Team Inc.
05/13/2026 | Press release | Distributed by Public on 05/13/2026 14:38
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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;
•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, 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; emissions control and compliance; 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.
Results of Operations
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
The following is a comparison of our results of operations for the three months ended March 31, 2026 to the three months ended March 31, 2025 (in thousands).
| Three Months Ended March 31, |
Favorable (Unfavorable)
|
||||||||||||||||||||||
| 2026 | 2025 | $ | % | ||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||
|
Revenues by business segment1:
|
|||||||||||||||||||||||
| IHT | $ | 123,391 | $ | 113,621 | $ | 9,770 | 8.6 | % | |||||||||||||||
| MS | 91,665 | 85,034 | 6,631 | 7.8 | % | ||||||||||||||||||
| Total revenues | $ | 215,056 | $ | 198,655 | $ | 16,401 | 8.3 | % | |||||||||||||||
|
Operating income (loss)1:
|
|||||||||||||||||||||||
| IHT | $ | 10,917 | $ | 10,731 | $ | 186 | 1.7 | % | |||||||||||||||
| MS | (1,488) | (3,149) | 1,661 | 52.7 | % | ||||||||||||||||||
| Corporate and shared support services | (12,800) | (13,585) | 785 | 5.8 | % | ||||||||||||||||||
| Total operating loss | $ | (3,371) | $ | (6,003) | $ | 2,632 | 43.8 | % | |||||||||||||||
| Interest expense, net | $ | (8,882) | $ | (11,436) | $ | 2,554 | 22.3 | % | |||||||||||||||
| Loss on debt extinguishment | - | (11,853) | $ | 11,853 | NM | ||||||||||||||||||
|
Other income (expense), net
|
925 | (204) | 1,129 | 553.4 | % | ||||||||||||||||||
| Loss before income taxes | $ | (11,328) | $ | (29,496) | $ | 18,168 | 61.6 | % | |||||||||||||||
| Provision for income taxes | (5) | (222) | 217 | 97.7 | % | ||||||||||||||||||
| Net loss | $ | (11,333) | $ | (29,718) | $ | 18,385 | 61.9 | % | |||||||||||||||
1 As of January 1, 2026, ECS, previously included in the MS segment, was moved to the IHT segment, refer to Note 15 - Segment Disclosure for more information.
NM - not meaningful
Revenues. Total revenues increased by $16.4 million, or 8.3%, from the prior year period and were favorably impacted by $3.2 million attributable to foreign exchange rates movements. Revenue for the IHT segment increased by $9.8 million, or 8.6%, compared to the prior year period, primarily driven by an increase in U.S. revenue of $6.5 million attributable to higher turnaround and capital projects activity, as well as increase in year-over-year callout and turnaround activities in Canada and other international regions of $3.3 million. MS segment revenue increased by $6.6 million, or 7.8%, compared to the prior year period, mainly due to higher turnaround activities and callout projects in the U.S., and higher revenue from projects in Canada and international areas.
Operating income (loss). Overall operating loss was $3.4 million in the 2026 period, a $2.6 million, or 43.8%, improvement compared to an operating loss of $6.0 million in the prior year period. This improvement was primarily driven by the increased revenue and cost management. IHT reported an increase in operating income of $0.2 million, or 1.7%, as compared to prior year due to job mix. MS operating loss decreased by $1.7 million, or 52.7%, as compared to the prior year period, primarily driven by the increased revenue in the U.S. and a reduction in operating losses in the U.S. and Canada. Corporate operating loss decreased by $0.8 million compared to the prior year period, primarily due to lower legal and professional services costs, partially offset by higher personnel costs in the current period.
For the three months ended March 31, 2026 and 2025, operating loss includes net expenses totaling $1.7 million and $3.0 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 March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating loss | $ | (3,371) | $ | (6,003) | |||||||
| Professional fees and other | 1,606 | 2,007 | |||||||||
| Legal costs (refunds) and litigation reserves | (1,560) | 490 | |||||||||
| Severance charges, net | 1,629 | 467 | |||||||||
| Total non-core expenses | 1,675 | 2,964 | |||||||||
| Operating loss, excluding non-core expenses | $ | (1,696) | $ | (3,039) | |||||||
Excluding the impact of these identified non-core items in both periods, operating loss decreased year over year by $1.3 million, from $3.0 million to $1.7 million. See our non-GAAP reconciliation for additional details of our non-core expenses.
Interest expense, net. Interest expense, net decreased by $2.6 million for the three months ended March 31, 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. In addition, we renegotiated the terms of our ABL Revolving Credit Loans, resulting in further reductions in applicable interest rates. The decrease was also due to lower overall debt balances compared to the prior period.
Cash interest paid for the three months ended March 31, 2026 and 2025 was $2.5 million and $8.9 million, respectively.
Loss on debt extinguishment. During the three months ended March 31, 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 $1.1 million in other income (expense), net, was primarily driven by foreign currency transaction losses in the current year period reflecting the effects of positive fluctuations in the value of the U.S. dollar relative to the foreign currencies to which we have exposure.
Taxes. The provision for income tax was $0.0 million on the pre-tax loss of $11.3 million in the current year period compared to income tax expense of $0.2 million on the pre-tax loss of $29.5 million in the prior year period. The effective tax rate was a provision of 0.0% for the three months ended March 31, 2026, compared to a provision of 0.8% for the three months ended March 31, 2025. The effective tax rate differs from the prior year period due to changes in the valuation allowance.
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:
| TEAM, INC. AND SUBSIDIARIES | ||||||||||||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
||||||||||||||
|
(unaudited, in thousands except per share data)
|
||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Adjusted Net Loss: | ||||||||||||||
| Net loss | $ | (11,333) | $ | (29,718) | ||||||||||
|
Professional fees and other1
|
1,606 | 2,007 | ||||||||||||
|
Write-off of software cost
|
- | 45 | ||||||||||||
|
Legal costs and litigation reserves (refunds)
|
(1,560) | 490 | ||||||||||||
|
Severance charges, net2
|
1,629 | 467 | ||||||||||||
| Loss on debt extinguishment | - | 11,853 | ||||||||||||
| Tax impact of adjustments and other net tax items | (46) | (13) | ||||||||||||
| Adjusted Net Loss | $ | (9,704) | $ | (14,869) | ||||||||||
| Dividend and accretion to redemption value on redeemable preferred stock | (2,874) | $ | - | |||||||||||
|
Adjusted Net Loss attributable to common shareholders
|
$ | (12,578) | $ | (14,869) | ||||||||||
| Adjusted Net Loss per common share: | ||||||||||||||
|
Basic and Diluted
|
$ | (2.76) | $ | (3.31) | ||||||||||
| Consolidated Adjusted EBIT and Adjusted EBITDA: | ||||||||||||||
| Net loss | $ | (11,333) | $ | (29,718) | ||||||||||
| Provision for income taxes | 5 | 222 | ||||||||||||
|
Loss (gain) on equipment sale
|
(13) | 5 | ||||||||||||
| Interest expense, net | 8,882 | 11,436 | ||||||||||||
|
Professional fees and other1
|
1,606 | 2,007 | ||||||||||||
|
Write-off of software cost
|
- | 45 | ||||||||||||
|
Legal costs and litigation reserves (refunds)
|
(1,560) | 490 | ||||||||||||
|
Severance charges, net2
|
1,629 | 467 | ||||||||||||
|
Foreign currency loss (gain)
|
(917) | 205 | ||||||||||||
|
Pension cost (credit)3
|
5 | (51) | ||||||||||||
| Loss on debt extinguishment | - | 11,853 | ||||||||||||
| Consolidated Adjusted EBIT | (1,696) | (3,039) | ||||||||||||
| Depreciation and amortization | 8,453 | 8,402 | ||||||||||||
| Non-cash share-based compensation cost (credit) | 954 | (53) | ||||||||||||
| Consolidated Adjusted EBITDA | $ | 7,711 | $ | 5,310 | ||||||||||
| Free Cash Flow: | ||||||||||||||
|
Cash used in operating activities
|
$ | (9,095) | $ | (28,661) | ||||||||||
| Capital expenditures | (2,424) | (1,406) | ||||||||||||
| Free Cash Flow | $ | (11,519) | $ | (30,067) | ||||||||||
____________________________________
1 For the three months ended March 31, 2026, consists of $1.6 million related to support costs. For the three months ended March 31, 2025, consists of $2.0 million related to refinancing transactions.
2 For the three months ended March 31, 2026, includes $1.4 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.
| TEAM, INC. AND SUBSIDIARIES | ||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) | ||||||||||||||
| (unaudited, in thousands) | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Segment Adjusted EBIT and Adjusted EBITDA: | ||||||||||||||
|
IHT4
|
||||||||||||||
| Operating income | $ | 10,917 | $ | 10,731 | ||||||||||
|
Professional fees and other1
|
1,054 | - | ||||||||||||
| Severance charges, net | - | 115 | ||||||||||||
| Adjusted EBIT | 11,971 | 10,846 | ||||||||||||
| Depreciation and amortization | 3,316 | 2,816 | ||||||||||||
| Adjusted EBITDA | $ | 15,287 | $ | 13,662 | ||||||||||
|
MS4
|
||||||||||||||
| Operating loss | $ | (1,488) | $ | (3,149) | ||||||||||
|
Professional fees and other1
|
69 | - | ||||||||||||
| Severance charges, net | 177 | 334 | ||||||||||||
| Adjusted EBIT | (1,242) | (2,815) | ||||||||||||
| Depreciation and amortization | 3,797 | 4,271 | ||||||||||||
| Adjusted EBITDA | $ | 2,555 | $ | 1,456 | ||||||||||
| Corporate and shared support services | ||||||||||||||
| Net loss | $ | (20,762) | $ | (37,300) | ||||||||||
| Provision for income taxes | 5 | 222 | ||||||||||||
| Loss (gain) on equipment sale | (13) | 5 | ||||||||||||
| Interest expense, net | 8,882 | 11,436 | ||||||||||||
| Foreign currency loss (gain) | (917) | 205 | ||||||||||||
|
Professional fees and other1
|
483 | 2,007 | ||||||||||||
| Write-off of software cost | - | 45 | ||||||||||||
|
Legal costs and litigation reserves (refunds)
|
(1,560) | 490 | ||||||||||||
|
Severance charges, net2
|
1,452 | 18 | ||||||||||||
|
Pension cost (credit)3
|
5 | (51) | ||||||||||||
| Loss on debt extinguishment | - | 11,853 | ||||||||||||
| Adjusted EBIT | (12,425) | (11,070) | ||||||||||||
| Depreciation and amortization | 1,340 | 1,315 | ||||||||||||
| Non-cash share-based compensation cost (credit) | 954 | (53) | ||||||||||||
| Adjusted EBITDA | $ | (10,131) | $ | (9,808) | ||||||||||
| Consolidated Adjusted EBITDA | $ | 7,711 | $ | 5,310 | ||||||||||
___________________
1 For the three months ended March 31, 2026, consists of $1.6 million related to support costs. For the three months ended March 31, 2025, consists of $2.0 million related to refinancing transactions.
2 For the three months ended March 31, 2026, includes $1.4 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 Disclosure for more information.
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 March 31, 2026, we had approximately $40.5 million of available borrowing capacity under our various credit facilities, consisting of $30.5 million available under the 2022 ABL Credit Agreement and $10.0 million available under the Second A&R Second Lien term Loan Agreement (the availability period for the Second Lien Delayed Draw Term Loan expired on April 15, 2026 with no amounts drawn prior to the expiration date). 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 March 31, 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 May 11, 2026, we had consolidated cash and cash equivalents of $11.2 million, excluding $4.2 million of restricted cash used mainly as collateral for letters of credit and commercial card programs, and approximately $24.8 million of undrawn availability under our various credit facilities, resulting in total liquidity of $36.0 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.
Cash Flows
The following table summarizes cash flows from Operating, Investing and Financing activities (in thousands):
| Three Months Ended March 31, | ||||||||||||||||||||
| Cash flows provided by (used in): | 2026 | 2025 |
Favorable
(Unfavorable)
|
|||||||||||||||||
| Operating activities | $ | (9,095) | $ | (28,661) | $ | 19,566 | ||||||||||||||
| Investing activities | (2,410) | (1,406) | (1,004) | |||||||||||||||||
| Financing activities | 6,237 | 11,188 | (4,951) | |||||||||||||||||
| Effect of exchange rate changes on cash | (38) | 137 | (175) | |||||||||||||||||
| Net change in cash and cash equivalents | $ | (5,306) | $ | (18,742) | $ | 13,436 | ||||||||||||||
Cash and cash equivalents. Our cash and cash equivalents as of March 31, 2026 totaled $12.8 million, consisting of $8.7 million of unrestricted cash on hand, and $4.1 million of restricted cash. International cash balances as of March 31, 2026 were $6.5 million, and approximately $1.2 million of such cash is located in countries where currency or regulatory restrictions exist.
As of December 31, 2025, our cash and cash equivalents were $18.1 million, consisting of $14.1 million of unrestricted cash on hand 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 is restricted.
Our total debt and finance obligations were $306.5 million, of which $3.9 million was classified as current at March 31, 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 three months ended March 31, 2026, net cash used in operating activities was $9.1 million, an improvement of $19.6 million as compared to net cash used in operating activities of $28.7 million in the 2025 period. Changes in working capital items - such as the growth of receivables and payment of operating payables - are significant factors affecting operating cash flows and can represent significant uses of cash, particularly during periods of increasing revenue and activity levels. During the three months ended March 31, 2026, changes in working capital items used $8.6 million in cash flows, a $15.1 million decrease compared to the $23.7 million in cash flows used by working capital in the corresponding 2025 period.
Cash flows attributable to our investing activities. For the three months ended March 31, 2026, net cash used in investing activities consisted primarily of capital expenditures of $2.4 million as compared to $1.4 million for the three months ended March 31, 2025.
Cash flows attributable to our financing activities. For the three months ended March 31, 2026, net cash provided by financing activities was $6.2 million, consisting primarily of the net borrowings under the Revolving Credit Loans of $7.2 million, partially offset by the principal payments under the First Lien Term Loan and equipment financing loans.
For the three months ended March 31, 2025, net cash used in financing activities was $11.2 million, consisting primarily of borrowings under the First Lien Term Loan of $175.0 million, net borrowings under the Revolving Credit Loans of $8.0 million, and borrowings under the 2025 Second Lien Term Loan. 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 pay down of the Corre Uptiered Loan. In addition, we paid $8.1 million of debt issuance costs for the refinancing transactions at March 12, 2025.
Effect of exchange rate changes on cash and cash equivalents. For the three months ended March 31, 2026 and 2025, the effect of foreign exchange rate changes on cash was $0.0 million and $0.1 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.
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 three months ended March 31, 2026.
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