Q3 2024 Team Inc Earnings Call
Conference over to Nelson Haight CFO. Please go ahead.
Thank you operator, good morning, everyone and welcome to the team Inc. Discussion about our third quarter 2020 for operational and financial results on the discussion today are Keith Tucker, our CEO and myself Nelson Haight, the 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 Companys control. Although these forward looking statements are based on management's current expectations and beliefs.
<unk> 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 <unk> 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.
Speaker Change: Which speak as of their respective dates with that I will turn it over to Keith Tucker our CEO.
Keith Tucker: Thank you Nelson and welcome everyone and thank you for joining us to review, our recent accomplishments and our third quarter results.
Keith Tucker: As we are approaching the end of the year I wanted to highlight some of the significant accomplishments that we've made thus far in 2024 over the past two years, we've been executing a strategic roadmap designed to better position team for success and improved financial performance in a few.
Keith Tucker: We have simplified the business work to address our capital structure and balance sheet improved our margins and are now well positioned to grow once again our results. So far in 2024 reflect tangible progress in the execution of this strategy.
We have increased our margins and adjusted EBITDA lowered our costs and continue to work to identify and implement additional cost reductions and margin enhancements I'm encouraged by the progress we've made so far and the overall trajectory of our business and I am thankful for all the employees.
Keith Tucker: <unk> team and have helped to make this possible.
Keith Tucker: Turning to our third corner, we continue to deliver solid results with positive free cash flow and year over year improvements in revenue operating income adjusted EBITDA and lower expenses.
Keith Tucker: For the third quarter revenue was up 2% compared to Q3 2023, mainly due to a 6% increase in revenue from our U S inspection and heat treating and mechanical services segments, driven by strong turnaround and nest and activity.
U S revenue growth was partially offset by lower year over year revenue from both of our Canadian segment due to lower turnaround and NES 10 activity and less project work. We made continued progress in our cost management program with selling general and admin.
Keith Tucker: <unk> expense for the third quarter, nearly $4 million lower versus the prior year period, and on an adjusted basis, which excludes noncash and nonrecurring items down 30 basis points from 2023 to 21, 7% up revenue.
Keith Tucker: In the third quarter, we delivered adjusted EBITDA of $11 3 million driven by strong performance in our U S operations.
Keith Tucker: And through the first nine months of 2024, we generated nearly $40 million of adjusted EBITDA, a 21% improvement over the first nine months of 2023.
Keith Tucker: Our ongoing actions to lower costs have led to margin expansion that we believe we can continue to build upon as we have noted previously our goal has been to grow adjusted EBITDA margins to 10% or more and through the first nine months were over 6%, which is an important step towards achieving this goal.
Keith Tucker: Paul.
Speaker Change: We have made meaningful progress thus far in 2024, and we believe there is more to accomplish to that end, we remain focused on strict cost discipline driving revenue growth and improving operational execution importantly in September we launched a series of actions that.
Speaker Change: In the near term are expected to yield annualized cost savings of between 6 million and $8 million in.
Speaker Change: In addition, we are in the midst of implementing a number of actions to drive improvements in the performance of our Canadian operations.
Speaker Change: These actions are a mix of top line growth initiatives and steps to improve our cost structure and margins. We expect to see the results from these actions reflected in our performance beginning in the fourth quarter and continuing into 2025.
Speaker Change: Our results also benefited from an improved job mix driven by our increased focus on higher margin revenue streams with stronger pricing as demonstrated by the 41% increase in heat treating revenue and 32% increase in aerospace revenue in the third quarter.
Speaker Change: We remain keenly focused on maintaining our positive margin trajectory and cash flow generation through both top line growth initiatives and continued cost discipline, which will further strengthen our financial position and accelerate our cash flow growth ultimately leading to enhanced shareholder value.
Speaker Change: Looking ahead to the fourth quarter of 2024, we continue to experience healthy activity levels across both of our segments and expect further improvement in margin and performance and financial performance versus 2023, we expect these factors together with additional.
Speaker Change: <unk> traction on our commercial initiatives to provide positive momentum as we enter 2025 with that I would like to turn it over to Nelson to discuss our financial accomplishments.
Nelson Haight: Thank you Keith.
Nelson Haight: Our third quarter 2024 results demonstrate the ongoing progress we are making on generating positive cash flow adjusted EBITDA and improving our margins as Keith discussed we saw year over year increases in revenue operating income and adjusted EBITDA, our gross larger for the third quarter was 25, 4%, but more importantly, we.
Nelson Haight: Generated positive free cash flow of $3 9 million through a combination of better financial performance improved working capital management in a tightly focused capital program Arkansas.
Nelson Haight: Our consolidated net loss for the quarter decreased to $11 1 million a $1 million improvement over the 2023 period.
Nelson Haight: We are confident in the strategic roadmap, we laid out earlier this year to improve our cost structure and streamline our operations and we are continuing to implement additional improvements. We expect our ongoing program will further demonstrate sustainable improvements in margins and cash flow as Keith pointed out over the last two years, we have worked to stabilize the business and focus.
Nelson Haight: Our efforts on the execution of our strategic roadmap the results from which can be seen in our improved financial results. We have increased our adjusted EBITDA every year since 2021. Its just the first quarter of 2023, we have delivered improved year over year quarterly adjusted EBITDA for seven straight quarters, we have generated almost 40.
Adjusted EBITDA, thus far in 2024, and nearly $50 million on a trailing 12 months basis in.
Nelson Haight: In addition, our adjusted EBITDA margin has improved dramatically over the same period, and we see a clear path forward towards achieving our goal of a 10% or more of adjusted EBITDA margin.
Nelson Haight: Furthermore, we expect our improved cash flow and EBITDA generation should provide increased liquidity, which should further strengthen the balance sheet, while also reducing our leverage ratio and allowance for debt pay down.
In September 2024, we successfully amended and extended our ABL credit facility on attractive terms that improved accessibility and pricing further strengthening our balance sheet as we continue to drive top line and adjusted EBITDA improvement. We continue to look for opportunities to further improve our capital structure and view this ABL renewal as a successful.
Nelson Haight: First step right.
Nelson Haight: To thank our financial partners for their continued support and confidence in <unk>.
Nelson Haight: We believe that we are in a significantly improved position now compared to where we were three years ago and I am confident in our ability to continue successfully executing our strategic vision and improving our overall financial and operating performance. We are excited to continue to deliver strong results that we expect will lead to growth in shareholder value with that.
Speaker Change: Let me now turn it back over to Keith for some closing comments.
Please standby and operator will assist you in a moment.
Keith Tucker: Thanks, Nelson, we are encouraged with the progress that we've made and the overall trajectory of the business, but this leadership team believes there is more that we can do.
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Okay.
Keith Tucker: Regarding our full year outlook I want to note that due to the underperformance. We are currently working to address in our Canadian business and to a lesser extent certain international operations. We are revising our full year operating and cash flow guidance for 2024, we now see total company revenue.
Speaker Change: [music].
Speaker Change: Welcome to the Conference Center, please standby and operator will assist you in a moment.
Speaker Change: [music].
Keith Tucker: You up between $845 million and $860 million and gross margin of between 220 million and $228 million and adjusted EBITDA between 53% and $55 million our capital expenditure guidance remains unchanged turning to 2025, we.
Speaker Change: Welcome to the Conference Center, please standby and operator will assist you in a moment.
Keith Tucker: See continued operational and financial momentum based upon the early traction of our commercial initiatives and continued focus on cost discipline, we expect to see low to mid single digit revenue growth and improved performance from our Canadian operations and further meaningful progress towards our <unk>.
Speaker Change: [music].
Keith Tucker: Adjusted EBITDA margin of at least 10% all of which we believe will lead to further growth and shareholder value I am grateful for Citron outstanding and experienced workforce that is working to safely execute on our strategic plan and unlock the inherent value hearing team.
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Speaker Change: Okay, Rachel Smith with <unk>.
Performance from our Canadian operations, and further meaningful progress towards our targeted adjusted EBITDA margin of at least 10% all of which we believe will lead to further growth and shareholder value I am grateful for Citron outstanding and experienced workforce that is working to safely.
Keith Tucker: I am very proud of our safety culture, and our focus on continuous improvement because at the end of the day. Our people are our most vital asset and no job is too important not to be done safely and.
Keith Tucker: In closing I remain very excited about our future because I am a firm believer in our capabilities talented employees and this leadership team we continue to deliver improving results as we execute the strategy, we outlined to the market in may.
Speaker Change: Execute on our strategic plan and then unlock the inherent value here at team I am very proud of our safety culture, and our focus on continuous improvement because at the end of the day. Our people are our most vital asset and no job is too important not to be done safely.
Keith Tucker: The work we've done over the past two and a half years has yielded some encouraging results, which are evident in our 2020 for performance and I believe that we are well positioned to sustainably and profitably grow team well into the future. Thank you for joining us today and for your continued interest.
Speaker Change: In closing I remain very excited about our future because I am a firm believer in our capabilities talented employees and this leadership team we continue to deliver improving results as we execute the strategy, we outlined to the market in may.
Keith Tucker: And team.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: The work we've done over the past two and a half years has yielded some encouraging results, which are evident in our 2020 for performance and I believe that we are well positioned to sustainably and profitably grow team well into the future. Thank you for joining us today and for your continued interest.
Speaker Change: And team.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
With regard.
Speaker Change: Excuse me. This conference has already ended thank you.