Press Release
<< Back
Team, Inc. Reports First Quarter 2020 Results
Decisive Actions Implemented to Further Reduce and Control Variable Costs
Gross Margin in Line with Prior
First Quarter 2020
- Quest Integrity revenues increased 16.3% over Q1 2019; Q1 2020 operating income improved 271.4% over the same period last year
- Consolidated gross margin of 24.3% in Q1 2020 in line with the same quarter last year
- Selling, general and administrative expenses decreased by
$3.8 million in Q1 2020 compared to Q1 2019 and decreased by$1.3 million when compared to Q4 2019 - OneTEAM program savings of
$6.6 million realized in Q1 2020 - In compliance with all bank covenant requirements at
March 31, 2020 - COVID-19 and the oil and gas supply-demand imbalance triggered a non-cash, pre-tax goodwill impairment charge of
$191.8 million ;$178.6 million after-tax basis
Second Quarter 2020 and Beyond
- Amended and extended TEAM’s credit facility through
January 15, 2022 to provide covenant flexibility while maintaining ample liquidity - Implemented director, executive and employee compensation decreases, enacted furloughs and reduction in workforce, and eliminated all non-essential spend
- Lowered full year 2020 capital expenditures by more than 30%
- Expanded and accelerated the OneTEAM program to deliver additional structural and permanent cost reductions
“In response, during the last few weeks of March, we implemented decisive and aggressive actions that delivered more than
“I am pleased that we completed an amendment and extension to our credit facility in the second quarter, which provides us operational flexibility and enhanced liquidity through the recovery period and supports our future growth. We remain committed to our financial priorities of conserving cash, paying down debt and protecting our balance sheet.
“As part of the critical and essential services network and in close collaboration with our clients, TEAM supports the performance, efficiency, and longevity of aging assets and ensures compliance with standards and regulations. In addition, we are focused on diversifying into markets and industries that are experiencing less disruption. We expect to lead the recovery by leveraging our three segments, engineering and manufacturing capabilities, our array of integrated solutions and the continued technological advancement of our digital strategy.
“We cannot underestimate the long road ahead during this challenging and dynamic period. I am proud of our experienced and knowledgeable leadership team for quickly executing our playbooks and ensuring the wellbeing and safety of our employees and their families, our clients and the community. I would like to especially thank TEAM’s technicians on the front lines who have continued to provide essential and exceptional services to our valued clients.
“Notwithstanding the ongoing effects of the pandemic, we will continue to make disciplined decisions to move the business in the right direction and are confident in TEAM’s performance and potential, as well as our ability to achieve our long-term strategic targets,” concluded
Consolidated net loss in the first quarter of 2020 was
Consolidated revenues for the first quarter of 2020 were
SG&A for the first quarter was
First quarter 2020 reported results include certain net charges not indicative of Team’s core operating activities, including:
Adjusted net income or loss, Adjusted EBIT, Adjusted EBITDA and free cash flow 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
Three Months Ended |
Increase (Decrease) | ||||||||||||
2020 | 2019 | $ | % | ||||||||||
(unaudited) | (unaudited) | ||||||||||||
Revenues by business segment: | |||||||||||||
IHT | $ | 107,881 | $ | 127,056 | $ | (19,175 | ) | (15.1 | )% | ||||
MS | 104,519 | 121,526 | (17,007 | ) | (14.0 | )% | |||||||
Quest Integrity | 24,439 | 21,017 | 3,422 | 16.3 | % | ||||||||
Total | $ | 236,839 | $ | 269,599 | $ | (32,760 | ) | (12.2 | )% | ||||
Operating income (loss): | |||||||||||||
IHT1 | $ | (192,150 | ) | $ | 1,721 | $ | (193,871 | ) | NM2 | ||||
MS | 1,022 | 5,534 | (4,512 | ) | (81.5 | )% | |||||||
Quest Integrity | 6,106 | 1,644 | 4,462 | 271.4 | % | ||||||||
Corporate and shared support services | (27,910 | ) | (25,427 | ) | (2,483 | ) | (9.8 | )% | |||||
Total | $ | (212,932 | ) | $ | (16,528 | ) | $ | (196,404 | ) | NM2 |
_________________
1 Includes goodwill impairment charge of
2 NM - Not meaningful.
Quest Integrity continued its strong revenue growth and increases in operating income with a 16.3% year-over-year improvement in revenue and a 271.4% increase in operating income. Quest Integrity’s performance is primarily the result of increased demand for Quest Integrity’s proprietary services and tools.
Decreased activity levels in IHT and MS were due to volumes being negatively impacted by weather disruptions and lower non-recurring projects at the start of the year. Towards the latter part of the quarter, the outbreak of COVID-19 and decline in oil prices resulted in certain clients temporarily closing facilities and/or curtailing operations, resulting in the postponement of client projects and lower demand for the Company’s services.
Cash and Debt
Consolidated cash and cash equivalents were
Non-Cash Goodwill Impairment Charge
During the first quarter of 2020, the impact of the COVID-19 pandemic, decline in crude oil prices driven by the oil and gas supply-demand imbalance and the decrease in the Company’s stock price was deemed to be a triggering event, requiring the Company to perform an interim assessment. As a result, the Company recognized a non-cash goodwill impairment charge during the three months ended
Credit Agreement Amendment and Extension
Effective
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.
Conference Call and Webcast Details
By Phone: Dial 1-888-699-2378 inside the
By Webcast: The call will be broadcast over the web and can be accessed on Team’s website, www.teaminc.com under “Investor Relations.” Please log on at least 10 minutes in advance to register and download any necessary software. A replay will be available shortly after the call.
About
Headquartered in
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. 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, (i) the duration and magnitude of the COVID-19 pandemic, related economic effects and the resulting negative impact on demand for oil and gas along with the current surplus in the global supply of oil, (ii) any difficulties or delays that could affect the Company's ability to effectively implement the remediation plan, in whole or in part, to address the material weakness identified in the Company's internal control over financial reporting, as described in Item 9A. "Controls and Procedures" of the Company’s Annual Report on Form 10-K for the year ended
SUMMARY OF CONSOLIDATED OPERATING RESULTS | ||||||||
(unaudited, in thousands, except per share data) | ||||||||
Three Months Ended | ||||||||
2020 | 2019 | |||||||
Revenues | $ | 236,839 | $ | 269,599 | ||||
Operating expenses | 179,353 | 203,652 | ||||||
Gross margin | 57,486 | 65,947 | ||||||
Selling, general and administrative expenses | 78,444 | 82,267 | ||||||
Restructuring and other related charges, net | 186 | 208 | ||||||
191,788 | — | |||||||
Operating loss | (212,932 | ) | (16,528 | ) | ||||
Interest expense, net | 6,776 | 7,425 | ||||||
Other income (expense), net | 472 | (58 | ) | |||||
Loss before income taxes | (220,180 | ) | (23,895 | ) | ||||
Less: Provision (benefit) for income taxes | (20,453 | ) | 333 | |||||
Net loss | $ | (199,727 | ) | $ | (24,228 | ) | ||
Loss per common share: | ||||||||
Basic | $ | (6.54 | ) | $ | (0.80 | ) | ||
Diluted | $ | (6.54 | ) | $ | (0.80 | ) | ||
Weighted-average number of shares outstanding: | ||||||||
Basic | 30,540 | 30,228 | ||||||
Diluted | 30,540 | 30,228 |
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION | |||||||
(in thousands) | |||||||
2020 | 2019 | ||||||
(unaudited) | |||||||
Cash and cash equivalents | $ | 20,523 | $ | 12,175 | |||
Other current assets | 303,469 | 305,403 | |||||
Property, plant and equipment, net | 184,447 | 191,951 | |||||
Other non-current assets | 279,099 | 475,688 | |||||
Total assets | $ | 787,538 | $ | 985,217 | |||
Current portion of long-term debt and finance lease obligations | $ | 5,296 | $ | 5,294 | |||
Other current liabilities | 146,120 | 145,242 | |||||
Long-term debt and finance lease obligations, net of current maturities | 345,362 | 325,299 | |||||
Other non-current liabilities | 63,331 | 72,712 | |||||
Stockholders’ equity | 227,429 | 436,670 | |||||
Total liabilities and stockholders’ equity | $ | 787,538 | $ | 985,217 |
SUMMARY CONSOLIDATED CASH FLOW INFORMATION | ||||||||
(unaudited, in thousands) | ||||||||
Three Months Ended |
||||||||
2020 | 2019 | |||||||
Net loss | $ | (199,727 | ) | $ | (24,228 | ) | ||
Depreciation and amortization expense | 11,708 | 12,271 | ||||||
Provision for doubtful accounts | (45 | ) | 637 | |||||
Deferred income taxes | (5,764 | ) | (771 | ) | ||||
Non-cash compensation cost | 1,530 | 2,434 | ||||||
191,788 | — | |||||||
Working capital changes | (263 | ) | 15,939 | |||||
Other items affecting operating cash flows | 1,690 | 1,346 | ||||||
Net cash provided by operating activities | 917 | 7,628 | ||||||
Capital expenditures | (8,305 | ) | (6,610 | ) | ||||
Cash used for business acquisitions, net | (1,013 | ) | — | |||||
Proceeds from disposal of assets | — | 47 | ||||||
Other items affecting investing cash flow | 6 | 47 | ||||||
Net cash used in investing activities | (9,312 | ) | (6,516 | ) | ||||
Borrowings (payments) under revolving credit agreement, net | 20,153 | (3,550 | ) | |||||
Payments under term loan, net of debt discount | (1,250 | ) | — | |||||
Cash associated with share-based payment arrangements, net | (349 | ) | (342 | ) | ||||
Other items affecting financing cash flows | (60 | ) | (500 | ) | ||||
Net cash provided by (used in) financing activities | 18,494 | (4,392 | ) | |||||
Effect of exchange rate changes | (1,751 | ) | 76 | |||||
Net change in cash and cash equivalents | $ | 8,348 | $ | (3,204 | ) | |||
SEGMENT INFORMATION | |||||||||
(in thousands) | |||||||||
Three Months Ended |
|||||||||
2020 | 2019 | ||||||||
(unaudited) | (unaudited) | ||||||||
Revenues | |||||||||
IHT | $ | 107,881 | $ | 127,056 | |||||
MS | 104,519 | 121,526 | |||||||
Quest Integrity | 24,439 | 21,017 | |||||||
$ | 236,839 | $ | 269,599 | ||||||
Operating income (loss) (“EBIT”) | |||||||||
IHT | $ | (192,150 | ) | $ | 1,721 | ||||
MS | 1,022 | 5,534 | |||||||
Quest Integrity | 6,106 | 1,644 | |||||||
Corporate and shared support services | (27,910 | ) | (25,427 | ) | |||||
$ | (212,932 | ) | $ | (16,528 | ) | ||||
Adjusted EBIT | |||||||||
IHT | $ | (354 | ) | $ | 1,823 | ||||
MS | 1,152 | 5,619 | |||||||
Quest Integrity | 6,106 | 1,644 | |||||||
Corporate and shared support services | (24,067 | ) | (20,037 | ) | |||||
$ | (17,163 | ) | $ | (10,951 | ) | ||||
Adjusted EBITDA | |||||||||
IHT | $ | 3,629 | $ | 6,325 | |||||
MS | 6,583 | 11,033 | |||||||
Quest Integrity | 6,992 | 2,565 | |||||||
Corporate and shared support services | (21,129 | ) | (16,169 | ) | |||||
$ | (3,925 | ) | $ | 3,754 |
Non-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. Adjusted net income (loss) and adjusted net income (loss) per diluted share, each as defined by the Company, exclude the following items from net income (loss): costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation and non-routine legal costs and settlements, professional fees for acquired business integration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized Enterprise Resource Planning (“ERP”) implementation costs, goodwill impairment charge and certain other items that management does not believe are indicative of core operating activities and the related income tax impacts. EBIT, as defined by the Company, excludes income tax expense (benefit), interest charges and items of other (income) expense and therefore is equal to operating income (loss) reported in accordance with GAAP. Adjusted EBIT further excludes the following items: costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation and non-routine legal costs and settlements, professional fees for acquired business integration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized ERP implementation costs, goodwill impairment charge and certain other items that management does not believe are indicative of core operating activities. Adjusted EBITDA further excludes from 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, less cash and cash equivalents.
Management believes that excluding certain items from GAAP results allows management to better understand the consolidated financial performance from period to period and to better identify operating trends that may not otherwise be apparent. Moreover, the Company believes these non-GAAP financial measures will provide its stakeholders with useful information to help them evaluate operating performance. However, there are limitations to the use of the non-GAAP financial measures presented in this report. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures of other companies who may calculate non-GAAP financial measures differently than Team does, 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.
The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity, prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. You are encouraged to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||
(in thousands, except per share data) | ||||||||
Three Months Ended |
||||||||
2020 | 2019 | |||||||
(unaudited) | (unaudited) | |||||||
Adjusted Net Income (Loss): | ||||||||
Net income (loss) | $ | (199,727 | ) | $ | (24,228 | ) | ||
Professional fees and other1 | 2,545 | 5,105 | ||||||
Legal costs2 | 1,250 | 264 | ||||||
Restructuring and other related charges, net3 | 186 | 208 | ||||||
191,788 | — | |||||||
Tax impact of adjustments and other net tax items4 | (14,050 | ) | (1,171 | ) | ||||
Adjusted net income (loss) | $ | (18,008 | ) | $ | (19,822 | ) | ||
Adjusted net income (loss) per common share: | ||||||||
Basic | $ | (0.59 | ) | $ | (0.66 | ) | ||
Diluted | $ | (0.59 | ) | $ | (0.66 | ) | ||
Adjusted EBIT and Adjusted EBITDA: | ||||||||
Operating income (loss) (“EBIT”) | $ | (212,932 | ) | $ | (16,528 | ) | ||
Professional fees and other1 | 2,545 | 5,105 | ||||||
Legal costs2 | 1,250 | 264 | ||||||
Restructuring and other related charges, net3 | 186 | 208 | ||||||
191,788 | — | |||||||
Adjusted EBIT | (17,163 | ) | (10,951 | ) | ||||
Depreciation and amortization | ||||||||
Amount included in operating expenses | 5,937 | 6,331 | ||||||
Amount included in SG&A expenses | 5,771 | 5,940 | ||||||
Total depreciation and amortization | 11,708 | 12,271 | ||||||
Non-cash share-based compensation costs | 1,530 | 2,434 | ||||||
Adjusted EBITDA | $ | (3,925 | ) | $ | 3,754 | |||
Free Cash Flow: | ||||||||
Cash provided by operating activities | $ | 917 | $ | 7,628 | ||||
Capital expenditures | (8,305 | ) | (6,610 | ) | ||||
Free Cash Flow | $ | (7,388 | ) | $ | 1,018 |
____________________________________
1 For the three months ended
2 For the three months ended
3 Relates to restructuring costs incurred associated with the OneTEAM program, including international restructuring under the OneTEAM program.
4 Represents the tax effect of the adjustments at an assumed marginal tax rate of 21% for the three months ended
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) | |||||||
(in thousands) | |||||||
Three Months Ended |
|||||||
2020 | 2019 | ||||||
(unaudited) | (unaudited) | ||||||
Adjusted EBIT and Adjusted EBITDA by Segment: | |||||||
IHT | |||||||
Operating income (loss) | $ | (192,150 | ) | $ | 1,721 | ||
Restructuring and other related charges, net2 | 8 | 102 | |||||
191,788 | — | ||||||
Adjusted EBIT | (354 | ) | 1,823 | ||||
Depreciation and amortization | 3,983 | 4,502 | |||||
Adjusted EBITDA | $ | 3,629 | $ | 6,325 | |||
MS | |||||||
Operating income | $ | 1,022 | $ | 5,534 | |||
Restructuring and other related charges, net2 | 130 | 85 | |||||
Adjusted EBIT | 1,152 | 5,619 | |||||
Depreciation and amortization | 5,431 | 5,414 | |||||
Adjusted EBITDA | $ | 6,583 | $ | 11,033 | |||
Quest Integrity | |||||||
Operating income | $ | 6,106 | $ | 1,644 | |||
Adjusted EBIT | 6,106 | 1,644 | |||||
Depreciation and amortization | 886 | 921 | |||||
Adjusted EBITDA | $ | 6,992 | $ | 2,565 | |||
Corporate and shared support services | |||||||
Operating loss | $ | (27,910 | ) | $ | (25,427 | ) | |
Professional fees and other1 | 2,545 | 5,105 | |||||
Legal costs3 | 1,250 | 264 | |||||
Restructuring and other related charges, net2 | 48 | 21 | |||||
Adjusted EBIT | (24,067 | ) | (20,037 | ) | |||
Depreciation and amortization | 1,408 | 1,434 | |||||
Non-cash share-based compensation costs | 1,530 | 2,434 | |||||
Adjusted EBITDA | $ | (21,129 | ) | $ | (16,169 | ) |
___________________
1 For the three months ended
2 Relates to restructuring costs incurred associated with the OneTEAM program, including international restructuring under the OneTEAM program.
3 For the three months ended
Contact:
EVP, Chief Financial Officer and Treasurer
(281) 388-5521
Source: Team, Inc.
Investors
Shareholder Tools
Investor Relations Contact
Investor Relations, Phone (281) 388-5551
TEAM, Inc., 13131 Dairy Ashford, Suite 600, Sugar Land, TX 77478, United States Of America