Q1 2025 Team Inc Earnings Call
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Speaker Change: Good day and welcome to the Team Incorporated First Quarter Update conference call. All participants will be in a listen only mode.
Speaker Change: I would now like to turn the conference over to Mr. Nelson Haight, Executive Vice President and Chief Financial Officer. Please go ahead, sir.
Speaker Change: Thank you, operator. Good morning, everyone, and welcome to Team Inc's discussion about our first quarter 2025 operational and financial results. On the discussions today are Keith Tucker, our Chief Executive Officer, and myself, Nelson Haight Chief Financial Officer.
Speaker Change: taxes, adjusting the dock, cashflow, and future business outlook, which by their nature are on certain and outside of the company's control.
Speaker Change: Although these forward-looking statements are based on management's current expectations and beliefs,
Speaker Change: Actual results may differ materially. For a discussion of some of the risk factors that could cause actual results to differ, please refer for the risk factors section of Team's latest annual and quarterly filing filed with the Securities and Exchange Commission, along with our associated earnings release.
Speaker Change: Team assumes no obligations to update any board with the statements or information which speak as of their respective dates. With that, I will turn it over to Keith Tucker, our CEO .
Keith Tucker: Thank you, Nelson. Welcome everyone, and thank you for joining us to review our first quarter of 2025 operational and financial highlights.
Keith Tucker: During the first quarter of 2025, we continue to make progress against our strategic roadmap designed to better position team for success and improve financial performance.
Keith Tucker: Over the past two years, we have worked to simplify our business, expand our margins and and trust our campus structure can balance you.
Keith Tucker: Our success today on these initiatives has team well positioned to grow the top line and market share.
Keith Tucker: Nelson will go into more detail about this, but I believe the hard work from all of our employees at Team has helped to make our success possible.
Keith Tucker: Turning to the first quarter of 2025, we continued to deliver solid results.
Keith Tucker: We made significant progress against one of our core commercial initiatives.
Keith Tucker: growing revenue from midstream and markets by nearly 15% in the quarter. Our inspection e-treating segment delivered strong top line growth with revenue up 6.8% over the prior year and up 8.8% in our core US operations.
Keith Tucker: and our mechanical service segment, Lower Call Out Revenue and Delays and Project and Turn Around Activity, shift it revenue into future periods which offset the growth in our IHG segment.
Keith Tucker: Overall revenues were essentially flat year over year, but I want to remind you that our work is seasonal, and while winter is usually our slowest time.
Keith Tucker: Having said that, we expect to see increases in year-over-year activity for the full year 2025.
Keith Tucker: We delivered a just to the EBITDA for the first quarter of $5.3 million.
Keith Tucker: Notably, our inspection and heat treating segment generated a 39% year-over-year improvement and adjusted EBITDA, driven by year-over-year revenue growth of nearly 22% in our higher large and heat-treating services.
Keith Tucker: We continue to see benefits from our cost discipline in the first quarter with our selling general and administrative expense lower by about 2 million versus the price of their period.
We remain focused on driving revenue growth.
Strict Cost Discipline and Improving Operational Execution
Keith Tucker: In addition, we have implemented steps to improve the performance of our Canadian operations.
Keith Tucker: These actions are a mix of top-line growth initiatives and improvements to our cost structure and margins. We expect to begin to see the results from these actions and our 2025 results with the full-year impact realized in 2026.
Keith Tucker: Looking ahead, while we continue to closely monitor the potential impact of terror policies and related effect on our end-markets.
Keith Tucker: We've experienced strong activity levels to start the second quarter and expect second quarter top line growth over the prior year across both segments and improved adjusted EBITDA levels.
Keith Tucker: We believe our diversified portfolio of service offerings across multiple industries and our geographic footprint positions us to better navigate recent macro economic uncertainty around terror policies.
Keith Tucker: Our management team is focused on the things that we can't control, which are continued cost-discipline and execution on our commercial initiatives.
Keith Tucker: and we remain committed to delivering top-line growth for the whole year and at least 15% year-over-year growth in adjusted EBITDA.
Keith Tucker: With that, I would like to turn it over to Nelson to discuss our financial accomplishments.
Nelson Haight: Thank you, Keith. Before I go into our first quarter results, I would like to discuss in more detail the recent actions we've taken to strengthen our balance sheet.
Nelson Haight: As Keith mentioned in March, we closed the Reconancing Transaction that lowered our blended interest rate by over 100 basis points, simplified our capital structure and extended our terminal and materies out to 23.
Nelson Haight: Our new first-line term loan facility consists of a funded 175 million term loan that the tours in 2030 and a 50 million delayed draw of term loan available to the company subject to satisfying certain conditions.
Nelson Haight: We use the initial proceeds to repay about $158 million about a standing debt consisting of our delayed draw term loan and equipment in real estate loans under our annual credit facility and a portion of the outstanding bounds of our prior senior skewed term loan.
Nelson Haight: All remaining outstanding debt under the prior senior secured term loan rolled over into a new 97.4 million second lean term loan also maturing in 2030.
Nelson Haight: The completion of this transaction addressed all our near term maturities and lowered our cost of capital while also providing the company financial flexibility as the company's performance continues to improve.
Nelson Haight: Turning now to our first quarter financial results, our revenue was essentially black year over year and our growth margin was 23.8%.
Nelson Haight: Our justice-selling general and administrative costs, which excludes expenses not representative of our ongoing operations in non-cash amount such as depreciation and cheer-based compensation, declined by almost 1 million represented 22.7% of cost-solidated revenue.
Nelson Haight: are adjusted in that loss by the quarter was 14.9 million, also essentially flat with the first quarter of 2024.
Nelson Haight: We delivered solid and adjusted EBITDA of 5.3 million and continue to focus on expanding our margins through cost discipline and it focused on growing higher margin work. Since 2021, we have increased our adjusted EBITDA every year and we believe that we will continue that trend in 2025.
Keith Tucker: As Keith noted, we have continued to build off our strategic roadmap and during the first quarter we launched the next phase targeting further cost optimization and improved workforce utilization.
Keith Tucker: We expect this phase of our ongoing program to generate sustainable, groomed mist and margins and cash flow that are targeting annualized cost savings of at least 10 million.
Keith Tucker: We are in a significantly improved position compared to where we worked three years ago and I remain confident in our ability to continue building off our progress today in improving our overall financial and operating performance.
Keith Tucker: We expect to continue delivering improvements in our results that will ultimately lead to growth and shareholder value. With that, let me now turn it back over to Keith for some closing comments.
Keith Tucker: Thanks, Nelson. Over the past several years, we've made significant progress against our strategic plan, designed to drive improved operational and financial performance.
We expect to continue building off that progress in 2025.
Improve performance from our Canadian operation.
Keith Tucker: At least 15% year-over-year growth in adjusted EBITDA and further meaningful progress towards our adjusted EBITDA target margin of at least 10%.
Keith Tucker: All of which we believe will lead to further growth in shareholder value. Our progress today would not be possible without our outstanding and experienced workforce that is working every day to safely execute our strategic plan and unlock the inherent value you're at team.
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 most vital asset and no job is too important not to be done safely.
Keith Tucker: In closing, I remain confident about our future because I am a firm believer in our capabilities, talented employees, and our leadership team.
Keith Tucker: We have delivered improved results over the past three years, and we remain committed to continuous improvement in margin, cost discipline, and cash flow generation.
Keith Tucker: I believe that we are well positioned to sustainably and properly grow team well into the future. Thank you for joining us today and for your continued interest in team.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.