Team, Inc. Stock

Good day, and welcome to Team, Inc.'s Third Quarter 2026 Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Joseph Caminiti, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Team, Inc.'s Third 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 and quarterly reports filed with the Securities and Exchange Commission as well as the company's third quarter earnings release. Team undertakes no obligation to update any forward-looking statements, which speak only 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 an overview of our progress during the third quarter, including the continued advancement of Team's operational and commercial transformation before discussing the current operating environment and how we are positioning the business as we move into 2027. Clinton will then provide a more detailed review of our financial results, balance sheet and updated full-year outlook. Before discussing the quarter, I want to briefly highlight some recent commercial developments.

In aerospace, we are in advanced discussions with a leading global aerospace manufacturer on a potential long-term agreement that would expand the specialized services we provide from our aerospace facilities. Any financial contribution would build over several years, and we expect to be in a position to share more in the near term. We are also in advanced discussions on a multiyear valve testing and inspection opportunity supporting a commercial nuclear project in Europe, which would extend our Mechanical Services business further into the nuclear power market.

We expect to share more on this in the near term as well. Both opportunities draw on specialized capabilities we already have in our Inspection and Heat Treating and Mechanical Services businesses. Additionally, we recently resolved a multiyear legal dispute with a large global integrated oil company that was previously one of our large customers with historical revenue exceeding $20 million a year prior to this dispute.

Now with that dispute behind us, we expect to bring this customer back into our commercial planning, which gives us the opportunity to earn a greater share of its spend over time in line with our commercial strategy. We are already engaged in positive commercial discussions, and we are encouraged by the quick reestablishment of a relationship, which had been prevented in recent years.

Turning to our broader transformation. During the third quarter, we continued to make meaningful progress advancing the operational and commercial initiatives introduced on our last call. As a reminder, our transformation is centered on 3 key areas: leadership and accountability, commercial execution and operational efficiency. Over the past several months, we have taken deliberate steps to strengthen our organizational structure, establish greater accountability and improve the consistency of execution across the business.

Importantly, we remain on track with our transformation priorities and are encouraged by the progress made to date. Starting on the leadership front, we have continued to build on the organizational changes implemented earlier this year with a focus on establishing clear ownership of our key priorities and improving coordination across our commercial, operational and financial functions. On the commercial front, we are focused on identifying a leader for the transformation of our commercial sales organization. At the same time, we are making progress establishing a more disciplined and coordinated approach to how we identify, pursue and execute customer opportunities. This includes improving pipeline visibility, strengthening pricing and estimating practices and bringing greater consistency to account management and project selection.

Our goal is not simply to generate additional revenue, but to pursue profitable growth in markets where our technical expertise, execution capabilities and safety record are most valued. As part of that effort, we recently centralized the quotations function to bring greater discipline and strategy to the function. We are also driving our sales force to use our CRM tracking system so that we are better positioned to both compete for opportunities and forecast the work. A central component of that strategy remains expanding our presence beyond traditional refining and petrochemical markets.

While those industries remain core to Team and represent meaningful long-term opportunities, we continue to see attractive prospects across aerospace, commercial nuclear power, LNG, utilities and other industrial end markets. We are encouraged by the momentum building across these markets, which has helped partially offset softer turnaround activity within our traditional customer base. As these commercial efforts continue to gain traction, we believe they will support a more balanced revenue mix and reduce our exposure to the timing of large turnaround and maintenance projects.

Turning to operational efficiency. We have continued executing initiatives aimed at simplifying our business, improving productivity and establishing a more efficient cost structure. Our efforts remain focused on several key areas, including global footprint rationalization, organizational efficiency, procurement, labor, fleet utilization and improvements to the systems and processes supporting our operations.

We have made meaningful progress in Europe and Canada, where we have undertaken actions to streamline our operations, consolidate facilities and better align our organizational structure with the opportunities across those markets. These actions, alongside our broader efforts to improve workforce productivity and reduce operating complexity are important steps toward creating a leaner and more scalable operating model.

We expect to complete additional initiatives through the remainder of the year with the financial benefit of these improvements becoming increasingly evident as we move into 2027. While there is more work ahead, we are encouraged by the pace of execution and believe the progress we are making will position Team to generate stronger operating leverage as commercial activity grows. Clint will provide additional detail on our progress against the structural cost improvement targets introduced last quarter, including updated expectations for realized savings and the annualized benefits of the program.

Shifting to the operating environment. Third quarter results continue to reflect the deferral of planned turnaround and maintenance activity broadly across the industry in our core refining and petrochemical markets. As we discussed last quarter, elevated refinery utilization and favorable operating economics have continued to encourage customers to extend operating runs, delaying certain planned outages and maintenance projects. This dynamic has been particularly impactful within our Mechanical Services business, which carries greater exposure to higher-margin turnaround and outage-related work.

During the third quarter, turnaround revenue declined approximately 49% compared to the prior year period, following a decline of more than 50% observed through the first half of the year. The reduced contribution from this activity has continued to impact our revenue mix, labor utilization and overall profitability. We think it is important to reiterate that this near-term headwind is expected to be transient to our financials. Based on our experiences in these markets, this maintenance work can only be deferred for a finite period of time, and we currently expect much of it to begin returning in early 2027.

At the same time, our Inspection and Heat Treating business has remained comparatively resilient, supported by the recurring nature of inspection requirements and customers' continued need to operate their assets safely and reliably. Even as facilities extend operating runs, ongoing inspections remain essential. Combined with the growth we are generating across other industrial markets, this has helped partially offset the pressure from lower turnaround activity.

We also continue to navigate disruptions associated with the ongoing conflict in the Middle East as the conflict has expanded in overall scope, including the Saudi region during the quarter, impacting our business in the third quarter more than it had prior. As conditions in the region have deteriorated, we have experienced additional challenges affecting customer activity and our ability to complete certain contracted projects.

More recently, the expansion of the conflict has created further restrictions on access to customer facilities, resulting in additional work being pushed beyond the current year. These developments are creating incremental pressure on our fourth quarter outlook, particularly as the timing of project completion remains difficult to predict. Importantly, as we said, we believe much of this activity has been deferred rather than lost.

However, the timing of its eventual completion remains dependent on customer operating decisions and broader market conditions. Given this, we intend to retain necessary labor in order to be well positioned for the rebound in this activity as we progress into 2027 and ensure we don't lose out on that opportunity.

Looking ahead, we continue to believe the underlying demand for Team's specialized services remains intact. Refining and petrochem facilities require ongoing inspection, maintenance and repair to operate safely and efficiently. And there is a practical limit to how long certain maintenance activities can be deferred. We are seeing indications of increased turnaround and maintenance activity being planned for 2027, although the timing of that work will ultimately depend on customer operating schedules and refining utilization.

As those conditions normalize, we believe Team will be well positioned to capture opportunities across our core markets. Importantly, we expect to enter 2027 with a more efficient operating structure and an increasingly diversified commercial pipeline. The combination of structural cost improvements, stronger commercial execution and expanding opportunities across high-value industrial markets should provide a more favorable foundation for profitability and cash generation.

As deferred turnaround activity eventually returns, we believe these improvements will also allow Team to benefit from greater operating leverage across the business. While the timing of the recovery in our traditional markets remains uncertain, we are confident in the direction of our transformation and the actions we are taking to strengthen Team's underlying earnings power. Our priorities remain clear: improve execution across the existing business, expand into attractive markets where our capabilities are differentiated and establish a more efficient operating structure capable of supporting sustained profitable growth.

With that, I'll turn the call over to Clinton for a more detailed discussion of our third quarter financial results and updated outlook.

Thank you, Gary, and good morning, everyone. Turning to our financial results. Revenue was $220.4 million compared with $225 million in the prior year period, a decrease of 2%. Revenue grew 8.3% in our international markets, which was more than offset by a decline of 4.4% in the United States, while Canada was relatively flat. Inspection and Heat Treating revenue was $127.1 million, an increase of 3.9% year-over-year, primarily due to increased non-turnaround revenue and call-out activity in those segments.

Segment operating income improved to $15.2 million from $14 million, reflecting a more favorable project mix. Mechanical Services revenue was $93.3 million, a 9.1% decrease year-over-year, driven by lower turnaround and project revenue of $11.1 million in the U.S. and $1.2 million in Canada, partially offset by a $2.9 million increase in our other international regions. Segment operating income was $400,000 compared to $3.4 million in the prior year period, reflecting the reduced activity levels in the U.S. and Canada.

On our last call, we indicated that we expected a portion of the deferred mechanical services activity to begin returning over the balance of the year. That did not materially occur in the third quarter. And as Gary noted, the escalation of the conflict in the Middle East has since pushed additional contracted work out and product sales likely beyond year-end.

Looking at the year-over-year change in our revenue, the downturn in turnaround activity with our refining and petrochemical customer accounts for more than 100% of the decline, and this is work that generally carries strong margins. The good news is that we have been able to backfill much of that decline in growth in our key targeted markets. We expect that growth to become more evident and to further strengthen our consolidated results as the deferred refining and petrochemical revenue returns.

Consolidated gross margin was $55.8 million or 25.3% of revenue compared with $58 million or 25.8% in the third quarter of 2025. The decline in nominal gross margin dollars reflects the lower contribution from higher-margin turnaround work within Mechanical Services, where our labor base does not flex with activity levels to the same degree as our inspection workforce and the related impact on utilization. Selling, general and administrative expenses were $50.7 million, a decrease of $500,000 or 1.1% from the prior year period.

Reported SG&A included $7.4 million of noncash and nonrecurring items this quarter compared with $4.4 million a year ago, primarily legal costs and litigation reserve, severance and transition costs associated with workforce reductions, facility consolidation and lease terminations. Adjusted SG&A, which includes expenses not representative of Team's ongoing operations such as nonrecurring professional, legal, financing and severance expenses and noncash expenses such as share-based compensation expense, decreased by $3.5 million or 7.4% to $43.3 million or 19.7% of revenue compared with 20.8% in the prior year period.

Adjusted EBITDA was $15.7 million or 7.1% of revenue compared with $14.5 million or 6.5% in the third quarter of 2025, an increase of $1.2 million or 8.2% and up sequentially from $12.8 million in the second quarter. The increase was driven by Inspection and Heat Treating, where segment adjusted EBITDA rose to $19.2 million from $17.3 million, partially offset by Mechanical Services, where segment adjusted EBITDA declined to $7 million from $7.8 million. Corporate and shared support costs were essentially unchanged.

Turning to our structural cost improvement program. During the quarter, we advanced actions in Europe and Canada. Through the third quarter, we have realized approximately $9 million of savings, and we are raising our near-term expectations for our structural cost improvements, now expecting to capture between $15 million and $18 million of benefit in 2026. We are increasing our expectation on the total amount we expect to capture through our efforts with full program benefits now expected to range between $30 million to $38 million at full annual run rate, up from a range of $20 million to $35 million.

Through the third quarter, we have incurred approximately $5 million of one-time implementation costs, including $1.8 million of transition costs and $2.3 million of severance in the quarter. These initiatives are largely within our control and are intended to create a more efficient cost structure and stronger operating leverage as customer activity improves. I think it's important to note that our transformation initiatives, particularly on the cost side, are already having an impact, which has strengthened our confidence in the nominal amount of long-term structural cost improvement as well as the pace of capture.

As we noted earlier, we finalized a one-time settlement with a former customer and the cost associated with that is embedded within our SG&A results for the quarter. Stripping out this one-time settlement cost provides us good visibility into the progress we are making in driving our structural costs, and we believe this will be more fully evident in the results as we go forward. Further, these actions support our ability to drive operating leverage and expand our EBITDA and operating margin.

Turning to cash flow and the balance sheet. Cash used in operating activities was $3.2 million in the quarter and capital expenditures were $2.6 million, resulting in free cash flow of negative $5.8 million. Through the first 9 months of the year, cash used in operating activities was $11.6 million, an improvement of $16.5 million compared with the prior year period, driven primarily by working capital. We ended the quarter with total liquidity of approximately $43.5 million and net debt of $308.1 million.

During the quarter, we repaid $9.5 million under the ABL. Net working capital and cash generation remain key priorities. We are focused on improving order to cash, increasing accountability throughout the organization and using future cash generation to further reduce debt.

Turning to guidance. We are revising our full year 2026 outlook to reflect the continued deferral of turnaround and maintenance activity in our core markets and the additional work pushed beyond year-end following the escalation in the Middle East. We now expect revenue of $870 million to $890 million, gross margin of $226 million to $249 million and adjusted EBITDA of $56 million to $59 million. The difference compared to our 2025 results and our original 2026 guidance stems directly from these deferrals.

Our outlook assumes continued stability within the Inspection and Heat Treating, no further escalation of the Middle East conflict and the realization of the cost actions already taken. The timing of deferred work remains dependent on customer operating decisions and conditions in global fuel markets. As we move into 2027, we expect the structural cost actions, our working capital initiatives and our commercial diversification efforts to provide a stronger foundation for profitability and cash flow generation as deferred maintenance activity returns. We remain focused on executing the transformation priorities Gary outlined and on delivering improved margins, adjusted EBITDA and cash generation.

With that, I'll turn the call back over to Gary.

Thank you for taking the time this morning to dial in and participate in our call. We look forward to updating you on our transformation initiatives and growth as we move into 2027. Thank you.

Thank you, Gary and Clinton. As we announced earlier on the call, we invited investors to submit questions ahead of time. We would like to thank those investors who took the time to do so, and we appreciate your continued engagement. We will only be taking questions today that were submitted in advance. Starting with question one. What is the year-over-year impact in the third quarter and year-to-date deferral revenues in dollar terms? And what is the time line expectation for recouping those revenues?

Sure. This is Gary. Turnaround revenue declined approximately 49% in the third quarter and is down approximately 51% year-to-date. The impact is mostly visible in our Mechanical Services where lower oil and gas turnaround activity reduced third quarter revenue by $11.1 million in the U.S. and $1.2 million in Canada. Year-to-date, Mechanical Services revenue is down $15.1 million, driven primarily by lower turnaround and project activity. On timing, we believe much of this work has been deferred rather than lost. There's a practical limit to how long this maintenance can be deferred, and we are seeing indications of increased turnaround activity being planned for 2027. We currently expect much of it to be returning in early 2027 with the exact timing dependent on customer operating schedules and refining utilization.

And for a second question, how has the conflict in the Middle East affected the timing of this turnaround work? And what is helping to offset the decline in the meantime?

Yes. The conditions in the region have deteriorated. We've experienced additional challenges affecting customer activity and our ability to complete certain contracted projects. More recently, the expansion of the conflict has created further restrictions on access to customer facilities, resulting in additional work being pushed beyond the current year. It's creating incremental pressure on our fourth quarter outlook, and we're working closely with customers on the exact timing of when we can gain access to the facilities.

This is Clinton. The Inspection and Heat Treating revenue grew 3.9% to $127.1 million, primarily on project and call-out activity and inspection remains essential even as customers extend operating runs. We've also been able to backfill much of the decline with growth in our key targeted markets.

Thank you, Clinton. Moving to the third question. As this work returns, how should we think about the effect on margins for the consolidated business as well as for the segment?

This is work that generally carries strong margins. Our Mechanical Services labor base does not flex with activity levels to the same degree as our inspection workforce, so lower volumes weigh on utilization. As deferred activity returns on to a more efficient cost structure, we believe Team will benefit from greater operating leverage. This will impact operating margins, EBITDA margins and drop through to earnings. Keep in mind, we are retaining labor in the current time frame in order to be best positioned to react and capture those revenues when they come back.

And on to the next question. Can you give greater context on the new commercial agreements you are near to signing that you announced? And what is the relative size? And how big can you scale your business in those areas?

Sure. This is Gary.

Particularly -- I'm sorry, I don't want to cut you off, but particularly in the nuclear and aerospace. And are any of these also factored into guidance for the year or into 2027?

Sure. This is Gary. Both opportunities are still in advanced discussions. So I want to be careful not to get ahead of them. In aerospace, the potential long-term agreement with a leading global aerospace manufacturer would expand the specialized services we provide from our aerospace facilities and any financial contribution would build over several years. In nuclear, we are discussing a multiyear valve testing and inspection opportunity supporting a commercial nuclear project in Europe.

Because these agreements aren't yet signed, we're not going to size them today. Our updated 2026 guidance does not depend on either one, and we would expect any contribution to build over time. Both of them draw on our capabilities we already have, and we expect to be in a position to share more in the future here.

What is driving the shift to the guidance versus last quarter if little has changed? What is giving you confidence also at the same time that you'll be able to hit the lower range now? And how should we be thinking about bridging to 2027 expectations inclusive of these project deferrals versus the growth in other areas?

Yes. This is Clinton. Two things changed since our last call. We expected a portion of the deferred Mechanical Services activity to begin returning over the balance of the year, and that did not materially occur in the third quarter. The escalation of the conflict in the Middle East has since pushed additional contracted work and product sales likely beyond year-end. The difference compared to our original guidance stems directly from these deferrals.

On confidence, our updated range of $56 million to $59 million of adjusted EBITDA reflects our expectation that the recovery in this activity largely shifts into early 2027. It assumes continued stability within the Inspection and Heat Treating, no further escalation of the Middle East conflict and the realization of the cost actions already taken. On 2027, we are not providing guidance today.

The building blocks are the return of deferred turnaround and maintenance activity, structural cost benefits that we now expect to reach $30 million to $38 million at full annual run rate and continued growth in our key targeted markets. We expect that growth to become more evident and to further strengthen our consolidated results as the deferred refining and petrochemical revenue returns.

What is the strategy and associated time line and the kind of order of operations around addressing the company's capital structure and potential for improving its credit facility structure and borrowing terms over time? And is that part of your strategy along with the transformation?

Yes. This is Clinton. Our order of operations starts with the business. The first priority is executing the transformation where we now expect $30 million to $38 million of structural cost benefits at full annual run rate alongside our working capital initiatives. We expect those actions to provide a stronger foundation for profitability and cash flow generation as we move into 2027, and we intend to use future cash generation to further reduce debt. We ended the quarter with total liquidity of approximately $43.5 million and net debt of $308.1 million.

We are reviewing our ABL and other credit agreements -- arrangements and what our potential alternatives may be to make sure we have the flexibility to invest and grow the business. Of course, our progress with the transformation and the credit market conditions, including interest rates, will impact what the capital structure possibilities are for us. As earnings and our cash flow improve, we believe Team will be in a stronger position to address its capital structure, and we will update investors as that work progresses.

On the transformation, what are the visible impacts to the financials from the transformation efforts on both the cost and growth side? And if you strip out some of the one-time closure costs and the dollar impact of that settlement, what are the overall impacts?

Yes. The clearest way to see it is in our adjusted results, which exclude those items. Our third quarter results included a one-time charge of $2 million related to the legal settlement, along with $1.8 million of transformation costs and $2.3 million of severance. Excluding the settlement, corporate and shared support costs would have declined by 12.6%. Adjusted SG&A decreased by $3.5 million or 7.4% to 19.7% of revenue compared with 20.8% in the prior year period. Through the third quarter, we have realized approximately $9 million of savings against approximately $5 million of one-time implementation costs, the majority for severance and facility closures.

On the growth side, Inspection and Heat Treating revenue increased 3.9% and revenue in our international markets grew 8.3%, and we have been able to backfill much of the decline in turnaround activity with growth in our key targeted markets. Together, these helped adjusted EBITDA increase 8.2% to $15.7 million, and our adjusted EBITDA margin expanded to 7.1% from 6.5% on revenue that was down 2%.

Thank you. I think that concludes the question and answers we have for today. Thank you for attending our third quarter review, and we look forward to updating everyone at our fourth quarter review. Stay safe, and thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Welcome to the Team, Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joseph Caminiti with Alpha IR Group. Please go ahead.

Thank you, operator. 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 and 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, then 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 have 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 3 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 has joined us as Chief Financial Officer. We have also added a new Chief Operating Officer, a new Chief Human Resources 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. 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 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 and 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, CORE Partners, and we thank CORE for their engagement and support in the years leading up to this transition.

With that, I'll turn the call over to Clinton.

Thank you, Gary, and good morning, everyone. I am pleased to be joining Team and participating in my first earnings call as Chief Financial Officer. Since joining the company, I have spent time with Gary and leaders across the organization, reviewing the business, our financial processes and the transformation initiatives underway. I'm encouraged by Team's underlying strengths and the opportunity to improve margins, cash generation and operational consistency.

Turning to the second quarter. Revenue was $229 million compared with $248 million in the prior year period. Inspection and Heat Treating revenue was $131 million, a 5% decrease year-over-year. This decrease was largely attributable to a $5 million drop in the U.S. and a $2.6 million reduction in Canada, both due to reduced turnaround activities in those regions. Mechanical Services revenue was $97 million, an 11% decrease year-over-year. As Gary discussed, results reflected the deferral of planned turnaround and maintenance activity as certain customers extended facility operating runs.

As we have mentioned, our results have carried the impact of deferred turnaround activity as refining customers have deferred maintenance to capture strong crack spreads. To date, turnaround revenues are down a little more than 50% versus the prior year, driven by this current dynamic. Notably, the activity tied to these revenues cannot be forgone, and we expect to capture these revenues in later periods with expectations for pickup beginning in the second half of the year.

While consolidated revenue remained relatively resilient, the lower contribution from turnaround work resulted in a less favorable mix of sales and also affected labor utilization and operating leverage. Selling, general and administrative expenses for the second quarter were $46.6 million, decreased by $3.9 million or 7.8% from the second quarter of 2025. Adjusted selling, general and administrative expense, which excludes expenses not representative of Team's ongoing operations such as nonrecurring professional, legal, financing and severance expenses and noncash expenses such as share-based compensation expense, decreased by $2.3 million or 4.8% to $44.6 million compared to the prior year period.

Adjusted EBITDA was $13.7 million compared with $24.5 million in the second quarter of 2025. The change primarily reflected lower Mechanical Services activity and the related impact on revenue mix and labor utilization and fixed cost deleveraging.

Turning to our structural cost improvement program Gary highlighted earlier, we have identified approximately $20 million to $35 million of annualized savings and productivity benefits across our facility footprint, fleet, procurement, organizational structure and operating processes. We anticipate that these initiatives will support future cash flow generation in the range of $5 million to $15 million this year. We note that while these initiatives are underway, they are very much in the early stages and are not yet reflected in our results. We expect approximately $8 million to $15 million of benefit during the second half of 2026 and expect to achieve the full annualized run rate by 2027.

We currently anticipate onetime implementation costs of approximately $5 million to $10 million. These initiatives are largely within our control and intended to create a more efficient cost structure and stronger operating leverage as customers' activity improves. Alongside these actions, we are sharpening our commercial focus and extending our specialized capabilities into a more diversified set of high-value industrial end markets. Together, we expect these steps to improve our margins, support stronger performance in the second half and strengthen Team's underlying earnings power and cash flow generation over time.

Turning to cash flow and the balance sheet. Cash used in operating activities was $0.7 million and capital expenditures were $3.9 million. We ended the quarter with total liquidity of approximately $51.2 million and net debt of $300.3 million. Net working capital and cash generation remain key priorities. We are focused on improving order to cash, increasing accountability throughout the organization and using future cash generation to further reduce debt.

Turning to guidance. We are reaffirming our full year 2026 outlook for revenue of $920 million to $945 million, gross profit of $240 million to $260 million and adjusted EBITDA of $68 million to $73 million. In the near term, we expect our results to likely come in towards the lower half of the provided ranges, given the uncertainty of timing regarding a rebound in deferred maintenance and turnaround activity tied to the ongoing Middle East conflict and its impact on global fuel markets.

Our outlook assumes that a portion of the mechanical service activity deferred during the second quarter begins returning over the balance of the year. The precise timing remains dependent on customer operating decisions, and our current expectations are, therefore, more weighted toward the second half. Guidance also incorporates the expected benefit from some of the initiatives underway, along with continued stability within inspection and Heat Treating and improved labor utilization as productivity returns. We remain focused on executing the transformation priorities Gary outlined and delivering improved margins, adjusted EBITDA and cash generation.

With that, I'll turn the call back over to Gary.

Thank you for taking the time this morning dialing in and participating in our call. We look forward to updating you on our transformation initiatives and growth as we go forward with the year. Thank you.

Thank you, Gary and Clinton. When we announced this call, we invited investors to submit their questions ahead of time. We'd like to thank those investors who took the time to do so, and we appreciate your continued engagement. In addition, we will be opening the call up to a live Q&A following the responses to those submitted questions.

Correction, we will only be taking questions today that were submitted in advance. Question one. Yesterday's announcement detailed a significant increase in ownership from Stellex Capital Management and a significant premium to market value. Can you comment on the transaction and what you believe is driving Stellex's increased ownership? And what may this additional Stellex investment mean going forward?

Sure. This is Gary. We can't speak on behalf of Stellex, but I can say this sends a very strong message to the management team that Stellex has confidence in our business strategy, the value to be unlocked here, the ongoing transformation and our ability to work to deliver differentiated value to our customers. We also look at it as confidence from CORE's perspective that they would not sell unless there was a significant premium.

We have an incredible brand and technician workforce here at Team, and we believe there's a lot of opportunity to improve margins with structural efficiencies and by obtaining more business in markets that value our services and safety record, and we'll pay accordingly for that, whether it be in aerospace, nuclear power, midstream, data centers and so on. We can assume that Stellex shares our confidence and they have seen the opportunity before us after being a strategic investor in Team since September 2025, and it's been a very positive and constructive relationship since they initiated their position last year.

We look forward to the continued collaboration with Stellex, and we view their interest as being aligned with the company and its shareholders with the ultimate goal of long-term value creation and unlocking the value of this business with improved margins while also having the highest safety standards and striving to be the employer of choice for service technicians in our industry.

This quarter, you introduced concrete targets for structural cost improvement for this year and at a full run rate. Do you anticipate sourcing structural benefits? Are there upfront capital costs associated with implementing these actions?

Yes. This is Clinton. Yes, related to the anticipation of the sourcing of the structural benefits, optimization of the supply chain, facility, fleet, global footprint and organizational structure as well as sharpening our commercial focus. It's important to note that we have started this improvement plan, but there's still a lot to do and the impacts may take some time to fully run through the financials. We have begun our efforts on the commercial side, but there's still a lot to do there as we look to the back half of 2026 and into 2027. But we have specific identified plans with goals to achieve our objectives.

Regarding the upfront costs associated with implementing these actions, yes, we have estimated between $5 million to $10 million of onetime costs to implement the changes, which includes global changes to our footprint and certain technology upgrades to improve our efficiencies. We are also evaluating capital needed to drive growth in areas where we have customers asking to provide new services to them and looking for ways to ensure we get the returns needed from those customers.

You referenced significant deferrals of turnaround and maintenance activity versus the prior year due to the state of fuels markets in response to the Middle East conflict. Can you quantify the impact year-to-date on revenues? What gives you the confidence that this will begin to rebound in the second half of 2026?

Sure. This is Gary. The conflict has negatively impacted revenue by more than $20 million in the first half of 2026, coming from both deferred turnaround and maintenance activity, which we attribute to the increase of crack spreads for our customers and to a lesser extent, specific business activity that slowed in the Middle East region for us. While Team was able to offset some of the downside in revenue, the service line mix was unfavorable, driving lower margins. We understand that customers will want to take advantage of crack spreads when they increase, but the work cannot be indefinitely deferred.

As mentioned, there is a practical limit to how long customers can delay required inspection, maintenance and repair work. So we do believe some of the activity will need to resume in the back half of 2026. However, the timing of that is dependent on some of the macro factors such as refining utilization that are, in turn, impacted by the Middle East conflict. So it can be hard to predict the exact timing.

You also referenced that Q2 saw new growth partially offsetting the pressure from refining customers or turnaround activity. Can you comment on the growth you're capturing in new markets and which of these is the most target-rich in near term? And what do you think you can ultimately achieve through these new verticals?

Sure. This is Gary. We are seeing growth in LNG, aerospace, commercial nuclear power, pulp and paper markets as examples, where we're seeing more than 10% year-on-year growth, and we expect growth in these markets to be higher in the second half of 2026. One of the most exciting things about these new markets is they all have high growth potential, and Team is well positioned to increase its wallet share in these markets.

Part of the transformation of the organization is to position Team to take advantage of these new markets while continuing to maximize performance for the historical core markets. As we move forward, we intend to have part of our sales organization more structured and focused towards these new markets, and we also look at that from different angles, including cross-selling, sales training and technical sales expertise in these markets. Our customers want service from Team because they know what we can deliver, safe, reliable and technically superior performance by our technicians. And it's our job as a management team to ensure that we are positioned to provide that to them.

Turning to cash flow. Can you comment on how you expect to drive cash flow improvement?

Yes. This is Clinton again. This is one of the first areas identified here in my financial assessment since joining Team. The order-to-cash improvement project is focused on improving working capital throughout the business. Some of the areas of improvement are by optimizing inventory levels and reducing invoicing time line to lower overall accounts receivable required to support the business. The $5 million to $10 million cash flow improvement is targeted to be realized by end of the year, driving higher liquidity.

I think that concludes the questions and answers. This is Gary. Thank you for attending our second quarter review and look forward to updating everyone at our third quarter review in early November. Stay safe. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to Team, Inc.'s First Quarter 2026 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Team, Inc.'s discussion about our first quarter 2026 operational and financial results. On the discussion today are Gary Hill, our Chief Executive Officer; and myself, Nelson Haight, 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 and other income and expense, taxes, adjusted EBITDA, cash flow and future business outlook, which by their nature, are uncertain and outside of the company's control.

Although these forward-looking statements are based on management's current expectations and beliefs, actual 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 Team, Inc.'s 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, which speak as of their respective dates. With that, I will turn it over to Gary Hill, our Chief Executive Officer.

Thank you, Nelson. Welcome, everyone, and thank you for joining us on the call today. I am pleased with the solid start to 2026 that we were able to deliver from both an operational and financial perspective. First quarter 2026 revenue rose 8.3% year-over-year to $215 million, our highest Q1 revenue since 2019. This growth was driven by robust performance across both our Inspection and Heat Treating and Mechanical Service segments. These results drove meaningful profitability gains, including a 45.2% increase in adjusted EBITDA to $7.7 million and a 90 basis point improvement in adjusted EBITDA margin. Both are the best Q1 levels since prior to 2019.

Our last call was my first with Team, and I've been here for about 100 days now. In that time, I have been able to meet with many of our hard-working employees, visit some of our worldwide locations and had in-depth discussions with the leadership team and Board. I am going to share my observations with you and share the priorities, strategic vision and guidance for 2026 that are the result of these meetings. I want to start by saying that following these discussions, I am even more excited by the financial and operational potential and the opportunity to lead Team. I believe that our strategic vision will help accelerate our delivery of progressively better operational and financial results. My first observation is about Team's most important asset, our people.

Our workforce truly has an unparalleled set of skills and technical expertise to tackle any issue that may arise for our customers. We have a dedicated service team that is customer-focused and 100% committed to quality and safety. This is paramount to our success, which is why one of the key points of our strategic vision is deepening our commitment to our workforce. We want to improve our retention rate, which we believe is already industry-leading, and we do that by protecting and investing in our people. For example, we believe Team is the first in our industry to develop a former hire-to-retire career path program for our technicians that lays out the long-term benefits from working at Team and is a key differentiator from our peers.

Along with our leading benefit program focused on total health and long-term wellness, we also want to strengthen engagement with our employees by encouraging open and honest communication, which is why we conduct annual satisfaction surveys that provide actionable feedback on employee concerns. We know how important our people are, and we want to make Team the employer of choice by ensuring our employees return home safely every day and remain committed to helping Team achieve our collective goals. Another observation is that we have good stability in our core markets of refining and petrochem and some very encouraging long-term tailwinds in our targeted growth markets of LNG, midstream, data centers, power and aerospace. While the Middle East conflict has had minimal direct impact on Team, it is impacting the oil and gas industry, and there are some knock-off effects like increased refining run times, thus pushing some turnaround scopes out later into the year.

Regardless of what we believe to be shorter-term headwind, long-term refining and petrochem remains a strong core opportunity given the age of refineries, their high utilization rates and the commercial need to remain online. Team can help with monitoring, repair and maintenance, often with minimal or no impact on run time. LNG and midstream have seen tremendous growth in the U.S. over the past decade and geopolitical events are driving natural gas demand and opportunities for U.S. LNG to supply new areas around the world. Expansion of existing facilities and greenfield development drive growing inspection mechanical services demand. Another relatively new area is the AI data center build-out that is occurring. The forecast demand for power related to AI-fueled data center construction is unprecedented, which should drive considerable inspection and mechanical services on the power side as well as the construction and maintenance side.

We also believe that strong growth in commercial aerospace and increased defense spending provides significant opportunities for our highly accretive laboratory inspection services, which are key growth areas for Team going forward. On the last call, I spoke about opportunities to expand our wallet share with existing customers and accelerate our growth in core and targeted end markets. I also spoke of challenging our entire Team to accelerate top line growth, enhance efficiency and reduce costs to improve our operating leverage, which should drive margin and EBITDA growth. I want our organization to be committed to improving the rate of progress in these key areas.

First up is commercial. We want to prioritize healthy, sustainable growth that is margin accretive and less cyclical. With our strong customer focus, proven technical expertise, geographic footprint and breadth of service offering, we are focused on expanding our market share in the targeted end markets I previously mentioned. We see a large opportunity for Team and with a focused and disciplined effort, expect to capture market share. We're also being more disciplined about the work we pursue, focusing on opportunities where our technical capabilities and quality of execution are most valued. We are prioritizing healthy growth over growth at any cost.

Next is our ongoing focus on cost efficiency. We have made meaningful progress in cost optimization over the past several years, but there is certainly an opportunity for further improvement, particularly in supply chain, better integrating how our teams and locations work together, further simplifying processes and investing in systems to lower costs, all of which is intended to improve our scalability and expand margins. We are defining the opportunity over and above the reductions previously announced and believe that in the second quarter earnings release and conference call, we will have a better set of targeted cost reduction amounts to convey to the market.

Finally is our workforce, which I discussed in detail, but I want to further outline how we can improve there. We are targeting strategic additions to our already experienced leadership team that I believe will enhance our capabilities and elevate accountability across the organization. I want all our leaders to share that commitment and to work hand-in-hand with our workforce to deliver our strategic vision together. I want to enhance communication and our analytics to accelerate and improve our decision-making. We need to be nimble and capable of meeting our customers' needs in a changing market so that we can realize first-mover advantages.

Before I turn the call over to Nelson to go into the quarterly results in detail, I want to give a high-level overview of our full year 2026 guidance. Our strategic vision and the priorities that I have discussed this morning should lead to a healthier growth in our revenue, margins and adjusted EBITDA. We are off to a good start in 2026, and we believe our full year revenue can grow about 4% at the midpoint of our guidance range of between $920 million and $945 million as compared to 2025 actuals. This revenue growth, coupled with the margin expansion opportunities we are targeting, should help us substantially improve our free cash flow and adjusted EBITDA over the prior year.

We are forecasting our gross margin in 2026 to be between $240 million and $260 million, which is an 8% increase at the midpoint compared to 2025. When you start compounding the top line growth with margin expansion and improved operating leverage, you see the impact with our 2026 adjusted EBITDA guidance increasing 16% at the midpoint to between $68 million and $73 million. We have provided a framework of strategic priorities focused on our people, efficiency, leadership and commercial results that we'll continue to refine and build upon. Expect more detail in the second quarter of 2026. With that, I would like to turn it over to Nelson to discuss our financial accomplishments.

Thank you, Gary. As I mentioned on the last call, we have focused on simplifying the business, strengthening our capital structure and balance sheet and improving our operating leverage and margins. While we still have work to do, we are now positioned to strategically grow our top line and expand our cash flow generation. The first quarter results for 2026 and our guidance for full year 2026 should accurately reflect the impact of our operational and commercial initiatives with year-over-year expansion in our revenue, margins and adjusted EBITDA driven by our ongoing focus on cost efficiency and margin accretive growth.

Turning to the first quarter. We continue to deliver solid results, generating year-over-year improvements in revenue, operating income and adjusted EBITDA. As Gary mentioned, our first quarter revenue was up $16.4 million or 8.3% compared to the prior year period, which was the highest first quarter revenue since 2019. This increase was driven by a $9.8 million or 8.6% increase in our Inspection and Heat Treating segment revenues, which were boosted by increased project and call-out activity in the U.S. and Canada. Additionally, we saw a $6.6 million or 7.8% increase in our Mechanical Services segment, which was supported by higher project and turnaround activity with both new and existing customers. Operating income was up $2.6 million or 43.8% year-over-year, driven by stronger revenue in both the U.S. and Canada and lower corporate costs.

As Gary mentioned, we are focused on winning higher-margin opportunities in both segments that together with sustainable cost reductions should lead to continued improvement in operating income. Our progress in cost efficiency can be seen in our first quarter adjusted selling, general and administrative expense, which excludes noncash items and expenses not representative of ongoing operations. While the absolute amount was slightly higher, expressed as a percentage of revenue, adjusted SG&A decreased by 150 basis points versus the prior year period, pointing to improving scalability and leverage. This helped drive our adjusted EBITDA higher by nearly $2.4 million to $7.7 million.

I believe that we are in a significantly improved financial position in 2026. As an organization, we are fixated on improving margins and growing adjusted EBITDA. For 2026, we are prioritizing free cash flow generation through more efficient use of working capital and improved cash flow margins, and we will target further deleveraging in the business and debt paydown. Both our net loss and free cash flow are steadily improving, and I remain confident in our ability to successfully execute on the strategy and priorities that Gary outlined earlier. We look forward to continuing to build up these strong results that we expect will lead to growth in shareholder value. With that, let me turn it back over to Gary for some closing remarks.

Thanks, Nelson. As you heard today, Team has delivered strong operational and financial results in the first quarter of 2026, and we are refining and implementing a strategic vision that we expect will continue delivering healthier growth in the top line, margins and adjusted EBITDA. Over the past several years, Team has repositioned itself and made meaningful improvements in operations, safety and its financial performance and balance sheet. Team has a unique culture, storied history, strong customer relationships and numerous built-in strengths already in place. I want to reinforce open communication and collaboration with stakeholders, employees, shareholders and customers to better drive progress and build on past successes.

Team boasts a proud history and a workforce renowned industry-wide for delivering safe and technically superior customer service. This has established an outstanding foundation, and my goal is to take this very strong company and make it even better through continuous improvement. We are implementing the steps necessary to accelerate that rate of improvement through focused initiatives and operational execution. I am very excited about our future because we have talented employees and differentiated offerings for our customers.

We provided guidance for fiscal year 2026 that forecasts meaningful growth of 4%, 8% and 16% in revenue, gross margin and adjusted EBITDA compared to 2025. As you have heard today, every employee here is committed to delivering these improving results that will continue to strategically grow Team and unlock substantial value for our shareholders. Thank you for joining us today and for your continued interest in Team.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to Team, Inc.'s Fourth Quarter and Full Year 2025 Operational and Financial Results Conference Call. [Operator Instructions] Please note, this event is being webcasted.

I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Team, Inc.'s discussion about our fourth quarter and full year 2025 operational and financial results. On the discussion today are Gary Hill, our Chief Executive Officer; and myself, Nelson Haight, 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 company's control.

Although these forward-looking statements are based on management's current expectations and beliefs, actual 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 Team Inc.'s 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, which speak only as of their respective dates.

With that, I will turn it over to Gary Hill, our CEO.

Thank you, Nelson. Welcome, everyone, and thank you for joining us on the call today. I want to start by saying how honored I am to be here and join you all for my first earnings call as Team's CEO. With more than 30 years of hands-on experience in industrial services and related industries, having the opportunity to lead, grow and enhance a company like Team is an extraordinary opportunity.

I am excited to lead Team at this pivotal stage, and I'd like to thank our employees for their warm welcome, sharing their perspectives and their hard work and dedication that have helped to deliver the strong operational and financial results that Nelson will discuss with you today.

During my first 6 weeks, I've spent a lot of time connecting with our employees, customers and stakeholders. These conversations have given me a deeper understanding of where we stand as a company, the challenges we face and the opportunities ahead.

I look forward to working closely with the Board, the management team and Team's talented employees to strategically grow our company. Over the past several years, Team has repositioned itself and made meaningful improvements in operations, safety and in its financial performance and balance sheet. Team has a unique culture, storied history, strong customer relationships and numerous built-in strengths already in place. I want to maintain open communication and collaboration with shareholders employees, stakeholders and customers to better drive progress and build on past successes.

Team boasts a proud history and a workforce renowned industry-wide for delivering safe and technically superior customer service. This has established an outstanding foundation and my goal is to take this very strong company and make it even better through continuous improvement. I see opportunities to expand our wallet share with existing customers and accelerate our growth in end markets, such as aerospace and midstream, and I'm challenging myself and our entire team to accelerate top line growth, enhance efficiency and reduce costs, which should lead to margin and EBITDA growth.

I want to continue strengthening our organization through further investment in our people and infrastructure to more profitably and efficiently deliver the products and services that meet our customers' needs.

Finally, Team has built an impressive safety culture, and continuing to build off that success to ensure everyone gets home safely will always be our highest priority.

With that, I would like to turn it over to Nelson to discuss our financial accomplishments.

Thank you, Gary. Over the last 3 years, we have been focused on simplifying the business, strengthening our capital structure, and balance sheet, and improving our margins, and while we still have some work to do, we are now well positioned to accelerate our top line growth and further expand our cash flow generation.

Our results in 2025 reflect the impact of our operational and commercial initiatives. With year-over-year expansion in our revenue, margins and adjusted EBITDA driven by our ongoing focus on improving cost efficiency and expanding margins.

In March of 2025, we successfully refinanced our capital structure, lowering our blended interest rate by more than 100 basis points and extending our term loan maturities out to 2030. In September 2025, we closed on a $75 million private placement of preferred stock and warrants that helped us to pay down about $67 million of debt.

As part of that same transaction, we also amended our ABL credit facility to, among other things, increase the commitment by $20 million to provide additional flexibility during the seasonal spring and fall demands on our working capital and to lower the applicable interest rate margin. We also amended our first lien term loan facility to lower the applicable interest rate margin and improve financial flexibility.

The private placement also included a delayed draw feature available through September 2027 debt depending upon the intended use of proceeds, allows the company to raise up to an additional $30 million through the placement of additional preferred stock and warrants. Our net debt at the end of 2025 was $279 million down, from about $289.6 million at the end of 2024, and we exited 2025 with strong liquidity of $77.4 million.

The tangible improvements we delivered in operating performance and cash flow generation over the past several years were key to completing these financial transactions. As a result, we have addressed all of our near-term maturities, lowered our cost of capital and provided financial flexibility as the company's performance continues to improve.

Turning to the fourth quarter. We continued to deliver solid results, generating year-over-year improvements in revenue, operating income, adjusted EBITDA and gross margins. For the fourth quarter, revenue was up $11.5 million or 5.4% as compared to the prior year period, driven by an 8.9% increase in our Mechanical Services segment and a 1.9% increase in our Inspection and Heat Treating segment. Our operating income was up $4.4 million or 200% year-over-year.

Our focus on higher margin opportunities in both segments, coupled with sustainable cost reductions led to significant improvement in operating income.

Our continued progress in the previously announced cost management program can be seen in our fourth quarter adjusted selling, general and administrative expense, which excludes noncash items and expenses not representative of ongoing operations, and which was lower by $1 million in absolute terms and 150 basis points when expressed as a percentage of revenue versus the prior year period. This helped drive our adjusted EBITDA higher by nearly $2 million to $16.4 million.

These positive trends were also seen in our full year 2025 results. Revenue increased $44 million or 5.2% year-over-year with increases in both our Inspection and Heat Treating and Mechanical Services segments of 7.5% and 2.8%, respectively. In conjunction with the increased revenue, we saw our operating income increase by $3.9 million or 39%.

Importantly, we generated $60.7 million of adjusted EBITDA, a roughly 12% improvement over 2024 and our adjusted EBITDA margin expanded to almost 7% for 2025, which was up from 6.4% in 2024. We have significantly improved our adjusted EBITDA over the last 3 years, and we believe we are on the right trajectory toward achieving our goal of an adjusted EBITDA margin greater than 10%.

I believe that we are in a significantly improved position compared to where we were 3 years ago. As an organization, we remain highly focused on growing adjusted EBITDA and we will continue to prioritize free cash flow generation through further improvements in working capital management and margin expansion to deleverage the business and allow for meaningful debt paydown.

I remain confident in our ability to successfully execute on these goals and look forward to continuing to deliver strong results that we expect will lead to growth in shareholder value.

With that, let me now turn it back over to Gary for some closing comments.

Thanks, Nelson. As you heard today, Team has delivered strong operational and financial results in 2025 and heading into 2026, we expect to continue building off this momentum with further growth in the top line and adjusted EBITDA.

I'm very excited about our future because we have talented employees and differentiated offerings for our customers. Given my recent transition to the CEO role, we will not be providing guidance on fiscal year 2026 at this time to allow for a deeper review of our operational performance, market trends and strategic priorities.

We will present a more fulsome update that lays out our longer-term plans and objectives and 2026 guidance to the market after the end of the fiscal quarter.

Finally, I am committed to continuous improvement and believe that we can strategically grow Team and unlock substantial value for our shareholders. Thank you for joining us today and for your continued interest in Team.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Team Inc. Third Quarter Update Call. I would now like to turn the conference over to Nelson Haight, Chief Financial Officer. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Team, Inc.'s discussion of our third quarter 2025 operational and financial results. On the discussion today is Keith Tucker, our Chief Executive Officer; and myself, Nelson Haight, 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 company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual 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 Team, Inc.'s 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, which speak as of their respective dates.

With that, I will turn it over to Keith Tucker, our CEO.

Thank you, Nelson. Welcome, everyone, and thank you for joining us to review our third quarter operational and financial highlights.

I want to start off by thanking our employees for their hard work, which has made many of our recent successes possible. In the third quarter of 2025, we continue to deliver improved operational and financial results with year-over-year growth in revenue, margin and adjusted EBITDA, all while expenses continue to trend lower as a percentage of revenue. Revenue grew almost 7% or about $14 million year-over-year, with gross margin increasing by 8.4% and adjusted EBITDA up to 28.6% to the highest level for a third quarter since at least 2016.

As you can see, the growth in our adjusted EBITDA outpaced our top line growth, which is a testament to the solid progress we continue to make on our ongoing cost and margin improvement initiatives.

Drilling down into the segments, we saw 5.7% overall revenue growth in Inspection and Heat-Treating, driven by strong Nested and Call-out activity in the U.S. and 8.9% growth in our International operations, including Canada. We have now seen multiple quarters of growth in our Canadian operation, demonstrating the increasing traction of our ongoing initiatives to strengthen our commercial and financial performance in that area.

In our Mechanical Services segment, we saw strong revenue growth of 7.8% or $8 million, led by increased turnaround demand in our U.S. operations and improved year-over-year top line performance in Canada.

With both our IHT and MS segments demonstrating top line growth, it should come as no surprise that our adjusted EBITDA for the third quarter increased by $3.2 million year-over-year, with adjusted EBITDA margin up 110 basis points to 6.5% of our consolidated revenue. Additionally, we continue to see benefits from our cost discipline in the third quarter, lowering our adjusted selling, general and administrative expense, which excludes expenses not representative of Team's ongoing operations, such as non-recurring fees and non-cash expenses to 20.8% of consolidated revenue versus 21.7% in the third quarter of 2024. We believe that our ability to continuously deliver on our cost control and margin expansion initiatives and improving our balance sheet will continue to drive future shareholder value and stock appreciation.

To that end, in September 2025, we completed the private placement of preferred stock with Stellex Capital Management, which strengthened our balance sheet and enhanced financial flexibility. This $75 million investment recognizes the impactful progress made to-date in our ongoing program to improve margins and lower our cost structure, as well as reinforces the significant opportunities that remain for further improvements in margins and top line growth. We are excited to partner with Stellex and look forward to working together to accelerate our value creation plan.

We believe that our ongoing actions and continued focus on executing our strategic vision will help lead to more top line growth and further improvements to our margins and free cash flow generation. We have seen some outstanding numbers reported in our 2025 results from our actions thus far, and during the third quarter, we continued to work on identifying additional opportunities to improve cost efficiencies and accelerate top line growth, and we expect to see additional impacts to our full year 2026 operational and financial results.

Looking ahead, we believe our diversified portfolio of service offerings across multiple industries and our geographic footprint positions us to better navigate macroeconomic uncertainty. We see top line growth over the prior year across both segments and improved adjusted EBITDA levels for the fourth quarter of 2025. We have line of sight to full year 2025 revenue growth of approximately 5% and adjusted EBITDA growth of approximately 13%. Our organization is focused on the things we can control, which are continued cost and capital discipline and execution on our commercial initiatives that includes aggressively leveraging our technical expertise in end markets with attractive margin profiles such as power, aerospace and LNG and increased wallet share. We remain committed to delivering profitable growth that enhances our financial results and drive shareholder value.

With that, I would like to turn it over to Nelson to discuss our financial accomplishments.

Thank you, Keith. Before I go into third quarter financial results, I would like to discuss in more detail the recent actions we have taken to strengthen our balance sheet.

Over the last several years, we have diligently improved our balance sheet and enhanced our financial flexibility, and in 2025, we made further improvements. In March, 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.

In September, we successfully closed on a $75 million private placement of preferred stock and warrants with Stellex that helped us to pay down about $67 million of debt. As part of the same transaction, we also amended our ABL credit facility to increase the commitment by $20 million in order to provide additional flexibility during the seasonal spring and fall demands on our working capital and to reduce the applicable interest rate margin.

We also amended our first lien term loan facility to reduce the applicable interest rate margin and improve financial flexibility.

Finally, the private placement includes a delayed draw feature that will allow the company to raise up to an additional $30 million in proceeds through the placement of additional preferred stock and warrants over the next 24 months. Our success since 2022 in improving our financial and operating performance helped make these transactions possible, and we believe these improvements to our balance sheet helps better position Team to accelerate execution of our long-term strategic plan focused on top line growth, lowering our cost structure and strengthening our cash flow.

We also look to lean on Stellex as a partner whose insights and expertise we expect will help us achieve our strategic goals faster and more efficiently. These actions have helped to increase our liquidity, which at September 30, 2025, had increased to $57.1 million, consisting of unrestricted cash of $10.6 million and $46.5 million of undrawn availability under various credit facilities. This does not include the $30 million of potential additional proceeds from any future preferred stock issuances that I spoke about earlier.

Turning to our financial results. We are very pleased to see strong top line growth in both of our segments in the third quarter. For the first 9 months of 2025, our IHT segment delivered 9.4% of year-over-year growth and our Mechanical Services segment delivered revenue growth of just under 1%. On a combined basis, this is almost $33 million of additional year-over-year revenue. Thus far in 2025, we've also seen a 12% improvement in adjusted EBITDA or about $5 million year-over-year.

While our absolute adjusted selling, general and administrative costs, which excludes expenses not representative of our ongoing operations and other non-cash amounts, has marginally increased over the first 9 months of 2025. Those expenses as a percentage of consolidated revenue are down 70 basis points year-over-year to 20.7% of revenue.

Our adjusted net loss for the first 9 months of 2025 is also down almost $7 million compared to the first 9 months of 2024.

We have generated over $44 million in adjusted EBITDA through the first 9 months of 2025, and we are on pace to deliver strong year-over-year growth. We have increased our adjusted EBITDA every year since 2021, and we are forecasting approximately 13% growth in adjusted EBITDA for the full year 2025 and believe that our continued focus on expanding our margins through cost discipline and growing higher-margin work will help us accomplish this goal while building positive momentum, as we head into 2026.

As you've heard from both Keith and myself this morning, we are executing on our strategic road map designed to deliver profitable growth and improved cash flow generation. Year-to-date, our free cash flow has been negatively affected by non-recurring refinancing and transaction fees and related expenses as well as negative working capital impacts, specifically around accounts receivable and payables. Looking forward, we expect fewer non-recurring professional fees, and we expect these adverse working capital trends to begin reversing in the fourth quarter, all of which should help improve our future free cash flow generation.

Over the last 3-plus years, we've made significant progress in improving the financial position and operating performance of the company. The balance sheet is healthier. Margins have improved and the top line is growing while the company continues to safely deliver best-in-class technical solutions to our customers. With our employees' continued focus and dedication, I'm confident in our ability to build off our progress to-date with further improvements in our overall financial and operating performance that will ultimately unlock the inherent value in Team.

With that, let me now turn it back over to Keith for some closing comments.

Thanks, Nelson. We've worked hard to streamline our business, expand our margins and simplify our cost structure and improve our balance sheet.

Looking ahead, we expect to continue seeing strong operational and financial results in the fourth quarter of 2025 with year-over-year growth in the top line, continued improved performance from our Canadian and other international operations and further meaningful progress towards our adjusted EBITDA target margin of at least 10%, all of which we believe will enhance shareholder value. I'm 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.

In closing, I remain confident about our future because I am a firm believer in our capabilities, talented employees and this leadership team. We have delivered improving results over the past 3 years, and we remain committed to continuous improvement in margin, cost discipline and cash flow generation. 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 in Team.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.