10-Q: TEAM, INC. Reports Q3 2025 Results, Debt Refinancing

TEAM, Inc. reported a net loss of $11.4 million for Q3 2025 and $45.4 million for the nine months ended September 30, 2025, alongside significant debt refinancing activities.

Summary

• Total revenues increased by $14.2 million (6.7%) to $224.976 million for the three months ended September 30, 2025, compared to $210.758 million in the prior year quarter.
• Total revenues increased by $32.7 million (5.1%) to $671.657 million for the nine months ended September 30, 2025, compared to $638.976 million in the prior year period.
• Net loss for the three months ended September 30, 2025, was $(11.447) million, an increase from $(11.126) million in the prior year quarter.
• Net loss for the nine months ended September 30, 2025, was $(45.431) million, an increase from $(31.084) million in the prior year period.
• Operating income decreased to $1.342 million for the three months ended September 30, 2025, from $3.158 million in the prior year quarter.
• Operating income decreased to $7.442 million for the nine months ended September 30, 2025, from $7.931 million in the prior year period.
• Adjusted EBITDA increased to $14.541 million for the three months ended September 30, 2025, from $11.311 million in the prior year quarter.
• Adjusted EBITDA increased to $44.322 million for the nine months ended September 30, 2025, from $39.631 million in the prior year period.
• A loss on debt extinguishment of $1.283 million was recorded for the three months and $13.136 million for the nine months ended September 30, 2025.
• Net cash used in operating activities for the nine months ended September 30, 2025, was $(28.122) million, compared to $1.143 million provided in the corresponding 2024 period.
• On September 11, 2025, the company completed Series B Transactions, issuing 75,000 shares of Series B Preferred Stock and warrants for $75.0 million, using proceeds to repay existing debt.
• Total long-term debt and finance lease obligations decreased by $22.3 million to $302.8 million at September 30, 2025, from $325.1 million at December 31, 2024.

Sentiment

Score: 4

Explanation: While revenue and adjusted EBITDA showed growth, the significant increase in net loss, decrease in operating income, substantial cash outflow from operations, and large debt extinguishment loss indicate underlying financial challenges. The successful capital raise and debt restructuring provide some stability and flexibility but do not fully offset the negative financial performance.

Positives

• Total revenues increased by 6.7% for the three months and 5.1% for the nine months ended September 30, 2025, compared to the prior year periods.
• The Inspection and Heat-Treating (IHT) segment's revenue grew by 5.7% in Q3 and 9.4% in 9M 2025, driven by higher callout, nested activity, and large turnaround projects in the U.S. and Canada.
• IHT operating income increased by 16.9% in Q3 and 30.9% in 9M 2025, reflecting contributions from revenue growth and improved operating income in the U.S. and Canada.
• The Mechanical Services (MS) segment's revenue increased by 7.8% in Q3 2025, primarily due to increased U.S. turnaround activities and project work in Canada.
• MS operating income increased by 31.2% in Q3 2025, with an increase in U.S. operating income of $1.9 million and Canada of $1.0 million.
• Consolidated Adjusted EBITDA increased by 28.6% to $14.541 million for Q3 2025 and by 11.8% to $44.322 million for 9M 2025.
• Successfully completed Series B financing on September 11, 2025, raising $75.0 million through the issuance of Series B Preferred Stock and warrants, enhancing liquidity.
• Debt agreement amendments (ABL, First Lien, Second Lien) provide enhanced financial flexibility, including reductions to interest rate margins (effective Oct 1, 2025, for First Lien; Jan 1, 2026, for ABL) and increased leverage ratio thresholds.
• Total long-term debt and finance lease obligations decreased by $22.3 million from December 31, 2024, to September 30, 2025.
• The company was in compliance with all debt covenants as of September 30, 2025.
• Available borrowing capacity under various credit agreements was $46.5 million as of September 30, 2025, and $65.1 million as of November 10, 2025.
• Access to an additional $30.0 million in liquidity through a Series B Delayed Draw option until September 2027.

Negatives

• Net loss attributable to common shareholders increased to $(12.057) million for Q3 2025 from $(11.126) million in Q3 2024, and to $(46.041) million for 9M 2025 from $(31.084) million in 9M 2024.
• Overall operating income decreased by $1.8 million (57.5%) for Q3 2025 and by $0.5 million (6.2%) for 9M 2025.
• Corporate operating loss increased by $4.9 million in Q3 and $4.7 million in 9M 2025, primarily due to higher non-recurring professional fees and legal costs.
• A significant loss on debt extinguishment of $13.136 million was recognized for the nine months ended September 30, 2025, due to debt refinancing activities.
• Net cash used in operating activities for the nine months ended September 30, 2025, was $(28.122) million, a substantial increase in cash usage compared to $1.143 million provided in the prior year period, primarily due to working capital impacts.
• MS segment operating income decreased by $4.3 million (22.5%) for 9M 2025, mainly due to lower international project activity in regions like Trinidad, the United Kingdom, and Latin America.
• Other income (expense), net, was negative $(2.396) million for 9M 2025, primarily driven by unfavorable foreign currency transaction losses.
• The effective tax rate increased to 9.1% for Q3 2025 from 4.7% in Q3 2024, and decreased to 5.0% for 9M 2025 from 7.1% in 9M 2024, due to the mix of pretax income/losses in valuation allowance jurisdictions.

Risks

• Ability to generate sufficient cash from operations, access credit facilities, or amounts available under term loans to support operations.
• Ability to maintain compliance with covenants under debt arrangements and the Series B Certificate of Designation.
• Ability to manage inflationary pressures in operating costs.
• Negative market conditions, including domestic and global inflationary pressures, impact of tariffs, future economic uncertainties, and impacts from epidemics and pandemics, particularly in heavily dependent industries.
• Delays in the commencement of major projects.
• Seasonal and other variations, such as severe weather conditions (including conditions influenced by climate change) and the nature of customer industry, affecting the timing of new contracts and termination of existing contracts, potentially resulting in unpredictable fluctuations in cash flows and financial results.
• Significant debt and high leverage which could negatively impact access to capital markets, liquidity position, and ability to manage increases in interest rates.
• Risk of non-payment and/or delays in payment of receivables from customers.
• Ability to maintain compliance with the NYSE's continued listing requirements and rules.
• Financial forecasts being based upon estimates and assumptions that may materially differ from actual results.
• Incurrence of liabilities and suffering of negative financial or reputational impacts relating to occupational health and safety matters.
• Changes in laws or regulations in the local jurisdictions where business is conducted.
• The inherently uncertain outcome of current and future litigation.
• Acts of terrorism, war or political or civil unrest in the United States or elsewhere, changes in laws and regulations, or the imposition of economic or trade sanctions affecting domestic and international commercial transactions.

Future Outlook

The company believes its current working capital, forecasted cash flows from operations, and existing debt arrangements provide sufficient liquidity to fund operations, service indebtedness, and maintain compliance with debt covenants for the next twelve months and long-term, based on current expectations. This assessment, however, relies on assumptions that may prove inaccurate, potentially leading to an earlier exhaustion of capital resources. The company also has access to an additional $30.0 million in liquidity through a Series B Delayed Draw option until September 2027, subject to certain conditions.

Management Comments

• "We believe that we are uniquely qualified to provide integrated solutions involving: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the customers election."
• "We are capable of escalating with the customers needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry."
• "We are unique in our ability to provide these services in three distinct customer demand profiles: (i) turnaround or project services, (ii) callout services, and (iii) nested or run-and-maintain services."
• "Based upon such liquidity assessment, we believe that the Company’s current working capital, forecasted cash flows from operations, current and expected availability under our existing debt arrangements and capital expenditure financing is sufficient to fund our operations, service our indebtedness, and maintain compliance with our debt covenants for the next twelve months, and based on current expectations, the long-term."

Industry Context

The company operates in diverse heavy industries including Energy (refining, power, renewables, nuclear, offshore oil and gas, and liquefied natural gas), Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive, and mining), Midstream (valves, terminals and storage, and pipeline), Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways), and Aerospace and Defense. The report indicates a healthy demand environment for industrial maintenance and inspection services in the U.S. and Canada, with increased activity in turnaround projects and non-destructive evaluation. However, some international regions, such as Trinidad, the United Kingdom, and Latin America, experienced lower demand for certain services, suggesting regional variations in industry activity.

Corporate Governance

Legal Proceedings

• Kelli Most Litigation: A lawsuit filed on November 13, 2018, for wrongful death, resulted in a $222.0 million jury verdict against Team on June 1, 2021. The Texas First Court of Appeals vacated the judgment and dismissed the case on May 16, 2024. The plaintiff re-filed the lawsuit in the U.S. District Court, Kansas District, on March 5, 2025. The company has accrued a $39.0 million liability, which is covered by third-party insurance policies (deductibles met).
• Pandemic-related government subsidies: The company received notices of noncompliance for a foreign funding assistance program. An initial assessment of $5.5 million was accrued as of December 31, 2023. After a successful appeal, the accrued liability was reduced to $1.7 million as of September 30, 2025, which is not covered by insurance.

Related Party Transactions

• In September 2025, JFL Credit Opportunities Fund II, L.P. and affiliates, in which one of the company's independent directors is an equity partner, acquired $15.0 million of the company's outstanding loan under the Second A&R Second Lien Term Loan Agreement. The terms of the loan remained unchanged.
• The company engaged in debt transactions with Corre Partners Management, LLC and its affiliates, including the repayment of the Corre Delayed Draw Term Loan, Corre Incremental Term Loan, and a partial payment on the Corre Uptiered Loan, and rolling the remaining portion into the 2025 Second Lien Term Loans.
• On September 11, 2025, the company entered into a Securities Purchase Agreement with InspectionTech Holdings LP (an affiliate of Stellex Capital Management LLC) for the issuance of Series B Preferred Stock and warrants.
• On September 11, 2025, InspectionTech Holdings LP (the Stellex Holder) acquired $10.0 million of the company's outstanding loan under the Second A&R Second Lien Term Loan Agreement. The terms of the loan remained unchanged.

Stakeholder Impact

• Shareholders: Experienced an increased net loss attributable to common shareholders. Potential future dilution from warrants issued in the Series B Transactions and additional warrants from the Series B Delayed Draw. The Series B Preferred Stock introduces a new class of equity with senior dividend and liquidation preferences.
• Creditors/Lenders: The debt refinancing and amendments provide enhanced financial flexibility, including interest rate margin reductions and increased leverage ratio thresholds, potentially reducing immediate default risk. Total debt decreased, improving the overall debt profile.
• Employees: The resolution of the pandemic-related government subsidy repayment, with a reduced liability, mitigates potential negative impacts on employee-related accruals.
• Customers: Continued provision of specialty industrial services, with growth in the IHT segment and U.S. Mechanical Services, indicates ongoing service delivery and potential for expanded offerings.
• Regulatory Authorities: The company continues to navigate legal proceedings and compliance reviews, such as the Kelli Most litigation and government subsidy noncompliance, which could have financial and reputational implications.

Next Steps

• The company has the option to draw up to $30.0 million as a Series B Delayed Draw until September 11, 2027, subject to certain conditions.
• Interest rate margin reductions on the 2022 ABL Credit Agreement are effective beginning January 1, 2026.
• Interest rate margin reduction on the First Lien Term Loan Agreement commences October 1, 2025.
• The company will continue to evaluate the possible outcomes of the Kelli Most litigation in light of future developments.
• Additional disclosures may be provided in future periods as the impact of the One Big Beautiful Bill Act legislation is determined.

Key Dates

Recommendation

The company demonstrates revenue growth and improved adjusted EBITDA, indicating operational strength in its core segments, particularly Inspection and Heat-Treating. However, these positives are significantly overshadowed by a substantial increase in net loss, negative operating cash flow, and a large non-cash loss on debt extinguishment. While the recent capital raise and debt restructuring provide crucial liquidity and enhanced financial flexibility, the path to sustained profitability and positive cash flow from operations remains uncertain. The stock is a 'hold' as the positive operational momentum is offset by persistent financial losses and high leverage, suggesting a need for further observation of the effectiveness of the restructuring and the company's ability to convert revenue growth into net income and consistent positive operating cash flow.

Keywords

Specialty industrial services, Inspection, Heat-treating, Mechanical services, Non-destructive testing, NDE, NDT, Leak repair, Asset integrity, Turnaround services, Callout services, Run-and-maintain services, Energy industry, Manufacturing industry, Midstream, Infrastructure, Aerospace and Defense, Debt refinancing, Series B Preferred Stock, Warrants, ABL Credit Agreement, Term Loan, SEC filing, 10-Q