TEAM INC 10-Q

ITEM 2. 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; • our ability to manage inflationary pressures in our operating costs; • negative market conditions, including domestic and global inflationary pressures, impact of tariffs, future economic uncertainties, and impacts from epidemics and pandemics, 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) and the nature of our customers’ industry; • our ability to expand into new markets (including low carbon energy transition) and attract customers in new industries may be limited due to our competition’s breadth of service offerings and intellectual property; • our significant debt and high leverage which could have a negative impact on our financing options, liquidity position and ability to manage increases in interest rates; • our ability to access capital and liquidity provided by the financial and capital markets; • the timing of new customer contracts and termination of existing contracts may result in unpredictable fluctuations in our cash flows and financial results; • risk of non-payment and/or delays in payment of receivables from our customers; 22 T able of Contents • our ability to maintain compliance with the NYSE’s 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; • our ability to continue as a going concern; • 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, 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. Recent Refinancing Transactions . On March 12, 2025, we entered into certain debt refinancing transactions with our existing and new lenders (collectively, the “Refinancing Transactions”). Refer to Note 10 - Debt to the unaudited condensed consolidated financial statements for additional details. Compliance with NYSE listing standards. On March 14, 2025, the Company received notice from the NYSE that the Company had regained compliance with the NYSE continued listing standards. Specifically, the Company resolved its prior non-compliance with the quantitative listing standards described in Section 802.01B of the NYSE Listed Company Manual. 23 T able of Contents Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024 The following is a comparison of our results of operations for the three months ended March 31, 2025 to the three months ended March 31, 2024 (in thousands). Three Months Ended March 31, Favorable (Unfavorable) 2025 2024 $ % (unaudited) (unaudited) Revenues by business segment: IHT $ 106,215 $ 99,448 $ 6,767 6.8 % MS 92,440 100,152 (7,712) (7.7) % Total revenues $ 198,655 $ 199,600 $ (945) (0.5) % Operating income (loss): IHT $ 8,693 $ 5,185 $ 3,508 67.7 % MS (1,111) 4,091 (5,202) (127.2) % Corporate and shared support services (13,585) (15,662) 2,077 13.3 % Total operating loss $ (6,003) $ (6,386) $ 383 6.0 % Interest expense, net $ (11,436) $ (12,098) $ 662 5.5 % Loss on debt extinguishment (11,853) — $ (11,853) (100%) Other (expense) income, net (204) 1,362 (1,566) (115.0) % Loss before income taxes $ (29,496) $ (17,122) $ (12,374) (72.3) % Provision for income taxes (222) (73) (149) (204.1) % Net loss $ (29,718) $ (17,195) $ (12,523) (72.8) % Revenues. Total revenues decreased $0.9 million or 0.5% from the prior year period. IHT segment year-to-date revenue increased by $6.8 million or 6.8% compared to the prior year period, primarily driven by an increase in U.S. operations revenue of $7.8 million attributable to higher turnaround and capital projects activity as well as $2.0 million from our Aerospace facility, partially offset by lower year over year callout and turnaround activities in Canada and other international regions of $1.0 million. MS segment revenue decreased by $7.7 million or 7.7% compared to the prior year period, mainly driven by lower turnaround activities and callout projects in the U.S. and lower revenue from projects in international areas other than Canada. Operating income (loss). Overall operating loss was $6.0 million in the 2025 period, a $0.4 million or 6.0% improvement as compared to an operating loss of $6.4 million in the prior year period. IHT operating income increased by $3.5 million or 67.7%, primarily driven by increased revenue and lower costs. MS operating income decreased by $5.2 million or 127.2% as compared to the prior year period. MS operating income from U.S. and International operations, excluding Canada, decreased by $3.0 million and $2.3 million, respectively, primarily driven by lower year over year revenue due to projects from the prior year period that did not repeat in 2025. Corporate operating loss decreased by $2.1 million compared to the prior year period, primarily due to lower personnel and professional services costs in the current period . For the three months ended March 31, 2025 and 2024, operating income (loss) includes net expenses totaling $3.0 million and $2.6 million, respectively, that we do not believe are indicative of our core operating activities, as detailed in the table below (in thousands): 24 T able of Contents Three Months Ended March 31, 2025 2024 Operating loss $ (6,003) $ (6,386) Professional fees and other 2,007 2,081 Legal costs 490 82 Severance charges, net 467 425 Total non-core expenses 2,964 2,588 Operating loss, excluding non-core expenses $ (3,039) $ (3,798) Excluding the impact of these identified non-core items in both periods, operating loss decreased by $0.8 million, from $3.8 million to $3.0 million. See our non-GAAP reconciliation for additional details of our non-core expenses. Interest expense, net. Interest expense, net decreased by $0.7 million from the prior year period. The decrease was primarily attributable to lower interest rates on our ABL Revolving Credit Loans and other facilities. Cash interest paid for the three months ended March 31, 2025 and 2024 was $8.9 million and $5.9 million, respectively. Loss on debt extinguishment. On March 12, 2025, pursuant to the Refinancing Transactions, we repaid the total outstanding balances under the ME/RE Loans, Corre Delayed Draw Term Loan and Corre Incremental Term Loan and made a partial payment on the Corre Uptiered Loan, together with any applicable prepayment premiums and related accrued interest, resulting in a loss on debt extinguishment of $11.9 million. The loss on debt extinguishment includes $7.4 million of unamortized debt issuance cost (noncash) written off as part of the debt payoffs. Other income (expense), net . The overall change in other income (expense), net of $1.6 million, was primarily driven by foreign currency transaction losses in the current year period reflecting the effects of negative 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 $0.2 million on the pre-tax loss of $29.5 million in the current year-to-date period compared to income tax expense o f $0.1 million o n the pre-tax loss of $17.1 million in the prior year-to-date period. The effective tax rate was a provision of 0.8% for the three months ended March 31, 2025, compared to a provision of 0.4% for the three months ended March 31, 2024. The effective tax rate differs from the prior year period due to changes in the valuation allowance. 25 T able of Contents Non-GAAP Financial Measures and Reconciliations We use supplemental non-GAAP financial measures which are derived from the consolidated financial information including adjusted net income (loss); adjusted net income (loss) per share; earnings before interest and taxes (“EBIT”); adjusted EBIT; adjusted earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) and free cash flow to supplement financial information presented on a 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 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 GAAP financial measurements on a consolidated and segmented basis: 26 T able of Contents TEAM, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited, in thousands except per share data) Three Months Ended March 31, 2025 2024 Adjusted Net Loss: Net loss $ (29,718) $ (17,195) Professional fees and other 1 2,007 2,081 Write-off of software cost 45 — Legal costs 2 490 82 Severance charges, net 3 467 425 Loss on debt extinguishment 11,853 — Tax impact of adjustments and other net tax items 4 (13) (112) Adjusted Net Loss $ (14,869) $ (14,719) Adjusted Net Loss per common share: Basic and Diluted $ (3.31) $ (3.33) Consolidated Adjusted EBIT and Adjusted EBITDA: Net loss $ (29,718) $ (17,195) Provision for income taxes 222 73 Loss (gain) on equipment sale 5 (10) Interest expense, net 11,436 12,098 Professional fees and other 1 2,007 2,081 Write-off of software cost 45 — Legal costs 2 490 82 Severance charges, net 3 467 425 Foreign currency loss (gain) 205 (1,239) Pension credit 5 (51) (113) Loss on debt extinguishment 11,853 — Consolidated Adjusted EBIT (3,039) (3,798) Depreciation and amortization Amount included in operating expenses 3,102 3,583 Amount included in SG&A expenses 5,300 6,057 Total depreciation and amortization 8,402 9,640 Non-cash share-based compensation costs (credit) (53) 665 Consolidated Adjusted EBITDA $ 5,310 $ 6,507 Free Cash Flow: Cash provided by (used in) operating activities $ (28,661) $ 1,886 Capital expenditures (1,406) (3,016) Free Cash Flow $ (30,067) $ (1,130) ____________________________________ 1 For the three months ended March 31, 2025, consists of $2.0 million related to the Refinancing Transactions, For the three months ended March 31, 2024, includes $1.9 million related to debt financing, and $0.2 million related to support costs. 2 Primarily relates to accrued legal matters and legal reserves. 3 Represents customary severance costs associated with staff reductions across multiple departments. 4 Represents the tax effect of the adjustments. 5 Represents pension credits 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. 27 T able of Contents TEAM, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) (unaudited, in thousands) Three Months Ended March 31, 2025 2024 Segment Adjusted EBIT and Adjusted EBITDA: IHT Operating income $ 8,693 $ 5,185 Professional fees and other — 40 Severance charges, net 3 115 95 Adjusted EBIT 8,808 5,320 Depreciation and amortization 2,816 3,029 Adjusted EBITDA $ 11,624 $ 8,349 MS Operating income $ (1,111) $ 4,091 Professional fees and other — 82 Severance charges, net 3 334 325 Adjusted EBIT (777) 4,498 Depreciation and amortization 4,271 4,649 Adjusted EBITDA $ 3,494 $ 9,147 Corporate and shared support services Net loss $ (37,300) $ (26,471) Provision for income taxes 222 73 Loss (gain) on equipment sale 5 (10) Interest expense, net 11,436 12,098 Foreign currency loss (gain) 205 (1,239) Professional fees and other 1 2,007 1,959 Write-off of software cost 45 — Legal costs 2 490 82 Severance charges, net 3 18 5 Pension credit 4 (51) (113) Loss on debt extinguishment 11,853 — Adjusted EBIT (11,070) (13,616) Depreciation and amortization 1,315 1,962 Non-cash share-based compensation costs (credit) (53) 665 Adjusted EBITDA $ (9,808) $ (10,989) ___________________ 1 For the three months ended March 31, 2025, consists of $2.0 million related to the Refinancing Transactions, For the three months ended March 31, 2024, includes $1.9 million related to debt financing, and $0.2 million related to support costs. 2 Primarily relates to accrued legal matters and legal reserves. 3 Represents customary severance costs associated with staff reductions across multiple departments. 4 Represents pension credits 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. 28 T able of Contents Liquidity and Capital Resources Financing for operations consists primarily of our 2022 ABL Credit Agreement, First Lien Term Loan Agreement, Second A&R Second Lien Term Loan 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, 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. In preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following: (i) projected cash outflows, (ii) projected cash inflows, and (iii) projected availability under the Company’s existing debt arrangements. The cash flow projections were based on known or planned cash requirements for operating and financing costs and include management’s best estimate regarding future customer activity levels, pricing for its services and for its supplies and other factors. Actual results could vary significantly from those projections. 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 projections. 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. For example, the threat of recession and related economic repercussions could have a significant adverse effect on our financial position and business condition, as well as that of our customers and suppliers. Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, service our indebtedness, maintain compliance with the financial covenants contained in our various credit agreements and affect our future need or ability to borrow under our credit agreements. Our ability to access the capital markets will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us, or at all. In addition, we may seek to engage in one or more of the following, such as refinancing and/or extending the maturities of all or part of our existing indebtedness, amend existing debt to gain additional flexibility, entering into a strategic partnership with one or more parties, or the sale or divestiture of assets, but there can be no assurance that we would be able to enter into such a transaction or transactions on a timely basis or on terms favorable to us, or at all. Our failure to raise capital through our operations, refinancing or strategic alternatives as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. In addition to impacting our current sources of funding, the effects of such events may also impact our liquidity or require us to revise our allocation or sources of capital, reduce capital expenditures, implement further cost reduction measures and/or change our business strategy. Political economic repercussions could also have a broad range of effects on our liquidity sources and will depend on future developments that cannot be predicted at this time. 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. Such risks include the following: • 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; • our ability to manage inflationary pressures in our operating costs; • loss of customers or other unforeseen deterioration in demand for our services; • seasonal fluctuations, such as severe weather and other variations in our customers’ industries that may impede or delay the timing of customer orders and the delivery of our services; • rapid increases in raw materials, including impacts and uncertainty from trade disputes and tariffs, and labor costs that may hinder our ability to meet our forecasted operating expenses; • persisting or increasing levels of inflation domestically and internationally as well as increased costs due to tariffs and the impact of such inflation on our ability to meet our current forecast; • changes in regulations governing our operations and unplanned costs to comply with such regulatory changes; • counterparty credit risk related to our ability to collect our receivables; • our significant debt and high leverage which could have a negative impact on our financing options, liquidity position and ability to manage increases in interest rates; and • unexpected or prolonged fluctuations in interest rates and their impact on our forecasted costs of raising additional capital. See Item 1A “Risk Factors” in our Annual Report on Form 10-K for additional information. 29 T able of Contents Recent Refinancing Transactions . On March 12, 2025, we entered into the Refinancing Transactions with our existing and new lenders. Refer to Note 10 - Debt to the unaudited condensed consolidated financial statements for additional details. As of March 31, 2025, we had approximately $16.3 million of available borrowing capacity under our various credit facilities, consisting of $6.3 million available under the Revolving Credit Loans, and $10.0 million available under the Second Lien Delayed Draw Term Loans. Our principal uses of cash are for working capital needs, capital expenditures, and operations. As of March 31, 2025, we were in compliance with our debt covenants. Our ability to maintain compliance with the financial covenants contained in the 2022 ABL Credit Agreement, First Lien Term Loan Agreement and Second A&R Second Lien Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties. As of May 8, 2025, we had consolidated cash and cash equivalents of $8.6 million, excluding $3.9 million of restricted cash used mainly as collateral for letters of credit and commercial card programs, and approximately $15.2 million of undrawn availability under our various credit facilities, resulting in total liquidity of $23.8 million. 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): 2025 2024 Favorable (Unfavorable) Operating activities $ (28,661) $ 1,886 $ (30,547) Investing activities (1,406) (3,016) 1,610 Financing activities 11,188 (9,834) 21,022 Effect of exchange rate changes on cash 137 (273) 410 Net change in cash and cash equivalents $ (18,742) $ (11,237) $ (7,505) Cash and cash equivalents. Our cash and cash equivalents as of March 31, 2025 totaled $16.8 million, consisting of $12.8 million of unrestricted cash on hand, and $4.0 million of restricted cash. International cash balances as of March 31, 2025 were $4.8 million, and approximately $1.1 million of such cash is located in countries where currency or regulatory restrictions exist. As of December 31, 2024, our cash and cash equivalents were $35.5 million, including $31.5 million of unrestricted cash on hand, and $4.0 million of restricted cash. International cash balances as of December 31, 2024 were $5.1 million, including $1.1 million of cash located in countries where currency or regulatory restrictions existed. Our total debt and finance obligations were $353.6 million, of which $3.8 million was classified as current at March 31, 2025, compared to total debt of $325.1 million at December 31, 2024. Cash flows attributable to our operating activities. For the three months ended March 31, 2025, net cash used in operating activities was $28.7 million, a decrease of $30.5 million as compared to net cash provided by operating activities of $1.9 million in the 2024 period. The decrease was primarily driven by the higher negative working capital impacts of $23.7 million primarily attributable to an increase in accounts receivable and lower accrued liabilities and accounts payable. Our net cash provided by operating activities was further impacted by loss on debt extinguishment of $11.9 million, depreciation and amortization of $8.4 million, PIK interest of $3.3 million and amortization of debt issuance costs of $1.4 million. For the three months ended March 31, 2024, net cash provided by operating activities was $1.9 million. Our net cash provided by operating activities was driven by net loss for the period, which totaled $17.2 million, offset by positive working capital impacts of $5.7 million, depreciation and amortization of $9.6 million, PIK interest of $3.1 million, and amortization of debt issuance costs of $2.0 million. Cash flows attributable to our investing activities. For the three months ended March 31, 2025, net cash used in investing activities consisted primarily of capital expenditures of $1.4 million. For the three months ended March 31, 2024, net cash used in investing activities consisted primarily of capital expenditures of $3.0 million. Cash flows attributable to our financing activities. For the three months ended March 31, 2025, net cash provided by financing activities was $11.2 million, consisting primarily of the net borrowings under the Revolving Credit Loans of $8.0 30 T able of Contents million, borrowings under the new First Lien Term Loan and 2025 Second Lien Term Loan 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. For the three months ended March 31, 2024, net cash used in financing activities was $9.8 million, consisting primarily of net payments under our 2022 ABL Credit Facility of $9.9 million, payments under the ME/RE Loans of $0.7 million, payments under the Incremental Term Loan of $0.4 million, and payment of debt issuance costs of $1.4 million, partially offset by equipment financing of $2.5 million. Effect of exchange rate changes on cash and cash equivalents. For the three months ended March 31, 2025 and 2024, the effect of foreign exchange rate changes on cash was $0.1 million and negative $0.3 million, respectively. The impact of exchange rates on cash and cash equivalents is primarily attributable to fluctuations in U.S. Dollar exchange rate against the Euro, the British Pound, the Canadian Dollar and the Brazil Real. Off-Balance Sheet Arrangements From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. See Note 10 - Debt in this Quarterly Report on Form 10-Q and Note 11 - Debt in our Annual Report on Form 10-K for additional details of our off-balance sheet arrangements. 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, 2025. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this item 3.