TISI - Earnings call transcript Q2 2019

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Operator

Good day ladies and gentlemen and welcome to the Team, Inc., second quarter 2019 earnings conference call. [Operator instructions] As a reminder, today's conference may be recorded.

I'd now like to introduce your host for today's conference, Mr. Don Bleasdell, Vice President of Finance. Sir, please go ahead.

Don Bleasdell

Liz. you, Thank Team’s to fiscal XXXX year Welcome second call. conference everyone quarter Amerino today's Chief company's Ball. on me Gatti, Financial call Susan our With and are the Officer; Chief Officer, Executive through webcast section Relations our website can being the of also teaminc.com. is link under call be This accessed the at audio Investor and

replay only date this be and or sensitive August information of listening teaminc.com. no of longer X, of that XXXX. will recorded on replay going available website, as advised the time Information Therefore, to as it via any the of accurate any call speaks There company's a reading. today, please be be transcript by will may webcast be call, today's

access telephonic addition, provided replay release. yesterday's was will a press how in XX. In to replay these until features available August be Information on

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

on involve revise or inherent may and Commission. risks update of The Exchange statements, forward-looking caution number These the Report any company's no or Securities the a to actual required contained other forward-looking Form other statements could and publicly and be in Annual uncertainties those XX-K and law. except filed company company's with documents in and risks described and detail by uncertainties furnished reports any obligation factors in as assumes cause from that to factors investors results statements. we in are differ and materially Forward-looking the

an Amerino outlook. results, before will our progress will providing we by take market on update begin Susan our questions, our and and then highlight OneTEAM your detail will business. Amerino

I'd now call like turn to over the Amerino? Amerino. to

Amerino Gatti

morning appreciate we today. good joining Don you you us and Thank everyone;

innovation and strong continued transformation quarter of ongoing improved technology, sustained success pleased flow integration recovery, the are leveraging to slower the despite workforce pricing execution, project management, optimized program. Team's margins results: the driving OneTEAM and top-line highlights Strategic discipline, share cash second and We following selection improvement enhanced and

Consolidated or XX% approximately impacted and but ago. activity market, softness operations X.X% was in second $XX or from $XX quarter were projects. current up The down exiting year the by certain a of negatively million revenues million quarter some $XXX sequentially, continued million non-recurring Canadian underperforming

the pleased margin, are We improvements SG&A adjusted flow. with cash gross very and EBITDA, in free

quarter XX% previously adjusted in up provides XXX adjusted representing Second The gross revenues, $XX.X to was level QX of basis lower XXXX XX.X% the million $XX.X margin EBITDA since year-over-year margin stated was adjusted margin, EBITDA target XX% EBITDA XX.X% our our points sequentially. million, quarterly for support million XXXX. $XX.X Despite margin or highest and further XXXX.

strongest year, plans. the quarterly integrity percentage driven over implementation XXX margin of was margin basis XXXX. mechanical operational by points improved margin last in of representing execution Gross Gross gross further and and businesses, initiatives ongoing and improvement segments, quest these strategic strong by our since pricing led XX% services

and we costs. labor successfully other In addition, associated utilization managed

year lowest OneTEAM the implementation successful reflects $XXX,XXX the $XX.X our SG&A since million from XXXX. million plan of SG&A quarter Second was within cost-savings or further program. the period year-over-year of The XX.X% prior SG&A in $XX.X our decreased reduction sequentially. and transformation

we facility. credit Typical borrower on of quarter, our net the a second were

the million, first improvement of an million The approximately half flow XXXX. free cash $X.X first over of half $XX was negative

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

and segment inspection heat The review. segment treating and million. revenues $XXX high-level a of reported EBITDA of provide million adjusted I'll Now $XX.X

year. underperforming year-over-year declines divisions. West softness businesses end XXX%, IHT respectively. ongoing some to improvements last sequential primarily and has year-over-year, Canadian in pressures Gulf More attribute We market of revenue the IHT's in Coast margin shuttered X% the lower and regional also recently, were performance While the and the both to that experienced competitive and were achieved

delivered second of and XX.X% services revenues mechanical The or quarter $XXX of XXXX segment margin. million $XX.X adjusted million EBITDA

than The represents year, the were MS adjusted increased prior adjusted slightly adjusted XXXX. by EBITDA quarter XX%. EBITDA second While highest since EBITDA lower revenues quarterly

Our hot contributed creating growth improved tap Previous performance. fittings the line investments times. manufacturing strong second quality service advantages quarter stop tap delivery are in and through reduced driving technology our hot and to and and line competitive

XX% to integrity the second record year. segment second Adjusted period. last $XX EBITDA higher was increase of than achieved a XXXX the quarter $XX.X compared The quarter quest year revenues prior or XX% million, in when million

experiencing penetration for markets expanded are proprietary markets and Quest high-resolution INVISTA inspections. margin ultrasonic growth despite related further growth increased announced to previously recruiting, both and enabling applications of a new existing strategic the in into training investments tools. We demand into technology

I highlights will core safety one our number performance, value. technology Safety now is other provide on our and updates.

TRIR Our could companywide recordable class and focus reduced safety quarter. remain committed cases their injuries. our improving and more be achieving focus than on and not more improved lost We our year-over-year of on second world by performance across for I generated operations. employees to safety zero proud quality. in time XX% safety We the our

hot our solutions the Moving tapping both on with market demand XXXX. our capacity and along for through Canada. of management stop on support and projects project applications; technology in integrated of continuing as services, for to line the we solid delivery a provides Growing innovation ongoing, the backlog responsible, and enhancement midstream transmission U.S. expanded our and pipeline revenue focus initiative, part midstream

XXXX. In an volume quoted projects addition, and seen requests have we of increasing for client being are

East for and is successfully includes decoking, Quest its process which revenue Quest solution, Middle Integrity cleaning America yet Latin plus inspection for clients another and assessment into and condition continues working region. the growth on in smart expanded record year. each track markets, its rapid several

service, heater our for clients. heater only are fitness domain the and assessment. the performance and and ultrasonic specialized in critical optimization solution fully life high-resolution of to Quest This with all industry condition process company inspection asset which comprehensive asset remains combined decoking, enables integrated critical extension,

And our proprietary our that Digital, workflows provide efficiency and platform through maximizes enabled quality digitally clients. lastly, value continues to Team for

repeat our during we digital services are mobile fall implemented number quarter, our During highest clients digital expecting the for several the turnaround projects season. of and

XXXX So far more year. turnarounds compared the last have completed period we to XX% digital same in

over for now turn and progress financial our a and it more OneTEAM will to review, Susan? detailed will Susan I I then about share outlook.

Susan Ball

Thank everyone. you, and morning good Amerino,

second of Second over quarter $XX.X net quarter a increase income was million $X.X million, XXXX. the

was second underperforming approximately of operations Second the down over $XXX revenues million, XXXX. quarter shut million were to XXXX which course of from $X.X down quarter consolidated due X.X% were that

better The when compared soft currency XXXX that for experienced Canadian negatively half Additionally, remained company. revenues and results impacted exchange sequentially revenue $X.X foreign by to overall over to year-over-year contributed the decline million. market the

higher year. first margins XX%, Quarterly significantly as quarter than revenues XXXX of Consolidated second in of refining despite $XXX when decrease. rates of top-line improved off backed earlier the million XX.X% million up of to XX% quarter an revenues the gross points were experienced $XX the the utilization basis to XXX the or XXXX increase highs compared

improvements. rigor attributable fall-through since of highest program, favorable OneTEAM generated planning and utilization We process the the primarily and the includes workforce margins which our the focus to of and continued quarterly XXXX, success ongoing gross both

changes revenue gross decreased IHT as in of MS on margin IHT volume as fall-through. increased The for Integrity gross revenue margin XX% the decrease. softness XX% the a an a decrease. impacts revenue margin margin bulk increased well and X% Quest ongoing XX% of Canadian the XX% result X% gross increase. on on associated market,

X.X% as Consolidated EBITDA second adjusted EBITDA percentage a of quarter Adjusted increased basis the XXXX in quarter of revenue $XX.X the from X.X% quarter of of second points XXX XXXX. XXXX. XX.X% the million second from in was to up of

Now however million, increase the down performance. The XXXX XX% same turning X% to sequentially, last and our reported heat quarter treating when compared segment second of revenues period of year. inspection $XXX an segment to

in however quarter EBITDA $XX increase Second the of from sequentially, XXX% XXXX. million, second $XX.X of an adjusted down quarter million was

mechanical second an and $XXX of XXXX EBITDA of Adjusted or million the than the quarter second same margin, year. but was XX% million, sequentially, $XX.X increase The an quarter XX.X% when segment in XXXX. increase XX% lower delivered to of sequentially an XXX% $XXX increase revenues of last million slightly period compared services of

since the or million XX% XX% achieved when revenues adjusted year year. segment a adjusted increase Adjusted quarter The the $XX.X EBITDA integrity quest MS million, The EBITDA EBITDA second higher $XX last of to XXXX second prior was represents compared quarter XXXX. record quarter highest in than quarterly second the period.

SG&A Moving as million OneTEAM decrease in $XX.X SG&A as of now second to our spend second compared million program. of the to quarter XX.X%. $XX.X our improve for through SG&A, to continue of $XX.X XXXX, a XXXX or million actions, we Total the management quarter cost implementation was the well

the on focus since in incurred of second was SG&A spend our quarter from quarterly quarter million ongoing managing improving to down million $XX.X XXXX. SG&A the lowest costs spend Sequentially, XXXX was the rigorously, Due first and $XX.X XXXX.

the XXXX, of $XXX ended our available The company operating carry months effective taxable to loss has million tax forwards Our net federal June of which rate for offset are income as six XX, approximately XX, approximated tax XXXX, December future domestic income. X.X%.

XXXX. period month the same of slightly million months million in first XX, XXXX. million an first over half improvement $XX.X were Capital than $XX.X June Team six operating the of XXXX, the $X.X in of million ending the For six cash higher in representing the generated flow, expenditures of $XX.X half

the representing first a negative $XX free of XXXX. half XXXX a half to million improvement First cash flow compared million, when was $X.X

are more cash and to our for track We free be $XX $XX also of to XXXX the our than for $XX guidance million to in range the full to remain on in million spend XXXX. capital reaffirm able from year flow doubling million

$XX borrowing the of XXXX second the million with approximating of have under liquidity credit cash ended and total We at million $XX available $XX.X June approximately facility with quarter of XXXX. million XX, capacity

labor second net As with increased of lag on due were in a collections increased revenues, to higher borrower capital requirements the sequential quarter. we cash working associated costs quarter the this time expected, generating

flow remain with generation. committed to down paying debt any cash free We

cost flows second secured our senior quarter, ratio the free capital working was cash for be and was million. with continued generating reductions $X.X achieving reduction. in X.XXx. continues Our XXXX the disciplined associated at second at additional management expectations expense of allocation, with interest and and Exiting control XX, the quarter cash receivable inventory returns, focus on year, to the approximately of and half leverage XXXX Cash being our June

We in an regarding on extending provide continue to we believe and want the facility July as well update our revenue. credit discussions as cost-savings to ability allows in responsibly do us will to facility on that with margin and I XXXX. an a realize improvement structure, us facility. extension our credit on are with senior the capital more to currently the provide obtain benefits execute long-term credit closing, continued to In We OneTEAM the reductions ultimately active continue flexible the the time overall gross program, further the as to cost-effective additional manage from that of matures demonstrate

over That turn completes now the I the review. back financial to Amerino. call will

Amerino Gatti

Thank you, Susan.

to Before your the we of questions, provide program want take outlook. and review our I market a progress OneTEAM

integration cost of XXXX. The year, expect this to of the full savings achieve are track to OneTEAM $XX by million We second and the annual of generated $XX deliver million pillars efficiencies run half and million $XX.X in $XX our on to of of $XX transformation program first million year. the two million the year cost we to targeted in remain end for and rate the

Our leverage, de-emphasize pillar and contracts, has enabled us to realize revenue improvement. sustained operating focus deliver lower-value the enhancement margin on

of by an despite advisors us projects both have expanded by to improvements. America program, higher margins allowing overall lift in-house. revenue and expertise North gross OneTEAM quarter, the reduce from productivity driven efficiencies shift our a to expenditures decline, value internalized and we Simultaneously, second the and the third-party some mix the bringing for In

growth to approximately due to economies. the business a uncertainty the political Now shifting decline a associated in economic XXXX. global The across projection This reduction financial and earlier latest in from general conditions market and many for confidence, X% the forecasts outlook. is higher is of tightening policy year trade

demand average had to services remained compared levels but the stronger at January July data, term. to late the U.S. an of our year. month off utilization near return at for The EIA refinery translate were to a medium soared backed July. in rate QX of slightly through the XXXX to February high XX% but in XXXX. XX% prior utilization XX%, than in lower lower utilization A According will in

prepare integration and higher additional term Team, due of and of for In pressures have strategic benefit long to to tear. logistics driving some will the capitalizing and continue. materials we in our have order to environment services the nature such on-stream, made work. the also inspection, end enabled labor, corrosive offset the mechanical headwinds, to wear markets more Over repair Team inflationary maintenance competitive. heat factors be macroeconomic on operating to and manufacturing Meanwhile, treating of engineering operations these shifting utilizations trends, and as our investments and asset market more begin remedial on The

the tools increased from to On fully deployed, result than have market continues turnaround workforce depressed XXXX. utilization. significantly environment, activity year, Canadian hurdles IHT lower Canadian has by Canadian uncertainty profitability technician and been last increased activity led activity delays. labor and market The in due and front, lower are impacting management benefiting our economic we has in aggressive competitors. increased been to and project regulatory project segment. revenues turnaround we mainly to sequentially, the This anticipate Despite bidding this

of update will I our Before goals taking and objectives. questions, your some

expect with half an XXXX of to being the half XXXX. of be perspective, second XXXX First, to last from we the of revenue first year inverse comparable a

scheduling stops not of occurred. are in projects, smaller have several off-cycle that We form the mostly historically pit

recently due delayed and to refinery discovery increasing utilization Additionally, projects, high are rates activity. we experiencing

Second, given planned higher we improve activity performance from the aerospace segment its the in to sectors. midstream refining, the second expect and of half year, the IHT

deliver Third, generated finally, $XX margins to $XX basis And in XXXX, to of we XXX XXX in the year. the million EBITDA million XXXX prior than doubling flow expect adjusted year. more point generate improvement to expect cash last free we for over

ongoing our would focus support, particular clients, which hard our In is value of their closing, all and creating employees for shareholders for like safety, in work stakeholders. I for to thank on suppliers their and and essential Team's to

new allowing in be more fluctuations Our responsive agile, structure to is scalable, on market. based us demand and the

to your happy At this be point, will take questions. we

Operator

question Our Afzal first [Operator the Tahira from line instructions] comes with of KeyBanc.

Your open. now line is

Tahira Afzal

on Hi quarter. a good Amerino. Congrats

Amerino Gatti

Thank you, Tahira.

Tahira Afzal

something slightly and guess across love the for comments outlook improvement some that's clearly be know your macroclimate uncertainty Would it's industrial color if nudged seeing space, the on company with seem seems I environment a else to it EBITDA the Amerino, to level. you've to what the response margin perhaps. the I aligned get specific macro whether talked down about so in or we're is.

Amerino Gatti

projected to of be the X% down. seeing So XXX is Canada and still our adjusted year-over-year. to EBITDA points overall, X% basis not market to a We're exception We're XXX forecasting improvement the with our growth in the EBITDA be basis will that delivery that feel the improvement that the made terms target we Tahira. quarter reaching the of we end and through point of businesses, underperforming quarterly this year, in line of

Tahira Afzal

some and it it Amerino, see about as these how know sort Does sort Got margin it, outlook you to next XX% into year call? or XX% too EBITDA to your of developing. you that XXXX is of change uncertainties of for early

Amerino Gatti

are and to focused doing two we we we're the is, think I that on to control, on which pace what can million. are things $XX Number very cost Tahira. is two pillars, Well, million one $XX the very we deliver confident we're

there. not stopping are We

our into at as and looking G&A further operations XXXX consolidation going well as a and now transformation, international of also opportunities are We beyond. in terms

terms talked of the two that about, effort, clearly So focused those pillars. focus on Susan in we're the

of some On I'm in sectors and the generally there market to other so XX delay by work done revenue any XX% historically, shift to months, midstream, XX the side, – XX%, in sorry. we've terms downstream

business our we down have margins slowdown, seeing in we is delay there through a So and the bit opportunity little even facilities yet, age, generally grow the we're capture still and not would which the and cycle comes utilizations need. that of if growth that to a as the

now finish. we XX% right expect to of into terms strong to looking XXXX, us, for is So where XX% the in

support. a still a up We've one to expect Cincinnati even there at because end I to sectors of beyond least growth, opportunities gotten and two our continue focus is we've We've the base our got if a U.S. overall slowdown hubs: expand. in in good Europe, refining. cost We clients good to just two visiting in the some of revenue one delay, opportunities example. of X% that One was diversify a market is pillars. bit Aerospace We on X% do to in got other and

I there's cross-sell. well diversify So opportunity to line, that top think as also as

Tahira Afzal

Very Amerino! congrats helpful, again and

Amerino Gatti

Thank you.

Operator

of Thompson next with [Operator comes question Thalhimer line Davis. Our Adam instructions] from the

Your now line is open.

Adam Thalhimer

morning. good Hey, Congrats!

Amerino Gatti

Thank Good you, morning! Adam.

Adam Thalhimer

you about this to when of half of being the are half the back 'XX, talk you revenue similar talking Hey, or margins? year first about

Amerino Gatti

revenue. No,

of from So that because QX will out turnarounds, it's an activity an HX with at and rates this – our the stated year, Talk] utilization activity, project line XXXX, in our the revenue hours, year. QX model we're our high where last of in QX, be activity QX From as last standpoint our which plans, [Cross is standpoint, we of looking laying inverse quarter, QX of

it's margin. with margin So improved to point revenue XXX improvement a on XXX to basis the year-over-year reach

Adam Thalhimer

your in Okay, make just math sure I best but adds that that's half EBITDA up of to years, so consistent. want to

Susan Ball

when No, no, say increased right quarter a the looking Again, improvement. and and that improvement you that. had very the the and levels consistent. it's the again looking strong reduction, contracts in process third second I you're math quarter, on at would our and reductions no, management when continuing into our revenue activity with look overall you're cost workforce the again, ongoing at with is fourth cost, but we

Amerino Gatti

acquisition time year and Team. manufacturing and made to plus So to Adam, have frame, significantly The that's last when obviously half us contributed combined of 'XX a we over competitive. in helping went be we've back investments right? because engineering the we've Furmanite the more So

management when the table capabilities. that midstream A quarter. and our by in to revenue midstream of a project mechanical some the talked good all with market and not work, obviously type leverage exercise only clients management product us some about lot services, two it's line, growth, allowing in the bring by also improvements, also I to things want sector as we've but We've that our us pieces diversified more you between of which our of to and midstream are doing project those so lead had pricing stream

on-stream, remedial services, into of to to overall the And shift want market more with results that an repair we're improve in company. the to that's continue the to invest we mechanical that confident the macro area very

Adam Thalhimer

you that queue, I'll you of should and how are then the in QX? one in EBITDA versus in about And curious July then confidence and can in just in help think us What you seeing also, back terms August and outlook? hop what gives QX much Alright, more but back-half put revenue demand. we

Amerino Gatti

So in we're the terms activity between to year. turnaround season season, similar stated we're more second X% We're a X% be hours, forecasting terms to last the of of the we seeing now how right which activity, hours, half is HX. improvement as HX versus lot a first to half of expecting in turnaround

because One of refining on more of pit creating we're the seeing project utilizations small, basically have some high project work. as delays are discovery the the is mini of turnarounds now which more benefits I the right are and side, stops, stated

and So August high happens, rates. know but play because historically, we're terms August which we're you of the and that right in seeing July now, which September is strong out what a seeing of uncommon the of some happens utilization

we're it's HX last than a positive. a also furthermore, than will we year, their going think so international half to seeing expect this And Canada, going I to HX, be And second be lumpy stronger stronger did for year. of on front not the it's the that's rest we year the do – although

mentioned I'm revenue HX percentages side of I 'XX. 'XX So overall, you. in between – Thank HX then in the with activity just line those sorry, of up and that

Adam Thalhimer

Okay, I Thanks guys. you. got

Operator

to queue closing back I'm Gatti at to call no for showing Mr. in questions time. like the remark. I'd this turn further

Amerino Gatti

think have I more we one question.

Operator

Afzal from follow-up a is KeyBanc; now open. have do with your We line Tahira

Tahira Afzal

I a you quest the for lot Amerino, know talking are being Thanks of within same guess squeezing profile the about you when me in. that? revenues what's

Amerino Gatti

grow in year. second half the quest the So continue of to will

in year-over-year to We growth. be to XX% quest range expect the of XX%

Tahira Afzal

great. Okay,

talking are half the for similar year, about first you so when last other So the segments? more being to it's

Amerino Gatti

correct. That's

Tahira Afzal

and than me I'm you've generating of terms then cash myself? really next a my And has but shown know you flow place, on $XX great integrated you your all Susan, you year. this I correct luck, great. side like Amerino, in are settle had million in? little And efforts guess I could if year know in pushing doing know you potentially when you’re getting success okay talking Okay, am ahead once model about cost sales in What the you time are free more of these to look put

Susan Ball

I to more in reductions, cost as the mean, – we with future the flow. $XX in could forecasting we looking up future $XX into you cash look and are see million free XXXX another again million with

Tahira Afzal

you Thank great. Okay, impressive! folks. Very very much

Amerino Gatti

you much. Thank very

Operator

I'm And showing… Talk] [Cross

Amerino Gatti

want go to I So just – ahead.

Operator

any I'm saying, further showing questions. not I'm just

Amerino Gatti

Okay, thank you Liz.

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

Operator

Ladies disconnect. and and today’s a now in gentlemen, may thank you conference. for you day! your program the concludes great Everyone, This participation have

Team (TISI) 11 Aug 192019 Q2 Earnings call transcript