TEAM INC

The following is a comparison of our results of operations for the three and nine months ended September 30, 2025 to the three and nine months ended September 30, 2024.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

The following is a comparison of our results of operations for the three months ended September 30, 2025 to the three months ended September 30, 2024 (in thousands):

Revenues. Total revenues increased by $14.2 million or 6.7% compared to the same period in the prior year. Revenues were favorably impacted by $0.9 million attributable to foreign exchange rates movements. IHT revenues increased by $6.2 million or 5.7% primarily driven by $5.0 million of revenue growth from higher callout and nested activity in the U.S. with new customers and addition to existing customer sites. Additionally, IHT revenues in Canada and other international regions increased by $1.2 million, driven by higher non-destructive examination and heat-treating activity primarily in Canada. MS reported an $8.0 million or 7.8% increase in revenues, largely attributable to a $7.9 million increase in U.S. turnaround activities, and a $3.4 million increase in project work in Canada. These gains were partially offset by a $3.3 million decrease in revenues from other international locations, including the United Kingdom, due to lower demand for leak repair services and valve product services during the quarter.

Operating income (loss). Overall operating income was $1.3 million in the current year quarter, a $1.8 million decrease compared to operating income of $3.2 million in the prior year quarter. IHT operating income increased by $1.7 million or 16.9% reflecting the contributions from revenue growth for the quarter, with operating income from the U.S. increasing by $1.0 million, and improved operating income from Canada of $0.4 million driven mainly by higher customer project activity. MS operating income increased by $1.4 million or 31.2% as compared to the prior year quarter, with an increase in U.S. operating income of $1.9 million and Canada of $1.0 million. This improvement was partially offset by lower operating income from other international regions of $1.5 million, driven by lower customer project activity as compared to the prior year quarter. Corporate operating loss increased by $4.9 million, primarily due to higher non-recurring professional fees and legal costs, see details noted in the table below.

Operating income includes net expenses totaling $4.1 million for the three months ended September 30, 2025 and net credits totaling $1.3 million for the three months ended September 30, 2024, that we do not believe are indicative of our core operating activities, as detailed in the table below (in thousands):

Excluding the impact of these identified non-core items in both periods, operating income increased by $3.6 million or 200.7%, from $1.8 million in the three months ended September 30, 2024 to $5.4 million for the three months ended September 30, 2025. See our non-GAAP reconciliation for additional details of our non-core expenses.

Interest expense, net. Interest expense remained consistent in the current quarter as compared to the prior year quarter.

Cash interest paid during the quarter ended September 30, 2025 and 2024 was $9.8 million and $7.1 million, respectively, with the increase in cash interest driven by the timing of interest payments on the First Lien Term Loan.

Loss on debt extinguishment. The loss on debt extinguishment reflects the write-off of unamortized debt issuance costs associated with the prepayment of the 2025 Second Lien Term Loans on September 11, 2025.

Other income (expense), net. Overall change in other income (expense), net of $3.3 million is primarily attributable to gain on favorable foreign currency fluctuations during the current quarter.

Taxes. The provision for income tax was $0.9 million on the pre-tax loss of $10.5 million in the current year quarter, compared to a $0.5 million income tax provision on a pre-tax loss of $10.6 million in the prior year quarter. The effective tax rate, inclusive of discrete items, was a provision of 9.1% for the three months ended September 30, 2025, compared to a provision of 4.7% for the three months ended September 30, 2024. The increase in effective tax rate for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 is due to the mix of pretax income in non-valuation allowance jurisdictions and pretax losses in valuation allowance jurisdictions. The impact is a larger increase in income tax expense as compared to pretax income, resulting in a higher effective tax rate.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The following is a comparison of our results of operations for the nine months ended September 30, 2025 to the nine months ended September 30, 2024 (in thousands):

Revenues. Total revenues increased by $32.7 million or 5.1% from the prior year period. IHT year-to-date revenue increased by $30.1 million or 9.4% compared to the prior year period, primarily driven by an increase in U.S. revenue of $23.0 million mainly due to large turnaround projects for our existing customers at new sites, and expanded support in established nested activities for existing customers. In addition, increased demand for enhanced non-destructive evaluation and testing services generated $3.1 million in year over year growth from our laboratory testing and inspection facility in Cincinnati. Greater turnaround and callout services, especially in eastern Canada also contributed a $3.4 million revenue increase. MS revenue increased by $2.6 million or 0.8% compared to the prior year period, with a $9.1 million U.S. revenue increase due to increased turnaround and call out activity and a $2.9 million revenue increase in Canada, offset by a revenue decrease in other international areas of $9.4 million due to the conclusion of prior year projects in Trinidad, the United Kingdom and Latin America that did not repeat in 2025.

Operating income (loss). Overall operating income was $7.4 million in the 2025 period, a $0.5 million or 6.2% decrease over operating income of $7.9 million in the prior year period. IHT operating income increased by $8.5 million or 30.9%, primarily driven by the increased revenue described above. MS operating income decreased by $4.3 million or 22.5% as compared to the prior year period. MS operating income from international operations, excluding Canada, decreased by $4.5 million, reflecting the impact of prior year project activity that did not repeat this year, partially offset by a $1.0 million increase in operating income from the U.S. revenue driven mainly by higher margin projects. Corporate operating loss increased by $4.7 million compared to the prior year period, primarily due to increased non-recurring professional fees and legal reserves in the current period, offset by lower personnel and support cost, see details noted in the table below.

For the nine months ended September 30, 2025 and 2024, operating income includes net expenses totaling $10.5 million and $2.0 million, respectively, that we believe are not indicative of our core operating activities, as detailed in the table below (in thousands):

Excluding the impact of these identified non-core items in both periods, operating income improved by $8.0 million, or 80.7% from $10.0 million in the nine months ended September 30, 2024 to $18.0 million in the nine months ended September 30, 2025. See our non-GAAP reconciliation for additional details of our non-core expenses.

Interest expense, net. Interest expense, net decreased by $0.6 million from the prior year period. The decrease was primarily attributable to lower interest rates on our Revolving Credit Loans and other facilities.

Cash interest paid for the nine months ended September 30, 2025 and 2024 was $22.6 million and $19.5 million, respectively.

Loss on debt extinguishment. On March 12, 2025, as part of debt refinancing with existing and new lenders, we repaid the outstanding balances of the ME/RE Loans, Corre Delayed Draw Term Loan, and Corre Incremental Term Loan, and made a partial payment on the Corre Uptiered Loan, including applicable prepayment premiums and accrued interest. These transactions resulted in a loss on debt extinguishment of $11.9 million, which includes $7.4 million of noncash unamortized debt issuance cost written off with the payoffs. Additionally, a $1.3 million write-off of unamortized debt issuance costs was recognized in connection with the prepayment of the 2025 Second Lien Term Loans on September 11, 2025.

Other income (expense), net. The overall change in other income (expense), net of $1.2 million, was primarily driven by the foreign currency transaction losses in the current year period reflecting the effects of unfavorable fluctuations in the value of the U.S. dollar relative to the foreign currencies to which we have exposure.

Taxes. The provision for income tax was $2.2 million on the pre-tax loss of $43.3 million in the current year-to-date period compared to income tax expense of $2.0 million on the pre-tax loss of $29.0 million in the prior year-to-date period. The effective tax rate was a provision of 5.0% for the nine months ended September 30, 2025, compared to a provision of 7.1% for the nine months ended September 30, 2024. The effective tax rate differs from the prior year period due to changes in the valuation allowance.

Non-GAAP Financial Measures and Reconciliations

We use 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.

We define 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, loss on debt extinguishment, certain severance charges, non-routine write-off of assets 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, pension credit, and items of other (income) expense. Consolidated adjusted EBITDA further excludes depreciation, amortization, and non-cash share-based compensation costs from consolidated adjusted EBIT. Segment adjusted EBIT is equal to segment operating income (loss) excluding costs associated with non-routine legal costs and settlements, non-routine professional fees, certain severance charges, and certain other items as determined by management. Segment adjusted EBITDA further excludes depreciation, amortization, and non-cash share-based compensation costs from segment adjusted EBIT. Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures paid in cash.

We believe 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 which 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 EBITDA is also used as a basis for the Chief Operating Decision Maker (Chief Executive Officer) 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 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.

The following tables set forth the reconciliation of adjusted net income (loss), EBIT and EBITDA to their most comparable GAAP financial measurements on a consolidated and segmented basis:

1 For the three and nine months ended September 30, 2025, includes $0.4 million and $1.7 million, respectively related to debt financing, and $1.6 million and $4.6 million, respectively, related to support costs. For the three and nine months ended September 30, 2024, includes $0.3 million and $2.7 million, respectively, related to debt financing, and for the nine months ended September 30, 2024, includes $0.2 million related to support costs.

2 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the amount of the discounted pension liability. The pension plan was frozen in 1994 and no new participants have been added since that date.

1 For the three and nine months ended September 30, 2025, includes $0.4 million and $1.7 million, respectively related to debt financing, and $1.6 million and $4.6 million, respectively, related to support costs. For the three and nine months ended September 30, 2024, includes $0.3 million and $2.7 million, respectively, related to debt financing, and for the nine months ended September 30, 2024, includes $0.2 million related to support costs.

2 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the amount of the discounted pension liability. The pension plan was frozen in 1994 and no new participants have been added since that date.

Liquidity and Capital Resources

Financing for operations consists primarily of our 2022 ABL Credit Agreement, First Lien Term Loan Agreement, Second A&R Second Lien Term Loan Credit Agreement, and cash flows from our operations.

We have evaluated our liquidity within one year after the date of issuance of the accompanying condensed consolidated financial statements to assess the Company’s ability to fund its operations. Based upon such liquidity assessment, we believe that the Company’s current working capital, forecasted cash flows from operations, current and expected availability under our existing debt arrangements and capital expenditure financing is sufficient to fund our operations, service our indebtedness, and maintain compliance with our debt covenants for the next twelve months, and based on current expectations, the long-term. We based this assessment on assumptions that may prove to be inaccurate, and we could exhaust our available capital resources sooner than we expect in the event that we fail to meet our current financial performance expectations. See Note 10 - Debtin this Quarterly Report on Form 10-Q and Note 11 - Debt in our Annual Report on Form 10-K for additional details concerning our debt obligations.

We closely monitor the amounts and timing of our sources and uses of funds. Our ability to maintain a sufficient level of liquidity to fund our operations and meet our financial obligations is dependent upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control.

Our ability to generate operating cash flow, sell assets, access capital markets or take any other action to improve our liquidity and manage our debt is subject to the risks described or referenced herein and other risks and uncertainties that exist in our industry, some of which we may not be able to anticipate at this time or control.

See Item 1A “Risk Factors” in our Annual Report on Form 10-K and risk factors included within Cautionary Note Regarding Forward-Looking Statements above, for additional information.

As of September 30, 2025, we had approximately $46.5 million of available borrowing capacity under our various credit facilities, consisting of $36.5 million available under the Revolving Credit Loans, and $10.0 million available under the Second Lien Delayed Draw Term Loans. Our principal uses of cash are for working capital, capital expenditures, and operations.

As of September 30, 2025, we were in compliance with our debt covenants. Our ability to maintain compliance with the financial covenants contained in the 2022 ABL Credit Agreement, First Lien Term Loan Agreement and Second A&R Second Lien Term Loan Credit Agreement depends upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

As of November 10, 2025, we had consolidated cash and cash equivalents of $8.1 million, excluding $4.2 million of restricted cash used mainly as collateral for letters of credit and commercial card programs, and approximately $65.1 million of undrawn availability under our various credit facilities, resulting in total liquidity of $73.2 million. In connection with the Series B Transactions, we have access to up to $30.0 million in additional liquidity through September 2027, subject to certain conditions under the Purchase Agreement.

Cash Flows

The following table summarizes cash flows from Operating, Investing and Financing activities (in thousands):

Cash and cash equivalents. Our cash and cash equivalents as of September 30, 2025 totaled $14.8 million, consisting of $10.6 million of unrestricted cash on hand, and $4.2 million of restricted cash. International cash balances as of September 30, 2025 were $6.1 million, and approximately $1.2 million of such cash is located in countries where currency or regulatory restrictions exist.

As of December 31, 2024, our cash and cash equivalents were $35.5 million, including $31.5 million of unrestricted cash on hand, and $4.0 million of restricted cash. International cash balances as of December 31, 2024 were $5.1 million, including $1.1 million of cash located in countries where currency or regulatory restrictions existed.

Our total debt and finance obligations were $302.8 million (of which $4.0 million was classified as current at September 30, 2025), compared to total debt of $325.1 million at December 31, 2024. The $22.3 million decrease was primarily due to the paydown on the 2022 ABL Credit Agreement and Second A&R Second Lien Term Loan following the Series B Transactions on September 11, 2025, partially offset by new borrowings from the refinancing completed on March 12, 2025.

Cash flows attributable to our operating activities. Our largest source of operating cash inflow is cash collection from customers for work performed. The primary use of operating cash is to pay our suppliers, employees, tax authorities, and others.

Cash flows from operating activities are primarily generated from net income or loss adjusted for certain non-cash items which include depreciation and amortization, PIK interest, and amortization of debt issuance costs. For the nine months ended September 30, 2025, cash flows from operating activities also included an adjustment to net loss for the non-cash loss on debt extinguishment.

For the nine months ended September 30, 2025, net cash used in operating activities was $28.1 million, an increase of $29.2 million as compared to $1.1 million of cash provided by operating activities in the 2024 period. This was primarily driven by working capital impacts. Changes in working capital items such as the growth of receivables, and payment of operating payables are significant factors affecting operating cash flows and can be significant uses of cash, particularly in periods of increasing revenue and activity levels. Changes in working capital items used $38.4 million in cash flows during the nine months ended September 30, 2025, a $23.9 million increase as compared to the $14.5 million in cash flows used by working capital in the corresponding 2024 period.

Cash flows attributable to our investing activities. For the nine months ended September 30, 2025, net cash used in investing activities consisted primarily of capital expenditures for equipment of $7.2 million.

For the nine months ended September 30, 2024, net cash used in investing activities consisted primarily of capital expenditures for equipment of $7.5 million.

Cash flows attributable to our financing activities. For the nine months ended September 30, 2025, net cash provided by financing activities totaled $14.2 million. This amount primarily reflects cash inflows from the $175 million borrowing under the new First Lien Term Loan and $75 million in proceeds from the issuance of Series B Preferred Stock. These inflows were partially offset by cash outflows, including a partial repayment of the 2025 Second Lien Term Loan, net payments of $10.0 million under the Revolving Credit Loans, and the full repayment of outstanding balances under the Corre Delayed Draw Term Loan, Corre Incremental Term Loan and ME/RE Loans, and the Corre Uptiered Loan. Additionally, during the period, we incurred $11.4 million in debt issuance costs related to refinancing transactions completed both with existing and new lenders as of March 12, 2025. We also paid $7.0 million in costs associated with the issuance of Series B Preferred Stock and warrants. These financing activities reflect our ongoing efforts to optimize our capital structure and manage liquidity.

For the nine months ended September 30, 2024, net cash used in financing activities was $9.9 million, consisting primarily of the payments under the ME/RE Loans of $2.1 million, payments under the Corre Incremental Term Loan of $1.1 million, and payment of debt issuance costs of $7.4 million, partially offset by equipment financing of $1.2 million and net borrowings under the Revolving Credit Loans of $0.5 million.

Effect of exchange rate changes on cash and cash equivalents. For the nine months ended September 30, 2025 and 2024, the effect of foreign exchange rate changes on cash was $0.3 million and negative $0.3 million, respectively. The impact of exchange rates on cash and cash equivalents is primarily attributable to fluctuations in the U.S. Dollar exchange rate against the Euro, the British Pound, the Canadian Dollar and the Brazilian Real.

Off-Balance Sheet Arrangements

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. See Note 10 - Debtin this Quarterly Report on Form 10-Q and Note 11 - Debt in our Annual Report on Form 10-K for additional details of our off-balance sheet arrangements.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is included in our Annual Report on Form 10-K. There were no material changes to our critical accounting policies during the nine months ended September 30, 2025.