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8-K - FORM 8-K - TEAM INC | a8-kinvestorpresentationap.htm |
©Copyright 2018. TEAM, Inc. All Rights Reserved.
Investor Presentation – April 2018
(NYSE: TISI)
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©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Safe Harbor Statement
+ 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. 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. Such known factors are detailed in
the Company's Annual Report on Form 10-K and in the Company's Quarterly Reports on Form
10-Q 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
projected cost savings, 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.
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©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
TEAM at a Glance
+ Premier provider of specialized industrial services to a broad range of
energy and industrial end markets
+ Our customers view our services as required for uptime and safe
operations and not discretionary – vital to their ongoing operations
+ Broad and differentiated set of technology for inspection and mechanical
services focused on the integrity of our customers’ assets
+ Longstanding relationships with our customers – spanning over 20 years
+ Global footprint of over 220 locations in 20 countries – we are where our
customers need us
+ Safety culture – TRIR of 0.39 in 2017
+ Significant financial and operating scale – over $1.2 billion of revenue
and more than 7,300 employees
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©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Core Values
SAFETY FIRST /
QUALITY ALWAYS
In everything we do
INTEGRITY
Uncompromising
standards of integrity
and ethical conduct
SERVICE
LEADERSHIP
Leading service
quality,
professionalism
and responsiveness
INNOVATION
Supports
continuous growth
and improvement
PRIDE AND
RESPECT
For our customers,
for each other and
for all our
stakeholders
TEAMWORK
Global teamwork
and
collaboration
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Driving Execution Excellence
Key Investment Highlights
+ Provider of inspection and assessment, turnaround, and on-stream services for ~45 years
+ Broad and deep specialty of standard services and products portfolio
+ Cross-selling service and integrated solutions opportunities across customer networks
Premier provider of
Maintenance and
Inspection Services
+ Top 20 customers for at least 10+ years
+ No single customer accounts for more than 5% of revenue
+ Diversified customer base
– Refinery (40%); Petrochemical (20%), Pipeline (10%), Power (10%) and other (20%)
Long-standing
Diversified, Blue Chip
Customer Base
+ Proprietary inspection technologies and software solutions
+ Decades of talent, expertise and technology developed in-house and from acquired companies
+ Critical assets in place to service pipeline, refining, petrochemical and power
Deep Domain
Expertise Driving
Technology
Advantage
+ Benefits of Phase I (Cost Reductions) and Phase II (OneTEAM)
+ OneTEAM is a companywide top-to-bottom integration and transformational change program
+ 3 Pillars of the program are (1) Revenue Enhancement including Cross-Selling, (2) Operations
Improvement and (3) Center-Led Functions Cost Improvement
Driving Execution
Excellence
+ Market-based strategy provides focus and broadens our addressable markets
+ Aging infrastructure in combination with increasing safety concerns and regulatory pressure
+ Recent maintenance spending deferrals across the refining industry projected to improve
over near term
Poised for Growth
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Driving Execution Excellence
New Executive Management
+ New CEO – Amerino Gatti
Prior Experience:
– More than 25 years at Schlumberger Limited
– President of the Production Group, oversaw 20,000 employees across 85 countries and delivered growth and market
share gain for a business with multi-billion dollars in annual revenues
– Served in a variety of roles of progressing leadership responsibility including, President - Production Group, President
Well Services, VP Production Group - North America, VP Marketing & Sales - North America, VP & General Manager -
Qatar GeoMarket, and VP Sand Management Services
+ New Board Member – Craig L. Martin
Prior Experience:
– Nearly 45 years of experience in the international engineering and construction industry
– Former President and Chief Executive Officer of Jacobs Engineering Group Inc., a provider of technical, professional
and construction services
– Before joining Jacobs in 1994, worked in various roles at CRSS and Martin K. Eby Construction Co.
– Currently is the Chairman of the Board of Hill International, Inc.
+ New Board Member – Brian K. Ferraioli
Prior Experience:
– Executive Vice President and Chief Financial Officer of KBR, Inc., an engineering, construction and services company
– Prior to KBR, served as Executive Vice President and Chief Financial Officer at The Shaw Group, Inc. and worked for 28
years in various finance and accounting functions with Foster Wheeler AG
– Currently serves on the boards of Vistra Energy and Babcock & Wilcox Enterprises
– Previously, served on the board of directors of B&W's predecessor company, Babcock & Wilcox, Inc., as well as
Adolfson & Peterson
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Driving Execution Excellence
Agenda
+ 7,300+ highly trained and experienced specialty
technicians delivering services locally through 220+
locations
Who We Are
What We Do
Market Dynamics
OneTEAM
Financial Highlights
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Driving Execution Excellence
Enterprise Legacy of Growth
1929
FURMANITE
BECOMES FULL
LEAK SEALING
COMPANY
1960
METALOCK LTD
ACQUIRED
MECHANICAL
SERVICES ADDED
TO COMPANY
OFFERINGS
1973
TEAM
INDUSTRIAL
SERVICES INC. IS
FOUNDED
1980
INITAIL PUBLIC
OFFERING
1999
X RAY INSPECTION,
INC. ACQUIRED
2004
COOPERHEAT-
MQS
ACQUIRED
2006
GENERAL SERVICES
GROUP (GSG)
OF FLOWSERVE
CORPORATION
ACQUIRED
2007
AITEC
INSPECTION
SERVICES
ACQUIRED
2008
LEAK REPAIRS
SPECAM
ACQUIRED
2010
QUEST INTEGRITY
GROUP, LLC
ACQUIRED
2012
QUALSPEC
GROUP FORMED
TCI SERVICES INC.
ACQUIRED
2013
GLOBAL ASCENT, INC.
ACQUIRED
2015
DK AMANS VALVE
ACQUIRED
QUALSPEC
GROUP
ACQUIRED
2016
FURMANITE
CORPORATION
ACQUIRED
ACQUISITION OF
QUALITY INSPECTION
SERVICES AND TIAT
INSPECTION IN EUROPE
2011
SELF LEVELING
MACHINES, INC.
ACQUIRED
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Driving Execution Excellence
Leading Technological Advancements
1920
EUGENE CLAY
FURMAN
DEVELOPS LEAK
SEALING PROCESS
1924
EUGENE CLAY
FURMAN DEVELOPS
FIRST DIY LEAK
SEALING KITS
1927
EUGENE CLAY FURMAN
FILES 1ST LEAK SEALING
PROCESS PATENT
EUGENE CLAY FURMAN
MARKETS LEAK
SEALING KITS
1929
FURMANITE
BECOMES FULL
LEAK SEALING
COMPANY
1980
TEAM BECOMES
1ST COMPANY TO
PROVIDE LDAR
SERVICES TO THE
INDUSTRY
2005
TEAM INTRODUCES
METHOD 21 REPORTER
SOFTWARE FOR QUALITY
AND COMPLIANCE
VERIFICATION OF FIELD
DATA
2007
TEAM EUROPE
INTRODUCES CNC
MANUFACTURING OF
LEAK REPAIR
ENCLOSURES
2008
QUEST INTEGRITY
LAUNCHES SUITE OF
UT ILI TOOLS
TEAM INTRODUCES
SPECIALTY FIELD
MACHINING SERVICES
2011
TEAM INTRODUCES
SMARTHEAT-WIRELESS
HEAT TREATMENT
TECHNOLOGY
2013
TEAM INTRODUCES
L-CATT, LDAR
COMPLIANCE
ASSURANCE TICKET
TRACKER
2015
TEAM LAUNCHES
HIGH ENERGY PIPING
(HEP) PHASED ARRAY
INSPECTION
QUEST INTEGRITY
LAUNCHES SUBSEA AND HIGH
RESOLUTION UT ILI TOOLS
2016
QUEST INTEGRITY
INTRODUCES GROUND
BREAKING, HIGH
RESOLUTION 2”
UT ILI TOOLS
2017
TEAM SUCCESSFULLY
DIGITIZES MULTI-UNIT
TURNAROUND
INSPECTION
PROCEDURES AND
WORKFLOW
TEAM MODERNIZES
MANUFACTURING WITH
AUTOMATION AND 5-
AXIS CNC CAPABILITIES
2018
TEAM ADDS
ON-STREAM
INSPECTION
PROGRAMS TO
DIGITAL PLATFORM
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Driving Execution Excellence
High Standard of Safety
All employees are empowered and expected to STOP a task or operation that is unsafe;
this standard has full management support.
0.18 0.17
0.25
0.09
0.13
0.24
0.31
0.05 0.08
0.09 0.06
0.02
0.16
0.04 0.05 0.07
1.87
1.22
1.12
0.60
0.54
1.19
1.02
0.71
0.68
0.49
0.57
0.51 0.52
0.32 0.33
0.39
0.00
0.50
1.00
1.50
2.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Lost Time Incident Rate (TLIR) Total Recordabe Incident Rate (TRIR)
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Driving Execution Excellence
Worldwide Footprint. Local Responsiveness.
Operational Countries
20
Total Locations
220
Global Support Centers
34
Corporate Headquarters
Sugar Land,
Texas
7,300+
Employees
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Driving Execution Excellence
Geographic and Service Diversification Strength
Revenue by Geography
United
States
73%
Canada
11%
Europe
10%
RoW
6%
Revenue by Segment
Year-end 2017 TEAM
Employees 7,300+
Locations 220+
Countries 20
49%
44%
7%
Global Footprint Key Benefits of Scale
+ Attract, develop and retain skilled employees
+ Integrated service capability driving customer value
+ Enhanced opportunity with larger, more complex projects
+ Better access to serve new customers
+ Enhanced purchasing power with supplier base
+ Strong safety and quality cultureRoW (Rest of World): Latin America and Asia
Quest Integrity
($82 M)
Mechanical Services
($530 M)
Inspection &
Heat Treating
($588 M)
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Driving Execution Excellence
Agenda
+ 7,300+ highly trained and experienced specialty technicians
delivering services locally through 220+ locationsWho We Are
+ Provider of inspection and assessment,
turnaround, and on-stream services for ~45 years
What We Do
Market Dynamics
OneTEAM
Financial Highlights
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Driving Execution Excellence
Ensure pinpoint
precision and thermal
processes accuracy
with our heat transfer
analysis and heat-
treating products
and services.
HEAT TREATING
SOLUTIONS
Validate the integrity
of materials, parts
and components with
advanced testing
methods
and techniques.
INSPECTION
SOLUTIONS
Eliminate the need for
costly shutdowns with
specialized on line and
on-site maintenance
and repair services.
MAINTENANCE
& REPAIR
SOLUTIONS
Improve operational
planning with
technology-enabled,
advanced inspection
and engineering
assessment services
and products.
ASSET INTEGRITY
MANAGEMENT
SOLUTIONS
Unparalleled Breadth and Depth of Solutions
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Driving Execution Excellence
Integrated Workflow - Collect, Analyze and Repair (CAR)
Collect Data
Inspection &
Heat Treating
and Quest
Integrity
Analyze Condition
Quest Integrity,
Inspection & Heat
Treating and Mechanical
Services
Repair or
Replace
Mechanical
Services
Workflow cycle re-occurs on predictive, time or reactive basis depending upon operator progressiveness and
plant or asset age and operating condition severity.
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Driving Execution Excellence
Multi-Level Customer Relationship
Nested/Resident Emergency/Call-outProject/Turnaround
+ Personnel dispatched as
needed
+ Expertise and proximity
dependent
+ Emergency/unplanned
services
+ Medium and large scale
maintenance operations
+ Highly planned SOW’s
+ Location proximity highly
valuable
+ Highly seasonal; Peak cycles
in spring/fall
+ New construction in the
form of upgrades and
expansions
+ Maintenance on a reactive,
time and predictive basis
+ On-site, full time personnel
+ Field overhead billable
+ Performance based
+ Regular/planned
maintenance
+ Daily/weekly maintenance
operations
+ Insight into future work
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Driving Execution Excellence
Local Competitors
Leverage Size and Scale
~7,300+ employees across 220
locations
Adept at escalating from standard to
specialty services
Ability to fully integrate solutions
Most branches within 35 miles of our
largest customer sites
Digital platforms to capture and
organize pertinent operational
performance data
Safety and Quality departments to
continually drive improvements
Broad and deep service and product
portfolio supporting a full range of
customer needs
Insufficient resources to meet peak
demands
Lack technicians and equipment
Less location proximity increasing
travel and related costs
Lacking sophistication to capture key
performance indicators and drive
efficiencies
Little or no technical support resources
Safety and quality expertise
Fewer services to combine to gain
operational leverage
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Driving Execution Excellence
Differentiating Engineered Technologies
Proprietary Inspection Technologies and Software Solutions
+ Advanced Inspection – globally standardized inspection solutions
+ InVista – In-line Inspection (ILI) system for un-piggable pipelines and
buried or inaccessible process piping
+ FTIS - Furnace Tube Inspection System for fired heater serpentine coils
+ LOTIS - Laser Optic Tube Inspection System for steam reformer tubes
+ MANTIS - External tube crawler for steam reformer tubes
Custom Flow Loop
and Test Facility
FTIS™ Ultrasonic Intelligent Pig
MANTISTM external crawler
Corrosion illustrated in patented
2D and 3D graphics
+ Pipeline Integrity Management –Midstream, Subsea
+ Fired Heater Integrity Management – Refining, Petrochemical, Chemical
+ Plant & Facility Piping Integrity Management - Refining, Petrochemical, Chemical
+ Steam Reformer Integrity Management – Syngas, Refining
+ Power Asset Integrity Management – Thermal, Geothermal, Hydro, Nuclear
Solutions for Target Markets
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Driving Execution Excellence
Team Digital
Team Digital is our proprietary platform that maximizes
quality and efficiency through digitally enabled workflows
Planning, Remote
Dispatch,
Management, QA/QC
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Driving Execution Excellence
Agenda
+ 7,300+ highly trained and experienced specialty
technicians delivering services locally through 220+
locations
Who We Are
+ Provider of inspection and assessment,
turnaround, and on-stream services for ~45 years
What We Do
+ Diverse customer base across several large
industrial markets
Market Dynamics
OneTEAM
Financial Highlights
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Driving Execution Excellence
Industrial Services to Support Any Industry
NUCLEAR
AUTOMOTIVE
REFINING PETROCHEMICAL
POWER
MINING
MANUFACTURING
OFFSHOREPIPELINE
PULP PAPER GOVERNMENT
CHEMICAL AEROSPACE
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Driving Execution Excellence
Industrial Services Spend by Industry
Petroleum Refining and Chemical Processing industries are projected to increase from 2017 to 2018
Dollars in Billions
Notes:
IIR data filtered to Mechanical Completion, Maintenance Programs, Long-Term Maintenance, and Scheduled Maintenance
Source: Market data from 2015-2019 IIR Data, A&M Analysis
$9.9B
$9.2B
$10.2B
$8.6B
Power is a
potential area for
greater market
penetration by
Team
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Driving Execution Excellence
Petroleum Refinery Industry
U.S. Turnaround Maintenance Spend Forecast
Source: IIR Data
Crude Prices
WTI 321 Margin
Brent 321 Margin
Historical Turnarounds
Future Turnarounds
DOE EIA Inventories
Independent Refiners
Integrated Refiners
Seasonality Trends
Refinery Utilization
Unit Costs
INPUT OUTPUT (Southwest U.S.A)
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Driving Execution Excellence
Long Standing Blue Chip Customers
20%
1
0
% 2017 Revenue
$1.2 Billion
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©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Agenda
+ 7,300+ highly trained and experienced specialty
technicians delivering services locally through 220+
locations
Who We Are
+ Provider of inspection and assessment,
turnaround, and on-stream services for ~45 years
What We Do
+ Diverse customer base across several large
industrial markets
Market Dynamics
OneTEAM
+ Companywide top-to-bottom integration and
transformational change initiative platform
Financial Highlights
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Driving Execution Excellence
OneTEAM Introduction
+ What is OneTEAM?
– A transformational change effort identified by TEAM leadership focused on:
+ Revenue Enhancement
+ Operations Improvement
+ Center-Led Functions Cost Improvement
– Development and implementation of processes, standards, and training
– Enables greater coordination, cost-optimization, collaboration, and communication
within and across segments
– Ongoing program that began in Q1 2018 and is planned through first half of 2019
+2018 will be focused on repositioning the company for accelerated, profitable growth
– Continues to build our premier position and reputation for safety, quality and
shareholder returns
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Driving Execution Excellence
Addressing the Change - OneTEAM Pillars
+ Focused Commercial Function
+ Sales and marketing
+ Integrated Business Processes
+ Cross-sell opportunities
+ Defined Standards
+ Pricing and value
+ Efficient, cost-effective, and
scalable organization
+ Reduced administrative burden
on branches
+ Branches focused on product and
service delivery, safety, quality,
customers and field personnel
+ Value added functions to enable
the business
+ Leverage size and scale
+ Implement function-led
support centers
+ Establish standard
support structure
01 Revenue Enhancement 02 03
Center-Led
Function
Operations
Improvement
+ Drive customer value through specialized services leading to above market growth
+ Increase efficiency with integrated operations and standards / quality
+ Create Center-Led Functions that are value added to enable operations and financial performance
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Driving Execution Excellence
Agenda
+ 7,300+ highly trained and experienced specialty
technicians delivering services locally through 220+
locations
Who We Are
+ Provider of inspection and assessment,
turnaround, and on-stream services for ~45 years
What We Do
+ Diverse customer base across several large
industrial markets
Market Dynamics
+ Strongest financial results in Q417 since Q216;
Credit Facility amended to provide flexibility
OneTEAM
Financial Highlights
+ Companywide top-to-bottom integration and
transformational change initiative platform
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Driving Execution Excellence
Financial Highlights
Adjusted EBITDA reconciliation provided in Appendix
+ Q4 2017 – strongest financial performance since Q2 2016
– Inspection & Heat Treating –
+ Second highest Revenue Quarter for the year
+ Highest Adjusted EBITDA Quarter since Q2 2016
– Mechanical Services –
+ Highest Revenue Quarter for the year
+ Highest Adjusted EBITDA Quarter since Q2 2016
– Quest Integrity –
+ Record Revenue year; Highest Revenue Quarter since Q2 2015
+ Highest Adjusted EBITDA Quarter since Q2 2015
+ $30M Annualized Phase I cost-savings initiative completed in 2017
+ Bank Facility amended to provide additional flexibility
– Reduced Senior Secured Debt by 50% in July 2017 with the Convertible Debt Offering
+ June 30, 2017 – Total Senior Secured Debt (incl. LC’s) $402M
+ December 31, 2017 – Total Senior Secured Debt (incl. LC’s) $200M
– Reduced Senior Secured Debt Ratio
+ June 30, 2017 – 6.8x
+ December 31, 2017 – 3.5x
NYSE: TISI
Mechanical
Services
Inspection &
Heat Treating
Asset Integrity
& Reliability
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Driving Execution Excellence
Long History of Organic Growth and Strategic Acquisitions
($ in millions)
$260
$318
$479 $498
$545
$508
$624
$714
$813
$926
$1,197 $1,200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Acquired Quest Integrity
(Nov 2010)
Acquired Qualspec
(July 2015)
Acquired Furmanite
(February 2016)~15% CAGR for
2006 - 2017
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Driving Execution Excellence
Balance Sheet Data
(1) Does not reflect unamortized discount, issuance costs and embedded derivative
($ in millions)
Dec-16 Jun-17 Dec-17
Bank Credit Facility Debt 367$ 382$ 178$
Letter of Credit Outstanding 22$ 20$ 22$
Total Sr. Secured Debt 389$ 402$ 200$
2023 Due Convertible Notes (1) -$ -$ 230$
Total Unsecured Debt -$ -$ 230$
Total Debt 389$ 402$ 430$
LTM Interest
Total Cash Interest 12$ 13$ 19$
LTM Adj. EBITDA
Adj. EBITDA (reported) 86$ 59$ 53$
Adj. EBITDA (covenant calculation) 93$ 59$ 57$
LTM Credit Statistics
Senior Secured Debt / Adj. EBITDA 4.2x 6.8x 3.5x
Total Debt / Adj. EBITDA 4.2x 6.8x 7.6x
Available Borrowing Capacity Under Credit Facility 29$ 121$ 41$
Interest Coverage Ratio (Cash Basis) 7.6x 4.4x 3.0x
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Driving Execution Excellence
Revenues and Adjusted EBITDA
(in thousands)
2017 2016 2017 2016
Revenues
Inspection & Heat Treating 148,690$ 153,449$ 588,441$ 589,478$
Mechanical Services 144,819 147,565 529,973 539,627
Quest Integrity 22,825 18,811 81,797 67,591
316,334$ 319,825$ 1,200,211$ 1,196,696$
Operating Income (loss) ("EBIT")
Inspection & Heat Treating 9,989$ 10,323$ 11,128$ 43,367$
Mechanical Services 11,325 2,279 (33,993) 27,283
Quest Integrity 5,085 1,917 12,337 4,780
Corporate & shared support (28,612) (20,222) (104,582) (78,548)
(2,213)$ (5,703)$ (115,110)$ (3,118)$
Adjusted EBIT
Inspection & Heat Treating 11,323$ 10,789$ 34,595$ 44,302$
Mechanical Services 11,490 8,315 21,297 36,198
Quest Integrity 5,090 3,629 12,766 7,908
Corporate & shared support (19,991) (15,600) (76,106) (56,957)
7,912$ 7,133$ (7,448)$ 31,451$
Adjusted EBITDA
Inspection & Heat Treating 16,080$ 15,607$ 53,874$ 64,155$
Mechanical Services 17,861 14,653 44,709 57,585
Quest Integrity 6,083 5,478 17,189 13,697
Corporate & shared support (16,625) (14,665) (63,201) (48,966)
23,399$ 21,073$ 52,571$ 86,471$
Three Months Ended
December 31,
Twelve Months Ended
December 31,
Note: Non-GAAP items reconciliation provided in the Appendix section
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Driving Execution Excellence
Key Performance Objectives for 2018
Safety Performance
Revenue Growth
Business Unit, Region & Branch Profitability
Enterprise Profitability
Cash Generation
+ TEAM is well positioned to benefit from overall market growth by leveraging our strengths: our people,
technology, size & scale and our blue-chip client base
+ Strengthen our leadership position and reputation for safety, quality, and shareholder returns
Driving
Execution
Excellence
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©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Investment Consideration
Premier
provider of
Maintenance
and
Inspection
Services
Long-standing
Diversified,
Blue Chip
Customer
Base
Deep Domain
Expertise
Driving
Technology
Advantage
Driving
Execution
Excellence
Poised for
Growth
1
2
34
5
©Copyright 2018. TEAM, Inc. All Rights Reserved.
Investor Relations
+1 281.388.5500 | IR@teaminc.com
13131 Dairy Ashford, Suite 600 | Sugar Land, Texas 77478
Appendix
Supplemental Financial Information
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Driving Execution Excellence
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 (defined below); and adjusted earnings
before interest, taxes, depreciation and amortization ("adjusted EBITDA") 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):
acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation, professional fees for
acquired business integration and changing our fiscal year end, gains and losses on the revaluation of contingent consideration, non-capitalized ERP
implementation costs, restructuring and other related charges, goodwill impairment losses, executive severance/transition costs, gains (losses) on our
convertible debt embedded derivative, write-off of deferred loan costs, and certain other items that management does not believe are indicative of core
operating activities and the related income tax impacts. We also exclude the income tax impacts of certain special income tax items including certain
changes to valuation allowances and the effects of certain tax legislation changes. The identification of these special tax items is judgmental in nature, and
their calculation is based on various assumptions and estimates. EBIT, as defined by the Company, excludes discontinued operations, income tax expense,
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: acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense
litigation, professional fees for acquired business integration and changing our fiscal year end, gains and losses on the revaluation of contingent
consideration, non-capitalized ERP implementation costs, restructuring and other related charges, goodwill impairment losses, executive
severance/transition costs, 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.
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 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.
Segments names – Inspection & Heat Treating was previously referred as TeamQualspec and Mechanical Services was previously referred as
TeamFurmanite
©Copyright 2018. TEAM, Inc. All Rights Reserved.
38
©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Revenue Reconciliation
Source: Company disclosures. Furmanite acquired in March 2016 hence prior 2 months shown to obtain a Reported + Acquired Revenue figure
$(000's) Reported FRM Total
FY2016 Jan-Feb 2016 FY 2016
Inspection & Heat Treating 589 1 590
Mechanical Services 540 43 582
Quest Integrity 68 - 68
Total 1,197 44 1,240
©Copyright 2018. TEAM, Inc. All Rights Reserved.
39
©Copyright 2018. TEAM, Inc. All Rights Reserved.
Driving Execution Excellence
Adjusted EBITDA Reconciliation
(in thousands)
2017 2016 2017 2016
Inspection & Heat Treating
Operating Income 9,989$ 10,323$ 11,128$ 43,367$
Acquisition costs - - - 307
Legal, professional fess and other - (184) - (184)
Restructuring and other related charges 104 - 966 -
Natural disaster costs 20 - 1,325 162
Asset write-offs 1,210 650 1,210 650
Goodwill impairment loss - - 21,140 -
Gain on revaluation of contingent consideration - - (1,174) -
Adjusted EBIT 11,323 10,789 34,595 44,302
Depreciation and Amortization 4,757 4,818 19,279 19,853
Adjusted EBITDA 16,080$ 15,607$ 53,874$ 64,155$
Mechanical Services
Operating Income (loss) 11,325$ 2,279$ (33,993)$ 27,283$
Acquisition costs - - - 257
Legal, professional fess and other - 519 163 728
Restructuring and other related charges 382 5,513 393 5,513
Natural disaster costs (217) 4 633 233
Goodwill impairment loss - - 54,101 -
Loss on revaluation of contingent consideration - - - 2,184
Adjusted EBIT 11,490 8,315 21,297 36,198
Depreciation and Amortization 6,371 6,338 23,412 21,387
Adjusted EBITDA 17,861$ 14,653$ 44,709$ 57,585$
Quest Integrity
Operating Income 5,085$ 1,917$ 12,337$ 4,780$
Acquisition costs - - - 114
Legal, professional fess and other - 1,712 - 3,014
Restructuring and other related charges 5 - 429 -
Adjusted EBIT 5,090 3,629 12,766 7,908
Depreciation and Amortization 993 1,383 4,423 5,323
Non-cash share based compensation costs - 466 - 466
Adjusted EBITDA 6,083$ 5,478$ 17,189$ 13,697$
Corporate & shared support
Operating Income (loss) (28,612)$ (20,222)$ (104,582)$ (78,548)$
Acquisition costs - - - 6,736
Legal, professional fess and other 6,005 1,799 12,552 7,224
ERP Costs 1,927 2,823 13,776 7,631
Restructuring and other related charges 499 - 863 -
Executive severance/transition costs 163 - 1,190 -
Natural disaster costs 27 - 95 -
Adjusted EBIT (19,991) (15,600) (76,106) (56,957)
Depreciation and Amortization 1,336 702 5,029 2,110
Non-cash share based compensation costs 2,030 233 7,876 5,881
Adjusted EBITDA (16,625)$ (14,665)$ (63,201)$ (48,966)$
Three Months Ended Twelve Months Ended
December 31, December 31,