Team's Q3 Earnings Fall Y/Y Despite Strong Revenue Gains

Shares of Team, Inc. TISI have declined 6.3% since the company reported third-quarter 2025 results, a steeper pullback than the S&P 500 index’s 1.9% decrease over the same period. Yet, despite the post-earnings dip, the stock has risen 11.4% over the past month, significantly outpacing the S&P 500’s 0.1% gain. The divergence suggests that while investors reacted cautiously to the latest quarterly numbers, sentiment toward the name has strengthened more broadly in recent weeks.

Team delivered solid top-line and profitability improvements in the quarter. Revenues increased 6.7% year over year to $225 million, driven by broad-based gains across both reportable segments. The gross margin expanded 8.4% to $58 million, outpacing revenue growth. Adjusted EBITDA climbed 28.6% from the prior-year period to $14.5 million, widening the adjusted EBITDA margin by 110 basis points. Net loss was $11.4 million, modestly higher than the $11.1 million loss recorded a year earlier. Earnings per share came in at a loss of $2.68 compared with a loss of $2.52 last year.

Team, Inc. Price, Consensus and EPS Surprise

Team, Inc. price-consensus-eps-surprise-chart | Team, Inc. Quote

Segment Trends and Other Key Business Metrics of TISI

Team’s Inspection & Heat-Treating (“IHT”) segment generated $113.8 million in revenues, up 5.7% from the year-ago period. The increase reflected higher nested and call-out service activity in the United States, as well as an 8.9% lift in international markets, including Canada. Operating income for the segment rose 16.9% to $11.5 million. The Mechanical Services (“MS”) segment also delivered growth, with revenues improving 7.8% to $111.2 million, supported by stronger U.S. turnaround activity and improved results in Canada. The segment’s operating income advanced 31.2% to $5.9 million.

Adjusted selling, general and administrative expenses fell to 20.8% of revenues from 21.7% in the prior-year quarter, marking continued progress on cost control. However, corporate and shared support services expenses increased due to non-recurring legal and professional fees, compressing consolidated operating income to $1.3 million from $3.2 million in the year-ago period.

TISI: Management Commentary

Management highlighted that adjusted EBITDA reached its highest third-quarter level since at least 2016. The CEO emphasized that growth in adjusted EBITDA outpaced revenue gains, signaling traction in ongoing cost-reduction and margin-expansion initiatives. Both leaders expressed confidence that the company’s strengthened balance sheet, improved operational discipline and growing international performance, particularly in Canada, position the business for continued improvement.

Management also reiterated a focus on maintaining cost discipline, enhancing commercial execution in higher-margin end markets and expanding wallet share among existing customers. Leadership pointed to continued multi-year progress in margin improvement and cost structure simplification as evidence that its transformation efforts are gaining momentum.

Factors Influencing TISI’s Quarterly Performance

The revenue increase was driven primarily by volume gains in both core segments. In IHT, higher nested and call-out activity contributed to U.S. growth, while expanded nondestructive examination and heat-treating work supported international results. Mechanical Services benefited from elevated U.S. turnaround demand and improved Canadian activity.

On the cost side, margin improvements reflected field cost rationalization, a better project mix and continuing benefits from earlier restructuring actions in Canada. Adjusted EBITDA expanded meaningfully, but consolidated operating income contracted due to higher non-recurring corporate expenses. Lower international MS revenues weighed on that segment’s operating contribution, though gains in U.S. and Canadian operations offset a portion of this drag. Interest expenses remained sizable, and the quarter included a loss on debt extinguishment related to refinancing activities.

Guidance by TISI

Management reiterated expectations for full-year 2025 revenue growth of approximately 5% and adjusted EBITDA growth of roughly 13%. The company anticipates year-over-year top-line gains in the fourth quarter, alongside continued adjusted EBITDA improvement. Leadership also expects the financial performance of Canadian and other international operations to strengthen further. During the call, executives noted that ongoing initiatives should contribute to additional cost efficiencies and margin expansion into 2026.

Other Developments at TISI

Team completed a $75 million private placement of preferred stock with Stellex Capital Management in September 2025. Proceeds were used to pay down roughly $67 million of debt, helping reduce total debt from $325.1 million at year-end 2024 to $302.8 million on Sept. 30, 2025. The transaction enhanced liquidity and provided access to an additional $30 million in potential future preferred stock proceeds. Management indicated that the strengthened balance sheet improves financial flexibility and supports the company’s long-term transformation plan.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research