Jeremy L. Dillon
RW Monitor
11/7/2014
While Perma-Fix Environmental Services has experienced a string of poor quarterly performances dating back to last year, the company is on “an uphill ride” following its profitable third quarter results, Perma-Fix CEO Lou Centofanti said this week during the company’s third quarter earnings call. Perma-Fix reported an operating income of $2.6 million for the quarter, compared to an operating loss of $667,000 in the same period of 2013, and Centofanti indicated the results would be replicated in the following quarters. “We are beginning to see the benefits of our efforts to streamline the organization,” Centofanit said during the call.
The company attributed the positive quarter to increased business on the treatment side, as well as cost cutting initiatives. Revenue for the Treatment Segment was $12.7 million compared to $8.9 million for the same period in 2013 due to higher waste volume, Perma-Fix said. “We saw significant improvement in our treatment revenue, which increased 42 percent compared to the same period last year,” Centofanti said. “At the same time, our gross margin more than doubled to 33 percent compared to 16 percent from the same period last year. This improvement is the result of higher volume in our Treatment Segment, more project work in our Services Segment and our cost reduction initiatives implemented over the past six months.” Gross profit for the third quarter of 2014 was $5.6 million compared to $3.1 million for the third quarter of 2013, and revenue was $16.9 million compared to $19.1 million for the same period last year.
Next Two Quarters Should Be Positive, Company Says
With visibility stretching to the first quarter of 2015, Perma-Fix predicted these results would continue for the next two quarters. An increased backlog and confidence in the sales pipeline should render positive results, Cenotfanti said. “We are encouraged by the outlook for the fourth quarter and for earlier 2015, given our sales pipeline within the service segment and our backlog in the treatment segment,” he said. “The backlog improved to $10.7 million, an increase of over 75% from the end of the second quarter. We expect our fourth quarter results to be as profitable as the third quarter.” Perma-Fix Chief Financial Officer Ben Naccarato echoed the positive prediction for 2015. “The cost cuts we’ve made, as well as the fact that we have a better baseline of business, and hopefully continuing to improve, is why we are more optimistic about 2015,” Narccarato said.
Perma-Fix, though, does not plan to stop improving the cost efficiency of the company. “We’ve cut significant operating expenses out of the business, and continue to look for ways to further streamline the organization,” Centofanti said. “At the same time, we remain focus on paying down debt and further strengthening the balance sheet. I greatly appreciate the support from investors that have stuck with us in this turbulent period.”
Tc-99m Update
Centofanti also celebrated the progress the company’s subsidiary, Perma-Fix Medical, has achieved in securing funding for its medical isotope production technology. He indicated that funding for the technology should be complete this month. “We are in the process of completing the recent funding of our medical isotope ("Tc-99m") technology with European investors at the subsidiary level and expect this financing to be completed during November 2014,” Centofanti said. “In addition, we were recently awarded a notice of allowance on our patent application, which allowed all our claims. This very broad patent is a major milestone for the company. We continue to advance the technology and are in ongoing discussions with potential strategic partners from within the industry. We look forward to announcing additional developments as they unfold.”
Perma-Fix also reiterated its desire to pivot its technology into a larger production design. Centofanti indicated that the company after looking at demand and potential competition felt a larger production design is needed to fully take advantage of the market. The company announced earlier this year the successful demonstration of its technology to produce the medical isotopes used in millions of procedure annually, and Perma-Fix has been trying to raise funding to move its design through the regulatory process in Europe and the United States. While a larger design would better fit the larger markets, the time needed to re-configure the design will push back Perma-Fix’s ability to begin production. Originally, the company had anticipated filing for Food and Drug Administration approval by the end of the year, but according to Centofanti, the regulatory submittals are more likely to happen sometime next year.
