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Chairman's Letter

Dear Fellow Shareholders:

In 2019, we made significant strides to improve TEAM’s overall performance, positioning the Company for sustainable and long-term profitable growth. We completed a number of important strategic initiatives through our OneTEAM integration and transformation program. Since OneTEAM’s launch in 2017, our focus has been on increasing margins and generating cash flow that led to these positive financial achievements:

  • Our Adjusted EBITDA1of $80.3 million grew by approximately $28 million, or 50%, over 2017.
  • Gross Margin was $328 million, or 28.2% of revenue, a 240-basis points expansion over the last two years.
  • SG&A was $328 million, a decrease of $32.5 million, or 9%, compared to 2018.
  • Operating cash flow was approximately $59 million for 2019, highest generated in the last three years.
  • Free cash flow was approximately $30 million for the full year 2019, an improvement of $80 million since 2017.
  • TEAM paid down approximately $33 million of debt, reducing our debt to the lowest level in over three years.

The Mechanical Services segment delivered positive year-over-year revenue and Gross Margin and reported a 66% growth in EBITDA. This positive performance was driven by TEAM’s OnStream service line, investments in manufacturing and engineering, technology, and workforce management.

The Quest Integrity segment delivered back-to-back years of record performance with more than 18% revenue growth for each of the past two years and expanded EBITDA margin by 30% when compared to 2018. Quest continues to perform exceptionally well in its target markets and is quickly building market share in new industry sectors.

The Inspection and Heat Treating segment reported lower year-over-year revenue and adjusted EBITDA due to our clients’ focus on maintaining high utilization rates and operational flexibility to maximize margins. Despite lower revenues, EBITDA fall-through was limited to 17% as a result of disciplined project selection and effective cost control measures.

Safety is Our Number One Core Value

We improved TRIR year-over-year by 25% and reduced recordable injuries by more than 30%. During the year, we received the Voluntary Protection Program Star of Excellence from four clients and the American Fuel and Petroleum Manufacturers Distinguished Safety Award from three others. The 2019 safety performance was one of the best for the Company.

I remain extremely proud of our people and their commitment to safety as we strive for ZERO recordable injuries.


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     Amerino Gatti
       Chairman and Chief Executive Officer




TEAM Performance

Overall, TEAM’s 2019 performance improvement showcases our ongoing commitment to generate increased free cash flow for debt paydown, focus on working capital, and other efforts to reduce costs.

The Strength of OneTEAM


In 2019, we made significant progress with the successful implementation of the OneTEAM transformation and integration program in North America. OneTEAM provides us with a foundation to drive sustainable, profitable growth and deliver both discrete specialized services and differentiated integrated solutions to clients worldwide.

Through OneTEAM we accomplished the following:

  • The OneTEAM program’s two cost reduction pillars generated total savings of $22.9 million in 2019 and delivered within our targeted range of $20 to $25 million for the year. We remain on track to achieve the projected run-rate savings of $35 to $45 million by the end of 2020.
  • We controlled costs through enhanced supply chain management and improved project execution to generate a 240-basis point Gross Margin expansion over the past two years, as a result of pricing discipline, workforce management, and market diversification.
  • We deployed the OneTEAM program into our international operations in late 2019 using the successful and scalable North American blueprint to position TEAM for profitable global growth.
  • Most importantly, our commitment to capital management and deleveraging the Company led to a free cash flow improvement of more than $80 million since 2017.

The OneTEAM program’s focus transitioned from the Operations and Center-Led pillars to the Revenue Enhancement pillar, highlighting pricing strategy, product and service mix, and integrated project management. The Revenue Enhancement pillar also includes revenue diversification, allowing us to become far less dependent on any single sector or geography.



OneTEAM Delivers 

The OneTEAM program’s two cost reduction pillars generated total savings of $22.9 million.


Investing in Innovation to Accelerate Growth


Our industry expertise, innovation, and advanced technology applications are key differentiators for TEAM and serve as strategic drivers to outpace our competitors. Our investments in innovation and technology-leading solutions include:

  • 2019 represented the largest project volume since the commercialization of TEAM Digital, our proprietary platform that maximizes quality and efficiency through digitally enabled workflows. Over 450 technicians have been trained on the platform, and TEAM Digital has managed more than 75,000 successful inspections. We continue to achieve 20% to 30% productivity gains from increased time on tools, reduced standby time and automated reporting.
  • Quest Integrity’s smart cleaning solution, which includes decoking, inspection and condition assessment, was deployed in the Middle East and Latin America markets. TEAM remains the only company in the industry with combined process heater decoking, high-resolution ultrasonic inspection and comprehensive condition assessment. This fully integrated domain and critical asset specialized solution enables fitness for service, heater performance optimization and asset life extension, all of which are critical to our clients.
  • TEAM has more than 35-years of experience in the Aerospace industry and is a single source provider for all engine certification programs. One of our Aerospace operations received Federal Aviation Administration certification in the Midwest, supporting chemical processing, advanced NDT and metallurgical services for one of the largest engine manufacturers in the world. Through our one-source solution, we are capable of expediting inspection with on-time delivery.

We are committed to leveraging innovation and technology to advance our industry expertise and capabilities and maximize efficiency. Through strategic investments in innovation, we have laid a solid foundation for long-term growth, improved shareholder returns, and meeting the challenges of tomorrow.


Forging Ahead in Uncertain Times


At present, the Coronavirus pandemic has caused some disruptions to our operations, and the recent drop in commodity prices has led to a decline in capital spending by our clients. First and foremost, the health and safety of our employees and their families is of immediate priority and we are strictly adhering to the guidelines set by our Critical Response Team and the local governing bodies. Additionally, we have implemented continuity plans for our core businesses and are managing our costs and cash in a fiscally responsible manner. Like many other companies, we have been forced to take difficult, yet proactive steps to protect our ability to quickly resume business activities after the recovery.  While it is too early to forecast the ultimate impact of these events, we strongly believe we are well positioned to build on our 2019 results once the business landscape begins to stabilize.




TEAM Competitive Advantage

TEAM remains the only company in the industry with combined process heater decoking, high-resolution ultrasonic inspection and comprehensive condition assessment.


The Road Ahead


During these challenging times, we are identifying creative ways to leverage opportunities within the skillsets of our personnel and our advanced technologies in order to support new industries. We are focused on delivering our Inspection and Heat Treating and Mechanical Services offerings in sectors that are likely to experience less disruption, such as power, renewables, pipeline, and process-related industries. We expect Quest to continue to grow in 2020 as a result of the market-leading solutions we provide our clients. Our vast and successful nested business also allows us to expand upon our current footprint and service offerings. We are collaborating with our longstanding, diverse nested clients to develop creative solutions to drive continuity and quickly mobilize resources in the near-term. Looking ahead, we will remain focused on managing what is in our control and mitigating the evolving end-market fluctuations.

In conclusion, we remain steadfast on our priorities – free cash flow, debt paydown, expanding margins, and top line growth; in that order. Our agility and thoughtful approach in these challenging times, along with a balanced, structured, and recurring revenue diversification strategy, will drive operational efficiencies and positive results across our Company.

On behalf of my colleagues at TEAM and our board of directors, thank you for your continued support.

Amerino Gatti

Chairman and Chief Executive Officer



Leveraging Opportunities

During these challenging times, we are identifying creative ways to leverage opportunities within the skillsets of our personnel and our advanced technologies in order to support new industries, including healthcare, power and utilities.


TEAM's Purpose

Our purpose is to ensure the energy that fuels a better tomorrow.


1. See page A-2 in the Company’s Proxy Statement filed on April 9, 2020 for a reconciliation of Adjusted EBITDA, a non-GAAP measure to the corresponding GAAP results.