Target Hospitality Corp. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Company Overview: 2024 results illustrate benefits of established network and strong operating platform. Efficient structure and capital allocation support a flexible business model.
• HFS Segment: Positive momentum with consistent customer activity, expansion of relationships, and a recent multi-year workforce hub contract with Lithium Americas.
• Government Segment: Transition during election cycle, but reactivated Dilley community and positioned to support government immigration initiatives. Actively engaged in discussions for West Texas community reactivation.
• Financials: Fourth quarter 2024 total revenue $84M, adjusted EBITDA $41M. HFS and other segments $40M; Government segment $44M (decrease due to contract termination). Ended quarter with $191M cash, $366M total liquidity, no borrowings. Redeemed senior notes, saving $19.5M annually.

Segment Performance

• HFS Segment: Quarterly revenue of approximately $40 million. Benefits from consistent customer demand and premium service offerings. Continues to expand relationships and has a multi-year workforce hub contract with Lithium Americas.
• Government Segment: Quarterly revenue of approximately $44 million. Experienced transition during the 2024 election cycle but reactivated the Dilley community. PCC community assets are in a ready state with quarterly carrying costs of $2-3 million. Dilley contract awarded with over $246 million revenue over a five-year term.

Guidance

• 2025 financial outlook: Total revenue between $265M and $285M, adjusted EBITDA between $47M and $57M. Reflects PCC contract termination and Dilley contract award. LAC contract revenue recognition back half-weighted. Dilley contract run rate similar to prior with 40-50% margin.

Risks

• Uncertainty in government contract outcomes, including finalization of West Texas community reactivation and other government initiatives. Long sell cycles for large industrial projects like Lithium Americas contract.

Question and Answer

• Q: Thoughts on remarketing West Texas Pecos assets vs Dilley? A: Jason Vlacich stated Dilley is a proxy, and there could be upside with a different population mix. Brad Archer added it depends on population and asset application.
• Q: Lithium Americas contract opportunity? A: Jason Vlacich mentioned potential beyond 2027, expanded capacity in Q1, and the project is pacing well.
• Q: Q1 performance and contract run rates? A: Jason Vlacich said minimal Dilley Q1 activity, LAC contract back half-weighted, and HFS is steady with similar utilization to last year.
• Q: West Texas assets modifications? A: Brad Archer said little to no capital needed for West Texas assets, as they are in good shape for opportunities.
• Q: Revolver draw and balance sheet use? A: Jason Vlacich said minimal draw on revolver, balance sheet is in great shape, and focus is on organic opportunities.