Perma-Fix (PESI)

[value1008]

PESI-- I listened carefully to the CC while comparing it with the transcript given at http://seekingalpha.com/article/3661026-perma-fix-environmental-services-pesi-ceo-lou-centofanti-on-q3-2015-results-earnings-call-transcript?part=single -- but that transcript was very garbled in a number of places, so i cleaned it up to match the actual CC in the most relevant places and am posting the entirety of it here below.

I was delighted to hear CEO Lou say (i'd not heard this before) that their resin might be bringing in revenue opportunities even before their PFM subsidiary is bringing in revenues from the medical field. That's huge news, IMO.

Also, in their main business, he spoke of the "pent up demand" for services and treatment that should bring in lots of the smaller, steady revenue stream as well as (finally) some really big projects.

~~~~~~~~~~~~~~~~~~

Perma-Fix Environmental Services' (PESI) CEO Lou Centofanti on Q3 2015 Results - Earnings Call Transcript

Q3 2015 Earnings Conference Call
November 4, 2015, 11:00 AM ET

Executives
David Waldman - Investor Relations, Crescendo Communications
Lou Centofanti - Chairman and Chief Executive Officer
Ben Naccarato - Chief Financial Officer
Analysts
Al Kaschalk - Wedbush Securities
Sam Rebotsky - SER Asset Management
Bill Chapman - Morgan Stanley
Michael Potter - Monarch Capital Group, LLC
Justin Putnam - Talanta Investment Group
Bill Nasgovitz - Heartland Advisors

David Waldman - Investor Relations, Crescendo Communications
Good morning, everyone and welcome to Perma-Fix Environmental Services third quarter 2015 conference call. On the call with us this morning are Dr. Lou Centofanti, Chief Executive Officer 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 statements 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. Lou Centofanti. Please go ahead, Lou.

Lou Centofanti - Chairman and Chief Executive Officer
Thank you, David and welcome everyone. We’ve achieved another quarter of profitability and remain on target to hit our guidance of $6 million to $7 million of adjusted EBITDA, and very pleased with how we’re evolving with the business in the company.

Now let me streamline and stabilize 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, we’re happy to report revenue increased 53.4% compared to the same period last year. This growth indicates winning more contract awards, it appears to be picking up… as an example we recently were awarded a contract valued at approximately $1 million for demolition and decommissioning services at a technology development lab in Knoxville.

This an example of one of the smaller contracts we bid on and were awarded. Many of the smaller contracts we don't announce. But 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 2015, but rather an extraordinary one in 2014 as we received and processed waste from a project that required 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 am pleased to report some very positive developments on the medical side as you know we recently announced completed another successful scale of our process which confirmed our preparatory resin could withstand higher radiation levels up to six curies. We believe we’re now very close to overcoming nearly all technical hurdles related to the resin; we’ve received positive feedback from the industry in active discussions with many of the key players.

As previously announced we finalized our agreement with Digirad wherein Digirad invested $1 million into our subsidiary Perma-Fix Medical, which is listed on the Warsaw Exchange. I would point out they invested at a significant premium to current market price, which is further illustration of the growing interest in our process from within the industry. And also we do not believe the price in the Warsaw 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 operations upon successful completion of development of the process. We are currently in discussions with a number of prominent companies involved in other areas of the supply for Tc-99.

At the same time 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. And we will provide further updates on this in the near future.

So to wrap up, we remain very confident in our prior guidance for full-year and while we are pleased with the results, we’re far from satisfied and we’ll continue to focus on growth opportunities in 2016 based on the sales pipeline within the service segment and opportunities with in-treatment.

As we look ahead it’s still early but when you look from, at our 2014 to projected 2015 we've 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?

Ben Naccarato - Chief Financial Officer
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 is 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 versus 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 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. And of course the increase was offset by dropping 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 30, 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 is contributed to the improvement in the gross profit and the gross margins.

The total 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 quarter includes $364,000 -- again, which represents our portion of the Perma-Fix medical expenses. Our earnings per share from continuing operations was $0.12 a share compared to $0.20 per share last year and 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 and improvement of $3.3 million.

On the balance sheet, compared to our year end cash, it is down $1.7 million primarily due to the operating cash requirements from losses incurred in the first quarter, but offset by positive cash generated in the second and third and $1 million raised by our Perma-Fix medical facility. Our total receivables including unbilled are down $1.3 million mostly due to our 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 and our total debt is down it’s $8.9 million compared to $11.4 million at year end and it's made up of $7.5 million from our credit facility FD&C, our shareholder loan of $1.3 million and a miscellaneous loan of $29,000.

Finally, I'll summarize our year-to-date cash flow as of September 30. 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, but we had some proceeds from equipment and the final escrow from our 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 and that's offset by the equity raised at our Perma-Fix medical facility of about $970,000.
With that, I’ll now turn the call over to the operator for questions.

Question-and-Answer Session
Operator
We will now be conducting the question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Al Kaschalk with Wedbush. Please proceed with your question.

Al Kaschalk - Wedbush Securities
Hey, good morning guys…. On the medical side Lou you gave us sort of the progress to date, what’s next in the near-term next three to six months sort of the commercial visibility or progress should we say to getting the next couple of stuffs. The investments need to made, trials et cetera. Thanks

Lou Centofanti - Chairman and Chief Executive Officer
The main is we are very focused today and 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 and so we are going through a variety of tests today with our FDA consultants in terms of what is needed and preparing really for what will be our first set down with the FDA. And probably [it will be] the first of the year to go over our process or data and how it should be submitted and considered.

So right now it's, one, basically develop, continue to develop
the data needed and, two, looking at ways to further focus the technology in terms of - for our commercial unit, but we’re really excited right now. We see a path forward with the data is very good and we’re very pleased with the results. So 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.

Al Kaschalk - Wedbush Securities
On this task forward is there further strategic partners or when do you take another step on that regard in terms of either announcement or Digirad partner and …

Lou Centofanti - Chairman and Chief Executive Officer
Digirad was a general advisor on the industry in helping us focus the - we’re in discussions with a variety of potential partners and several of those would involve assisting us from the regulatory point of view. So I can't really say at this point when will have more to say about that, but those discussions are very active right now, going on.

Al Kaschalk - Wedbush Securities
Okay on the treatment side, I guess –yes, there was a tough comparison—it still seems a little bit lower than maybe what we would like. What are you seeing in terms with the fiscal year end for the government the September push. Why is backlog sort of where 5 million level as oppose to bit higher?

Lou Centofanti - Chairman and Chief Executive Officer
Well, Al the push probably wasn’t as aggressive as we've seen in the past but the backlog is got sort of a different twist to it than what you normally see, we talked about and impact we given guidance is because we have some visibility on some way streams and project and our backlog is actually somewhat managed by our license right now we've got a pretty good visibility for something coming hopefully and into next year and because of our license we have to manage when that comes in.

So believe it or not for once we’re actually telling into hold on and then that's reflected in the lower backlog, but that just means were anticipating more of a flatter receipt schedule than we’ve usually had in the past where you know kind of fourth-quarter, first-quarter falls right off the table. So we are not overly concerned because we have some sort of commitments that will sort of make up for that lower backlog.

Al Kaschalk - Wedbush Securities
Okay that that gives you confidence on the 15 number and therefore given this timing and managing the process you're able to fill lack of better words slot for 50% growth in EBITDA for 2016. I assume the majority of that is because of this backlog our composition?

Lou Centofanti - Chairman and Chief Executive Officer
Yes well the service growth but yes lot to do with it two but yet that give lot more confidence in our treatment numbers which as you know our treatment numbers is a probability of the service members this kind of the revenue side growth.

Al Kaschalk - Wedbush Securities
Okay and then just a on just a broader comment Lou, a lot of the industrial companies are, I won’t say inconsistent, but certainly some growth and some more less constructive comments about waste streams. Despite the diversification efforts are you seeing more opportunities or more customers delaying projects that the diversification process may not be as robust in the near-term.

Lou Centofanti - Chairman and Chief Executive Officer
Well, we’ve suffered over the last 3 year, 4 years with seeing because of the problems with nuclear industry had both the DOE and then on the commercial side and so what I see is that there is 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. So what we're seeing I think is we went through that back two, three years ago. And we’re now past that 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 nuclear field that are requiring our efforts and technology and services.

So we think we’ve seen that that happened in the past and when that happened is 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.

Al Kaschalk - Wedbush Securities
All right. Okay, very good we’ll look forward to it.

Lou Centofanti - Chairman and Chief Executive Officer
Thanks, Al.

Operator
[Operator Instructions] Our next question comes from the line of
Vernon McCreary with Stockbroker Club. Please proceed with your question.

Vernon McCreary
Hello. And thank you for letting me on the call. I am quite new to the company. But I am phoning from Toronto and one of the questions we haven't encountered is the concern with chemotherapy with the isotopes of Chalk River being sort of stalled and stopped time-to-time. I am wondering if you could talk about how soon you can get to that market and what you think the size of the market might be.

Lou Centofanti - Chairman and Chief Executive Officer
Well, 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 probably going to see Chalk River dropping off either next year or under the best scenario in 2018.

What we see is that in the interim there is a, the industry has done a variety of things to have backups. So you'll see a supply now with respect to ours is that we’re really looking at – that probably being realistic, getting the FDA in sometime next year and then a year after that with a commercial product.

And Canada would be an ideal market for us because it is a very diffused market and we see some advantages there. But over the next, and the market size is immense, the product we would be selling –you’re talking about several hundred million dollar market in Europe and the U.S. when you look at it very simplistically from just – if we only sold Tc99, so 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 but try to get it approved through the regulatory agencies and then figure out how to distribute it. But we are real excited about the technology

Vernon McCreary
You mention that if you just produce the basic item, market might be a few hundred million. Do you have plans to do something I could value add on or market it in a way with quite a larger revenue stream?

Lou Centofanti - Chairman and Chief Executive Officer
The advantage of this technology that I’ve always seen that it’s a disruptive technology and it could totally change how the industry behaves and what it does, so that is very possible. And so the market itself around the world is a $6 billion market with over half of that in North America, so it is a dramatic market with a variety of services that could be added on in time.

So yes it's tremendous opportunity and you know today it [Tc-99m] is the heart of diagnostic medicine. And without it [there would] be a fairly dramatic effect on diagnostics and also on the chemo side and other sides of the business. So…

Vernon McCreary
What’s your R&D size on this project?

Lou Centofanti - Chairman and Chi99m] ef Executive Officer
Well, we are a small company and it's almost embarrassing to tell you because when I tell people in the medical field what we are spending they find it hard to believe the progress we've made with what we have. We are spending today about half a million a quarter and I could tell you that everyone else we’re competing with is spending tens of millions of dollars so – but 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.

Vernon McCreary
So if you had more money you could spend it on the R&D field?

Lou Centofanti - Chairman and Chief Executive Officer
We could accelerate our development and growth if we had more funds, yes.

Vernon McCreary
Thank you for this.

Operator
Our next question comes from the line of Sam Rebotsky with SER Asset Management. Please proceed with your question.

Sam Rebotsky - SER Asset Management
Good morning Lou.

Lou Centofanti - Chairman and Chief Executive Officer
Sam, how are you?

Sam Rebotsky - SER Asset Management
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 prices traded at and what price Digirad has paid for their interests [in PFM]. And is there any thought about listing this company in the U.S., do you think that we get a better valuation if we did that?

Lou Centofanti - Chairman and Chief Executive Officer
First, the answer to your last question is yes, we are very interested in listing in into the U.S., as 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 [purchase] price [of PFM shares] was about $14 and in fact we would not sell stock today at these kinds of prices on the open market. So we think it's not being anywhere near truly valued.

Sam Rebotsky - SER Asset Management
So does it make sense I'm not sure whether to list on the bulletin board or do you want to wait for NASDAQ or 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 [PFM] which would then increase the value of Perma-Fix if there is a realistic price?

Lou Centofanti - Chairman and Chief Executive Officer
We’ve looked at all the various options and one is an uplisting onto the bigger Warsaw exchange which would dramatically improve the liquidity and the ability of the investors to buy it in Europe. And then we’ve reviewed all the various options for the U.S. I say probably by the end of next year about 12 months we would be clear on where we are going from an option point of view with the stock and the company in Warsaw.

Sam Rebotsky - SER Asset Management
Okay, so at this point that you wouldn't be listing in the U.S. for at least another year or presumably you would uplist first in Warsaw even though you feel there is a greater valuation. Might you, if you got some approvals, would that encourage you to do something sooner or is that what you're waiting on?

Lou Centofanti - Chairman and Chief Executive Officer
Well, there is a variety of things we are waiting on, we are reviewing all of them and all the various options and we have a variety of strategic partners interested in working with us one way or another so really the change in listing or bringing back to the U.S. also depends on how we work with these various strategic partners.

That also comes into play on all of this. You know doing a NASDAQ listing today… we’re not sure that's quite right but probably by the end of the year it could be – it could make a lot of sense. There are other less significant markets in the U.S. we could list on but we’re not quite sure what that would bring us. So in the cost and effort you know probably [it would] be the same as doing a NASDAQ listing.

So right now our thought is to get a little more time, maybe move ahead with Warsaw and while that's going through then preparing the same documents that would be required for the NASDAQ. So we’ve laid out the paths for every possibility right now.

Sam Rebotsky - SER Asset Management
Okay, now as far as your the Nuclear and other contract business what type of bids do you have out there is there a dollar amount you have more bids out there then before your backlog doesn't seem to be moving up, but do you have more business -- is there any more money that the government is going to be putting out or are we waiting on something from the government?

Lou Centofanti - Chairman and Chief Executive Officer
Well I think as we sit today you’ve seen numbers on services are growing significantly especially in the commercial side of our business and we’re seeing more opportunities than we've ever seen and in the schedule for bidding over the next two years, three years on the DOE side is going to be pretty significant for large contracts very large contracts now there we would have in most of those cases we [would] be on a team, or a subcontractor to the team.

So… but we we've got a lot of bids out --in fact our opportunity list is as big as it's ever been. I am pretty confident we’re going to win some significant projects and I see the bid opportunities just continue to increase and really it is increasing on the small to medium which is always been our bread and butter. So like I said earlier on the earlier question is there have 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.

Sam Rebotsky - SER Asset Management
So what I don't think I understand is that somebody needs a goose [up the rear, i.e., a goad], whether it is money to be put in the system before they allocate and commit to the project as the federal government requiring companies to do things --is that the federal government doing things, is there additional money in the budget that's required to sort of get it off to really grow?

Lou Centofanti - Chairman and Chief Executive Officer
All the above; we’re seeing actually all the above: you got the commercial side, there is pressure on a variety of major industrial companies in the mining business and the gas business, there is the fracking that produces a tremendous amount 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 and remember that the problem we have is none of these things: we have to bid on contracts our clients don’t like us talking about and don't like us announcing things. So we’re a little hamstrung in sometimes telling you until long after the fact on what's going on. But as we sit today we are seeing international, we’re seeing commercial, and we’re having we think good success on being on good teams and teams that should win.

Sam Rebotsky - SER Asset Management
All right, Lou. Hopefully you could get these contracts and start reporting the numbers.

Lou Centofanti - Chairman and Chief Executive Officer
I hate to sort of dance on your question. I’m somewhat limited in how I can talk about what's really going on with our clients as business.

Sam Rebotsky - SER Asset Management
Thanks, good luck.

Lou Centofanti - Chairman and Chief Executive Officer
Thank you.

Operator
[Operator Instructions] Our next question comes from the line of Justin Putnam with Talanta Investment Group. Please proceed with your question.

Justin Putnam - Talanta Investment Group
Good morning. My first question, what are your expectations to the isotope R&D expenses going forward. I think you said you were only about a half-million right now, but you are expecting that to grow?

Ben Naccarato - Chief Financial Officer
Yes, 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 little bit reactive to circumstances where we’re at with the planning. But you know as a rule right now you could probably use 50% increase on that starting in the year.

Justin Putnam - Talanta Investment Group
Okay. And then my second question Lou, I guess it is for you and you kind of dance around this a lot as well. But I was just curious to know if there are any - so the FDA process approval is a big step in your medical isotope program. But are there any other revenue opportunities maybe outside of the U.S. prior to that accreditation.

Lou Centofanti - Chairman and Chief Executive Officer
With the medical project?

Justin Putnam - Talanta Investment Group
Yes.

Lou Centofanti - Chairman and Chief Executive Officer
It’s – any country has got to require governmental approval and most of them will require, actually most of them will look to the FDA as the leader. So that once you have FDA then it’s become 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.
So in one way it probably will pay off in the development of our technology base. So we’re seeing that, they are 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. So as we sit today, we’ve actually been excited about how it is leading us to other opportunities in technology both on the wayside and on the use of our resin technologies.

Justin Putnam - Talanta Investment Group
Okay. So, for example with that Digirad deal, they agreed to purchase certain quantity of this isotopes, is that correct, that’s still dependent on FDA approval?

Lou Centofanti - Chairman and Chief Executive Officer
Absolutely, yes. They can’t use it without that approval. So all those things are really subject to us being able to get through the FDA.

Justin Putnam - Talanta Investment Group
I mean on purchasing, how much they would agree to?
Lou Centofanti - Chairman and Chief Executive Officer
Well, they [Digirad] are one of the largest consumers in the U.S. I don't remember the exact number, there is no limit on what they could purchase. They are the largest consumer of Tc99 in the U.S. In fact they’ve just bought another distribution system that now almost will make them a very, significantly much larger significant user. So I don't remember the number but they are a very large consumer.

Justin Putnam - Talanta Investment Group
To know them and….

Lou Centofanti - Chairman and Chief Executive Officer
Right, exactly it’s more our production limit that would limit the availability. So if we can produce it they will buy it.

Justin Putnam - Talanta Investment Group
Okay. And then last question on that. So they currently own 5.4%. Is that correct?

Lou Centofanti - Chairman and Chief Executive Officer
Correct.

Justin Putnam - Talanta Investment Group
The Perma-Fix medical and you own 60.5%. Is that correct?

Lou Centofanti - Chairman and Chief Executive Officer
Correct.

Justin Putnam - Talanta Investment Group
And then the remainder is just public float?

Lou Centofanti - Chairman and Chief Executive Officer
Correct, yes.

Ben Naccarato - Chief Financial Officer
Several funds in Poland and the small public float.

Justin Putnam - Talanta Investment Group
Okay. All right, great. Thank you for taking my question.

Operator
Our next question comes from the line of Bill Chapman with Morgan Stanley. Please proceed with your question.

Bill Chapman - Morgan Stanley
Lou, Ben good morning.

Lou Centofanti - Chairman and Chief Executive Officer
Hi Bill.

Bill Chapman - Morgan Stanley
Let me ask on the plants that are produced in the Tc-99 and they are 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?

Lou Centofanti - Chairman and Chief Executive Officer
We are talking to pretty much all of them and it would be for a variety [of uses]– they all see some value in what we are doing and so 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 and so there's a variety of approaches each of these companies have taken in terms of our discussions and so – but we see opportunities right now with everyone. In fact, we are somewhat drowned in opportunities [as to] what makes the best sense.

So as we look at the industry today we are really excited about our position where we are and how it can help these people really grow their business. And it’s everything from using their generators by putting our resin in it to developing a new generator that would be used in select markets that they can't compete in today.

Bill Chapman - Morgan Stanley
Okay, you are going to them and they are using high rich uranium or low rich I presume and so you can offer a much lower cost…

Lou Centofanti - Chairman and Chief Executive Officer
Much lower cost at simpler production way, the uranium systems require highly centralized production distribution system whereas our technology could be done in a more distributed defuse production distribution system. So you make the whole chain more reliable, you make the whole chain closer to the users. So there's some tremendous advantages that we could offer, that our technology would offer.

Bill Chapman - Morgan Stanley
Okay, well thank you very much.

Operator
Our next question comes from the line of Michael Potter with Monarch Capital Group. Please proceed with your question.

Michael Potter - Monarch Capital Group, LLC
A quick question on something you discussed earlier was that our license or the license that we have in some way it did not enable us to bring in some waste from the government this year, that we have to wait for the next year. Can you give us a little bit more detail on that?

Lou Centofanti - Chairman and Chief Executive Officer
Yes, really all our facilities have limits on the license, you can only have so much enriched uranium, plutonium or certain radioactive isotopes and so when our clients, especially DOE, has large quantities of certain materials that have the limiting isotopes then we just have to plan the arrival and we can only have so much on site so we have to bring the waste in, treat it, then get out the door before we can accept more. So this is a – it’s a common limit we've had. Today we do a lot of very high activity materials and very specialized materials: plutonium and lot of transuranic waste. All of those have some significant limits on how much you could have on site. And so we then have to manage it in and out to avoid having problems with our license.

Michael Potter - Monarch Capital Group, LLC
But even though we are limited on what we could have on our site, don't we still have the work order? Or are they not issuing the work order until we are able to accept delivery?

Lou Centofanti - Chairman and Chief Executive Officer
No, we have the work order, but we cannot accept the waste, correct.

Michael Potter - Monarch Capital Group, LLC
So we have the work order-- so wouldn’t that be in your backlog?

Lou Centofanti - Chairman and Chief Executive Officer
No.

Ben Naccarato - Chief Financial Officer
Michael, our backlog has always been sort of unearned revenue number, it is waste on-site that has been received but not yet treated.

Michael Potter - Monarch Capital Group, LLC
I see.

Lou Centofanti - Chairman and Chief Executive Officer
You need to remember that we work off of… our contracts are open-ended and so they will give us a work order under that contract and, say, we have this month but until we receive it there is no guarantees that they will actually send it. Now they say we got 100 drums of this material and can you start taking? and we say we will take it over the next five months. So it works that way but you can’t recognize that because there is still limits of the contract that they could change in any time.

Michael Potter - Monarch Capital Group, LLC
It’s always the case right. It’s always been historical.

Lou Centofanti - Chairman and Chief Executive Officer
Correct, yes.

Ben Naccarato - Chief Financial Officer
In some cases the customer must get it done so we have a little more confidence that they won’t pull funding versus other time.

Lou Centofanti - Chairman and Chief Executive Officer
Right, but we are still working with record.

Ben Naccarato - Chief Financial Officer
Yes but the backlog is truly an unearned number.

Michael Potter - Monarch Capital Group, LLC
Okay. Can you give us a sense of how large a piece of businesses should be coming in the beginning of year?

Lou Centofanti - Chairman and Chief Executive Officer
Well I mean it is spread out, we have several commitments with some of the DOE sites where they have to move, specially like they have requirements they have to move a certain amount of material under the new rules DOE in space that pretty much guarantees we are going to get $5 million or $10 million a year out of them. So that's the kind of thing that we see we have, they have requirements, we’re the only option and they'll be sending us that amount over the next year. So that gives us a pretty strong [forecast;] we usually don't have that kind of commitment. It’s a nice steady number.

Ben Naccarato - Chief Financial Officer
I think the best way to answer, Michael, is we rarely have a commitment that can't be pulled off the table and this one still and more pressure on the generator to get that out but it's almost like we rarely have anything guaranteed and we sort of have a pretty good comfort level for $5 million to $10 million.

Michael Potter - Monarch Capital Group, LLC
Okay. I'm assuming that is the main factor because you guys have confidence in the guidance for 2016 of 50% increase in adjusted EBITDA?

Lou Centofanti - Chairman and Chief Executive Officer
Well that was… we’re seeing a lot of opportunity, yes that's one and that’s great to have it’s really the amount of opportunities were seeing on the commercial and on the international and– and then on the governmental side it is looking very positive right now. So we see a lot of opportunities.

Michael Potter - Monarch Capital Group, LLC
Okay. There was a recent article in the Wall Street Journal a few days ago, within the past week, on the issues that DOE’s having managing the sites and a lot of the waste that’s been built up and budget issues over the past two years and all that kind of good stuff that we’ve known for a long, long time. You want to add any comment to that Lou?

Lou Centofanti - Chairman and Chief Executive Officer
Well, déjà vu, it’s my own speech. I mean there is so much waste out there, specially at DOE - specially at department of defence, specially at the commercial sites, the [Army] Corps of engineers -- I mean it just I can go on and on and then and so you know that there was a lot of discussion in that article a lot about what was going on in California international labs and we’re in the middle of that right now with our service group.

We are running the health physics work out there and so we are in the middle of all that and that just goes back to what we see… is that we have on our service side --probably the premier group for health physics and managing the radiation control at sites. So that group is really blossoming right now and with it is coming a lot of work so and it’s leadership work, they are highly technical, fitting well with our treatment group and we are seeing that all bloom right now. So it’s a good place to be where we are and we just see that there is a need in the nuclear industry for more leadership and more technical approach and people are coming to us for that.

Michael Potter - Monarch Capital Group, LLC
Okay. All right guys. I’ll get back in the queue. Thanks.

Operator
Our next question is a follow-up question from Sam Rebotsky with SER. Please proceed with your question.

Sam Rebotsky - SER Asset Management
Yes, one question I didn’t ask as far as the Polish company, how many shares are outstanding. You said that’s trading around $10 and Digirad bought at $14, and we own 60%. What is the total number of shares outstanding that are tradable?

Lou Centofanti - Chairman and Chief Executive Officer
Approximately 1.3 million shares.

Sam Rebotsky - SER Asset Management
So 1.3 million shares, okay, so that’s a valuation of $13 million-plus for that [PFM], okay. Is it helpful to have that information more readily available in the financial data that we put out?

Lou Centofanti - Chairman and Chief Executive Officer
Well, since it’s totally consolidated it somewhat shows up, but not in terms of the value on our balance sheet.

Ben Naccarato - Chief Financial Officer
They are a subsidiary of our company so really our financial data represents Perma-Fix and that includes – the value of that is presumably in our stock price and in our valuation.

Sam Rebotsky - SER Asset Management
Well at this point in time the $13 million-plus valuation and if you're successful in accomplishing what 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.

Ben Naccarato - Chief Financial Officer
Okay, thank you.

Operator
Our next question comes from the line of Bill Nasgovitz with Heartland. Please proceed with your question.

Bill Nasgovitz - Heartland Advisors
Good morning. Lou, what was your estimate of EBITDA for this year?

Lou Centofanti - Chairman and Chief Executive Officer
$6 million to $7 million.

Bill Nasgovitz - Heartland Advisors
Okay, thank you.

End of Q&A
Operator
We have no further questions at this time. I’d now like to turn the floor back over to management for closing comments.

Lou Centofanti - Chairman and Chief Executive Officer
Once again I’d like to thank everyone for participating in our conference call with another quarter under our belt of sustained profitability; I can say confidently we’ve turned the corner. We are now on track to hit our guidance of $6 million to $7 million and encouraged by our prospects heading into the New Year. We are pursuing several large contracts in the service segment which we hope to announce soon and see a growing number of opportunities within treatment [segment].

We are 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.