TIC Solutions, Inc. Q2 FY2026 earnings call

Strategic Positioning and Megatrends

• The company is positioned to benefit from four major structural tailwinds: global aging infrastructure requiring ongoing investment, growing energy demand driving investment in power delivery, LNG and related infrastructure, rising data consumption supporting data center construction and services, and the digitization of the physical world increasing demand for asset data and analytics.
• The company's integrated cross-segment lifecycle model (supporting clients from planning through construction to ongoing operations) is working as intended, with growing cross-selling activity expanding scope of work and creating new opportunities that did not exist for the legacy standalone businesses.

Operational Progress

• Combined backlog for CNE and GEO hit a record $1.18 billion, up 20% year-over-year, providing strong revenue visibility into the second half of 2026 and 2027.
• The integration program for the combined company is on track: $20 million in annualized run-rate cost synergies have been realized as of Q2 2026 (up from $17 million at the end of Q1), and the company remains on target to hit the full $25 million annualized synergy target by the end of 2026.
• The company is investing in AI tools to improve operational efficiency: current initiatives include a Procedure Knowledge Assistant for field technicians, an engineering report assistant to leverage historical project knowledge, and document intelligence tools to identify compliance and contract risks. These tools are expected to improve utilization, cost discipline, and margins over time.
• Three bolt-on acquisitions were completed in Q2 2026, expanding technical capabilities and geographic density. The company completed a repricing of its $1.6 billion term loan, cutting the interest rate by 25 basis points and reducing annual interest expense by $4 million. The company also repurchased 1.9 million shares for $16 million under its existing share repurchase program.

End Market Performance

• Key end markets delivered strong growth in Q2: buildings (+28% YoY to $115 million), industrial manufacturing and metals (+40% YoY to $56 million), power and utilities (+11% YoY to $90 million), and aerospace and defense (+40% YoY to $10 million).
• INM expanded into new adjacent markets, winning its first large-scale multi-year bridge inspection engagement for public infrastructure, a large addressable market with recurring mandated demand similar to INM's core industrial business.
• GEO completed a high-profile successful deep-sea offshore mapping pilot for the U.S. federal government focused on critical rare earth mineral exploration, which is expected to generate significant follow-on work as the program moves to full operational deployment.

1. Consulting and Engineering (CNE): Q2 2026 revenue was $207 million, up 16.8% year-over-year, representing 35.45% of total consolidated revenue. Adjusted gross margin was 47.2%, up 75 basis points year-over-year. Year-to-date 2026 revenue was $394 million, up 13.3% year-over-year, with an adjusted gross margin of 47.4%.
2. Inspection and Mitigation (INM): Q2 2026 revenue was $297 million, down 5.5% year-over-year, representing 50.86% of total consolidated revenue. Adjusted gross margin was 28.3%, down 45 basis points year-over-year, driven by lower volumes of high-margin outage activity. Year-to-date 2026 revenue was $532 million, down 3% year-over-year, with an adjusted gross margin of 26.6%.
3. Geospatial (GEO): Q2 2026 revenue was $81 million, up 7.9% year-over-year, representing 13.87% of total consolidated revenue. Adjusted gross margin was 51.5%, up 360 basis points year-over-year, driven by favorable project mix and timing. Year-to-date 2026 revenue was $147 million, up 6.3% year-over-year, with an adjusted gross margin of 51.3%.

Total consolidated Q2 2026 revenue was $584 million, up 3.3% year-over-year. Consolidated adjusted EBITDA was $95 million, up from $89 million year-over-year, with an adjusted EBITDA margin of 16.2%, up 40 basis points year-over-year.

• The company maintained (reiterated) its full-year 2026 guidance, with projected total revenue of $2.15 billion to $2.25 billion and adjusted EBITDA of $330 million to $355 million. This guidance aligns with the company's original expectations of 4% top-line growth and 10% adjusted EBITDA growth set earlier in 2026.
• Q3 2026 guidance projects total revenue of $610 million to $630 million and adjusted EBITDA of $100 million to $110 million. At the midpoint, this represents 9% year-over-year revenue growth and 16% year-over-year adjusted EBITDA growth, driven by improvement in INM performance and continued strength in CNE.
• Full-year 2026 projections for key line items: net interest expense of $95 million to $105 million, cash taxes of $25 million to $30 million, and capital expenditures of $50 million to $65 million. The company expects healthy full-year free cash flow generation, with cash conversion expected to increase in the second half as seasonal working capital collections catch up to revenue.
• The company reaffirmed its long-term 2029 targets: $3 billion in total revenue, 18% adjusted EBITDA margin, and 85% free cash flow conversion.

• Geospatial segment revenue and margins are subject to quarterly variability due to the segment's mix of large fixed-price contracts, with fluctuations driven by project timing and delivery schedules.
• INM's near-term performance is dependent on converting its robust commercial pipeline into revenue in the second half of 2026, and on the successful ramp-up of delayed outage work that was shifted from Q2 to the second half.
• SG&A as a percentage of revenue increased year-over-year in Q2 2026, driven by higher incentive compensation, indirect labor, legal reserves, benefit costs, and overhead from recent acquisitions. The company must continue executing on cost discipline and integration synergies to improve SG&A leverage over time.
• Net leverage increased to 3.7x as of the end of Q2 2026, driven by seasonal working capital builds and share repurchases during the quarter, though the company expects leverage to improve as cash conversion increases in the second half.
• Forward-looking results are subject to general market and macroeconomic uncertainties that could cause actual performance to differ materially from management projections, per standard forward-looking statement disclosures.

Q: Can you size the impact of cross-selling on organic growth this year and next, and which segment has the highest near-term growth visibility? / A: Management does not break out separate cross-selling revenue numbers, but the benefit of cross-selling is directly reflected in the 20% year-over-year record combined backlog for CNE and GEO, and in increased end market exposure across all segments. CNE has the strongest near-term visibility due to its robust backlog. GEO will continue to see quarterly volatility from its large fixed-price contract mix. INM returned to year-over-year growth in June 2026, and is expected to contribute to overall growth through the second half of 2026 and into 2027.

Q: Beyond seasonal recovery in the second half, what factors support INM returning to consistent long-term growth, and what are the margin expectations for INM's new expansion into public infrastructure? / A: Excluding the impact of 2025 site losses and delayed Q2 outage work, INM's underlying business was actually up 4% year-over-year in Q2 2026. The commercial pipeline for new INM sites is at its highest level in recent history, and new site wins are accelerating, particularly in the Gulf Coast. The new expansion into bridge and public infrastructure targets higher-margin work than INM's current average, and leverages existing cross-segment relationships with CNE to win new work. INM's higher-margin rope access inspection service line also grew almost 10% in Q2, showing ongoing diversification within the segment.

Q: Is AI creating any headwinds for the business, and is it helping larger players like TIC gain share from smaller competitors that cannot afford AI investments? / A: Management sees AI as a long-term opportunity, not a headwind, and has not seen any negative impact on pricing or win rates from AI. TIC is actively investing in AI to improve operational efficiency for both back-office and field/engineering work, with early use cases already showing productivity improvements. Because smaller competitors lack the capital to invest in similar AI tools, TIC expects to gain share over time, and can layer AI capabilities into acquired small businesses to increase their value after bolt-on acquisitions.

Q: Where does TIC have the greatest appetite for future M&A across its three segments, and what is the current M&A market environment? / A: TIC deploys $100 million to $150 million in M&A capital annually, and the M&A pipeline remains robust, with more available opportunities in CNE due to its extremely large total addressable market. However, attractive opportunities are also being evaluated in INM and GEO. Acquisitions are selected based on strategic fit, cross-selling upside, and return on investment, regardless of segment. Sellers are often interested in selling to TIC because it acts as a "forever home" that provides career growth opportunities for existing teams that independent sellers cannot match, and the current market environment offers attractive pricing for disciplined buyers.