Team (TISI) Second Quarter 2025 Earnings Conference Call Transcript

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Source: The Motley Fool

Event Details

The conference call took place on Wednesday, August 13, 2025, at 11 a.m. Eastern Time.

Participants

• Keith D. Tucker – President & Chief Executive Officer
• Nelson M. Haight – Executive Vice President & Chief Financial Officer

Conference Call Summary

Opening Remarks from Keith D. Tucker

Thank you, Nelson, and welcome to everyone joining us as we discuss our second quarter achievements. This quarter, we saw robust performance, with notable increases in revenue, gross margin, and adjusted EBITDA. Revenue climbed by 8.5% year-over-year, nearly $20 million higher, while gross margin improved by 7.1% and adjusted EBITDA rose by 12.4%. Our adjusted EBITDA growth outpaced revenue gains, reflecting the effectiveness of our ongoing initiatives to optimize costs and margins.

Breaking down the results by segment, our Inspection and Heat Treating division achieved a 15% rise in revenue, largely due to a 13% increase in the U.S. market. Canadian operations also excelled, posting a 31% year-over-year revenue jump, underscoring the success of our strategies to enhance commercial and financial outcomes. Additionally, our higher-margin heat treating business experienced a 26% revenue boost, contributing to a 25% increase in IHT segment adjusted EBITDA and a 118 basis point gain in segment margin.

Within Mechanical Services, U.S. operations led with a 7% revenue increase, offsetting temporary declines internationally and resulting in 2% overall growth for the segment. Adjusted EBITDA for the quarter reached $24.5 million, up 12.4% from the previous year, and adjusted EBITDA margin improved to 9.9% of consolidated revenue. Our disciplined approach to costs led to a reduction in adjusted selling, general, and administrative expenses, now at 18.9% of revenue compared to 19.8% a year ago.

We remain committed to expanding revenue, maintaining strict cost controls, and enhancing operational execution. In Q2 2025, we implemented several measures expected to deliver approximately $10 million in annualized cost savings, with $6 million anticipated to benefit the latter half of the year. Our targeted efforts in Canada are beginning to yield results, and we anticipate continued improvement throughout the rest of 2025.

Transformation and Leadership Updates

Recently, we appointed Dan Dolson as Executive Vice President, Chief Strategy & Transformation Officer, to spearhead our transformation efforts. We believe that focused leadership will accelerate our progress in revenue growth and cost efficiency. The management team is dedicated to our transformation plan, and we have already identified further opportunities to boost margins and operational efficiency, which we will pursue in the coming months. These ongoing initiatives are expected to drive top-line growth and further strengthen our cost structure and profitability.

While we are starting to see positive impacts from these actions in our 2025 results, the full benefits are expected to materialize in 2026. We are closely monitoring U.S. tariff developments and have found ways to optimize our supply chain and sourcing to counteract potential cost increases. Our diversified services and broad geographic reach position us well to navigate economic uncertainties and support continued growth and improved adjusted EBITDA in the second half of 2025.

Our focus remains on factors within our control: disciplined cost management and effective execution of commercial strategies. We are committed to achieving full-year top-line growth and at least 15% year-over-year improvement in adjusted EBITDA. With that, I’ll hand it over to Nelson for a financial update.

Financial Overview from Nelson M. Haight

Thank you, Keith. Before reviewing our second quarter financials, I want to highlight recent steps taken to strengthen our balance sheet. In March 2025, we completed a refinancing that reduced our blended interest rate by over 100 basis points, simplified our capital structure, and extended term loan maturities to 2030. This move addressed all near-term maturities, lowered our capital costs, and provided greater financial flexibility as our performance improves.

As of June 30, 2025, our total liquidity stood at $49 million, including $16.6 million in cash and $32.7 million in available credit. For the second quarter, revenue increased by 8.5% compared to last year, resulting in a $4.5 million gain in gross margin, which reached 27.5%. Adjusted selling, general, and administrative expenses rose slightly, but as a percentage of revenue, they declined by 90 basis points to 18.9%, reflecting improved cost leverage.

Our adjusted net loss for the quarter narrowed to $900,000, a $1.1 million improvement over Q2 2024. Adjusted EBITDA for the quarter reached $24.5 million, and for the first half of 2025, we generated nearly $30 million in adjusted EBITDA, about 5% higher than the same period last year.

Since 2021, we have consistently grown adjusted EBITDA annually. Our target for 2025 is at least 15% growth in adjusted EBITDA, and we are confident that ongoing margin expansion and cost discipline will help us achieve even stronger results in the second half. As Keith mentioned, we are advancing our strategic roadmap, targeting further improvements in SG&A, workforce utilization, and top-line performance.

The next phase of our program aims to deliver lasting improvements in margins and cash flow, with dedicated leadership helping us reach these goals more quickly and efficiently. Over the past three years, we have made substantial progress in strengthening our financial position and operations. Our balance sheet is more robust, margins have expanded, and revenue is growing, all while delivering top-tier technical solutions safely to our clients.

Thanks to our team’s dedication, I am confident we can build on this momentum, further enhance our financial and operational performance, and drive long-term growth and value for shareholders. With that, I’ll return the call to Keith for closing remarks.

Closing Comments from Keith D. Tucker

Thank you, Nelson. We continue to advance our strategic initiatives. Over the past two years, we have streamlined operations, improved margins, simplified our capital structure, and strengthened our balance sheet. Looking forward, we anticipate continued strong operational and financial results in the second half of 2025. For the full year, we expect ongoing top-line growth, improved performance from our Canadian and international businesses, at least 15% year-over-year growth in adjusted EBITDA, and further progress toward our target adjusted EBITDA margin of at least 10%, all of which we believe will increase shareholder value.

Our achievements are a testament to the dedication of our entire team. I am proud of our commitment to safety and continuous improvement, as our people are our greatest asset and safety is always our top priority. I am optimistic about our future, confident in our talented workforce and leadership, and committed to ongoing improvements in margins, cost management, and cash flow generation.

We are well-positioned for sustainable, profitable growth in the years ahead. Thank you for your participation and continued interest in Team.

Operator: This concludes today’s conference. Thank you for joining us. You may now disconnect.

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