Team Stock Jumps 20% After Q4 Earnings Rise and Margin Gains

Core Insights - Team, Inc. (TISI) shares have increased by 20.1% since the release of fourth-quarter and 2024 results, outperforming the S&P 500 index, which declined by 0.1% [1] - The company reported a slight revenue decrease for Q4 2024 but showed significant profitability improvements [2][4] Revenue & Earnings Performance - Q4 2024 revenues were $213.3 million, down from $214.1 million year-over-year, but gross margin improved to $57.3 million, or 26.9% of revenues, a 330-basis-point increase [2] - Operating income for Q4 2024 was $2.2 million, a turnaround from an $8.9 million loss in Q4 2023 [2] - The net loss narrowed to $7.2 million, or $1.61 per share, from $23.1 million, or $5.25 per share, in the prior-year quarter [3] - For the full year, revenues totaled $852.3 million, down from $862.6 million in 2023, but gross margin improved to $223.2 million, or 26.2% of revenues [4] Operational Efficiency - The improvements in earnings were driven by operational efficiency, with SG&A expenses declining by $4.2 million year-over-year in Q4 to $55.1 million [5] - For the year, SG&A expenses fell by $11.4 million, or 5.1%, totaling $182.7 million [5] Segment Performance - Both core segments, Inspection and Heat Treating (IHT) and Mechanical Services (MS), contributed to higher operating income in Q4 [6] - IHT's operating income rose 45.4% year-over-year to $9.5 million, while MS grew 51% to $8.1 million [6] Management Commentary - Management expressed confidence in the results, highlighting an expansion of the Adjusted EBITDA margin by 150 basis points to 6.4% in 2024 [7] - The company has achieved year-over-year improvement in quarterly adjusted EBITDA for eight consecutive quarters [7] Key Performance Drivers - Margin gains were attributed to improved pricing, a favorable project mix, and lower operating costs, particularly in the U.S. market [8] - Free cash flow for Q4 reached $19.6 million, up from $8.1 million a year earlier, and for the year, free cash flow totaled $13.3 million, a recovery from a negative $21.4 million in 2023 [9] Guidance & Outlook - Management projects mid-single-digit top-line growth for 2025, driven by higher-margin service offerings and market penetration into adjacent sectors [10] - The company anticipates at least 15% year-over-year growth in adjusted EBITDA and targets a long-term adjusted EBITDA margin of 10% or more [10] Financial Developments - In March 2025, Team completed a refinancing transaction that improved its capital structure, issuing a $175 million First Lien Term Loan and a $50 million delayed draw term-loan facility [12] - The refinancing extended maturities, lowered the blended interest rate by more than 100 basis points, and improved liquidity to $77.4 million at the end of 2024 [13]