Team Reports 8.5 Percent Q2 Revenue Rise

Team (TISI 18.46%), a provider of inspection, mechanical, and heat-treating services to industrial sectors, reported results for Q2 2025 on August 12, 2025. The earnings report highlighted 8.5% year-over-year growth in GAAP revenue and notable gains in operating metrics, particularly in the Inspection and Heat Treating segment. The quarter did not include published analyst estimates for direct comparison. Adjusted EBITDA improved by 12.4%, and cost optimization measures supported operating margin expansion. Despite operational progress, the company’s net loss (GAAP) widened compared to the prior year, and Free cash flow (non-GAAP) remained negative. Overall, the quarter showed Team advancing on its transformation initiatives, with strong performance in key segments but continued challenges from GAAP net losses and increased debt levels.

Business Overview and Strategy

Team is an industrial services company delivering a range of inspection, heat-treating, and mechanical services to ensure asset integrity for customers in energy, manufacturing, and other critical industries. Its main offerings include non-destructive testing, which detects flaws in materials or structures, mechanical services such as repairs, and specialized heat-treating processes that alter material properties for durability and performance. The company operates in 13 countries and serves a broad customer base, with no single client accounting for more than 10 % of revenue.

In recent years, Team has focused on transformation efforts aimed at operational efficiency, margin improvement, and diversification of both services and industries served. A key success factor is its ability to provide integrated solutions, combining inspection, engineering, and repair in a single package. Regulatory compliance and the technical expertise of its workforce are also central to its competitive position, allowing it to navigate complex industry requirements and deliver reliable services to customers across sectors.

Quarterly Performance and Segment Results

Inspection and Heat Treating (IHT) was the leading segment in Q2 2025. Segment revenue increased by 15.2%, or $17.2 million, reaching $130.4 million. U.S. IHT revenue rose by 13.4%, reflecting higher demand in turnaround and callout services. Canadian operations posted a 31.4% year-over-year gain in revenue. Operating income in IHT grew by 26.7% to $15.8 million, and Adjusted EBITDA for the Inspection and Heat Treating segment increased by 25% to $19.5 million. These gains reflect stronger activity levels with existing accounts and a shift toward services like laboratory testing and advanced non-destructive evaluation (NDE), which offer higher margins.

The Mechanical Services (MS) segment showed modest top-line growth in Q2 2025. Revenue increased 1.9% year over year to $117.6 million (GAAP). U.S. operations drove this gain with a 6.6% revenue rise, offset by a $2.3 million drop in international markets (GAAP). Operating income for the Mechanical Services segment fell 4.7% to $10.1 million, as international weakness offset U.S. improvements. Adjusted EBITDA for MS slipped 2.4% compared to last year, reflecting competitive and project delays outside the U.S.

Company-wide, adjusted selling, general, and administrative expenses (SG&A) were 18.9% of revenue, down from 19.8% in Q2 2024 despite a slight increase in total dollars spent. The company reported making progress on its cost optimization program, with actions taken during the quarter projected to yield $10 million in annualized savings and $6 million in benefits expected during the second half of 2025. This emphasis on discipline contributed to an adjusted EBITDA margin rise to 9.9% (non-GAAP), up 0.4 percentage points from the prior year.

Cash flow remains an area requiring attention. Free cash flow (non-GAAP) was negative again, though improved compared to Q2 2024. Net cash used in operating activities (GAAP) narrowed to $(3.3) million from $(6.4) million in Q2 2024, while Capital expenditures were $2.9 million. The company’s liquidity stood at $49.3 million, with $16.6 million in unrestricted cash and $32.7 million of available credit as of June 30, 2025. However, Total debt climbed to $370.2 million as of June 30, 2025, following a refinancing in March 2025, pushing shareholders’ equity (GAAP) was a deficit of $(22.9) million as of June 30, 2025. These figures highlight ongoing pressure from interest expense and working capital needs.

Service Offerings and Key Elements

Team’s core services include conventional, specialized, and proprietary inspection, heat-treating, and mechanical repair. The Inspection and Heat Treating group focuses on non-destructive testing—methods that reveal flaws in pipes, pressure vessels, or infrastructure, without damaging the assets—plus heat-treating processes that strengthen materials. Mechanical Services covers planned and emergency repairs, as well as maintenance for complex industrial assets.

The company reports no customer concentration risk, with diversified revenue streams across its client base. Advanced NDE and laboratory testing—part of the IHT product set—were highlighted as drivers of higher activity. Management reiterated the company’s continuing focus on compliance, safety, and operational discipline as it seeks to improve efficiency and meet regulatory requirements. No dividend was paid or announced this quarter.

Looking Ahead and Management Outlook

Leadership stated it expects strong activity to continue into Q3 2025, with further revenue and adjusted EBITDA (non-GAAP) growth anticipated in both segments for the second half of 2025. Management reaffirmed its goal of at least 15% year-over-year growth in adjusted EBITDA (non-GAAP) for the full year 2025 and maintains its focus on cost savings, operational execution, and improving profitability, especially in Canadian and international operations.

While management’s commentary outlined targets for top-line and margin improvement for Q1 2025, but did not provide specific guidance for revenue or earnings per share. The company is closely monitoring tariffs and supply chain developments, citing these as areas of potential cost pressure.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.