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Wednesday, Aug. 13, 2025 at 11 am ET
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Keith D. Tucker: Thank you, Nelson. Welcome, everyone, and thanks for joining us to review our second quarter operating and financial highlights. We delivered strong results in the second quarter as we saw significant growth in revenue, gross margin and adjusted EBITDA. Revenue grew by 8.5% or nearly $20 million year over year, while gross margin increased by 7.1% and adjusted EBITDA by 12.4%. As you can see, our adjusted EBITDA growth outpaced our top line growth which is a testament to the strong progress we continue to make in our ongoing cost and margin optimization program.
By segment, we saw 15% overall revenue growth in testing and heat treatment, driven by over 13% growth in the US. This performance, along with a nearly 26% year-over-year revenue increase in our high-heat trading profit helped drive 25% growth in our IHT segment adjusted EBITDA and a 118 basis point improvement in our IHT segment adjusted EBITDA margin.
In our Mechanical Services segment, our US operations led year-over-year revenue growth of 7%, which offset short-term revenue weakness in our international business and helped drive the 2% growth we saw in overall MS revenue. Our adjusted EBITDA for the second quarter increased 12.4% year over year to $24.5 million, with adjusted EBITDA gaining 40 basis points to 9.9% of our consolidated revenue. We continue to see benefits from our cost moderation in the second quarter, reducing our adjusted selling, general and administrative expenses that exclude expenses that oversee the ongoing operations of the Team such as non-reimbursable fees and non-cash expenses to 18.9% of consolidated revenue compared to 19.8% in the second quarter of 2024.
We remain focused on driving revenue growth, tight cost control and operational improvement. In the second quarter of 2025, we completed a series of actions targeting further improvements in our SG&A and other expenses that are expected to result in annualized cost savings of approximately $10 million. We expect to see about $6 million of those savings in the second quarter of 2025. In the second quarter, we also began to see some results from our targeted actions to improve the financial and commercial performance of our Canadian operations, particularly on the top line, and we expect to see continued year-over-year improvement in the second quarter of 2025.
A few weeks ago, we announced the appointment of Dan Dolson as Executive Vice President, Chief Strategy and Transformation Officer to lead our transformation efforts moving forward. We believe that dedicated leadership overseeing our ongoing transformation program will accelerate revenue growth and our ability to capture additional cost savings. Our management team is committed to achieving the goals of our transformation plan and we have already identified additional opportunities to improve margin and efficiency that we will pursue in the second half of 2025. We believe that all of these ongoing actions will help lead to top line growth and the continued improvement of our cost structure and margins.
As we are just beginning to see the effects of these actions in our 2025 results, we expect to see the full year impact in 2026. Looking forward, we continue to monitor US tax policy and identify opportunities to improve our supply chain and material availability to help mitigate any potential cost pressures. We believe that our diverse portfolio of service offerings across multiple industries and our regional location enable us to better navigate the recent macroeconomic uncertainty around tax policies. We see higher linear growth than the previous year in both segments and improved EBITDA levels in the second quarter of 2025.
Our management team is focused on the things we cannot control, which is the continued direction of costs and the execution of our commercial plans and we remain committed to delivering top-line growth throughout the year and growth of at least 15% year-on-year in adjusted EBITDA. With that, I would like to turn it over to Nelson to discuss our financial achievements.
Nelson M. Haight: Thank you, Keith. Before I get into our second quarter financial results, I would like to discuss in more detail the recent actions we have taken to strengthen our balance sheet. As we discussed on the last call, in March 2025, we closed the refinancing operation that lowered our compounded interest rate by 100 basis points, simplified our capital structure and extended our loan maturities to 2030. The completion of this transaction addressed all of our near-term maturities and lowered our interest rate to improve our financial performance while continuing to provide our company with capital.
As of June 30, 2025, we had increased our net cash to $49 million, including $16.6 million in consolidated cash and $32.7 million in unused availability under various credit facilities. We now turn to our financial results for the second quarter. Despite a slight decrease in our revenue recognition in certain international areas on our mechanical services side, our net income increased 8.5% over the prior year period resulting in a $4.5 million increase in our net income, which stood at 27.5% for the quarter. We experienced a slight increase in our adjusted selling, general and administrative expenses that do not include the costs that are attributable to our continuing operations and non-cash amounts.
But when those costs were expressed as a percentage of consolidated revenue, we saw benefits from our cost optimization with a 90 basis point year-over-year reduction to 18.9% of consolidated revenue. Our net loss for the quarter decreased to $900,000, an improvement of $1.1 million compared to the second quarter of 2024. We grew second quarter adjusted EBITDA to $24.5 million and generated nearly $30 million in adjusted EBITDA during the first half of 2025, outpacing the first half by 202%.
Since 2021, we have been increasing our adjusted EBITDA every year, and we have set ourselves a goal of at least 15% growth in adjusted EBITDA for the full year of 2025, and we believe that our continued focus on increasing our margins through cost guidance and growing high margin work will help us achieve this goal with strong year-on-year results in the second half of the year. As Keith noted, we continued to build our strategic roadmap and target additional improvements in SG&A and other expenses, higher employee utilization.
We expect this next phase of our ongoing program to make sustainable improvements in revenue and cash flow and we believe that dedicated leadership in these programs will help sharpen our focus and allow us to achieve these goals faster and more effectively. Over the past 3-plus years, we have made significant progress in improving the company’s financial position and operations. The balance sheet is healthy, margins are improving and the top line is growing as the company continues to safely deliver high quality technology solutions to our customers.
With our employees’ continued focus and dedication, I am confident in our ability to build on our progress to date with further improvements in our financial performance and operations that will ultimately lead to growth and shareholder value. With that, let me turn it over to Keith for closing remarks.
Keith D. Tucker: Thank you, Nelson. We continue to make progress against our strategic roadmap. And in the last 2 years, we have worked to simplify our business, expand our borders, simplify our financial structure and improve our balance sheet. Looking ahead, we expect to continue to see strong operating and financial results in the second half of 2025. For the full year, we expect to see year-over-year growth in the top line, continued improved performance from our Canadian and other international operations, at least 15% year-over-year growth in adjusted EBITDA and meaningful progress in achieving our adjusted EBITDA, which we believe will enhance shareholder value by at least 1% at a rate of 0.
Our success so far is a direct result of the hard work of all our employees in the team. I am proud of our culture of safety and our focus on continuous improvement because ultimately, our people are our most important asset, and no job is too important to be done safely. In conclusion, I remain confident about our future because I strongly believe in our capabilities, talented employees and our leadership team. We have delivered improved results over the past 3 years, and remain committed to continuous margin improvement, cost control and revenue generation.
I believe we are well positioned to grow the Group sustainably and profitably in the future. Thank you for joining us today and for your continued interest in the Group.
User: The conference is over now. Thank you for attending today’s presentation. Now you can hang up.
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Team (TISI) Q2 2025 Earnings Call Transcript was first published by The Motley Fool.
