0001493152-26-021732
SEC filingQ1 2026 delivered revenue of $11.1M, down 20.1% from lower government waste volumes partially offset by commercial gains, while gross losses of $2.9M emerged from elevated Treatment Segment fixed costs amid capacity investments.
Revenue fell 20.1% to $11.1 million in Q1 2026 from $13.9 million a year ago, primarily because of lower waste volumes from government-related customers. This decline was partially offset by higher waste volumes from commercial clients, demonstrating progress in expanding the commercial customer base as noted in Management's Discussion. These shifts highlight the cyclical nature of government contracts and the strategic pivot toward diversified revenue sources.
Gross profit deteriorated sharply to a $2.9 million loss, or -25.9% of revenue, compared to a $657 thousand profit last year—a swing management attributes to increased fixed costs within the Treatment Segment. These fixed costs, which did not scale down with lower volumes, eroded margins and directly contributed to the gross loss. As waste volumes recover, management expects better absorption of these fixed operating costs, which should improve gross and operating margins over time.
Net income reflected the operational challenges at a $7.5 million loss, or -$0.40 diluted EPS, versus -$0.19 last year. The broader net loss was driven by these revenue shortfalls, gross margin compression, and operating expense growth, underscoring the impact of volume variability and investment timing.
Cash from operating activities used $3.8 million, up from $2.1 million, primarily due to the net loss from operations and the discussed working capital decrease. Capital expenditures totaled $859,000, supporting investments to expand treatment capacity, grow the trained workforce, and upgrade infrastructure in anticipation of higher waste volumes, including under the DFLAW program. Free cash flow was -$4.6 million. Management plans to fund 2026 capital needs from operations, liquidity, or financing, with expected cash requirements covering working capital, debt payments, discontinued operations monitoring, PFAS R&D, and capex—sourced from cash on hand, operational cash flows, and revolver availability.
Operationally, the PFAS treatment system has entered commercial operation, with a second-generation unit slated for deployment in the second half of 2026 at the EWOC facility in Oak Ridge, Tennessee. This positions the company to triple production capacity, aligning with anticipated waste volume increases that should enhance cost absorption and margins.