TH - Earnings call transcript Q3 2019 | Target Hospitality Corp.

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Operator

Greetings, and welcome to Target Hospitality's Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mr. President, Investor Vice Senior Sahai, Treasurer, Relations. and Narinder you, Mr. Thank begin. Sahai, may you

Narinder Sahai

issued presentation you. to on call. earnings we welcome morning, the The and Hospitality's release Thank our and XXXX Investors Target section Good Web are today's for call third of quarter news yesterday posted the site. conference

Brad Officer; will Officer. the our EVP Kalamaras, Q&A a call on Archer, After me Troy Chief Eric remarks are, Brad Schrenk, there for our session. Commercial also Chief and Financial and President question-and-answer session. Joining Officer, today the and be join prepared by Chief Eric, Executive our and us will

we discussion in call may Before some a of that our you include forward-looking XXXX this conference statements. responses to I'd questions begin, outlook remind your including of these statements, and like to

As to that to are the Known results events to that forward-looking the uncertainties by cause materially filings with described could recent Exchange subject our material XX-Q, periodic actual other implied and differ yesterday, in statements. and XX-K, could from U.S. most those Securities most results these cause differ issued release forward-looking factors Commission. such, they the future and our from news recent our are statements actual

or are to date you any wish the to update reliance only forward-looking on of any all after place We caution our statements they of of date revise not obligation hereof. publicly no to undue the statements, forward-looking as speak which made. We undertake

in release non-GAAP yesterday. measures, More reconciliations comparable including GAAP are addition, most call, In reference the issued regarding information to on today's news non-GAAP these will included measures. we the certain measures

over to With that, I'll turn now Brad. call the

Brad Archer

our XXXX everyone. us for morning joining today you results. to third discuss Thanks Narinder, and good quarter Thank

service and their small, big guests specifics, reflection to the each a work is the want of hard day. Target every true into and for and Hospitality XXX interaction, customer-centered Their or women in get of and our delighting thank in customers dedication our and every care commitment promise. our men of taking we to culture exemplary Before I

the to turn let's quarter. Now,

customers this Permian Drilling Index effects. in year revenue since deceleration the some a service cash end the As production for know, capital Frontloading completions has quarter. growth This experienced with the and has is constrained assessed. employment Utilization company. of of oilfield in keeping Permian needs through contraction well the within activity activity This, significant services Permian quarter. The Basin our our as energy its future end-market Basin segment energy spending you Equipment at lowest in as construction in the cascading the third experienced firms, spending is as are and for having driver and of first-half and is the the largest predominantly and combined earnings for for capital Basin. of level, second-half exploration are the third flows, production a XXXX,

Amid strong of and resilience was operational financial this quarter business third us, backdrop, results. our I proud for quarter as the solid we the of a delivered am

same the our returns. we generated initiated time attractive at promised, margins, executed on strategy, and As growth shareholder

cash Our tremendous had simultaneously shareholders. the momentum been has highest the the generation grow operational us ever in and our We capital the it quarter. allowing was to return flexibility company to

the for this quarter, XX,XXX Our system-wide us key in total cross a helped beds time. company. XX,XXX beds reached for utilized the first This milestone

producing disciplined confident in and manner through-cycle have in consistent remain this executed a very We growth returns.

to growth growth of growth of beds from mainly $XX our due in and into Enhancement pro quarter rate Signor to includes which million. benefits our was Program, adjusted volume basis, increases having combined both year-over-year we EBITDA revenue by up more third Signor X% an to of Year-over-year, EBITDA. million. from $XX also daily grew our in revenue the by and utilized both driven average was Revenue saw translated a in XXXX, we which for which forma third On adjusted results quarter X%

Target of earlier growth All for Hospitality, this becoming a including this a period record year. company public was particularly in of change and impressive

now market. to highly over discuss for the XXXX our take results our distinctive financial minutes the third call comments energy me I'll business few markets, Let within turning so focus our is and a positioning side on government our Eric stable before updated The U.S. outlook. my end quarter to and of predictable,

they managed blue accommodations competitive decades. through and We with our larger we chip a that with provisions. of is longer mutually long-term built The have secure customers investment advantage. to have exclusivity customers have and guaranteed The customer base part partner employee as contracts us tend longstanding relationships over own beneficial view that horizon, with with their payment relationship

of certainty our For until with believe working. the our capital for We of customers, provides and and both into and a you Many playbook customers for stability the with of we customers long-term upfront visibility provides us a capital our win-win is utilization disciplined not aligning communities. this right commit know structure on earnings This do also of lot it selecting develop new us. of certainty In cash customers. we that and turn, with size degree We time in return. being right agreement flexibility approach is deployment spend have to This that flows. the communities high contract achieve to a spending. and allows our right a future and location our

for into fourth unexpected been will activity We next least in year. customers. of the are our of year the seasonally Historically, case view expect the lower This pick some this to reassessed. second-half the downturn anticipated market. in capital activity E&P don't recent until energy when U.S. the is discussions for prolonged weaker has quarter budgets our our energy activity turn not up confirmed of is that year with a key at that likely strongest customers. implies Clearly, this third the quarter quarter Further, not

impact U.S. assets scale resource expect how and in We are So, companies short doing energy market what the that those a long-term that we view and it? taking between about continuing likely bifurcation back run. are to are does their this of those dynamic a in us the

business, core our customers longstanding comprises Our revenue which resilient. remained from contracted

Excluding in higher core versus to to continue revenue in needs Permian the third top from Energy, unchanged. expect the of was relatively and TC customers our customers second sequentially year. quarter energy of our workforce quarter the their remain XX accommodation this Many invest Basin

our align the services and best in capitalized the We largest continue to market. players with

through XX%, and we head to and our roll-offs. advantages, have do renewal contract any fourth into above due which Our significant demonstrates network remain importantly the and not quarter strong XXXX, our exclusivity we with make way customers rates partnerships our contract as

probability of business largely commercial uncontracted workloads, Our comprised opportunities. is with and select less high predictable customers

We to of commercial promising and work to multi-year continue more transient the converting opportunities, contracts. on customers

due for While allowed the third opportunities transient of deferral customers diminished un-contracted a result. year, we us opportunistic experienced next into visibility as to in some and certain availability impact quarter to the beds be on demand commercial our of

for We wanting we're first first from in as typically expensive take market customers value. share are and the well-positioned to call the hotels to environment, attrition they such this better experience are

size one fit We all. does recognize not that

regional network service This are be of allows with and demonstrating will So accommodation differing we're structures. playing to value-added and exemplary approach field us serve assertive terms and Hospitality's communities, services, leveling better the with unmatched, needs. contract are providers. largest also we flexible in customers There Target that.

that because we producers Additionally, of work further to current resilience the integrated the our are over portfolio horizon. large, by we That's past, the in pivoting to retained in to environment, core we more have us, total to all customers. have investments multi-year as done our strengthen important continue business of even making

provision recover, grow utilize customers allow us with needs. beds reset customers as our As activity existing seamlessly with levels to contracts and budgets, should exclusivity our

Let track reiterate, established we a Target company, growth profitable me Hospitality also record consistent and growth. of have a is

prospects pipeline and mature of value-enhancing acquisitions, and growth tracks both opportunity a have organic healthy executing on plan simultaneously. we We for

even few We years have than into evolved today resilient more much was a it ago. a business

initiatives offerings our the competencies. our for and we're same we we have add strengthen to confident shareholders. we the us returns value, service as to our At continue and core diligently competency, underway our where are end-markets, into position continue can product growth We generate diversify trajectory working to time, apply

to Our progress our future. our are forward to resources strong drive our we balancing build on investments sales by in going fundamentals and while making expect margins, and

is results now financial to for over pleasure Eric my our and quarter it It outlook. additional turn to our third XXXX remarks updated on

Eric Kalamaras

and good This great you, my I am morning, with Thank Brad, with quality a be leadership and Hospitality, organization Target to high pleased growth joining and inaugural potential. excellent call is everyone.

follow-up we I outlook. with our Brad third of review our discussion XXXX As our results, of capital delivered begin indicated, results. updated and quarter with details will program, solid

to our continue we benefit quarter, the In network. third growing from

overall in end-market Lodging to and as expansions, sharp we XX% revenue growth nearly adjusted Total on EBITDA of slower-than-expected $XX year-over-year the in an by growth adjusted were adjusted increased New our XX% nice million, of to achieved TCPL $XX as still well pace integration execution. EBITDA the revenue builds and recent acquisitions, and slower the energy both Superior Well, EBITDA. modestly of increased ProPetro our XX%. and margin results million, a impacted and successful project focus and operational

were minimal million. Recurring last investments our is $X to growth EBITDA services transition in support well that from adjusted year from total being improvements corporate year-over-year us allow and business a higher With beds, as an of as growth to to with improved increase The increase utilized result company, leverage. for of The infrastructure the cost the the with and public expenses sales a declined. quarter associated operational was primarily in additional costs. incremental cost scale

$X million costs recurring We our corporate $X expect around per to quarter. million remain to

in of was beds Basin new increase a prior integration, increase signal as the ADRs segment primarily This in lower year average driven community decreased XX% acquired as an the signal overall well base X,XXX We quarter quarter. as added average versus expansions. additions quarter. increased new beds result ADR delivered primarily of communities. the in Turning and $XX beds utilized third the utilize declines to than the available performance, increase doubled, available revenue activity and more beds our million, average despite Average of and by and XX% XX% Permian from levels. an

and which right XX to our led the footprint profit the to creating late in average last a activity nearly million due ADR. flat model. was The due to Bakken decrease compared the levels cost at bed beds average compared basis lag mainly asset XX-month and year, convert increase stable ADR, government timing provides quarter customers year XXX year. ADR improving a significantly to of the utilization gross of the there's drove utilize decline and declined last deliberately in nature to utilization a same efficiencies. our pricing Recall to Revenue lower $XX relatively point basin, unchanged while utilize this contractual In to adjusted period beds, reflecting revenue by expected XX%, lower we in sized average segment This to In margin. available prior revenue.

Adjusted gross points margin occupancy XXX costs. basis profit due increased to primarily lower

which all TCPL than the anticipated was primarily This from driven XX% revenue margin $X by consisted gross pre-FID activities. third revenue had the Our and of other construction profit lower quarter. adjusted fee segments, of of million for project significantly

hopeful While of a of XXXX. project negligible this are we contract expecting for start, remainder contribution we are the from

still in operations had million in of $XX of operations we the particularly million is from as interest We the quarter. from cash quarter flow second and flow this $XX in cash the of during We that the cash period cash third year. net quarter paid another generated same considering level significant in notable This produced generation. net

capital as maintenance nominal spending As discretionary our is needs. given much capital

flow ability provides This clear generation cash quarter business. our glimpse the a of exceptional of

continue objectives. meaningful expect flexibility We our us to to allowing fund flow, growth the cash generate to

enhancing third of this construction expenditures all and Mexico of capital and/or Carlsbad, the two new million. revenue was legacy New investments, Capital communities for in were hydrating expansion in the Almost $XX signal communities. Texas quarter spending including of

$XX revolving consolidated and the repurchase quarter earlier Texas of Capital of facility capital debt. August Year-to-date million expenditures stock million, a the stock third we times, on also on included community We leverage growth repurchases Including in million. acquisitions of quarter. with were the XX. Midland X.X excluding $XXX $XX ProPetro's third expenditures announced credit commenced million the in long-term the ended quarter total authorization $X purchase to drawn million $XX net pursuant for

through plan shares to repurchased or approximately share our attractive generates million, have discretionary attractive approximately or shareholders, investment for We repurchases total growth we $XX opportunities superior the of spending that Today, returns on flow whether authorization. XX% those for organic opportunities acquisitions. continue are our cash

provide us capital objectives. and run sheet our invest generation broader aligned flexible capital balance allocation solid significant sheet, both Our are to and maintaining priorities with accomplish these financial initiatives. robust value the in of cash in long balance growth, with deploy flexibility enhancing to These

business and our variable opportunities. business. our some to The This and activity outlook, pricing XXXX intact. portion that deferred contracted in has primarily the completions financial experienced drilling which the un-contracted have and slowing remains well for we Turning as portion affected of resulted decline commercial our as has development has of our utilization impacted demand, largely

In addition, activities run the has rate not project contribution as expected. related TCPL from materialized construction to

from Orla As a Carlsbad growth we acquisitions. in our flow in offset our third beds counter and two headwinds, incremental well communities in the from to these from these utilized new cash quarter impacts as as

range grow between X% range And $XXX the and of million we combined pro background, be and expecting million. X% this and $XXX adjusted million and million. and EBITDA $XXX are in to pro full-year grow forma the $XXX to With XXXX to revenue between in be X% X% combined of forma now

As programs near decelerate of expansion our our and for to pace new completion, the year. build remainder expect this spending of capital we capital the

XXXX. to capital million spending between million $XX for And $XX be expect non-acquisition growth and

oriented of We business on focus the and long-term model strategic our our structural are confident advantages large in customers.

execute XXXX our Our updated network to and but not also growth our significant us the cash not to to generate the allows ability but control business spending, of our model also our us time. coupled in and initiatives focused on through pace with capital quantum gives the flows exclusivity confidence only full-year only outlook ability

Brad will that, back I closing comments. for turn With to the over call

Brad Archer

Thanks, summary, strong and delivering operational solid Eric. momentum continued In our results. execution is financial

contracts relationships. quarter. to the core customers have our And of our business. our deliver was this We in continued this underpin growth evident on clearly and our strategy And with stability

count bed exceptional in and flow from We cash our quarter grew generated the operations.

business. is I the oilfield large reiterated working line and our value further control on a producers from in a proposition structural market, sight of business of integrated While to revenues. company. our We confidence high the as cannot quality our advantages we we to our of we in shareholders that mix And the actively today, have majority increase are significant service maintain

on returns. We are focused also

Our cash to ability solid without significant returns our sacrificing execute us shareholders. growth and balance sheet strategy generation allows our for

markets, outstanding and executing results. strategy, to winning Our team is in our committed our delivering

Hospitality. up your for Thank you again you line Operator, open for interest questions. Target in may the now

Operator

Thank you. [Operator Instructions] Thank you.

comes the with of question Gengaro proceed line question. from Stifel. Please first your Our Stephen with

Stephen Gengaro

that with and $XX variance your $XX the try of back quarter revenue guide that's sort Thank we the implied about and of million you, kind million. portion contracted? revenue of good Can million morning of of gentlemen. $XX of quarter Can we about you fourth of part that to with in start what that talk the I the pieces envelope lead a kind like, moving think fourth of to of $XX revenue looks million, up is to out your quarter what came range in I guidance? XX% fourth number around contracted of sort figure When your and

Brad Archer

Hey, joining Thanks Stephen, Brad. this here is for today.

of to intact. high is part business, level Let on then the this long-term Eric and to core as but We've more and our business number can, me more of the business business jump the if the still specifically in we've some kind wants past, mentioned our on visibility look, great to is in strength, and he that our take contracts. color got give due on

experienced pushed and is business our two right. portion commercial the direct which be and variable, specifically this business, to portion spot business Look, our short-term Now, expect the this transient in portion of believe have the improve. of and conversely, less visibility we budgets on, when through which reset we market we the softness this areas, the softness un-contracted in quarter, we opportunities year, first fourth the the to of of can

bit, very business the not work of we Troy out the I'm a still the and quite market's is thing to because exclusivity I good hasn't there busy. our in contracts. it's and the under The Permian, shut rebid gone down don't here's lot that. say for, why a away, And is, have it's

this haven't I reset, headcount maybe And fourth this So away, dropped set in we we're and in coming back. the had and get look budgets quarter, work went some at with of them, when New customers some up in some Year. this to they work is the talks know back

into they they it, if So basin, again, go to room. the rebidding not back our come

a that's quarter. this good of guaranteed contracts, long-term tell to our on remember, convert is continue to and variable goal gain I'd to a past in the So, And forward point to always business you, look this. level, for high then momentum doing we'll portion the fourth

Eric Kalamaras

think good I -- Stephen, Kalamaras. is Eric This morning.

I seen I fourth structural is, think changed, contracts that we think would in add right. to only our relative quarter the about as we've thing what have not XXXX,

So for real wouldn't now there's contracted, mentioned, change portion what that seen A nothing that correct, and historically, into has but we’ve changed of frankly think in no really and with XXXX I matter. as mean quarrel fully QX, here. it's seeing into we're what is there you I number, your directionally substantial structurally look, I revenue,

Brad what's impacted, been spread the and business really portion I has the driving variable that's in think as of the the mentioned, outlook.

Stephen Gengaro

XX% visible $XXX -- comments XXXX to get when that And million a then when just is off you at number, at several that you think you. when the over is XXXX, based made was Okay, you that mentioned it of of XXXX, $XXX seem XX% Is think high, too on that, that it revenue I'm would last that a what thank contracted, guidance think number. revenue reasonable because assuming a I sense getting too about about the just about is I'm you've now, to low? is, and quarters that contracted and million there's for I'm trying suggest to of

Eric Kalamaras

you the question. Sure, thank for no,

would certain say this, outlook detailed give -- so at XXXX I So, okay. time, this we're ready not a of more to a

say, I right, I that short-term what say Here's is levels what would come what have can see guess I down. these we so activity

the don't until I what looks some some through the the the like these portion year. do on of flooding get opine of through I opportunities re-emerge business to of portion to We XXXX. specifically cycle expect seeing part contracted commercial business. back this impact are want the we to on of business variable our

us fulsome allows back that, just it for with So, leave come I to now. would on a that more update it and at

Stephen Gengaro

but to it relative being right Okay, was that in I -- you XX% your guidance? that contracted, saying talk XXXX revenue when was that about

Eric Kalamaras

That would no thing correct. through you roll-offs meantime is The in that I as XXXX. significant help, think we is, one XXXX I the about would have contractually and add into think coming

that outlook as about So, think predicated provided certainly prior the that, I number. XX% you previously was was think upon look, the

on directionally So you're right that.

Stephen Gengaro

Okay, you. great. Thank

Operator

line your Our with question Scott question. proceed of next comes Oppenheimer. with from the Schneeberger Please

Unidentified Analyst

for was those XXX contracted utilization you quarter additional the at being how will progressed communities? little decrease the that guys. fourth It's new on the to third due the you 'XX the with on year-over-year contracting in by Honing Scott. a the number release Daniel in morning, bit, have bed noted beds, not of new Good quarter quarter in by utilization a impacted additions be higher beds How and end.

Troy Schrenk

Look, fourth that think the appreciate Troy. had XXXX. attributable with Hi, the soft of that the I and about uncontracted expect it And third we Look, have to utilization forward look have our was again, progress in both candidly, that deferred Good the variable quarter, do the commercial the It's mentioned But quarter. mentioned, Daniel. is we I'm to portion we of we Eric the be and we've which made. and question. that's as opportunities Brad remarks, largely in morning. several had is pleased business, portion. been as some in as

hasn't gone away. work that Now,

to mentioned, that can line we reset contracts XXXX work, its have that helpful? by as really up year, we set right, and budgets we're very well return reasonable that direct on exclusive when sight virtue on capture of that there Brad first-half work confidence of the have in work capture of is our We in that

Unidentified Analyst

little to Perfect. now. you. Switching gears it Got a ADR bit. Thank

the excluding stable a year-over-year year-over-year You Signor ADR both the fourth think excluding Signor communities has quarter-over-quarter that here know a it been and basis. how quarter us at remaining we ADR Could about and a on Signor perspective pretty provide you including communities, should on in both basis?

Brad Archer

And well. comment. in I'd to Sure, I'll make jump Troy a like as

as into I you positive about into moving I mix QX right head may QX, we into part trends actually heading see or some think you you as and XXXX. into think would ADR see of so think modification perhaps there heading

than else. going than I to think mix anything a it's really really more So be a issue, -- more

Troy Schrenk

Yes.

I So the carefully think recognize again, the cores including transient terms, or of maximize portion mean to ADR. profitability. by this as business reiterate, thing impacted is Look, to said, Daniel, I that only important the we're just the intact balancing spot we've to add would price the I utilization I that think it's and is not

So perspective. uncontacted terms balancing an when utilization the ADR intact that those again is in think profitability, and for the that from on about pricing core focused but max we're prices, portion, ADR that you

Brad Archer

Brad. Daniel, it's

call right? back customers spent to that's And at in down part our in it versus QX more QX, Just our too, say on look addition of it than they QX to just plus we're still then, did it, continue with we there so is when when you you out, top and intact, take QX, renewals. XX further us one XX% our core

renewal variable things consistently, in is and that those So part even the business. hold of our up

in just but we XXXX. fourth that So, fundamentally on roll as business the quarter, about into of good feel continuing it the not part we

Unidentified Analyst

very Thank Got it. much. you

Operator

proceed Capital question with Jeff Northland next a comes question. Markets. your line of from Our with Grampp Please

Jeff Grampp

to bit of the you whatever the too I of you and, characteristics don't from how how and fitting I you to little bit maybe but was want might if into target market are kind more, touch maybe at on that of details I into guess, maybe about markets you kind your high-level prepared remarks, was guys you just a some can a be looking on talked guys curious, kind Brad, get evaluating that new of that for end trying morning, get hoping you the guys. dig here, you more, maybe Good company. in see will, opportunity. ecosystem, specific seeing of a understanding, markets

Brad Archer

I'll invest yes hit kind going a with on and in look, to too, Permian. to Sure, this a the continue of scale we're larger starting

the our, the as We continue invest returns so look disciplined to all, way play. continue business have not at we at part look and long-term to believe will how deploy a that the organic years. a and of has visibility. for inorganic, good it's And many many, where there's has be we that because we at We there and we changed it trend, capital,

us think the the look can piece, overstated, ability we're to I On I flows, be don't diversification. stages our to we diversification as which gives at with you, this. be adjacent early add and thing of cash is industries in the would optimistic the tell great markets

for will shareholders. tell So that look forward. always we -- the is that at work the not that pushing areas not that we've returns you The and something is we'll road. to to the honest be capital to because deliver far process. best too put But with our of internally in part it started we're playbook down last we going keep I'm

out at continue are tell, diversification. looking other we the that I in as such there Permian. invest will we There're when to So things

Jeff Grampp

early we trying it. communities. about you But new maintenance on specific. Is at that should acquired to capital upgrades I side, guess got or appreciate I any potential maybe want and understanding whether outside to in of there the And it, follow-up, acquisitions Got that. CapEx, thinking that's my any process still like I'm other that? guys excluding too things are be get XXXX or CapEx, frame, don't build facilities

Eric Kalamaras

a Good at flexible question, we Eric. have to have fortunate plan really this point. very morning. It's capital -- great we're This is really

minimal we're some The into we heading trying again, up opportunities, say pretty, looks deferred I there commercial really, shore would would still caveat so, head we that to needs. we XXXX, have be pretty like, And have what but right. as capital

that we hole look that to but would the be one So flexible. now it's right would pretty fill

Brad Archer

And If build a the and Eric new going to just then we're don't playbook facility an or or that add-on. in there a we returns, for our new add that same. go supports out remember, contract I a would invest still have not

they as even going a at the the inorganic, then business. prosecute the take going organic at we a of look go with versus them. So get returns, we're it. we'll we to that, same the thing this, to come, scenario, do And look piece and the That's buy not we're the as even to build it's not though have cash

very be So approach. to in going we're disciplined that

Eric Kalamaras

business, AND that to we lot of cash to Yes, is this into generate so, that available I discretionary think comment is the extent minimal that's XXXX. There's cash spending the a other us. thing I would in capital flow we of add partially heading off have Brad's of lot a

for to grow pretty us that's move enviable position as to a and so, And it. be in the forward business we to look

Jeff Grampp

time, guys. the Understood, appreciate I

Brad Archer

you. Thank

Operator

comes with question McVeigh Kevin line next with Credit Suisse. question. your Our of Please proceed a from

Kevin McVeigh

Thank you. much full-year guidance? ProPetro And QX? the Hey, how and can contributed XXXX sense of Superior give you impact to a what is just Lodging the on

Brad Archer

don't that numbers. Sure, say or on contribution to morning, in I give terms give specific wasn't, to EBITDA so but good want was that, okay. Mid I digits mid-single want to there hi suffice That's there. -- Kevin to of specific there don't a numbers

Kevin McVeigh

didn't a guess kind decline That's stronger. seasonally, of then, And of XX% I in the implies the happen looks thing, to revenue, It fine. your midpoint it like the point, range Brad this QX, time. but kind of

as think scenario given that guidance, like XXXX bottom-up you again, XXX but think modeling to not downside from is the as least a you're that is worst a XXX? that perspective? we about based at reasonable a I about, Just Is know

Brad Archer

our not 'XX future give a fourth that good do what sure I'm take And I predicting business. Again, we're parameter wouldn't ready what business. about high-level, is say that is to I'd for right? number the is quarter feel the We here's

have We fourth this scenario. lot believe We short-term a of is quarter long-term contracts. a

is our their talked we year, lot doing. down you that look what to, we've they have on of of back We to side customers way, at sure, where think we talking have believe we No the making at understand doubled customers in they're business a By protection and history XXXX. our role-offs and next significant supportive.

not at parameter the again, would fourth a looking not tell going to for I'm I you you 'XX number. to be So give quarter 'XX. What that is

Eric Kalamaras

seeing well, while all additive alone, Yes. larger which QX, this much And growth of the I through the you're a TransCanada, from certainly the right, we're for as of amount revenue think base call beyond embedded activities, we've as of that to as way outlook the thing that's also the pre-work outlook recall had waiting year that outlook, won't coming in in of some we impacts to a kind Kevin, the what well. see that decent the right, at second-half, that in was, also during contract, so other

Kevin McVeigh

get where where it's Eric, TCPL, the came then in? be that any thought you was it if to of too specific, And it, from but it. versus I Got sense going

Eric Kalamaras

I Look, don't say. on have that. I specific would numbers

Kevin McVeigh

Sure.

Eric Kalamaras

would was I it put on I QX, in not probably generally, magnitude what third QX, a more. to say, be, of would say would be looking half I thought just look to it's for might probably we it about it, about order if just for say just

Kevin McVeigh

you. thank Great,

Operator

of line the Sabadra from Please your Deutsche comes question. proceed question Ashish next Bank. with with Our

Ashish Sabadra

my Thanks taking question. for

Thanks. talk I the am in in how the exited last was how trends the was the change. and about in So you wondering quarter? we August, items quickly Can which just if environment call the reiterated quarter on just the mid

Brad Archer

you your repeat here. question? breaking up I We am Can sorry. were

Ashish Sabadra

just that. the on reiterated excluded about I my was guidance quarter Yes, -– that the was was Sorry it question and the just expansion last acquisition. and the

And and did quarter? so my the the you when versus entered the the about question you how was talk environment in trends change. how quarter like the just - exiting quickly Can quarter

Brad Archer

we is that our putting to business changed as we that was QX the finger fairly opportunities of what of as that go those we Yes, sizable that. were Again, on right. deeper commercial intact. That's we high level. And Look, deferred core back I have moved to well that these which TCPL for well. variable that The you change the We They biggest And at good that. remained the kind away. of point definitely as in are variability moved see that a to down part what were going definitely believe our the a don't range business the QX. sometime portion in think right. started portion the was portion of the then

the -- up today the three things those are we really what quarter. for So, telling fourth made

Troy Schrenk

started of in Yes, portion haven't really I biggest is and half so kind the a and QX, add that up or deferral will pace thing -– started really really the only picking the opportunities really of month until seeing that was that ago. of the of biggest back just

Ashish Sabadra

of You That's authorization helpful. authorization about is stock do buyback think And just where price still just have lot growth use you capital remaining. for a the buyback? -– how remaining still given versus the of

we use So of think capital just going forward? as about

Eric Kalamaras

This Eric. Sure. is

So I do combined. on hand. in couple flow a go They and comments of capital hand cash made

about we So ex-interest in $XX ops cash generated from million flow expense.

at relative a us we and lot that idea And gives about think when like it we capital opportunities, of we of the being So, our look return of flexibility. opportunistic.

for continue to in invest going are growth. We to this business

are specific can't bigger strategic execute But for capital market any activity, we look, I our buyback on certainly comment concert so plans included. in to all options going are with plans. And that

that. part I And company. and the growth buybacks but extent shareholder day, facilitate capital we the are use to the to the for end going And of think returns. so growth are best run long are Great, of of we at

Ashish Sabadra

profits question And trajectory the gross bit final a Thanks. going margins one moderated on about the Permian. Those from in or How gross helpful. third think should maybe Thanks. to that we forward? That's second quarter.

Eric Kalamaras

Sure, no problem.

little express So, I forward, think there we as move in is look, variable clearly challenge market. that of the we a the more part

about. as mix we of However, higher talked offset some is some ADR that by

think think a on -– So, it look, little I it's you the wouldn't see wouldn't I call though. degradation I on the substantial don't Permian. bit -– I margin

Ashish Sabadra

Okay, thanks.

Operator

follow-up your Our Gengaro question with Please next is from question. Stifel. Stephen question with proceed a

Stephen Gengaro

debt relative things option in thought of perspective, that valuation a it oil a those as leverage cash free like how about just as flow of a don't you see and desire Thanks. stock? the feel equity service up as getting think you another you prior or over debt - de-levering but on this the flexibility, cash question just the far flow A remains debt on conversion, same, have back following a having with perspective, do couple of about and lot have buying to actually, from in back debt multiple companies you visibility, your that world, how of stock. lot reduction people about a understand a is And to to but as your buying of leverage cap lot debt. debt if kind from see but There and I and

Brad Archer

execute Yes, growth Steven, There's how sure. going intentions to comes right. a to always really want a there, right. Look, of strategic forward, prosecute question. as business and great down, it's to balance It you your

you hearing you? So, quarters. assets quarter, pay the have just million think about look, you're run I we could do you a us down say this if our look, revolver for theoretically what's we're to cash in think long the We generated and what is, more pre-payable all put couple in debt, in investing your here. $XX advantageous

about pretty where we the So, good roughly frankly, leverage X.X pretty, we or in times at And look and feel our pretends that think at less future. about it.

just think more and perspective, to to to would time, from play will albeit, love I'd look, flexibility maximize it are we but where balance but more flexible, you I flexible we pleased tell that So with by just that. we're sheet have always ways capital at we'll you through structure there, maintain I look want pretty know, year,

Stephen Gengaro

And Okay, us tell mentioned percentage they you you -- revenue what the I you top think for? to thank mentioned customers. of account Are Brad, XX you. twice your willing with

Brad Archer

I appreciate No. do the but question. I won't that,

Stephen Gengaro

words, out your take that. figure didn't but I I

Brad Archer

it, right. ask to had You

Stephen Gengaro

and you mix final companies cetera clearly U.S. of can sense see when recovery the the add fourth in drop-off larger mix, and think us oil pumping but and about expected from all service quarter an for the think are providers, E&Ps? a at customers When give world, importance seeing revenue perspective some the in I a the your from from from a the you we with E&P look you service service of a oil Okay, you companies service me. companies revenue of oil et in companies little as of revenue relative versus just then XQ, I'm pretty and color not versus sharp here, the sure a pressure but can if

Troy Schrenk

and were Yes, this the announced both by as of think the in Good a way built look, to facilities, Stephen, I Greenfield we Permian is Look, producers good morning, the there investment. Clearly, migrating think that's two new which it are really integrated the the long-term, this example of that Basin. long-term in at Basin, Troy. the leaning and the about for E&P business into us look a way. Permian the Permian and I the and is think this, good question, year that

And so, matched has look, right. our business that,

oilfield into producers sheets, great be, to made on the sector important that long-term Permian. operating a have lean flow, as acreage the integrated companies side, we upstream to a mistake, service business have effort in the the free and about balance an great strategically and continue on other will strong cash but concerted the strong and with basis, no E&P base make we So, think Permian a of part is

far, I thus demonstrated for think with remains a we've further we've got growth great success think pipeline had we've those that -- organic intact producers. and I

Brad Archer

statement with people right Look, add the to places. just doing in business will one right that, the I it's

look Permian at true We prove a say bifurcated proven the in market to I will that, today fairly Basin it's it's and continue and today. you think true just XXXX. When

that place, out you as some of; the person of we you integrated there's a out continuing are approach sold some totally We there. are more their large softer, financial to variability. those at until orders then where we're areas where Troy in rigs, few is the this but put get disciplined look business continuing which in, when us are spend, that said another are some leaning lodges is for becoming add that in very overall, and can't into, and seeing of they have of others to producers, some of their guys we're But healthy

again, the continues people So, to business right places the pay-off with in for doing right us.

Stephen Gengaro

Thank you.

type kind on you think that that yes, million to work, run quick reasonable? I other until pipeline more the Just pipeline we earlier sort this $X hear about business of mean a one is visibility one, final, to without quarter of be the per alluded I that segment rate work, going revenue is

Brad Archer

Yes. about out your it's than probably it's QX, little Look, -- probably for more right. I would say, number maybe probably going that, is

Stephen Gengaro

Okay, great. Thank gentlemen. you,

Brad Archer

Thank you.

Operator

Thank you.

floor for session. We have like over would comments. reached now closing I Mr. you of the end the question-and-answer to to Archer, the turn back

Brad Archer

Sure, interest Target forward next thanks. look the I to joining appreciate your to call would like speaking to Hospitality, continued in for you. and quarter. you today. thank Thank you We

Operator

this conclude and gentlemen, teleconference. today's Ladies does

at time. a day. this lines you may disconnect your You Thank participation have wonderful for your and

Target Hospitality (TH) 13 Nov 192019 Q3 Earnings call transcript