Overview
Unless otherwise indicated, the terms “Team,” “the Company,” “we,” “our” and “us” are used in this report to refer to Team, Inc., to one or more of our consolidated subsidiaries, or to all of them taken as a whole.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this report, and in conjunction with our Annual Report on Form 10-K and other documents previously filed with the SEC. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those described in more detail under the heading “Risk Factors” included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. See also “Cautionary Note Regarding Forward-Looking Statements” below.
Cautionary Note Regarding Forward-Looking Statements.
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf in other materials we release to the public including all statements, other than statements of historical facts, included or incorporated by reference in this Quarterly Report on Form 10-Q, that address activities, events or developments which we expect or anticipate will or may occur in the future. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “will,” “could,” “should,” “may” and similar expressions.
We based our forward-looking statements on our reasonable beliefs and assumptions, and our current expectations, estimates and projections about ourselves and our industry. We caution that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions about events and circumstances that we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. New risk factors emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking statements cannot be relied upon as a guarantee of future results and involve a number of risks and uncertainties that could cause actual results to differ materially from those projected in the statements, including, but not limited to the statements under “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and other important factors include, among others, risks related to:
•our ability to generate sufficient cash from operations, access our credit facilities or amounts available under our term loans to support our operations, or maintain our compliance with covenants under our debt arrangements and our Certificate of Designation of Series B Preferred Stock, as filed with the Delaware Secretary of State on September 11, 2025 (the “Series B Certificate of Designation”);
•our ability to manage inflationary pressures in our operating costs;
•negative market conditions, including domestic and global inflationary pressures, impact of changes in global trade policies and tariffs, and future economic uncertainties, particularly in industries in which we are heavily dependent;
•delays in the commencement of major projects;
•seasonal and other variations, such as severe weather conditions (including conditions influenced by climate change), volatility of oil and gas prices, and the nature of our customers’ industry affecting the timing of new contracts and terminations of existing contracts which may result in unpredictable fluctuations in our cash flows and financial results;
•our significant debt and high leverage which could have a negative impact on our ability to access capital markets, our liquidity position and our ability to manage increases in interest rates;
•risk of non-payment and/or delays in payment of receivables from our customers;
•our ability to maintain compliance with the NYSE continued listing requirements and rules;
•our financial forecasts being based upon estimates and assumptions that may materially differ from actual results;
22
Table of Contents
•our incurrence of liabilities and suffering of negative financial or reputational impacts relating to occupational health and safety matters;
•changes in laws or regulations in the local jurisdictions that we conduct our business;
•the inherently uncertain outcome of current and future litigation; and
•acts of terrorism, war or political or civil unrest in the United States or elsewhere, including the conflict in the Middle East and the threatened and actual closing of oil shipping routes, including the Strait of Hormuz, by Iran and affiliated groups in connection therewith, changes in laws and regulations, or the imposition of economic or trade sanctions affecting domestic and international commercial transactions.
GENERAL OVERVIEW
Business. We are a global, leading provider of specialty industrial services offering customers access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability, and operational efficiency for our customers’ most critical assets. We conduct operations in two segments: Inspection and Heat- Treating (“IHT”) and Mechanical Services (“MS”). Through the capabilities and resources in these two segments, we believe that we are uniquely qualified to provide integrated solutions involving: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the customer’s election. In addition, we are capable of escalating with the customer’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that we are unique in our ability to provide these services in three distinct customer demand profiles: (i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.
IHT provides conventional and advanced non-destructive testing services primarily for the process, pipeline and power sectors, pipeline integrity management services, emissions control and compliance and field heat-treating services, as well as associated engineering and condition assessment services. These services can be offered while facilities are running (onstream), during facility turnarounds or during new construction or expansion activities. In addition, IHT provides comprehensive non-destructive testing services and metallurgical and chemical processing services to the aerospace and other industries covering a range of components including finished machined and in-service components. IHT also provides advanced digital imaging including remote digital video imaging.
MS provides solutions designed to serve customers’ unique needs during both the operational (onstream) and off-line states of their assets. Our onstream services include our range of standard to custom-engineered leak repair and composite solutions; hot tapping and line stopping; and online valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes customer production time. Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns. Our specialty maintenance, turnaround and outage services are designed to minimize customer downtime and are primarily delivered while assets are off-line, often through the use of cross-certified technicians whose multi-craft capabilities deliver the production needed to achieve tight time schedules. These critical services include on-site field machining; bolted-joint integrity; vapor barrier plug testing; and valve management solutions.
We market our services to companies in a diverse array of heavy industries which include:
•Energy (refining, power, renewables, nuclear, offshore oil and gas, and liquefied natural gas);
•Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive, and mining);
•Midstream (valves, terminals and storage, and pipeline);
•Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways); and
•Aerospace and Defense.
23
Table of Contents
Results of Operations
The following is a comparison of our results of operations for the three and six months ended June 30, 2026 to the three and six months ended June 30, 2025.
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
The following is a comparison of our results of operations for the three months ended June 30, 2026 to the three months ended June 30, 2025 (in thousands):
Three Months Ended June 30, Favorable (Unfavorable)
2026 2025 $ %
(unaudited) (unaudited)
Revenues by business segment1:
IHT $ 131,283 $ 138,222 $ (6,939) (5.0) %
MS 97,395 109,804 (12,409) (11.3) %
Total revenues $ 228,678 $ 248,026 $ (19,348) (7.8) %
Operating income (loss)1:
IHT $ 13,334 $ 17,965 $ (4,631) (25.8) %
MS 2,307 7,952 (5,645) (71.0) %
Corporate and shared support services (13,468) (13,814) 346 2.5 %
Total operating income $ 2,173 $ 12,103 $ (9,930) (82.0) %
Interest expense, net $ (9,280) $ (11,896) $ 2,616 22.0 %
Other income (expense), net 193 (3,490) 3,683 105.5 %
Loss before income taxes $ (6,914) $ (3,283) $ (3,631) (110.6) %
Benefit (provision) for income taxes 102 (983) 1,085 110.4 %
Net loss $ (6,812) $ (4,266) $ (2,546) (59.7) %
1 As of January 1, 2026, ECS, previously included in the MS segment, was moved to the IHT segment, refer to Note 15 - Segment Disclosures for more information.
Revenues. Total revenues decreased by $19.3 million, or 7.8%, compared to the prior year period, partially offset by a favorable foreign exchange impact of $1.0 million. IHT segment revenue decreased by $6.9 million, or 5.0%, in comparison to the prior year period. This decrease was primarily driven by lower turnaround activity in the U.S. and Canada, which accounted for decreases of $5.0 million and $2.6 million, respectively, partially offset by a $0.7 million increase across other international regions. MS segment revenue decreased by $12.4 million, or 11.3%, relative to the prior year period, reflecting lower turnaround and project activities across all the operating regions.
Operating income (loss). Overall operating income totaled $2.2 million in the 2026 period, representing a decline of $9.9 million, or 82.0%, relative to operating income of $12.1 million in the prior year period, driven primarily by a reduction in revenue. IHT reported a decrease in operating income of $4.6 million, or 25.8%, in comparison to the prior year period, driven by unfavorable project mix impacting margins and higher benefit costs. MS reported a decrease in operating income of $5.6 million, or 71.0%, in comparison to the prior year period, driven by lower activity levels across all the segment’s operating regions. The decrease in operating income was further driven by unfavorable project mix impacting margins and higher benefit costs. Corporate operating loss improved by $0.3 million compared to the prior year period, attributable primarily to reduced professional services and legal costs, partially offset by higher personnel costs including severance charges in the current period.
24
Table of Contents
For the three months ended June 30, 2026 and 2025, operating income includes net expenses totaling $1.8 million and $3.5 million, respectively, that we do not believe are indicative of our core operating activities, as detailed in the table below (in thousands):
Three Months Ended June 30,
2026 2025
(unaudited) (unaudited)
Operating income $ 2,173 $ 12,103
Professional fees and other 686 2,301
Legal costs and litigation reserves — 799
Severance charges 1,129 375
Total non-core items 1,815 3,475
Operating income, excluding non-core items $ 3,988 $ 15,578
Excluding the impact of these identified non-core items in both periods, operating income decreased by $11.6 million from $15.6 million in the three months ended June 30, 2025 to $4.0 million in the three months ended June 30, 2026. See our non-GAAP reconciliation for additional details of our non-core expenses.
Interest expense, net. Interest expense decreased by $2.6 million compared to the prior year period. The decrease was primarily attributable to lower interest expense on the Second Lien Term Loan following a partial paydown in September 2025 using a potion of the proceeds from the issuance of preferred stock, as well as reduced interest rates on the ABL Credit Facility and First Lien Term Loan, also effective September 2025.
Cash interest paid during the quarter ended June 30, 2026 and 2025 was $5.5 million and $3.9 million, respectively.
Other income (expense), net. The favorable change in other income (expense) was primarily attributable to a foreign currency gain of $3.9 million.
Taxes. The benefit for income tax was $0.1 million on the pre-tax loss of $6.9 million in the current year quarter, compared to a $1.0 million income tax provision on a pre-tax loss of $3.3 million in the prior year quarter. The effective tax rate, inclusive of discrete items, was 1.5% for the three months ended June 30, 2026, compared to 29.9% for the three months ended June 30, 2025. The effective tax rate differs from the prior year period due to changes in the valuation allowance.
25
Table of Contents
Results of Operations
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following is a comparison of our results of operations for the six months ended June 30, 2026 to the six months ended June 30, 2025 (in thousands).
Six Months Ended June 30, Favorable (Unfavorable)
2026 2025 $ %
(unaudited) (unaudited)
Revenues by business segment1:
IHT $ 254,674 $ 251,843 $ 2,831 1.1 %
MS 189,060 194,838 (5,778) (3.0) %
Total revenues $ 443,734 $ 446,681 $ (2,947) (0.7) %
Operating income (loss)1:
IHT $ 24,251 $ 28,696 $ (4,445) (15.5) %
MS 819 4,803 (3,984) (82.9) %
Corporate and shared support services (26,268) (27,399) 1,131 4.1 %
Total operating income (loss) $ (1,198) $ 6,100 $ (7,298) (119.6) %
Interest expense, net $ (18,162) $ (23,332) $ 5,170 22.2 %
Loss on debt extinguishment — (11,853) 11,853 NM
Other income (expense), net 1,118 (3,694) 4,812 130.3 %
Loss before income taxes $ (18,242) $ (32,779) $ 14,537 44.3 %
Benefit (provision) for income taxes 97 (1,205) 1,302 108.0 %
Net loss $ (18,145) $ (33,984) $ 15,839 46.6 %
1 As of January 1, 2026, ECS, previously included in the MS segment, was moved to the IHT segment, refer to Note 15 - Segment Disclosures for more information.
NM - not meaningful
Revenues. Total revenues decreased by $2.9 million, or 0.7%, compared to the prior year period, and were favorably impacted by $4.2 million attributable to foreign exchange rate movements. IHT segment revenue increased by $2.8 million, or 1.1%, in comparison to the prior year period, driven primarily by a $1.4 million increase in U.S. revenue attributable to higher turnaround and capital projects activities experienced in the first quarter, as well as a $1.8 million increase resulting from year-over-year growth in callout and turnaround activities across other international regions, partially offset by a $0.4 million decrease in Canada. MS segment revenue decreased by $5.8 million, or 3.0%, relative to the prior year period, attributable primarily to lower turnaround and project activities throughout the segment’s operating regions.
Operating income (loss). Overall operating loss totaled $1.2 million in the 2026 period, representing a decline of $7.3 million, or 119.6%, compared to operating income of $6.1 million in the prior year period, driven primarily by a reduction in revenue. IHT segment reported a decrease in operating income of $4.4 million, or 15.5%, in comparison to the prior year period, driven by unfavorable project mix impacting margins and higher benefit costs. MS segment operating income decreased by $4.0 million, or 82.9%, compared to the prior year period, driven primarily by reduced revenue across the segment’s operating regions, as well as unfavorable project mix impacting margins and higher benefit costs. Corporate operating loss improved by $1.1 million compared to the prior year period, attributable primarily to reduced legal and professional services costs, partially offset by higher personnel costs, including severance charges, and non-cash share-based compensation costs in the current period.
For the six months ended June 30, 2026 and 2025, operating income (loss) includes net expenses totaling $3.5 million and $6.4 million, respectively, that we do not believe are indicative of our core operating activities, as detailed in the table below (in thousands):
26
Table of Contents
Six Months Ended June 30,
2026 2025
(unaudited) (unaudited)
Operating income (loss) $ (1,198) $ 6,100
Professional fees and other 2,292 4,308
Legal costs (refunds) and litigation reserves (1,560) 1,289
Severance charges 2,758 842
Total non-core expenses 3,490 6,439
Operating income, excluding non-core expenses $ 2,292 $ 12,539
Excluding the impact of these identified non-core items in both periods, operating income decreased year over year by $10.2 million, from $12.5 million to $2.3 million. See our non-GAAP reconciliation for additional details of our non-core expenses.
Interest expense, net. Interest expense, net decreased by $5.2 million for the six months ended June 30, 2026, compared to the same period in 2025. The decrease was primarily attributable to the refinancing completed in March 2025, in which we replaced our existing credit facilities with new facilities at lower interest rates, as well as lower interest expense on the Second Lien Term Loan following a partial paydown in September 2025 using a potion of the proceeds from the issuance of preferred stock and the related reduction in interest rates on the ABL Credit Facility and First Lien Term Loan, also effective September 2025.
Cash interest paid for the six months ended June 30, 2026 and 2025 was $8.0 million and $12.8 million, respectively.
Loss on debt extinguishment. In March 2025, we completed refinancing transactions that resulted in the repayment of our existing loans. As a result, we recognized a loss on debt extinguishment of $11.9 million which included the write-off of unamortized debt issuance costs.
Other income (expense), net. The overall change of $4.8 million in other income (expense), net, was primarily attributable to foreign currency transaction gains of $5.0 million, reflecting the favorable impact of U.S. dollar strengthening against the currencies of our international operations.
Taxes. The benefit for income tax was $0.1 million on the pre-tax loss of $18.2 million in the current year period compared to income tax provision of $1.2 million on the pre-tax loss of $32.8 million in the prior year period. The effective tax rate was 0.5% for the six months ended June 30, 2026, compared to 3.7% for the six months ended June 30, 2025. The effective tax rate differs from the prior year period due to changes in the valuation allowance.
27
Table of Contents
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 U.S. 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 U.S. 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 U.S. GAAP financial measurements on a consolidated and segmented basis:
28
Table of Contents
TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Adjusted Net Loss:
Net loss $ (6,812) $ (4,266) $ (18,145) $ (33,984)
Professional fees and other1 686 2,301 2,292 4,308
Write-off of assets 167 — 167 45
Legal costs and litigation reserves (refunds) — 799 (1,560) 1,289
Severance charges2 1,129 375 2,758 842
Loss on debt extinguishment — — — 11,853
Tax impact of adjustments and other net tax items (88) (90) (134) (103)
Adjusted Net Loss $ (4,918) $ (881) $ (14,622) $ (15,750)
Dividend and accretion to redemption value on redeemable preferred stock (3,006) — (5,880) —
Adjusted Net Loss attributable to common shareholders $ (7,924) $ (881) $ (20,502) $ (15,750)
Adjusted Net Loss per common share:
Basic and Diluted $ (1.73) $ (0.20) $ (4.49) $ (3.50)
Consolidated Adjusted EBIT and Adjusted EBITDA:
Net loss $ (6,812) $ (4,266) $ (18,145) $ (33,984)
(Benefit) provision for income taxes (102) 983 (97) 1,205
Loss (gain) on equipment sale 9 — (4) 5
Interest expense, net 9,280 11,896 18,162 23,332
Professional fees and other1 686 2,301 2,292 4,308
Write-off of assets 167 — 167 45
Legal costs and litigation reserves (refunds) — 799 (1,560) 1,289
Severance charges2 1,129 375 2,758 842
Foreign currency loss (gain) (373) 3,544 (1,290) 3,749
Pension cost (credit)3 4 (54) 9 (105)
Loss on debt extinguishment — — — 11,853
Consolidated Adjusted EBIT 3,988 15,578 2,292 12,539
Depreciation and amortization 8,466 8,527 16,919 16,929
Non-cash share-based compensation cost 312 366 1,266 313
Consolidated Adjusted EBITDA $ 12,766 $ 24,471 $ 20,477 $ 29,781
Free Cash Flow:
Cash provided by (used in) operating activities $ 680 $ (3,344) $ (8,415) $ (32,005)
Capital expenditures (3,982) (2,910) (6,406) (4,316)
Free Cash Flow $ (3,302) $ (6,254) $ (14,821) $ (36,321)
____________________________________
1 For the three and six months ended June 30, 2026, professional fees and other included $0.7 million and $2.3 million, respectively, related to executive search and third party support costs. For the three and six months ended June 30, 2025, professional fees and other included $2.3 million and $3.0 million, respectively, related to executive search and third party support costs, and for the six months ended June 30, 2025, professional fees and other included $1.3 million related to debt financing.
2 For the three and six months ended June 30, 2026, severance charges included $0.6 million and $2.1 million related to customary severance costs associated with executive departures.
3 Represents pension cost (credit) 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.
29
Table of Contents
TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)
(unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
Segment Adjusted EBIT and Adjusted EBITDA:
IHT4
Operating income $ 13,334 $ 17,965 $ 24,251 $ 28,696
Professional fees and other1 — 750 1,054 750
Severance charges 390 62 390 177
Adjusted EBIT 13,724 18,777 25,695 29,623
Depreciation and amortization 3,396 2,898 6,712 5,714
Adjusted EBITDA $ 17,120 $ 21,675 $ 32,407 $ 35,337
MS4
Operating income $ 2,307 $ 7,952 $ 819 $ 4,803
Professional fees and other1 — — 69 —
Legal costs and litigation reserves — 251 — 251
Severance charges 100 313 277 647
Adjusted EBIT 2,407 8,516 1,165 5,701
Depreciation and amortization 3,713 4,285 7,510 8,556
Adjusted EBITDA $ 6,120 $ 12,801 $ 8,675 $ 14,257
Corporate and shared support services
Net loss $ (22,453) $ (30,183) $ (43,215) $ (67,483)
(Benefit) provision for income taxes (102) 983 (97) 1,205
Loss (gain) on equipment sale 9 — (4) 5
Interest expense, net 9,280 11,896 18,162 23,332
Foreign currency loss (gain) (373) 3,544 (1,290) 3,749
Professional fees and other1 686 1,551 1,169 3,558
Write-off of assets 167 — 167 45
Legal costs and litigation reserves (refunds) — 548 (1,560) 1,038
Severance charges2 639 — 2,091 18
Pension cost (credit)3 4 (54) 9 (105)
Loss on debt extinguishment — — — 11,853
Adjusted EBIT (12,143) (11,715) (24,568) (22,785)
Depreciation and amortization 1,357 1,344 2,697 2,659
Non-cash share-based compensation cost 312 366 1,266 313
Adjusted EBITDA $ (10,474) $ (10,005) $ (20,605) $ (19,813)
Consolidated Adjusted EBITDA $ 12,766 $ 24,471 $ 20,477 $ 29,781
___________________
1 For the three and six months ended June 30, 2026, professional fees and other included $0.7 million and $2.3 million, respectively, related to executive search and third party support costs. For the three and six months ended June 30, 2025, professional fees and other included $2.3 million and $3.0 million, respectively, related to executive search and third party support costs, and for the six months ended June 30, 2025, professional fees and other included $1.3 million related to debt financing.
2 For the three and six months ended June 30, 2026, severance charges included $0.6 million and $2.1 million related to customary severance costs associated with executive departures.
3 Represents pension cost (credit) 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.
4 As of January 1, 2026, ECS, previously included in the MS segment, was moved to the IHT segment, refer to Note 15 - Segment Disclosures for more information.
30
Table of Contents
Liquidity and Capital Resources
Financing for operations consists primarily of our 2022 ABL 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 - Debt in 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 will be 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 this Quarterly Report on Form 10-Q and 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 June 30, 2026, we had approximately $28.9 million of available borrowing capacity under the 2022 ABL Credit Agreement. In connection with the issuance of the Series B Preferred Stock and related warrants, we have access to up to $30.0 million in additional liquidity through September 2027 through a delayed draw mechanism, subject to certain conditions under the Purchase Agreement. Our principal uses of cash and liquidity are for working capital needs, capital expenditures and operations.
As of June 30, 2026, we were in compliance with our debt covenants. Our ability to maintain compliance with the financial covenants contained in our credit agreements is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties, as described elsewhere herein.
As of August 6, 2026, we had consolidated cash and cash equivalents of $6.4 million, excluding $4.0 million of restricted cash used mainly as collateral for letters of credit and commercial card programs, and approximately $48.0 million of undrawn availability under our various credit facilities, resulting in total liquidity of $54.4 million. We also have $30.0 million of Series B Delayed Draw availability as described above.
Refer to Note 10 - Debt for additional information about our debt instruments.
31
Table of Contents
Cash Flows
The following table summarizes cash flows from Operating, Investing and Financing activities (in thousands):
Six Months Ended June 30,
Cash flows provided by (used in): 2026 2025 Favorable(Unfavorable)
(unaudited) (unaudited)
Operating activities $ (8,415) $ (32,005) $ 23,590
Investing activities (6,375) (4,316) (2,059)
Financing activities 22,724 21,161 1,563
Effect of exchange rate changes on cash (95) 324 (419)
Net change in cash and cash equivalents $ 7,839 $ (14,836) $ 22,675
Cash and cash equivalents. Our cash and cash equivalents as of June 30, 2026 totaled $26.0 million, consisting of $22.3 million of unrestricted cash, and $3.7 million of restricted cash. International cash balances as of June 30, 2026 were $4.6 million, and approximately $0.7 million of such cash is restricted.
As of December 31, 2025, our cash and cash equivalents were $18.1 million, consisting of $14.1 million of unrestricted cash and $4.0 million of restricted cash. International cash balances as of December 31, 2025 were $4.4 million, and approximately $1.2 million of such cash was restricted.
Our total debt and finance obligations were $326.3 million, of which $4.1 million was classified as current at June 30, 2026, compared to total debt of $297.2 million at December 31, 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 six months ended June 30, 2026, net cash used in operating activities totaled $8.4 million, reflecting an improvement of $23.6 million relative to $32.0 million in the 2025 period. During the six months ended June 30, 2026, changes in working capital items utilized $12.7 million, representing a favorable variance of $27.3 million in comparison to the $40.0 million utilized by working capital in the corresponding 2025 period. This favorable variance is attributable to reduction in accounts receivable resulting from fluctuations in activity levels, as well as reduction in other accrued liabilities arising primarily from timing of payroll payments during the period.
Cash flows attributable to our investing activities. For the six months ended June 30, 2026, net cash used in investing activities consisted primarily of capital expenditures of $6.4 million as compared to $4.3 million for the six months ended June 30, 2025.
Cash flows attributable to our financing activities. For the six months ended June 30, 2026, net cash provided by financing activities was $22.7 million, consisting primarily of the net borrowings under the Revolving Credit Loans of $24.7 million, partially offset by the principal payments under the First Lien Term Loan and equipment financing loans.
For the six months ended June 30, 2025, net cash used in financing activities was $21.2 million, consisting primarily of borrowings under the First Lien Term Loan of $175.0 million and the net borrowings under the Revolving Credit Loans of $20.0 million. These inflows were partially offset by the payments of the total outstanding balances under the Corre Delayed Draw Term Loan, Corre Incremental Term Loan and ME/RE Loans, and a partial paydown of the Corre Uptiered Loan. In addition, we paid $8.9 million of debt issuance costs for the debt refinancing transactions executed with our existing and new lenders at March 12, 2025.
Effect of exchange rate changes on cash and cash equivalents. For the six months ended June 30, 2026 and 2025, the effect of foreign exchange rate changes on cash was $0.1 million and $0.3 million, respectively. The impact of exchange rates on cash and cash equivalents is primarily attributable to fluctuations in U.S. Dollar exchange rate against the Euro, the British Pound, the Canadian Dollar and the Brazil 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 - Debt in 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.
32
Table of Contents
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 six months ended June 30, 2026.