TISI - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen and welcome to the Team Inc.

First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Mr. Don Bleasdell, Vice President of Finance. begin. may you Sir,

Don Bleasdell

Chief May Welcome accessed call. Team’s as the website call X, call With company’s the that replay webcast section this only and Gatti, Jimmy. call Relations available date There Ball. speaks a of webcast reading. be year also Investor may the is of today, are will going of quarter transcript teaminc.com. audio XXXX at Therefore, the on website, being our Officer Executive advised be conference replay me can XXXX. Chief our via by Officer, recorded everyone today’s any you, no company’s as Information please longer of any Susan first This information teaminc.com. and be time-sensitive to and fiscal call Amerino Financial through Thank or will to of on be under be listening today’s accurate the link it

In replay will replay until how in information available addition, a The yesterday’s to these provided was features telephonic release. May on access XX. earnings be

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

by and report or materially other uncertainties questions, filed XX-K will no publicly that our Forward-looking on Susan and annual are differ Commission. on progress and contained Amerino take of then any those detail number your furnished law. a before our update in results. The or highlight on investors other Exchange reports documents required could the any market business. will Amerino as except and statements risks company factors and factors OneTEAM risks revise with the actual may by forward-looking begin and caution described and and And an inherent to outlook. obligation from involve we statements. company’s Form in be cause we the results providing to uncertainties, assumes forward-looking statements, will update our Securities company’s in These detail

Now turn to over like I to the Amerino? Amerino. would call

Amerino Gatti

weather across In our from QX government of resulting large to was due impact impacted negatively further in XXXX, by The and shutdown, businesses and Canada volumes US the parts US, deepened disruptions nonrecurring of the were and discontinued segments. delays businesses. pent-up projects to QX margins MS IHT certain QX virtually market. a acquisitions. remained flat, the by Harvey lower sets Canadian in tough due from these you comparison were which demand services gross morning Don revenues than you, a levels market and decrease period. We strong a good experienced million at MS Consolidated mechanical Integrity prior approximately appreciate treating year both the revenue. $XXX segments heat quarter and year decreased continued X% everyone. over $XXX We Revenue XX% segments. us and These Integrity partially expected growth. declines were and first IHT today. inspection and joining by of in lower XX% year Quest that driven strongest revenues, in resulted execution depressed offset improvement Despite from a year-over-year XXXX higher project in softness its our in respectively XX% the in Thank strong generated million, Hurricane activity revenue Quest while deferrals, our in since

costs year-over-year reduction initiatives. and sequential on greatest period. or We by key with ongoing prior returns. a of actively reflects the projects our X.X% from component from also of OneTEAM decreased in and focused program managing our of investing implementation First reduction X.X% year million the The It $X.X and the showing fourth further the XXXX. quarter successful SG&A remain cost in $X.X total million SG&A quarter decreased or

borrower net a be to expected we credit on facility. our quarter, the During

However, through We million the represents debt management, improvement free positive flow, we prior which from third of quarter. disciplined an our for the generated capital cash $X.X year consecutive reduced period.

We also debt. repaid approximately million in $X outstanding

we of year. last XXXX, million doubling cash in million than free Looking ahead, the $XX to $XX flow more expect generate generated

segment. will a and review quarterly decrease I heat of revenues million quarter $XXX prior reported from Now our year the first performance segment $XXX The period. by inspection XXXX million, treating XX% in

history, largest million, in decline first certain the second in million First of IHT’s underperforming sustained the was quarter one revenue down primarily of in not projects well softness did half adjusted repeat as the EBITDA driven in of of year-over-year this was XXXX. the quarter, XXXX. businesses $X.X and Canadian $XX.X inspection which quarter discontinuation refinery by company’s the the as market from

XXXX. that XX% As of businesses X% QX lower to Canadian than continue the the hurdle operations when do we internal $XXX The due not $XX take in mechanical the to appropriate segment to primarily quarter of of discontinuation international part delivered rates the for program, of decrease is meet XXXX a of million first underperforming million million, quarter XXXX. million, of our our and the services as market. the previously $XX mentioned decline evaluate revenues first in was compared softness EBITDA Similar proactively MS in actions. transformation revenue to and IHT, Adjusted in ongoing $XXX

second to the to the last a As year MS slow XXXX. call, have to we of expected and half our perform discussed similar start during

XXXX revenues revenues were the Integrity QX million, a from when Quest prior MS purposes, Quest increase services. Growth as domestic EBITDA to achieved year. compared million XXXX and as as fully Quest $X.X expansion, well X% the Integrity’s of and tools $XX quarter deliver of resources our XX% XXXX segment investments, tool comparison provide higher which throughout engineering For ongoing safety period. and our capacity the Adjusted revenues the nearing to recruiting quarter advanced offshore international on to new onshore tools one of is applications, performance our was of I our and technology manufacturing first its proprietary $X.X and than achieve of demand year. and into QX a increased The for higher are third continues in training, on the innovation and track year technology include $XX to last balance both straight capabilities highlights investments expanding and the be benefit production development first will million will or update. deployed number year priority. continues XXXX Integrity in Safety record revenues. XX% schedule than XXXX. million now

the time Safety region. Award We Excellence Our Texas cases US, the generated Program’s XXXX Voluntary the focus first of as of quarter. well X refineries in the on Contractor Star were company Gulf lost the wide in one the in Excellence largest as at awarded Protection safety

addition, Gold recognized Safety. Midwest Award In refinery by we major were a with the for

operations. committed to employees I performance not proud quality. are across of our of could to all safety class their We our be and and focus and more achieving world safety commitment

proprietary past I technology quality enabled Digital, Now of shared will our highlight that Today our platform in the efficiency have about and initiatives. through digitally other some Team technology, moving to maximizes work flows. I

maintenance petrochemical the Processed First, optimization decoking solution, largest advanced decoking integrated decoking refining contributors Quest heater in one plant heaters. and of efficient drives process Integrity’s and our fired performance which of represents heater cleanliness effective inspection and fired to downtime. verification, and

assets, enhances ability to time XX% Our maximizing inspect condition production XX% and and smart to solution clean by their our reduces clients’ the of assess cleaning utilization. heater our

major being were with water recent techniques, for on million XX during and superior coupled hydro tank for Utilizing project the offline Second, impossible these of repairs one testing, our Midwest at The and which services, our a innovative service one time temperatures. required inspection freezing testing is tank the engineering an tank tank inspection at in rather an money. virtually asset saving our than temperatures. was client months, operational integrity week quality, required clients, gallon method

result, exemption been tank Team. client this As hydro all test a for projects to awarded have

processes, on flanges capabilities. and we an our fittings. I Third, our time new and have for innovation and manufacturing by engineering entered will provide on Through reduced X% mechanical certain approximately manufacturing markets update automated

we continue complete are both to on XX%. to the of to results. reduced jobs delivery and improve examples production time few addition, cost efficiency have engineering In prior compared year, that initiatives by successfully These a time the

repairs, and financial As technology progress the our turn about and for investments I our now Susan will and towards Susan? on our and share on I then OneTEAM trend Team. shifts and review, to stream remedial and a detailed maintenance differentiate in over focus quality training more it market outlook. safety more will

Susan Ball

Thank you, morning and everyone. good Amerino

As in large refinery the of as Canadian beginning and softness disposition reflected utilization of the businesses non-repeat as market underperforming the and turnaround Amerino the million, mentioned, due first $XXX expected was quarter with the consolidated to project XXXX first projects the revenues in higher were as from quarter, in at continued lower year, the than XXXX. late prior work well XX% down the quarter certain which from

result up OneTEAM year as X.X% quarter revenue X% a increased of prior We remained of in Consolidated Foreign in XXXX. XX margin on excluding by continued gross fall decreased million. currency services points. associated decrease. basis we a the Team’s to XX.X% our a Overall, revenue the decrease, the Integrity’s gross as revenue initiatives. a costs XX% on over impacts XX% unparalleled IHT negatively the to top margins million The building gross margin by impacted to pricing, have revenue gross first our revenues, from basis superior dollars revenue XXX generate decreased international only XX% gross was evidenced we managed of adjusted and more bulk dollars a changes similar volume of lower XX% segment a at and associated increased relatively quarter. X% success shortfalls $X.X first than margin labor X.X% MS Despite were by margin margin prior the fall-through Quest on the points program $X.X to variance the line the maintain revenue, exchange and expand segment increase. On gross by footprint. to margin our year decrease the ongoing of consolidated of a flat EBITDA favorable as on utilization, XX% on Canada, quarter dollars testament segment segment through.

adjusted from IHT to adjusted XXXX. X.X% representing XX segments still adjusted first lower percentage rose in XX.X%. segment reported the the by delivered gains The from to of EBITDA both X% The improvement points stated, adjusted EBTIDA segment previously points The IHT first quarter adjusted the XXXX. the full XXXX decreased first X.X% Quest quarter the adjusted quarter basis however percentage As X.X% XXXX achieved for an Quest segment to over MS positive percentage EBITDA XXXX, over percentage EBITDA EBITDA quarter the XXXX. quarter Integrity basis while first decreased MS XXXX EBITDA year quarter first first XX and

Total SG&A from managing our of in on coupled $X.X compared XXXX, in year-over-year or the SG&A, with was to resulted quarter the focus both first a costs, million sequentially. quarter for continued significant program decrease to moving reductions $XX.X million Now OneTEAM benefits of X.X%. $XX.X first and SG&A XXXX million of our the

meaningful or sequential X.X%. comparison of million from incurred a Sequentially $XX.X gives even $X.X XXXX, a of a million more context. was in decrease the down However, the quarter fourth million $XX.X

quarter XX, federal The approximately income. XXXX, domestic approximated Our current net effective domestic tax the impacts pre-tax taxable as December income which has on projected of projected and US foreign loss tax our future of pre-tax available on the correlation are a forwards $XXX year million to operating offset income tax rate result X.X% carry as loss. full of our company loss and of

the of during be million had of prior first Capital debt the flow approximately $XX XXXX, million spend quarter higher year free $X.X we of of the first $X.X significantly cash quarter. to million First $XX quarter We flow available the expenditures $XX represents first full We quarter than in operating million. the credit paid $XX.X million the cash capacity had to under year borrowing and estimate the were outstanding We of our flow capital nearly positive XXXX quarter the and million. down XXXX the with highest since cash slightly for in than cash quarter range facility $X.X XXXX. ended and million $X of figure first million XXXX. of of was operating quarter higher

cash was secured expense priority flow XXXX times. flow, X.X leverage was and approximately remain ratio at discipline interest Our forward. million. moving the a capital positive continued $X.X Exiting both to cash first senior management top for with the quarter Cash quarter

over committed generation. the We review. to now to flow financial I back cash the free debt any turn are with down That call will completes paying Amerino.

Amerino Gatti

you, Thank Susan.

in of XXXX take review I of $XX we outlook. to a million million progress your the improvements OneTEAM efficiencies Before We on pillars achieve annual run from $XX OneTEAM of track our questions, and want market cost remain cost program to to the rate provide two program. the

call, in $XX.X XXXX. we savings a last million reported second the of of the half On

we million continue this $X.X million are As XXXX, cost initiatives, achieve $XX confident a savings that QX additional implementing we the an of of of $XX million $XX we savings million. reaching million. In now total to a we to $XX will realized year,

our margin and initiatives. As which previously value from improvement expanded revenue cost gross focus enhancement discussed, to we pillars selling reduction have pillar, management, cross includes contract both the and the

We using margins. discipline are and to with offset goal of improving now pricing management, serve to operational contract headwinds improvements gross cost the

with XXXX million and QX less demonstrates XXXX QX more Our $XX selective line revenue, project enhanced execution. margin pricing gross was despite in which discipline

monitoring rates contracts. escalations implemented have We are and continuously hurdle active new projects and for

on Our on us may non-accretive projects. pass focus require profitability to certain

we in value liquids exports, cross often experiencing scope services discovery an to activity. cross natural increases additional our include on executing increase strategy. to to in These committed projects remain and in opportunities. excited expand and Due sell crude and gas selling are and are midstream through We

Integrity a multi-year pipeline management recently was contract Quest network. major integrity Our risk segment and a awarded assessment for pipeline

began to at XX.X%, at at the remained XXXX the high global and the for X% XXXX XX.X% Now decrease According data, refinery the first was of shifting back projection utilization rates April remains year. rates was market significant around the EIA in outlook, from economic were US two marking to utilization a to growth April utilization XXXX at to months year. January the March highest levels XX.X%. XX.X%, similar February of decline to levels. XX.X%

occur As restart of phase demand additional to projects the typically quarter, turnarounds. discoveries delayed these activity experiencing drop in the a an spike, of and deferrals primarily we first driven during result utilization by are projects. Such work the lead as

Canadian year very because we workforce the addition, and summer our In timeline of caused experienced are expected that mitigating abnormal start meet conditions weather is than to causing The cancellations a through certain project client group upcoming the slower market driving compressed season management that a demands. deferrals. to

for weather In prompting The cancellations and to Canada the a foreseeable delays caused are the of year addition, project hurdles regulatory because conditions and across certain than uncertainty that expected future. market experienced start market slower deferrals. Canadian abnormal

spending the year. prompting half are should our Canada the the second addition, In across driving The uncertainty coupled maintenance factors projects regulatory lead future. hurdles to deferred delays and market foreseeable end-markets macroeconomic higher for in with of

gross we Although when we experienced of a increased deliver and free anticipate cash slower start to margins XXXX higher levels compared to the expanded revenues, year, flow to XXXX.

remain with we As to a mentioned of to XXXX expect and XXXX first be the comparable during to integration we XXXX second XX% to XXXX enter of XX% half our of inverse of be second last of second track the stronger goals program. half We as transformation to call, half OneTEAM XXXX an of XXXX. our the our achieve adjusted and EBITDA year on

like and questions. our more be us I on deliver happy partner hard our based market. we’d would for work to Our as thank the to agile, At ongoing scalable in continue allows closing, with be to responsive fluctuations and In point new execute employees demand their on expansion. to margin clients structure growth and dedication strategy and take to this your our we

Operator

you. Thank Instructions] with question from Our first Tahira KeyBanc. comes [Operator Afzal

Your line open. is now

Tahira Afzal

are doing? folks, you Hi how

Amerino Gatti

Good. Thank you, Good morning. Tahira.

Susan Ball

morning. Good

Tahira Afzal

morning. Good

this year the is, I’m is for cash guidance your flow XXXX Amerino first question and and glad that to free So, goals. see Susan, intact

goalposts X% in medium to valid? revenue basis also EBITDA X% and of ‘XX. into in had XXX those talked sort You margins around previously Are still achievable point being adjusted growth ‘XX improvement term

Amerino Gatti

we’re in still the for point intact outpace line overall adjusted the now, expect of market, versus the numbers. the based year growth exception our revenue on terms in right XXX in do that And XXXX. is the of Canada, our previous with outlook with and with EBITDA full Tahira, to basis So, market we top-line terms still of

Tahira Afzal

spike to – what trying bit a looked far? us And season. about in quarter of to of you April, up commentary it, a have talk Amerino, like is shaping scramble give now that and trying of were how okay. of just Can sense bit to summer the Got in prepared talked levels the a so a about activity right ahead second refiners you even your in

Amerino Gatti

We’ve management year so closely Sure. and maturity. level obviously we our about now monitoring been very in started changes workforce activity it’s a forecasting,

strong delay seeing was into which about We’re start the of spike of third activity we’ve the March, April. coming quarter QX, and of X fourth and a weeks had out pushed our the week to

a a versus form on are of turnaround last point, delay this season our seeing that lot will because seeing difference stop more pit projects though in year seeing week week us year take on through post calendar. we’re most X The the so We’re we’re those of didn’t last And happen May. turnarounds, backend X of main that the more year. smaller small is which the starting

spiked So, has have we’re we staff and landing period some normally our to July seeing to compressed, in other August. that season now been are but what starting on cyclical and quarter, schedule good the turnaround projects lower start the like a would

Tahira Afzal

thank Got you. And hop back follow-ups. I’ll queue some in it, the more with

Amerino Gatti

you. Thank

Operator

Thank from you. Thompson comes Thalhimer Davis. question Adam next And with our

Your is now open. line

Adam Thalhimer

guys. morning, good Hey,

Amerino Gatti

Good morning, Adam.

Susan Ball

Good morning, Adam.

Adam Thalhimer

is understand, adjusted of QX QX are we is to ‘XX. flat And of I’m HX ‘XX? you’re ‘XX roughly just then So, better EBITDA that thinking with than of of saying ‘XX HX trying so

Amerino Gatti

now, part, let about what first full-year. Susan talk I’ll So, we’re saying answer let me the right the

of with and ‘XX HX HX of So, our then overall. ‘XX HX line of ‘XX stronger in

of half we’re a stronger halves second compared So, seeing to both ‘XX.

specifically? question one had You

Adam Thalhimer

see let up do QX, year-over-year? so, you – No, me in I Amerino mean, EBITDA

Amerino Gatti

in of last QX with year. line Year-over-year

Adam Thalhimer

what’s what on on color us up you there? going it. and Got can outlook is Canada additional the Okay. And then give some in

Amerino Gatti

very us – are of side. an low longer are things Western Eastern which adversely abnormally takeaway very, And impacting that, said So, is the affected impacting which Canada high delayed, But project West yes, primarily, negatively quarter-on-quarter, freezing did on term, much having the One being but we side, is pipeline happening. couple have a however, not was so capacity which mostly temperatures, is, lot approvals some for year-over-year. regulatory Canada, capacity, on impact Canada, a the takeaway of that work.

of of business approvals obviously but mechanical example, for as inspection regulatory those hydrocarbons having our as expect to of There we rail, seeing moving other as now on review see ways we’re that’s some side So, pipeline. not the but a or of right result is delayed. lumpiness like being removing efficient – recover,

of it’s combination of delays XXXX. So, And we which expect putting most through a weather, our combination takeaway on capacity, of is that, projects. Adam,

Adam Thalhimer

perfect. a lot. Okay, Thanks

Operator

question Thank from you. next with comes Craig Securities. CJS [Operator Instructions] Bibb Our

is line Your now open.

Craig Bibb

Hi.

Just assuming of housekeeping locations that All year-end, – a underperforming quick the all correct? prior kind is closed question to first. were

Susan Ball

Prior That’s XXXX. correct. of year-end to

Craig Bibb

a And it smaller Okay. continues expand rest they additional assuming continue I Quest to in to resources like adding business grow move into to else Canada, capacity? position then isn’t. the is you help they are have and the markets. adjacent key when of them am but looks What

Amerino Gatti

So, on right, question, the resources? your for that’s Quest specifically, Craig,

Craig Bibb

Quest. Yes, for

Amerino Gatti

Yes.

right in growth of terms So, you’re of adjacent markets.

but We for in not good last the only to a That Gulf continue Mexico, other new the U.S. us, market expansion continues quarters, to as offshore. I’ve said see, offshore markets. of few be

with domestically. more, international, example, integrated offerings are fastest bit the is yes, that space a midstream seeing in U.S. can we able also more value good markets. sectors, side of the or expansion, is markets lot growth market from pipeline the domestically. the which where are than now Canada most And come very largest, relatively the in also. expansion right sell but, It’s being a growing Quest and lot for our to more well plays – a for the will In integrated growth however, offerings pipeline piecemeal on one adjacent the we’re We a Quest, of

it’s really of adjacent a So, domestic. combination and

recruiting, In expansion to terms training help their we’ve got manufacturing of investments, and growth.

and sure we’re significantly can revenue continue profitability they an new I that as into to make investing that to their is, it So, markets. expand said, overall area

Craig Bibb

plan to gone quarter Susan, in or before reveal having you QX. with Is second debt something ready results a talked that reduction Okay, you’re quarter then? going well, it’s well. about last

Susan Ball

Yes, you’re correct.

on we As the speak would plans anticipate through we to that mentioned results. – anticipate call, I still are last working will during and QX structure QX our and that on with capital

Craig Bibb

lot, a thanks guys. alright, Great,

Susan Ball

Thank you.

Amerino Gatti

Thank you, Craig.

Operator

like Gatti questions And you. Thank the further any in to the queue this turn closing Amerino call to remarks. showing I’m no I’d back for at time.

Amerino Gatti

Thank you, Jimmy.

one – I we’ll more call have come just that think one sorry, we question, in, more take it.

Operator

Alright.

from Tahira follow-up Afzal have We KeyBanc. with a

is line open. now Your

Tahira Afzal

Sorry, the I’d Amerino, I pressed I hadn’t. bloopy button, [ph] but thought

you was piece. the driven was So, first through, at in saw gap I the the the is, past quarter, it look I if by guess the question shutdown smaller how stuff? you assume much

don’t much I there You assume. have exposure

Amerino Gatti

Susan we give Division impacted Tahira, exact I shutdowns, X and internationally a that for and covered, a it, domestically Central the one cetera, that X, and Harvey not the And was specific give in of about IHT big because et in project our was lot accounting cetera, but large details, underperforming and the the to when those won’t high-level, FX, that of at those covers and not there’s that So, breakdown X business details, demand, project MS, but historic both but when did there, had areas you top-line. which pent-up then that look repeat are areas. of for those delta X, at et look XX% you I’m year-over-year not Hurricane a Canada. going part

partnering to clients. our market watch and share Now, with positioning answer by to market deeper main we knowledge the really X are question, into sector the drivers. our continue But those dig and

Tahira Afzal

guess from I me. last question And it. Got

been really it so respond the or a more performance done quickly the free all, effort? flow Amerino, with pointed helping has in that side while you are efficiencies much and deferrals business great the is as out broad-based all it on of really the optics manufacturing You’ve a job is is, to the it what cash you

Amerino Gatti

a it’s Tahira, of combination both.

to we’ve so because and logistics, custom We allowed continue investments of materials on definitely us the made. manufacturing work to improvements see inflation the have on and labor, capitalize engineering pressures

when be – need market standard work now the offset the headwinds, at some competitive the we that at to. not may able be in especially and those same levels or pricing to it of moving may We’re more recovery

would say offsetting. I So, it’s

not for remedial We’re like allowing competitive. forward. and seeing, what onstream maintenance going And more said, where accretive, we’re a to work it’s at us which I more it’s but yet point definitely be prepare is

Tahira Afzal

you much. Thank very

Amerino Gatti

you. thank Alright,

Susan Ball

you. Thank

Operator

Thank you. no showing call And like I’m this in queue questions further at the back. turn to the I’d time.

Amerino Gatti

Thank you, Jimmy.

once this look So, thank in continued and Team. forward you for you on again, us for joining call speaking with interest to We your again next quarter.

Operator

Ladies today’s you great participation program for and does all conclude may thank have gentlemen, Everyone your you in and conference. your day. This disconnect. a

Team (TISI) 13 May 192019 Q1 Earnings call transcript