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    TISI
    Earnings call· Jun 2026(Q2 FY26)

    TEAM Q2 FY26 earnings call TISI

    Aug 11, 2026 Source

    Executive summary

    Team, Inc. Q2 FY26 — Deferred Maintenance Impacts Q2, Transformation Plan Underway

    Team, Inc. reported soft Q2 FY26 results, primarily due to deferred Mechanical Services activity influenced by geopolitical factors and favorable refining economics. A new CEO is driving a transformation plan focused on leadership, commercial execution, and operational efficiency to enhance consistency, margins, and cash generation. The company is also strategically expanding into new, higher-growth industrial markets to diversify its revenue base and build resilience against market cyclicality.

    Highlights

    4

    • Identified approximately $20M to $35M of annualized structural cost savings and productivity benefits.

    • Expected $5M to $15M cash flow generation from initiatives this year, with $8M to $15M benefit in H2 2026.

    • Seeing growth of more than 10% year-on-year in new markets like LNG, aerospace, commercial nuclear power, and pulp and paper.

    • Stellex Capital Management increased ownership, becoming the largest common equity shareholder, signaling strong confidence in the company's strategy.

    Concerns

    5

    • Q2 revenue decreased to $229M from $248M in the prior year period, driven by deferred Mechanical Services activity.

    • Adjusted EBITDA decreased to $13.7M compared with $24.5M in Q2 2025, primarily due to lower Mechanical Services activity, unfavorable revenue mix, and fixed cost deleveraging.

    • Turnaround revenues are down a little more than 50% versus the prior year due to customers extending operating runs to capture strong crack spreads.

    • The Middle East conflict negatively impacted revenue by more than $20M in the first half of 2026.

    • Full-year 2026 outlook for revenue, gross profit, and adjusted EBITDA is reaffirmed but expected to come in towards the lower half of the provided ranges.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $920M to $945M
    high materiality
    Medium
    Full-year 2026 Gross Profit
    $240M to $260M
    high materiality
    Medium
    Full-year 2026 Adjusted EBITDA
    $68M to $73M
    high materiality
    Medium
    Structural Cost Improvement Program Annualized Savings
    $20M to $35M
    medium materiality
    High
    Structural Cost Improvement Program Benefit
    $8M to $15M
    medium materiality
    High
    Cash Flow Generation from Initiatives
    $5M to $15M
    medium materiality
    Medium
    Implementation Costs for Structural Improvements
    $5M to $10M
    low materiality
    High
    Cash Flow Improvement from Order-to-Cash Project
    $5M to $10M
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Inspection and Heat Treating
    Decrease 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.
    		$131M-5%——
    Mechanical Services
    Reflected the deferral of planned turnaround and maintenance activity as certain customers extended facility operating runs.
    		$97M-11%——

    Operational metrics

    10
    Selling, General and Administrative Expenses
    $46.6M-$3.9M YoY
    Q2 FY26

    Decreased by 7.8% from Q2 2025.

    Adjusted Selling, General and Administrative Expenses
    $44.6M-$2.3M YoY
    Q2 FY26

    Decreased by 4.8% compared to the prior year period. Excludes nonrecurring professional, legal, financing, severance, and share-based compensation expenses.

    Adjusted EBITDA
    $13.7Mvs $24.5M in Q2 2025
    Q2 FY26

    Change primarily reflected lower Mechanical Services activity, related impact on revenue mix and labor utilization, and fixed cost deleveraging.

    Cash used in operating activities
    $0.7M
    Q2 FY26
    Capital expenditures
    $3.9M
    Q2 FY26
    Total liquidity
    $51.2M
    Q2 FY26

    As of quarter end.

    Net debt
    $300.3M
    Q2 FY26

    As of quarter end.

    Turnaround revenues
    down >50%YoY
    Q2 FY26

    Driven by current dynamic of customers deferring maintenance to capture strong crack spreads.

    Revenue impact from Middle East conflict
    >$20M
    H1 2026

    From deferred turnaround and maintenance activity and slowed business in the Middle East region.

    Growth in new markets
    >10%
    YoY

    Expected to be higher in H2 2026.

    Deals & partnerships

    2
    Stellex Capital ManagementIncreased ownership, becoming largest common equity shareholder

    Transaction with prior shareholder CORE Partners. Management views this as a strong vote of confidence in the company's strategy and potential.

    CORE PartnersSold stake to Stellex Capital Management

    Prior shareholder, sold stake in a negotiated transaction to Stellex Capital Management.

    Capital programs

    2
    Structural Cost Improvement Programunderway$20M to $35M

    Benefit: Annualized savings and productivity benefits

    Identified across facility footprint, fleet, procurement, organizational structure, and operating processes. Expected to achieve full annualized run rate by 2027. Anticipated $8M to $15M benefit in H2 2026. One-time implementation costs estimated at $5M to $10M.

    Order-to-Cash Improvement Projectunderway

    Benefit: $5M to $10M cash flow improvement

    Focused on improving working capital by optimizing inventory levels and reducing invoicing timelines. Targeted to be realized by end of the year, driving higher liquidity.

    Risks & headwinds

    3
    Deferred Mechanical Services activityH1 2026, ongoing

    Turnaround revenues down >50% YoY; >$20M negative revenue impact in H1 2026

    Mitigation: Transformation initiatives to improve efficiency and capture activity when it returns; diversification into new end markets; expectation that work cannot be indefinitely deferred and will resume in H2 2026.

    Unfavorable revenue mixQ2 FY26

    Compressed margins and operating leverage in Q2

    Mitigation: Improving pricing discipline; strategic project selection; expanding into new, higher-value industrial end markets to create a more balanced opportunity funnel.

    Uncertainty of timing for rebound in deferred maintenanceH2 2026

    Full-year outlook expected to come in towards the lower half of ranges

    Mitigation: Focus on executing transformation priorities to improve margins, adjusted EBITDA, and cash generation, irrespective of precise timing.

    What to watch in Q3 FY26

    5

    Structural Cost Improvement Program benefits

    H2 2026
    Currentearly stages, not yet reflected in results
    Target$8M-$15M benefit

    Why it matters

    Verifies progress on cost savings and margin expansion, crucial for the company's transformation.

    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.

    Q&A highlights

    5

    Comment on Stellex's increased ownership, what is driving it, and what it means for the future.

    Management views Stellex's increased ownership as a strong vote of confidence in the business strategy, the value to be unlocked, and the ongoing transformation. They believe Stellex shares their confidence in improving margins through structural efficiencies and expanding into new markets like aerospace and nuclear power, building on a positive relationship since Stellex's initial investment in September 2025.

    “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.”

    asked by Joe Caminiti · answered by Gary Hill

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance and Market Headwinds

    Team, Inc. reported a revenue of $229 million in Q2 FY26, a decrease from $248 million in the prior year. This decline was primarily attributed to deferred Mechanical Services activity, as customers extended operating runs to capitalize on favorable refining economics and due to the ongoing Middle East conflict. This resulted in a less favorable revenue mix, compressing margins and operating leverage, although the Inspection and Heat Treating segment demonstrated comparative stability.

    02

    New CEO's Transformation Plan

    CEO Gary Hill, in his initial 120 days, identified key areas for improvement across commercial execution, labor utilization, operating efficiency, and cash generation. The transformation plan is structured around three pillars: strengthening leadership and accountability, enhancing commercial execution through improved pipeline management and pricing discipline, and optimizing operational efficiency by reviewing facility footprint, procurement, fleet, and overhead costs. These actions aim to create a more efficient and scalable operating structure.

    03

    Structural Cost Improvement Program

    The company has identified approximately $20 million to $35 million in annualized savings and productivity benefits from initiatives spanning facility footprint, fleet, procurement, organizational structure, and operating processes. These efforts are expected to contribute $5 million to $15 million in cash flow generation this year, with $8 million to $15 million of that benefit anticipated in the second half of 2026. The full annualized run rate is projected to be achieved by 2027, with one-time📎 implementation costs estimated at $5 million to $10 million.

    04

    Expansion into New End Markets

    Team is strategically broadening its commercial focus beyond its traditional refining and petrochemical customer base to include high-value industrial end markets such as aerospace, LNG, nuclear, utilities, and aviation. These new markets are currently experiencing over 10% year-on-year growth and are expected to contribute more significantly in the second half of 2026. The objective is to build a more diversified and balanced opportunity funnel, reducing dependence on large turnaround projects and buffering against market cyclicality.

    05

    Stellex Capital Management Investment

    Stellex Capital Management has become Team, Inc.'s largest common equity shareholder through a negotiated transaction with prior shareholder CORE Partners. Management views this as a strong vote of confidence in the company's business strategy, the value to be unlocked through ongoing transformation, and the ability to deliver differentiated value. This increased investment aligns Stellex's interests with the company's long-term goals of improved margins, safety standards, and overall value creation.

    06

    Cash Flow and Liquidity Focus

    CFO Clinton Roeder emphasized improving working capital through an 'order-to-cash' improvement project. This initiative focuses on optimizing inventory levels and reducing invoicing timelines to lower overall accounts receivable. The project aims to realize $5 million to $10 million in cash flow improvement by the end of the year, which is critical for enhancing liquidity and supporting the company's goal of further reducing net debt.

    AI-generated summary of the company’s earnings call. Not investment advice.