Team (NYSE:TISI) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

Team reported first-quarter 2026 revenue of $215 million, an 8.3% increase year-over-year, marking the highest Q1 revenue since 2019.

Adjusted EBITDA rose by 45.2% to $7.7 million, with a 90 basis point margin improvement, reflecting strong performance in inspection, heat treating, and mechanical service segments.

The company emphasized strategic initiatives including workforce investment, expansion into growth markets like LNG, midstream, and data centers, and a focus on healthy, margin-accretive growth.

Team provided 2026 guidance with expectations of 4% revenue growth, 8% gross margin increase, and 16% adjusted EBITDA growth, driven by cost efficiency and market share expansion.

Management discussed ongoing efforts to optimize costs, enhance leadership, and improve decision-making processes, with plans for detailed cost reduction targets in the next quarter.

Full Transcript

OPERATOR

Good day and welcome to Team's first quarter 2026 conference call. All participants will be in a 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 recorded. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Nelson Haight (Chief Financial Officer)

Thank you Operator Good morning everyone and welcome to Team'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'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.

Gary Hill (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. This growth was driven by robust performance across both our inspection and heat treating and mechanical service segments. 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 have been here for about 100 days now. In that time I have been able to meet with many of our hard working employees, visit some of our worldwide locations and have 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 are 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 former 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 knockoff effects 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 in 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 US over the past decade and geopolitical events are driving natural gas demand and opportunities for US 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 buildout 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 accretive 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 cost 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 offering. 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 scoped 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 in 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.

Nelson Haight (Chief Financial Officer)

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 callout activity in the US and Canada. Additionally, we saw a 6.6 million or 7.8% increase in our mechanical services segment which was supported by 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 US 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 in 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 SGA 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 to 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 cost cash flow margins and we will target further deleveraging in the business and debt paydown. Both our net loss and free cash flow are steadily improving and 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 off 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.

Gary Hill (Chief Executive Officer)

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.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.