Target Hospitality (TH) Q1 2025 Earnings Call May 19, 2025 09:00 AM ET Company Participants Mark Schuck - Senior Vice President of Investor Relations & Financial PlanningBrad Archer - President and CEOJason Vlacich - CFO & Chief Accounting OfficerStephen Gengaro - Managing DirectorScott Schneeberger - Managing Director Conference Call Participants Greg Gibas - Vice President & Senior Research Analyst Operator Good morning, ladies and gentlemen, and welcome to the Target Hospitality First Quarter twenty twen ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was approximately $70 million, with adjusted EBITDA of approximately $22 million [14] - The company ended the quarter with $35 million in cash and $169 million in total liquidity, with a net leverage ratio of 0.1 times [19] - The financial outlook for 2025 consists of total revenue between $265 million and $285 million and adjusted EBITDA between $47 million and $57 million [19] Business Segment Data and Key Metrics Changes - The Government segment produced quarterly revenue of approximately $26 million, a decrease primarily due to the termination of the PCC contract and the South Texas Family Residential Center contract [14] - The HFS and All Other segments delivered quarterly revenue of approximately $44 million, benefiting from consistent customer demand [15] - The Workforce Hospitality Solutions segment generated approximately $5 million of revenue in Q1, with the majority of construction revenue expected in Q2 and Q3 [17] Market Data and Key Metrics Changes - The company is experiencing strong demand for hospitality solutions to support significant workforce requirements associated with large industrial projects across the U.S. [8] - The government segment is actively pursuing growth opportunities related to immigration initiatives, with a focus on reactivating facilities and supporting policy objectives [9][10] Company Strategy and Development Direction - The company announced two multi-year contracts expected to generate over $380 million in revenue, illustrating its ability to support critical domestic initiatives [5] - The strategic growth initiatives are focused on expanding and diversifying the contract portfolio across end markets, including both commercial and government sectors [12] - The company is evaluating a robust growth pipeline, particularly in large capital investments aimed at modernizing domestic infrastructure [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the existing customer base and operational flexibility, supporting a resilient business model [12] - The company is optimistic about the growth opportunities stemming from significant domestic capital investments and national security initiatives [20] - Management emphasized the importance of maintaining financial flexibility to react to value-enhancing opportunities as they arise [20] Other Important Information - The company redeemed all outstanding senior notes due in June 2025, resulting in expected annual interest savings of over $19 million [18] - The reactivation of the Dilley, Texas facility is progressing ahead of schedule, with expectations for full activation by September 2025 [14] Q&A Session Summary Question: Opportunities on idle assets in the government side - Management indicated strong interest in West Texas assets and ongoing conversations with the government, emphasizing the facility's readiness for immediate occupancy once funding is secured [28] Question: Contract details on the lithium front - The majority of revenue from the workforce subcontract will come from construction activities, expected to contribute about $65 million this year, with service revenue kicking in through 2027 [30][31] Question: M&A or new asset considerations - Management noted strong bid activity in large domestic infrastructure projects and indicated that immediate government opportunities may not require significant capital investment [38][42] Question: Trends in ADR and demand - Management stated that while utilization is slightly up, ADR is down due to a competitive market, with expectations for the remaining quarters to resemble Q1 [46] Question: Financial cadence for the WorkhorseHub contract - The majority of construction activity is expected in Q3, with Q4 being a minimal wrap-up period [50][52] Question: Opportunities to assist the government on immigration policy - Management plans to utilize existing assets first and then consider open market options or new builds if necessary [54]