Team, Inc. Q4 2025 Earnings Call - CEO Transition and Margin Momentum After Capital Structure Reset

Operator: Good morning, and welcome to Team, Inc.’s fourth quarter and full year 2025 operational and financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note this event is being webcast. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Nelson Haight, Chief Financial Officer, Team, Inc.: 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.

Gary Hill, Chief Executive Officer, Team, Inc.: 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 Haight to discuss our financial accomplishments.

Nelson Haight, Chief Financial Officer, Team, Inc.: Thank you, Gary. Over the last three years, we have been focused on simplifying the business, strengthening our capital structure and balance sheet, and improving our margins. While we still have some work to do, we’re 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. 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 the 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 non-cash 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 three 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 three 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.

Gary Hill, Chief Executive Officer, Team, Inc.: Thanks, Nelson. As you heard today, Team has delivered strong operational and financial results in 2025. 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 in 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.

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