TISI - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Team, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. to of conference Finance. like Bleasdell, to now President Vice would turn over the Don I

You begin, may sir.

Don Bleasdell

me are call Thank Information be speaks Investor Relations and you, as section Gatti; Officer. year With our This recorded fiscal Inc.'s and the on accessed first today's Nicole. Welcome, and also everyone, X, through link XXXX to teaminc.com. this time-sensitive information May be under Greg the today, Boane, call be may audio conference Chief please Officer, no date the is Chief replay. advised can only of of Executive Team's any website of Team, EVP of quarter on Therefore, longer at XXXX. Amerino as call any Financial accurate call. that webcast being

including we pursuant the Before statements Securities Act forward-looking you I'd provisions remind performance. events of Harbor XXXX, to of continue, call Reform Private that contains this or future like statements to Litigation expectations, financial Safe future the made of

Form now would over no to I Amerino? publically obligation turn on company's other revise Exchange assumes company forward-looking These Mr. and inherent and in contained number results filings to and on uncertainties a in caution that statements. to Report XX-K cause investors could forward-looking factors risks described the of Annual the differ statements risks Gatti. such the and update and statements. any materially The other with from the to Forward-looking in uncertainties and Amerino those are Commission. Securities like any we involve company's call factors or detail actual

Amerino Gatti

back begin today. detailed on brief Greg update then will our providing before call I appreciate to a Thank you, Don, a me, good and and we you by questions. take commentary then the share your joining will handing business. us financial everyone. I'll morning,

our be the financial context segments. business results our recently will renamed within discussing We of

consolidated called segments. reportable of and to Mechanical The be we group TeamQualspec quarter Heat Services. referred have first be QX our Team of delivered in the renamed as highest year name. XXXX, of marked and X% This Furmanite since Integrity the Inspection million Qualspec of will will period. Quest the its As Treating the $XXX retain an revenue two and quarter now prior first TeamFurmanite will from increase acquisitions. million, $XXX revenues

projects also year. since October XXXX. declined Mechanical We X%. revenues revenues growth March Difficulties] this Heat X%, of several Integrity growth single [Technical and (X:XX) highest later experienced the by followed Quest in shifted month of Inspection revenue Treating as XX% of

our Quest, million increased year in was year-over-year. X% quarter prior points. basis revenue million adjusted EBITDA up XXX Excluding margin consolidated Adjusted XX% from EBITDA $XX and improved the to $X

project and million. The solid execution. the first team same adjusted quarter At resulted $XX of the to higher stretched segment higher X% year levels revenues the fact, during addition in Inspection million in funding The the pricing by while the to quarter. in first million flexible prior workforce segment last we revenues in debt, $XXX beginning million progressive costs million quarter in EBITDA to technician last of an overtime the lower quarter first period than EBITDA, $XXX EBITDA XXXX. X% due and quarter. to compares the segment move Treating $XX.X of expanded In of experienced million, the activity first delivered than This This EBITDA adjusted compared when improvement of project first $X.X delivered and XXX% X% quarter, $XXX increased or first performance. gross year million quarter segment $XX adjusted demand. when year a year. point to expansion million And Adjusted of in compared quarter we OneTEAM to the to was the from of was of $XX Services higher period also revenues quarter led or Mechanical to million of I implemented margin million a first million, quarter $X.X flow and $XXX year. paid now Adjusted free million $XX This quarter. prior over program. the segment Quest levels $X segment by constraints increase overview will our margin scopes. down million increase growth $X.X that revenues changes changes revenues drove last These large XXX-basis Heat borrowing anticipated labor of same to and $XX improve improved gross higher and cash a activity of The in meet year. million. and customer and prior Integrity over was This EBITDA the delivered

remainder we lumpiness will of XXXX. technology. manufacturing project I deferrals the mentioned safety, we on highlights now As specific quarter, last provide into and due expected to

a worked focus We I performance injuries a nine over year region of more our recordable the period with am our customer on zero for continue to milestone, Midwest a than proud significant half achieving in million X.X and team safety culture. and facility. at man a hours

make technology decreased XX%. to its some us by have These increased lean through lead and since work will investments in benefits on-time proprietary and alone, Mechanical the more inroads quarter to XXXX. the XX% a times delivery in We our of meet segment. allow completions our are November Team cases investments beginning needs. order platform. achieved within this customer In our control Services have and costs to processes of We continues volume in improvement than better realize manufacturing our by XX% Digital

additional and in six we first of successfully pilot our the project into XXXX, integrated completed first software projects quarter Our Canada. in

excited be to continued We this very technology. differentiating about

review. on financial XX% quarter it productivity I achieving and over standby for XX% the now reduced We will from gains reporting. time to time Greg automated are increased tools, first turn to

Greg L. Boane

Amerino. Thanks,

segment earlier, X% improvement had over XXXX an are XX% profitability or improvement. fall-through manufacturing semi-fixed call. has pricing address flexible on Treating lower had hours million engineering in and gross XX% labor margin utilization with some the QX from and decrease QX revenues XXXX gross margin in margin prior to implemented like Amerino operating increased pricing $XX million have XXXX. margin quarters to increasing with very Quest strong million year reducing XX% QX targeted experienced XX% overtime QX in to structure related during gross the up consolidated in to will XX% from margin cost these QX decreased XXXX, in their effectively engineering. $X.X gross to QX Inspection by related to while higher gross overtime QX QX XXXX. by planned Mechanical project in Higher Heat margin of and had Inspection later and shifting than $X Services and workforce gross Mechanical with which hours terms markups which Services stated carry certain of costs, higher costs resources, Services revenue the Heat led to XXXX. their million coupled hours assignments increase approximately QX and on contract labor The The improving XX% good decline. compared increased and a lower and has XXXX to functions levels later managed from increased Treating profit team and picked assessment XXXX challenges in Mechanical margin revenues activity QX unfavorable execution consolidated and XX% $XX Amerino XX% project costs XXXX. from XXXX declining items markets Overtime XXXX. and As flexible quarter. as cost improvements

million $XX and trends review QX million spending I on the XXXX. excluded because XXXX SG&A, was of roughly believe $X the to compared Moving was $XX a Consolidated most in a quarter discuss items expense on for relevant. sequential that comparison to includes QX for I'll million is SG&A moment. expense that I'll Adjusted basis in SG&A first million $XX.X

discussed XXXX we As approximately the as and to incentive XXXX Furmanite accelerated was $XX sequential $XX name, compensation expected been million $XX.X XXXX of factor When made $X.X XXXX, of items call, higher The in we million XXXX which primarily have XXXX million. increase forma expense in million to of QX to would around in is of amortization to the $X.X following SG&A QX brand QX $X in a the pro have on increases related QX reclassified up on SG&A QX R&D stock-based million and million. we earnings these SG&A items.

resets. part QX is normal XXXX payroll item taxes first tax payroll the The January by sequentially million annual $X.X increased of as

with taxes payroll QX decline in the to expect XXXX declines further year. in We later

reset. QX bad due increased a $X runs Second expense allowance quarter. $X.X debt $XX with to was of is XXXX. combined isolated XXXX per in now debt QX sequentially normalized was million sequentially bad our million amount QX stock-based inclusive allowance D&A million expense low flat $X.X SG&A in corporate of item mainly XXXX XXXX few $X.X annual payroll million, and recorded to Shifting for reserves for of million additional tax around compensation. QX a and the

compensation there around amortization of professional during we the $XXX,XXX our be due For a core to following. an accelerated of and including away $XX full activities. to million consider of increase legal XXXX year over the and was and of the million $X.X I'll update. items minutes the stock-based the quarter discussing a $X around current trade OneTEAM no not spend fees excluded items do in Furmanite quarter, million total change severance related There restructuring expected quarter $XX the excluded the primarily to work outside of comprised we before $XX using million, depreciation amortization to of indicative expenses. operating be XXXX, of that in $X.X expect shifting from last Non-cash program program, was from the million is the million of current related to be organizational to the name. of tax few XXXX, In related

issue expense Cash was below net operating the on expense million interest non-cash amortization income, the cost million for to XXXX statement $X.X related down QX $X.X and debt. million. $X debt Moving discount debt income was the of includes interest quarter convertible and for

factors total the should between million million liquidity than rate XX% the cover had of and by resulted I'll QX available improved effective we At less XX%. million flows. balance approximately $XX deduction Finally, cash losses, is $XX the limitation. of accounting non-cash NOLs QX actual are treated allowances, as associated impacts interest conversion XXXX a the there by new and debt combination pre-tax the $X with all foreign A and the of was the feature related million convertible of and borrowing March sheet sequentially. these on of capacity under million our $XX a now to X%, cash revolver, a which the balance derivative. the gain to valuation tax for normalized of was amount Taxes in of earnings rate in $XX be Team XX, of of impacted

our It We of from are is generation of cash cash our flow XXXX our one program. XXXX operations million, improvement $X key of seeing the a in impacts around in XXXX. on focus was from net $X million QX generation incentive XXXX. objectives improved QX an of performance

impact managing Free positive than Our approximately QX million million in QX the flow and debt We XXXX. $X.X QX from inventory working focus XXXX. flow as down AR XXXX. million $X CapEx capital or capital paid in in $XX a by versus to in lower evidenced was improved cash year. generated XXXX around around by $X QX on million million bank last working as having primarily improvement was compared $X cash

X.X secured completes in to leverage review. turn it with debt As maximum senior the EBITDA The now XX, compared financial X.XX times March to times. of Amerino. we're of to That our compliance ratio a I'll over improved existing covenant back covenants.

Amerino Gatti

Greg. you, Thank

our accelerate under increase are following to initiatives We to the the margins. OneTEAM immediate actions taking program

contract order margins We improve to identified are of on overtime issues we reviewed second in conditions in unfavorable these such contracts, terms contract We're management. markups. address top half taking the First, dilutive as this year. focused XX and project our actions to

to IHT of reducing maximize Second, time function. to labor use Mechanical including workforce non-billable X% Services deploying improvement we business visibility, and labor Services a time. resource this to capabilities planning through the are over experienced and successful utilization segment project X% management our Mechanical in utilization demand the improve

Third, we reduction plans low indirect are accelerating focused performing restructuring on our streamlining locations. and costs and cost SG&A

program that locations Medium We process of OneTEAM provide and being foundation of transformation our we to to integration in company. look restructured. the for have identified the XX% the approximately XX% to term, are

of phase design the last have on the was completed the entered have announced and deployment We phase call now that program. the

earnings As our pillars: a last of and now program enhancements, OneTEAM focuses revenue cost improvement. the since achievements functional operations center-led improvement, reminder, on the OneTEAM call. I support cover three will some

incremental project targeted early achieved As and the pillar, we of part $X future have to already enhancement million growth million of wins. revenue revenue we've $X from of cross-selling initiatives success

Within Each to recently consistently a division poised out and division by division manageable enterprise our growth. and segment new our led will capability rolled geographic strength the customer improvement addressable with be market business we The us footprint present operations cross large pillar, allow full structure our to leader for and clients. one model. will geographic

of we procurement to are cost part improvement our gain function pillar, center-led support cost size As centralize to our savings the functional leveraging and scale. continuing

have already We the favorable more early benefits company. contracts, commercial enhancing for and from experienced savings terms

and to for in We external program call, Alvarez note OneTEAM our an contract of million for in order expected cost fund investment complete, with revised Marsal, $XX external The plan is one-third As partner, that negotiated cash flow. into costs consulting we to with deploy employees. to to one-third It recently is monthly spending OneTEAM require we costs, disclosed fixed million to XX% manage program XXXX. train free of our and & price to a is internal restructuring to in for important consulting, and last split with expected costs. the one-third the occur between thirds; $XX

overall to cost than and one maintenance XX% increasing year a showed been program pillars. expecting payback two achieve end has and the refining $XX From fully approximately data improvement of the planned estimated be towards to to million functional External and capacity cost end utilization five our markets of for organic past of to in positive Once shows greater indicators perspective, margins. of implemented, is to growth are the a macroeconomic million be for operations improvement the EBITDA rate support our efficiencies strengthening XX% growth $XX expect are the We inspection is years. our quarter. every the years, and program target we businesses. OneTEAM the from market U.S. which The center-led signs that

and the recognize are we specializes committed workforce our budgets, is This beyond. manage collaborate In we reductions. to accelerated our closing, and that we CapEx watchful to the the While and of customers. remain Team we safety cost CapEx that for and on best contract underway continue Team strictly planning will management, profitability, can are with to still is maintenance announcements recovery customers where delivering improving returning ongoing focused XXXX and space and their

employees the Finally, change this to for drive thank personally it point, work I'll and would for to like of loyalty, their our I willingness all hard to our first and embrace operator question. At execution excellence. turn

Operator

you. first KeyBanc. Thank Tahira our from And question from Afzal comes

now Your line open. is

Tahira Afzal

much Thank quarter. free congratulations, some this very Amerino, flow in cash and you squeezing out

Amerino Gatti

Thank you, Tahira.

Tahira Afzal

be what we've first benefit. market would my the being perhaps trend maybe we expected question guess little is, I thought always higher than a a maybe positive

through EBITDA a good progressively Given the you a range of about cetera, $XX $XX sort that be or build-up million does to cost you headwinds should are out how progressively we terms up maybe thinking of perhaps facing the million pricing, year? on of quarterly the et basis Quest? in build it can because some the overtime Is lay

Amerino Gatti

like address part I'd which is market, of address then to the of first handling EBITDA. and just the So the growth we'll Tahira, the

of is discovery So a project of was don't work to a be negative. our on market increases Actually, scope inspection considered activity identified want lot move. I the market tailwind by the the the expansion, situation a that customers side, positive

workforce it's aligned do the customers the with a capabilities that activity, workforce in using thing. positive our We overtime to and to place get and recruit have flexible with so and train obviously back have and plans our planning work

let forward, through it address on Greg will as see buildup forward the on it going we and comment I'll we XXXX EBITDA. As the we move

Greg L. Boane

Just...

Tahira Afzal

Thanks so much.

Greg L. Boane

your of Tahira, as what a million EBITDA, million clarification, were reference $XX there? you to $XX to to referring

Tahira Afzal

saying and in million sneaky being got was we've the $XX I well, quarter.

I'm assuming progressively the up hopefully it will head So through year.

Greg L. Boane

Yeah.

to Obviously, expecting we're experienced Our year expansion margin will the the the be business. the QX. that progression Services. progression, than Mechanical the seasonality We're at stronger pleased QX we of through with follow

Inspection Amerino also EBITDA from Quest looking profit up improving As we're QX gross sequentially QX. better and on over a the Quest generation to in said, expecting focused margins much and and margins we're be into

Tahira Afzal

of I've I'll those. couple And queue back follow-ups. it. for in got Got hop a the

Amerino Gatti

Tahira. you, Thank

Operator

next CJS from Thank comes our Bibb you. And question Securities. from Craig

Your line is now open.

Craig Bibb

letting and Hi, that how Amerino, takes talk a the refinery customers? that me kind spending, team, you $XX. question. how oils thanks of ask impact a might have your for perspective closing broader puts brought above the the you about of some of profitability on you Could

Amerino Gatti

and good Thank you Okay. morning.

been last prices new however, we're refining, throughout crack spend specifically the first on starting have America thing positive. down see The the oil that to projects and is with months North the tailwinds I've all, year-on-year. capital on So refining we're spreads and Canada. traveling of including spent couple seeing is increased

which customers' projects Inspection space play we're services capital is up into the public year-on-year. some announcements. key where our And our obviously However, using of to XX% significantly is XX% of the ranges maintenance both Mechanical,

is turnaround additional why that Inspection it's from the business. scopes that's quite a within discovery So perspective, additional saw work. It's and few expansions what driving of driving work we project project

get year-over-year still projects, down into drilled XX%. that XX% maintenance, to one we when So you that's refining capital I up down think level see but

Craig Bibb

Okay.

guys XX% So anything to would XX% in or see like are you demand? going that increase

Amerino Gatti

then and a market a that we're with of that. And associated spend then increase. their that's Well, share have obviously percentage we

then within do increase lines. from of have obviously customer So to spend service you'd that portion that the our from our share and those math a to spend, go market

Craig Bibb

year? the a you bit more outlook spring both Okay. turnarounds the about and could for talk the maybe in in detail And little later in

Amerino Gatti

saw two and we've spring and January a March in So -- expect continue of going it's for started the actually between phase we don't it season activity we that at strong to to discovery will to months XX% But and of the in again, And expect as see continued March. I over ramp-up We next this turnaround XX% turnaround couple we've activity pace. next obviously, that months, continue not seen as strong. look March. the continue season

it's perspective, good. that from So

projects have with point, the And We this the half in fourth quarter line turnaround put see at planning. ahead the second be together to side look season first. we of expect our the on on project to

Craig Bibb

the with line first. In

we So looking are demand in mean of growth QX? start like I type double-digit in at the

Amerino Gatti

quarter a growth. digit this to QX off single coming and in low do high increase revenue we're digit So, X% see double we

Craig Bibb

right. let I'll take lot. Great. Thanks a else someone All a shot.

Amerino Gatti

you. Thank you. Thank

Operator

Thank Rice. from Johnson Malloy you. And our next comes from question Marty

Your line is now open.

Martin W. Malloy

Good morning.

Amerino Gatti

morning. Good

Martin W. Malloy

I have just OneTEAM understand million expect program expansion. and guess to you that of and and combination increase you million then? talked of a be that of Should million that benefits to revenue in want the to make XX% sure cost I million $XX $XX $XX of – with XXXX that's you about occurring margin that and I in here occurring the $XX XXXX

Amerino Gatti

So let you let if two mind, me points. don't me just – clarify

spend So it's out of $XX million over in carrying XXXX the XXXX project. remainder the to $XX QX in to XX% close with spend and million

on and $XX that's And go to be that is now operations it of is through. center-led The cost that's for pillar. the That pillar, million an pillar and which to as only bracketed pillars, enhancement division provide million, phase we've We'll the branch the million gave not restructuring from revenue done the last to $XX million. program. quarter, going $XX anything $XX We've So other to the procurement the continue estimate. we updates which -- and activities. to It now we from that. does include the SG&A

Martin W. Malloy

in show $XX improvement that expect to to $XX annual we million million should And XXXX? up

Amerino Gatti

we'll half a million the And the year But that that expect be in range. in expect of up between we And So, this then year to and the will million XXXX full be both. we the of second to that, then year. in million $X be will of this an to in year program full $XX implementation middle show to be see $X XXXX of of million we $XX $XX to expect $XX the million XXXX million implementation. next to and

Martin W. Malloy

question. to services? you. of Gulf That's Could there the maybe on Thank you Great. build-out it relates what petrochemical the and as market last your talk about And helpful. then kind you're with Coast the seeing

Amerino Gatti

types when in both So, the is that market petrochemical a of services it's refining, versus facilities. services very similar perform we petrochemical we do in

petrochemical refining We the the on of are it in comes it, it's in similar seeing rest on we're that to not capital maintenance to projects seeing increase capital and when capital, market. projects refining

difference a Petrochemical, that – is the about XX% growth narrow that more refining. the improvement petrochemical the you, real refining to I'm bit it side, versus a in market So just down for year-on-year capital And on little side. increase. it's sorry seeing the we're market on capital in XX%

Martin W. Malloy

Understood.

Amerino Gatti

year-on-year. refining, Versus the -- the actually refining sorry, versus is which down

Martin W. Malloy

Thank you. Great. Okay.

Amerino Gatti

you. Thank

Operator

our question And comes Stephens, you. from Duncan from Thank next Inc. Matt

now is line Your open.

Willam Kerr Steinwart

Hey. guys. the for actually This Matt. Good Will on is morning, call

Amerino Gatti

morning, Good Will.

Greg L. Boane

Will. Hi,

Willam Kerr Steinwart

a you Good around morning. tie growth. X% bow call here to the overall market I on just that we've the wanted last to commentary the hitting noted been indicators expectations and X% for

that that now, think what to fair So update it on assume us is? to if now X% and can you X% range has gone you is that up

Amerino Gatti

is digit, cetera, general the lines, the and reaching first higher overall I So, we're I to X% versus of haven't growth, a digit the pulp do look high-single projected petrochemical, going though low-double be that changed, year-over-year seeing the quarter overall the reach refining, growth we're et the growth levels pace to service rate. second quarter think paper, et combining for cetera. market all will at Will, single-digit The market you if X%, growth

Willam Kerr Steinwart

Okay.

helpful. That's Okay.

Amerino Gatti

been have projects. Yeah. just and just share in and year is out X% saw clarification, first Quest, quarters the it's without Quest, other Quest a growth that year-over-year projects know we in market was tailwind not those a And quarter it pushed and into in deferred we specific as the remember, loss about

Willam Kerr Steinwart

Okay.

you're year-over-year So, currently just is the growth XQ single-digit clarify, what high expecting? in to

Amerino Gatti

Yes.

Willam Kerr Steinwart

you you size. revenue and give you're hit you Can piece provide the early Okay. opportunity little initiative, and/or you as revenue the seeing targets what look, And then called out, bit, around enhancement and you benefits it's of potential years OneTEAM I do... this couple the going detail over some – a more business possibly there early some enhancement can this the the out think on a to into on XXXX can know, you

Amerino Gatti

Sure. (XX:XX)

Amerino Gatti

to I'm you here more revenue. yeah, going not Sure. near information start because focused on number to want Sure, on a problem, that's the give going the no away – I'm I Will. long for giving don't term to term

Willam Kerr Steinwart

Sure.

Amerino Gatti

We have of awarded that for in $XX the target the year. of – a to math in that then, $X our seen fall-throughs, wins cross-selling later do on already be $XX We've et have initiative XXXX. million awarded cetera. be million million to obviously, can million to project executed been And $X you will

Willam Kerr Steinwart

pricing, tight and fall? the on into that quantify this seen that way similar call cause to gross that on quarter, that you contracts Okay. can headwind Then, out the given was unfavorable terms margins? there market is could any And the have contract headwinds you what other the headwind any with

Amerino Gatti

Sure.

going overtime to talk the to flexible we the I'm So obviously down, is I'm Greg were breaking let going about address contract. that and which and the piece contract then lines two specifically

did that all, It's project a of workforce. thing was we get expansions, it not because into tailwind. is the overtime knew contract for good of and of This We flexible some is First negative. the want I scope coming, but growth us. to reiterate positive a

to that. are we number with now work that's of contracts starting Number one. how customers our our we two go to So manage when and is, through

travel, easy costs There is is are more built the other items that So, an and contracts thing. markup rate that these et diems discretionary cetera. into like per overtime obviously, are

As customer and try the with to service you move U.S., the is impact around ramp-ups. handle that cost people needs the and a there

at dilutive, it's stuff somewhat look with logistical markup it. the So when that that Cs and that you all are overtime it's and Ts comes

the are planning management We through working better tool. workforce on

count no a turnaround of having much people how between are and in the local content balance get for our customers and more a it's add view moving head versus season quarters with planning obviously there troughs versus cycle. And that around handling We meeting their project is longer-term always you to the turnaround. then

balance that, always obviously, that those because to and the you with have an to on have have are customers. and our have immediate Ts we working types you you fix, customers. things to, Cs we're not the recruit, of train with to your So It's negotiate but

the quarter I of flip switch expect a the I'll to Greg? impact from And we on Greg immediately. saw that actual those through type don't things. So let comment just on over

Greg L. Boane

markup tell you is same flexible look profit And were labor is they standard there costs that, on quarter. as costs know, lot million of when compilation can we in $XX – going a at overtime quarter but the impact jobs and and what was, there's we you on hours. not What didn't up and specific quarter-to-quarter, Will, of some and So, obviously, the hundreds we're the contracts of real a this at the rates getting as of the thousands through I data.

you uplift and incremental component much labor. stream hours and that our revenue significant of when demand lower margin through was than in mash activity there that all the was because flexible so, And a together, a our of that overtime customer customer meeting standard at

Amerino Gatti

zero be trough never always have will because the turnaround season balance season. that with the to And we

zero. don't be So, previous the to flexible hours we higher But expect was it overtime than ever quarter and definitely plans.

Willam Kerr Steinwart

Sure. Very helpful.

Amerino Gatti

Thank Okay. you.

Willam Kerr Steinwart

Last I thing sneak this from in. can me, if

quarter, thoughts cash year; this updated the first you a can improved lot give flow free thoughts some on in generation Just there?

Amerino Gatti

after funding free stated -- say the that's the year cash at will program. positive the in cash that flow to we've the I we past, of OneTEAM finish as flow planning are So

direction. progress receivables will go and that on free reductions us some in we any will our our CapEx positive cash So good towards be debt. and flow move to paying made down We've senior

after a So, good positive estimate -- neutral program funding to positive free the still flow the is for cash year.

Willam Kerr Steinwart

guys. lot, growth. on Congrats a the Thanks

Amerino Gatti

Thank you.

Greg L. Boane

Thank you.

Operator

And from Tahira question from we KeyBanc. a Thank have you. follow-up Afzal

Your now line open. is

Tahira Afzal

Hi, guys.

assume still pathway year seems it notable too to more a looking the that towards the at fairly sort a you're we Amerino, to guess like of step-up XX% we're but I perhaps. at XX%, early, it into or looking Is approach? it's Just XXXX or back-ended first -- if should gradual XX% XX% is

Amerino Gatti

deployment Tahira, schedule. because our Gradual, on is

Tahira Afzal

Right.

Amerino Gatti

we're XX some We expect those seeing be months. grow, to will enhancement deployment I wins the early The revenue earlier. and mentioned to as already continue

the increase So XX% the to a XXXX. to of back near half XX% gradual

or So that's based assumptions the approach. a I as foundation And but on this stated call, in is are gradual approach there last some line in months market program we're in take significant about taking. conditions, the it it's reductions, a us putting a deploy. the just program light Obviously, long-term Tahira, growth top that place is a that to count XX It's the structure of not we're will head not company. and change it's switch, it

Tahira Afzal

look okay. just it, terms from with market Permian Quest, of, had particular, side, is if we nimble Amerino, talk Quest you the we've market then, moving big, it in there's pipeline really the moves the in more activities? how seen that now at being Marcellus And in on Got region-to-region,

Amerino Gatti

line? You product mean that Quest Integrity specifically,

Tahira Afzal

Yeah.

Amerino Gatti

Yeah.

to about run within tools can to a two organization. services nice special of our They travel are is, two handle but So because We days. them. they customer, to one, the near to size technicians, with due number be on thing part we sales continue commercial very cases run Pelican and one Quest or location as we and mobile perform one our the it with the

facilities, et they're don't like have mobile. infrastructure of lot that bog very them So a They down. cetera,

backup tool where to a their platform and in them North or move So in well their as they America people both very timeframe. moving are as and with have quick backup allows international can tools base the markets

manufacturing product one because support they're required, our cetera, Mechanical a not an of lines there's mobile as probably most et like et cetera, of So example. lot

Tahira Afzal

it. Got

much. very you Thank Okay.

Amerino Gatti

you. Thank

Operator

from Thank from Craig you. follow-up another And Bibb Securities. we CJS have

is now Your line open.

Craig Bibb

Yeah.

us Could in like works and you the you at an times. a You X just revenues then few you cross-selling specifics? give that maybe just a like were anecdote enhancements how revenue cross-selling explain kind little of of mentioned more more brought with

Amerino Gatti

Sure.

our so first is all room it's the the is most a So the we business units, share in all running even still across lines nice three this fragmented. of of of service fragmented business have our because thing with on very market cross-selling, that lot

have in and already an then that cross-selling, on we're to a So services, relationship already look have example pull Services. Inspection contract go when use doing we to have a or as already customers you a discoveries then like we're to able going I'm able Mechanical our at Inspection or and we're footprint into projects,

do third services, hand-in-hand to So if customers they they that that's want The through first analyze And data Inspection done is we to the data, the collect that you repair. our then services, Quest and services. Integrity our collaboratively. with have they them thing do thing work at thing lifecycle, and they is to next look detection move is leak

have a we pulling Mechanical Inspection it that's type an cross-selling But common expanding into customer, use, the both of footprint we is a that's that ones of in and our So the go on and CAR very a final take we with obviously, those reports workflow lot the closely approach Services, customers type and ways. which offering with the engineering that that then work and we've buy with our vice-versa work done. we can more integrated our support

happening that So today. example you how gives it's an of

Craig Bibb

Okay.

So...

Amerino Gatti

to to Furthermore -- sorry that with to say actually Inspection that's earlier planning opportunity for and and Mechanical managers, us regional -- of starting and pipelines start function allows and phase. customers the was Services meeting which looking deployed start collaborate furthermore, our to have us now beginning allows sales in our I commercial the – going project

Craig Bibb

Okay.

Inspection was in not the Mechanical past, in Services? bringing So

Amerino Gatti

depending past, a the far with you go, back how had pre-Furmanite in we the smaller Mechanical acquisition, Well, business.

broader base. Furmanite our portfolio and much Qualspec much acquisitions, we of portfolio the a customer have broader with a and So of offerings

it's in legs program those transformation top and integration grow Treating, to and our it now but acquisitions Mechanical of part three and not all organization weren't stronger Inspection obviously is to So And that line Services the leverage and of Heat our improve we're Quest Integrity. in, bringing they EBITDA. the much and

we now, we want So acquisitions acquisitions. the EBITDA improvement and these from but last made couple to leverage those gain of that over years,

it, it's to that not but capture. significant of that amount they upside weren't So doing we there's want

Craig Bibb

you organization the marketing, you're of how that that kind level are or when then changed? offering And higher package in doing like has deals

Amerino Gatti

So it's both.

going package explain into I categories. I deals. to the market shift whole think, would expect we don't is that it to three

then advanced integrated asset the just providing working pulling integrated unit, fully then but Mechanical The to Inspection will metallurgy not another large not continue the in a is into and we'll of top move have together. discrete services to business lines of it's service will we or want what services. first buy it's And consider bringing one support always, majority We offerings we base market can and services that business. pyramid planning be where where The bundled discrete our a with to the always but is more in engineering, it's modules. our working

distinct broad suppliers. a number our reduce a it's of select are of And that So three suppliers driving in cetera. of to customers buckets. have et really services, want the strong programs, today safety They to breadth lot

as our group the to that our and it's integrated customers take very we're strong that that So procurement and for offerings move in lines with our working will operations of those direction. But going well asset it's overnight, provide with both relationship, that technical happen customer. not to competency use the grow to something us as time build to closely service

Craig Bibb

just then And quick Okay. one one. easy

So as Alvarez is associated shifted savings Marsal, just cost your that there line, & with managing fixed risk? or price top a to you your with

Amerino Gatti

savings, There creep of we scope protected more we the a the importantly, but ensure project. to wanted was

hitting them. to good the very a discussion now committed Alvarez. with did now a partnership delivering was both of It's program the very lot on with early it a analysis tight the KPIs. and They and So we're

Craig Bibb

Great.

lot. a Thanks Okay.

Amerino Gatti

Thank you.

Operator

Marty follow-up more one from have we Johnson And from you. Thank Malloy Rice.

is line now open. Your

Martin W. Malloy

Thank you.

impact to of or a more with to that to work regulations quick needed? type the a refineries and question. I you enhancements recently increased associated that just in the been lot see have any provide IMO of XXXX comply Just you all from to The with the was fuel do expect being curious, news kind

Amerino Gatti

little think too tell. I So, a to early it's bit

with customers meeting are XXXX. We to beyond start looking

times, are future valuable be on But working unplanned I and think because turnaround things engineering customer that our ones very say are what again, to does the play Digital as Team lot programs become like to projects, more a is want we strict, with closer the importantly, improving specialized we into it those events. that groups, more advanced will be reducing I offer. our planning, services and we regulations want

do playing think IMO scope change, see regulations the strengthen a improve might as not I example with we or or I but guess, So role think one customers. large our improve, our and be breadth that's I where

Martin W. Malloy

Great. you. Thank

Amerino Gatti

Thank you very much.

Operator

Thank turn like you. And I'm showing no will back further further management to questions to I call any the at for this remarks. now time.

Amerino Gatti

on you, for in next you call and interest We with forward I today, all joining continued We to Team. us speaking again Thank your look thank of to you want quarter. operator. appreciate the you

Operator

thank today's This for Ladies and conference. program. gentlemen, today's you in your concludes participation

You great may all disconnect. Everyone, have a day.

Team (TISI) 9 May 182018 Q1 Earnings call transcript