Team targets at least 15% adjusted EBITDA growth for 2025 as cost discipline drives margin gains

Earnings Call Insights: Team, Inc. (TISI) Q2 2025

MANAGEMENT VIEW

* CEO Keith D. Tucker reported significant progress in the second quarter, highlighting "strong results" with revenue growing 8.5% year-over-year, a gross margin increase of 7.1%, and adjusted EBITDA up 12.4%. Tucker emphasized that "growth in our adjusted EBITDA outpaced our top line growth," attributing this to ongoing cost and margin improvement programs.
* Tucker noted 15% revenue growth in the Inspection and Heat Treating (IHT) segment, driven by over 13% growth in the U.S. and 31% year-over-year revenue growth in Canadian operations. He also pointed to a nearly 26% rise in higher-margin heat treating revenue, which helped deliver "25% growth in IHT segment adjusted EBITDA and a 118 basis point improvement in our IHT segment adjusted EBITDA margin."
* The Mechanical Services (MS) segment saw U.S. revenue up 7%, offsetting international weakness. Adjusted EBITDA for the quarter was $24.5 million, with adjusted EBITDA margin up 40 basis points to 9.9%.
* Cost discipline remains a focus, with adjusted SG&A expense reduced to 18.9% of consolidated revenue versus 19.8% in Q2 2024. Actions taken in Q2 are expected to yield annualized cost savings of around $10 million, with $6 million of those savings expected in the second half of 2025.
* The company appointed Dan Dolson as Executive Vice President, Chief Strategy & Transformation Officer to lead ongoing transformation efforts. Tucker stated, "We have already identified additional opportunities to improve margin and efficiency that we will pursue in the second half of 2025."
* CFO Nelson M. Haight stated, "In March 2025, we closed a refinancing transaction that lowered our blended interest rate by over 100 basis points, simplified our capital structure and extended our term loan maturities to 2030. The completion of this transaction addressed all of our near-term maturities and lowered our cost of capital while also providing the company financial flexibility as our performance continues to improve."

OUTLOOK

* Tucker indicated, "We see top line growth over the prior year across both segments and improved adjusted EBITDA levels for the second half of 2025."
* For the full year, Tucker stated the company expects "year-over-year growth in the top line, continued improved performance from our Canadian and other international operations, at least 15% year-over-year growth in adjusted EBITDA and further meaningful progress towards our adjusted EBITDA target margin of at least 10%."
* Management expects the full-year impact of ongoing cost actions to be realized in 2026, with $6 million of savings anticipated in the second half of 2025.

FINANCIAL RESULTS

* Haight reported, "Our overall revenue was up 8.5% over the prior year period generating a $4.5 million increase in our gross margin, which stood at 27.5% for the quarter."
* Adjusted SG&A costs as a percentage of revenue decreased by 90 basis points to 18.9%.
* Adjusted net loss for the quarter was $900,000, improving by $1.1 million compared to Q2 2024.
* Adjusted EBITDA for the quarter was $24.5 million, and nearly $30 million has been generated in adjusted EBITDA for the first half of 2025, outpacing the first half of 2024 by about 5%.
* Liquidity at June 30, 2025, included $16.6 million in consolidated cash and $32.7 million of undrawn availability under credit facilities.

Q&A

* NOT_APPLICABLE: The current transcript does not contain a Q&A section or analyst questions.

SENTIMENT ANALYSIS

* The transcript does not include analyst questions or commentary, so analyst sentiment cannot be assessed.
* Management maintained a confident and optimistic tone throughout, with Tucker stating, "I remain confident about our future because I am a firm believer in our capabilities, talented employees and our leadership team."
* Compared to the previous quarter, management’s tone remains consistently confident and focused on execution, with an emphasis on cost discipline, margin improvement, and growth initiatives.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a shift from "essentially flat" year-over-year revenue in Q1 to 8.5% revenue growth in Q2, with gross margin improving from 23.8% in Q1 to 27.5% in Q2.
* Adjusted EBITDA rose from $5.3 million in Q1 to $24.5 million in Q2, with first-half 2025 adjusted EBITDA outpacing the first half of 2024 by about 5%.
* Both quarters emphasized a target of at least 15% year-over-year adjusted EBITDA growth for 2025, but Q2 highlighted tangible progress on cost savings and improved performance in Canadian operations.
* The appointment of a Chief Strategy & Transformation Officer in Q2 marks a strategic development not mentioned in Q1.
* Management tone in both quarters was confident, but Q2 comments provided more detail on realized improvements and future cost-saving expectations.

RISKS AND CONCERNS

* Management cited ongoing monitoring of U.S. tariff policy and its potential impact on supply chain and material costs, noting efforts to "improve our supply chain and material sourcing to help mitigate any potential cost pressure."
* Revenue recognition was described as "a bit lumpy" in certain international Mechanical Services operations.
* There was continued focus on cost discipline and operational execution to manage macroeconomic uncertainty.

FINAL TAKEAWAY

Team, Inc. management emphasized strong second quarter performance supported by revenue growth, margin expansion, and disciplined cost controls. The company set a clear expectation for at least 15% year-over-year adjusted EBITDA growth in 2025, with additional cost savings to support further margin improvement. Strategic leadership changes and a focus on operational execution are intended to drive continued shareholder value as Team pursues its transformation roadmap.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/tisi/earnings/transcripts]

MORE ON TEAM

* Team, Inc. (TISI) Q2 2025 Earnings Conference Call Transcript [https://seekingalpha.com/article/4813187-team-inc-tisi-q2-2025-earnings-conference-call-transcript]
* Financial information for Team [https://seekingalpha.com/symbol/TISI/income-statement]