Edited Transcript of TISI.N earnings conference call or presentation 18-Jun-20 2:00pm GMT

This morning, I will begin with a high-level economical magazine and draft how we are managing our material along the pandemic. Susan will then detail our first region results and economical position, after which, I will provide an overview of the just trends and an update can our OneTEAM program.

Our first region results were noticeably impacted by contrary just conditions. Consolidated first region revenues were $237 million, down 12% from a year ago. despite lower year-over-year quarterly revenues of $33 million, first region sum border was $57.5 million or 24.3%, can par with 24.5% can the foregoing year quarter. can addition, we were able ought generate sure operating cash flow of nearly $1 million and reduced SG&A expenses by $3.8 million when compared ought the first region of 2019.

Turning ought our portion performance. Mechanical Services first region revenues were $104.5 million, down 14% from the first region of 2019 and adjusted EBITDA was $6.6 million, a decline of 40% when compared ought the same era last year. after a slow begin ought the quarter, Mechanical Services experienced increased domain task from mid-January into March until activity was impacted by the pandemic and the visit global demand. silent the region did no satisfy our expectations, Mechanical Services saw a step reform can its midstream task although pipeline operators performed ongoing goodness management programs. although an example, Team was engaged ought provide can 250 hot tap and row pause fittings because an goodness remediation project. We manufactured and delivered high-quality state-of-the-art fittings can time, and although a result, the visitor awarded us a significant division of their domain activities because the surplus of 2020.

Inspection and fever Treating revenues from the first region were $107.9 million, down 15.1% from the first region of 2019, and adjusted EBITDA was $3.6 million, a decline of 43% from the foregoing year quarter. despite IHT's disappointing quarterly results, largely can our downstream markets, we saw a growth can force and pulp and Paper sectors. This is an instance of our successful revenue diversification initiative ought leverage our skill sets and question material expertise across different industries and geographies.

Quest goodness continued its strong deed by increasing revenues by 16% and improving operating allowance by 271% can Q1 2019. during the first quarter, Quest completed its largest-ever LNG reactor turnaround and inspection can the center East. Using high-resolution ultrasonic technology, Quest inspected the reactors with our proprietary customary header delivery system. Our advanced engineering orchestra performed a fitness because service assessment that enable the clients ought prioritize repairs and last manufacture quickly and safely.

Overall, activity was negatively affected by the unprecedented economic emergency triggered by COVID-19 pandemic and volatility can estate prices, driven by the grease and gas provide and implore imbalance. The first region 2020 revenue shock from these events was nearly $23 million.

In addition, the determination by OPEC+ can early March ought exaggerate production, combined with the disperse of COVID-19 into North America, created an oversupply, causing grease implore ought autumn ought an all-time low.

Many of our clients reprioritized their operations, resulting can scope reductions can sure ongoing work, deferrals or suspensions of planned maintenance projects and cuts can headmaster spend.

In order ought proactively greet the shock of the pandemic and the grease and gas provide and implore imbalance, we quickly mobilized 4 task army addressing health, material continuity, visitor war and fare and cash management, each led by members of my executive team.

First, the health task force. The health and safety of our employees is our peak priority, and the pandemic has significantly disrupted the day-to-day lives of many of our people. Following the guidelines attitude by our sharp response team, we are taking the inherent precautions ought protect our employees worldwide. On-site personnel were limited ought those that are crucial ought visitor operations and implemented social distancing protocols, which embrace working can shifts ought minimize the danger of exposure.

The majority of Team's aim markets cannot be flow remotely. Therefore, many of our refinery clients implemented temperature monitoring and screening ought safely last operations. across with our clients, we dine empowered our technicians ought pause task and explain any activities they believe ought be unsafe.

Team is also strengthening task attitude standards, policies and procedures and age decision-making protocols because both our districts and visitor locations. We dine responded ought more than 100 visitor inquiries ought provide detailed information about our pandemic response plan, including PPE measures and improvements, exposure procedures and respond ought task directives. Team procured and distributed sharp supplies ought can 80 districts globally. We're also helping our employees and their families by providing guidance can how ought minimize the disperse of the virus and sharing estate that our employees can apply can home.

The material continuity task compel was established ought proactively overhear fluctuations can our aim markets and prepare because multiple scenarios with reckon ought design activity and our global workforce. Together with our workforce management and provide safe functions, we accomplished the following: transitioned most non-build employees ought operate remotely and implemented a work-from-home protocol ought minimize danger exposure, limited journey and instituted shelter-in-place directives, ordered excess reserves of manufacturing materials ought mitigate provide safe disruptions and, finally, executed company-wide fare measures.

Team's global workforce management obligation allows us ought essentially coordinate and foretell employee utilization, communicate more effectively with our on-site domain technicians and provide ongoing logistical back ought answer and mobilize can this dynamic environment. With clients' frequent changes ought design scopes, our workforce management obligation has been diligently managing profession requirements and the furlough rgeister ought oath the capability of our resource pool is balanced with our clients' needs. although a result, despite the slowdown can activity, we dine been able ought assert our tall technician utilization rates, ranging among 85% and 90%.

I mentioned earlier that our clients are reevaluating their 2020 design rgeister and headmaster spending plans. We established the sales and visitor war task compel ought proactively mingle with each visitor ought find creative, cost-effective solutions ought their pressing challenges. because example, after a tendency refinery explosion, our nested crew recommended Quest Integrity's unmanned aerial system ought safely capture images and information of the damaged structures, instrument and components.

The visitor war task compel is also looking beyond our modern footprint and service offerings ought back new industries by leveraging the skill sets of our technicians and advanced technologies. We are focused can diversifying into markets and industries that are experiencing less disruption.

By prioritizing those products and services that can best back the midstream power, renewables, utilities, infrastructure and process-related industries, we will leverage the force of our 3 segments, engineering and manufacturing capabilities and integrated solutions ought perform the recovery.

Finally, our fare and cash management task compel shortly implemented decisive aggressive actions ought oath that costs linger aligned with the reduced activity levels. These concrete actions included reducing director, executive and employee compensation; enacting furloughs and restricting unbilled time; executing a reduction can force; eliminating sum nonessential spend; and working with our provide safe partners ought diminish costs. These fast and decisive actions implemented during the last few weeks of March delivered more than $5 million of savings can the first quarter.

While we linger mindful of headmaster investments that can be required ought compose competitive advantages, from a cash perspective, we are laser-focused can cash flow improvements, which embrace collections, billing, CapEx management and inventory reductions.

We will leverage the 4 task army along the recovery aspect can order ought prepare because -- prepare our workforce and best post Team because the future. I will now reform it can ought Susan because a detailed economical magazine and then part more about our just trends and OneTEAM progress. Susan?

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Susan M. Ball, Team, Inc. - Executive VP, CFO & Treasurer [4]

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Thank you, Amerino, and good morning, everyone. although Amerino mentioned, first region consolidated revenues of $237 million were down 12% from the first region of 2019. Quest goodness increased revenues by 16% can the foregoing year, which was offset by revenue declines of 14% and 15% can our Mechanical Services and Inspection and fever Treating segments, respectively.

The COVID-19 pandemic and the grease and gas provide and implore imbalance impacted our revenues by nearly $23 million. also contributing ought the lower revenue was unseasonably bad climate can North America and a delayed ramp-ups of activity following the extended New Year holiday.

After a slow begin can January, our international operations rebounded until mid-February, when few projects can Asia Pacific, United Kingdom and the Central European markets were delayed and subsequently deferred due ought the pandemic.

Consolidated sum border was $57.5 million or 24.3% compared with 24.5% can the same region a year ago. despite the revenue decline, we generate a favorable autumn along due ought the advance of the OneTEAM program and the implementation of our decisive cost-cutting actions.

The first region 2020 fare savings benefits of OneTEAM approximated $6.6 million.

On a portion base because sum margin, Mechanical Services decreased 22% can a 15 -- can a 14% revenue decline. Inspection and fever Treating was down 17% can a 15% revenue decrease. And Quest increased 28% can a 16% revenue improvement.

Now moving ought SG&A. We last ought effect year-over-year reductions of SG&A price along our fare management actions, including the expansion of the OneTEAM program. sum SG&A costs because the first region 2020 decreased $3.8 million or 4.7% from the first region of 2019 ought $78.4 million, largely due ought overall reduced compensation and journey costs. can a sequential basis, SG&A was down $1.3 million from $79.7 million can the fourth region of 2019.

COVID-19, the grease and gas provide and implore imbalance and the shock ought our stock price were deemed ought be a triggering event, requiring us ought perform an interim goodwill impairment assessment. The results of the assessment indicated that goodwill impairment had occurred can the IHT segment. below U.S. GAAP accounting rules, we recognized the noncash pretax goodwill impairment reproach of $191.8 million during the first region of 2020. This had no other shock can the company's ongoing operations.

The first region reported a net loss of $199.7 million although compared ought a loss of $24.2 million can the foregoing year quarter.

Adjusted net loss, a non-GAAP measure, was $18 million, or $0.59 adjusted net loss per diluted part because the first region of 2020 compared ought an adjusted net loss of $19.8 million or a $0.66 adjusted net loss per diluted part because the same region can 2019. significant Q1 2020 adjustments included the noncash goodwill impairment reproach also although $2.7 million can OneTEAM and other professional costs and $1.3 million can nonrecurring legal costs.

Consolidated adjusted EBITDA was a loss of $3.9 million can the first region of 2020, which was down from a $3.8 million entertain recorded can the first region of 2019.

Now turning specifically ought our portion performance. Mechanical Services portion delivered first region 2020 revenues of $104.5 million, down 14% from $121.5 million can the first region of 2019. Adjusted EBITDA was $6.6 million, down from $11 million earned can the same era last year.

The Inspection and fever Treating portion reported first region 2020 revenues of $107.9 million, down 15% when compared ought the $127.1 million posted can the same era last year. First region adjusted EBITDA was $3.6 million, down from $6.3 million can the foregoing year quarter. despite lower revenues, the fall-through ought EBITDA was fairly limited can 14%, and this was largely the arise of the effectiveness of the fare cope with actions.

Quest goodness revenues of $24.4 million were up 16% can the foregoing year era of $21 million. First region adjusted EBITDA was $7 million or 173% higher than the last year's quarter.

Our effective impose assess was nearly 9.3% compared ought 1.4% can the first region of 2019. Our normalized effective impose assess is nearly 25% ought 30%.

The corporation has domestic federal impose net operating losses of nearly $105 million, which are available ought offset our future domestic federal taxable income.

During the quarter, we benefited from the CARES deed and carried back federal net operating losses can the foregoing years instead of carrying the losses forward, which accelerates the impose entertain and recovery of refunds.

In the first quarter, Team generated $917,000 of operating cash flow, representing a decline of nearly $6.7 million can the same era can 2019.

Capital expenditures because the first region of 2020 were $8.3 million. ought back the company's commitment ought free cash flow generation, we dine lowered our 2020 annual headmaster expenditures design by more than 30%. Our forecasted headmaster expenditures because 2020 of nearly $20 million will be utilized ought oath funding of sustainable and safe operations and because those projects that advocate the highest impose of return.

Our cash and cash equivalents can the aim of the first region was $20.5 million compared ought $12.2 million can the aim of the fourth region 2019.

The undrawn borrowing base below our existing faith facility was nearly $100 million going into the second quarter.

We were can compliance with our shore covenants can March 31, 2020.

Our senior secured leverage ratio can the aim of the region was can 2.27x.

We are pleased ought dine completed the faith facility amendment and extension can the second quarter. The amended faith facility matures January 15, 2022, and provides us the additional covenant flexibility ought operate along this recovery period. We trust that our liquidity estate are sufficient ought satisfy our working headmaster needs and cash requirements. economical priorities last ought be ought keep cash, revenue down debt and protect our remains sheet.

In closing, we are prepared ought accept additional actions ought farther diminish our fare structure and asset base although just conditions warrant. although our capital concentrate is fare and cash management, we will last ought estimate future opportunities that forward sure returns can investment or operational efficiency.

That completes the economical review. I will now reform the summon back can ought Amerino.

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Amerino Gatti, Team, Inc. - Chairman & CEO [5]

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Thank you, Susan. ago we accept your questions, I will provide an overview of the modern just conditions and magazine some of our anticipated restructuring actions although we prepare because the recovery.

Despite the OPEC+ announcement can April ought chop manufacture output, rough grease prices remained feeble although a arise of the shelter-in-place directives that were implemented ought embrace the disperse of COVID-19. The implore disruption created by the pandemic occurred much faster than provide could be reduced, triggering a drive exaggerate can rough inventory volumes. According ought EIA data, reduced implore because refined products caused refinery utilization rates ought decline ought 2008 levels. Utilization rates dine declined farther can the second quarter, except we conduct expect ought exclaim on a gradual recovery along the second half of the year. Team used to typically entertain because a era of 12 ought 18 months following the utilization impose drop. However, the pandemic and modern just dynamics dine delayed the implore growth because our products and services.

Before I part Team's near-term, midterm and long-term objectives, I expectation ought reiterate that nobody can foretell with any pledge the scale or length of disruption from COVID-19 or how deep and earnest the economic and health impacts will be. Our near-term aim was ought aggressively diminish our variable fare structure ought align with the lower activity levels. We linger prepared ought accept additional actions although warranted ought answer ought the evolving material environment.

We trust the modern just dynamics gift 3 near-term opportunities because Team. First, pure-play refiners absence ought linger operational silent they estimate maintenance projects and ongoing regulatory compliance requirements. Second, integrated clients will leverage their downstream businesses ought mitigate the shock of lower grease prices can their consolidated results. And third, given the oversupply of manufacture and increasing inventory levels, there is significant implore because expend and storage of both rough and petroleum products.

As shelter-in-place protocols are gradually lifted, we expect gasoline and diesel implore ought drive the recovery, both of which, according ought EIA data, made up more than 70% of U.S. manufacture can 2019.

From a midterm perspective, we anticipate onstream and call-out activity ought perform the recovery, followed by nested operations and, afterward can the year, projects and turnarounds. We assert strong satisfy with our furloughed technicians, last ought provide them with health benefits and design ought oath their certification levels are preserved can order ought quickly restart operations.

Team's scalable operating model and the depth and breadth of our products and services portfolio allows us ought flex with material demands. can order ought forward additional structural and everlasting fare reductions, we dine expanded and accelerated the next aspect of the OneTEAM program. This OneTEAM tuneup is a dedicated 10- ought 12-week sprint, accelerating initiatives that will farther optimize the organization. We appraise the OneTEAM tuneup and other fare reduction actions will forward among $20 million ought $25 million of savings can the second quarter.

The long-term fundamentals because our products and services linger strong. although isolate of the sharp and basic services network and can end collaboration with our plants, Team supports the performance, efficiency and longevity of aging estate and ensures compliance with federal, throng and industry standards and regulations.

I expectation ought reiterate 4 of our competitive advantages.

First, our scalable and agile structure increases our faculty ought flex with just demands, allowing us ought be more responsive, create well-informed decisions and slaughter efficiently.

Second, the operations planning faculty of our workforce management obligation allows us ought optimize the utilization of our estate globally.

Third, our different blue-chip visitor base and maturing sales and explain management obligation provide a strong base ought reform revenues and compose appraise from our integrated solutions.

And fourth, our innovative technique and industry-leading digital applications back our clients although they hunt differentiated and cost-effective solutions because the sophisticated asset management challenges.

Technology and digital applications also depart our clients ought perform danger and minimize exposure of personnel can a post-pandemic recovery.

As previously mentioned, we linger focused can managing what is can our control. Given the difficult except inherent fare actions implemented late can the first quarter, we expect Q1 will symbol the lowest region of the year can condition of sum border and adjusted EBITDA.

Looking forward, we anticipate our second region 2020 revenues ought be nearly 35% ought 40% below Q2 2019.

Also, Quest is experiencing lumpiness can the second region due ought continued travel-related restrictions and extended quarantine periods.

As a arise of the sum implementation of our fare and cash actions, we expect second region sum border improvement when compared ought Q1 2020 also although sure adjusted EBITDA and free cash flow.