PESI Q1 Earnings Call: Delays in Federal Projects and PFAS Progress Shape Outlook

Environmental waste treatment and services provider Perma-Fix (NASDAQ:PESI) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 2.2% year on year to $13.92 million. Its non-GAAP loss of $0.19 per share was 35.7% below analysts’ consensus estimates.

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StockStory’s Take

Perma-Fix’s first quarter performance was influenced primarily by delays in federal procurement and project activity, which management attributed to the transition in the U.S. administration. CEO Mark Duff explained that although these challenges constrained revenue growth, the company saw improvement in its Treatment segment as waste receipts and backlog increased toward quarter-end. Duff highlighted that the company achieved higher gross profit in the Treatment segment, supported by increased waste volumes, reduced variable costs, and targeted operational efficiency initiatives. Additionally, the Services segment experienced a slight revenue decline but benefited from better margins due to cost reductions and resource alignment. Management was candid about the temporary nature of these headwinds and emphasized ongoing investments in facility readiness and staffing to support anticipated growth.

Looking ahead, Perma-Fix’s outlook is anchored in several growth drivers, including its expanding waste treatment backlog, progress on federal contract opportunities, and advancements in PFAS destruction technology. Duff stated, “Our Gen 2 PFAS unit remains on track for Q4 deployment and should expand our processing capacity by at least three times.” The company expects to benefit from the ramp-up of the Department of Energy’s (DOE) Direct-Feed Low-Activity Waste (DFLAW) program at Hanford, with recurring revenue potential beginning later this year. Management also noted upcoming contract awards with the DOE and Department of Defense, as well as international expansion efforts. However, they cautioned that execution risks remain, particularly around the timing of federal project starts and the adoption pace of new PFAS regulations.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to procurement delays affecting project starts, but highlighted progress in Treatment operations and PFAS commercialization as positive developments.

• Treatment segment backlog growth: Waste receipts at the Perma-Fix Northwest facility increased, lifting the segment backlog by approximately 30% to over $10 million, reflecting stronger demand from Hanford-related projects.
• Operational efficiency improvements: CEO Mark Duff cited ongoing investments in staffing, training, and facility upgrades, which improved throughput and gross profit in the Treatment segment despite higher fixed labor costs.
• PFAS technology advancement: The company began receiving its first federal shipments for PFAS destruction and implemented chemical recycling upgrades that reduced costs and increased process efficiency. The upcoming Gen 2 system is expected to triple processing capacity.
• Federal project delays: The Services segment faced revenue pressure due to deferred federal procurement, but management pointed to a growing pipeline of larger DOE and DOD contract opportunities, particularly in Hanford and West Valley.
• International expansion efforts: Perma-Fix reported increased waste receipts from Canada, Mexico, and Germany and continued to pursue partnerships and permits in Europe, including the JRC Italy project, with late 2026 as the target for treatment operations.

Drivers of Future Performance

Perma-Fix’s guidance for the rest of the year depends on backlog conversion, federal funding continuity, and scaling its PFAS and Hanford initiatives.

• Hanford DFLAW program ramp-up: Management expects the August start of DOE’s DFLAW program at Hanford to drive high-margin, recurring revenue streams, though actual waste processing receipts may begin several weeks after operations commence.
• PFAS regulatory tailwinds: The company is positioned to benefit from stricter state and federal PFAS regulations, with the Gen 2 processing unit expanding capacity and making Perma-Fix more competitive on cost and efficiency relative to incineration alternatives.
• Federal contract pipeline visibility: Perma-Fix anticipates improved revenue as delayed federal and DOD projects resume, but notes that the timing of awards and funding allocations remains uncertain, particularly for new work at West Valley and other DOE sites.

Catalysts in Upcoming Quarters

In the upcoming quarters, the StockStory team will watch (1) execution and throughput on Hanford waste streams, particularly as the DFLAW program ramps up, (2) commercial adoption and operational scale-up of the Gen 2 PFAS unit, and (3) the pace and scope of new federal project awards, especially at West Valley and under DOE/DOD contracts. Progress in international expansion and regulatory movement on PFAS destruction standards also remain important signposts.

Perma-Fix currently trades at a forward EV-to-EBITDA ratio of 91.4×. At this valuation, is it a buy or sell post earnings? See for yourself in our full research report (it’s free).

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