Team, Inc. Reports Wider Loss Amid Mixed Q1 Performance
Shares of Team, Inc. (TISI) increased by 3% following its first-quarter 2025 results, outperforming the S&P 500 index’s 1% growth in the same period. However, over the past month, Team’s stock has declined by 6.7%, contrasting sharply with the 11.4% rise in the S&P 500, indicating underperformance despite a brief post-earnings rally.
Financial Overview
In the first quarter, Team reported total revenues of $198.7 million, slightly down from $199.6 million a year earlier. The company’s net loss widened to $29.7 million, or $6.61 per share, compared to a loss of $17.2 million, or $3.89 per share, during the same quarter in 2024. This loss included an $11.9 million charge for debt extinguishment, associated with a refinancing undertaken in March 2025. Additionally, adjusted EBITDA fell to $5.3 million from $6.5 million a year prior, with the margin decreasing to 2.7% from 3.3%.
Segment Performance and Business Metrics
The Inspection and Heat Treating (IHT) segment served as the primary growth driver, with revenues increasing by 6.8% year-over-year to $106.2 million. This growth was bolstered by an 8.8% rise in U.S. operations. Notably, adjusted EBITDA for IHT surged by 39%, fueled by a 22% increase in higher-margin heat treating services and a remarkable 64% increase in revenue from the Cincinnati laboratory.
In contrast, the Mechanical Services (MS) segment experienced a revenue decline of 7.7%, totaling $92.4 million. The downturn was attributed to decreased emergency callout activity and weather-related delays, particularly in the U.S. This segment also reported an operating loss of $1.1 million, shifting from a profit of $4.1 million in the previous year.
The overall gross margin for the company fell to 23.8% from 24.4%. However, selling, general, and administrative (SG&A) expenses decreased by 3.4% to $53.3 million, with adjusted SG&A comprising 22.7% of revenues, reflecting slight operational efficiencies.
Management Insights
CEO Keith Tucker highlighted ongoing progress with the company’s strategic roadmap, noting that seasonal factors and harsh winter weather in January impacted project revenues. However, he expressed optimism about increasing activity levels as the company approached the second quarter, forecasting full-year revenue growth and at least a 15% rise in adjusted EBITDA.
CFO Nelson Haight echoed these optimistic sentiments, noting consistent execution and improving performance contributed to the March refinancing. He reiterated that adjusted EBITDA has shown year-over-year improvement since 2021, with expectations for continued gains in 2025. Both executives emphasized initiatives aimed at enhancing cost structures and operational efficiencies, including efforts focused on Canadian operations.
Key Performance Influencers
The MS segment faced challenges due to reduced demand for emergency services and project delays. Conversely, the IHT segment gained from an uptick in demand for specialized inspection and heat treating services, particularly within the Energy, chemical, and petrochemical sectors. Team credits the execution of its strategic goals, including operational efficiency and cost control measures, as pivotal to sustaining its positive momentum. A notable initiative aimed at achieving annualized savings of at least $10 million was launched during the quarter.
Future Guidance
Looking ahead, Team anticipates better financial performance across both segments in the second quarter. The management remains committed to achieving at least a 15% surge in adjusted EBITDA for the fiscal year, driven by margin enhancements, improved operations in Canada, and steady revenue growth. While specific guidance on earnings per share or revenue was not provided, management remains optimistic about ongoing operational advancements.
Significant Developments
A key development in the quarter was the refinancing completed in March 2025. This transaction replaced short-term liabilities with long-term financing, extending loan maturities to 2030 and reducing the blended interest rate by over 100 basis points. The revised capital structure includes a $175 million first lien term loan, a $50 million delayed draw term loan, and a $97.4 million second lien term loan. The refinancing reduced debt by approximately $158 million and enhanced the company’s financial flexibility.
In summary, Team’s Q1 2025 results revealed a mixed performance with robust gains in IHT offset by challenges in the MS sector. The company’s strategy appears to be setting the stage for potential growth throughout the year, supported by improved cost structures and simplified financial arrangements.
