Team Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: We delivered 8.5% revenue growth year-over-year (nearly $20 million) with gross margin up 7.1% and adjusted EBITDA rising 12.4% to $24.5 million.
  • Positive Sentiment: Ongoing cost and margin improvement programs are expected to yield $10 million in annualized savings, with about $6 million flowing through in 2025 and adjusted SG&A down to 18.9% of revenue.
  • Positive Sentiment: Completed a refinancing that lowered our blended interest rate by over 100 basis points, extended term-loan maturities to 2030 and increased total liquidity to $49 million.
  • Positive Sentiment: Appointed Dan Dolson as Executive VP, Chief Strategy and Transformation Officer to drive our transformation roadmap and capture additional revenue growth and cost savings.
  • Neutral Sentiment: Management is monitoring U.S. tariff policy and implementing supply-chain and sourcing improvements to mitigate potential cost pressures.
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Earnings Conference Call
Team Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good morning and welcome to the Team Incorporated Second Quarter twenty twenty five Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and welcome to Team Inc. Discussion about our second quarter twenty twenty five operational and financial results. On the discussions today is Keith Tucker, our Chief Executive Officer and myself, Nelson Haight, Chief Financial Officer. I want to remind you that management's commentary today may include forward looking statements, including without limitation those regarding revenue, gross margin, operating expense, other income and expense, taxes, adjusted EBITDA, cash flow and future business outlook, which by their nature are uncertain and outside of the company's control.

Speaker 1

Although these forward looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer to the Risk Factors section of Team Inc. Annual and quarterly filings filed with the Securities and Exchange Commission along with our associated earnings release. Team assumes no obligation to update any forward looking statements or information which speak as of their respective dates. With that, I will turn it over to Keith Tucker, our CEO.

Speaker 2

Thank you, Nelson. Welcome, everyone, and thank you for joining us to review our second quarter operational and financial highlights. We delivered strong results in the second quarter as we saw significant growth in revenue, gross margin and adjusted EBITDA. Revenue grew 8.5% or almost $20,000,000 year over year with gross margin increasing by 7.1% and adjusted EBITDA up by 12.4. As you can see, the growth in our adjusted EBITDA outpaced our top line growth, which is a testament to the solid progress we continue to make in our ongoing cost and margin improvement program.

Speaker 2

Drilling down into the segments, we saw 15% overall revenue growth in Inspection and Heat Treating, driven by an increase of over 13% in The U. S. We also saw our Canada operations deliver year over year revenue growth of 31%, demonstrating the mounting traction of our ongoing initiatives to strengthen commercial and financial performance of this business. This performance together with a nearly 26% year over year revenue increase and our higher margin heat treating revenue helped to drive 25% growth in IHT segment adjusted EBITDA and a 118 basis point improvement in our IHT segment adjusted EBITDA margin. In our Mechanical Services segment, our U.

Speaker 2

S. Operations led the way with a year over year increase in revenue up 7% offsetting short term revenue weakness in our international business and helping to drive the 2% growth we saw in total MS revenue. Our adjusted EBITDA for the second quarter increased by 12.4% year over year to $24,500,000 with adjusted EBITDA margin up 40 basis points to 9.9% of our consolidated revenue. We continue to see benefits from our cost discipline in the second quarter, lowering our adjusted selling, general and administrative expense, which excludes expenses not representative of Team's ongoing operations, such as non recurring fees and non cash expenses to 18.9% of consolidated revenue versus 19.8% in the 2024. We remain focused on driving revenue growth, strict cost discipline and improving operational execution.

Speaker 2

In the 2025, we completed a series of actions targeting further improvement in our SG and A and other costs that are expected to yield annualized cost savings of around $10,000,000 We expect to see about $6,000,000 of those savings flow through in the 2025. In the second quarter, we also began to see some results from our targeted actions to improve the financial and commercial performance of our Canadian operations, particularly in the top line, and we expect to see continued year over year improvement in the 2025. A few weeks ago, we announced the appointment of Dan Dolson as Executive Vice President, Chief Strategy and Transformation Officer to lead our transformation efforts moving forward. We believe dedicated leadership overseeing our ongoing transformation program will accelerate revenue growth and our ability to capture additional cost savings. Our management team is committed to achieving the goals of our transformation plan and we have already identified additional opportunities to improve margin and efficiency that we will pursue in the 2025.

Speaker 2

We believe all of these ongoing actions will help lead to top line growth and further improvements to our cost structure and margins. While we are beginning to see the results from these actions in our 2025 results, we expect to see the full year impact in 2026. Looking ahead, we continue to monitor U. S. Tariff policy and have identified opportunities to improve our supply chain and material sourcing to help mitigate any potential cost pressure.

Speaker 2

We believe our diversified portfolio of service offerings across multiple industries and our geographic footprint positions us to better navigate recent macroeconomic uncertainty around tariff policies. We see top line growth over the prior year across both segments and improved adjusted EBITDA levels for the 2025. Our management team is focused on the things that we can control, which are continued cost discipline and execution on our commercial initiatives, and we remain committed to delivering top line growth for the full year and at least 15% year over year growth in adjusted EBITDA. With that, I'd like to turn it over to Nelson to discuss our financial accomplishments.

Speaker 1

Thank you, Keith. Before I go into our second quarter financial results, I would like to discuss in more detail the recent actions we've taken to strengthen our balance sheet. As we discussed on the last call in March 2025, we closed the refinancing transaction that lowered our blended interest rate by over 100 basis points, simplified our capital structure and extended our term loan maturities to 2,030. The completion of this transaction addressed all of our near term maturities and lowered our cost of capital while also providing the company financial flexibility as our performance continues to improve. At 06/30/2025, we had increased our total liquidity to $49,000,000 consisting of consolidated cash of $16,600,000 and $32,700,000 of undrawn availability under various credit facilities.

Speaker 1

Turning now to our second quarter financial results. Despite a bit of lumpiness in our revenue recognition in certain international locations on our mechanical services side. Our overall revenue was up 8.5% over the prior year period generating a $4,500,000 increase in our gross margin which stood at 27.5 for the quarter. We experienced a slight increase in our adjusted selling, general and administrative costs which exclude expenses not representative of our ongoing operations and non cash amounts but when those expenses are expressed as a percentage of consolidated revenue we saw the benefits from our improving cost leverage with a 90 basis point year over year reduction to 18.9% of consolidated revenue. Our adjusted net loss for the quarter was down to $900,000 an improvement of 1,100,000.0 compared to the 2024.

Speaker 1

We grew second quarter adjusted EBITDA to 24,500,000.0 and have generated nearly 30,000,000 in adjusted EBITDA through the 2025 outpacing the 2024 by about 5%. Since 2021, we have increased our adjusted EBITDA every year and we have set a goal of at least 15% growth in adjusted EBITDA for full year 2025. And we believe that our continued focus expanding our margins through cost discipline and growing higher margin work will help us accomplish this goal with even stronger year over year results in the second half of the year. As Keith noted, we have continued to build up our strategic roadmap and are targeting further improvements in SG and A and other costs, workforce utilization in the top line. We expect this next phase of our ongoing program to generate sustainable improvements to margins and cash flow and believe that dedicated leadership to these initiatives will help sharpen our focus and allow us to achieve these goals faster and more efficiently.

Speaker 1

Over the last three plus years we've made significant progress in improving the financial position and operating performance of the company. The balance sheet is healthier, margins have improved and the top line is growing while the company continues to safely deliver best in class technical solutions to our customers. With our employees continued focus and dedication, I'm confident in our ability to build up our progress to date with further improvements in our overall financial and operating performance that will ultimately lead to growth and shareholder value. With that, let me turn it back over to Keith for some closing remarks.

Speaker 2

Thanks, Nelson. We continue to make progress against our strategic roadmap and over the past two years we have worked to streamline our business, expand our margins, simplify our capital structure and improve our balance sheet. Looking ahead, we expect to continue seeing strong operational and financial results in the 2025. For the full year, we expect to see year over year growth in the top line, continued improved performance from our Canadian and other international operations, at least 15% year over year growth in adjusted EBITDA and further meaningful progress towards our adjusted EBITDA target margin of at least 10%, all of which we believe will enhance shareholder value. Our success to date is a direct result of the hard work of all our employees and team.

Speaker 2

I'm very proud of our safety culture and our focus on continuous improvement because at the end of the day, our people are our most vital asset and no job is too important not to be done safely. In closing, I remain confident about our future because I am a firm believer in our capabilities, talented employees and our leadership team. We have delivered improving results over the past three years and we remain committed to continuous improvement in margin, I believe that we are well positioned to sustainably and profitably grow well into the future. Thank you for joining us today and for your continued interest in Team.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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