Team Inc. (TISI) Q3 2025: $75M Stellix Infusion Accelerates Margin Expansion Path
Team Inc. leverages a $75 million Stellix Capital investment to reinforce balance sheet strength and fuel margin expansion, as both core segments deliver solid revenue growth and cost discipline continues to drive outperformance on adjusted EBITDA. The company’s multi-year operational overhaul is now yielding compounding financial flexibility and positions TEAM to further capitalize on high-margin verticals in 2026. Management’s guidance signals continued progress, but cash flow headwinds and working capital volatility remain critical watchpoints.
Summary
- Balance Sheet Fortified: Stellix Capital’s $75 million investment and debt paydown unlock new flexibility for growth and margin initiatives.
- Segment Momentum Builds: Inspection and Mechanical Services both show sustained revenue gains, with Canada rebounding after multi-quarter improvement efforts.
- Margin Expansion in Focus: Ongoing cost discipline and mix shift toward higher-margin work underpin 2026 EBITDA targets.
Performance Analysis
Team Inc. delivered broad-based revenue growth in Q3 2025, with consolidated sales up nearly 7% year-over-year as both Inspection & Heat Treating (IHT) and Mechanical Services (MS) segments posted healthy gains. IHT revenue rose 5.7%, propelled by robust U.S. nested and call-out activity, while MS climbed 7.8% on strong U.S. turnaround demand and a notable rebound in Canadian operations. International, including Canada, accelerated 8.9%, marking multiple quarters of sequential improvement as management’s commercial and operational initiatives gain traction.
Adjusted EBITDA outpaced top-line growth, surging 28.6% year-over-year to the highest Q3 level since at least 2016. Gross margin improved 8.4%, and adjusted EBITDA margin expanded by 110 basis points to 6.5%, underscoring the impact of ongoing cost and margin improvement programs. SG&A as a percentage of revenue fell to 20.8% from 21.7% a year ago, reflecting tighter expense control even as absolute expenses edged up. Year-to-date, adjusted EBITDA is up 12%, and cumulative revenue growth has added almost $33 million versus 2024.
- Cost Discipline Drives Leverage: Margin gains outstrip revenue growth as SG&A ratio falls, supporting higher EBITDA conversion.
- Canadian Operations Turn Corner: Multiple quarters of growth in Canada validate turnaround efforts and add stability to international results.
- Free Cash Flow Drag: Non-recurring refinancing fees and working capital swings weighed on cash flow, but these pressures are expected to ease in Q4.
Balance sheet actions in 2025—including the Stellix Capital investment and term loan refinancing—have further reduced interest expense, extended maturities, and increased liquidity to $57.1 million, positioning TEAM to pursue its long-term growth and margin targets with greater agility.
Executive Commentary
"We continue to deliver improved operational and financial results with year-over-year growth in revenue, margin, and adjusted EBITDA, all while expenses continue to trend lower as a percentage of revenue... This $75 million investment [from Stellix] recognizes the impactful progress made to date in our ongoing program to improve margins and lower our cost structure, as well as reinforces the significant opportunities that remain for further improvements in margins and top-line growth."
Keith Tucker, Chief Executive Officer
"Our success since 2022 in improving our financial and operating performance helped make these transactions possible, and we believe these improvements to our balance sheet helped better positioned team to accelerate execution of our long-term strategic plan focused on top-line growth, lowering our cost structure, and strengthening our cash flow."
Nelson Haight, Chief Financial Officer
Strategic Positioning
1. Margin Expansion and Cost Structure Simplification
TEAM’s multi-year focus on cost discipline and operational efficiency is delivering margin leverage, with adjusted EBITDA growth consistently outpacing revenue gains. SG&A as a percentage of revenue continues to decline, and management is targeting an adjusted EBITDA margin of at least 10% over the longer term. The company is also aggressively pursuing higher-margin work in sectors like power, aerospace, and LNG, aiming to shift mix toward more profitable verticals.
2. Balance Sheet and Liquidity Transformation
The $75 million Stellix Capital investment—alongside refinancing that lowered interest rates and extended maturities—has enabled TEAM to pay down $67 million of debt and increase liquidity to $57.1 million. The deal’s delayed draw feature allows for up to $30 million in additional preferred equity, providing further optionality to support working capital or targeted investments as needed.
3. Segment Growth and Diversification
Both core segments are contributing to top-line growth, with IHT and MS each posting mid-to-high single-digit gains. The Canadian business, after a period of underperformance, is now consistently growing, validating management’s commercial and operational turnaround efforts. International operations are also benefiting from these changes, further diversifying revenue streams and reducing reliance on any single geography or end market.
4. Commercial Initiatives and Technical Expertise Leverage
TEAM is doubling down on commercial execution by leveraging its technical expertise in high-margin end markets, aiming to increase wallet share with existing clients and penetrate new accounts where its value proposition is strongest. The company’s diversified service portfolio positions it to capture opportunities across multiple industries, even as macro uncertainty persists.
Key Considerations
TEAM’s Q3 2025 results reflect a business in transition, with operational and financial progress now unlocking new strategic flexibility. Investors should weigh the durability of recent gains against persistent cash flow headwinds and the need for continued execution on cost and commercial initiatives.
Key Considerations:
- Stellix Partnership as Catalyst: New capital and board-level alignment with Stellix could accelerate TEAM’s value creation plan and provide access to additional resources if needed.
- Working Capital Volatility: Accounts receivable and payables drove negative working capital impacts, but management expects reversal in Q4; monitoring execution here is critical for free cash flow.
- Segment Mix Evolution: Continued growth in Canada and international markets is critical for sustaining revenue momentum and margin improvement.
- Cost Structure Watch: Ability to hold SG&A in check as revenue scales will determine how much incremental profit drops to the bottom line.
Risks
TEAM’s forward progress is exposed to several material risks, including execution risk on cost and commercial initiatives, continued working capital volatility, and the need to sustain segment growth amid macroeconomic uncertainty. The company is also subject to labor and input cost inflation, as well as competitive pricing pressures in its core markets. Management’s margin expansion narrative will require consistent delivery to maintain investor confidence.
Forward Outlook
For Q4 2025, Team Inc. guided to:
- Year-over-year top-line growth across both IHT and MS segments
- Improved adjusted EBITDA levels versus prior year
For full-year 2025, management raised guidance to:
- Approximately 5% consolidated revenue growth
- Approximately 13% adjusted EBITDA growth
Management highlighted several factors that will shape results:
- Reversal of negative working capital trends to support free cash flow
- Continued focus on high-margin work and cost discipline as levers for further margin expansion
Takeaways
TEAM’s Q3 2025 marks a clear inflection in financial flexibility and operational momentum, but the path to sustained free cash flow and higher margins will depend on execution in working capital management and the continued mix shift toward higher-margin verticals.
- Balance Sheet Reset: Stellix Capital’s investment and refinancing moves materially de-risk TEAM’s capital structure and support multi-year growth ambitions.
- Operational Progress Validated: Consistent segment growth, especially in Canada, demonstrates that turnaround efforts are beginning to compound.
- 2026 Outlook Hinges on Execution: Investors should watch for evidence of sustained free cash flow, SG&A leverage, and further margin expansion as TEAM seeks to reach its 10% EBITDA margin target.
Conclusion
Team Inc. exits Q3 2025 with renewed financial flexibility and operational momentum, underpinned by a strengthened balance sheet and disciplined cost structure. The Stellix partnership and ongoing commercial execution lay the groundwork for further margin gains and profitable growth, but sustained cash flow improvement remains a key test for 2026 and beyond.
Industry Read-Through
TEAM’s experience offers a clear read-through for industrial services peers: Multi-year cost discipline, segment turnaround, and balance sheet repair can unlock compounding value, especially when paired with targeted capital injections and operational execution. The emphasis on higher-margin verticals and technical expertise reflects a broader industry pivot toward specialization and value-added services. Investors in the sector should closely monitor working capital dynamics and the ability to translate top-line growth into sustainable free cash flow, as these remain gating factors for valuation re-rating across the industrial services landscape.