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TI

TEAM INC (TISI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $213.3M, essentially flat year over year (-0.4%), while gross margin expanded 330 bps to 26.9% and Adjusted EBITDA rose 50.5% to $14.6M (6.9% margin) on improved pricing, favorable mix, and cost actions .
  • Net loss narrowed to $7.2M ($1.61 loss per share) from $23.1M ($5.25 loss per share) in Q4 2023; cash from operations was $21.6M and Free Cash Flow was $19.6M, showing stronger cash generation .
  • Both segments (Inspection & Heat Treating and Mechanical Services) delivered higher operating income year over year despite modest revenue declines; IHT +45.4% and MS +51.0% operating income improvement in Q4 .
  • Post-quarter, Team closed a refinancing that extended maturities to 2030 and lowered its blended interest rate by >100 bps, reducing financing pressure and providing flexibility; management guided to mid-single-digit revenue growth and “at least” 15% Adjusted EBITDA growth in 2025, with progress toward ≥10% Adjusted EBITDA margin .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and EBITDA: “In the fourth quarter, we successfully grew Adjusted EBITDA margin across both segments while holding corporate and support costs flat, driving a 50.5% improvement in Adjusted EBITDA” .
  • Cost actions and cash flow: “We saw the benefits from these targeted initiatives, generating $21.6 million in cash flow from operations… and $19.6 million of Free Cash Flow” .
  • Segment operating performance: IHT operating income +45.4% to $9.5M and MS operating income +51.0% to $8.1M in Q4 on pricing, mix, and cost reductions .

What Went Wrong

  • Top-line softness in international: Q4 revenue declines outside the U.S. (especially Canada and other international regions) offset U.S. growth in both segments .
  • Elevated interest burden: Net interest expense remained high at $12.0M in Q4, constraining net results despite operating improvements .
  • Equity erosion and leverage: Stockholders’ equity fell to $1.74M at year-end, while total debt rose to $325.1M and net debt to $289.6M, underscoring balance sheet sensitivity despite the refinancing .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$214.1 $210.8 $213.3
Gross Margin ($USD Millions)$50.4 $53.5 $57.3
Gross Margin (%)23.6% (calc from cited rev/GM) 25.4% 26.9%
Operating Income ($USD Millions)$(8.9) $3.2 $2.2
Adjusted EBITDA ($USD Millions)$9.7 $11.3 $14.6
Adjusted EBITDA Margin (%)4.5% 5.4% 6.9%
Diluted EPS ($USD)$(5.25) $(2.52) $(1.61)

Segment breakdown (Q4 2024 vs Q4 2023):

SegmentRevenue Q4 2023 ($M)Revenue Q4 2024 ($M)Δ ($M)Δ (%)Operating Income Q4 2023 ($M)Operating Income Q4 2024 ($M)Δ ($M)Δ (%)
Inspection & Heat Treating (IHT)$107.1 $106.4 $(0.7) (0.7)% $6.5 $9.5 $3.0 45.4%
Mechanical Services (MS)$107.0 $106.9 $(0.1) (0.1)% $5.4 $8.1 $2.7 51.0%
Total$214.1 $213.3 $(0.8) (0.4)% $(8.9) $2.2 $11.1 124.9%

KPIs and cash metrics:

KPIQ3 2024Q4 2024
Cash from Operations ($USD Millions)$5.6 $21.6
Free Cash Flow ($USD Millions)$3.9 $19.6
SG&A ($USD Millions)$50.4 $55.1
Adjusted SG&A ($USD Millions)$45.7 $45.96
Cash & Equivalents ($USD Millions, year-end)N/A$35.5
Total Debt ($USD Millions, year-end)N/A$325.1
Net Debt ($USD Millions, year-end)N/A$289.6

Note: Q4 2023 gross margin % shown is calculated using cited revenue and gross margin dollars .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ResultChange
Revenue ($USD Millions)FY 2024$850–$900 (Q2 reaffirm) $845–$860 (Q3 update) Lowered
Gross Margin ($USD Millions)FY 2024$235–$265 (Q2 reaffirm) $220–$228 (Q3 update) Lowered
Adjusted EBITDA ($USD Millions)FY 2024$58–$68 (Q2 reaffirm) $53–$55 (Q3 update) Lowered
Capital Expenditures ($USD Millions)FY 2024$9–$11 (Q2 reaffirm) $9–$11 (Q3 update) Maintained
Revenue growthFY 2025Low to mid-single-digit growth (Q3 commentary) Mid-single-digit growth (Q4 outlook) Refined/maintained
Adjusted EBITDA growthFY 2025Progress toward ≥10% margin (Q3 commentary) At least +15% YoY growth; progress toward ≥10% margin (Q4 outlook) Raised specificity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Cost optimizationLaunched targeted commercial initiatives; Adjusted EBITDA margin reached 9.5% in Q2 Ongoing program; $6–$8M annualized cost savings targeted Expanded initiatives targeting ≥$10M annualized cost savings Intensifying savings effort
Canadian operationsExpect improved performance in H2’24 from international/Canada Underperformance led to lowered FY’24 guidance; actions underway Implementing steps to improve cost structure/margins; impact expected in 2025–2026 Remediation ongoing
Capital structure/refinancingPlanning to address next maturity (Aug 2025) Amended/extended ABL; improved pricing/access Closed refinancing, extended maturities to 2030, >100 bps rate reduction Material improvement
Higher-margin growth (aerospace/midstream)Approved incremental aerospace investment; emphasis on midstream Heat treating +41%, aerospace +32% YoY in Q3 Pursuing higher-margin call-out and advanced services; adjacent market expansion Continuing expansion
Margin targetsGoal ≥10% Adjusted EBITDA margin; Q2 margin 9.5% Clear path to ≥10%; Q3 margin 5.4% “At least” 10% target reiterated; 2024 margin 6.4% Ongoing progression
Cash flow disciplineImproved CFO and FCF vs prior periods FCF $3.9M in Q3; WC management cited CFO $21.6M; FCF $19.6M in Q4 Strengthening

Management Commentary

  • CEO on margin/EBITDA progress: “In the fourth quarter, we successfully grew Adjusted EBITDA margin across both segments… driving a 50.5% improvement in Adjusted EBITDA” .
  • CEO on 2025 outlook: “We expect consolidated top line growth in the mid-single digits… and at least 15% year over year growth in Adjusted EBITDA… towards our Adjusted EBITDA margin target of at least 10%” .
  • CFO on refinancing: “We closed a refinancing transaction that lowered our blended interest rate by over 100 basis points… and extended term loan maturities to 2030” .
  • CFO on margin trajectory: “Our adjusted EBITDA margin… has significantly improved over the last 3 years… on the right trajectory toward achieving our goal of a 10% or more adjusted EBITDA margin” .

Q&A Highlights

  • The company did not host Q&A on the call, limiting real-time guidance clarifications and analyst probing .
  • Prepared remarks emphasized refinancing, margin trajectory, and cost optimization, including targeted ≥$10M annualized savings and improvements in Canadian operations .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2024/Q3 2024/Q2 2024 and FY 2024/FY 2025 could not be retrieved during this session due to provider limits; treat consensus as unavailable for this recap. This limits beat/miss analysis versus Street.
  • Given absence of estimates, focus centers on sequential and year-over-year trends, margin expansion, and cash flow improvements, alongside the balance sheet de-risking via refinancing .

Key Takeaways for Investors

  • Q4 demonstrated operational leverage: substantial year-over-year margin/EBITDA improvement despite flat revenue, supported by cost actions and favorable mix; continuation of this playbook is central to 2025 targets .
  • Cash generation inflected: CFO of $21.6M and FCF of $19.6M in Q4 provide tangible evidence of improved working capital discipline and operating performance .
  • Refinancing is a structural catalyst: extended maturities and lower blended interest rate (>100 bps reduction) reduce financing risk and can amplify EBITDA-to-FCF conversion as margins rise .
  • Segment execution strong: both IHT and MS drove operating income growth on pricing/mix and cost reductions; sustaining U.S. strength while remediating Canada/international will be key to top-line growth .
  • 2025 setup: mid-single-digit revenue growth and ≥15% Adjusted EBITDA growth targets, with a clear focus on higher-margin offerings (call-outs, advanced services) and adjacent markets (midstream, aerospace, lab inspection/testing) .
  • Watch balance sheet metrics: equity is thin ($1.74M) and leverage remains high; execution on EBITDA growth and cash generation post-refinancing is critical to de-risk capital structure over 2025 .
  • Near-term catalysts: Q2 investor update on strategic vision, ongoing cost optimization realization, and visible improvement in Canadian operations trajectory could drive narrative and valuation re-rating .