Team, Inc. 2026 Q2 Earnings Call

Good morning, everyone, and welcome to Team Inc.'s second quarter 2026 earnings call. Joining me on today's call are Gary Hill, Team's Chief Executive Officer, and Clinton Roeder, Team's Chief Financial Officer. Before we begin, I would like to remind everyone that management's remarks today may contain forward-looking statements, including statements regarding revenue, gross margin, operating expenses, adjusted EBITDA, cash flow, and the company's future business outlook. These statements are based on management's current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to the Risk Factors section of Team's most recent annual quarterly reports filed with the Securities and Exchange Commission, as well as the company's second quarter earnings release. Team undertakes no obligation to update any forward-looking statements which speak as of their respective dates.

With that, I will turn the call over to Gary Hill, Team's Chief Executive Officer.

Good morning, everyone, and thank you for joining us. I'll begin with a brief overview of the second quarter and spend most of my time discussing what I've learned during my first roughly 120 days as CEO and the actions we are taking to position Team for stronger and more consistent performance. Lastly, I will cover some additional news, which we shared yesterday regarding a significant change in our shareholder base. Clinton will then provide a more detailed review of the financial results, balance sheet and outlook. Our second quarter results reflected the underlying strength of our operating model and foundational business. Overall, our results came in soft relative to the year-ago period, driven largely by the timing of customer turnaround, outage, and maintenance activity, particularly within the mechanical services.

Given the macro environment and downstream effects of the ongoing conflict in the Middle East, several customers extended operating runs to take advantage of favorable refining economics, shifting certain planned projects out of the quarter. This resulted in lower turnaround activity and a less favorable revenue mix, which compressed margins and operating leverage. Additionally, I'd like to note that we are carrying one-off impacts to our Middle East business, more acutely impacted by the ongoing conflict. At the same time, the relative stability of our overall revenue base demonstrated the underlying resilience of the business. Inspection and heat treating was comparatively more stable, supported by nested and recurring inspection activity, and the ongoing need for customers to safely and reliably operate their assets.

On top of that relative stability, our results are capturing added resilience from the revenue growth we are driving in other markets and industry verticals, which will continue supporting results on a go-forward irrespective of the macro backdrop. We believe a meaningful portion of this specific mechanical services activity has been deferred and pushed out to later quarters. We expect some of that work to begin returning during the second half of the year. Although the precise timing remains dependent on individual customer operating decisions, the crack spread environment, and ultimately a timely resolution to the conflict. The quarter also reinforced the importance of the transformation work already underway across Team.

In my first 120 days, I spent considerable time with our employees, customers, and commercial and operating leaders in order to better understand the strengths of the organization and identify areas where we can improve and capture greater value across the enterprise. Team has a strong foundation. We have highly skilled employees, deep technical expertise, and long-standing relationships with many of the largest operators across our core markets. The services we provide are critical to the safe, reliable, and efficient operation of customer assets. I've also seen a high level of commitment throughout the organization. Our employees understand the importance of their work and take considerable pride in supporting our customers. Building on that foundation, we identified several opportunities to improve consistency across commercial execution, labor utilization, operating efficiency, and cash generation.

Commercially, we see opportunities to improve how we manage our sales pipeline, estimate and price projects, and strategically select the work we pursue. Operationally, we see opportunities to deploy our workforce more efficiently, create clear ownership across the organization, and improve coordination between teams. We are also evaluating our global facility footprint, our fleet and overhead structure while improving the data and systems that support decision-making. Those findings became the basis for the action plan we are now executing. Our plan is centered on three areas: leadership and accountability, commercial execution, and operational efficiency. First, we have strengthened leadership team and established clear ownership of our key priorities. In addition to my role as CEO, Clinton Roeder has joined us as Chief Financial Officer.

We have also added a new chief operating officer, a new chief human resource officer, and a senior vice president of operational excellence, all of whom I am very excited to have part of the Team organization and will contribute meaningfully to our execution and strategic direction. We continue to evaluate opportunities to strengthen our commercial leadership and ensure we have the right structure in place to support the company's priorities. These additions are intended to improve accountability, coordination, and operating discipline across Team. I also want to formally welcome Clinton Roeder. He brings relevant financial, operating, and capital market experience and has already become an important partner to me and the broader leadership team. The second area of focus is commercial execution. We are putting a clear commercial structure in place and introducing greater consistency around pipeline management, estimating, quoting, and account ownership.

Our objective is not simply to generate more revenue. It is to pursue profitable growth in areas where Team's technical expertise, safety record, and execution capabilities are valued. That includes improving pricing discipline and ensuring that travel, training, vehicles, overtime, and other customer-specific requirements are appropriately reflected in our commercial terms. We are also making thoughtful investments in our systems, including opportunities to leverage AI where applicable. These system investments will be aimed at generating better visibility into customer activity, upcoming opportunities, win rates, and project economics across the organization. The third area is operational efficiency. We are reviewing our global facility footprint, procurement, fleet, organizational structure, and overhead costs. We are also focused on labor utilization, billable hours, and better coordination between inspection and heat treating and mechanical services.

Some actions have already been completed while others are underway or expected to be implemented over the balance of the year. The goal is to create a more efficient and scalable operating structure that improves execution, supports stronger operating leverage, and enhances cash generation as activity grows. Clinton Roeder will provide additional detail on the expected benefits, implementation costs, and timing of these initiatives. Improving the performance of the existing business remains our first priority. Refining and petrochemical customers will continue to be core to Team. These facilities are complex, highly regulated, and require ongoing inspection, maintenance, and repair. We believe there is a meaningful opportunity to deepen our existing customer relationships and capture a greater share of the work available within our current markets. At the same time, Team's capabilities are applicable across a broader range of industrial and infrastructure end markets.

We are expanding our commercial focus and see significant near-term opportunities to apply our capabilities across selected areas including aerospace, potentially LNG, nuclear, utilities, aviation, and other industrial markets. These opportunities are at different stages of development, and we are not suggesting that each is already a material contributor. Our objective is to build a broader and more balanced opportunity funnel over time with a greater mix of recurring activity and less dependence on the timing of large turnaround projects. This broader commercial strategy, together with better pricing, project selection, and execution, should help create a more resilient and consistently profitable business and buffer against end market cyclicality. Looking ahead, we expect a portion of the deferred mechanical services activity to begin returning during the second half of the year. There is a practical limit to how long customers can delay required inspection, maintenance, or repair work.

However, the timing remains dependent on customer operating decisions, and we are not assuming that all deferred activity returns within any single quarter based on the timing of a resolution of the conflict in the Middle East. We do note, however, that the deferral of this work may also create a stronger setup for future quarters as customer maintenance schedules normalize. More importantly, the actions underway across commercial execution, labor planning, productivity, and cost management should improve Team's ability to capture that activity and generate stronger operating leverage and thus returns as it rebounds. We are still early in the transformation, but the diagnostic work is largely complete. Our priorities are clear, and implementation is underway. Team has valuable technical capabilities, long-standing customer relationships, and an experienced workforce. Our focus is on pairing those strengths with stronger leadership, greater commercial discipline, and a more efficient operating structure.

We believe these actions will position Team to deliver more consistent performance, stronger earnings, and improved cash generation over time. Before I turn the call over to Clinton, I want to briefly touch on the announcement we shared last night around the same time that we issued our earnings release. As you likely saw, Stellex Capital Management is now our largest common equity shareholder. We are excited to continue working with the Stellex team and recognize this transaction as a strong vote of confidence in the significant embedded value of the Team franchise that can be unlocked. This increase in Stellex's holdings came through a negotiated transaction with our prior shareholder, Corre Partners, and we thank Corre for their engagement and support in the years leading up to this transition. With that, I'll turn the call over to Clinton.