Team, Inc. Q1 FY2026 earnings call

• Workforce Strategy
  • CEO Gary L. Hill, in his 100th day at the firm, identified the skilled, committed workforce as Team Inc.'s most valuable asset.
  • The firm is deepening its commitment to employees to improve retention: it has launched an industry-first from-hire-to-retire career path program for technicians, paired with a leading total health and wellness benefit program.
  • Annual employee satisfaction surveys are conducted to gather actionable feedback on employee concerns, with the goal of making Team Inc. the employer of choice in the industry.
  • The firm plans to make strategic additions to its experienced leadership team to enhance organizational capabilities and accountability, and improve data analytics and internal communication to accelerate decision-making.

Market Positioning and Tailwinds

• Core refining and petrochemical markets remain stable, with long-term growth opportunities driven by aging infrastructure, high utilization rates, and customer need for continuous operation, where Team Inc. can provide minimal-downside monitoring, repair and maintenance services.
• High-growth targeted end markets include LNG, midstream, AI-focused data centers, power, and aerospace. Geopolitical shifts are driving increased U.S. LNG export demand and facility development, while unprecedented AI data center construction is expected to generate large new demand for inspection and mechanical services. Growing commercial aerospace activity and increased defense spending also create opportunity for the firm's high-margin laboratory inspection services.

Commercial and Cost Efficiency Strategy

• The firm prioritizes margin-accretive, less cyclical, sustainable growth over growth at any cost, and is focusing on disciplined pursuit of opportunities where its technical expertise and execution quality deliver high value, with a goal of expanding market share in its targeted high-growth end markets, particularly by increasing wallet share with existing customers.
• Team Inc. has already made meaningful progress on cost optimization over the past several years, and is targeting further improvement across supply chain management, cross-team and cross-location integration, process simplification, and system investments to lower costs, improve scalability, and expand margins. A detailed set of targeted cost reduction targets will be announced in the second quarter 2026 earnings call.

Team Inc. reported total first quarter 2026 revenue of $215 million, an 8.3% year-over-year increase. There are two operating product segments:

1. Inspection and Heat Treating: First quarter revenue increased $9.8 million (8.6% year-over-year), with growth driven by higher project and call out activity across the U.S. and Canada. This segment contributed 52.6% of total Q1 2026 revenue.
2. Mechanical Services: First quarter revenue increased $6.6 million (7.8% year-over-year), supported by higher project and turnaround activity with both new and existing customers. This segment contributed 47.4% of total Q1 2026 revenue.

Across the company, Q1 2026 adjusted EBITDA rose 45.2% year-over-year to $7.7 million, with a 90 basis point improvement in adjusted EBITDA margin. Operating income increased 43.8% year-over-year to an additional $2.6 million, driven by higher segment revenue and lower corporate costs. Adjusted selling, general and administrative expense as a percentage of revenue decreased 150 basis points year-over-year, demonstrating improving operating scalability.

• Full year 2026 revenue guidance is set at a range of $920 million to $945 million, representing approximately 4% year-over-year growth at the midpoint compared to 2025 actual results.
• Full year 2026 gross margin guidance is set between $240 million and $260 million, representing 8% year-over-year growth at the midpoint compared to 2025.
• Full year 2026 adjusted EBITDA guidance is set between $68 million and $73 million, representing 16% year-over-year growth at the midpoint compared to 2025.
• The firm expects substantial improvement in full year 2026 free cash flow compared to 2025, driven by revenue growth, targeted margin expansion, and improved working capital efficiency.

• The Middle East conflict has minimal direct impact on Team Inc., but has created indirect industry impacts, including increased refinery run rates that have pushed some scheduled turnaround projects to later in 2026, creating a short-term headwind.
• All forward-looking statements are inherently uncertain, and actual results may differ materially from guidance due to external factors outside of the company's control; additional discussion of risk factors can be found in the company's recent SEC filings.

No question and answer section was included in the provided transcript.