Team Q2 Earnings Call Highlights

Key Points

• Second-quarter performance weakened: Revenue fell 7.7% year over year to $229 million, while adjusted EBITDA declined to $13.7 million from $24.5 million, primarily because refining customers deferred turnaround and maintenance work.
• Transformation program targets significant savings: Team identified $20 million to $35 million in annualized savings and productivity benefits, with $8 million to $15 million expected in the second half of 2026 and a full run rate in 2027.
• Outlook remains cautious: Team reaffirmed its 2026 guidance but expects results near the lower end of its ranges due to uncertainty about deferred project timing. Management is also pursuing growth in LNG, aerospace, nuclear power and other markets to reduce reliance on refinery turnarounds.

Team NYSE: TISI reported second-quarter 2026 revenue of $229 million, down from $248 million a year earlier, as customers deferred refinery turnaround, outage and maintenance work amid favorable refining economics and the effects of the Middle East conflict on fuel markets.

Chief Executive Officer Gary Hill said the company’s results were “soft relative to the year-ago period,” primarily because several customers extended facility operating runs rather than completing planned projects during the quarter. The delayed work was particularly concentrated in the mechanical services business, reducing turnaround activity, shifting the revenue mix and pressuring margins and operating leverage.

Hill, who had been CEO for roughly 120 days at the time of the call, said the company believes a meaningful portion of the deferred work will return in later periods, with some activity expected to resume during the second half of 2026. However, he said the timing will depend on customer operating decisions, refining crack spreads and developments in the Middle East conflict.

Segment Results and Profitability

Inspection and heat treating revenue totaled $131 million, a 5% year-over-year decline. Chief Financial Officer Clinton Roeder said the decrease reflected a $5 million reduction in U.S. revenue and a $2.6 million decrease in Canada, both tied to lower turnaround activity.

Mechanical services revenue was $97 million, down 11% from the prior-year quarter. Roeder said turnaround revenue was down “a little more than 50%” year to date compared with the prior year, as refining customers delayed maintenance to capitalize on strong crack spreads.

While the company said its overall revenue base remained relatively resilient, lower mechanical services activity created an unfavorable sales mix and affected labor utilization and fixed-cost absorption.

• Selling, general and administrative expense was $46.6 million, down $3.9 million, or 7.8%, from the second quarter of 2025.
• Adjusted SG&A expense was $44.6 million, down $2.3 million, or 4.8%, year over year.
• Adjusted EBITDA was $13.7 million, compared with $24.5 million in the prior-year period.

Roeder attributed the decline in adjusted EBITDA primarily to lower mechanical services activity, the resulting revenue mix, weaker labor utilization and fixed-cost deleveraging.

Transformation and Cost Program

Hill outlined a transformation plan focused on leadership and accountability, commercial execution and operational efficiency. He said the company has added a chief operating officer, chief human resources officer and senior vice president of operational excellence, while Roeder recently joined as CFO.

The company is reviewing its global facility footprint, fleet, procurement practices, organizational structure and overhead costs. It is also working to improve workforce deployment, billable hours, coordination across service lines, pricing discipline, project selection and sales-pipeline management.

Roeder said the company has identified approximately $20 million to $35 million in annualized savings and productivity benefits from these initiatives. The program is expected to contribute $8 million to $15 million of benefit in the second half of 2026, with the full annualized run rate expected in 2027.

Implementation is expected to require approximately $5 million to $10 million of one-time costs, including costs related to global footprint changes and technology upgrades. Roeder said the company expects the initiatives to support cash-flow generation in the range of $5 million to $15 million this year, though the actions remain in their early stages and have not yet been reflected in reported results.

Expansion Beyond Core Refining Markets

Refining and petrochemical customers remain central to the company’s business, according to Hill, but Team is broadening its commercial efforts toward other industrial and infrastructure markets. The company identified aerospace, LNG, commercial nuclear power, pulp and paper, utilities, aviation and other industrial markets as potential growth areas.

Hill said the company is seeing more than 10% year-over-year growth in LNG, aerospace, commercial nuclear power and pulp and paper. He said Team expects growth in those markets to be higher in the second half of 2026 and plans to dedicate part of its sales organization to developing those opportunities.

The company said these markets are at different stages of development and are not all currently material contributors. Its objective is to develop a more balanced opportunity funnel with more recurring activity and less dependence on the timing of major turnaround projects.

Liquidity, Cash Flow and Outlook

Cash used in operating activities was $0.7 million during the quarter, while capital expenditures were $3.9 million. Team ended the quarter with approximately $51.2 million in total liquidity and net debt of $300.3 million.

Roeder said improving working capital is a priority, including optimizing inventory and shortening invoicing timelines to reduce accounts receivable needed to support the business. The company is targeting $5 million to $10 million in cash-flow improvement by year-end.

Team reaffirmed its full-year 2026 outlook for revenue of $920 million to $945 million, gross profit of $240 million to $260 million and adjusted EBITDA of $68 million to $73 million. Management said it expects results to trend toward the lower half of those ranges because of uncertainty over when deferred turnaround and maintenance activity will return.

Separately, Hill said Stellex Capital Management became the company’s largest common equity shareholder through a negotiated transaction with prior shareholder Corre Partners. Hill said Team views the transaction as a vote of confidence in the company’s transformation strategy and long-term value creation potential.

About Team (NYSE:TISI)

Team, Inc NYSE: TISI designs, engineers and manufactures industrial screen printing and digital printing equipment for a variety of end markets. The company's solutions are used primarily in textile decorating, apparel, signage and graphics, and specialty industrial applications. By combining precision mechanical design with automated controls, Team delivers systems that enhance production speed, print quality and repeatability for its customers.

Team's product portfolio includes manual and automatic screen presses, inkjet UV LED curing systems, digital direct-to-garment printers and hybrid platforms that integrate multiple printing technologies.

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