Perma Fix Environmental Services Inc (PESI) Q2 2021 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Perma-Fix Second Quarter 2021 Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, David Waldman, Investor Relations. Sir, the floor is yours.

Thank you, Rushan, and good morning, everyone, and welcome to Perma-Fix Environmental Services second quarter 2021 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 2021 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 Cresendo 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 US 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 on our website. Now I'd like to turn the call over to Mark Duff. Please go ahead, Mark.

All right. Thanks, David, and good morning everyone. During the first half of 2021, we continued to experience the impact of the COVID-19 pandemic as the federal government has been much slower than the commercial sector to resume normal operations. This was not unique to us but has been experienced across the industry by most of our peers as well. Nevertheless, we were able to report a net income of $3 million for the quarter. We have $7 million of cash on the balance sheet and have lowered our bank debt to under $1.5 million. Importantly, we've begun to see activity pick up heading into the third quarter and expect a solid second half of the year barring any further slowdowns related to the COVID-19 new strains. Not only did we see things pick up this year, but we also believe we're very well positioned for 2022 as there is tremendous pent-up demand in both our Treatment and Services segments. Turning first to our Services Segment, our bidding pipeline is more robust than ever. As I mentioned last quarter, our teams have been working around the clock. We have been developing four or five simultaneous proposals at any given time. This is a direct reflection of the improvements we've made internally, specifically within our bidding organization. As a result, we are now bidding on a wide array of contracts collectively valued in the hundreds of millions of dollars. The fact is that we're not losing bids. The government procurement process has been delayed, and these contracts will eventually get awarded. Just last month, we were awarded a multimillion-dollar service contract for the Tritium Systems Demolition and Disposal project, which is expected to be completed over the next 18 months. We believe this contract is a good illustration of where things are heading and reflects our competitive edge, as this specific procurement includes significant competition with several of our toughest competitors as well as larger firms all bidding against us. Although this particular contract is smaller than some of the other contracts we're bidding on, it shows that the market is starting to open and we expect more contracts to be announced and awarded in the coming weeks and months. It's also worth noting that some of the contracts we're bidding on, if we are successful, could be transformative to the company. Importantly, these larger site operations and cleanup procurements within the Department of Energy are multibillion-dollar awards and include substantial small business subcontracting requirements as a percentage of the revenue. This plays into our strength, as Perma-Fix plans to remain a small business as defined by the government as under 750 employees for the foreseeable future. While we're working hard to secure teaming relationships on the proposal efforts, even if we're not successful on initial awards, there are still significant future opportunities for subcontracts with these primes on these projects within both of our segments. Turning to our Treatment Segment, we're beginning to realize increases in waste treatment activity both in bidding opportunities, receipts, and plant production as our Services Segment shipments have been delayed through most of Q2. However, it's important to reiterate this business has not gone away. In fact, the backlog of waste that must be treated continues to grow. Due to the diversification efforts of our sales team, we've been able to penetrate several new commercial markets and coupled with our typical government acceleration at the end of the fiscal year, which is Q3, we anticipate waste receipts rates closer to normal heading into September and into Q4. We also continue to expand our waste treatment offering. We recently completed design and began fabrication and construction of our new Therma-Fix Gen3 system, a third-generation vacuum thermal desorption system. The Therma-Fix Gen3 unit offers a treatment solution for problematic waste streams while providing increased efficiency and productivity as well. With our initial sales launch just a couple of months ago in June of 2021, and even before the unit has commenced operations, we've already secured an existing on-site waste treatment backlog in inventory and a large sales pipeline, which underscores the demand for this capability in both the commercial and government sectors. We're very excited about the system and anticipate steady receipts up through start-up in the fourth quarter and well into the 2022 timeframe. Turning to the Test Bed initiative, which we refer to as TBI, it's also referred to as the low-level waste off-site disposal project. We continue to progress and have received strong support from the Department of Energy in terms of providing a supplemental pathway for treatment of low-level waste from the 56 million gallons of tank waste located at the Hanford reservation. DOE recently notified that Washington State Department of Ecology that they are preparing an environmental assessment on the next phase of the test bed initiative. The Environmental Assessment or EA process is one of the final steps required before we can commence Phase 2 of the project, which will include extraction, shipment, and transportation of 2,000 gallons of tank waste to our Perma-Fix Northwest facility located in Richland, Washington. DOE officials have stated that shipment of this waste to our facility should occur prior to next summer. As recently reported in the local Hanford Area newspaper, the Tri-City Herald, use of routing, which is the basis of our process to treat the Hanford tank waste could save the taxpayer millions—billions of dollars and speed the emptying of the tank waste from the leak-prone underground storage tanks. As we've stated in the past, assuming we're successful, this project can be quite transformative to our company and will supplement the vitrification which is currently under construction and testing at the DOE Hanford site. To wrap up, while we're disappointed in our overall Q2 performance, we believe Perma-Fix is well positioned for growth. I'm especially proud of our business development efforts our team has initiated and completed which highlights our ability to adapt to the changing market. During this period, we've also invested in our capabilities and our facilities and have built a highly scalable infrastructure with a first-class team of folks to take us to the next level. Now with the return of normalization following the pandemic, we truly believe we're well positioned to aggressively grow both sides of the business and we're starting to see things pick up. As we look at our pipeline for the balance of this year and beyond, we expect to resume solid organic growth in the near term. I truly believe that the future is brighter than ever for Perma-Fix and we look forward to driving significant value for our shareholders. On that, I'll now turn it over to Ben who will discuss the financial results in more detail. Ben?

Thank you, Mark. I'll start with revenue. As mentioned earlier, the COVID pandemic really impacted our revenue in both segments as government sites haven't shipped the waste at their historic volumes and have been very slow to award or fund projects in the Service Segment. As such, our total revenue for continuing operations for the second quarter was $16.1 million compared to last year's second quarter of $22 million, a decrease of $5.9 million or 26.8%. The decrease in revenue is primarily due to the drop in the Services Segment, which totaled about $5.8 million, while our Treatment Segment was only marginally down from the prior year, about $134,000. The drop in revenue in Services was due to the completion of large projects whose revenue we've not been able to replace by another project or projects of equal value. For the year-to-date June 30th, our revenue was down $7.6 million or 16.2%. This drop in revenue comes from both segments as the Service Segment has been impacted again by the completion of certain projects and is down approximately $5.4 million, while the Treatment Segment has been impacted by the drop in volume of waste and is down $2.2 million from last year. From a gross profit standpoint, the quarter was $966,000 compared to $3.3 million in the second quarter of 2020. The drop in gross profit was approximately $2.3 million and was primarily from the Services Segment where reduced project revenue impacted gross profit from both a volume and margin standpoint. Also, lower volume of waste mix had a minimal impact on the Treatment Segment, while the fixed costs at the plants were kept fairly constant. For the six months ended June 30, gross profit was $3.3 million compared to $7.9 million in the prior year. This drop in gross profit was impacted by the lower volume in both segments as well as reduced margins in the Service Segment projects. Our G&A costs for the quarter were $3 million compared to $2.7 million in the second quarter last year. This increase of $297,000 was primarily related to increased salaries and consulting expenses that supported the increased bid and proposal activity. For the six months ended June 30th, G&A costs were $6.2 million compared to $5.6 million in the prior year. Again, the biggest impact on this variance was the higher bid and proposal expense from labor costs and outside consultants. Our net income attributable to common shareholders for the quarter was $3 million compared to last year's net income of $204,000. The main driver of this improvement was a gain on the extinguishment of debt related to the company's PPP loan which totaled $5.4 million and was forgiven in June of 2021. Our basic income per share for the quarter was $0.25 compared to income per share of $0.02 in the prior year. Our year-to-date basic income per share was $0.16 compared to $0.12 in 2020. Our adjusted EBITDA from continuing operations for the quarter, as defined in this morning's press release, was a loss of $1.7 million compared to income of $847,000 last year and this reflects the lower revenue in both segments impacted by the ongoing effects from the COVID pandemic. Turning to the balance sheet compared to year-end 2020, our cash on the balance sheet was at $7.3 million compared to $7.9 million at the end of 2020. Our unbilled receivables were down $7.1 million, which reflects the reductions in revenue compared to Q4 in the service segment. Our current liabilities were down $8.8 million as a result of the timing of our payments, a reduction in the activity in the service segment, and the forgiveness of the PPP loan. Our backlog at the end of June was $6.7 million, which is down from $7.6 million at year-end and up slightly from $6.4 million in June of 2020. Our total debt for the quarter—at the impact quarter end was $1.3 million, which is primarily owed to PNC Bank, our credit facility. Finally, I'll talk about cash flow activity in 2021. Our cash provided by continuing operations was $803,000; our cash used by discontinued operations was $315,000; cash used for investing of continuing operations was $649,000, which is primarily cap spending; and our cash used for financing was $439,000, which represents our monthly payments on our term loan totaling about $219,000 and another $220,000 per finance lease and debt issuance costs. With that operator, I'll now turn the call over to questions.

Okay. Ladies and gentlemen, we have reached the question-and-answer portion of the call. And our first question comes from Howard Brous.

Mark, Ben, first of all, I hope you and your families are well and protected from COVID. Has anyone been affected by it?

So far so good, Howard. Thanks for asking.

Yes. We're good at the families, Howard.

All right. Thanks. That's the most important thing. Let me first start with TBI the filing. When do you expect that filing to the state?

Right now, they're working on the permit. I don't know exactly when that's supposed to go in, Howard. I know that they have scheduled a hearing for the EA based on draft comments—that's supposed to happen in the next few months and then they'll submit the permit to the state. They're doing it in sequence as opposed to in parallel, which is something we're pushing them to try to consider doing both at the same time. All that should happen in the next three to four months to support beginning this extraction in the spring.

Given that permit, what are the possibilities or probabilities that once you start extracting the 2,000 gallons the spigot stays open?

It's difficult to speculate. We're certainly keeping that option open, and we can do up to 300 gallons a year now with our capability and our permit. We're certainly promoting that. We need to decide to do that. There's still some question as to whether they're going to use the TSCR system, which is a much more elaborate pumping and extraction system, or the originally designed what we call 'pump on a stick' that was designed just for TBI, which is much slower. If they use that TSCR system, it will go very quickly and pull out about five times as fast. I don't know if DOE has made this decision internally yet. But one could speculate that if you're treating the tank waste successfully, they would continue to support that demonstration with greater volume, but it would be speculation to make that assumption.

Okay. Fair enough. Am I missing something? But is it fair to say that a good number of the mid-level executives in the DOE have not been appointed and that's part of the problem of the lack of some of these large awards?

Yes. It is a fair statement, Howard. I think again, it's really difficult to understand what's holding some of these bids up. As we've mentioned in the last several conference calls, we have a sizable spreadsheet of bids that we've submitted with significant award values that have just been continually delayed. One could speculate, and I would definitely believe, Howard, that your statement is true. Because there is not an assistant secretary confirmed by the new administration, there is a tendency to wait for that to occur. While they do have a good team of folks carrying over from the old administration that are managing things, there's just a natural tendency to wait for the new person to arrive to make these big decisions. I would speculate across the board, Howard, that the lack or delays of getting the assistant secretaries in place in many of these cases have an impact on the procurement process for sure.

Would that be the same for the EPA with the Navajo bids?

The Navajo, what you're speaking about is the abandoned uranium mine program, and that one is more of a mystery. I have to assume you're correct on that.

Right.

And that one is more of a mystery. I have to assume you're correct on that. I don't follow the EPA organizational chart as much as DOE, but I have to assume it's a similar situation. I know that at one time it was funded. I don't know if that's changed.

It was funded.

Yes. It's a significant program that has a very significant future for us and for other participants. We were initially informed that task orders would have been distributed months ago. I don't know what's holding it up. We had a difficult time finding information or getting information back from it, and I have to assume you're correct that it's largely because of administration changes.

Well, the settlement was $1.7 billion EPA with the Navajo. So the contract we're talking about is about $220 million, if my memory serves me correctly. Does that sound about right?

That sounds about right. That's basically the contract value for that. Yes, that's correct.

All right. What about, as an example Moab, Luckey, Oak Ridge, the Navy bids? Is that all in a similar vein that we're still awaiting?

That's correct, Howard. There's also though even at lower levels, there's a lot of task orders in the $5 million to $10 million range that don't require that level of approval. The procurement processes are just moving really slow across the country in all different organizations. We have task order bids, the DOE, the Corps of Engineers, the Navy all waiting for announcement of award and mobilization. It's really every level of procurements have been very lethargic in the decision announcement process. It may not just be the administration issues. I think it's largely COVID related, where it's just a lot of people working from home. The rush to get back out in the field is not there yet, because our clients are not out in the field yet. So it's really both. The larger ones are certainly administration-dependent, but the smaller ones, I think, are just slow processes in the procurement cycles.

Mark, Ben, wish you the best. Stay safe and good luck. Thank you very much.

Okay. Thanks.

Appreciate your accord, Howard. Appreciate it.

Bye-bye.

Up next, we have Ryan Hamilton. Ryan, please state your question.

Good morning, everyone. And thank you for taking my questions.

Hi, Ryan.

Good morning, Ryan.

Could you— you touched a little bit in your opening remarks, but could you walk us through the cadence of the quarter? And maybe start with March and kind of just walk us through how March— or how, like, May looked compared to April and so on. Can you just walk us through that if you don't mind?

Yes. Ryan, March and April were—and we talked about this several quarters ago, and we had a fiery discussion in Q3 and Q4 last year. So we expected Q2 to be a tough quarter for a number of reasons. Number one, we had targeted and defined an unusually large quantity of large procurements like the Moab procurement and a number of others that were going to require some investment and positioning that we felt we had a real offering that was going to be very competitive. And we did get that, and we got a number of others. So far as the cadence on the Services Segment, we saw the project in Seattle, which was very good to us for two years, ramp down, a significant ramp-up in proposal efforts which took a significant investment through Q2, and the lack of awards of outstanding bids that we've already submitted. So all that together showed we've demonstrated a drop in revenue on the Services side of the house. We were not able to replace quickly enough that Seattle project that was generating significant revenue for us. So, we're anticipating we'll win our share of these awards. As soon as it is awarded, we'll be back in action to replace the Seattle project. The one we did win was the Princeton Plasma Physics Lab. We'll start to do that, and it's ramping up quickly. We have a number of others that are smaller and a couple of others that we're expecting here about any day. We still expect those to start impacting our end of Q3. On the Treatment side of the house as far as your term cadence goes, we did start seeing things pick up. They've ramped up a little bit every month. We had a couple of significant receipts bump from June into July and August that lowered us a little bit towards the end of June. We're starting to see our backlog creep up. But more importantly, we're seeing a lot of opportunities to bid on waste receipts. As I mentioned before, we're getting some backlog and inventory for our new system in Florida, the BTD. All these things together, and knowing where our clients are going with backlog to move before the end of the fiscal year, we're anticipating looking at a better Q3 than we did in Q2 on the waste receipt side of the house particularly. So we're seeing some things pick up. Our sales team is very busy now. You asked about kind of contrast in March. We weren't flying anywhere. Our clients weren't meeting with us because they had restrictions on visitors. Now our entire sales team, I look down the hallway, and all the offices are dark and they're out in the field meeting with folks, going to conferences and meeting with commercial clients, doing presentations, all that kind of stuff. So it's a lot different energy than it was just in March, and that's ramped up through the quarter and provides kind of the energy and optimism we have for where the waste treatment side is going. It's kind of a long-winded answer, Ryan.

No, that's great. And I appreciate the color. You touched on backlog. Could you break out what you have between Treatment and Services currently?

Well, I think, I'll let Ben jump in. I think, Ben mentioned a $6.7 million backlog at the end of June. I believe that was just for Treatment if I remember correctly, and with our Services, it's a little bit more than that. You want to address that, Ben?

Yes. The $6.7 million was the Treatment backlog. Services is in around the $30 million to $32 million range at the end of the quarter. And that's funded...

Yes. No, I'm sorry, what was that?

That's funded backlog. We track various looks at backlog in the Service segment because there are projects that you may have won, but it's not funded and there are some that are high probability. But what kind of the surest thing is the funded backlog and that was at about the $30 million to $35 million range.

Perfect. You touched on SG&A being up a little bit on wages and a couple of other things. Assuming that COVID kind of drags out a little longer here, are there any other big ticket items that you could kind of extract out of SG&A costs at all?

Yes. We're pretty lean on G&A. There's always some. Depending on urgency, but we are a smaller public company and certain costs just don't go away. That's why we're so dependent on—and the needle moves so quickly on revenue shifts. Again, there are always certain costs, and we're always looking at them on a regular basis. If you look at the history of our G&A number, good and bad years, it's always kind of been in a certain range.

Got you. And kind of along those lines as far as increasing wages, are you—on your bidding activity, are you increasing price?

That's a good question, Ryan. It's pretty flat on the Services side of the house. It is very competitive as our competitors are quite hungry as well. If you listen to some of the other earnings calls from the big boys that we team with, as well as some of the smaller private companies, everyone's waiting for the same bids, waiting for things to be awarded, and projects are being completed the same deal. Everyone is really going through similar cycles. There's more of a tendency to reduce your fee and your margins, but wages are pretty consistent, and we're not seeing that change dramatically year-over-year overall. It's really important to have a technology that can cut costs, which we have got several that are in our procurement. So we're hopeful we'll be able to show greater value on some of our bids.

Excellent. And kind of along those lines as far as bidding activity goes, you've touched a little bit on it. Could you maybe go into maybe the size of the job that you're seeing—that you're putting out bids on, number of bidders, kind of just walk us through that just a little bit more what the bidding activity looked like?

It's a broad question, Ryan. But in general, we've got the large bids like the Moab one that's been talked about, that's a 10- to 15-year contract, and Luckey is 10 years as well, which is a site in Ohio. Those are big bids with lots of competitors. It’s difficult to really plan on those because they can go in many different directions. Most of our other projects are between $5 million and $10 million task orders. We've got probably 10 of those we're waiting on. We have a couple between $20 million and $50 million that we're also pretty optimistic about. We are pursuing a couple new markets particularly with the Navy in their ship program and revitalization program at an awful shipyard in Virginia, where we're taking our expertise that we've developed in the DOE market for decontamination and decommissioning and applying it to the Navy and their programs for decommissioning as well. We're optimistic about that number of bids there. We also bid a number of IDIQs. I think we're waiting to hear on maybe seven or eight IDIQs, which are pretty much a license to bid and there'll be more bids once these are awarded. We're optimistic that we're going to win five or six of those. And know that they're well funded. But again, it's just real slow. They got to award the IDIQs and then run task orders through them, and we'll wait like everybody else waiting for that to happen.

And as we continue to wait for awards to be, I guess, handed out, at what point do these facilities just overfill? I mean, at some point I would imagine they can no longer delay and it becomes almost a crisis. Is that a right assessment?

Yeah. No, what you're speaking about is more the operational waste streams that we get. There is a certain amount of that that does occur. Most of the projects I'm speaking of are cleanup projects. So you can kick that can down the road on cleanup, and it doesn't necessarily achieve the scenario you just mentioned. Those projects will remain. But usually, those projects are holding up something else. In other words, if you have a contaminated building, you want to get rid of it because you want to put something else there or meet a milestone. There is a driver typically, and that's what we're hoping we'll start getting into place here in the next couple quarters.

Okay. Okay. Thanks a lot for your time, guys. I appreciate it.

Thanks, Ryan.

Up next, we have Stephen Fyne. Stephen Fyne, please state your question.

How are you guys? Hope everyone is okay.

Hi, Stephen.

Hi. How you doing? What's an IDIQ? I never heard that term.

IDIQ is indefinite delivery indefinite quantity contracts. It’s like what they call a MATOC, which is a Multi Award Task Order Contract. What the government does is they'll award to somewhere between three and 10 contractors. What the value of that is, Stephen, is when they make those awards, they don't have to shoot up full RFPs for every project. They basically prequalify you on your experience, your financials, your capability and all that and then just send out a scope of work and a price sheet. You can do task orders very quickly for a predefined or prequalified group of bidders or companies. It's a way to accelerate contracts that have lots of different task orders that go through them over the next five years. So you don't—when you win a contract like that in IDIQ, you don't win any value. We don't take the value on it, but you are in a position with reduced competition and reduced investment. When the task orders come out, you can bid quickly, and they award quickly. It's not a big investment.

All right. The $5 million that was forgiven, was that money used up or is that money there, or was it used up?

Well, it's part of—it wasn't a timing thing. We got it last year. We got it in April of 2020. We're at $7.3 million now. So it just was all part of the bank account.

So there's actually cash there, or is this just an accounting thing?

No, no. The cash balance on the balance sheet is a cash balance, yeah.

All right. All right. And while I have you, Ben, when you mentioned there's a $30 million backlog for Service, is that supposedly going to be multi-quarter business or just the next quarter or this quarter?

Yes. That is all our projects at that point in time. Therefore, subcontracts might be—they may run over a year, 1.5 years, others may be short burn. So that really doesn't give you an indication of.

Yes. That doesn't give you an idea. All right. And then the other question is when you were talking about your cost of goods, you mentioned that in there are costs related to bidding. How much is that?

That would be in the G&A not the bidding.

Yes. Yes. So...

We were about $300,000 over from the prior year, and a large chunk of that is twofold. One, we—as Mark mentioned a few times—the bidding activity was pretty intense. We had to bring in help, contract, outside contract costs. The other piece of that, and it kind of goes back to an earlier question about managing our G&A, many times, we'll bring in costs related that would be billable in other times. That increases the G&A number because you use them on a bid and proposal project. So when a new project comes in, they move into cost of goods sold and are tied to revenue. That kind of is another way that it manages your G&A costs.

Got it. Okay. So is it—I guess I'll direct this to Mark. I mean, understanding everything that's going on, do you think it's feasible that we will equal last year, this year? I mean, do $100 million?

Steve, I don't believe $100 million is attainable this year based upon what's happening with COVID right now in Q3. If you were to ask me last quarter, I probably would have felt a little bit more optimistic about it. But DOE is kind of doing a little wait and see on where things are with getting back in the field to a certain degree. Having said all that, I think we can get real close to a fourth quarter that would represent $100 million burn. So in other words, $25 million in every quarter. I think it's sustainable. If they get some things awarded, we're on the winning end of it.

With regard to COVID, are you requiring your people to get vaccinated?

I was wondering if we would get that question, Steve. It took a while to get to that question. We are not at this point but we are on that path. We're heading in that direction and we're waiting for a couple things to happen. Right now, we just did a survey internally. We're in about the mid-70s percent vaccinated, which is pretty far above the national average. We have about 15% of our staff in that survey have said that they intend to get vaccinated. I feel confident that we can be in the mid-80s percentage vaccinated in the next couple of weeks based on that survey. Having said that, I'm pretty comfortable there. We don't have a lot of cases overall in the company, but we do in the areas that we live in. If the government goes to a mandate, we'll likely follow those mandates. You've probably heard the Biden administration talk about this. So if the government has it for the government contractors, I can't say for certain that we would implement it right away, but I certainly think it's highly likely we will.

I thought I heard that the military was being—they were required in the military to be, but I mean wherever you are for lack of a better word politically and with all that's going on. You've got enough troubles with the business and so forth. Certainly, one would not throw into the pot, one would think the possibility that somebody unvaccinated could impact your crippled operation at this point. So I'm very strong on that being essential. All right. You had business out in, what was it, transuranic, it was that you would get from CHM2 out in Hanford. Is that true? That's past bid. You will get business...

Yes.

Is that—are you getting that back or what?

No. What happened was they changed contractors out there on the Plateau contract at Hanford, which is an enormous contract, as you know. The administration has changed in headquarters, and they determined they need to make some adjustments to the way they ship waste, which is not a big adjustment, but it does require some permit changes. These permit changes have been ongoing—and they're expected to be in place in the next month or two. Once those are done, then they'll start to resume shipping again for the transuranic. That's been a very big impact on us overall, to get that program back in place, and we're optimistic that will be in place in the September timeframe maybe October, and get back to normal the shipments.

For just as a lack of a better word a sarcastic comment, I note that the new contract winner for that, the old CHM2, includes people from Aecom, who at least from my read have been obstructive to you in the past. So again, I'm being—if I'm out of line, I'm out of line. All right. With regard to the TBI, why all of a sudden—I mean, if you did the three gallons, you didn't have to do an environmental study before the three gallons? I mean, why was it suddenly they wanted an environmental study for the 2,000 gallons?

I'm trying to recall, was there an EA for the three gallons, do you remember?

No. The DOE determined they didn't need it for that size project. So, it was not required for the three gallons.

It was a Ponzi, yes. So finding no significant impact because it was so small. That's right.

Okay. Well I just find—and these are my statements, okay? So I just find this whole situation—the deeper I get into it—I mean there was a—in May of this year, who was it? Gary Peterson and Bob Ferguson came out with an article in the paper out in the Tri-City paper. In there, they pointed out at the present vitrification plant is functional that it will create a gallon of waste for every gallon that they treat. So with the escalating costs and so forth, if that's so, the whole thing is just insane and absolutely makes no sense. We're witnessing the effects of climate change, which has to—with one reasonable person would think would continue where are they going to find money to pay extra money that's obviously—the costs have escalated there. I think what it was two years ago, they said it went up to about $400 million, $500 million or $1 billion. With all the money that's been pumped in the economy, I guess it will be more expensive. The whole thing to me is just—it just doesn't make sense. It’s insane. It just seems to me that maybe, again being cynical that people do not want you to succeed. But I made my comments. There was—clearly the world out there wants its vitrification whether it's real or not. My last question, which I didn't understand is you spoke about a TSCR system versus what is at the AVANTech system? What is it—what's is...

Thanks, Steve for pointing that out. I didn't mention TSCR. That's an acronym that I'm sure very few people know about. It's the Tank Side Cesium Removal system, which is a very well-engineered system that DOE and its contractors have developed to remove tank waste quickly and efficiently and take out some of the higher level radionuclides, cesium out of the process stream. In other words, as the waste is rising through the system, it will move it through an exchange system. What that does is it takes out some of the radionuclides so we can call this low-level waste and send it to us to treat it. That system, which is very, very similar to the one at Savannah River that you just mentioned is operating very well, is in development and testing at Hanford now and that system could be used to extract tank waste very quickly and efficiently once it's gone through the readiness process and demonstration process, or we could put the system in that was designed for this application just for us. Either way, we'll take the 2,000 gallons, however we can get it. The TSCR system, which is the one we're developing now would be very efficient. We demonstrate how it works and could be used very efficiently and provide the opportunity to keep the waste coming after they do the demonstration.

So my readings were—so this TSCR system, you have stuff—the AVANTech is by—is this next to the tank?

Yes.

So how does this differ? I mean, I've read that they actually approved the AVANTech system and there were even articles subsequent to that we're supposed they purchase huge containers where they were going to store the waste into the containers and then would go for treatment. So is that the same thing we're talking about?

That's the same thing we're talking about, yes.

Yes. Okay. All right. All right. Well, I—the thing I guess, look, I think you guys—your attitude is great. You couldn't ask for—it's a tough area. And I applaud the effort and everything. But this TBI thing disturbs me, because number one, even if you looked at this as a support function for the plant, which as I understand is not going to be big enough to handle everything. A smart businessman would have a backup. The way this has moved, the way this is structured, after all this time this, to me reminds me of how long it took you to get to three gallons, and we're talking next summer and why next summer. I mean why can't this—why can't there be a lower urgency? But again, that's my thought process. My hope is with all this other stuff you're doing, that you'll become a $200 million company by the end of 2022 or thereabout. If something like this happens, it happens and so forth. But again, look, it's tough times. I applaud you guys. I most importantly applaud your attitude. I think your attitude is fabulous. You're looking ahead. You've gone through tough times and just keep it up, because the old story is the people win who are there in the end, who don't give up. Thank you all.

Thank you, Steve. I appreciate the kind words.

There are no further questions at this time. Ladies and gentlemen, this does conclude today's Q&A. I would now like to turn the call over to management for any closing remarks.

All right. Thank you very much. I'd like to thank everyone for participating in our second quarter conference call. As we said, we remain extremely bullish on the outlook for business and believe we're extremely well-positioned for growth. We appreciate the continued support of our shareholders and look forward to providing further updates as developments unfold. Thank you.