Team(TISI) - 2024 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Team, Inc.'s unaudited condensed consolidated financial statements for Q3 and YTD 2024, including balance sheets, income statements, and cash flows Condensed Consolidated Balance Sheets Total assets decreased to $545.4 million, total liabilities increased to $527.5 million, and total equity significantly decreased to $17.9 million by September 30, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $19,087 | $35,427 | | Total current assets | $314,891 | $322,101 | | Total assets | $545,366 | $565,744 | | Total current liabilities | $174,805 | $174,938 | | Long-term debt and finance lease obligations | $314,182 | $306,214 | | Total liabilities | $527,468 | $520,148 | | Total equity | $17,898 | $45,596 | Unaudited Condensed Consolidated Statements of Operations Q3 2024 revenues increased slightly to $210.8 million, with operating income of $3.2 million and a narrowed net loss of $11.1 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $210,758 | $206,715 | $638,976 | $648,484 | | Gross margin | $53,524 | $52,787 | $165,809 | $160,705 | | Operating income (loss) | $3,158 | $(1,258) | $7,931 | $(4,408) | | Net loss | $(11,126) | $(12,134) | $(31,084) | $(52,598) | | Loss per share (Basic & Diluted) | $(2.52) | $(2.78) | $(7.04) | $(12.07) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $1.1 million for the nine months ended September 30, 2024 Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,143 | $(22,069) | | Net cash used in investing activities | $(7,305) | $(7,019) | | Net cash used in financing activities | $(9,927) | $(7,395) | | Net decrease in cash and cash equivalents | $(16,340) | $(36,592) | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes cover business segments, recent debt amendments, and the favorable appellate ruling in the Kelli Most litigation - The company operates in two segments: Inspection and Heat Treating (IHT) and Mechanical Services (MS), providing services to heavy industries like energy, manufacturing, and infrastructure[16] - On September 30, 2024, the company amended its debt agreements, extending the maturity of its 2022 ABL Credit Facility to 2027 and modifying interest rate margins to expand borrowing availability[17][40][42] - In the Kelli Most litigation, an appeals court vacated a $222 million judgment against the company and dismissed the case, with a $39.0 million liability accrued and fully offset by insurance receivables[59] - The company successfully appealed a $2.0 million portion of a government subsidy repayment notice, reducing the accrued liability from $5.5 million to $3.5 million[59] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2024 financial performance, liquidity, and capital resources, highlighting improved operating income and recent debt amendments Results of Operations Q3 2024 total revenue increased by 2.0% year-over-year, driven by IHT segment growth and reduced corporate costs, leading to improved operating income Q3 2024 vs Q3 2023 Performance (in thousands) | Segment | Revenue Change | % Change | Operating Income (Loss) Change | % Change | | :--- | :--- | :--- | :--- | :--- | | IHT | $3,747 | 3.6% | $3,448 | 53.8% | | MS | $296 | 0.3% | $(2,022) | (31.2)% | | Corporate | N/A | N/A | $2,990 | 21.1% | | Total | $4,043 | 2.0% | $4,416 | 351.0% | YTD 2024 vs YTD 2023 Performance (in thousands) | Segment | Revenue Change | % Change | Operating Income (Loss) Change | % Change | | :--- | :--- | :--- | :--- | :--- | | IHT | $(2,140) | (0.7)% | $9,821 | 55.5% | | MS | $(7,368) | (2.3)% | $(3,207) | (14.3)% | | Corporate | N/A | N/A | $5,725 | 12.9% | | Total | $(9,508) | (1.5)% | $12,339 | 279.9% | Non-GAAP Financial Measures Consolidated Adjusted EBITDA for Q3 2024 was $11.3 million, reflecting improved operational efficiency for the nine-month period Consolidated Adjusted EBITDA Reconciliation (in thousands) | Period | Net Loss | Adjustments | Consolidated Adjusted EBITDA | | :--- | :--- | :--- | :--- | | Q3 2024 | $(11,126) | $22,437 | $11,311 | | Q3 2023 | $(12,134) | $23,261 | $11,127 | | YTD 2024 | $(31,084) | $70,715 | $39,631 | | YTD 2023 | $(52,598) | $85,377 | $32,779 | Liquidity and Capital Resources Recent debt amendments extended maturities and expanded borrowing availability, significantly improving the company's financial flexibility and liquidity - On September 30, 2024, the company amended its 2022 ABL Credit Agreement, extending the maturity date to September 30, 2027, and amending interest rate margins to expand borrowing availability[104][105] - As of September 30, 2024, available borrowing capacity was approximately $28.0 million, comprising $18.0 million under Revolving Credit Loans and $10.0 million under the Incremental Term Loan[106] - As of November 8, 2024, total liquidity was $40.4 million, comprising $9.9 million in cash and $30.5 million in undrawn credit availability[106] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Team, Inc. is not required to provide market risk disclosures - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[114] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal controls - The CEO and CFO concluded that as of September 30, 2024, the company's disclosure controls and procedures were effective[115] - No material changes were made to the company's internal control over financial reporting during the quarter ended September 30, 2024[115] PART II—OTHER INFORMATION Legal Proceedings This section refers to Note 13 of the financial statements for details on legal proceedings, including the vacated Kelli Most litigation judgment - For details on legal proceedings, the report directs readers to Note 13 - Commitments and Contingencies in the financial statements[117] Risk Factors The primary risk is non-compliance with NYSE listing standards due to low market capitalization and shareholders' equity, despite an accepted compliance plan - On March 14, 2024, the company was notified by the NYSE of non-compliance with listing standards due to its average global market capitalization and shareholders' equity falling below $50.0 million[118] - The company submitted a compliance plan which the NYSE accepted, allowing a 12-month period to regain compliance, though delisting remains a risk impacting stock liquidity and price[118] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities[119] Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q3 2024 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended September 30, 2024[120] Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to credit agreements, corporate governance documents, and certifications by the CEO and CFO - The exhibits include recent amendments to the company's Term Loan Credit Agreement and ABL Credit Agreement, both dated September 30, 2024[122]