TISI

Business Context and Reporting Period

Company: TEAM, INC. (TISI)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: A global provider of specialty industrial services operating in two segments: Inspection and Heat-Treating (IHT) and Mechanical Services (MS). Services include non-destructive testing, heat-treating, and mechanical repair for energy, manufacturing, and infrastructure sectors.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 7.8% ($19.3 million) in Q2 2026 compared to Q2 2025, driven by lower turnaround activity in the U.S. and Canada. For the six-month period, revenue was relatively flat, down only 0.7%.
• Operating Performance: Operating income dropped 82.0% to $2.2 million in Q2 2026 from $12.1 million in the prior year. The MS segment saw a 71.0% decline in operating income due to lower activity levels and unfavorable project mix.
• Segment Reclassification: Effective January 1, 2026, Emission Control Services (ECS) were moved from the MS segment to the IHT segment. Prior period data has been recast to reflect this change.
• Interest Expense: Net interest expense decreased by 22.0% in Q2 2026 compared to the prior year, attributed to lower interest rates on the ABL Credit Facility and First Lien Term Loan following refinancing in September 2025.
• Legal Accruals: The Company accrued a $10.0 million liability for the Kelli Most litigation (wrongful death case), which is fully offset by an insurance receivable.

Guidance, Outlook, and Risks

• Liquidity Position: As of August 6, 2026, total liquidity was approximately $54.4 million, comprising $6.4 million in cash and $48.0 million in undrawn credit facility availability. The Company also has access to up to $30.0 million via a Series B Preferred Stock delayed draw mechanism through September 2027.
• Debt Covenants: The Company is currently in compliance with all debt covenants. Management believes current resources are sufficient to fund operations and service debt for the next 12 months.
• Risk Factors: Key risks include significant debt levels and high leverage, potential inability to generate sufficient operating cash flow, inflationary pressures on operating costs, and the uncertain outcome of ongoing litigation (specifically the Kelli Most case).
• Unusual Items: Net loss includes non-core items such as severance charges ($1.1 million in Q2, $2.8 million YTD) and professional fees. Excluding these, Adjusted Net Loss was $(7.9) million for Q2 and $(20.5) million YTD.

Investor Verification Checklist

• Debt Structure: Verify the terms of the 2025 Second Lien Term Loan, specifically the Paid-in-Kind (PIK) interest component which added $4.3 million to the principal balance YTD.
• Legal Contingency: Confirm the status of the Kelli Most litigation and the certainty of the $10.0 million insurance recovery offsetting the accrued liability.
• Preferred Stock Accretion: Review the impact of the 10.5% PIK dividend on Series B Preferred Stock, which increased the carrying value by $4.2 million YTD and reduced net income attributable to common shareholders.
• Working Capital Trends: Monitor accounts receivable, which increased by $15.9 million from year-end 2025 to June 30, 2026, potentially indicating collection delays.
• Segment Mix: Assess the long-term impact of the ECS segment reclassification on future IHT vs. MS performance comparisons.