 billion market, with over half of that in North America. It is a dramatic market with a variety of services that could be added on in time. Yes, it's a tremendous opportunity, today it's the heart of diagnostic medicine, without it'd be a fairly dramatic effect on diagnostics and also on the chemo side and other sides of the business.
What's your R&D size on those projects?
Well, we're a small company, and it's almost embarrassing to tell you because when I tell people in the medical field what we're spending, they find it hard to believe the progress we've made with what we have. Ben, what is it?
Half a million a quarter.
We're spending today about half a million a quarter, and I could tell you that everyone else we're competing with is spending in the tens of millions of dollars. We've made tremendous progress on what we have, and our spending will increase in 2016. It's going to go up as we get into some of the more highly medical requirements.
If you had more money, you could spend it in the R&D field?
We could accelerate our development and growth if we had more funds, yes.
Thank you for this.
Yeah. Mm-hmm.
Our next question comes from the line of Sam Rabosky with SCR Asset Management. Please proceed with your question.
Yeah. Good morning, Lou.
Sam, how are you?
Okay. Now, the Perma-Fix Medical, the Polish company, I believe it's been trading in Poland for close to two years. Could you sort of give the metrics of what the high and low, the price it's traded at, and what price Digirad has paid for their interest? Is there any thoughts about listing this company in the U.S.? Do we think that we'd get a better valuation if we did that?
First, the answer to your last question, yes, we're very interested in listing it into the U.S. because we think we would have a better valuation. The stock has traded for approximately $10. It's been higher, and it's been a little lower. I think the Digirad price was.
I think $14.
Yeah, it was about $14. In fact, we would not sell stock today at any of these kind of prices on the open market. We think it's not being anywhere near truly valued.
Does it make sense, I'm not sure whether to list it on the bulletin board, or do we want to wait for Nasdaq? What is our thoughts on a timeframe to start trading the stock? As you make more progress in getting the products forward, and get some kind of approvals, there would be more interest, I would think, in creating a greater value for this company, which would then increase the value of Perma-Fix if there's a realistic price.
We've looked at all the various options. One is an uplisting onto the bigger Warsaw exchange, which would dramatically improve the liquidity and the ability of investors to buy it in Europe. We've reviewed all the various options for U.S. I'd probably say, by the end of next year, about 12 months, it'd be clear on where we're going from an option point of view with the stock and the company in Warsaw.
Okay. At this point, you wouldn't be listing in the U.S. for at least another year, or presumably you'd uplist it first in Warsaw, even though you feel there's a greater valuation. If you got some approvals, would that encourage you to do something sooner, or is that what you're waiting on?
Well, there's a variety of things we're waiting on. We're reviewing all of them and all the various options, and we have a variety of strategic partners that would be interested in working with us one way or another. Really, the change in listing or bringing it back to the U.S. also depends on how we work with those various strategic partners.
Okay.
That also comes into play on all of this. Doing a Nasdaq listing today is, we're not sure that's quite right, but probably by the end of the year, it could make a lot of sense. There are other less significant markets in the U.S. we could list it on, but we're not quite sure what that would bring us. The cost and effort would probably be the same as doing a Nasdaq listing.
Okay.
Right now, our thoughts is to give it a little more time, maybe move ahead with the Warsaw, and while that's going through, then you're almost preparing the same documents that would be required for the Nasdaq. We've looked at, like I say, we've laid out the paths for every possibility right now.
Okay. Now, as far as the nuclear and your other contract business, what type of bids do you have out there? Is there a dollar amount? Do you have more bids out there than before? Your backlog doesn't seem to be moving up, but do you have more bids? Is there any more money that the government is going to be putting out, or are we waiting on something from the government?
Well, I think, as we sit today, you've seen our numbers on services are growing significantly, especially on the commercial side of our business. We're seeing more opportunities than we've ever seen. The schedule for bidding over the next two, three years on the DOE side is going to be pretty significant for large contracts, very large contracts. There we would have, in most of those cases, we'd be on a team or a subcontractor to a team. We've got a lot of bids out. In fact, our opportunity list is as big as it's ever been. I'm pretty confident we're going to win some significant projects, and I see the bid opportunity just continues to increase. Really, it's increasing on the small to medium, which has always been our bread and butter.
Like I said earlier on an earlier question, there's been a lot of projects somewhat delayed. On the commercial side, we actually see pressure building for people to do things, and we see a lot of new opportunities.
Lou, I don't seem to understand. Does somebody need a goose, whether it's money to be put in the system for they allocate and commit to projects? Is it the Federal Government requiring companies to do things? Is it the Federal Government doing things? Is there additional money in a budget that's required to sort of get it off, to really grow?
All the above. We're seeing actually all the above. You've got the commercial side. There's pressure on a variety of major industrial companies in the mining business and the gas business. The fracking produces a tremendous amount of waste, and it's causing issues and opportunities for us in the commercial side and in the Government side, we're seeing lots of work. Remember, the problem we have is none of these things, when they do them, we have to bid on contracts. Our clients don't like us talking about them and don't like us announcing things. We're a little hamstrung in sometimes telling you until long after the fact on what's going on. As we sit today, we're seeing international, we're seeing commercial, and we're having, we think, good success on being on good teams and teams that should win.
All right, Lou. Hopefully, you could get these contracts and start reporting the numbers.
I hate to sort of dance on your question.
Yeah
I'm somewhat limited in how I can talk about what's really going on with our clients.
All right.
This business.
Thanks. Good luck.
Thank you.
As a final reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Justin Putman with Talanta Investment Group. Please proceed with your question.
Good morning. My first question is, what are your expectations for the isotope R&D expenses going forward? I think you said you were running about a half a million right now, but you're expecting that to grow?
Yeah, we think that number's going to go up. We're working those numbers today, but you could probably expect probably about a 50% increase just without anything else dramatic happening. We're sort of a little bit reactive to the circumstances where we're at with the planning. As a rule right now, you could probably use a 50% increase on that starting in the new year.
Okay. My second question, Lou, I guess this is for you, and I think you've kind of danced around this a lot as well, but I was just curious to know if there are any The FDA process approval is obviously a big step for your medical isotope program, are there any other revenue opportunities, maybe even outside the U.S., prior to receiving that accreditation?
With the medical project?
Yes.
Any country you go to will require a governmental approval. Actually, most of them will look to the FDA as the leader. Once you have FDA, it becomes semi-automatic in some of the smaller countries. Now, the medical isotope has led us to a variety of other opportunities that we're chasing. In one way, it probably will pay off in the development of our technology base. We're seeing that. They're bringing to us a variety of other issues, especially with our resin technologies, that could see revenue much sooner than we'd ever see with medical. As we sit today, we've actually been excited about how it is leading us to other opportunities in technology, both on the waste side and on the use of our resin technologies.
Okay. For example, with that Digirad deal, they agreed to purchase a certain quantity of isotopes, is that correct? That's still dependent on FDA approval.
Oh, absolutely. Yeah. They can't use it without that approval. All those things are really subject to us being able to get through the FDA.
Have you disclosed how much they've agreed to purchase? Is it TS or
Well, they are one of the largest consumers in the U.S. I don't remember the exact number. Huh?
No limit.
Yeah. There's no limit on what they could purchase, but they are the largest consumer of Tc-99m in the U.S. In fact, they've just bought another distribution system that now almost will make them a very significant, much larger significant user. I don't remember the number, but they are a very large consumer.
No limit either, right?
Our production limit is.
Yeah. Right. Exactly. It's more our production limit that would limit the availability. If we can produce it, they will buy it.
Okay. Last question on that. They currently own 5.4%, is that correct?
Correct.
Of the Perma-Fix Medical, you own 60.5%, is that correct?
Correct. Mm-hmm.
The remainder is just public float?
Correct. Yes. Several funds in Poland, and a small public float.
Okay. All right, great. Thank you for taking my questions.
Okay.
Our next question comes from the line of Bill Chapman with Morgan Stanley. Please proceed with your question.
Lou, Ben, good morning.
Hey, good morning, Bill.
Hello . Let me ask on the plants that are producing the Tc-99m. They're also in the business of selling generators, I believe like Australia or South Africa, if I remember correctly. How do we approach them on using the resin?
We're talking to pretty much all of them. It would be for a variety. They all see some value in what we're doing. There's been a variety of discussions with everyone. It sort of goes to what their goals are, what they're looking at, how they want to grow. There's a variety of approaches each of these companies have taken in terms of our discussions. We see opportunities right now with everyone. In fact, we're somewhat drowning in opportunities with what makes the best sense. As we look at the industry today, we're real excited about our position, where we are, and how we can help several of these people really grow their business.
It's everything from using their generators, putting our resin in it, to developing a new generator that would be used in selective markets that they can't compete in today.
Let's say you're going to them, and they're using high rich uranium or low rich, I presume. You can offer a much lower cost to them?
A much lower cost, a simpler production way. The uranium systems require a highly centralized production distribution system, whereas our technology could be done in a more distributed, diffuse production distribution system. You make the whole chain more reliable. You make the whole chain closer to the users. There's some tremendous advantages that our technology would offer.
Thank you very much.
All right, Bill.
Our next question comes from the line of Michael Potter with Monarch Capital Group. Please proceed with your question.
Hey, guys. Just a quick question on something you discussed earlier was that our license or the license that we have, in some way, did not enable us to bring in some waste from the government this year, that we have to wait till next year. Can you give us a little bit more detail on that?
Yeah. All our facilities have limits on the license. You can only have so much enriched uranium, plutonium, or certain radioactive isotopes. When our clients, especially DOE, has large quantities of certain materials that have these limiting isotopes, then we just have to plan the arrival. You can only have so much on-site, we have to bring the waste in, treat it, then get it out the door before we can accept more. It's a common limit we've had. Today, we do a lot of very high activity materials and very specialized materials, plutonium, do a lot of transuranic waste. All of those have some significant limits on how much you could have on-site. We then have to manage in and outs to avoid having problems with our license.
Even though we're limited on what we could have on our site, don't we still have the work order?
Uh-
Are they not issuing the work order until we're able to accept delivery?
No, we have the work order, but we can't accept the waste. Correct.
We have the work order, so wouldn't that be in our backlog?
No.
No, Michael, our backlog has always been sort of an unearned revenue number. It's waste on-site that has been received but not yet treated.
I see.
You need to remember that our contracts are open-ended, and so they will give us a work order under that contract and say, "We have this much." Until we receive it, there's no guarantees that they will actually send it. They said, "We got 100 drums of this material, and can you start taking it?" We said, "We'll take it over the next five months." It works that way, but you can't recognize it because there is still limits in the contract that they could change at any time they want.
Well, that's always the case, right?
Yeah.
That's always been the case, historically.
It's always the case. Correct. Yes.
Yeah. In some cases, it's the customer must get it done, so we have a little more confidence that they won't pull funding versus other times we don't.
Right. We still wouldn't recognize it.
Yes. The backlog is truly an unearned number.
Okay. Can you give us a sense of how large a piece of business this is that should be coming in at the beginning of the year?
Well, it's spread out. We have several contracts. We have several commitments with some of the DOE sites where they have to move, especially like in out at Hanford, they have requirements. They have to move a certain amount of material under their new rules with the DOE and the state, that pretty much guarantees we're going to get $5 million or $10 million a year out of them now. That's the kind of thing we see. They have requirements, and we're the only option, and they'll be sending us that amount over the next year. We usually don't have that kind of commitment with clients.
Uh-
I'm going to answer your question, but it's a nice, steady number.
It gives us a lot of confidence.
I think the best way to answer it, Michael, is we rarely have a commitment that can't be pulled off the table, and this one, though it still can, a little more pressure on the generator to get that out at $5-$10. It's almost like we rarely have anything guaranteed, and we sort of have a pretty good comfort level for $5 million-$10 million.
Okay. I'm assuming that is the main factor that gives you guys confidence in the guidance for 2016, a 50% increase in adjusted EBITDA?
Well, that plus we're just seeing a lot of opportunity. That's one, and that's great to have, but the amount of opportunities we're seeing on the commercial and on the international and then on the governmental side is looking very positive right now. We see a lot of opportunities.
Okay. There was a recent article in The Wall Street Journal, a few days ago, within the past week, on the issues that the DOE is having managing these sites and a lot of the waste that's been built up, and their budget issues over the past few years, and all this good stuff that we've known for a long time. Do you want to add any comment to that, Lou?
Well, deja vu. It's my old speech. There's so much waste out there, especially at DOE, especially at Department of Defense, especially at the commercial sites, the Corps of Engineers. I could go on and on. There was a lot of discussion in that article, a lot about what's going on in California at the national labs, and we're in the middle of that right now with our service group, where we're running the health physics work out there. We're in the middle of all that, and that just goes back to what we see is, we have, on our service side, probably the premier group for health physics and managing the radiation control at sites. That group is really blossoming right now. With it is coming a lot of work, and it's leadership work. They're highly technical.
We're fitting well with our treatment group, and we're seeing that all bloom right now. It's a good place to be where we are. We just see that there's a need in the nuclear industry for more leadership and more technical approach, and people are coming to us for that.
Okay. All right, guys, I'll get back in the queue. Thanks.
Thanks.
Our next question is a follow-up question from Sam Rabosky with SCR. Please proceed with your question.
Yes, Lou, one question I didn't ask. As far as the Polish company, how many shares are outstanding? You said it's trading around $10, and Digirad paid $14. We own 60%. What is the total number of shares outstanding that are tradable?
Approximately 1.3 million shares.
1.3 million shares. Okay. That's a valuation of $13 million plus for that. Okay. Is it helpful to have that information more readily available in the financial data that we put out?
Well, since it's totally consolidated, it somewhat shows up, but not in terms of a value on our balance sheet.
Yes. Generally, they are a subsidiary of our company. Our financial data represents Perma-Fix, and the value of that is presumably in our stock price and in our valuation.
Well, at this point in time, the $13 million to plus valuation, and if you're successful in accomplishing what you're trying to do, this would have a greater valuation than is reflected in Perma-Fix. You reflect book value and not the market valuation.
Right.
All right. Hopefully, you're successful sooner than later. Okay. Thank you.
Okay.
Our next question comes from the line of Bill Nasgovitz with Heartland. Please proceed with your question.
Good morning.
Morning, Bill.
Lou, what was your estimate of EBITDA for this year?
Six to seven.
Okay. Thank you.
We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.
Once again, like to thank everyone for participating in our conference call. With another quarter under our belts of sustained profitability, I can say confidently we've turned the corner. We're now on track to hit our guidance of $6 million-$7 million and are encouraged by our prospects heading into the new year. We're pursuing several large contracts in the service segment, which we hope to announce soon and see a growing number of opportunities within treatment. Very excited about our medical subsidiary based on the interest we received from the industry and are now finalizing plans for the FDA and look forward to providing you updates. Thank you all for participating and look forward to the next call. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.