What changed in this filing

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Item 1. Financial Statements

2024-05-14 compared with 2023-11-09 · 189 added, 376 removed, 389 unchanged (59% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

ASSETS (unaudited)

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Common stock, par value $ 0.30 per share, 12,000,000 shares authorized;

4,368,422 and 4,342,909 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

4,415,201 and 4,415,147 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 459,269 458,614

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenues $ 199,600 $ 202,277

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Selling, general and administrative expenses 55,117 54,748

Restructuring and other related charges, net — — — 16

Operating loss ( 6,386 ) ( 7,746 )

Interest expense, net ( 12,098 ) ( 16,741 )

Loss on debt extinguishment ( 3 ) — ( 1,585 ) —

Other income, net 1,362 635

Loss from continuing operations before income taxes ( 11,062 ) ( 25,155 ) ( 48,578 ) ( 88,973 )

Loss before income taxes ( 17,122 ) ( 23,852 )

Provision for income taxes ( 73 ) ( 859 )

Net loss from continuing operations ( 12,134 ) ( 26,620 ) ( 52,598 ) ( 93,155 )

Discontinued operations:

Net income from discontinued operations, net of income tax — 3,747 — 16,268

Net loss $ ( 17,195 ) $ ( 24,711 )

Basic net loss per common share:

Loss from continuing operations ( 2.78 ) ( 6.16 ) ( 12.07 ) ( 22.51 )

Income from discontinued operations — 0.87 — 3.93

Total $ ( 2.78 ) $ ( 5.29 ) $ ( 12.07 ) $ ( 18.58 )

Loss per common share:

Basic and Diluted

$ ( 3.89 ) $ ( 5.69 )

Weighted-average number of shares outstanding:

Basic 4,368 4,322 4,358 4,139

Basic and Diluted

See accompanying notes to unaudited condensed consolidated financial statements.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net loss $ ( 17,195 ) $ ( 24,711 )

Other comprehensive loss before tax:

Other comprehensive income (loss) before tax:

Foreign currency translation adjustment ( 2,862 ) 778

Other comprehensive loss, before tax ( 3,366 ) ( 7,035 ) ( 1,311 ) ( 12,152 )

Tax provision attributable to other comprehensive loss

11 — ( 35 ) —

Other comprehensive loss, net of tax ( 3,355 ) ( 7,035 ) ( 1,346 ) ( 12,152 )

Defined benefit pension plans:

Amortization of prior service cost

Amortization of net actuarial loss

Other comprehensive income (loss), before tax ( 2,775 ) 778

Tax provision attributable to other comprehensive income (loss) — ( 23 )

Other comprehensive income (loss), net of tax ( 2,775 ) 755

Total comprehensive loss $ ( 19,970 ) $ ( 23,956 )

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

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Shareholders’

Equity (Deficit)

Shares Amount

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Foreign currency translation adjustment, net of tax — — — — ( 2,862 ) ( 2,862 )

Defined benefit pension plans, net of tax

— — — — 87 87

Non-cash compensation — — 665 — — 665

Balance at March 31, 2024 4,415 $ 1,325 $ 459,269 $ ( 394,596 ) $ ( 39,707 ) $ 26,291

Net loss — — — ( 15,753 ) — ( 15,753 )

Net settlement of vested stock awards 11 4 ( 16 ) — — ( 12 )

Foreign currency translation adjustment, net of tax — — — — 1,254 1,254

Non-cash compensation — — 245 — — 245

Balance at June 30, 2023 4,368 $ 1,311 $ 457,692 $ ( 342,143 ) $ ( 36,988 ) $ 79,872

Net loss — — — ( 12,134 ) — ( 12,134 )

Foreign currency translation adjustment, net of tax — — — — ( 3,355 ) ( 3,355 )

Non-cash compensation — — 232 — — 232

Balance at September 30, 2023 4,368 $ 1,311 $ 457,924 $ ( 354,277 ) $ ( 40,343 ) $ 64,615

Balance at December 31, 2022 4,343 $ 1,303 $ 457,133 $ ( 301,679 ) $ ( 38,997 ) $ 117,760

Accounting pronouncement adjustment — — ( 5,651 ) 3,824 — ( 1,827 )

Net loss — — — ( 24,711 ) — ( 24,711 )

Issuance of common stock 1,190 357 9,411 — — 9,768

Foreign currency translation adjustment, net of tax — — — — 346 346

Non-cash compensation — — ( 624 ) — — ( 624 )

Net settlement of vested stock awards 14 4 ( 52 ) — — ( 48 )

Balance at March 31, 2022 4,312 $ 1,293 $ 456,385 $ ( 404,222 ) $ ( 26,386 ) $ 27,070

Net loss — — — ( 21,552 ) — ( 21,552 )

Issuance of common stock 10 3 ( 74 ) — — ( 71 )

Foreign currency translation adjustment, net of tax — — — — 755 755

Non-cash compensation — — 382 — — 382

Balance at June 30, 2022 4,322 $ 1,296 $ 456,876 $ ( 425,774 ) $ ( 31,849 ) $ 549

Net loss — — — ( 22,873 ) — ( 22,873 )

Foreign currency translation adjustment, net of tax — — — — ( 7,035 ) ( 7,035 )

Non-cash compensation — — 629 — — 629

Balance at September 30, 2022 4,322 $ 1,296 $ 457,505 $ ( 448,647 ) $ ( 38,884 ) $ ( 28,730 )

Balance at March 31, 2023 4,357 $ 1,307 $ 457,463 $ ( 326,390 ) $ ( 38,242 ) $ 94,138

See accompanying notes to unaudited condensed consolidated financial statements.

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(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Depreciation and amortization 9,640 9,546

Write-off of deferred loan costs — 2,748

Write-off of software cost

Loss on debt extinguishment 1,585 —

Amortization of debt issuance costs, debt discounts, and deferred financing costs 1,975 8,486

Paid-in-kind interest 3,122 3,485

Allowance for credit losses 687 ( 362 )

Foreign currency (gains) losses ( 776 ) 571

Allowance for credit (gains) losses 40 ( 201 )

Foreign currency gains

( 1,239 ) ( 177 )

Deferred income taxes ( 626 ) ( 37 )

Gain on asset disposal ( 268 ) ( 4,296 )

Loss (gain) on asset disposal

Non-cash compensation costs 665 382

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Income taxes 672 436

Net cash used in operating activities ( 22,069 ) ( 46,365 )

Net cash provided by (used in) operating activities

1,886 ( 17,763 )

Cash flows from investing activities:

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Cash flows from financing activities:

Borrowings under 2020 ABL Facility — 10,300

Payments under 2020 ABL Facility — ( 72,300 )

Borrowings under 2022 ABL Credit Facility (Revolving Credit Loans) 27,292 106,531

Payments under 2022 ABL Credit Facility (Revolving Credit Loans) ( 16,293 ) ( 11,715 )

Repayment of APSC Term Loan ( 37,092 ) —

Repayment of Convertible Debt ( 41,161 ) —

Borrowings under ME/RE Loans 27,398 —

Borrowings under Revolving Credit Loans — 6,622

Payments under Revolving Credit Loans ( 9,909 ) ( 12,623 )

Payments under ME/RE Loans ( 711 ) —

Borrowings under Corre Incremental Term Loans 42,500 —

Borrowings under 2022 ABL Credit Facility (Delayed Draw Term Loan) — 35,000

Payments under Corre Incremental Term Loans

Payments for debt issuance costs ( 1,400 ) —

Issuance of common stock, net of issuance costs — 9,696

Other 2,542 ( 235 )

Net cash provided by (used in) financing activities

Net cash used in financing activities

( 9,834 ) ( 6,236 )

Effect of exchange rate changes on cash ( 273 ) 153

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

( 11,237 ) ( 26,206 )

1 unchanged sentence

Cash and cash equivalents at end of period $ 24,190 $ 31,869

_________________

1 Condensed consolidated statement of cash flows for the nine months ended September 30, 2022 includes discontinued operations.

See accompanying notes to unaudited condensed consolidated financial statements.

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Description of Business.

Unless otherwise indicated, the terms “we,” “our,” “us,” and “Team” are used in this report to refer to either Team, Inc., to one or more of its consolidated subsidiaries or to all of them taken as a whole.

Unless otherwise indicated, the terms “we,” “our,” “us,” “Team,” and “the Company” are used in this report to refer to either Team, Inc., to one or more of our consolidated subsidiaries, or to all of them taken as a whole.

Our stock is traded on the New York Stock Exchange (the “NYSE”) under the symbol “TISI”.

We are a global, leading provider of specialty industrial services offering clients access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services.

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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:

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;

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In addition, we are capable of escalating with the client’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 services in three distinct client demand profiles:

We also believe that we are unique in our ability to provide these services in three distinct client demand profiles:

(i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.

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These services can be offered while facilities are running (on-stream), 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 industry, covering a range of components including finished machined and in-service components.

IHT also provides advanced digital imaging including remote digital video imaging.

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• Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive, and mining);

• Midstream and Others (valves, terminals and storage, and pipeline);

• Public Infrastructure (amusement parks, bridges, ports, construction and building, roads, dams, and railways);

• Midstream (valves, terminals and storage, and pipeline);

• Public Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways);

• Aerospace and Defense.

Reverse Stock Split.

On December 21, 2022, we completed a reverse stock split of our outstanding common stock at a ratio of one-for-ten (the “Reverse Stock Split”).

The Reverse Stock Split effected a proportionate reduction in our authorized shares of common stock from 120,000,000 shares to 12,000,000 shares and reduced the number of shares of common stock outstanding from approximately 43,429,089 shares to approximately 4,342,909 shares.

We have made proportionate adjustments to the number of common shares issuable upon exercise or conversion of our outstanding warrants, equity awards and convertible securities, as well as the applicable exercise prices and weighted average fair value of the equity awards.

No fractional shares were issued in connection with the Reverse Stock Split.

Basis of presentation.

These condensed consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission.

Generally Accepted Accounting Principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods.

The results of operations for any interim period are not necessarily indicative of results for the full year.

Certain disclosures have been condensed or omitted

from the interim financial statements included in this report.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (“our Annual Report on Form 10-K”).

Certain disclosures have been condensed or omitted from the interim financial statements included in this report.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC (“our Annual Report on Form 10-K”).

Consolidation.

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Reclassifications.

Certain amounts in prior periods have been reclassified to conform to the current year presentation, including the separate presentation and reporting of discontinued operations.

Certain amounts in prior periods have been reclassified to conform to the current year presentation.

Such reclassifications did not have any effect on our financial condition or results of operations as previously reported.

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Since the date of our Annual Report on Form 10-K, there have been no material changes to our significant accounting policies.

Discontinued operations.

On November 1, 2022, we completed the sale of Quest Integrity (the “Quest Integrity Transaction”).

The criteria for reporting Quest Integrity as a discontinued operation were met during the third quarter of 2022 pursuant to that certain Equity Purchase Agreement by and between us and Baker Hughes Holdings LLC, dated as of August 14, 2022 (the “Sale Agreement”), and, as such, the prior year amounts related to Quest Integrity are presented as a discontinued operation.

Unless otherwise specified, the financial information and discussion in this Quarterly Report on Form 10-Q are based on our continuing operations (IHT and MS segments) and exclude any results of our discontinued operations (Quest Integrity).

Refer to Note 2 - Discontinued Operations for additional details.

DISCONTINUED OPERATIONS

On November 1, 2022, we completed the Quest Integrity Transaction with Baker Hughes for an aggregate purchase price of approximately $ 279.0 million, in accordance with the Sale Agreement.

We used approximately $ 238.0 million of the net proceeds from the sale of Quest Integrity to pay down $ 225.0 million of our term loan debt, and to pay certain fees associated with that repayment and related accrued interest, with the remainder reserved for general corporate purposes, thereby reducing our future debt service obligations and leverage, and improving our liquidity.

During the fourth quarter of 2022, we recorded total gain of $ 203.4 million, net of tax and working capital adjustments, on the sale of Quest Integrity.

We settled the working capital adjustment in the second quarter of 2023.

Quest Integrity previously represented a reportable segment.

Following the completion of the Quest Integrity Transaction, we now operate in two segments, IHT and MS.

Refer to Note 1 – Description of Business and Basis of Presentation for additional details regarding our IHT and MS operating segments.

Our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 report discontinued operations separate from continuing operations.

Our condensed consolidated statements of comprehensive loss and statements of shareholders’ equity (deficit) for the three and nine months ended September 30, 2022, as well as statements of cash flows for the nine months ended September 30, 2022, combine continuing and discontinued operations.

A summary of financial information related to our discontinued operations is presented in the tables below.

The following table represents the reconciliation of the major line items consisting of pretax income from discontinued operations to the after-tax income from discontinued operations (in thousands):

Three Months Ended

September 30, 2022 (unaudited) Nine Months Ended

September 30, 2022 (unaudited)

Major classes of line items constituting income (loss) from discontinued operations

Revenues $ 29,441 $ 88,704

Operating expenses ( 12,052 ) ( 39,508 )

Selling, general and administrative expenses ( 8,832 ) ( 26,422 )

Interest expense, net ( 78 ) ( 108 )

Other expense ( 2,675 ) ( 4,934 )

Income from discontinued operations before income taxes 5,804 17,732

Provision for income taxes ( 2,057 ) ( 1,464 )

Net income from discontinued operations $ 3,747 $ 16,268

The following table presents the depreciation and amortization and capital expenditures of Quest Integrity (in thousands):

Nine Months Ended September 30, 2022

Cash flows provided by operating activities of discontinued operations:

Depreciation and amortization $ 1,143

Cash flows provided by investing activities of discontinued operations:

Capital expenditures $ 3,703

Disaggregation of revenue.

Essentially all of our revenues are associated with contracts with customers.

A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below (in thousands):

Geographic area:

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(unaudited) (unaudited)

United States and Canada Other Countries Total United States and Canada Other Countries Total

IHT $ 100,800 $ 3,057 $ 103,857 $ 108,009 $ 2,303 $ 110,312

MS 67,286 35,572 102,858 76,135 31,892 108,027

Total $ 168,086 $ 38,629 $ 206,715 $ 184,144 $ 34,195 $ 218,339

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below:

Geographic area (in thousands):

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

(unaudited) (unaudited)

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Revenue by Operating segment and service type (in thousands):

Three Months Ended September 30, 2023

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

IHT $ 83,207 $ 39 $ 12,946 $ 7,665 $ 103,857

MS — 101,624 55 1,179 102,858

Total $ 83,207 $ 101,663 $ 13,001 $ 8,844 $ 206,715

Three Months Ended September 30, 2022

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

IHT $ 87,267 $ 19 $ 16,357 $ 6,669 $ 110,312

MS — 106,776 125 1,126 108,027

Total $ 87,267 $ 106,795 $ 16,482 $ 7,795 $ 218,339

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

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Total $ 81,010 $ 99,008 $ 13,591 $ 5,991 $ 199,600

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

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For additional information on our reportable operating segments and geographic information, refer to Note 14 - Segment and Geographic Disclosures .

Contract balances .

The timing of revenue recognition, billings, and cash collections results in the recognition of trade accounts receivable, contract assets and contract liabilities on the condensed consolidated balance sheets.

Trade accounts receivable include billed and unbilled amounts currently due from customers and represent unconditional rights to receive consideration.

The amounts due are stated at their net estimated realizable value.

Refer to Note 4 - Receivables for additional information on our trade receivables and the allowance for credit losses.

Contract costs .

We recognize the incremental costs of obtaining contracts as selling, general and administrative expenses when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.

Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs to generate or enhance resources that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered.

Costs to fulfill a contract recognized as assets primarily consist of labor and material costs and generally relate to engineering and set-up costs incurred prior to when the satisfaction of performance obligations begins.

Assets recognized for

costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the condensed consolidated balance sheets and were not material as of September 30, 2023 and December 31, 2022.

Such assets are recognized as expenses as we transfer the related goods or services to the customer.

All other costs to fulfill a contract are expensed as incurred.

Remaining performance obligations.

As permitted by ASC 606, Revenue from Contracts with Customers , we have elected not to disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an original expected duration of one year or less or (ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date.

As most of our contracts with customers are short-term in nature and billed on a time and material basis, there were no material amounts of remaining performance obligations as of September 30, 2023 and December 31, 2022.

A summary of accounts receivable as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

As most of our contracts with customers are short-term in nature and billed on a time and

material basis, there were no material amounts of remaining performance obligations as of March 31, 2024 and December 31, 2023.

ACCOUNTS RECEIVABLE

A summary of accounts receivable as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024 December 31, 2023

Trade accounts receivable $ 134,441 $ 151,316

Unbilled receivables 49,823 31,379

Unbilled revenues 43,885 33,607

Allowance for credit losses ( 3,625 ) ( 3,738 )

Total $ 174,701 $ 181,185

We measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This applies to financial assets measured at amortized cost, including trade and unbilled accounts receivable, and requires immediate recognition of lifetime expected credit losses.

Significant factors that affect the expected collectability of our receivables include macroeconomic trends and forecasts in the oil and gas, refining, power, and petrochemical markets, and changes in our results of operations and forecasts.

For unbilled receivables, we consider them as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.

The following table shows a rollforward of the allowance for credit losses (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Balance at beginning of period $ 3,738 $ 5,262

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Balance at end of period $ 3,625 $ 3,738

A summary of inventory as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

A summary of inventory as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024 December 31, 2023

Raw materials $ 9,680 $ 9,958

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PREPAID AND OTHER CURRENT ASSETS

A summary of prepaid expenses and other current assets as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

A summary of prepaid expenses and other current assets as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024 December 31, 2023

Insurance receivable $ 39,000 $ 39,000

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Total $ 60,283 $ 65,992

The insurance receivable relates to the receivable from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 9 - Other Accrued Liabilities .

These receivables are covered by our third-party insurance providers for any litigation matter that has been settled, or pending settlements where the deductibles have been satisfied.

The insurance receivable relates to the receivables from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 8 - Other Accrued Liabilities .

These receivables will be covered from our third-party insurance providers for litigation matters that have been settled, or are pending settlement, and where the deductibles have been satisfied.

The prepaid expenses primarily relate to prepaid insurance and other expenses that have been paid in advance of the coverage period.

The other current assets primarily include items such as software implementation costs, deferred financing charges and other receivables.

Other current assets include other accounts receivables, primarily related to insurance rebates, software implementation costs, and deferred financing charges.

PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

A summary of property, plant and equipment as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024 December 31, 2023

Land $ 4,006 $ 4,006

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Property, plant and equipment, net $ 123,137 $ 127,057

Included in the table above are assets under finance leases of $ 8.3 million and $ 7.4 million, and related accumulated amortization of $ 2.9 million and $ 2.3 million as of September 30, 2023 and December 31, 2022, respectively.

Depreciation expense for the three months ended September 30, 2023 and 2022 was $ 5.4 million and $ 5.5 million, respectively.

Depreciation expense for the nine months ended September 30, 2023 and 2022 was $ 16.5 million and $ 17.3 million, respectively.

Included in the table above are assets under finance leases of $ 8.9 million and $ 8.5 million, and related accumulated amortization of $ 3.5 million and $ 3.3 million as of March 31, 2024 and December 31, 2023, respectively.

Depreciation expense for the three months ended March 31, 2024 and 2023 was $ 5.3 million and $ 5.6 million, respectively.

INTANGIBLE ASSETS

A summary of intangible assets as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023

A summary of intangible assets as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024

Amount Accumulated

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Technology 2,301 ( 1,859 ) 442

Licenses 683 ( 683 ) —

Intangible assets $ 186,824 $ ( 127,269 ) $ 59,555

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Intangible assets $ 187,550 $ ( 124,857 ) $ 62,693

Amortization expense of intangible assets for the three months ended September 30, 2023 and 2022 was $ 3.2 million and $ 3.4 million, respectively.

Amortization expense of intangible assets for the nine months ended September 30, 2023 and 2022 was $ 9.6 million and $ 10.2 million, respectively.

The weighted-average amortization period for intangible assets subject to amortization was 13.7 years as of September 30, 2023 and December 31, 2022.

Amortization expense of intangible assets for the three months ended March 31, 2024 and 2023 was $ 3.1 million and $ 3.2 million, respectively.

The weighted-average amortization period for intangible assets subject to amortization was 13.8 years as of March 31, 2024 and December 31, 2023.

OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of September 30, 2023 and December 31, 2022 is as follows (in thousands):

September 30, 2023 December 31, 2022

A summary of other accrued liabilities as of March 31, 2024 and December 31, 2023 is as follows (in thousands):

March 31, 2024 December 31, 2023

Legal and professional accruals $ 51,663 $ 53,972

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Total $ 113,066 $ 118,089

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims, refer to Note 14 - Commitments and Contingencies for legal claims information.

Certain legal claims are covered by our third-party insurance providers and the related insurance receivable for these claims is recorded in prepaid expenses and other current assets, refer to Note 6 - Prepaid and Other Current Assets .

Legal and professional accruals include accruals for legal and professional fees as well as accrued legal claims.

See Note 13 - Commitments and Contingencies for additional information.

Certain legal claims are covered by our third-party insurance providers and the related insurance receivable for these claims is recorded in prepaid expenses and other current assets.

See Note 5 - Prepaid and Other Current Assets for additional information.

Payroll and other compensation expenses include all payroll related accruals including, among others, accrued vacation, severance, and bonuses.

Insurance accruals primarily relate to accrued medical and workers compensation costs.

Property, sales and other non-income related taxes includes accruals for items such as sales and use tax, property tax and other related tax accruals.

Property, sales and other non-income related taxes include accruals for items such as sales and use tax, property tax, and other related tax accruals.

Accrued interest relates to the interest accrued on our long-term debt.

Other accruals include various business accruals.

We recorded an income tax provision of $ 1.1 million and $ 4.0 million for the three and nine months ended September 30, 2023, compared to a provision of $ 1.5 million and $ 4.2 million for the three and nine months ended September 30, 2022.

The effective tax rate, inclusive of discrete items, was a provision of 9.7 % for the three months ended September 30, 2023, compared to a provision of 5.8 % for the three months ended September 30, 2022.

For the nine months ended September 30, 2023, our effective tax rate, inclusive of discrete items, was a provision of 8.3 %, compared to a provision of 4.7 % for the nine months ended September 30, 2022.

The effective tax rate differed from the statutory tax rate due to changes in the valuation allowance in certain jurisdictions.

As of September 30, 2023 and December 31, 2022, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

September 30, 2023 December 31, 2022

Other accruals include various business expense accruals.

We recorded an income tax provision of $ 0.1 million for the three months ended March 31, 2024, compared to a provision of $ 0.9 million for the three months ended March 31, 2023.

The effective tax rate, inclusive of discrete items, was a provision of 0.4 % for the three months ended March 31, 2024, compared to a provision of 3.6 % for the three months ended March 31, 2023.

The effective tax rate differs from the statutory rate due to changes in valuation allowance in certain jurisdictions.

As of March 31, 2024 and December 31, 2023, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

March 31, 2024 December 31, 2023

2022 ABL Credit Facility $ 103,506 $ 113,415

ME/RE Loans 1

Uptiered Loan / Subordinated Term Loan 1

23,608 24,061

Uptiered Loan 1

132,569 129,436

Incremental Term Loan 1

APSC Term Loan 1

38,985 38,758

Equipment Finance Loan

Total 301,469 305,670

Convertible Debt 1

Finance lease obligations 5,692 5,756

2 unchanged sentences

Total long-term debt and finance lease obligations, less current portion $ 300,038 $ 306,214

_________________

1 Comprised of principal amount outstanding, less unamortized discount and issuance costs.

1 unchanged sentence

2022 ABL Credit Facility

1 dated as of May 6, 2022, Amendment No.

2 dated as of November 1, 2022 and Amendment No.3 dated June 16, 2023, the “2022 ABL Credit Agreement”).

Available funding commitments to us under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $ 130.0 million to be provided by certain affiliates of the ABL Agent (the “Revolving Credit Loans”), with a $ 35.0 million sublimit for swingline borrowings, a $ 26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $ 35.0 million (the “Delayed Draw Term Loan”) provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “2022 ABL Credit Facility”).

Our obligations under the 2022 ABL Credit Agreement are guaranteed by certain of our direct and indirect subsidiaries referenced below as the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties.” Our obligations under the 2022 ABL Credit Facility are secured on a first priority basis by, among other things, accounts receivable, deposit accounts, securities accounts, and inventory of the ABL Loan Parties and are secured on a second priority basis by substantially all of the other assets of the ABL Loan Parties.

Availability under the revolving credit line is based on a percentage of the value of qualifying accounts receivable and inventory, reduced by certain reserves.

On February 11, 2022, we entered into a credit agreement, with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (the “ABL Agent”) (such agreement, as amended by Amendment No.1 dated as of May 6, 2022, Amendment No.2 dated as of November 1, 2022, Amendment No.3 dated as of June 16, 2023, and Amendment No.4 dated as of March 6, 2024, the “2022 ABL Credit Agreement”).

Available funding commitments under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $ 130.0 million to be provided by certain affiliates of the ABL Agent (the “Revolving Credit Loans”), with a $ 35.0 million sublimit for swingline borrowings, a $ 26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $ 35.0 million (the “Delayed Draw Term Loan”) originally provided by Corre Partners Management, LLC (“Corre”) and certain of its affiliates (collectively, the “2022 ABL Credit Facility”).

The terms of the 2022 ABL Credit Facility are described in the table below (dollar amounts are presented in thousands):

2 unchanged sentences

Amended maturity date 8/11/2025 8/11/2025

Original stated interest rate LIBOR + applicable margin (base + applicable margin) LIBOR+ 10 % (Base+ 9 %)

Amended interest rate SOFR + applicable margin (base + applicable margin) SOFR + 10 % (Base + 9 %)

Original stated interest rate LIBOR + applicable margin (base + applicable margin 1 )

LIBOR + 10 % (Base + 9 %)

Amended interest rate SOFR + applicable margin (base + applicable margin 1 )

SOFR + 10 % (Base + 9 %)

Actual interest rate:

9 unchanged sentences

Available amount at 3/31/2024 $ 6,723 $ —

The “applicable margin” in the table above is defined as a rate of 3.15 %, 3.40 % or 3.65 % for base rate loans with a 2.00 % base rate floor and a rate of 4.15 %, 4.40 % or 4.65 % for Adjusted Term Secured Overnight Financing Rate (“SOFR”) loans with a 1.00 % SOFR floor, in each case depending on the amount of EBITDA (as defined in ABL Amendment No.

3 to the 2022 ABL Credit Facility) as of the most recent measurement period as reported in a monthly compliance certificate.

The fee for undrawn revolving amounts is 0.50 %.

We incurred additional $ 0.3 million of financing cost related to the 2022 ABL Credit Facility in connection with Amendment No.

3 thereto (“ABL Amendment No.

3”) dated June 16, 2023.

These costs were capitalized and amortized on a straight-line basis over the new term of the 2022 ABL Credit Facility.

The Company may make voluntary prepayments of the loans under the 2022 ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loan, to certain conditions.

Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the 2022 ABL Credit Facility to the sum of the Delayed Draw Term Loan plus revolving facility usage outstanding is less than 130 %.

Amounts repaid under the Revolving Credit Loans may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the 2022 ABL Credit Agreement.

Amounts repaid under the Delayed Draw Term Loan cannot be re-borrowed.

Certain permanent repayments of the 2022 ABL Credit Facility loans are subject to the payment of a premium of 1.00 % from June 16, 2023 until August 11, 2024, and 0.50 % after August 11, 2024 until August 11, 2025.

The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, as described therein.

As of September 30, 2023, we are in compliance with the covenants.

As of September 30, 2023, $ 10.1 million in letters of credit was issued under the 2022 ABL Credit Agreement.

1 Applicable margin ranges based on EBITDA as defined in the 2022 ABL Credit Agreement

The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, as described in the 2022 ABL Credit Agreement, and further amended by Amendment No.

4, dated March 6, 2024.

As of March 31, 2024, we are in compliance with the covenants.

As of March 31, 2024, $ 8.4 million in letters of credit were issued under the 2022 ABL Credit Agreement.

Such amounts remain undrawn and are off-balance sheet.

The ABL Amendment No.

3, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $ 27.4 million of new term loans (the “ME/RE Loans”).

Our obligations in respect of the ME/RE Loans are guaranteed by certain direct and indirect material subsidiaries of the Company (the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”).

The ME/RE Loans under the 2022 ABL Credit Agreement are secured on a first priority basis by, among other things, certain real estate and machinery and equipment (the “Specified ME/RE Collateral”), accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties (collectively, the “ABL Priority Collateral”) and on a second priority basis by substantially all of the other assets of the ABL Loan Parties, subject to the terms of the Intercreditor Agreement (as defined below).

The ME/RE Loans were drawn in full on June 16, 2023 and were used to pay off the amounts owed under the existing APSC Term Loan, discussed below.

On June 16, 2023, we entered into ABL Amendment No.

3 which, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $ 27.4 million of new term loans (the “ME/RE Loans”).

Amounts repaid or prepaid under the ME/RE Loans may not be reborrowed.

The terms of ME/RE Loans are described in the table below (dollar amounts are presented in thousands):

Original maturity date 8/11/2025

Original stated interest rate SOFR + 5.75 % + 0.11 % credit spread adjustment

Maturity date

Stated interest rate

SOFR + 5.75 % + 0.11 % credit spread adjustment

Principal payments $ 237 monthly

Effective interest rate

9/30/2023 16.75 %

3/31/2023 N/A

11 unchanged sentences

Available amount at 3/31/2024 $ —

The Company may make voluntary prepayments of the ME/RE Loans from time to time.

Mandatory prepayments are required in certain instances when sales of assets are completed that are related to the Specified ME/RE Collateral, and with annual excess cash flow (as defined in the 2022 ABL Credit Agreement), subject to certain prepayment premiums (subject to certain exceptions), plus accrued and unpaid interest.

The remaining unpaid principal balance of the ME/RE loans at maturity will be $ 21.0 million.

Direct and incremental costs associated with the issuance of the ABL Amendment No.

3 were approximately $ 2.1 million and were deferred and presented as a direct deduction from the carrying amount of the related debt and are amortized on a straight-line basis over the term of the ME/RE Loans.

APSC Term Loan

On June 16, 2023, we used the proceeds from the ME/RE Loans and borrowings under the 2022 ABL Credit Facility to repay the total outstanding APSC Term Loan balance of $ 35.5 million plus the applicable prepayment premium, resulting in a loss on debt extinguishment of $ 1.6 million.

On December 18, 2020, we had entered into that certain Term Loan Credit Agreement with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), pursuant to which we borrowed $ 250.0 million (the “APSC Term Loan”).

The terms of APSC Term Loan are described in the table below (dollar amounts are presented in thousands):

Original maturity date 12/18/2026

Original stated interest rate variable

Effective interest rate

9/30/2023 N/A

9/30/2022 25.72 %

Actual interest rate:

9/30/2023 N/A

9/30/2022 10.24 %

Interest payments Quarterly

Cash paid for interest

YTD 9/30/2023 $ 2,849

YTD 9/30/2022 $ 9,693

PIK interest added to principal

YTD 9/30/2023 $ —

YTD 9/30/2022 $ 6,627

Balances at 12/31/2022

Principal balance $ 35,510

Unamortized balance of debt issuance cost $( 3,948 )

Net carrying balance $ 31,562

Amended and Restated Term Loan Credit Agreement - Uptiered Loan / Subordinated Term Loan and Incremental Term Loan

On November 9, 2021, we entered into a credit agreement (as amended by Amendment No.

1 dated as of November 30, 2021, Amendment No.

2 dated as of December 6, 2021, Amendment No.

3 dated as of December 7, 2021, Amendment No.

4 dated as of December 8, 2021, Amendment No.

5 dated as of February 11, 2022, Amendment No.

6 dated as of May 6, 2022, Amendment No.

7 dated as of June 28, 2022, Amendment No.

8 dated as of October 4, 2022, Amendment No.

9 dated as of November 1, 2022, Amendment No.

10 dated as of November 4, 2022, Amendment No.

11 dated as of November 21, 2022 and Amendment No.

12 dated as of March 29, 2023, the “Subordinated Term Loan Credit Agreement”) with Cantor Fitzgerald Securities, as agent, and the lenders party thereto providing for an unsecured approximately $ 123.1 million delayed draw subordinated term loan facility.

Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $ 22.5 million on November 9, 2021, and an additional $ 27.5 million on December 8, 2021.

On October 4, 2022, an additional approximately $ 57.0 million was added to the outstanding principal amount under the Subordinated Term Loan Credit Agreement in exchange for an equivalent amount of the Company’s senior unsecured 5.00 % Convertible Senior Notes (the “Notes”) held by Corre.

On June 16, 2023, the Company, entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (as amended and restated, the “A&R Term Loan Credit Agreement”) among the Company, as borrower, the guarantors party thereto, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as agent (the “A&R Term Loan Agent”).

Additional funding commitments to the Company under the A&R Term Loan Credit Agreement, subject to certain conditions, included a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre and certain of its affiliates, consisting of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw tranche.

Amounts outstanding under the existing subordinated term loan credit agreement (the “Uptiered Loan”) have become senior secured obligations of the Company and the A&R Term Loan Guarantors (as defined below) and are secured on a pari passu basis with the Incremental Term Loan, on the terms described below.

On July 31, 2023, $ 42.5 million, made up of $ 37.5 million of the term loan tranche and $ 5.0 million of the delayed draw tranche, of the $ 57.5 million Incremental Term Loan under the A&R Term Loan Credit Agreement was drawn down and the proceeds thereof were used to repay the Notes that matured on August 1, 2023.

The remaining availability of the delayed draw tranche of $ 15.0 million will be used, subject to certain maximum liquidity conditions, for working capital purposes.

The Company’s obligations under the A&R Term Loan Credit Agreement are guaranteed by certain direct and indirect material subsidiaries of the Company (the “A&R Term Loan Guarantors” and, together with the Company, the “A&R Term Loan Parties”).

The obligations of the A&R Term Loan Parties are secured on a second priority basis by the ABL Priority Collateral and on a first priority basis by substantially all of the other assets of the A&R Term Loan Parties, subject to the terms of an intercreditor agreement (the “Intercreditor Agreement”) between the A&R Term Loan Agent, the ABL Agent and the A&R Term Loan Parties, that sets forth the priorities in respect of the collateral and certain related agreements with respect thereto.

The Company may make voluntary prepayments of the loans under the A&R Term Loan Credit Agreement from time to time, and the Company is required in certain instances related to change of control, asset sales, equity issuances, non-permitted debt issuances and with annual excess cash flow (as defined in the A&R Term Loan Credit Agreement), to make mandatory prepayments of the loans under the A&R Term Loan Credit Agreement, subject to certain prepayment premiums as specified in the A&R Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest.

The A&R Term Loan Credit Agreement contains certain customary conditions to borrowings, events of default and affirmative, negative, and financial covenants (as described in the A&R Term Loan Credit Agreement).

As of September 30, 2023, we are in compliance with the covenants.

Further, the A&R Term Loan Credit Agreement includes certain customary events of default, the occurrence of which may require an additional 2.00 % interest on the outstanding loans and other obligations under the A&R Term Loan Credit Agreement and the debt may become payable immediately.

The terms of Uptiered Loan / Subordinated Term Loan and Incremental Term Loan are described in the table below (dollar amounts are presented in thousands):

Uptiered Loan / Subordinated Term Loan

1 The effective interest rate as of March 31, 2024, consisted of a 11.19 % variable interest rate paid in cash and an additional 6.19 % due to amortization of the related debt issuance costs.

The ME/RE Loans are governed by the 2022 ABL Credit Agreement and are subject to the same restrictive covenants as described under the 2022 ABL Credit Facility.

Amended and Restated Term Loan Credit Agreement - Uptiered Loan and Incremental Term Loan

On June 16, 2023, we entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (such agreement, as amended and restated, and as further amended by Amendment No.1 dated March 6, 2024, the “A&R Term Loan Credit Agreement”) among the Company, as borrower, the guarantors party thereto, the lenders from time-to-time party thereto and Cantor Fitzgerald Securities, as agent (the “A&R Term Loan Agent”).

The A&R Term Loan Credit Agreement included a term loan credit agreement entered into on November 9, 2021, as amended through March 29, 2023 (the “Uptiered Loan”), and an additional funding commitment, subject to certain conditions, consisting of a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre and certain of its affiliates, comprised of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw tranche.

4 dated March 6, 2024).

As of March 31, 2024, we are in compliance with the A&R Term Loan Credit Agreement covenants.

The terms of Uptiered Loan and Incremental Term Loan are described in the table below (dollar amounts are presented in thousands):

Uptiered Loan

Incremental Term Loan

Maturity date 12/31/2027 (12/31/2026 if outstanding balance is greater than $ 50 million)

Stated interest rate 12 % PIK through 12/31/2023, then cash and PIK split as described below

Stated interest rate

3/31/2024 13.5 % cash and PIK split 2

12 % paid in cash

3/31/2023 12 % PIK

12 % paid in cash

Principal payments at maturity $ 356 quarterly

1 unchanged sentence

3/31/2024 14.56% 3

9/30/2022 46.79 % N/A

3/31/2023 30.32% 3

Interest payments cash quarterly/PIK monthly quarterly

PIK interest added to principal

Cash paid for interest

YTD 3/31/2024 $ 285 $ 1,447

YTD 3/31/2023 $ — N/A

PIK interest added to principal

YTD 3/31/2024 $ 3,100 $ —

YTD 3/31/2023 $ 3,450 N/A

6 unchanged sentences

Principal balance 1

$ 115,443 N/A

Unamortized balance of debt issuance cost $( 7,538 ) N/A

Net carrying balance $ 107,905 N/A

$ 130,087 $ 48,052

Unamortized balance of debt issuance cost $( 651 ) $( 9,294 )

Net carrying balance $ 129,436 $ 38,758

Available amount at 3/31/2024 $ — $ 10,000

1 The principal balance of the Uptiered Loan / Subordinated Term Loan is made up of $ 22.5 million drawn on November 9, 2021, $ 27.5 million drawn on December 8, 2021, and $ 57.0 million added as part of the exchange agreement on October 4, 2022.

In addition, the principal balance also includes PIK interest recorded to date of $ 18.2 million and $ 7.4 million as of September 30, 2023 and December 31, 2022, respectively, and, with respect to the Incremental Term Loan, PIK fees of $ 0.9 million.

2 $ 5.0 million was drawn from the available balance on October 6, 2023.

The Uptiered Loan under the A&R Term Loan Credit Agreement bears interest at an annual rate of 12.00 %, paid-in-kind (noncash) (“PIK”) from June 16, 2023 through December 31, 2023, and thereafter a split between cash and PIK, with the cash portion ranging from 2.50 % per annum to 12.00 % per annum, and the PIK portion ranging from 9.50 % per annum to 0.00 % per annum, depending on the Company’s Net Leverage Ratio (as defined in the A&R Term Loan Credit Agreement).

In addition, if certain minimum liquidity thresholds set forth in the A&R Term Loan Credit Agreement are not met for an applicable interest payment date, all interest in respect of the Uptiered Loan payable on such interest payment date will be PIK, irrespective of the Net Leverage Ratio at such time.

In addition, if certain conditions related to repayments in respect of the Incremental Term Loan are not met, certain additional quarterly fees (not to exceed 4 such fees) plus a 150 basis point increase to the applicable interest rate will be payable to the lenders under the A&R Term Loan Credit Agreement in cash or common stock of the Company, at the Company’s option.

As of September 30, 2023 and December 31, 2022, APSC Holdco II, L.P.

held 500,000 warrants and certain Corre holders collectively held 500,000 warrants in each case providing for the purchase of one share of the Company’s common stock per warrant at an exercise price of $ 15.00 .

1 The principal balance of the Uptiered Loan is made up of $ 22.5 million drawn on November 9, 2021, $ 27.5 million drawn on December 8, 2021, and $ 57.0 million added as part of the exchange agreement on October 4, 2022.

In addition, the principal balance also includes PIK interest recorded to date of $ 25.3 million and $ 22.2 million as of March 31, 2024 and December 31, 2023, respectively, and PIK fees of $ 0.9 million incurred as of December 31, 2022.

2 Cash and PIK split is based on the Net Leverage Ratio as defined in the A&R Term Loan Credit Agreement.

Cash interest rate increased by 1.5 % on January 31, 2024.

3 The effective interest rate on the Uptiered Loan as of March 31, 2024 consisted of a 13.50 % stated interest rate paid in PIK and cash and an additional 1.06 % due to the amortization of the related debt issuance costs.

The effective interest rate on the Uptiered Loan as of March 31, 2023 consisted of a 12.00 % stated interest rate paid in PIK and an additional 18.32 % due to the acceleration of the amortization of the related debt issuance costs.

4 The effective interest rate on the Incremental Term Loan as of March 31, 2024 consisted of a 12.00 % stated interest rate paid in cash and an additional 10.96 % due to the amortization of the related debt issuance costs.

As of March 31, 2024 and December 31, 2023, APSC Holdco II, L.P.

held 500,000 warrants and certain affiliates of Corre collectively held 500,000 warrants, in each case providing for the purchase of one share of the Company’s common stock per warrant at an exercise price of $ 15.00 .

The warrants will expire on December 8, 2028.

The exercise price and the number of shares of our common stock issuable on exercise of the warrants are subject to certain antidilution adjustments, including for stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.

Convertible Notes

Description of Convertible Notes

On July 31, 2023, $ 42.5 million of the $ 57.5 million under the Incremental Term Loan was drawn down and the proceeds thereof were used to repay the principal and accrued interest of the outstanding Notes on their maturity date of August 1, 2023.

On July 31, 2017, we issued $ 230.0 million principal amount of Notes due 2023 in a private offering to qualified institutional buyers (as defined in the Securities Act of 1933) pursuant to Rule 144A under the Securities Act (the “Offering”).

Net proceeds received from the Offering were approximately $ 222.3 million after deducting discounts, commissions and expenses and were used to repay outstanding borrowings under a previous credit facility.

The Notes bore interest at a rate of 5.0 % per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2018.

Cash interest paid amounted to $ 2.1 million and $ 2.1 million for the nine months ended September 30, 2023 and 2022, respectively.

PIK interest of $ 4.2 million was added to principal during the nine months ended September 30, 2022.

There was no PIK interest in 2023.

The warrants can be exercised by rendering cash or by means of a cashless option as set forth in the agreement.

Equipment Finance Loan

On March 6, 2024, we entered into agreements to sell various equipment to an equipment finance lender for $ 2.9 million and lease the equipment for monthly payments of $ 181 thousand over 18 months.

The lease agreement provides for a bargain purchase option at the end of the lease term which we intend to exercise.

The Company determined that the transaction did not meet the criteria for sale-leaseback in accordance with ASC 842, Leases and accounted for this arrangement as an equipment financing.

The assets subject to the transaction remain on our balance sheet and continue to depreciate in accordance with our depreciation policy.

Fair Value of Debt

The fair value of our 2022 ABL Credit Facility, Uptiered Loan, Incremental Term Loan and ME/RE Loans are representative of the carrying value based upon the variable interest rate terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt.

The fair value of the Notes as of December 31, 2022 was $ 37.5 million, (inclusive of the fair value of the conversion option) and a “Level 2” measurement, determined based on the observed trading price of these instruments.

The Notes were fully paid off on August 1, 2023.

The fair value of our debt obligations is representative of the carrying value based upon the respective interest rate terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt obligations.

1970 Group Substitute Insurance Reimbursement Facility

On September 29, 2022, the 1970 Group extended us credit in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $ 21.4 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance policies (the “Insurance Policies”).

We are required to reimburse the 1970 Group for any draws made under the letters of credit within five business days of notice of any such draw.

The Substitute Insurance Reimbursement Facility Agreement was renewed on August 29, 2023 to update the letters of credit limit up to approximately $ 24.9 million with the termination date on the earlier of (i) the expiration or termination of our Insurance Policies or (ii) September 29, 2024.

On September 29, 2022, we entered into the Substitute Insurance Reimbursement Facility Agreement with 1970 Group Inc.

(“1970 Group”) (as amended by that certain first amendment thereto dated August 29, 2023, the “Substitute Insurance Reimbursement Facility Agreement”).

Under the Substitute Insurance Reimbursement Facility Agreement, the 1970 Group extended credit to us in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $ 22.9 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance policies.

As of March 31, 2024, we have $ 22.9 million of letters of credit outstanding under the Substitute Reimbursement Facility.

According to the provisions of ASC 470, Debt , the arrangement is a “Substitute Insurance Reimbursement Facility” limited to the amounts drawn under the letters of credit.

Therefore, until there is a draw on the Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement.

Therefore, until we use or draw on such Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement.

The fees paid by us periodically under this arrangement are deferred and amortized to interest expense over the term of the arrangement.

As of September 30, 2023, we had approximately $ 2.8 million of unamortized deferred fees.

As of September 30, 2023, we had $ 16.5 million of unrestricted cash and cash equivalents and $ 5.0 million of restricted cash.

International cash balances as of September 30, 2023 were $ 11.2 million, and approximately $ 0.7 million of such cash is located in countries where currency restrictions exist.

As of September 30, 2023, we had approximately $ 19.9 million of available borrowing capacity under our various credit agreements, consisting of $ 4.9 million available under the Revolving Credit Loans and $ 15.0 million available under the Incremental Term Loan under the A&R Term Loan Credit Agreement.

We have $ 37.6 million in letters of credit and $ 1.7 million in surety bonds outstanding and $ 2.1 million in miscellaneous cash

deposits securing leases or other required obligations.

Our cash and cash equivalents as of December 31, 2022 totaled $ 58.1 million including $ 1.4 million of cash located in countries where currency restrictions existed.

As of March 31, 2024, the unamortized balance of $ 0.7 million of deferred fees was included in other current assets.

As of March 31, 2024, we had $ 19.2 million of unrestricted cash and cash equivalents and $ 5.0 million of restricted cash, including $ 3.4 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balances as of March 31, 2024 were $ 8.2 million, and approximately $ 0.7 million of such cash is located in countries where currency or regulatory restrictions exist.

As of March 31, 2024, we had approximately $ 16.7 million of available borrowing capacity under our various credit agreements, consisting of $ 6.7 million available under the Revolving Credit Loans and $ 10.0 million available under the Incremental Term Loan under the A&R Term Loan Credit Agreement.

As of March 31, 2024, we had $ 33.9 million in letters of credit and $ 2.4 million in surety bonds outstanding and $ 0.6 million in miscellaneous cash deposits securing other required obligations.

As of December 31, 2023, our cash and cash equivalents consisted of $ 30.4 million of unrestricted cash and cash equivalents and $ 5.0 million of restricted cash, including $ 3.4 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balances as of December 31, 2023 were $ 12.0 million, including $ 0.6 million of cash located in countries where currency or regulatory restrictions existed.

EMPLOYEE BENEFIT PLANS

1 unchanged sentence

Net periodic pension credit includes the following components (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(unaudited) (unaudited) (unaudited) (unaudited)

Three Months Ended March 31,

(unaudited) (unaudited)

Interest cost $ 652 $ 687

7 unchanged sentences

5.5 % overall, 8.5 % for equities and 5.0 % for debt securities.

We expect to contribute $ 3.7 million to the U.K.

Plan for 2023, of which $ 2.8 million has been contributed through September 30, 2023.

SHAREHOLDERS’ EQUITY

Shareholder’s Equity and Preferred Stock

On December 21, 2022, we completed a reverse stock split of our outstanding common stock at a ratio of one-for-ten.

The Reverse Stock Split effected a proportionate reduction in our authorized shares of common stock from 120,000,000 shares to 12,000,000 shares and reduced the number of shares of common stock outstanding as of such date from approximately 43,429,089 shares to approximately 4,342,909 shares.

No fractional shares were issued in connection with the Reverse Stock Split.

As of September 30, 2023 there were 4,368,422 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of September 30, 2023 we had 500,000 authorized shares of preferred stock, none of which had been issued.

As of March 31, 2024 there were 4,415,201 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of March 31, 2024 we had 500,000 authorized shares of preferred stock, none of which had been issued.

Accumulated Other Comprehensive Income (loss)

A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):

Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

Three Months Ended

March 31, 2024 Three Months Ended

March 31, 2023

(unaudited) (unaudited)

5 unchanged sentences

$ ( 25,853 ) $ ( 11,041 ) $ ( 38 ) $ ( 36,932 ) $ ( 28,859 ) $ ( 10,474 ) $ 336 $ ( 38,997 )

Other comprehensive loss

( 1,311 ) — ( 35 ) ( 1,346 ) ( 12,152 ) — — ( 12,152 )

Other comprehensive income (loss) ( 2,862 ) 87 — ( 2,775 ) 778 — ( 23 ) 755

Balance, end of period $ ( 28,715 ) $ ( 10,954 ) $ ( 38 ) $ ( 39,707 ) $ ( 28,081 ) $ ( 10,474 ) $ 313 $ ( 38,242 )

COMMITMENTS AND CONTINGENCIES

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, which will only be resolved when one or more future events occur or fail to occur.

Team’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, Team’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

We accrue for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on our best estimate of the expected liability.

2 unchanged sentences

Notwithstanding the uncertainty as to the outcome and while our insurance coverage might not be available or adequate to cover these claims, based upon the information currently available, we do not believe that any uninsured losses that might arise from these lawsuits and proceedings will have a materially adverse effect on our condensed consolidated financial statements.

Notice of Potential Environmental Violation - On April 20, 2021, Team Industrial Services, Inc.

received Notices of Potential Violation from the U.S.

Environmental Protection Agency (“EPA”) alleging noncompliance with various waste determination, reporting, training, and planning obligations under the Resource Conservation and Recovery Act at seven of our facilities located in Texas and Louisiana.

The allegations largely related to spent film developing solutions generated through our mobile radiographic inspection services and related to the characterization and quantities of those wastes and related notices, reporting, training, and planning.

On February 9, 2022, Team and the EPA agreed to settle all the claims related to this matter and the formal settlement agreement was finalized in April 2022 with our agreement to pay penalties totaling $ 0.2 million.

Kelli Most Litigation - On November 13, 2018, Kelli Most filed a lawsuit against Team Industrial Services, Inc., individually and as a personal representative of the estate of Jesse Henson, in the 268th District Court of Fort Bend County, Texas (the “Most litigation”).

3 unchanged sentences

On January 25, 2022, the trial court signed a final judgment in favor of the plaintiff and against Team Industrial Services, Inc.

Post-judgment motions challenging the judgment were filed on February 24, 2022 and were denied by the court on April 22, 2022.

A notice of appeal was filed on April 25, 2022, and this case is currently pending in the Court of Appeals for the First District of Texas, in Houston.

Post-judgment motions challenging the judgment were filed on February 24, 2022 and were denied by the trial court on

April 22, 2022.

We believe the jury verdict is not supported by the facts of the case or applicable law, is the result of significant trial error, and that there are strong grounds for appeal.

We appealed the trial court’s judgment to the Texas First Court of Appeals by timely filing a notice of appeal on April 25, 2022, and filed our initial appellate brief on December 23, 2022.

We believe that the likelihood that the amount of the judgment will be affirmed is not probable.

We currently estimate a range of possible outcomes between $ 13.0 million and approximately $ 51.0 million, and as of September 30, 2023 we have recorded a receivable from our third-party insurance providers in other current assets with a corresponding liability of the same amount in other accrued liabilities at an amount we believe is the most likely estimate for a probable loss on this matter.

We currently estimate a range of possible outcomes between $ 13.0 million and approximately $ 51.0 million, and we have accrued a liability of $ 39.0 million as of March 31, 2024 which is the amount we believe is the most likely estimate for a probable loss on this matter.

We have also recorded a related receivable from our third-party insurance providers in other current assets with a corresponding liability of the same amount in other accrued liabilities.

Such amounts are treated as non-cash operating activities.

The Most litigation is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $ 3.0 million self-insured retention and deductible.

All retentions and deductibles have been met, accordingly, we believe pending the final settlement, all further claims will be fully funded by our insurance policies.

All retentions and deductibles have been met, and accordingly, we believe pending the final settlement, all further claims will be fully funded by our insurance policies.

We will continue to evaluate the possible outcomes of this case in light of future developments and their potential impact on factors relevant to our assessment of any possible loss.

Accordingly, for all matters discussed above, we have accrued in the aggregate approximately $ 40.7 million as of September 30, 2023, of which approximately $ 1.7 million is not covered by our various insurance policies.

Notice of repayment of pandemic related government subsidies - In response to widespread health crises, epidemics and pandemics, certain of our entities based in foreign jurisdictions received governmental funding assistance to compensate for a portion of employee wages between March 2020 and March 2022.

Following ongoing compliance reviews of these funding assistance programs, we received notices stating noncompliance with the requirements of these funding assistance programs.

Accordingly, based on the assessments completed by the government appointed administrative authority, we have accrued $ 5.5 million, to be repaid over an extended period, as of March 31, 2024.

Accordingly, for all matters discussed within this Note 13 - Commitments and Contingencies , we have accrued in the aggregate approximately $ 44.6 million as of March 31, 2024, of which approximately $ 5.6 million is not covered by our various insurance policies.

In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”).

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

IHT $ 99,448 $ 101,829

1 unchanged sentence

Total revenues

Three Months Ended

September 30, Nine Months Ended

September 30,

$ 199,600 $ 202,277

(unaudited) (unaudited) (unaudited) (unaudited)

Three Months Ended

(unaudited) (unaudited)

Operating income (loss):

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Capital expenditures 1 :

IHT $ 536 $ 1,427

MS 988 1,427 2,263 3,861

Corporate and shared support services — —

Total capital expenditures

$ 1,561 $ 2,028

1 Excludes finance leases.

Totals may vary from amounts presented in the condensed consolidated statements of cash flows due to the timing of cash payments.

Capital expenditures presented in the table above are on accrual basis and differ from the amounts presented in the condensed consolidated statements of cash flows.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Depreciation and amortization:

3 unchanged sentences

Total depreciation and amortization

$ 9,640 $ 9,546

Separate measures of our assets by operating segment are not produced or utilized by management to evaluate segment performance.

A geographic breakdown of our revenues for the three and nine months ended September 30, 2023 and 2022 is as

follows (in thousands):

A geographic breakdown of our revenues for the three months ended March 31, 2024 and 2023 is as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(unaudited) (unaudited) (unaudited) (unaudited)

(unaudited) (unaudited)

Total Revenues 1

7 unchanged sentences

RELATED PARTY TRANSACTIONS

Alvarez & Marsal provided certain consulting services to the Company in connection with our former Interim Chief Financial Officer position and other corporate support costs.

Effective June 12, 2022 the Interim Chief Financial Officer position ended as the Company named a permanent Chief Financial Officer.

The Company paid $ 8.1 million in consulting fees to Alvarez & Marsal for the year ended December 31, 2022.

In connection with the Company’s debt transactions, the Company engaged in transactions with Corre and APSC to provide funding as described in Note 11 - Debt .

In connection with the Company’s debt transactions, the Company engaged in transactions with Corre to provide funding as described in Note 10 - Debt .

SUBSEQUENT EVENTS

As of November 9, 2023, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended September 30, 2023 and determined that there were no events or transactions that would have a material impact on the Company’s results of operations or financial position except as described in Note 11- Debt .

As of May 14, 2024, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended March 31, 2024 and determined that there were no events or transactions that would have a material impact on the Company’s results of operations or financial position.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements