Release Date: March 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Target Hospitality Corp (NASDAQ:TH) reported strong financial results with a total revenue of approximately $84 million and adjusted EBITDA of approximately $41 million for Q4 2024.
• The company successfully re-contracted the Dilly assets, expected to generate over $246 million in revenue over a five-year term.
• Target Hospitality Corp (NASDAQ:TH) maintained a strong financial position with $191 million in cash and $366 million in total liquidity, achieving zero net debt by the end of 2024.
• The company redeemed all outstanding senior notes due June 2025, resulting in expected annual interest expense savings of $19.5 million.
• Target Hospitality Corp (NASDAQ:TH) is actively pursuing growth opportunities in both government and non-government sectors, including a multi-year workforce subcontract with Lithium Americas.

Negative Points

• The government segment experienced a revenue decrease due to the termination of the South Texas Family Residential Center contract and lower PCC variable services revenue.
• The PCC community contract was canceled effective February 21, 2025, leading to carrying costs of approximately $2 to $3 million per quarter.
• The company faces longer sales cycles for large industrial opportunities, which could delay revenue realization.
• Target Hospitality Corp (NASDAQ:TH) anticipates a short-term carrying balance on the revolver of around $40 to $50 million due to working capital requirements.
• The company's revised 2025 financial outlook reflects the impact of the PCC contract termination and the ramp-up period for the new Dilly contract.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with ZEPP.

Q: When remarketing the West Texas Pecos assets, how do the economics compare to the Dilly contract? A: (CFO) The best proxy for the economics at this point are the Dilly assets. It's possible they could be slightly better, but that would be what I would point you to at this point.

Q: Regarding the Lithium America's contract, what is the potential size of this market opportunity? A: (CFO) There is potential to go beyond 2027 in multiple phases. We feel well-positioned, and the project is pacing well. The best proxy for economics is what we've already announced. (CEO) The plan is to do a second phase, and the area has significant potential for more work.

Q: How should we think about revenue and EBIT in the first quarter and run rates for major contracts? A: (CFO) The run rate for Dilly is similar to the prior contract, roughly $50 to $55 million of annual revenue with a 40 to 50% margin. The LAC deal will have about $65 million recognized this year at a 25 to 30% margin. Q1 will have minimal Dilly contract revenue and a prorated portion of the PCC contract.

Q: Can you provide an update on the asset acquired in May 2023 and its current marketing status? A: (CEO) We are actively quoting many opportunities ranging from 250 to 5,000 beds, using existing and available fleet, including the asset mentioned. The demand for beds is high, and we are quoting projects that may require new equipment.

Q: What are the expectations for CapEx and free cash flow in 2025? A: (CFO) Free cash flow is expected to be positive, with CapEx projected to be lower than last year's $32.5 million unless a significant opportunity arises. We anticipate a short-term carrying balance on the revolver of around $40 to $50 million.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.