TISI

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.

Thank you, operator. Good morning, everyone, and welcome to TEAM, Inc.'s discussion about our first quarter 2026 operational and financial results. On the discussion today are Gary Hill, 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 and 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. 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.'s latest 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 Gary Hill, our Chief Executive Officer.

Thank you, Nelson. Welcome, everyone, and thank you for joining us on the call today. I am pleased with the solid start to 2026 that we were able to deliver from both an operational and financial perspective. First quarter 2026 revenue rose 8.3% year-over-year to $215 million, our highest Q1 revenue since 2019. These results drove meaningful profitability gains, including a 45.2% increase in Adjusted EBITDA to $7.7 million and a 90 basis point improvement in Adjusted EBITDA margin. Both are the best Q1 levels since prior to 2019. Our last call was my first with TEAM, and I've been here for about 100 days now.

In that time, I've been able to meet with many of our hardworking employees, visit some of our worldwide locations, and had in-depth discussions with the leadership team and board. I am going to share my observations with you and share the priorities, strategic vision, and guidance for 2026 that are the result of these meetings. I want to start by saying that following these discussions, I am even more excited by the financial and operational potential and the opportunity to lead TEAM. I believe that our strategic vision will help accelerate our delivery of progressively better operational and financial results. My first observation is about TEAM's most important asset, our people. Our workforce truly has an unparalleled set of skills and technical expertise to tackle any issue that may arise for our customers.

We have a dedicated service team that is customer focused and 100% committed to quality and safety. This is paramount to our success, which is why one of the key points of our strategic vision is deepening our commitment to our workforce. We want to improve our retention rate, which we believe is already industry leading, and we do that by protecting and investing in our people. For example, we believe TEAM is the first in our industry to develop a formal hire to retire career path program for our technicians that lays out the long-term benefits from working at TEAM and is a key differentiator from our peers.

Along with our leading benefit program focused on total health and long-term wellness, we also want to strengthen engagement with our employees by encouraging open and honest communication, which is why we conduct annual satisfaction surveys that provide actionable feedback on employee concerns. We know how important our people are, and we want to make TEAM the employer of choice by ensuring our employees return home safely every day and remain committed to helping TEAM achieve our collective goals. Another observation is that we have good stability in our core markets of refining and petrochem and some very encouraging long-term tailwinds in our targeted growth markets of LNG, midstream, data centers, power, and aerospace.

While the Middle East conflict has had minimal direct impact on TEAM, it is impacting the oil and gas industry, and there are some knock-on effect like increased refining runtimes, thus pushing some turnaround scopes out later into the year. Regardless of what we believe to be shorter-term headwind, long-term refining and petrochem remains a strong core opportunity given the age of refineries, their high utilization rates, and their commercial need to remain online. TEAM can help with monitoring, repair and maintenance, often with minimal or no impact on runtime. LNG and midstream have seen tremendous growth in the U.S. over the past decade, and geopolitical events are driving natural gas demand and opportunities for U.S. LNG to supply new areas around the world. Expansion of existing facilities and greenfield development drive growing inspection mechanical services demand.

Another relatively new area is the AI data center build-out that is occurring. The forecast demand for power related to AI-fueled data center construction is unprecedented, which should drive considerable inspection and mechanical services on the power side as well as the construction and maintenance side. We also believe that strong growth in commercial aerospace and increased defense spending provides significant opportunities for our highly accredited laboratory inspection services, which are key growth areas for TEAM going forward. On the last call, I spoke about opportunities to expand our wallet share with existing customers and accelerate our growth in core and targeted end markets. I also spoke of challenging our entire team to accelerate top line growth, enhance efficiency, and reduce costs to improve our operating leverage, which should drive margin and EBITDA growth.

I want our organization to be committed to improving the rate of progress in these key areas. First up is commercial. We want to prioritize healthy, sustainable growth that is margin accretive and less cyclical. With our strong customer focus, proven technical expertise, geographic footprint, and breadth of service offerings, we are focused on expanding our market share in the targeted end markets I previously mentioned. We see a large opportunity for TEAM and with a focused and disciplined effort expect to capture market share. We are also being more disciplined about the work we pursue, focusing on opportunities where our technical capabilities and quality of execution are most valued. We are prioritizing healthy growth over growth at any cost. Next is our ongoing focus on cost efficiency.

We have made meaningful progress in cost optimization over the past several years, but there is certainly an opportunity for further improvement, particularly in supply chain, better integrating how our teams and locations work together, further simplifying processes and investing in systems to lower costs, all of which is intended to improve our scalability and expand margins. We are defining the opportunity over and above the reductions previously announced, and believe that in the second quarter earnings release and conference call, we will have a better scope set of targeted cost reduction amounts to convey to the market. Finally is our workforce, which I discussed in detail, but I want to further outline how we can improve there. We are targeting strategic additions to our already experienced leadership team that I believe will enhance our capabilities and elevate accountability across the organization.

I want all our leaders to share that commitment and to work hand in hand with our workforce to deliver our strategic vision together. I want to enhance communication and our analytics to accelerate and improve our decision making. We need to be nimble and capable of meeting our customers' needs in a changing market so that we can realize first mover advantages. Before I turn the call over to Nelson to go into the quarterly results in detail, I want to give a high-level overview of our full year 2026 guidance. Our strategic vision and the priorities that I have discussed this morning should lead to a healthier growth in our revenue, margins, and Adjusted EBITDA.

We are off to a good start in 2026, and we believe our full year revenue can grow about 4% at the midpoint of our guidance range of between $920 million and $945 million as compared to 2025 actuals. This revenue growth, coupled with the margin expansion opportunities we are targeting, should help us substantially improve our free cash flow and Adjusted EBITDA over the prior year. We are forecasting our gross margin in 2026 to be between $240 million and $260 million, which is an 8% increase at the midpoint compared to 2025.

When you start compounding the top line growth with margin expansion and improved operating leverage, you see the impact with our 2026 Adjusted EBITDA guidance increasing 16% at the midpoint to between $68 million and $73 million. We have provided a framework of strategic priorities focused on our people, efficiency, leadership, and commercial results that we'll continue to refine and build upon. Expect more detail in the second quarter of 2026. With that, I would like to turn it over to Nelson to discuss our financial accomplishments.

Thank you, Gary. As I mentioned on the last call, we have focused on simplifying the business, strengthening our capital structure and balance sheet, and improving our operating leverage and margins. While we still have work to do, we are now positioned to strategically grow our top line and expand our cash flow generation. The first quarter results for 2026 and our guidance for full year 2026 should accurately reflect the impact of our operational and commercial initiatives with year-over-year expansion in our revenue, margins, and Adjusted EBITDA driven by our ongoing focus on cost efficiency and margin accretive growth. Turning to the first quarter, we continued to deliver solid results, generating year-over-year improvements in revenue, operating income, and Adjusted EBITDA.

As Gary mentioned, our first quarter revenue was up $16.4 million or 8.3% compared to the prior year period, which was the highest first quarter revenue since 2019. This increase was driven by a $9.8 million or 8.6% increase in our Inspection and Heat Treating segment revenues, which were boosted by increased project and call out activity in the U.S. and Canada. Additionally, we saw a $6.6 million or 7.8% increase in our Mechanical Services segment, which was supported by a higher project and turnaround activity with both new and existing customers. Operating income was up $2.6 million or 43.8% year-over-year, driven by stronger revenue in both the U.S. and Canada and lower corporate costs.

As Gary mentioned, we are focused on winning higher margin opportunities in both segments that together with sustainable cost reductions should lead to continued improvement in operating income. Our progress and cost efficiency can be seen in our first quarter adjusted selling general and administrative expense, which excludes non-cash items and expenses not representative of ongoing operations. While the absolute amount was slightly higher, expressed as a percentage of revenue, Adjusted SG&A decreased by 150 basis points versus the prior year period, pointing to improving scalability and leverage. This helped drive our Adjusted EBITDA higher by nearly $2.4 million-$7.7 million. I believe that we are in a significantly improved financial position in 2026. As an organization, we are fixated on improving margins and growing Adjusted EBITDA.

For 2026, we are prioritizing free cash flow generation through more efficient use of working capital and improved cash flow margins. We will target further deleveraging in the business and debt pay down. Both our net loss and free cash flow are steadily improving. I remain confident in our ability to successfully execute on the strategy and priorities that Gary outlined earlier. We look forward to continuing to build up these strong results that we expect will lead to growth and shareholder value. With that, let me turn it back over to Gary for some closing remarks.

Thanks, Nelson. As you heard today, TEAM has delivered strong operational and financial results in the first quarter of 2026, and we are refining and implementing a strategic vision that we expect will continue delivering healthier growth in the top line, margins, and Adjusted EBITDA. Over the past several years, TEAM has repositioned itself and made meaningful improvements in operations, safety, and its financial performance and balance sheet. TEAM has a unique culture, storied history, strong customer relationships, and numerous built-in strengths already in place. I want to reinforce open communication and collaboration with stakeholders, employees, shareholders, and customers to better drive progress and build on past successes. TEAM boasts a proud history and a workforce renowned industry-wide for delivering safe and technically superior customer service.

This has established an outstanding foundation, and my goal is to take this very strong company and make it even better through continuous improvement. We are implementing the steps necessary to accelerate that rate of improvement through focused initiatives and operational execution. I am very excited about our future because we have talented employees and differentiated offerings for our customers. We provided guidance for fiscal year 2026 that forecasts meaningful growth of 4%, 8%, and 16% in revenue, gross margin, and Adjusted EBITDA compared to 2025. As you have heard today, every employee here is committed to delivering these improving results that will continue to strategically grow TEAM and unlock substantial value for our shareholders. Thank you for joining us today and for your continued interest in TEAM.

Good morning, and welcome to Team, Inc.'s Fourth Quarter and Full Year 2025 Operational and Financial Results Conference Call. [Operator Instructions] Please note, this event is being webcasted. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Team, Inc.'s discussion about our fourth quarter and full year 2025 operational and financial results. On the discussion today are Gary Hill, 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. 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.'s latest 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 only as of their respective dates. With that, I will turn it over to Gary Hill, our CEO.

Thank you, Nelson. Welcome, everyone, and thank you for joining us on the call today. I want to start by saying how honored I am to be here and join you all for my first earnings call as Team's CEO. With more than 30 years of hands-on experience in industrial services and related industries, having the opportunity to lead, grow and enhance a company like Team is an extraordinary opportunity. I am excited to lead Team at this pivotal stage, and I'd like to thank our employees for their warm welcome, sharing their perspectives and their hard work and dedication that have helped to deliver the strong operational and financial results that Nelson will discuss with you today. During my first 6 weeks, I've spent a lot of time connecting with our employees, customers and stakeholders. These conversations have given me a deeper understanding of where we stand as a company, the challenges we face and the opportunities ahead. I look forward to working closely with the Board, the management team and Team's talented employees to strategically grow our company. Over the past several years, Team has repositioned itself and made meaningful improvements in operations, safety and in its financial performance and balance sheet. Team has a unique culture, storied history, strong customer relationships and numerous built-in strengths already in place. I want to maintain open communication and collaboration with shareholders employees, stakeholders and customers to better drive progress and build on past successes. Team boasts a proud history and a workforce renowned industry-wide for delivering safe and technically superior customer service. This has established an outstanding foundation and my goal is to take this very strong company and make it even better through continuous improvement. I see opportunities to expand our wallet share with existing customers and accelerate our growth in end markets, such as aerospace and midstream, and I'm challenging myself and our entire team to accelerate top line growth, enhance efficiency and reduce costs, which should lead to margin and EBITDA growth. I want to continue strengthening our organization through further investment in our people and infrastructure to more profitably and efficiently deliver the products and services that meet our customers' needs. Finally, Team has built an impressive safety culture, and continuing to build off that success to ensure everyone gets home safely will always be our highest priority. With that, I would like to turn it over to Nelson to discuss our financial accomplishments.

Thank you, Gary. Over the last 3 years, we have been focused on simplifying the business, strengthening our capital structure, and balance sheet, and improving our margins, and while we still have some work to do, we are now well positioned to accelerate our top line growth and further expand our cash flow generation. Our results in 2025 reflect the impact of our operational and commercial initiatives. With year-over-year expansion in our revenue, margins and adjusted EBITDA driven by our ongoing focus on improving cost efficiency and expanding margins. In March of 2025, we successfully refinanced our capital structure, lowering our blended interest rate by more than 100 basis points and extending our term loan maturities out to 2030. In September 2025, we closed on a $75 million private placement of preferred stock and warrants that helped us to pay down about $67 million of debt. As part of that same transaction, we also amended our ABL credit facility to, among other things, increase the commitment by $20 million to provide additional flexibility during the seasonal spring and fall demands on our working capital and to lower the applicable interest rate margin. We also amended our first lien term loan facility to lower the applicable interest rate margin and improve financial flexibility. The private placement also included a delayed draw feature available through September 2027 debt depending upon the intended use of proceeds, allows the company to raise up to an additional $30 million through the placement of additional preferred stock and warrants. Our net debt at the end of 2025 was $279 million down, from about $289.6 million at the end of 2024, and we exited 2025 with strong liquidity of $77.4 million. The tangible improvements we delivered in operating performance and cash flow generation over the past several years were key to completing these financial transactions. As a result, we have addressed all of our near-term maturities, lowered our cost of capital and provided financial flexibility as the company's performance continues to improve. Turning to the fourth quarter. We continued to deliver solid results, generating year-over-year improvements in revenue, operating income, adjusted EBITDA and gross margins. For the fourth quarter, revenue was up $11.5 million or 5.4% as compared to the prior year period, driven by an 8.9% increase in our Mechanical Services segment and a 1.9% increase in our Inspection and Heat Treating segment. Our operating income was up $4.4 million or 200% year-over-year. Our focus on higher margin opportunities in both segments, coupled with sustainable cost reductions led to significant improvement in operating income. Our continued progress in the previously announced cost management program can be seen in our fourth quarter adjusted selling, general and administrative expense, which excludes noncash items and expenses not representative of ongoing operations, and which was lower by $1 million in absolute terms and 150 basis points when expressed as a percentage of revenue versus the prior year period. This helped drive our adjusted EBITDA higher by nearly $2 million to $16.4 million. These positive trends were also seen in our full year 2025 results. Revenue increased $44 million or 5.2% year-over-year with increases in both our Inspection and Heat Treating and Mechanical Services segments of 7.5% and 2.8%, respectively. In conjunction with the increased revenue, we saw our operating income increase by $3.9 million or 39%. Importantly, we generated $60.7 million of adjusted EBITDA, a roughly 12% improvement over 2024 and our adjusted EBITDA margin expanded to almost 7% for 2025, which was up from 6.4% in 2024. We have significantly improved our adjusted EBITDA over the last 3 years, and we believe we are on the right trajectory toward achieving our goal of an adjusted EBITDA margin greater than 10%. I believe that we are in a significantly improved position compared to where we were 3 years ago. As an organization, we remain highly focused on growing adjusted EBITDA and we will continue to prioritize free cash flow generation through further improvements in working capital management and margin expansion to deleverage the business and allow for meaningful debt paydown. I remain confident in our ability to successfully execute on these goals and look forward to continuing to deliver strong results that we expect will lead to growth in shareholder value. With that, let me now turn it back over to Gary for some closing comments.

Thanks, Nelson. As you heard today, Team has delivered strong operational and financial results in 2025 and heading into 2026, we expect to continue building off this momentum with further growth in the top line and adjusted EBITDA. I'm very excited about our future because we have talented employees and differentiated offerings for our customers. Given my recent transition to the CEO role, we will not be providing guidance on fiscal year 2026 at this time to allow for a deeper review of our operational performance, market trends and strategic priorities. We will present a more fulsome update that lays out our longer-term plans and objectives and 2026 guidance to the market after the end of the fiscal quarter. Finally, I am committed to continuous improvement and believe that we can strategically grow Team and unlock substantial value for our shareholders. Thank you for joining us today and for your continued interest in Team.

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