Are the structural benefits anticipated, and are there upfront capital costs for implementation?

The company anticipates sourcing structural benefits from supply chain, facility, fleet, global footprint, and organizational structure optimization, as well as commercial focus. They acknowledge it's early stages and impacts will take time. Upfront costs are estimated at $5 million to $10 million for changes including global footprint adjustments and technology upgrades, with additional capital being evaluated for growth in new service areas. “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.”

Quantify the year-to-date impact of deferred turnaround activity and confidence in its rebound.

The Middle East conflict negatively impacted revenue by more than $20 million in H1 2026, primarily from deferred turnaround and maintenance activity due to increased crack spreads, and to a lesser extent, slowed business in the Middle East. While the service mix was unfavorable, management is confident some activity will resume in H2 2026 as work cannot be indefinitely deferred, but precise timing depends on macro factors like refining utilization and conflict resolution. “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.”

Comment on growth in new markets, which are most target-rich, and ultimate potential.

The company is seeing over 10% year-on-year growth in new markets such as LNG, aerospace, commercial nuclear power, and pulp and paper, with expectations for higher growth in H2 2026. These markets offer high growth potential, and Team is well-positioned to increase its wallet share. The transformation includes structuring the sales organization to focus on these new markets, leveraging cross-selling, sales training, and technical expertise. “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.”

TISI

Team (TISI) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 11, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$920M to $945M high materiality	FY26	Medium
Full-year 2026 Gross Profit	$240M to $260M high materiality	FY26	Medium
Full-year 2026 Adjusted EBITDA	$68M to $73M high materiality	FY26	Medium
Structural Cost Improvement Program Annualized Savings	$20M to $35M medium materiality	Annualized · 2027	High
Structural Cost Improvement Program Benefit	$8M to $15M medium materiality	H2 2026	High
Cash Flow Generation from Initiatives	$5M to $15M medium materiality	FY26 · 2026	Medium
Implementation Costs for Structural Improvements	$5M to $10M low materiality	One-time	High
Cash Flow Improvement from Order-to-Cash Project	$5M to $10M medium materiality	FY26 · 2026	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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%	—	—

Deals & partnerships

Stellex Capital Management Increased 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 Partners Sold stake to Stellex Capital Management

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

Capital programs

Structural Cost Improvement Program underway $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 Project underway

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

Deferred Mechanical Services activity H1 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 mix Q2 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 maintenance H2 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

Structural Cost Improvement Program benefits

H2 2026

Current early 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.

Find out whether TISI delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.