Ted W. Owen - Team, Inc. Greg L. Boane - Team, Inc.

Martin W. Malloy - Johnson Rice & Co. LLC Will Steinwart - Stephens, Inc. Tahira Afzal - KeyBanc Capital Markets, Inc. Craig Bibb - CJS Securities, Inc. Adam Robert Thalhimer - Thompson Davis & Co., Inc.

Good day, ladies and gentlemen, and welcome to the Team, Inc. First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instruction] As a reminder, this call is being recorded. I would like to introduce your host for today's conference, Mr. Ted Owen, President and CEO. Sir, you may begin. Ted W. Owen - Team, Inc.: Thank you and good morning, everyone. Again, my name is Ted Owen and I'm the President and CEO of Team. Joining me again today is Greg Boane, our Executive Vice President and CFO. The purpose of this call is to report on our first quarter earnings, update you on the status of our business integration activities and on our end markets. This call will contain forward-looking information within the meaning of the Federal Safe Harbor Provisions. So I will ask Greg to read the full disclaimer relative to forward-looking information after which I will provide some summary comments about the quarter. Greg L. Boane - Team, Inc.: Thanks, Ted. Good morning. This call will contain forward-looking information within the meaning of the Federal Safe Harbor provisions. Any forward-looking information discussed today is provided in accordance with the Private Securities Litigation Reform Act of 1995. We've made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information. A description of those factors is set forth in the company's SEC filings. There can be no assurance that the forward-looking information discussed today will occur or that our objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the company, whether as a result of new information, future events or otherwise. Today's discussions will also include certain non-GAAP financial measures. We have excluded certain non-routine items that we believe are not indicative of Team's ongoing operating activities, when arriving at adjusted net income, adjusted EPS, adjusted EBIT, and adjusted EBITDA. All of these are non-GAAP financial measures. Reconciliations of these non-GAAP and adjusted financial measures are provided in our quarterly earnings release. With that, I'll turn the call over to Ted. Ted? Ted W. Owen - Team, Inc.: Thank you, Greg. Yesterday, we reported first quarter revenues of $287 million, representing a growth of 14% over the first quarter of last year. However, on an adjusted pro forma basis, as if the Furmanite had been acquired on January 1, 2016, our revenues would have been down $8 million or 3% in the first quarter. On a GAAP basis, we reported a loss of $0.32 per share in the current year quarter versus a loss of $0.27 in last year's quarter. On an adjusted basis, our first quarter loss was $0.24 per diluted share versus an adjusted loss of $0.01 per share in the 2016 quarter. Again, on a pro forma adjusted basis, again assuming Furmanite results had been included in for the full 2016 quarter, the 2016 quarter would have reflected a loss of $0.09 per share. I know it's confusing when we have both non-routine items and incomparable data across both the years. The good news is that starting in Q2, the comparisons will be more apples-to-apples, as the Furmanite transaction will be fully incorporated in prior year numbers. It's important to emphasize that our first quarter of the year is clearly our seasonally weakest quarter. The seasonal weakness of Q1 of 2017 was exacerbated by the continued weak demand environment of 2016 that continued through January of 2017. On the last call, I mentioned the sudden deterioration that we experienced at the early conclusion of the fall turnaround season seasons during the months of November and December of 2016. And as I indicated on our last call, that weakness extended into January 2017. January revenues were below $80 million the weakest month we'd experienced in the last two years. In fact, we had an operating loss of $14 million in that month, creating a big hole for the quarter that we were unable to climb out of. The good news is that following a very dismal January, the first quarter delivered sequential improvement during the last two months of the quarter. In fact, February revenues were up 26% over January and March was up 35% over February. After 13 consecutive months of consolidated year-over-year monthly revenue declines, February and March were both up on a pro forma basis year-over-year. What should not be lost in the discussion is that we have continued to refine our business model and invest in tools to optimize resource allocations and utilizations. We believe these company-wide initiatives will allow us to leverage our broader customer base, focus on resources and expertise, what is valued most, and fortify the platform from which we can efficiently grow. I'll provide more detail about that later in the call. With that though, I want to turn it back over to Greg, who'll provide more detail on our financial results, again after which I'll provide more commentary about each of our business units, our Q1 results and our outlook. Greg L. Boane - Team, Inc.: Thanks, Ted. I'll go over the results for the first quarter and will start off by discussing segment performance before moving on to our consolidated results. Keep in mind that revenue comparisons are on a pro forma basis, while profit comparisons are as reported. TeamQualspec current quarter revenues of $143 million were up 5% from pro forma first quarter 2016 revenues. Heat treating revenues increased $3 million or approximately 16% in the current quarter versus the prior year quarter. TeamQualspec NDT inspection revenues were up 3% in the current quarter versus the prior year quarter. TeamFurmanite revenues of $122 million were down 16% from pro forma first quarter 2016 revenues. Historically, maintenance and repair services have been less resilient than NDT inspection services during periods with softer end markets and do lag some when activity levels pick up, as customers are more inclined to continue inspections and not run blind to maintain safe efficient equipment utilization but with tighter discretionary spending on actual maintenance and repairs. Quest Integrity revenues up $22 million, were up roughly 56% in the current quarter versus the prior year quarter. Now let me discuss the profitability of each of the segments. I'll be comparing EBIT and EBITDA results as reported in earnings release tables. TeamQualspec adjusted EBIT or operating income margin was 5% in the current quarter versus 5.8% in the prior year quarter. Adjusted EBITDA margin was 8.3% in the current quarter versus 9.5% in the prior year quarter. TeamFurmanite had a negative adjusted EBIT margin in the current quarter versus the 7% EBIT margin in the prior year quarter. Adjusted EBITDA margin was 4.2% in the current quarter versus 10.3% in the prior year quarter. Quest Integrity adjusted EBIT increased to 19.2% in the current quarter versus a negative adjusted EBIT in the prior year quarter. Adjusted EBITDA margin was 25.8% in the current quarter versus 4.3% in the prior year quarter. Turning now to our consolidated results, we reported first quarter revenues of $287 million, an increase of more than 14% over the prior year quarter revenues of $251 million. Current quarter results include the results of Furmanite which was acquired and included in our operations beginning March 1, 2016. Assuming Furmanite had been acquired at the beginning of 2016, pro forma consolidated revenues for the first quarter of 2016 would have been $295 million rather than $251 million. Consolidated gross margin in the current quarter declined by 20 basis points to 26.1% versus 26.3% in the prior year quarter. Consolidated SG&A expense for the first quarter was $89 million and includes $6 million of non-recurring costs that I'll cover in more detail later. Net of non-recurring costs of SG&A was $83 million up from $73 million in the first quarter of 2016, which included one month of Furmanite SG&A. Ted will cover SG&A in more detail in his prepared remarks. For the current quarter total depreciation and amortization expense was $13 million and non-cash compensation expense was $1.7 million. I'll spend a few minutes discussing the non-routine items in the current quarter that we do not consider to be indicative of our normal ongoing operating activities. In the current quarter, there was $4.1 million of non-capitalized ERP implementation costs, as well as $2 million in legal and professional fees for acquisition integration. These were partially offset by two unusual gains during the quarter. First, there was a $1.2 million gain on the revaluation of contingent consideration related to a previous acquisition, and a $1.2 million gain related to an asset sale of the Furmanite operations in Belgium. The gain on sale resulted from the elimination of a previously accrued severance liability of $1.6 million for planned employee reductions who were transferred to the purchaser. GAAP net loss for the first quarter was $9.5 million or $0.32 per diluted share versus a net loss of $0.27 per diluted share in the prior year quarter. GAAP adjusted net loss was $7.2 million or $0.24 per diluted share for the current quarter versus adjusted net loss of $0.01 per diluted share in the prior year quarter. I'll now give an update on the ERP implementation. During the first quarter, another 44 locations were added on to our ERP system. To-date, we have approximately 50% of our locations in North America are running on the new ERP system. And we have not encountered any major business disruptions other than change management and the short-term productivity declines during the first month of transitioning to the new system. The plan forward is to rollout the system to the remaining North America locations over the remainder of 2017, and into early 2018, and then to shift our focus toward our international operations. We have spent $61 million to date on the project. We've capitalized $46 million and we've expensed $15 million. Going forward, the capital component of the North America project is complete. We expect the implementation expense will be around $1.5 million per month through 2017, as we roll out the system to the remaining sites in North America. I'll now wrap up with some balance sheet and cash flow information. First quarter cash flow from operations was a net use of $3 million on the lower quarterly earnings and increased working capital funding from the increases in activity levels during the spring turnaround ramp up. Year-to-date CapEx was $11 million, $1 million related to (12:21) We paid down $10 million of debt during the quarter. Going forward, our primary use of free cash flow will be towards debt paydown. At March 31, total balance sheet debt was $357 million. Our cash balance was $24 million. We recently amended our credit facility to increase the leverage ratio to five times for Q1 and Q2 2017, with step-downs to 4.5 times in Q3, and 4 times in Q4. These new leverage ratios represent a 0.75 times increase in each quarter, above the previous ratios for 2017. The leverage ratio at the end of Q1 2017 was 4.7 times. That completes the financial review. I'll now turn it back over to Ted. Ted W. Owen - Team, Inc.: Thanks, Greg. During the last couple of calls, I focused my remarks on enterprise levels results, as each of our business units experienced the same end market and similar business integration issues. In Q1, we have begun to see some distinct acceleration, especially in our inspection-related businesses, TeamQualspec and Quest Integrity. So I want to spend a few minutes talking about the individual business units. Let's begin with Quest Integrity, which had an outstanding quarter. In fact, it was a quarter that resembled our performance at Quest before the soft market environment began in late 2015. Quest Integrity experienced a strong first quarter rebound in demand for its inspection and engineering assessment services, generating $4.2 million in operating income on $21.8 million in revenue. Year-over-year growth in revenue was 56%, while this quarter's $4.2 million in operating income compared to last year's $800,000 loss in this typically seasonally slower first quarter. In addition to generally healthier year-over-year demand for advanced inspection and in the pipeline and process sectors, Quest Integrity's inspection momentum is aided by recent NDT tool innovations related to resolution, coverage, operational flexibility and size. Advanced engineering activity was well balanced across pipeline, process and power, reflecting in part the relative recent addition of business development resources dedicated to advanced engineering sales. While also expanding Quest Integrity's traditional customer base, these advanced engineering resources are beginning to more fully realize the leverage inherent in Team's globally broad and deep client network. We believe that Quest Integrity remains well positioned as an inspection and engineering assessment industry leader in our target markets. Now, TeamQualspec; as Greg mentioned, TeamQualspec revenues were $143 million in the current quarter, up 5% compared to the prior year quarter. To put that in perspective, in the month of January, TeamQualspec revenues were actually down 10% year-over-year. So, year-over-year revenue growth in February and March was up 11%, with March revenues, which comprised 43% of the revenues for the quarter, being up 14% year-over-year. Our heat treating service line was up 16% from the prior year, due to an increase in project work. That's a good data point prospectively for our overall expectation of a more positive in-market environment. We continue to make great strides in strengthening our world-class inspection platform, where we're leveraging labor utilization and developing and/or applying NDT and information technology that addresses customer problems from digital solutions, to rope access, to advanced phased array methods. Now TeamFurmanite; TeamFurmanite generated first quarter operating income of just over breakeven or $0.5 million on a $121.8 million of revenue. Revenue was down a disappointing 16% for the quarter, year-over-year on a pro forma basis, dragged down by a very challenging start to the year when January revenues were down 30% on a pro forma basis. However, March performance demonstrated some of TeamFurmanite's potential with a 13% EBIT margin versus the prior year's 11.7% margin. Increasing profitability in the face of the soft start to the year is beginning to show results of the consolidation and cost initiatives following the merger with Furmanite, but also a number of key business model refinements. These refinements are favorably affecting: health and safety; service and product quality; and operations, including both personnel and equipment utilization, technology applications and general scalability and market competitiveness. They collectively address our ability to do more with less and to be more agile in responding to what we see as currently increased volatility around both cycles and seasonality. Selected business model refinements are in the areas of service line management, workforce support, equipment management, and project management resources. While TeamFurmanite revenues still lag prior year activity levels, we believe the February-March growth in our inspection, engineering and assessment, and heat treating services are a favorable barometer for future TeamFurmanite growth. Before I turn my attention to the market outlook, I want to provide more commentary on our enterprise results for the first quarter. I'm aware that our not providing guidance during the current market environment and concurrent period of business integrations and ERP system implementation makes modeling by our analysts and investors very difficult. So I want to walk down our Q1 earnings miss and provide some color. The consensus analyst earnings estimate for Q1 was $0.02 per share. Our adjusted loss, up $0.24 per share, missed that mark by $0.26 per share. If you convert that into EBIT or earnings before interest and taxes, that miss was about $12 million in comparison to the consensus estimate. About half of which was directly associated with January revenue and consequent gross margin shortfalls. We cannot make up that deficit, in spite of the strong revenue performance in February and March. The other half of the miss was due to higher SG&A than expected in the analyst estimates. About $3 million of that represents the front end investment in performance improvement initiatives we've spoken so often of. First, IT cost that are not considered non-recurring were about $2 million. These are costs necessary to support margin expansion initiatives, including our ERP implementation, work force support activities, manufacturing and engineering initiatives and supply chain management. Secondly, technology enhancements, supporting our team digital customer facing initiatives was about $400,000 in the quarter. Third, human resources supporting manufacturing, engineering, supply chain and service line management performance improvement initiatives was about $600,000 in the quarter. The cost curve around those initiatives will begin to turn as the performance improvement initiatives are fully realized beginning in 2018. Another $700,000 of SG&A increases is associated with additional bad debt expense in the quarter that's associated with the current soft end market environment. And finally, $2 million is explained by seasonal SG&A increases that routinely occur in the first quarter of each year with the reset of payroll and related benefit taxes, year-end audits, et cetera which trail off as the year progresses. While we don't provide earnings guidance for the year, I do think that we can be helpful to our analysts by sharing with you what we believe our near-term SG&A run rate will be. With the above factors in mind, we expect SG&A to average about $80 million per quarter for the balance of 2017 at current activity levels. Of course, we continue to pursue cost reduction plans throughout our business even as we make investments to support our performance improvement initiatives. Now, a word about our credit agreement leverage covenants, because I know all of you are interested in that. As Greg mentioned, we've recently amended our credit facility to increase our allowable leverage ratio for the balance of 2017, and we do not anticipate any compliance issues prospectively. Also, I want to report to you that we have no plans to initiate any sales of stock under the company's ATM offering at anywhere close to current market prices. Now, I'll move to our integration initiatives. Our efforts to integrate Furmanite and Qualspec had made a significant progress. During the quarter, we successfully transferred approximately 800 of the 1,000 Furmanite and Qualspec employees in the Gulf Coast and West regions to Team's payroll, that's a big deal in terms of the integration activities. We are intently focused on consolidating customer contracts, moving people and equipment across all three legacy organizations, including identifying, standardizing, and institutionalizing collective best practices across our services and products. We know these initiatives will take time, but we plan to become the integrated solution partner to our customer base. And we strongly believe that the industrial and financial potential of the entirety of our platform we're building is unsurpassed in our industry. Now, let's talk for moment about why we're encouraged about market outlook. Entering the second quarter, I can now point to several reasons to believe that Team will show a performance improvement in 2017 and 2018 when compared to 2016. First, industry data we follow suggest that the current refinery turnaround backlog is at the highest level in a decade. Secondly, spending levels in the petrochemical industry for new construction projects, which we're already beginning to benefit from, are expected to double over the next two years from 2016 levels. Third, North American LNG facilities are expected to significantly increase their capacity. There are currently seven export facilities under construction and an additional eight have been approved DOE and FERC. LNG maintenance spending is expected to increase by a 22% compound annual growth rate between 2017 and 2021 according to industry experts. And finally, we have a federal administration that's friendly to energy investment, with the best example of that, of course, being the recent approval of Keystone Pipeline project. We previously shared our internal targets of EBIT and EBITDA margins of 9% and 13% respectively. This would represent an adjusted EBIT target of about $130 million and an adjusted EBITDA target of nearly $200 million on future revenues of $1.5 billion. The weak market environment that extended into our seasonally weak first quarter does not change our view of that goal, though its timing is now more likely 2019 – 2018 as I indicated on our last call. We are well in our way to completing the major milestones necessary to achieve these goals, the full integration of the Qualspec and Furmanite businesses into Team, the completion Of North American implementation of our new ERP system and other initiatives that are focused on performance improvement opportunities. As expected, it's been a difficult journey, but a journey we expect to have completed by the end of 2017, at which time, we will begin to fully realize the potential of our company as the premier industrial service company in our space. And so with that, let's open up the line for questions.

And our first question comes from Martin Malloy with Johnson Rice. Your line is open. Martin W. Malloy - Johnson Rice & Co. LLC: Good morning. Ted W. Owen - Team, Inc.: Hi, Martin. Martin W. Malloy - Johnson Rice & Co. LLC: Hi. Just at the activity level that you spoke about, as we move into 2Q, are those across the segments? Are you seeing that in the TeamFurmanite segment that you're seeing as your outlook? Ted W. Owen - Team, Inc.: We're not yet seeing the activity levels in TeamFurmanite that are consistent with the kind of the growth in activity levels in our inspection businesses. We believe though that that the growth in inspection and activity levels in inspection is a good parameters, we've indicated in other calls, that inspection typically comes back first and strongest and followed by maintenance activities. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. And then, on the SG&A side, thank you for the guidance in terms of the quarterly run rate. I was wondering if you could maybe help us with the cadence in terms of how that's going to ramp down. And maybe somewhat related to that, the ERP system rollout, sounds like it's, compared to the last call, sounds like it's maybe going a little smoother. Greg L. Boane - Team, Inc.: I would say the ERP rollout is going as planned. We've got a large wave of locations scheduled for the third quarter. But today, things have gone pretty well from the standpoint of you're always going to have your short-term efficiency degradation and changed management, but we haven't experienced any what I would characterize as significant business disruptions where we had any inability to transact with the paying employees or billing customers. So, from that standpoint, it's gone according to plan. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. And then the cadence in terms of how the SG&A will ramp down to that $80 million per quarter run rate? Greg L. Boane - Team, Inc.: Well, relative to the $80 million run rate, we had some unusual items in the quarter, as Ted pointed out, audit fees, payroll tax benefit, ramp ups. When we look at kind of a normalized over the course of the year SG&A run rate, it averages out to around $80 million a quarter. For Q1, we have some of the seasonality impact that Ted mentioned. But going forward, we would expect it to normalize more around the $80 million a quarter. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. Thank you. I'll get back in the queue.

And our next question comes from Matt Duncan with Stephens, Inc. Your line is open. Will Steinwart - Stephens, Inc.: Hey, good morning guys. This is Will on the call for Matt. Ted W. Owen - Team, Inc.: Oh, hey, Will, how are you? Will Steinwart - Stephens, Inc.: Hey, I'm doing well. Thank you. I just want to start with a broad commentary. Did you see the momentum in the business continue into April that you saw? The pick-up, it sounds like, was significant from February over January than March over February? So, on a year-over-year basis, can you comment if that continued to niggle? (30:08) Ted W. Owen - Team, Inc.: It's a little harder to tell for April. We can tell you that activity levels continue to be reasonably strong for April. How that translates, because we're still making the sausage, if you will, for the month of April, so I don't have a handle on just how that translates into revenue, but certainly from an hours, billable hours, standpoint activity levels, our activity levels for April continued to be very strong. Will Steinwart - Stephens, Inc.: Okay. And then, moving over to TeamFurmanite in particular, those sales look as though they were down a lot on an organic basis, likely more than the market. Can you give some detail on what is going on there? Are you losing some business where Team or Furmanite was the top provider in a facility and the other was maybe number two, so customers are setting up someone else as their number two now? Can you kind of talk about that dynamic? Ted W. Owen - Team, Inc.: Yeah. There has certainly been some of that, and again that we had anticipated at the time of the acquisition of Furmanite. So, we expected that to happen. It has happened. But that's really not a significant piece of the – I think that's all in the margin and not really indicative. I think that we've just seen more just kind of general reduction in maintenance-related activities as opposed to inspection-related activities. Again, that's been fairly typical. We ask ourselves, particularly in Furmanite every day, two questions basically. A, do we have any evidence that we are losing market share? And the answer to that is no, we don't. Our customer base is still our customer base and we can't find any significant customer losses, if you will. We always have a lot of competition. So, that's not new. That's always been there. Then, obviously, the second thing we ask ourselves is has anything changed relative to from a customer standpoint that would cause our customers to be able on a run rate basis, a new normal basis, to kind of maintain their facilities at 10% less than historical averages. And again, we spend a lot of time talking to customers, talking to kind of industry experts, if you will. And we think the answer to that is no also. So, I think the answer is that maintenance activities have been more impacted than inspection activities in the downturn, and the return of maintenance is a little slower. Will Steinwart - Stephens, Inc.: Just staying on that topic for a second or two, you mentioned that (33:42) Ted W. Owen - Team, Inc.: I'm sorry. Will, we cannot hear you. Will Steinwart - Stephens, Inc.: Ted, do you have me? Ted W. Owen - Team, Inc.: Yeah. Will Steinwart - Stephens, Inc.: Sorry about that. So how long is that lag that you typically see in the business? Is there a correlation that could be drawn as you look back at that data that you see in the mechanical lag, the inspection? Is there anything that you can tell us as when you think that does inflect higher with this inspection level of business now? Ted W. Owen - Team, Inc.: I don't have good data looking back to tell you that, particularly as a result of the kind of the Furmanite acquisition. It complicates it more, as you can appreciate, so I really don't have good data on that. But again, I think, again, when we look to the data points that I indicated on the call relative to the market, much of those market indicators have to do with new construction installed base, expansion of installed base increases maintenance opportunities, if you will. And so our general view is that we should start seeing demand increases in the second half of 2017 and certainly into 2018. Will Steinwart - Stephens, Inc.: Okay. Then, last thing from me kind of the lag on the SG&A question from earlier and leverage. It still seems like it might be a little close in the current demand environment. Are there any cost that you can call out or anything in particular that you're going to be removing from the business going forward from here? Thanks, guys. Ted W. Owen - Team, Inc.: Well, again, we have a set of, of our plans relative to cost reduction activities. I don't want to go into those on the, on the call. But we are continually kind of implementing, if you will, tightening of resources in cost reduction plans, but none that I would want to discuses on the call. Will Steinwart - Stephens, Inc.: Thank you.

And our next question comes from Tahira Afzal with KeyBanc Capital Markets. Your line is open. Tahira Afzal - KeyBanc Capital Markets, Inc.: Hi. Ted. Good to see that things have improved to a bit. Ted W. Owen - Team, Inc.: Yeah. I agree. Tahira Afzal - KeyBanc Capital Markets, Inc.: So Ted, I just wanted to dive a little better into Quest Integrity, obviously, pretty stellar results there. That tends to be a bit lumpish. Are there some moving parts, you have backfill or do you feel that the profile of what you're seeing is very recurring? Ted W. Owen - Team, Inc.: Yeah. I think it is again because there's – the strong quarter for Quest was broad based. It was not a reflection of kind of a one individual kind project or just a few projects. It was across both the process, the pipeline and the kind of advanced engineering assessment kind of business units within Quest. So, it's just a – I think it is a good news in terms of – you are right that sometimes big projects can move Quest pretty significantly because there's a fairly high fixed cost base within Quest relative to kind of R&D activities, tool development activities and things like that, so revenue changes up or down can matter a lot. The encouraging part though for Quest is that it is broad-based in the first quarter. It just looks a lot more like kind of the Quest business model and demand profile prior to the downturn and I just think that's encouraging for our business overall. Tahira Afzal - KeyBanc Capital Markets, Inc.: Got it. And it seems like a lot of your core customers on their calls have been really saying that and showcasing their CapEx is up on the – well the maintenance spending has started to come back, which is good. Ted, if you're looking at that G&A line and thank you for all the details, those are very helpful. If you're looking at what could go away from that $80 million run rate at least qualitatively, because some of those elements are just seem to be transitionary to get you back on track. What are the elements you think could sort of fade away into next year? Ted W. Owen - Team, Inc.: Well, as I called out, there's the kind of the additional – there's some big buckets in terms of if you think about it. As we implement the ERP system, we are presently running on three different systems just domestically – four really. So, we're maintaining four systems domestically, the legacy Team system, new AX, which is about – again about half our locations are on that system, Legacy Furmanite until we complete the integration of the Furmanite business, and legacy Qualspec until we can complete those. So there's four different call them ERP or accounting or financial systems that we are maintaining presently. That involves IT cost, ERP or human resource cost and so as those – as we kind of get AX up and running across the network, we'll start seeing a significant reduction in some of those support activities. Similarly, the investment-related cost that I called out in my comments relative to supply chain, manufacturing engineering, some service line costs, those are front end investments to achieve the performance improvement opportunities that we talked about that so often, that we internally pegged at being a $20 million net opportunity, but you don't get it without making kind of the front end investments to do it. So I think you have this kind of this incremental investment cost that extends through 2017 before we really start getting the benefit of that in 2018. Tahira Afzal - KeyBanc Capital Markets, Inc.: Got it. Okay. So it seems like directionally there at least the G&A run rate should sort of trim going into next year unless, of course, the business is booming and you have to add back... Ted W. Owen - Team, Inc.: I think you're right. I think that's exactly right. Tahira Afzal - KeyBanc Capital Markets, Inc.: Perfect. Okay. So, I mean, could you – assuming that and I know the market is still fairly volatile, but if you continue to see the activity levels around the February-March level and you're seeing some of the M&A costs go down. I know you don't hit your 9% target till 2019, but could you hit kind of something close to 7% on the op margin side in 2018? Ted W. Owen - Team, Inc.: Sure. I think so. Tahira Afzal - KeyBanc Capital Markets, Inc.: Awesome. Okay. That's pretty helpful. Thanks.

And our next question comes from Craig Bibb with CJS Securities. Your line is open. Craig Bibb - CJS Securities, Inc.: Hey, guys. Ted W. Owen - Team, Inc.: Hey, Craig. Craig Bibb - CJS Securities, Inc.: So it sounds like when demand is coming off the bottom, typically inspection and heat treating turn up first and then mechanical services follow, which is what we saw in the first quarter. So did demand bottom in 2016? Are you comfortable with that? Ted W. Owen - Team, Inc.: Well, I think demand bottomed in kind of the, again, the winter months. The December-January timeframe is kind of the bottom of the normal seasonal cycle in kind of every year. So I think that demand overall particularly relative to inspection activity has bottomed. I think I'm less confident of mechanical services because we haven't seen – we saw a big bottom in January, again as I indicated. TeamFurmanite revenues in the month of January were down year-over-year on a pro forma basis 30%, I mean, that was just – I mean, that was extraordinary. In February and March, those revenues were down about 10% about 10% on a year-over-year basis. So we haven't seen TeamFurmanite revenues stabilize at this moment in time. So what we're seeing is, directionally, we're seeing growth, real organic growth in inspection activities both in TeamQualspec and Quest Integrity Group, but that has not – we have not seen that yet in the mechanical service sector of TeamFurmanite. Craig Bibb - CJS Securities, Inc.: Okay. And so when mechanical services revenues turn up year-over-year and stay there, would that be the marker that you've hit the cyclical bottom and are ready to go up cycle? Ted W. Owen - Team, Inc.: Yeah, I think that's fair. Craig Bibb - CJS Securities, Inc.: Okay. And then in your presentation, you referenced refinery turnaround backlogs are at record levels. Can you share those numbers with us? Ted W. Owen - Team, Inc.: I don't have the numbers in front of me. We have a variety of sources and we'll be happy to share the source of that. Craig Bibb - CJS Securities, Inc.: Okay. Ted W. Owen - Team, Inc.: Why don't you get with Greg, and he can give you the – he can share that information with you. Craig Bibb - CJS Securities, Inc.: Okay. And then at Quest again, just outstanding quarter, was any of that increase in revenue due to Qualspec or Furmanite customers that have cross-sell – cross-selling from Qualspec and Furmanite customers that have allowed Quest to go faster? Ted W. Owen - Team, Inc.: Again I think on the margin, there may have been some of that. I don't think that would – I wouldn't characterize that is being a significant component, although it's important. I mean, the leveraging of our full capabilities across our network is important for each of our business units. So I would tell you that Quest demand, there is an element of Quest demand that is generated by being part of the Team Global Network, and the same is also true in TeamQualspec and TeamFurmanite. Craig Bibb - CJS Securities, Inc.: Okay. And it sounded like the revenue upturn at Quest was broad based. Ted W. Owen - Team, Inc.: Yes. Craig Bibb - CJS Securities, Inc.: Does that indicate that the revenues can kind of stay at this level, not the usual lumpiness that you would warn us about? Ted W. Owen - Team, Inc.: Well, I would hope so because I don't see any – we don't see an element of major kind of individual projects in the quarter for Quest that – as frankly, we've seen from time to time in the past, there've been in occasions where really big project to Quest because it's relatively small business from a total revenue standpoint can move the needle quite a bit. Again, as I mentioned, the encouraging thing I think about the quarter for Quest is the work of those kind of projects, so it was broad based just generally stronger activity levels, stronger customer demand across our pipeline process and advanced engineering services. Again, part of that by the way as I indicated driven by kind of an investment within Quest of resources pertaining to business development in the advanced engineering side. Craig Bibb - CJS Securities, Inc.: You guys added to your sales force at Quest. Is that... Ted W. Owen - Team, Inc.: Yes. Craig Bibb - CJS Securities, Inc.: Okay. And then, you talked about the coming increase in Gulf Coast projects, petrochem, LNG. That's going to get really material in coming months, particularly in 2018. Obviously, you're going to maintain the plants and inspect them after they're built. What's your role in the construction part of them? Ted W. Owen - Team, Inc.: Primarily inspection. So probably the larger opportunity is inspection because, if you can appreciate, as piping systems are put together, if you will, assembled, there are welding operations. Welding requires heat treating and inspection, typically. So, the larger opportunity for us in new construction projects is typically in our inspection side of our business. Craig Bibb - CJS Securities, Inc.: And could you ballpark a $5 billion LNG facility is going to potentially create X million [dollars] in inspection opportunity for you? Ted W. Owen - Team, Inc.: Well, I really wouldn't want to do that. Let me just say that a new construction project, like an LNG facility or an ethylene plant where we are going to have a prime role in either as an inspection contractor or heat treating or even mechanical services from a bolting or machining kind of standpoint, isolation test plugs being another example, typically, looks like a big turnaround for us. And typically, a big turnaround for Team would be a project that could be, let's say, $1 million to $5 million in revenues associated with an individual project. And that would be much similar to that when it's a new construction opportunity. It looks and feels like a big turnaround to us. Craig Bibb - CJS Securities, Inc.: All right. And that would be kind of incremental to the cyclical upturn if that plays out as it looks like it might for later in the year and (49:27) 2018? Ted W. Owen - Team, Inc.: Well, it has two effects. One is the just kind of the incremental, if you will, but again not totally incremental, in the sense that new construction projects have always been a significant piece of our revenue base in the aggregate. I think of it as probably 85% to 90% of our revenues are derived from installed base, so inspection maintenance of operating facilities, be it pipelines, petrochemical power refining and then about 10% to 15% is always associated with new construction or expansion, kind of in typical. I think the expansion opportunities are going to be a little broader. So maybe it's more like 15% rather than 10% of our revenue. So that's kind of the incremental opportunity. As importantly, particularly on the kind of the LNG, the petrochemical space, it increases the kind of the capacity of installed base. And so, any time there are new facilities, those have to be also maintained and inspected. And so, it's not just the one-time opportunity associated with a new project. It's the opportunity associated with the continuing installed base opportunity. Craig Bibb - CJS Securities, Inc.: Okay. All right. Great. Thanks a lot, guys. Ted W. Owen - Team, Inc.: You bet.

Our next question comes from Adam Thalhimer with Thompson Davis. Your line is open. Ted W. Owen - Team, Inc.: Hey, Adam. Adam Robert Thalhimer - Thompson Davis & Co., Inc.: Hey, good morning, guys. Yes, Ted, you said you haven't quite seen mechanical stabilize yet. I was hoping you could talk about, just in broad terms, your outlook for the fall turnaround season and whether you think mechanical can turn around at that time? Ted W. Owen - Team, Inc.: Yeah. My expectation is that it will. If it is, then (51:41) we will have taken some other steps around that to more appropriately allocate resources. But, again, for the same reasons that I've described, inspection, we've always seen in kind of in cyclical downturns, that inspection activity, improvement in inspection comes before improvement in mechanical services. And the broad-based improvements we've seen in all of our inspection-related activities in TeamQualspec and Quest Integrity Group, again, broad-based in both cases not pertaining to simply a location. That's a good barometer for future results in mechanical services. And then two, kind of customer commentary about expectations of kind of maintenance turnaround activity in the second half of 2017 into 2018, all of the industry data that I pointed to, all of those things suggest that we should see a rebound, if you will, in the mechanical service side of our business, sooner rather than later. Adam Robert Thalhimer - Thompson Davis & Co., Inc.: That's great. And then you said, so if EBITDA is up in 2017, I was hoping you could talk a little bit about Q2 and the comps that you're facing in Q2, I get that at the back half of the year could be up, but can Q2 be up? Ted W. Owen - Team, Inc.: Yeah, I would expect Q2 to be up. Adam Robert Thalhimer - Thompson Davis & Co., Inc.: Okay. That's it from me. Thank you. Ted W. Owen - Team, Inc.: All right.

And I am showing no further questions. I'd now like to turn the call over to Ted Owen, President and CEO for closing remarks. Ted W. Owen - Team, Inc.: Okay. Thank you. And again, thanks to all of you for your interest in Team, and for your attention to today's call, and we will talk again in early August, I think. Thank you. Have a good day.

This does conclude the program. You may all disconnect. Everyone have a great day.