Perma-Fix Environmental Services, Inc. (PESI) Income Statement

The growth vector has flipped decisively: after posting modest positive growth between 2024Q4 and 2025Q4 (roughly 2-7%), the top line has contracted for two consecutive quarters, with the rate of decline more than doubling from -11.7% to -20.1% sequential to the latest print. Because no acquisition activity is disclosed in the supplied data, the weakness appears to be volume or project-mix driven rather than divestiture-driven, and the acceleration in the decline rate suggests the trough has not yet been established. Investors should monitor whether the $11.1M-$12.9M revenue band represents a new run-rate, since annualizing it would imply a materially smaller revenue base than the $60M+ implied by 2025 quarters.

Cost of sales exceeded revenue by $2.5M in the latest quarter and by $2.9M in 2026Q1, meaning the company is generating negative gross profit before any overhead is allocated — a structurally unusual position for a waste services operator and one that implies pricing is not currently recovering direct remediation or disposal costs. The swing from a 14.6% gross margin in 2025Q3 to -19.4% two quarters later is roughly 34 points of compression, which appears too large to be explained by normal input-cost cyclicality alone and may indicate contract repricing lags or under-accrual of job costs. Given that peers in the same comparison set sustain double-digit positive gross margins, PESI's cost base looks misaligned with its current revenue mix rather than merely exposed to sector-wide pressure.

SG&A has been remarkably stable in the $3.8M-$4.3M range across every quarter where it is disclosed, so the deterioration in operating margin from -10.7% in 2025Q3 to -50.5% in 2026Q2 is almost entirely a gross-profit event rather than an expense-control event. This is negative operating leverage in its purest form: the fixed cost structure that would amplify profits if revenue recovered will instead amplify losses for as long as gross margins remain below zero. The absence of disclosed SG&A figures in four of the ten quarters limits trend precision, but the disclosed quarters suggest management has not yet acted on overhead reduction commensurate with the revenue contraction.

That quarter combined the highest revenue of the period with the strongest gross margin, cutting the operating loss to a level roughly one-tenth of revenue — an outcome that demonstrates the model can approach breakeven when volume and cost coverage align. The subsequent reversal across 2025Q4 and into 2026 suggests 2025Q3 may have reflected an unusually favorable project mix rather than a durable structural improvement, since no comparable margin was sustained. The lasting implication is that PESI's path to profitability appears tied to restoring gross margin to double digits before any overhead leverage can matter, and 2025Q3 provides the empirical benchmark for what that would require.