Team, Inc.

Thank you for standing by and welcome to the second quarter 2020 Team Incorporated earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Kevin Smith, Senior Director of Investment of Investor Relations. Please go ahead, sir.

Thank you, Shalon. Welcome, everyone, to Team's 2020 Second Quarter Conference Call. With me on today's call are Ann Marino-Gotti, our Chairman and Chief Executive Officer, and our Chief Financial Officer, Susan Ball. This call is also being webcast and can be accessed through the audio link under the Investor Relations section of our website at teaminc.com. Information recorded on this call speaks only as of today, August 5th, 2020. Therefore, please be advised that any time sensitive information may no longer be accurate as of the date of any replaying or listening or transcript reading. There will be a replay of today's call and it will be available via webcast by going to the company's website, teaminc.com. In addition, a telephonic replay will be available until August 12th. The information on how to access this was provided in yesterday's earnings release. Before we continue, I'd like to remind you that this call contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995, including statements of expectations, future events, or future financial performance. Forward-looking statements involve inherent risks and uncertainties. and we caution investors that a number of factors could cause actual results to differ materially from those contained in any forward-looking statements. These factors and other risks and uncertainties are described in detail on the company's annual report on Form 10-K and in the company's other documents and reports filed or furnished with the Securities and Exchange Commission. The company assumes no obligation to publicly update or revise any forward-looking statements except as may be required by law. And Merino will begin by providing an update of our business Susan will then detail our results, and before we take your questions, Amarino will highlight our market outlook, one-team program, and second-half expectations. I would now like to turn the call over to Amarino.

Thank you, Kevin, and good morning, everyone. We appreciate you joining us today. Teams' second quarter was extremely challenging as we navigated through the global pandemic and an oversupplied oil market, which resulted in significant stress and volatility for our clients and employees. Based on our performance, Team's global workforce was up for the challenge, and I am proud of our people for their execution and perseverance during these dynamic times. Before we get started, I would like to formally introduce Kevin Smith, our new Senior Director of Investor Relations. Kevin has over 15 years of industry experience in the energy sector, including E&P, Midstream, and LNG, working in investor relations and previously as a research analyst. Susan and I are glad to have Kevin join our team and we are sure you will enjoy working with him. Despite the unprecedented drop in industry activity, we are pleased with our second quarter results, which reflect the tremendous efforts made by everyone in the company. Consolidated second quarter revenues were $189 million, down 40% from a year ago, but in line with the revenue outlook we provided on the last earnings call. The quarter got off to a difficult start as many of our clients implemented stay-at-home restrictions, delayed projects, and significantly cut CapEx plans. The unprecedented reduction in activity began in mid-March, troughed in April and May, and slowly started to recover in June when global economies, travel, and other regulatory restrictions began to relax. Second quarter gross margins of $57 million, or 30.3%, exceeded the comparable quarter's high watermark and set a record quarterly gross margin since 2015, pre-acquisitions. Adjusted EBITDA for the second quarter was $12.7 million or 6.7% margin. Despite realizing a $126.5 million decline in year-over-year revenues, our second quarter cost savings of $35 million Thank you very much. to paying down debt with any free cash flow generation. The second quarter performance was driven by a few key factors. First, our aggressive and decisive cost actions aligning with the significant decline in activity. Second, the permanent structure changes that were implemented make TEAM a much leaner, market responsive, and more profitable organization. And finally, the success to date of our revenue diversification initiative which is expanding our addressable markets with differentiated products and services to a variety of clients. Turning to our segment performance, mechanical services second quarter revenues were $92.8 million, down 36% from the second quarter of 2019 and adjusted EBITDA was $16.9 million, a decline of 35% when compared to the same period last year. Despite lower quarterly revenues, MS activity improved throughout the quarter. In fact, June was the best month of the year for our hot tapping and line intervention businesses. On-stream services such as emissions control and leak repair also performed better on a relative basis and were less impacted by the overall market conditions. One example is that our on-stream service line recently completed the world's largest on-site heat-cured composite repair of a petrochemical reactor. In just 14 days, team's highly trained technicians were able to repair a 17-foot diameter reactor that had over 2,200 square feet of repaired area. The comprehensive repair work extended the life of the facility for another two years. The client selection of our on-stream offering, which delayed their capital expenditure to replace the full unit, reflects the current decision-making in many of our core end markets. As we focus on diversifying into new sectors, MS experienced growth in the areas of nuclear, power, municipal and renewables. Inspection and heat treating revenues in the second quarter were $80.5 million, down 42% from the second quarter of 2019, and adjusted EBITDA was $9.5 million, a 32% decrease from the same quarter last year. Despite lower activity levels across most of our core sectors, IHT Realized growth in the pharmaceuticals and nuclear industries. Additionally, our pipeline integrity solutions business performed well with limited impact from market pressure and the pandemic. In the second quarter, pipeline integrity solutions received long-term commitments from three large pipeline operators. We expect this trend to continue and will be further supported by the PHMSA gas mega rule that will go into effect later this year. Our IHT segment remains focused on maintaining margin, growing revenue through well-informed cross-selling, and delivering specialized and more fully integrated value-added solutions to our clients. For example, IHT repaired a chemical refinery steam line located 170 feet above ground level that ultimately required multiple capabilities across different product lines. We delivered both our rope access technology and welding services significantly reducing weeks of time that would have been required to complete the operation by eliminating scaffolding and cranes. Teams integrated service offering allowed the client to consolidate service providers and reduce the number of on-site personnel, saving time and expense. Quest Integrity's second quarter revenues were $16 million, down 50% from the same quarter last year. Adjusted EBITDA was $1.7 million for the quarter, A decline of 83% when compared to the year-ago quarter. As expected, several of Quest's planned projects for the quarter were pushed to the second half of the year, resulting in a weaker performance. Quest was impacted by the overall slowdown in industry activity and both domestic and international stay-at-home orders, travel restrictions, and quarantine requirements. Quest, however, did make inroads in Latin America, where we have a successful track record. Quest's heater performance optimization has led to additional opportunities in specialty and conventional inspection and mechanical services. As an example, Quest is currently performing both asset integrity and reliability management programs for a large client in Mexico. Given our solid backlog of projects, we expect Quest's financial performance to improve in the second half of the year and into 2021. From a geographic perspective, there were varying levels of global recovery. Canada and many of our international businesses were slow to return. In addition to Quest's success in Latin America, our other segments are also seeing increased activity with large on-stream projects in Mexico, Peru, and Brazil. Domestically, we experienced activity increases along our Gulf Coast and North Divisions, which collectively cover pads 2, 3, and 4. Given the pandemic's geographic impact, we have yet to see the West Coast improve to the same degree as the rest of the country, but we have been successful in gaining market share in this region. I will now turn it over to Susan for a more detailed financial review. Susan?