Team, Inc. (NYSE: TISI) (“TEAM” or the “Company”),
a global, leading provider of specialty industrial services
offering clients access to a full suite of conventional,
specialized, and proprietary mechanical, heat-treating, and
inspection services, today reported its financial results for the
fourth quarter and full year ended December 31, 2022.
Fourth Quarter 2022
Highlights1:
- Increased fourth quarter 2022
revenues to $211.3 million, up $8 million over the 2021 fourth
quarter.
- Improved fourth quarter 2022 gross
margin by 270 basis points to 24.8% of revenue, up from 22.1% in
the 2021 fourth quarter.
- Reported fourth quarter 2022 net
loss from continuing operations of $56.9 million.
- Improved consolidated Adjusted
EBITDA to $6.7 million, up $8.3 million from the fourth
quarter of 20212.
- Reduced ongoing selling, general
and administrative expense by $3.6 million over the 2021 period, or
roughly $14 million on an annualized basis.
- As previously announced, on
November 1, 2022, completed the sale of the Company’s Quest
Integrity business to Baker Hughes for net proceeds of $279
million, reducing net debt (total debt less cash and cash
equivalents) to $227.9 million.
Full Year 2022
Highlights1:
- Grew full-year 2022 revenues by
5.8% to $840.2 million.
- Raised full year gross margin by
160 basis points to $201.6 million (24.0% of revenue) versus $177.7
million (22.4% of revenue) in 2021.
- Reported full year 2022 net loss
from continuing operations of $150.1 million compared to a net
loss of $184.8 million in 2021.
- Improved full year 2022
consolidated Adjusted EBITDA to $16.7 million, up $23 million
compared to 2021, and up $29.7 million after adjusting for COVID-19
related subsidies2.
- Significantly improved liquidity to
$103.5 million at December 31, 2022.
- Significantly delevered by reducing
net debt (total debt less cash and cash equivalents) to $227.9
million at December 31, 2022, versus $350.7 million at December 31,
2021.
1. Unless otherwise specified, the financial
information and discussion in this earnings release is based on the
Company’s continuing operations (IHT and MS segments) and excludes
results of its discontinued operations (Quest Integrity).
2. See the accompanying reconciliation of
non-GAAP measures at the end of this press release.
“Our fourth quarter results demonstrate the
growing impact of actions taken during 2022 to lower our cost
structure and streamline operations while capitalizing on revenue
growth opportunities. Our fourth quarter revenue grew 4% and our
gross margin increased nearly 17%, leading to significantly
improved Adjusted EBITDA and we achieved these gains despite
ongoing inflationary pressures in our supply chain and challenging
labor costs and availability,” said Keith D. Tucker, TEAM’s Chief
Executive Officer. “For the full year of 2022, our consolidated
Adjusted EBITDA benefited from revenue growth of nearly 6% over the
prior year and the impact of margin improvements and cost actions
that accelerated in the fourth quarter of 2022. Heading into 2023,
we expect to expand on this fourth quarter operational and
financial momentum as we target continued improvement in Adjusted
EBITDA margins over time.”
Mr. Tucker went on to note the Company’s recent
turnaround progress, “The past year was a year of substantial
progress for TEAM that included several noteworthy operational and
strategic achievements. We made measurable progress streamlining
our cost structure and empowering the field while delivering very
strong safety performance. In addition to paying down a substantial
portion of our term loan and expanding liquidity in the fourth
quarter, the Company also commissioned its state-of-the-art
aerospace inspection facility in Cincinnati, Ohio. This new
facility positions us to capitalize on this fast growing,
differentiated end market with an attractive margin profile. I am
grateful for the hard work and dedication of our employees during
this transformational year and their continued focus on our ongoing
turnaround.”
“Looking to 2023, we see opportunities for
further improvement in margins, Adjusted EBITDA and cash flow
driven by stronger activity levels, improvements in pricing and
additional gains in operating cost efficiency. We are excited about
the opportunities to expand and diversify our revenue base while
continuing to capitalize on our extensive technical capabilities
and strong market position in the provision of services critical to
the operational and environmental safety of our customers. Finally,
we plan to provide more detailed updates on our recent performance
and our longer-term commercial, operational, and balance sheet
improvement plans during the second quarter of 2023,” concluded
Tucker.
Financial Results
As noted above, on November 1, 2022, the Company
closed the sale of its Quest Integrity business. Financial
information, performance metrics and discussions for periods
presented are based on the Company’s continuing operations (IHT and
MS segments) and exclude results of discontinued operations (Quest
Integrity) except where stated otherwise.
Fourth quarter revenues were up $8.1 million to
$211.3 million as compared to $203.2 million in the prior-year
period, primarily due to higher activity levels in our leak repair,
hot tapping and valve businesses. Unfavorable foreign exchange rate
movements in the 2022 fourth quarter reduced consolidated revenue
growth by $4.8 million. In the fourth quarter of 2022, consolidated
gross margin was $52.4 million, or 24.8% of revenue, up 270 basis
points from 22.1%, or $44.9 million, in the same quarter a year
ago. Gross margin was positively impacted by direct margin
improvement and lower indirect costs as a percent of revenue
attributable to the Company’s ongoing expense reduction program,
improved pricing, and favorable project mix.
Selling, general and administrative expenses for
the fourth quarter were $57.2 million, down $6.4 million, or 10.0%
from the fourth quarter of 2021, mainly due to savings from the
Company’s ongoing cost reduction efforts and lower professional and
legal fees. After adjusting for expenses not representative of
TEAM’s ongoing operations, net cost reductions of $3.6 million were
achieved which are expected to generate approximately $14 million
of annual savings.
Consolidated net loss from continuing operations
in the fourth quarter of 2022 was $56.9 million ($13.15 loss per
share) compared to a net loss of $37.9 million ($12.19 loss
per share) in the fourth quarter of 2021. Fourth quarter 2022
consolidated net loss included a pre-tax loss on debt
extinguishment of $30.1 million ($12.4 million of cash fees and
premium and $17.7 million of non-cash charges for the write-off of
associated deferred financing costs and debt discounts) related to
the use of proceeds from the Quest Integrity sale to paydown $225.0
million of debt in early November. The Company’s adjusted measure
of net income/loss, consolidated Adjusted EBIT, a non-GAAP measure,
was a loss of $2.0 million in the fourth quarter compared to a loss
of $12.5 million in the prior year’s comparable quarter.
Consolidated Adjusted EBITDA, a non-GAAP measure, was $6.7 million
for the fourth quarter of 2022 compared to a negative $1.6 million
for the prior-year quarter. (See the accompanying reconciliation of
non-GAAP measures at the end of this earnings release.)
For the full year 2022, consolidated revenues
were $840.2 million, up 5.8% compared to $794.2 million
in 2021. Unfavorable foreign exchange rate movements throughout
2022 negatively impacted revenue growth by approximately $15.0
million. Net loss from continuing operations was
$150.1 million, or $35.85 loss per share, compared to a net
loss of $184.8 million, or $59.67 loss per share, in 2021. The
2022 net loss includes the pre-tax loss on debt extinguishment of
$30.1 million discussed above, as well as additional non-cash
interest expense of $21.8 million attributable to accelerated
amortization of deferred financing costs and debt discounts. The
2021 net loss includes pre-tax, non-cash, goodwill impairment
charges of $55.8 million associated with the Company’s MS Segment.
Consolidated Adjusted EBITDA, a non-GAAP measure, was
$16.7 million for the full year 2022 compared to a negative
$6.3 million in 2021, with the improvement driven by higher
activity, improved pricing, more favorable job mix and improved
margins that benefited from the Company’s cost reduction efforts.
(See the accompanying reconciliation of non-GAAP measures at the
end of this earningsrelease.)
Adjusted net loss, consolidated Adjusted EBIT
and consolidated Adjusted EBITDA are non-GAAP financial measures
that exclude certain items that are not indicative of TEAM’s core
operating activities. A reconciliation of these non-GAAP financial
measures to the most comparable GAAP financial measures is at the
end of this release.
Segment Results
The following table illustrates the composition
of the Company’s revenue and operating income (loss) by segment for
the quarters ended December 31, 2022 and 2021 (in thousands):
TEAM, INC. AND SUBSIDIARIES |
SEGMENT INFORMATION |
(unaudited, in thousands) |
|
|
|
|
|
|
|
Three Months EndedDecember
31, |
|
Better (Worse) |
|
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Revenues |
|
|
|
|
|
|
|
|
IHT |
|
$ |
102,529 |
|
|
$ |
105,294 |
|
|
$ |
(2,765 |
) |
|
(2.6 |
)% |
MS |
|
|
108,762 |
|
|
|
97,860 |
|
|
|
10,902 |
|
|
11.1 |
% |
|
|
$ |
211,291 |
|
|
$ |
203,154 |
|
|
$ |
8,137 |
|
|
4.0 |
% |
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
|
|
|
|
|
|
IHT |
|
$ |
4,055 |
|
|
$ |
2,173 |
|
|
$ |
1,882 |
|
|
86.6 |
% |
MS |
|
|
5,778 |
|
|
|
3,071 |
|
|
|
2,707 |
|
|
88.1 |
% |
Corporate and shared support services |
|
|
(14,706 |
) |
|
|
(24,154 |
) |
|
|
9,448 |
|
|
39.1 |
% |
|
|
$ |
(4,873 |
) |
|
$ |
(18,910 |
) |
|
$ |
14,037 |
|
|
74.2 |
% |
Revenues. IHT’s revenue
decreased by $2.8 million, or 2.6%, during fourth quarter 2022 as
compared to prior year, with higher revenue in the U.S. offset by
lower activity in heat treating and nested activity in Canada. MS’s
revenue grew by $10.9 million or 11.1% due to higher activity in
the Company’s U.S. and Latin America operations related to leak
repair, hot tapping, and the Company’s domestic valves business,
partially offset by lower activity in the international market due
to non-repeating project work in the 2021 period.
Operating income (loss). IHT’s
fourth quarter 2022 operating income increased by $1.9 million to
$4.1 million due to a more favorable job mix as well as realized
cost reductions. The increase in MS operating income was
approximately $2.7 million, driven by higher revenue, lower
costs and improvements in several key operating districts.
Consolidated operating income improved by $14.0 million driven by
the factors discussed above as well as significant reductions in
Corporate and shared support service costs of $9.4 million.
TEAM, INC. AND SUBSIDIARIES |
SEGMENT INFORMATION |
(unaudited, in thousands) |
|
|
|
|
|
|
|
Twelve Months EndedDecember
31, |
|
Better (Worse) |
|
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Revenues |
|
|
|
|
|
|
|
|
IHT |
|
$ |
422,562 |
|
|
$ |
415,371 |
|
|
$ |
7,191 |
|
1.7 |
% |
MS |
|
|
417,646 |
|
|
|
378,826 |
|
|
|
38,820 |
|
10.2 |
% |
|
|
$ |
840,208 |
|
|
$ |
794,197 |
|
|
$ |
46,011 |
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
|
|
|
|
|
|
IHT |
|
$ |
17,093 |
|
|
$ |
12,997 |
|
|
$ |
4,096 |
|
31.5 |
% |
MS |
|
|
20,930 |
|
|
|
(47,728 |
) |
|
|
68,658 |
|
NM |
Corporate and shared support services |
|
|
(77,825 |
) |
|
|
(92,151 |
) |
|
|
14,326 |
|
15.5 |
% |
|
|
$ |
(39,802 |
) |
|
$ |
(126,882 |
) |
|
$ |
87,080 |
|
68.6 |
% |
/NM = Not meaningful
Revenues. IHT revenues
increased by $7.2 million, or 1.7%, to $422.6 million, primarily
due to higher turnaround and nested activity in the U.S. compared
to the prior year, partially offset by a decrease in revenue in
Canada. MS revenue increased by $38.8 million, or 10.2%, to $417.6
million, primarily due to higher activity in the Company’s U.S. and
Latin American operations related to leak repair, hot tapping
services, and the U.S. valve business, partially offset by
decreases in international revenue due to non-repeating project
work in the United Kingdom.
Operating income (loss). IHT
operating income increased by $4.1 million, or 31.5%, driven
primarily by higher activity and revenue in the U.S. and realized
cost reductions, partially offset by COVID-19 related government
subsidies received in 2021 which were not received in 2022. The
year over year improvement in MS segment operating income is
primarily due to a $55.9 million noncash goodwill impairment charge
recorded in 2021, plus improvements of $2.5 million in the Canada
business, $3.2 million increase in the valve business, and
efficiency gains realized in the equipment centers, manufacturing,
and engineering cost centers during 2022. This was partially offset
by the lack of COVID-19 related government subsidies in the current
year compared to prior-year. Consolidated operating income improved
by $87.1 million, driven by the factors noted above and $14.3
million in reduced Corporate and shared support costs due to the
Company’s ongoing expense reduction efforts.
Liquidity
At December 31, 2022, the Company had $103.5
million of total liquidity, consisting of consolidated cash and
cash equivalents of $51.1 million, (excluding $7.0 million of
restricted cash held primarily as collateral for letters of credit)
and $52.4 million in undrawn availability under its various credit
facilities.
At March 13, 2023, the Company had $67.0 million
of total liquidity, consisting of consolidated cash and cash
equivalents of $31.3 million (excluding $6.7 million held mainly as
collateral for outstanding letters of credit) and approximately
$35.7 million of undrawn availability under its various credit
facilities. The seasonality in the Company’s business activity
drove the expected reduction in total liquidity since year end
2022. The Company typically experiences negative working capital
and liquidity impacts in the run up to the higher activity
routinely experienced during the spring and fall turnaround
seasons, when these negative working capital trends have
historically reversed.
The Company’s net debt (total debt less cash and
cash equivalents) was $227.9 million at December 31, 2022, compared
to $350.7 million at December 31, 2021.
As part of its operational and financial
turnaround plan, the Company continues to evaluate options to
address its capital structure, including the August 2023 maturity
of its $41.2 million convertible notes that remain outstanding.
Form S-1 Filing
The Company plans to file a shelf registration
statement on Form S-1 related to transactions completed during
fiscal year 2022. The Form S-1 filing will amend the Company's
previous Form S-3 filing, is not related to any potential offering
of additional, new securities, and the Company is not aware of any
present intent of the holders to sell any securities.
Quarterly Earnings Call
The Company will not host an earnings call this
quarter due to its previously announced strategic review process
and the ongoing execution of its operational and financial
turnaround plan; however the Company plans to provide more detailed
updates on its recent performance and progress during the second
quarter of 2023.
Non-GAAP Financial Measures
The non-GAAP measures in this earnings release
are provided to enable investors, analysts and management to
evaluate Team’s performance excluding the effects of certain items
that management believes impact the comparability of operating
results between reporting periods. These measures should be used in
addition to, and not in lieu of, results prepared in conformity
with generally accepted accounting principles (“GAAP”). A
reconciliation of each of the non-GAAP financial measures to the
most directly comparable historical GAAP financial measure is
contained in the accompanying schedule for each of the fiscal
periods indicated.
About Team, Inc.
Headquartered in Sugar Land, Texas, Team, Inc.
(NYSE: TISI) is a global, leading provider of specialty industrial
services offering clients access to a full suite of conventional,
specialized, and proprietary mechanical, heat-treating, and
inspection services. We deploy conventional to highly specialized
inspection, condition assessment, maintenance, and repair services
that result in greater safety, reliability, and operational
efficiency for our client’s most critical assets. Through locations
in more than 20 countries, we unite the delivery of technological
innovation with over a century of progressive, yet proven integrity
and reliability management expertise to fuel a better tomorrow. For
more information, please visit www.teaminc.com.
Certain forward-looking information contained
herein is being provided in accordance with the provisions of the
Private Securities Litigation Reform Act of 1995. We have made
reasonable efforts to ensure that the information, assumptions, and
beliefs upon which this forward-looking information is based are
current, reasonable, and complete. However, such forward-looking
statements involve estimates, assumptions, judgments, and
uncertainties. They include but are not limited to statements
regarding the Company’s financial prospects and the implementation
of cost saving measures. There are known and unknown factors that
could cause actual results or outcomes to differ materially from
those addressed in the forward-looking information. Although it is
not possible to identify all of these factors, they include, among
others, the duration and magnitude of accidents, extreme weather,
natural disasters, and pandemics (such as COVID-19) and related
economic effects, the Company’s liquidity and ability to obtain
additional financing, the Company’s ability to continue as a going
concern, the Company’s ability to execute on its cost management
actions, the impact of new or changes to existing governmental laws
and regulations and their application, including tariffs and
COVID-19 vaccination requirements; the outcome of tax examinations,
changes in tax laws, and other tax matters; foreign currency
exchange rate and interest rate fluctuations; the Company’s ability
to successfully divest assets on terms that are favorable to the
Company; our ability to repay, refinance or restructure our debt
and the debt of certain of our subsidiaries; anticipated or
expected purchases or sales of assets; the Company’s continued
listing on the New York Stock Exchange, and such known factors as
are detailed in the Company’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, each as filed
with the Securities and Exchange Commission, and in other reports
filed by the Company with the Securities and Exchange Commission
from time to time. Accordingly, there can be no assurance that the
forward-looking information contained herein, including statement
regarding the Company’s financial prospects and the implementation
of cost saving measures, will occur or that objectives will be
achieved. We assume no obligation to publicly update or revise any
forward-looking statements made today or any other forward-looking
statements made by the Company, whether as a result of new
information, future events or otherwise, except as may be required
by law.
Contact:Nelson M. HaightExecutive Vice
President, Chief Financial Officer(281) 388-5521
TEAM, INC. AND SUBSIDIARIES |
SUMMARY OF CONSOLIDATED OPERATING RESULTS |
(in thousands, except per share data) |
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
Revenues |
|
$ |
211,291 |
|
|
$ |
203,154 |
|
|
$ |
840,208 |
|
|
$ |
794,197 |
|
Operating
expenses |
|
|
158,941 |
|
|
|
158,264 |
|
|
|
638,597 |
|
|
|
616,501 |
|
Gross margin |
|
|
52,350 |
|
|
|
44,890 |
|
|
|
201,611 |
|
|
|
177,696 |
|
Selling, general, and
administrative expenses |
|
|
57,223 |
|
|
|
63,582 |
|
|
|
241,397 |
|
|
|
246,206 |
|
Restructuring and
other related charges, net |
|
|
— |
|
|
|
218 |
|
|
|
16 |
|
|
|
2,535 |
|
Goodwill impairment
charge |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,837 |
|
Operating loss |
|
|
(4,873 |
) |
|
|
(18,910 |
) |
|
|
(39,802 |
) |
|
|
(126,882 |
) |
Interest expense,
net |
|
|
(21,344 |
) |
|
|
(17,315 |
) |
|
|
(85,052 |
) |
|
|
(46,079 |
) |
Loss on debt
extinguishment and modification |
|
|
(30,083 |
) |
|
|
— |
|
|
|
(30,083 |
) |
|
|
— |
|
Loss on
warrants |
|
|
— |
|
|
|
(59 |
) |
|
|
— |
|
|
|
(59 |
) |
Other (income)
expense, net |
|
|
(1,508 |
) |
|
|
(1,262 |
) |
|
|
8,156 |
|
|
|
(3,052 |
) |
Loss before income
taxes |
|
|
(57,808 |
) |
|
|
(37,546 |
) |
|
|
(146,781 |
) |
|
|
(176,072 |
) |
Less: Provision
(benefit) for income taxes |
|
|
876 |
|
|
|
(353 |
) |
|
|
(3,306 |
) |
|
|
(8,773 |
) |
Net loss from
continuing operations |
|
$ |
(56,932 |
) |
|
$ |
(37,899 |
) |
|
$ |
(150,087 |
) |
|
$ |
(184,845 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) from
discontinued operations |
|
|
203,898 |
|
|
|
(5,154 |
) |
|
|
220,166 |
|
|
|
(1,174 |
) |
Net income
(loss) |
|
|
146,966 |
|
|
|
(43,053 |
) |
|
|
70,079 |
|
|
|
(186,019 |
) |
Loss per common
share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(13.15 |
) |
|
$ |
(12.19 |
) |
|
$ |
(35.85 |
) |
|
$ |
(59.67 |
) |
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
4,331 |
|
|
|
3,110 |
|
|
|
4,187 |
|
|
|
3,098 |
|
TEAM, INC. AND SUBSIDIARIES |
SUMMARY CONSOLIDATED BALANCE SHEET
INFORMATION |
(in thousands) |
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
|
2021 |
|
(unaudited) |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
58,075 |
|
$ |
55,193 |
|
|
|
|
Other current
assets |
|
289,478 |
|
|
264,000 |
|
|
|
|
Current assets
associated with discontinued operations |
|
— |
|
|
83,096 |
|
|
|
|
Property, plant, and
equipment, net |
|
138,099 |
|
|
145,480 |
|
|
|
|
Other non-current
assets |
|
130,993 |
|
|
158,775 |
|
|
|
|
Total assets |
$ |
616,645 |
|
$ |
706,544 |
|
|
|
|
Current portion of
long-term debt and finance lease obligations |
$ |
280,993 |
|
$ |
667 |
|
|
|
|
Other current
liabilities |
|
167,871 |
|
|
171,204 |
|
|
|
|
Current liabilities
associated with discontinued operations |
|
— |
|
|
16,396 |
|
|
|
|
Long-term debt and
finance lease obligations, net of current maturities |
|
4,942 |
|
|
405,184 |
|
|
|
|
Other non-current
liabilities |
|
45,079 |
|
|
61,226 |
|
|
|
|
Stockholders’
equity |
|
117,760 |
|
|
51,867 |
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
616,645 |
|
$ |
706,544 |
TEAM INC. AND SUBSIDIARIES |
SUMMARY CONSOLIDATED CASH FLOW
INFORMATION1 |
(in thousands) |
|
|
|
|
|
Twelve Months Ended December 31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
70,079 |
|
|
$ |
(186,019 |
) |
|
|
|
|
|
Depreciation and
amortization expense |
|
|
37,595 |
|
|
|
41,518 |
|
|
|
|
|
|
Gain on sale of
Quest |
|
|
(203,351 |
) |
|
|
— |
|
|
|
|
|
|
Amortization of debt
issuance costs and debt discounts |
|
|
35,509 |
|
|
|
13,784 |
|
|
|
|
|
|
Deferred income
taxes |
|
|
653 |
|
|
|
4,521 |
|
|
|
|
|
|
Non-cash compensation
cost |
|
|
247 |
|
|
|
7,013 |
|
|
|
|
|
|
Goodwill impairment
charge |
|
|
— |
|
|
|
64,632 |
|
|
|
|
|
|
Write-off of deferred
loan costs |
|
|
2,748 |
|
|
|
— |
|
|
|
|
|
|
Loss on debt
extinguishment |
|
|
17,719 |
|
|
|
415 |
|
|
|
|
|
|
Other |
|
|
(19,134 |
) |
|
|
18,683 |
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(57,935 |
) |
|
|
(35,453 |
) |
|
|
|
|
|
Capital
expenditures |
|
|
(24,690 |
) |
|
|
(17,605 |
) |
|
|
|
|
|
Proceeds from disposal
of assets |
|
|
7,205 |
|
|
|
3,528 |
|
|
|
|
|
|
Net proceeds from sale
of Quest |
|
|
260,841 |
|
|
|
— |
|
|
|
|
|
|
Net cash provided by (used in) investing
activities |
|
|
243,356 |
|
|
|
(14,077 |
) |
|
|
|
|
|
Borrowings (payments)
under ABL Facility, net |
|
|
37,916 |
|
|
|
53,000 |
|
|
|
|
|
|
Borrowings under
Subordinated Term Loan Facility |
|
|
— |
|
|
|
50,000 |
|
|
|
|
|
|
Payments under
Atlantic Park Term Loan |
|
|
(224,946 |
) |
|
|
— |
|
|
|
|
|
|
Payments for debt
issuance costs |
|
|
(13,709 |
) |
|
|
(10,457 |
) |
|
|
|
|
|
Issuance of common
stock, net of issuance costs |
|
|
9,639 |
|
|
|
— |
|
|
|
|
|
|
Other |
|
|
(871 |
) |
|
|
(693 |
) |
|
|
|
|
|
Net cash (used in) provided by financing
activities |
|
|
(191,971 |
) |
|
|
91,850 |
|
|
|
|
|
|
Effect of exchange
rate changes |
|
|
(690 |
) |
|
|
(1,591 |
) |
|
|
|
|
|
Net change in cash and
cash equivalents |
|
$ |
(7,240 |
) |
|
$ |
40,729 |
|
|
|
|
|
|
1 Consolidated statements of cash flows include
cash flows from discontinued operations.
|
December 31, 2022 |
|
December 31, 2021 |
Cash and cash equivalents from continuing operations |
$ |
58,075 |
|
$ |
55,193 |
Cash and
cash equivalents from discontinued operations |
|
— |
|
|
10,122 |
Total |
$ |
58,075 |
|
$ |
65,315 |
TEAM, INC. AND SUBSIDIARIES |
SEGMENT INFORMATION |
(unaudited, in thousands) |
|
|
|
|
|
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues |
|
|
|
|
|
|
|
|
IHT |
|
$ |
102,529 |
|
|
$ |
105,294 |
|
|
$ |
422,562 |
|
|
$ |
415,371 |
|
MS |
|
|
108,762 |
|
|
|
97,860 |
|
|
|
417,646 |
|
|
|
378,826 |
|
|
|
$ |
211,291 |
|
|
$ |
203,154 |
|
|
$ |
840,208 |
|
|
$ |
794,197 |
|
|
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
|
|
|
|
|
|
IHT |
|
$ |
4,055 |
|
|
$ |
2,173 |
|
|
$ |
17,093 |
|
|
$ |
12,997 |
|
MS2 |
|
|
5,778 |
|
|
|
3,071 |
|
|
|
20,930 |
|
|
|
(47,728 |
) |
Corporate and shared support services |
|
|
(14,706 |
) |
|
|
(24,154 |
) |
|
|
(77,825 |
) |
|
|
(92,151 |
) |
|
|
$ |
(4,873 |
) |
|
$ |
(18,910 |
) |
|
$ |
(39,802 |
) |
|
$ |
(126,882 |
) |
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBIT1 |
|
|
|
|
|
|
|
|
IHT |
|
$ |
4,149 |
|
|
$ |
2,259 |
|
|
$ |
17,379 |
|
|
$ |
13,658 |
|
MS |
|
|
6,374 |
|
|
|
3,101 |
|
|
|
21,615 |
|
|
|
8,633 |
|
Corporate and shared support services |
|
|
(12,502 |
) |
|
|
(17,877 |
) |
|
|
(59,030 |
) |
|
|
(74,462 |
) |
|
|
$ |
(1,979 |
) |
|
$ |
(12,517 |
) |
|
$ |
(20,036 |
) |
|
$ |
(52,171 |
) |
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA1 |
|
|
|
|
|
|
|
|
IHT |
|
$ |
7,168 |
|
|
$ |
5,330 |
|
|
$ |
29,770 |
|
|
$ |
26,617 |
|
MS |
|
|
11,173 |
|
|
|
8,169 |
|
|
|
40,636 |
|
|
|
29,133 |
|
Corporate and shared support services |
|
|
(11,640 |
) |
|
|
(15,078 |
) |
|
|
(53,742 |
) |
|
|
(62,006 |
) |
|
|
$ |
6,701 |
|
|
$ |
(1,579 |
) |
|
$ |
16,664 |
|
|
$ |
(6,256 |
) |
___________________ |
1 |
See the accompanying reconciliation of non-GAAP measures at the end
of this earnings release. |
|
|
2 |
Includes goodwill impairment charge of $55.8 million for the
twelve months ended December 31, 2021. Excluding the goodwill
impairment charge, operating income for MS would be
$8.1 million for the twelve months ended December 31,
2021. |
TEAM, INC. AND
SUBSIDIARIESNon-GAAP Financial
Measures(Unaudited)
The Company uses supplemental non-GAAP financial
measures which are derived from the consolidated financial
information, including adjusted net income (loss); adjusted net
income (loss) per diluted share, earnings before interest and taxes
(“EBIT”); Adjusted EBIT (defined below); adjusted earnings before
interest, taxes, depreciation, and amortization (“Adjusted EBITDA”)
and free cash flow to supplement financial information presented on
a GAAP basis.
The Company defines adjusted net income (loss),
adjusted net income (loss) per diluted share and Adjusted EBIT to
exclude the following items: costs associated with the Operating
Group Reorganization, non-routine legal costs and settlements,
non-routine professional fees, restructuring charges, certain
severance charges, goodwill impairment charges, and certain other
items that we believe are not indicative of core operating
activities. Consolidated Adjusted EBIT, as defined by us, excludes
the costs excluded from adjusted net income (loss) as well as
income tax expense (benefit), interest charges, foreign currency
(gain) loss, and items of other (income) expense. Consolidated
Adjusted EBITDA further excludes from consolidated Adjusted EBIT
depreciation, amortization and non-cash share-based compensation
costs. Segment Adjusted EBIT is equal to segment operating income
(loss) excluding costs associated with the Operating Group
Reorganization, non-routine legal costs and settlements,
non-routine professional fees, restructuring charges, certain
severance charges, goodwill impairment charges, and certain other
items as determined by management. Segment Adjusted EBITDA further
excludes from segment Adjusted EBIT depreciation, amortization, and
non-cash share-based compensation costs. Free cash flow is defined
as net cash provided by (used in) operating activities minus
capital expenditures. Net debt is defined as the sum of the current
and long-term portions of debt, including finance lease
obligations, less cash and cash equivalents.
Management believes these non-GAAP financial
measures are useful to both management and investors in their
analysis of our financial position and results of operations. In
particular, adjusted net income (loss), adjusted net income (loss)
per diluted share, consolidated Adjusted EBIT, and consolidated
Adjusted EBITDA are meaningful measures of performance that are
commonly used by industry analysts, investors, lenders, and rating
agencies to analyze operating performance in our industry, perform
analytical comparisons, benchmark performance between periods, and
measure our performance against externally communicated targets.
Our segment Adjusted EBIT and segment Adjusted EBITDA is also used
as a basis for the chief operating decision maker to evaluate the
performance of our reportable segments. Free cash flow is used by
our management and investors to analyze our ability to service and
repay debt and return value directly to stakeholders.
Non-GAAP measures have important limitations as
analytical tools, because they exclude some, but not all, items
that affect net earnings and operating income. These measures
should not be considered substitutes for their most directly
comparable U.S. GAAP financial measures and should be read only in
conjunction with financial information presented on a GAAP basis.
Further, our non-GAAP financial measures may not be comparable to
similarly titled measures of other companies who may calculate
non-GAAP financial measures differently, limiting the usefulness of
those measures for comparative purposes. The liquidity measure of
free cash flow does not represent a precise calculation of residual
cash flow available for discretionary expenditures. Reconciliations
of each non-GAAP financial measure to its most directly comparable
GAAP financial measure are presented below.
TEAM, INC. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
(unaudited, in thousands except per share
data) |
|
|
|
|
|
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
(Loss): |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(56,932 |
) |
|
$ |
(37,899 |
) |
|
$ |
(150,087 |
) |
|
$ |
(184,845 |
) |
Professional fees and other1 |
|
|
3,339 |
|
|
|
5,775 |
|
|
|
13,915 |
|
|
|
8,882 |
|
Legal costs (credit)2 |
|
|
(700 |
) |
|
|
398 |
|
|
|
2,571 |
|
|
|
7,243 |
|
Severance charges, net3 |
|
|
933 |
|
|
|
219 |
|
|
|
3,961 |
|
|
|
2,749 |
|
Natural disaster insurance
recovery4 |
|
|
(324 |
) |
|
|
— |
|
|
|
(1,196 |
) |
|
|
— |
|
Loss on debt extinguishment |
|
|
30,083 |
|
|
|
— |
|
|
|
30,083 |
|
|
|
— |
|
Loss on warrants |
|
|
— |
|
|
|
59 |
|
|
|
— |
|
|
|
59 |
|
Goodwill impairment charge |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,837 |
|
Tax impact of adjustments and other net tax
items5 |
|
|
(48 |
) |
|
|
(18 |
) |
|
|
(79 |
) |
|
|
(386 |
) |
Adjusted net
loss |
|
$ |
(23,649 |
) |
|
$ |
(31,466 |
) |
|
$ |
(100,832 |
) |
|
$ |
(110,461 |
) |
|
|
|
|
|
|
|
|
|
Adjusted net loss per
common share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(5.46 |
) |
|
$ |
(10.12 |
) |
|
$ |
(24.08 |
) |
|
$ |
(35.66 |
) |
|
|
|
|
|
|
|
|
|
Consolidated Adjusted
EBIT and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(56,932 |
) |
|
$ |
(37,899 |
) |
|
$ |
(150,087 |
) |
|
$ |
(184,845 |
) |
Provision (benefit) for income taxes |
|
|
(876 |
) |
|
|
353 |
|
|
|
3,306 |
|
|
|
8,773 |
|
Interest expense, net |
|
|
21,344 |
|
|
|
17,315 |
|
|
|
85,052 |
|
|
|
46,079 |
|
Foreign currency loss (gain) |
|
|
1,263 |
|
|
|
990 |
|
|
|
(2,692 |
) |
|
|
3,299 |
|
Pension expense (credit)6 |
|
|
(178 |
) |
|
|
(102 |
) |
|
|
(749 |
) |
|
|
(622 |
) |
Loss (gain) on equipment sale |
|
|
69 |
|
|
|
375 |
|
|
|
(4,200 |
) |
|
|
375 |
|
Loss on debt extinguishment7 |
|
|
30,083 |
|
|
|
— |
|
|
|
30,083 |
|
|
|
— |
|
Loss on warrants |
|
|
— |
|
|
|
59 |
|
|
|
— |
|
|
|
59 |
|
Professional fees and other1 |
|
|
3,339 |
|
|
|
5,775 |
|
|
|
13,915 |
|
|
|
8,882 |
|
Legal costs (credit)2 |
|
|
(700 |
) |
|
|
398 |
|
|
|
2,571 |
|
|
|
7,243 |
|
Severance charges, net3 |
|
|
933 |
|
|
|
219 |
|
|
|
3,961 |
|
|
|
2,749 |
|
Natural disaster insurance
recovery4 |
|
|
(324 |
) |
|
|
— |
|
|
|
(1,196 |
) |
|
|
— |
|
Goodwill impairment charge |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,837 |
|
Consolidated Adjusted
EBIT |
|
|
(1,979 |
) |
|
|
(12,517 |
) |
|
|
(20,036 |
) |
|
|
(52,171 |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
Amount included in operating expenses |
|
|
3,757 |
|
|
|
4,391 |
|
|
|
15,600 |
|
|
|
18,342 |
|
Amount included in SG&A expenses |
|
|
5,246 |
|
|
|
5,110 |
|
|
|
20,853 |
|
|
|
20,560 |
|
Total depreciation and amortization |
|
|
9,003 |
|
|
|
9,501 |
|
|
|
36,453 |
|
|
|
38,902 |
|
Non-cash share-based compensation costs |
|
|
(323 |
) |
|
|
1,437 |
|
|
|
247 |
|
|
|
7,013 |
|
Consolidated Adjusted
EBITDA |
|
$ |
6,701 |
|
|
$ |
(1,579 |
) |
|
$ |
16,664 |
|
|
$ |
(6,256 |
) |
|
|
|
|
|
|
|
|
|
Free Cash
Flow: |
|
|
|
|
|
|
|
|
Cash used in operating activities |
|
$ |
(1,152 |
) |
|
$ |
(2,866 |
) |
|
$ |
(51,725 |
) |
|
$ |
(41,674 |
) |
Capital expenditures |
|
|
(3,245 |
) |
|
$ |
(4,094 |
) |
|
|
(20,544 |
) |
|
|
(14,105 |
) |
Free Cash
Flow |
|
$ |
(4,397 |
) |
|
$ |
(6,960 |
) |
|
$ |
(72,269 |
) |
|
$ |
(55,779 |
) |
___________________ |
1 |
The three and twelve months ended December 31, 2022, includes $1.8
million and $10.2 million, respectively, related to costs
associated with debt financing, $1.0 million of corporate support
costs for the year ended December 31, 2022 and other project costs.
The three and twelve months ended December 31, 2021 includes $0.2
million and $1.9 million, respectively, of costs associated with
the Operating Group Reorganization (exclusive of restructuring
costs). Additionally, for the twelve months ended December 31,
2021, $3.9 million was related to costs associated with debt
financing and $2.8 million of corporate support costs. |
2 |
Primarily relates to accrued legal matters, adjustments to legal
reserves and other legal fees. |
3 |
2022 severance charges represent costs associated with executive
departures and our ongoing cost reduction efforts across multiple
segments. 2021 severance charges represent costs associated with
the Operating Group Reorganization and other continuing
restructuring measures. |
4 |
Amount represent the insurance recovery received during the year
for hurricane damage incurred in prior-year. |
5 |
Represents the tax effect of the adjustments. Beginning in Q2 2021,
we began using the statutory tax rate, net of valuation allowance
by legal entity to determine the tax effect of the adjustments.
Prior to Q2 2021, we used an assumed marginal tax rate of 21%. We
have updated the 2021 prior period tax impact to use the statutory
tax rate by legal entity, net of valuation allowance. |
6 |
Represents pension credit for the U.K. pension plan based on the
difference between the expected return on plan assets and the
amount of the discounted pension liability. The pension plan was
frozen in 1994 and no new participants have been added since that
date. Accruals for future benefits ceased in connection with a plan
curtailment in 2013. |
7 |
Represents loss on the partial payoff of the Atlantic Park Term
Loan consisting of $12.4 million of cash fees and premium and
the non-cash write-off of the unamortized balance of deferred
issuance cost and warrant and debt discounts of
$17.7 million. |
TEAM, INC. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Continued) |
(unaudited, in thousands) |
|
|
|
|
|
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBIT
and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IHT |
|
|
|
|
|
|
|
|
Operating income |
|
$ |
4,055 |
|
|
$ |
2,173 |
|
|
$ |
17,093 |
|
|
$ |
12,997 |
|
Severance charges, net1 |
|
|
94 |
|
|
|
86 |
|
|
|
286 |
|
|
|
661 |
|
Adjusted EBIT |
|
|
4,149 |
|
|
|
2,259 |
|
|
|
17,379 |
|
|
|
13,658 |
|
Depreciation and amortization |
|
|
3,019 |
|
|
|
3,071 |
|
|
|
12,391 |
|
|
|
12,959 |
|
Adjusted EBITDA |
|
$ |
7,168 |
|
|
$ |
5,330 |
|
|
$ |
29,770 |
|
|
$ |
26,617 |
|
|
|
|
|
|
|
|
|
|
MS |
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
5,778 |
|
|
$ |
3,071 |
|
|
$ |
20,930 |
|
|
|
(47,728 |
) |
Severance charges, net1 |
|
|
596 |
|
|
|
30 |
|
|
|
685 |
|
|
|
524 |
|
Goodwill impairment loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
55,837 |
|
Adjusted EBIT |
|
|
6,374 |
|
|
|
3,101 |
|
|
|
21,615 |
|
|
|
8,633 |
|
Depreciation and amortization |
|
|
4,799 |
|
|
|
5,068 |
|
|
|
19,021 |
|
|
|
20,500 |
|
Adjusted EBITDA |
|
$ |
11,173 |
|
|
$ |
8,169 |
|
|
$ |
40,636 |
|
|
$ |
29,133 |
|
|
|
|
|
|
|
|
|
|
Corporate and shared
support services |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(66,765 |
) |
|
$ |
(43,143 |
) |
|
$ |
(188,110 |
) |
|
$ |
(150,114 |
) |
Provision (benefit) for income taxes |
|
|
(876 |
) |
|
|
353 |
|
|
|
3,306 |
|
|
|
8,773 |
|
Loss (gain) on equipment sale |
|
|
69 |
|
|
|
375 |
|
|
|
(4,200 |
) |
|
|
375 |
|
Interest expense, net |
|
|
21,344 |
|
|
|
17,315 |
|
|
|
85,052 |
|
|
|
46,079 |
|
Loss on debt extinguishment2 |
|
|
30,083 |
|
|
|
— |
|
|
|
30,083 |
|
|
|
— |
|
Foreign currency loss (gain) |
|
|
1,263 |
|
|
|
990 |
|
|
|
(2,692 |
) |
|
|
3,299 |
|
Pension credit3 |
|
|
(178 |
) |
|
|
(102 |
) |
|
|
(749 |
) |
|
|
(622 |
) |
Loss on warrants |
|
|
— |
|
|
|
59 |
|
|
|
— |
|
|
|
59 |
|
Professional fees and other4 |
|
|
3,339 |
|
|
|
5,775 |
|
|
|
13,915 |
|
|
|
8,882 |
|
Legal costs5 |
|
|
(700 |
) |
|
|
398 |
|
|
|
2,571 |
|
|
|
7,243 |
|
Severance charges, net1 |
|
|
243 |
|
|
|
103 |
|
|
|
2,990 |
|
|
|
1,564 |
|
Natural disaster insurance
recovery6 |
|
|
(324 |
) |
|
|
— |
|
|
|
(1,196 |
) |
|
|
— |
|
Adjusted EBIT |
|
|
(12,502 |
) |
|
|
(17,877 |
) |
|
|
(59,030 |
) |
|
|
(74,462 |
) |
Depreciation and amortization |
|
|
1,185 |
|
|
|
1,362 |
|
|
|
5,041 |
|
|
|
5,443 |
|
Non-cash share-based compensation costs |
|
|
(323 |
) |
|
|
1,437 |
|
|
|
247 |
|
|
|
7,013 |
|
Adjusted EBITDA |
|
$ |
(11,640 |
) |
|
$ |
(15,078 |
) |
|
$ |
(53,742 |
) |
|
$ |
(62,006 |
) |
___________________ |
1 |
2022 severance charges represent costs associated with executive
departures and our ongoing cost reduction efforts across multiple
segments. 2021 severance charges represent costs associated with
the Operating Group Reorganization and other continuing
restructuring measures. |
2 |
Represents loss on partial payoff of the Atlantic Park Term Loan
consisting of $12.4 million of cash fees and premium and the
noncash write off of the unamortized balance of deferred issuance
cost and warrant and debt discounts in the amount of
$17.7 million. |
3 |
Represents pension credit for the U.K. pension plan based on the
difference between the expected return on plan assets and the
amount of the discounted pension liability. The pension plan was
frozen in 1994 and no new participants have been added since that
date. Accruals for future benefits ceased in connection with a plan
curtailment in 2013. |
4 |
The three and twelve months ended December 31, 2022, includes $1.8
million and $10.2 million, respectively, related to costs
associated with debt financing, $1.0 million of corporate support
costs for the year ended December 31, 2022 and other project costs.
The three and twelve months ended December 31, 2021, includes $0.2
million and $1.9 million, respectively, of costs associated with
the Operating Group Reorganization (exclusive of restructuring
costs), $3.9 million associated with debt financing and $2.8
million of corporate support costs. |
5 |
Primarily relates to accrued legal matters, adjustments to legal
reserves and other legal fees. |
6 |
Amount represents the insurance recovery for hurricane damage
incurred in prior year. |
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