Target Hospitality(TH) - 2025 Q1 - Quarterly Report

Revenue Performance - The termination of the PCC Contract resulted in a revenue decrease of approximately $168 million annually, with total revenue of$24.1 million for Q1 2025 compared to $53.6 million for Q1 2024 [136]. - Total revenue decreased by$36.8 million, or 34%, in Q1 2025 compared to the same period in 2024, primarily due to lower revenue from the Government segment [142]. - Total revenue for the three months ended March 31, 2025, was $69.9 million, a decrease of 34$106.7 million in the same period of 2024 [170]. - Services income decreased by 31% to $50.1 million, down from$72.4 million, primarily due to lower revenue in the Government segment following contract terminations [170][171]. - Specialty rental income fell by 56% to $15.0 million from$34.3 million, attributed to the same contract terminations in the Government segment [170][172]. - Government segment revenue decreased by 62% to $25.7 million from$67.6 million, primarily due to the termination of the PCC and STFRC contracts, which accounted for approximately $30 million and$12 million of the revenue decrease, respectively [187][188]. Profitability Metrics - The company reported a net loss of approximately $(6.5) million for Q1 2025, compared to net income of approximately$20.4 million for Q1 2024 [142]. - Consolidated Adjusted EBITDA for Q1 2025 was $21.6 million, a decrease of$32.1 million or 60% compared to the same period in 2024 [144]. - Adjusted gross profit was significantly impacted, resulting in a gross profit of $17.9 million, a 63$49.1 million in the prior year [170]. - For the three months ended March 31, 2025, the company reported a gross profit of $17.964 million, down from$49.068 million in the same period of 2024, resulting in an adjusted gross profit of $31.636 million compared to$63.849 million [232]. - The net income (loss) for the three months ended March 31, 2025, was $(6.459) million, a significant decrease from a net income of$20.383 million in the same period of 2024 [234]. - EBITDA for the three months ended March 31, 2025, was $16.569 million, compared to$49.779 million for the same period in 2024, while adjusted EBITDA was $21.571 million, down from$53.688 million [234]. Cash Flow and Liquidity - Cash flows from operations for Q1 2025 were approximately $3.9 million, a decrease of$46.7 million or 92% compared to $50.6 million in Q1 2024 [141]. - Net cash provided by operating activities was$3.9 million for the three months ended March 31, 2025, a significant decline from $50.6 million in the same period of 2024 [197]. - Net cash used in investing activities increased to$17.2 million from $8.9 million, primarily due to$15.5 million in growth capital expenditures related to the WHS operating segment [199]. - Net cash used in financing activities surged to $142.9 million from$21.3 million, driven by the full redemption of the 2025 Senior Secured Notes totaling $181.4 million [200]. - As of March 31, 2025, the ABL Facility had an unused available borrowing capacity of$134.1 million, providing sufficient liquidity for the next 12 months [192][204]. Contracts and Future Revenue - The Workforce Housing Contract with Lithium Nevada is expected to generate approximately $140 million in revenue over its initial term, with about$76 million of committed minimum revenue, and $68 million anticipated in 2025 [135]. - The DIPC Contract is expected to provide over$246 million in revenue over its five-year term, with a ramp-up period affecting initial revenue amounts [139]. - The DIPC Contract is expected to generate over $246 million in revenue over its five-year term, starting March 5, 2025 [166]. - The Workforce Housing Contract is projected to generate approximately$140 million in revenue, with $76 million in committed minimum revenue expected in 2025 [167]. Expenses and Cost Management - Selling, general and administrative expenses remained relatively stable at$14.8 million, with a slight decrease from $14.9 million in the previous year [177]. - The company incurred approximately$21.2 million in capital expenditures during the three months ended March 31, 2025, with $15.5 million allocated to the new WHS operating segment [195]. - The company incurred transaction expenses of$2.830 million during the three months ended March 31, 2025, compared to $240,000 in the same period of 2024 [234]. - Stock-based compensation expenses for the three months ended March 31, 2025, were$1.716 million, down from $2.748 million in the same period of 2024 [234]. Risk Factors - Major customers accounted for 34$40.9 million of outstanding floating-rate obligations, exposing it to increased interest expense if short-term interest rates rise [236]. - If floating interest rates increased by 100 basis points, the company's consolidated interest expense would rise by approximately $0.4 million annually [236].