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Team, Inc. Reports Second Quarter 2023 Results

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Team, Inc. reports Q2 2023 revenue of $239.5 million, up 8% YoY. Gross margin improves by 190 basis points. Net loss of $15.8 million, an improvement of $12.4 million YoY. Consolidated Adjusted EBITDA increases to $17.4 million, up from $5.7 million YoY. Ongoing cash selling, general and administrative expenses reduced by $3.2 million YoY. Successfully repaid remaining $41.2 million of convertible notes. Strong revenue growth and improved cost efficiency contribute to positive financial results.
Positive
  • Q2 2023 revenue increases by 8% YoY
  • Gross margin improves by 190 basis points
  • Net loss improves by $12.4 million YoY
  • Consolidated Adjusted EBITDA increases to $17.4 million
  • Ongoing cash selling, general and administrative expenses reduced by $3.2 million YoY
  • Successful repayment of convertible notes
Negative
  • None.

Second Quarter 2023 Revenue Increased $18.0 million or 8.1% Over Second Quarter 2022

Gross Margin Improved by 190 basis points Over Second Quarter 2022

SUGAR LAND, Texas, Aug. 10, 2023 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2023.

Second Quarter 2023 Highlights1:

  • Increased revenues to $239.5 million, up 8% over the 2022 second quarter.
  • Improved gross margin to $60.9 million and 25.4% of revenue, up roughly 190 basis points from the 2022 second quarter.
  • Reported net loss of $15.8 million, an improvement of $12.4 million over the 2022 second quarter.
  • Grew consolidated Adjusted EBITDA2 to $17.4 million (7.3% of consolidated revenue), up from $5.7 million (2.6% of consolidated revenue) in the 2022 second quarter.
  • Reduced ongoing cash selling, general and administrative expenses by $3.2 million over the 2022 period, and a total of $8.3 million year-to-date in 2023.
  • On August 1, 2023, successfully repaid the Company’s remaining $41.2 million of convertible notes with proceeds from the previously announced June 2023 refinancing transaction.

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 financial measures at the end of this press release.

“We are encouraged with the progress reflected in our second quarter results, which delivered strong revenue growth and Adjusted EBITDA of $17.4 million, more than triple the prior year period. More importantly, we saw the benefits from our improved cost efficiency, with our gross margin growing by 190 basis points to 25.4% of revenue and our Adjusted EBITDA margin expanding to 7.3% of revenue. Both of our operating segments also outperformed the 2022 period, with segment level Adjusted EBITDA margin improving by 160 basis points in our Inspection and Heat Treating segment, and 340 basis points in our Mechanical Services segment,” said Keith D. Tucker, TEAM’s Chief Executive Officer. “Our stronger operating leverage and lower cost structure resulted in nearly 66% of incremental revenue growth falling through to Adjusted EBITDA, further demonstrating the tangible progress made to date in our efforts to improve TEAM’s financial and operational strength while maintaining best in class safety and service quality.”

Mr. Tucker then went on to note the Company’s recent financing transactions, “In June, we successfully closed a series of refinancing transactions that allowed us to repay in full our existing senior secured term loan and, on August 1, repaid in full our remaining outstanding convertible notes. These transactions simplified our capital structure, extended our next debt maturity to August 2025 and successfully eliminated the conditions that led to the going concern disclosure in our 2022 fiscal year-end annual report and our first quarter report.”

“Looking to the third quarter, we see generally stronger activity levels across both our segments, driven by healthy customer end markets, which should provide further opportunities to capture accretive revenue growth. We are particularly excited about our state-of-the-art aerospace facility, where our activity levels continue to increase. Additionally, while we have made significant progress throughout our operation in reducing costs and improving cash flow, management remains focused on addressing underperforming components of the business and identifying further opportunities to improve efficiency and margins, the details of which we expect to share during the third quarter,” concluded Tucker.

Financial Results

On November 1, 2022, the Company closed the sale of its Quest Integrity business. Financial information, performance metrics and discussions for comparative period 2022 are based on the Company’s continuing operations (Inspection and Heat Treating (IHT) and Mechanical Services (MS) segments) and exclude results of discontinued operations (Quest Integrity) except where stated otherwise.

Second quarter revenues were up $18.0 million to $239.5 million as compared to $221.5 million in the prior-year quarter, primarily due to higher callout and turnaround activity in the IHT segment and higher activity levels in leak repair and hot tapping services across the MS segment. Unfavorable foreign exchange rate movements in the 2023 second quarter reduced consolidated revenue growth by $1.8 million. In the second quarter of 2023, consolidated gross margin was $60.9 million, or 25.4% of revenue, up 190 basis points from 23.5%, or $52.1 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, increased operational efficiency, improved pricing, and favorable project mix.

Selling, general and administrative expenses for the second quarter were $56.3 million, down $6.6 million, or 10.5% from the second quarter of 2022, mainly due to savings from the Company’s ongoing cost reduction efforts and lower professional fees. After adjusting for expenses not representative of the Company’s ongoing operations, and removing $6.1 million and $5.7 million, respectively, of noncash expenses consisting of depreciation and amortization and share-based compensation expense, our cash selling, general and administrative expenses declined by $3.2 million.

Consolidated net loss in the second quarter of 2023 was $15.8 million ($3.61 loss per share) compared to a net loss from continuing operations of $28.2 million ($6.53 loss per share) in the second quarter of 2022. The Company’s adjusted measure of net income/loss, consolidated Adjusted EBIT, a non-GAAP financial measure, was income of $7.7 million in the second quarter of 2023 compared to a loss of $3.9 million in the prior year’s comparable quarter. Consolidated Adjusted EBITDA, a non-GAAP financial measure, was $17.4 million for the second quarter of 2023 compared to $5.7 million for the prior year quarter, with the improvement driven by the factors noted above. (See the accompanying reconciliation of non-GAAP financial measures at the end of this earnings release.)

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 ongoing operations. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is presented at the end of this earnings release.

Segment Results

The following table illustrates the composition of the Company’s revenue and operating income (loss) by segment for the quarter ended June 30, 2023 and 2022 (in thousands):

 
TEAM, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(unaudited, in thousands)
     
  Three Months Ended
June 30,
 Better (Worse)
  2023 2022 $ %
Revenues        
IHT $116,740  $114,124  $2,616  2.3%
MS  122,752   107,416   15,336  14.3%
  $239,492  $221,540  $17,952  8.1%
         
Operating income (loss)        
IHT $6,548  $5,514  $1,034  18.8%
MS  12,720   6,984   5,736  82.1%
Corporate and shared support services  (14,672)  (23,292)  8,620  37.0%
  $4,596  $(10,794) $15,390  142.6%
                

Revenues. IHT revenues increased by $2.6 million or 2.3% and benefited from a $4.6 million or 5% increase in IHT U.S. revenue due to higher callout and turnaround activity and a $1.1 million increase in IHT other international revenue, partially offset by a $3.1 million decrease in Canada revenue due to lower turnaround activity. MS revenue increased by $15.3 million or 14.3%, attributable to a $4.8 million or 8.9% increase in U.S. revenue due to higher activity in leak repair, callout activity and hot tapping services and a $10.0 million revenue increase in other international regions and MS Canada.

Operating income (loss). IHT operating income increased by $1.0 million due to higher activity and higher margins in Canada and other international regions; partially offset by higher labor related costs in U.S. operations. MS operating income increased by $5.7 million as compared to the prior year quarter, driven by higher revenue and margins from the Company’s U.S., Canada and other international operations. Operating income from U.S. and other international operations increased by $3.4 million and $2.8 million, respectively, partially offset by a decrease in operating income from TEAM’s domestic valve business. Corporate operating loss decreased by $8.6 million due to lower professional fees and lower severance cost in the current quarter compared to the prior year quarter, and lower overall costs due to the Company’s ongoing cost reduction efforts.

 
TEAM, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(unaudited, in thousands)
     
  Six Months Ended
June 30,
 Better (Worse)
  2023 2022 $ %
Revenues        
IHT $218,569  $209,721  $8,848  4.2%
MS  223,200   200,857   22,343  11.1%
  $441,769  $410,578  $31,191  7.6%
         
Operating income (loss)        
IHT $11,271  $5,648  $5,623  99.6%
MS  15,913   7,497   8,416  112.3%
Corporate and shared support services  (30,334)  (46,346)  16,012  34.5%
  $(3,150) $(33,201) $30,051  90.5%
                

Revenues. IHT revenues increased by $8.8 million or 4.2%, primarily driven by an increase of $13.2 million in IHT U.S. revenue due to higher callout and turnaround activity, partially offset by lower activity in Canada. MS revenue increased by $22.3 million or 11.1%, consisting of an $8.8 million increase in the U.S. market primarily attributable to higher activity in callout, hot tapping and leak repair services, a $9.3 million increase in other international operations primarily attributable to higher turnaround activity, leak repair services and product sales, and a $3.5 million increase in Canada.

Operating income (loss). IHT operating income increased by $5.6 million or 99.6%, driven by higher activity and improved margins in the U.S. and cost reductions in Canada. MS operating income increased by $8.4 million as compared to the prior year period. Operating income from the U.S., other international and Canada operations increased by $4.2 million, $2.1 million and $2.1 million, respectively, driven by higher activity and improved margins. Corporate operating loss decreased by $16.0 million due to lower professional fees and lower severance cost in the current year period as compared to the prior year period and lower overall costs due to the Company’s ongoing cost reduction efforts.

Balance Sheet and Liquidity

On June 30, 2023, the Company had $61.8 million of total liquidity, consisting of consolidated cash and cash equivalents of $25.0 million (excluding $5.4 million of restricted cash) and $36.8 million of undrawn availability (excluding availability utilized on August 1 to repay the Company’s convertible notes) under its various credit facilities.

The Company’s total debt as of June 30, 2023 was $310.9 million as compared to $285.9 million as of fiscal year ended 2022. The Company’s net debt (total debt less cash and cash equivalents), a non-GAAP financial measure, was $280.5 million at June 30, 2023.

On August 8, 2023, after repaying the Company’s convertible notes on August 1, the Company had $54.7 million of total liquidity, consisting of consolidated cash and cash equivalents of $21.3 million (excluding $5.3 million of restricted cash) and approximately $33.4 million of undrawn availability under its various credit facilities.

Non-GAAP Financial Measures

The non-GAAP financial 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 Company’s ability to continue as a going concern; the Company’s ability to execute on its cost management actions; the Company’s ability to generate sufficient cash from operations, access its credit facility, or maintain its compliance with covenants under its credit facility and credit agreement; the Company’s ability to manage inflationary pressures on its operating costs; the Company’s ability to successfully divest assets on terms that are favorable to the Company; the Company’s 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 impact to the Company’s business, financial condition, results of operations and cash flows due to negative market conditions, including from the lingering impact of widespread public health crises, epidemics and pandemics, threats of domestic and global economic recession and future economic uncertainties, particularly in industries in which we are heavily dependent; seasonal and other variation, such as severe weather conditions (including conditions influenced by climate change) and the nature of the Company’s clients’ industry; the Company’s ability to expand into new markets (including low carbon energy transition) and attract clients in new industries may be limited due to its competition’s breadth of service offerings and intellectual property; the Company’s significant debt and high leverage which could have a negative impact on its financing options, liquidity position and ability to manage increases in interest rates; the timing of new client contracts and termination of existing contracts may result in unpredictable fluctuations in the Company’s cash flows and financial results; the risk of non-payment and/or delays in payment of receivables from the Company’s clients; the Company may not be able to continue to meet the New York Stock Exchange’s (“NYSE”) continued listing requirements and rules, and the NYSE may delist the Company’s common stock, which could negatively affect the Company, the price of the Company’s common stock and its shareholders’ ability to sell the Company’s common stock; the Company’s financial forecasts are based upon estimates and assumptions that may materially differ from actual results; the Company may incur liabilities and suffer negative financial or reputational impacts relating to occupational health and safety matters; changes in laws or regulations in the local jurisdictions that the Company conducts its business; the outcome of tax examinations; changes in tax laws, and other tax matters; foreign currency exchange rate and interest rate fluctuations; the inherently uncertain outcome of current and future litigation; if the Company fails to maintain effective internal controls, it may not be able to report its financial results accurately or timely or prevent or detect fraud, which could have a material adverse effect on its business; acts of terrorism, war or political or civil unrest in the U.S. or elsewhere, changes in laws and regulations, or the imposition of economic or trade sanctions affecting international commercial transactions 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. Haight
Executive Vice President, Chief Financial Officer
(281) 388-5521

 
TEAM, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED OPERATING RESULTS
(unaudited, in thousands, except per share data)
 
  Three Months Ended Six Months Ended
  June 30, June 30,
  2023 2022 2023 2022
         
Revenues $239,492  $221,540  $441,769  $410,578 
Operating expenses  178,576   169,426   333,851   317,334 
Gross margin  60,916   52,114   107,918   93,244 
Selling, general, and administrative expenses  56,320   62,908   111,068   126,429 
Restructuring and other related charges, net           16 
Operating income (loss)  4,596   (10,794)  (3,150)  (33,201)
Interest expense, net  (16,691)  (18,476)  (33,432)  (37,055)
Loss on debt extinguishment  (1,582)     (1,582)   
Other income, net  13   3,259   648   6,438 
Loss before income taxes  (13,664)  (26,011)  (37,516)  (63,818)
Less: (Provision) benefit for income taxes  (2,089)  (2,191)  (2,948)  (2,717)
Net loss from continuing operations  (15,753)  (28,202)  (40,464)  (66,535)
Net income from discontinued operations     6,650      12,521 
Net loss $(15,753) $(21,552) $(40,464) $(54,014)
Basic net loss per common share:        
Loss from continuing operations  (3.61)  (6.53)  (9.30)  (16.45)
Income from discontinued operations     1.54      3.10 
Total $(3.61) $(4.99) $(9.30) $(13.35)
         
Weighted-average number of shares outstanding:        
Basic  4,362   4,318   4,353   4,045 
                 


 
TEAM, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
    
 June 30, December 31,
 2023
 2022
 (unaudited)  
    
Cash and cash equivalents$30,437  $58,075 
    
Other current assets 296,318   289,478 
    
Property, plant, and equipment, net 131,956   138,099 
    
Other non-current assets 127,974   130,993 
    
Total assets$586,685  $616,645 
    
Current portion of long-term debt and finance lease obligations$4,547  $280,993 
    
Other current liabilities 154,019   167,871 
    
Long-term debt and finance lease obligations, net of current maturities 306,334   4,942 
    
Other non-current liabilities 41,913   45,079 
    
Stockholders’ equity 79,872   117,760 
    
Total liabilities and stockholders’ equity$586,685  $616,645 
        


 
TEAM INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED CASH FLOW INFORMATION1
(unaudited, in thousands)
   
  Six Months Ended June 30,
  2023 20221
     
     
Net loss $(40,464) $(54,014)
     
Depreciation and amortization expense  19,085   19,609 
     
Loss on debt extinguishment  1,582    
     
Amortization of debt issuance costs, debt discounts and deferred financing costs  16,229   12,077 
     
Deferred income taxes  730   (357)
     
Non-cash compensation cost  627   (59)
     
Write-off of deferred loan costs     2,748 
     
Working Capital and Other  (21,406)  (33,395)
     
Net cash used in operating activities  (23,617)  (53,391)
     
Capital expenditures  (5,073)  (14,001)
     
Proceeds from disposal of assets  332   5,119 
     
Net cash used in investing activities  (4,741)  (8,882)
     
Borrowings (payments) under ABL Facility, net  (21,093)  66,053 
     
Borrowings under Eclipse Term Loans  27,398    
     
Payments for debt issuance costs  (5,327)  (10,640)
     
Issuance of common stock, net of issuance costs     9,696 
     
Other  (495)  (323)
     
Net cash provided by financing activities  483   64,786 
     
Effect of exchange rate changes  237   (382)
     
Net change in cash and cash equivalents $(27,638) $2,131 


1 Consolidated statement of cash flow for 2022 includes cash flows from discontinued operations.
   


 
TEAM, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(unaudited, in thousands)
 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2023 2022 2023 2022
Revenues        
IHT $116,740  $114,124  $218,569  $209,721 
MS  122,752   107,416   223,200   200,857 
  $239,492  $221,540  $441,769  $410,578 
         
Operating income (loss)        
IHT $6,548  $5,514  $11,271  $5,648 
MS  12,720   6,984   15,913   7,497 
Corporate and shared support services  (14,672)  (23,292)  (30,334)  (46,346)
  $4,596  $(10,794) $(3,150) $(33,201)
         
Segment Adjusted EBIT1        
IHT $7,541  $5,539  $12,304  $5,689 
MS  12,819   7,038   16,288   7,551 
Corporate and shared support services  (12,699)  (16,473)  (26,652)  (32,321)
  $7,661  $(3,896) $1,940  $(19,081)
         
Segment Adjusted EBITDA1        
IHT $10,729  $8,635  $18,546  $12,039 
MS  17,523   11,672   25,745   17,069 
Corporate and shared support services  (10,807)  (14,629)  (22,639)  (29,785)
  $17,445  $5,678  $21,652  $(677)

___________________

1 See the accompanying reconciliation of non-GAAP financial measures at the end of this earnings release.
   

TEAM, INC. AND SUBSIDIARIES
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 share; earnings before interest and taxes (“EBIT”); Adjusted EBIT; 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) and adjusted net income (loss) per share to exclude the following items: non-routine legal costs and settlements, non-routine professional fees, restructuring charges, loss on debt extinguishment, certain severance 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 non-routine legal costs and settlements, non-routine professional fees, loss on debt extinguishment, certain severance 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 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 are 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 financial 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 Ended June 30, Six Months Ended June 30,
  2023 2022 2023 2022
Adjusted Net Loss:        
Net loss $(15,753) $(28,202) $(40,464) $(66,535)
Professional fees and other1  2,647   4,693   4,368   10,037 
Legal costs2  200   1,200   200   1,728 
Severance charges, net3  217   1,008   522   2,358 
Natural disaster insurance recovery     (872)     (872)
Loss on debt extinguishment  1,582      1,582    
Tax impact of adjustments and other net tax items4  (7)  (3)  (85)  (7)
Adjusted Net Loss $(11,114) $(22,176) $(33,877) $(53,291)
         
Adjusted Net Loss per common share:        
Basic $(2.55) $(5.14) $(7.78) $(13.17)
         
Consolidated Adjusted EBIT and Adjusted EBITDA:        
Net loss $(15,753) $(28,202) $(40,464) $(66,535)
Provision for income taxes  2,089   2,191   2,948   2,717 
Gain on equipment sale  7   (1,172)  (296)  (3,485)
Interest expense, net  16,691   18,476   33,432   37,055 
Professional fees and other1  2,647   4,693   4,368   10,037 
Legal costs2  200   1,200   200   1,728 
Severance charges, net3  217   1,008   522   2,358 
Foreign currency gain  143   (1,029)  (34)  (1,691)
Pension credit5  (162)  (189)  (318)  (393)
Natural disaster insurance recovery     (872)     (872)
Loss on debt extinguishment  1,582      1,582    
Consolidated Adjusted EBIT  7,661   (3,896)  1,940   (19,081)
Depreciation and amortization        
Amount included in operating expenses  3,694   3,914   7,413   8,072 
Amount included in SG&A expenses  5,845   5,095   11,672   10,391 
Total depreciation and amortization  9,539   9,009   19,085   18,463 
Non-cash share-based compensation costs  245   565   627   (59)
Consolidated Adjusted EBITDA $17,445  $5,678  $21,652  $(677)
         
Free Cash Flow:        
Cash used in operating activities $(5,854) $(511) $(23,617) $(56,486)
Capital expenditures  (2,381)  (5,279)  (5,073)  (11,416)
Free Cash Flow $(8,235) $(5,790) $(28,690) $(67,902)

____________________________________

1 For the three and six months ended June 30, 2023, includes $1.6 million and $3.2 million, respectively related to debt financing and $0.7 million and $0.8 million, respectively, related to lease extinguishment charges. For the three and six months ended June 30, 2022, includes $4.7 million and $10.0 million, respectively, related to costs associated with the debt financing and corporate support.
2 Primarily relates to accrued legal matters and legal fees.
3 For the three and six months ended June 30, 2023, primarily related to costs associated with staff reductions. For the three months ended June 30, 2022, includes $1.0 million primarily related to customary severance costs associated with staff reductions. For the six months ended June 30, 2022, includes $1.3 million related to customary severance costs associated with executive departures and $1.1 million associated with severance across multiple corporate departments.
4 Represents the tax effect of the adjustments.
5 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the cost 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.
   


 
TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)
(unaudited, in thousands)
    
  Three Months Ended June 30, Six Months Ended June 30,
  2023 2022 2023 2022
         
Segment Adjusted EBIT and Adjusted EBITDA:        
         
IHT        
Operating income $6,548  $5,514  $11,271  $5,648 
Severance charges, net1  165   25   205   41 
Professional fees and other  828      828    
Adjusted EBIT  7,541   5,539   12,304   5,689 
Depreciation and amortization  3,188   3,096   6,242   6,350 
Adjusted EBITDA $10,729  $8,635  $18,546  $12,039 
         
MS        
Operating income $12,720  $6,984  $15,913  $7,497 
Severance charges, net1  52   54   308   54 
Professional fees and other  47      67    
Adjusted EBIT  12,819   7,038   16,288   7,551 
Depreciation and amortization  4,704   4,634   9,457   9,518 
Adjusted EBITDA $17,523  $11,672  $25,745  $17,069 
         
Corporate and shared support services        
Net loss $(35,021) $(40,700) $(67,648) $(79,680)
Provision for income taxes  2,089   2,191   2,948   2,717 
Gain on equipment sale  7   (1,172)  (296)  (3,485)
Interest expense, net  16,691   18,476   33,432   37,055 
Foreign currency gain  143   (1,029)  (34)  (1,691)
Pension credit2  (162)  (189)  (318)  (393)
Professional fees and other3  1,772   4,693   3,473   10,037 
Legal costs4  200   1,200   200   1,728 
Severance charges, net1     929   9   2,263 
Loss on debt extinguishment  1,582      1,582    
Natural disaster insurance recovery     (872)     (872)
Adjusted EBIT  (12,699)  (16,473)  (26,652)  (32,321)
Depreciation and amortization  1,647   1,279   3,386   2,595 
Non-cash share-based compensation costs  245   565   627   (59)
Adjusted EBITDA $(10,807) $(14,629) $(22,639) $(29,785)

___________________

1 For the three and six months ended June 30, 2023, primarily related to costs associated with staff reductions. For the three months ended June 30, 2022, includes $1.0 million primarily related to customary severance costs associated with staff reductions. For the six months ended June 30, 2022, includes $1.3 million related to customary severance costs associated with executive departures and $1.1 million associated with severance across multiple corporate departments.
2 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the cost 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.
3 For the three and six months ended June 30, 2023, includes $1.6 million and $3.2 million, respectively related to debt financing and $0.7 million and $0.8 million, respectively, related to lease extinguishment charges. For the three and six months ended June 30, 2022, includes $4.7 million and $10.0 million, respectively, related to costs associated with the debt financing and corporate support.
4 Primarily relates to accrued legal matters and legal fees.
   

 


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