Target Hospitality Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 19, 2025
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Operator

Good morning, ladies and gentlemen, and welcome to the Target Hospitality First Quarter twenty twenty five Earnings Call Conference Call. This call is being recorded on Monday, 05/19/2025. I would now like to turn the conference over to Mark Schrook. Please go ahead, sir.

Mark Schuck
Mark Schuck
Senior Vice President of Investor Relations & Financial Planning at Target Hospitality

Thank you. Good morning, everyone, and welcome to Target Hospitality's First Quarter twenty twenty five Earnings Call. The press release we issued this morning outlining our first quarter results can be found in the Investors section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward looking statements contained in the press release.

Mark Schuck
Mark Schuck
Senior Vice President of Investor Relations & Financial Planning at Target Hospitality

This same language applies to statements made on today's conference call. This call will contain time sensitive information as well as forward looking statements, which are only accurate as of today, 05/19/2025. Target Hospitality expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date, except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality's periodic filings with the SEC. We will discuss non GAAP financial measures on today's call.

Mark Schuck
Mark Schuck
Senior Vice President of Investor Relations & Financial Planning at Target Hospitality

Please refer to the tables in our earnings release posted in the Investors section of the website to find a reconciliation of non GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer followed by Jason Vlasic, Chief Financial Officer and Chief Accounting Officer. After their prepared remarks, we will open the call for questions. I would now like to turn the call over to our Chief Executive Officer, Brad Archer.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We delivered strong first quarter results centered on the strength of our business fundamentals and proven capabilities. These elements illustrate the benefits of Target's efficient and durable operating model, supporting our ability to successfully navigate a variety of economic environments. During the first quarter, we announced two multi year contracts, which are expected to generate over $380,000,000 in revenue over the coming years.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

These contracts illustrate our unique ability to support a range of critical domestic initiatives spanning both commercial and government end markets. We are well positioned with strong momentum as we continue evaluating and pursuing the most active and robust growth pipeline we have had in many years. We are excited about this opportunity set and focused on accelerating our strategic growth initiatives. Now turning to our segments and growth pipeline. Our HFS segment continues to benefit from consistent demand where our world class customers find added value in the unmatched solutions our network provides.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

These capabilities support Target's longstanding customer relationship, some for over a decade, and a consistent 90% renewal rate since 2015. This consistency illustrates the value proposition of our network and ability to appropriately match customer demand through a variety of economic cycles. These characteristics support a well optimized network and enhance revenue cash flow visibility. The workforce subcontract, which we announced in February continues to progress in line with expectations. This expansion and diversification further illustrate our ability to utilize our distinct core competencies to advance our strategic growth initiatives.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Our ability to provide customized solutions across industries highlights the reach of our capabilities as we continue evaluating a strong commercial growth pipeline. This pipeline is predominantly centered around large capital investments focused on modernizing critical domestic infrastructure and advancing twenty first century technologies. As this potential historic capital investment cycle takes shape, we have seen growing demand for hospitality solutions to support the significant workforce requirement associated with these initiatives. These opportunities include large industrial projects throughout The US, including technology infrastructure, increased domestic critical mineral development and other related large capital investment programs. As a reminder, the size and scale of these growth opportunities inherently leads to longer sales cycles.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

However, we are encouraged by the pace of active conversations and progress on certain initiatives. We believe these commercial growth opportunities provide meaningful long term growth potential and are an important element of Target's strategic growth and diversification strategy. Moving to the government segment, Our government segment experienced a transition as we moved into 2025. However, amidst evolving policy initiatives, Target has illustrated its ability to provide unmatched solutions, supporting a range of critical US government initiatives. This execution underpins our ability to actively pursue a significant growth opportunity set, supporting the current administration's immigration initiatives.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

The reactivation of our Dilley, Texas facility is progressing and the community was able to receive an active population ahead of schedule. Our decision to maintain this community in a ready state was critical to the contract award and our ability, along with our partner, to quickly facilitate the community reopening. Regarding our West Texas assets, we are encouraged by the continued interest from The U. S. Government in utilizing this readily accessible community.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

We have conducted numerous site visits and tours of the facility with positive feedback indicating this community's ability to serve the current administration's policy objectives. Further, the substance of our conversations has indicated the US government's desire to utilize this facility consistent with its current layout, minimizing the need for additional capital investment. However, timing remains uncertain as there are likely administrative steps required, including securing necessary funding prior to potential contract award. While we are actively remarketing our West Texas assets, we are simultaneously evaluating multiple opportunities to support immigration initiatives beyond Target's existing asset portfolio and available beds. Given the scope of executive orders and resources required to adequately implement the government's current immigration policies, there is a significant demand for solutions aligned with Target's core competence.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

We are taking intentional steps to demonstrate Target's capabilities and believe there are multiple avenues to support these critical policy initiatives. Further, our strong operational reputation and partnerships with industry leading companies uniquely positions Target to participate in many of these mission critical solutions. In summary, the strength of our existing customer base, network capabilities, and proven operational flexibility support a resilient business model. This foundation supports our continued focus on pursuing strategic growth initiatives aimed at expanding and diversifying Target's contract portfolio across end markets. I'll now turn the call over to Jason to discuss our financial results in more detail.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Thank you, Brad.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

First quarter total revenue was approximately $70,000,000 with adjusted EBITDA of approximately $22,000,000 Our Government segment produced quarterly revenue of approximately $26,000,000 The decrease from prior year was primarily driven by the termination of the PCC contract effective 02/21/2025, and partially by the termination of the South Texas Family Residential Center contract on 08/09/2024. These declines were modestly offset by the reactivation of our Dilley, Texas assets and the Dilley contract award effective 03/05/2025. As a reminder, this contract is based on fixed monthly revenue regardless of occupancy and is expected to generate approximately $30,000,000 of revenue in 2025, with over $246,000,000 of revenue over its anticipated five year term. However, as the community progressively reopens, twenty twenty five monthly revenue contributions will correlate with the reactivation of each neighborhood within the facility. Further, this paced reopening will result in lower margin contribution through the second and third quarter of twenty twenty five prior to full reactivation.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

We anticipate the community will be fully activated by September of twenty twenty five, at which point we will realize revenue and margin contribution commensurate with the entire 2,400 bed community. Regarding our West Texas assets, as a reminder, we have decided to maintain these assets in a ready state as we actively remarket them. This decision, which is similar to the approach we took regarding our DILI assets, will result in carrying costs prior to potential new contract award of approximately 2,000,000 to $3,000,000 per quarter. Turning to our HFS and All Other segments. Our HFS and All Other segments delivered quarterly revenue of approximately $44,000,000 These segments continued to experience consistent customer demand, illustrating the value our customers find in our premium service offering and network capabilities.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

We have benefited from a more fully optimized HFS South segment, which continues to perform in line with our expectations in a competitive market. We're pleased with the Workforce Hospitality Solutions segment, which includes our recently announced Workforce Hub contract. Construction activity associated with the Workforce Hub contract is pacing on schedule and generated approximately $5,000,000 of revenue in the first quarter. We anticipate the majority of the construction revenue will be realized in the second and third quarters of twenty twenty five, with completion in the fourth quarter of twenty twenty five. As a reminder, this contract also provides for service revenue, which will support the premium workforce hub with comprehensive hospitality solutions through 2027.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

The contract exemplifies the benefits of our full service capabilities and establishes a long term revenue stream. Recurring corporate expenses for the quarter were approximately $10,000,000 As we move through the year, we will continue to look for opportunities to optimize our cost structure and strengthen margin contribution. Total capital spending for the quarter was approximately $21,000,000 including approximately $16,000,000 of growth capital to expand strategic network capacity and support the Workforce Hub contract. As we previously announced on 03/25/2025, we redeemed all outstanding senior notes due in June of twenty twenty five at a redemption price of 101 percent of par, resulting in an expected annual interest savings of over $19,000,000 Our decision to redeem the senior notes was focused on maintaining a balanced capital structure and financial flexibility as we continue pursuing a pipeline of strategic growth initiatives. We believe the current structure supports our ability to react to value enhancing growth opportunities as they arise, while appropriately balancing our obligations.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

We ended the quarter with $35,000,000 in cash $169,000,000 in total liquidity, with $41,000,000 of borrowings under the company's 175,000,000 revolving credit facility and a net leverage ratio of 0.1 times. We will continue to prudently manage the capital structure and look for opportunities to further reduce outstanding borrowings as we progress through 2025. Target's strong business fundamentals have established a flexible and durable operating model. These elements support the company's reiterated 2025 financial outlook, which consists of total revenue of between $265,000,000 and $285,000,000 and adjusted EBITDA of between $47,000,000 and $57,000,000 Target is well positioned with a flexible operating model and optimized balance sheet as we continue evaluating a robust growth pipeline, which we believe provides the greatest opportunity to accelerate value creation for our shareholders. While we continue to thoughtfully evaluate a holistic set of capital allocation initiatives, our primary focus is growing and diversifying Target's contract portfolio.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

As we focus on strategic growth initiatives, we believe it is prudent to maintain the financial flexibility we have established to quickly react to value enhancing opportunities as they arise. Importantly, as we evaluate these opportunities, we will remain focused on maintaining the strong financial profile we have established while optimizing margin contribution through our efficient operating structure. With that, I

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

will turn the call back over to Brad for closing comments.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Thanks, Jason. Our first quarter results were supported by strong business fundamentals and continued momentum across our operating segments. We are focused on sustaining this momentum as we evaluate one of the strongest growth pipelines we have had in many years. The breadth of these opportunities spans both commercial and government end markets, underpinned by strong secular tailwinds promoting significant domestic capital investments and national security initiatives.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

The growth opportunities are robust, extending beyond our existing asset portfolio and across multiple end markets. We are excited about these opportunities and believe Target's capabilities and proven reputation uniquely position the company as we actively pursue these strategic growth initiatives. We remain focused on enhancing Target's business mix and contract portfolio, which we believe will accelerate value creation for our shareholders. I appreciate everyone joining us on the call today and thank you again for your interest in Target Hospitality. I would now like to open the call for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. And you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two. If you use the speakerphone, please leave the handset before pressing any keys.

Operator

Your first question comes from Stephen Gengaro with Stifel. Please go ahead.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Thanks. Good morning, everybody.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Good morning.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Good morning. There's two for me. First is just around sort of opportunities on the idle assets in the government side. Is there like, can you give us any kind of incremental detail about the conversations you're having, the opportunity to put those to work and kind of what we should be thinking about as far as data points around it or what's driving the demand? I'm just trying to kind of get a sense from I know you can't tell us timing or economics, but any more color around that would be helpful.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yes, Stephen, this is Brad. Good morning. Let me just kind of give you a high level on some of the things that have happened since our last call. And I'll address kind of the government segment as a whole, but specifically starting on the West Texas assets. We continue to have strong interest as we said before.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

High level conversations with the government and our partners. Since our last quarterly call, we've led several tours of the facility, which has really increased the excitement around this asset. As we've said before, and this hasn't changed, the government fully intends to increase their bed capacity by approximately a hundred thousand beds And the West Texas facility, it's ready for immediate occupancy, giving them kind of what I've said before is an easy button, right? For once funding is in place. And at this point that is kind of the waiting game, right?

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Once funding gets in place, the budget's approved. But from all conversations we've had, we believe this facility is part of the government's acquisition plan. And we've been told that, through the conversation. So we feel good about this facility and what happens to it in the future. What I would say, and as a reminder, I know there's a lot of focus always on the West Texas assets and rightfully so, but what really gets us excited is all the other potential for more beds, more opportunities to service the government from the DoD side to the ICE side to other folks within the DHS community.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

We're seeing more and more every week that is hitting our pipeline. So in summary, would just say, look, the opportunity set is strong. Target strong operational reputation. It positions us well to get some of this business in the future. We put ourselves in a really good position to grow this segment.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Now we need to execute. And I believe we will.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Gotcha. Okay, great. No, that's helpful. And then the other question I just had was the contract you have on the lithium front and just how do we think about how that like so what's contracted right now and kind of what that means for contribution this year and next? And then kind of how do we think about the upside to that in 'twenty six plus?

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

Yeah. This is Jason. So in terms of the workforce subcontract, this year, the majority of the revenue generated is going to be from the construction activities, which we expect to wrap up this year in Q4. We think the majority of that activity is going to occur in Q2, with the majority in Q3 and a wrap up in Q4. That's going to contribute about $65,000,000 of revenue for the year on the construction piece with an estimated margin of between 2530%.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

After that, that's when the services part more fully kicks in through 2027. So that's the balance of that $140,000,000 revenue contract will be attributable to services. And then on the lithium project as a whole, there's the potential for multiple phases, which we're well positioned to participate in beyond 2027. These phases can go all the way through 02/1940.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yeah, that's why we really liked this project. We liked it for the first phase, but we really like it for multiple phases that they publicly been out there and talked about. Look, as we know, GM has taken all the capacity on the first phase, a big portion already on the second phase. So they're set up pretty well to continue to extend it. Again, we need to continue to perform.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

So we're their service provider in the second and the third phase on this, we believe we will. So I look at that as the upside of this, just the longevity of the project itself.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Great. No, thanks for the details, gentlemen. That's great.

Operator

Thank you. Next question comes from Scott Schneeberger with Oppenheimer. Please go ahead.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Thanks very much. Good morning.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Good morning, kind of following up

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

on the theme of new opportunities. Brad, you did a nice job outlining kind of what's occurred since last call with regard to West Texas. And you touched on the government opportunity as a whole. I thought I heard in there, though in prepared remarks somewhere, maybe looking at things that you may not already own. So in the answer to this question, could you address maybe M and A or new asset consideration that you might pursue?

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

And then maybe that's more on government side. And then on the non government side, just a discussion of ripeness of what's occurring out there. Thanks.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yeah, let me take the first on the non government kind of all things other than government, right? For you and I'll touch base on that. Then I'll let Jason touch on some of the other as well. But outside of the government pipeline, we continue to see very strong bid activity in large domestic infrastructure projects, such as mining, power and data centers to name a few. With that said, I want to spend a little time on the data center industry more specifically.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

As we're seeing the need for services across The US increased dramatically and very encouraged with the progress our business development team is making here. We've talked about it a little before in the other calls, but we've definitely moved the ball down the field on several of these projects. These projects tend to have a three year to six plus years kind of a build cycle. And look, I think everybody's aware of the massive amount of capital being pumped into this industry. And there's no doubt our services are needed on many of these that we're working on.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

So internally, there's a lot of excitement this data center movement, especially since our last call, we continue again, kind of move the ball down the field, feeling pretty good about some of these projects. In summary, from data centers, our pipelines, the strongest it's been. What we really like about it is some of these, especially in the data centers, they're approved, they're shovel ready. There's, They have the capital and they're spending it now. So we put ourselves again, like I said, in the government in a really good spot to execute here.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

And we we have to

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

go and do that. That's bottom line. But I think we're close on some of these. And on the government side, I would just say with respect to assets, a lot of the opportunities we're looking at that are right in front of us don't necessarily require a lot of capital investment. Specifically in the West Texas assets, the layout there, based on all of our conversations and facility site tours that Brad had mentioned and conversations with the government, the layout seems to fit the government's need as is.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

So we don't anticipate a lot of capital investment for those immediate government opportunities. However, if there are requirements around capital deployments, we'll certainly consider those to the extent that they're accretive. And many times, those will be built into the economics in terms of reimbursement and such. On the inorganic front, that's definitely still part of our diversification strategy. I would look at that as more of the medium and long term.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

In the immediate term, we're focused on our organic growth.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yeah, just one comment on the government side there, Scott is there is no doubt, the amount of rooms we have available compared to what the government needs, if we're lucky enough to win that much would require us to spend some capital, right? To Jason's point, it would be structured in a way where we're not stuck with that capital, we're going to bid it into the job, we're going get that capital back. There'll be guarantees if there's early termination, those types of things. So we will structure that where targets protected on that, as we always have in the past.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Very good. Got it. Thanks, guys. Nice color. For my follow-up, guess, probably more for you.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

In HFS, just curious if you could address trends in ADR, what you anticipate over the balance of the year and going forward. It's kind of a higher level of just what you anticipate from demand and then obviously how that's being priced.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

Yep. So we always balance network optimization with ADR and utilization. The utilization, you can see, is slightly up from prior year. ADR is down. It's a competitive market, but nothing structurally has changed with respect to the segment.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

I would anticipate the remaining quarters to look somewhat similar to Q1.

Scott Schneeberger
Managing Director at Oppenheimer & Co. Inc.

Great. Thanks, guys. I'll turn it over.

Operator

Thank you. The next question comes from Greg Gibas with Northland Securities.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Congrats

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

on the results. The follow-up on kind of the WorkhorseHub contract, construction ramping in Q2 and Q3, completion in Q4. Wondering if you could just give us a sense of kind of the financial cadence for the remainder of the year as kind of daily ramps is another factor as well.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

Yes, I guess the best way to put it is the majority of that activity is going to be in Q3. Q2 will be slightly below Q3. We had a minimal contribution of $5,000,000 of revenue in Q1. It's probably less than 10% complete at that point. And then Q4 will be sort of more minimal wrap up activity.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

On the Dilly ramp up, the margins are going to be bottomed out in Q2 as we ramp up. It has an accelerated revenue rent schedule as we move through the first six months of the contract as neighborhoods open in phases. And so there's a natural sort of front loading of expenses as we have to meet certain phased milestones for the reopening. But we expect the full economics on that to begin in September. The full economics associated with the full 2,400 beds, that's how the contract is structured.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

And Q4 will likely be the best quarter from a run rate standpoint on that contract going forward.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Perfect. That's really helpful. Great. And if I could follow-up to just some of your previous commentary on this call. Could you give us an example or maybe an idea of those opportunities to assist the government on the immigration policy beyond like existing assets like Royal facilities?

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Are you saying that these would likely involve like an asset purchase or are you saying like there are other opportunities as well? I just wanted to get a sense of what those are.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yes, look, we're first going to try and put out our existing, anything that we have existing that we can, right? And then, if we exceed the beds that we have in our own, far as our own resources, we would look to the open market to purchase some of that, right? Or build a new on facilities, very similar to how we ran our business for years, right? Again, try to put out what we own today and what's not being used and then go to the open market or build new.

Greg Gibas
Vice President & Senior Research Analyst at Northland Securities, Inc

Makes sense, thank you.

Operator

Thank you. The next question, we have a follow-up question from Stephen Gengaro with Stifel. Please go ahead.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Thanks. Thanks for taking the follow-up. Just as a kind of a curiosity, but trying to think about your network. Your lodges that serve the oil patch right now, I know you kind of haven't maybe as cleanly differentiated as you used to, but are those assets like as part of the network that you have built to service the customers? Are they basically like locked into that market at this point?

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Or could there be a scenario where you you need that level of capacity and distribution across the basins? Or could those assets be repurposed?

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Look, we have repurposed in the past. And we would definitely do that in the future. We're going to look to see what's available, what rates are. So we have not a lot of excess capacity, but where we do to optimize that, we would definitely look at taking some of that and just throwing this out there, using it on a data center or using it on a mine somewhere. That is always how we look at that first.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

We want to be a % maximized with our own equipment if we can, and then look outside if we need to buy or get something else. But all of our facilities can be used somewhere else. Whether that's in the government data center mining, other power projects, whatever.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

Yeah, we've done that historically. Mean, we built out the government segment with HFS assets, basically that were underutilized. We can quickly repurpose those assets. That's the benefit of having a flexible asset base.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

And look, to be clear, some of the bids in our pipeline, that's exactly how they're bid with taking some of our owned equipment that's set up and using it somewhere else.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Okay. And then as a follow-up, there, I'm trying to figure out to ask, is there like a level of commitment you have to your energy customers that you will have a certain amount of assets in certain basins over a certain period of time? Like, I'm just trying to understand the flexibility of doing that or like, are you locked in because of sort of contractual commitments to having this many rooms across this large of a swath of land over time. I'm just trying to get a better sense for that.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Yeah, let me be clear. That's a very good question. We are absolutely committed to the Permian Basin for our oil and gas customers, right? We have a big network there. So we would not mothball the network.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

We have definitely large contracts that we need to continue to service and it's great business, right? Doesn't take a lot of capital. We're pretty consistent as far as occupancy where we've been, but there's opportunity to maximize the efficiencies there as far as taking those rooms out if we needed them and putting them somewhere else without hurting our customer base.

Stephen Gengaro
Stephen Gengaro
Managing Director at Stifel Financial Corp

Great. Was what I was looking for. And I didn't ask the question as smoothly as I could have. Thank you.

Jason Vlacich
CFO & Chief Accounting Officer at Target Hospitality

No problem.

Operator

Thank you. There are no further questions at this time. I would now like to turn the call over to Brad Archer for closing remarks. Please go ahead.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Thank you. Yes, thanks to all of you who have joined the call today. And we look forward to speaking again on our second quarter call. And we appreciate your support of Target Hospitality. Operator, that will conclude our call for today.

Brad Archer
Brad Archer
President and CEO at Target Hospitality

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Executives
    • Mark Schuck
      Mark Schuck
      Senior Vice President of Investor Relations & Financial Planning
    • Brad Archer
      Brad Archer
      President and CEO
Analysts
    • Jason Vlacich
      CFO & Chief Accounting Officer at Target Hospitality
    • Stephen Gengaro
      Managing Director at Stifel Financial Corp
    • Scott Schneeberger
      Managing Director at Oppenheimer & Co. Inc.
    • Greg Gibas
      Vice President & Senior Research Analyst at Northland Securities, Inc
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Key Takeaways

  • Target delivered Q1 revenue of ~$70 million and adjusted EBITDA of ~$22 million, driven by two newly announced multi-year contracts expected to generate over $380 million in future revenue.
  • The HFS segment maintained a ~90% renewal rate since 2015 and reported $44 million in Q1 revenue, including $5 million from the on-schedule Workforce Hub contract that will contribute ~$65 million of construction revenue in 2025.
  • Government revenue in Q1 totaled $26 million, reflecting terminations offset by the Dilley reactivation contract (fixed monthly revenue to generate ~$30 million in 2025 and $246 million over five years) and ongoing interest in the ready-to-occupy West Texas facility.
  • Management highlighted a robust commercial pipeline, notably shovel-ready data centers, critical mineral projects, and infrastructure modernization, alongside evolving U.S. immigration needs driving demand for additional bed capacities and solutions beyond existing assets.
  • The company improved financial flexibility by redeeming $65 million of senior notes at 101% of par—saving ~$19 million in annual interest—and ended Q1 with $35 million cash, $169 million total liquidity, and net leverage of 0.1×, while reiterating full-year 2025 guidance of $265–285 million revenue and $47–57 million adjusted EBITDA.
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Earnings Conference Call
Target Hospitality Q1 2025
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