Perma-Fix Environmental Services(PESI) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The condensed consolidated financial statements detail the company's financial position and performance, highlighting asset growth, a return to profitability, and improved cash flow from operations Condensed Consolidated Balance Sheets The balance sheets reflect an increase in total assets driven by receivables, alongside a rise in liabilities and a modest increase in stockholders' equity Balance Sheet Highlights (In Thousands) | Balance Sheet Highlights (In Thousands) | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $32,217 | $23,526 | | Accounts receivable, net | $15,342 | $9,364 | | Unbilled receivables | $9,336 | $6,062 | | Total Assets | $79,504 | $70,898 | | Total Current Liabilities | $27,469 | $22,708 | | Deferred revenue | $7,765 | $4,813 | | Total Liabilities | $40,673 | $33,365 | | Total Stockholders' Equity | $38,831 | $37,533 | Condensed Consolidated Statements of Operations The statements of operations show significant revenue growth for both the quarter and nine-month period, leading to a return to profitability from prior-year losses Key Metrics (In Thousands) | Key Metrics (In Thousands) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $21,877 | $18,472 | $67,016 | $53,842 | | Gross Profit | $4,549 | $3,070 | $12,074 | $7,590 | | Income (loss) from operations | $496 | $(928) | $765 | $(3,691) | | Net Income (loss) | $341 | $664 | $404 | $(2,124) | | Basic EPS | $0.03 | $0.05 | $0.03 | $(0.16) | Condensed Consolidated Statements of Cash Flows The cash flow statements indicate improved operating cash flow, continued investment in property and equipment, and significant cash generation from financing activities Cash Flow Summary (In Thousands) | Cash Flow Summary (In Thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Cash used in operating activities | $(26) | $(893) | | Cash used in investing activities | $(1,386) | $(922) | | Cash provided by (used in) financing activities | $1,890 | $(694) | | Increase (decrease) in cash | $478 | $(2,513) | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue disaggregation, debt agreement amendments, significant receivable settlements, and the recognition of an Employee Retention Credit - Revenue is primarily recognized over time and is disaggregated by contract type (Fixed price, Time and materials) and generator (Government, Commercial). For the nine months ended Sep 30, 2023, total revenue was $67.0 million, with $53.8 million from domestic government sources[28][30][31] - The company amended its loan agreement with PNC Bank on July 31, 2023, extending the maturity to May 15, 2027, and obtaining an additional term loan of $2.5 million[57][60][66] - Perma-Fix Canada Inc. (PF Canada) has reached an agreement in principle with Canadian Nuclear Laboratories (CNL) to settle and receive payment for approximately $2.3 million in unpaid receivables and $1.1 million in contractual holdbacks[71] - The company determined it was eligible for the Employee Retention Credit (ERC) and claimed a refund of approximately $1,975,000, which was recognized as other income in Q3 2022 and received in cash in March 2023[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights significant revenue and gross profit growth driven by segment performance, improved liquidity from a credit facility amendment, and ongoing uncertainties including government reliance and macroeconomic factors Results of Operations Results of operations show strong consolidated revenue and gross profit growth for both the quarter and nine-month period, driven by segment-specific performance, while SG&A expenses remained stable Revenue Change by Segment (In thousands) | Revenue Change by Segment (In thousands) | Q3 2023 vs Q3 2022 | Nine Months 2023 vs 2022 | | :--- | :--- | :--- | | Treatment Segment | +$1,918 (+21.6%) | +$8,474 (+34.2%) | | Services Segment | +$1,487 (+15.5%) | +$4,700 (+16.2%) | | Total | +$3,405 (+18.4%) | +$13,174 (+24.5%) | Gross Profit Change by Segment (In thousands) | Gross Profit Change by Segment (In thousands) | Q3 2023 vs Q3 2022 | Nine Months 2023 vs 2022 | | :--- | :--- | :--- | | Treatment Segment | -$473 (-24.0%) | +$1,069 (+25.6%) | | Services Segment | +$1,952 (+177.0%) | +$3,415 (+99.8%) | | Total | +$1,479 (+48.2%) | +$4,484 (+59.1%) | - SG&A expenses remained flat, increasing by only $4,000 in Q3 2023 and decreasing by $66,000 for the nine-month period compared to the prior year[115][116] Liquidity and Capital Resources The company's liquidity is strong, supported by increased working capital and an amended credit facility that extends maturity and provides additional borrowing capacity, deemed sufficient for the next twelve months - At September 30, 2023, borrowing availability under the revolving credit facility was approximately $10,378,000, which included cash and was net of $3.2 million in standby letters of credit and a $750,000 availability reduction[121] - The company amended its credit facility on July 31, 2023, extending the maturity to May 15, 2027, adding a new $2.5 million term loan, and removing the Tangible Adjusted Net Worth covenant[128][131] - The company met all its loan covenant requirements in Q2 and Q3 2023 and expects to continue to do so for the next twelve months[136] Known Trends and Uncertainties Key trends and uncertainties include heavy reliance on government contracts, potential impacts from government shutdowns, progress on international agreements, and ongoing macroeconomic pressures like inflation - The company is heavily dependent on government contracts, which accounted for 74.2% of revenue in Q3 2023 and 82.6% YTD[141] - A potential U.S. government shutdown could negatively impact financial results through delays in procurement, waste shipments, and new projects[142] - An agreement in principle has been reached with CNL for the payment of approximately $2.3 million in receivables and $1.1 million in holdbacks to the company's Canadian subsidiary, PF Canada[144] - Macroeconomic factors, including inflation, supply chain issues, and higher interest rates, continue to negatively impact financial results and may inhibit the company's ability to raise prices[146] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies, thus no disclosure is provided - Disclosure is not required for smaller reporting companies[150] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[151] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[152] PART II - OTHER INFORMATION Item 1. Legal Proceedings No new material legal proceedings are pending against the company or its subsidiaries, nor have there been material changes to previously disclosed proceedings - There are no material legal proceedings pending against the company or its subsidiaries that have not been previously reported in the Form 10-K for the year ended December 31, 2022[154] Item 1A. Risk Factors No material changes have occurred in the risk factors previously disclosed in the 2022 Form 10-K and Q1 2023 Form 10-Q - No material changes have occurred in the risk factors previously disclosed in the 2022 Form 10-K and Q1 2023 Form 10-Q[155] Item 6. Exhibits This section lists the exhibits filed with the report, including credit agreement amendments, officer certifications, and Interactive Data Files (XBRL) - Exhibits filed include the Seventh Amendment to the Credit Agreement, CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 1350, and various Inline XBRL documents[158]