TH - Earnings call transcript Q4 2019 | Target Hospitality Corp.

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Operator

Greetings and welcome to the Target Hospitality Fourth Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to our host, Mark Schuck, Senior Vice President of Investor Relations. Thank you.

begin. may You

Mark Schuck

results and full everyone, we Target fourth website. full Hospitality's yesterday Investors in Good of section XXXX welcome earnings and our year and quarter year our release be call. quarter found outlining the morning, fourth to can The issued press

In archived our addition, this for website be replay will of a a call on limited time.

language call today's language regarding as forward-looking the XX, contain The of same in conference information, forward-looking press on today, made This contained cautionary applies statements the well statements note statements will only Please time-sensitive which March call. to accurate release. as XXXX. are as

arise Target applicable update conference after or except Hospitality as in law. to events this any call contained expressly obligation amend to the may or today's required disclaims date, by information reflect that circumstances

and For refer please the Target future complete of a list that SEC. may affect filings performance, uncertainties Hospitality's with periodic to risks

financial table measures website GAAP Please a We today's of call. our of will to today's earnings non-GAAP their and call the in section measures. in financial non-GAAP our measures posted reconciliation on discuss Investors on the referenced find to corresponding refer release

Officer, and call open Financial prepared T. be will the Archer, Executive and for will be and Brad we Eric Schrenk, remarks, Leading followed Commercial Officer, the Officer. Troy by Kalamaras, President Chief President today Vice their Executive Chief Chief After by questions. joined call

Executive to Chief over the Officer, Archer. now I'll call our Brad turn

Brad Archer

fourth for results. and XXXX us Thanks full morning, Mark. today to thank Good quarter discuss our and joining everyone, you year

the volatility created price second and monitor pressure in we effects consequently continue a closely any of to markets, put the through potential oil. recent have significant will our markets, have macro started, global the These crude which to we I commodity get that rippled Before business. like acknowledge have take to uncertainties would financial on events and to

and offerings, position taken have communities while at long solidify first to company we cumulative over of of being a hospitality service the network add year our the I to public the want of strong steps term. in unmatched back XXXX XXXX. continue competitive the Target to to in industry-leading accommodations returns to and and turning to advantage look produce provider first Now, operational our as positioning momentum We and specialty U.S. leading services the strategically throughout created first-class Target

premier remained two expanded XX,XXX. to with bed XX% over the integrated successfully strong additions, our U.S. of as a acquisitions the We increased multiple the and We combined average heart Basin, production. in services energy utilized full record turnkey hub for our of communities organic demand of beds dominant Permian

capital this our right growth the a to which our allowed core and customers manner us of being aligning allocation, locations disciplined have in We with in consistently focus has with attractive achieve consistent returns. right the effectuated with

was we more In half the levels impacted growth and of a immune plays, results to expected, been pronounced moderation This the second of half the year-end. move in in reduction of capital XXXX Basin second domestic XXXX, not Permian saw and activity. the toward spending our this has of we as impacting than shale

maintaining generating However, record saw approximately we full and flow. as in our year resiliency these the of growth EBITDA, adjusted all while XXXX business challenges XX%, proved meaningful of while revenue EBITDA model cash strong margins

business. as clear recent as is activity reduced persist the a activity into see to levels we and to global XXXX, customers likely While there stabilize we were increase levels until moved understanding events impacts cause will macro how any even our will to start to beginning address to their

macro uncertainty. have we contracts their to regarding to with not due modifications sit today, here existing important as conversations is to it customers had However, recent our we note that core

rates the workloads. of in customers our growth While our less fourth uncontracted which the about impacted predictable our quarter core these larger activity represent customers as business, XX% well, in revenue reduced have represents performed

on We all. always these into remain realize that focused does one-size as customers but converting a not fit contract,

of will terms to customer footprint offer needs cognizant community customer. degree throughout of varying and We our a marginal varying [capture] are the

Now, touch experienced Target. notably we this activity in second what fourth not reduction on ADR, quarter lower most utilization our The a results. of in industry let experienced me and immune the our to business half were And XXXX. and in as differentiates our results also

from key business. several Target are that However, there other points differentiates

XXXX, cash robust we significant of margin while maintained throughout discretionary XX%, generating First, flow.

of cash potential cycles. we I generation XXXX growth successful expect business of flow. through debt evaluating had is further to significant allows cash business vectors. the meaningful have This while this simultaneously evidenced believe be As said by generate to before, posture positioned us financial the other Target Target We strengthen a our where reduction, through predominantly to we variety discretionary outlook

of one is to of allocation. Second, the business key approach tenants capital our a disciplined strategy

allow and a carefully evaluate maintain certainty discretionary highly investments degree return ensuring we are of all high environments. in expenditures to capital us Our

revenue degree In decisions a underpin in investment capital we high provide addition, years the long-term of visibility which contracts, future. these with

revenue commodity These consistent maintaining on benefiting to far employees, from commitment accommodations less long-term demand paramount investment long-term prices business focusing doing network fluctuations customers their is Third, to high-quality and have to while a well-capitalized this high large that the visibility efficiencies provides. degree in contract correlated for horizons. short-term structure our customers with of our while are

of with us our by customers, seamlessly illustrated utilized first-class customers' network key flexibility, we This needs. to unparalleled beds four renewals which made is earlier executing grow year, this two allows announcements contract with the XXXX expansion Our provides major represented driven the operation was second community, this XX% first year of El customer the by which and of marked our demand. which [went energy Capitan of facility, in] expansion exclusively the revenue and approximately

strategic adjacent a consistent acquisitions the track created including proven This creating profitable opportunities, value-enhancing evaluating We financial other of strong continue potential have growth with value-added ability structurally growth. and foundation a business position record sound and and a provides to markets.

core will Target's on competitive opportunities within hospitality growth years we lean the evaluate of the vectors, competencies created in we As advantage experience industry. have and through potential squarely fall any

we is provider of advantages, to it are accommodations. considering remember a that suite of important simply competitive When bare-bone sleeping not Target

full with to oranges washed is We network added of towels service million meals million in than over fact and are rooms X.X illustrated while million hospitality competencies. approximately X.X the X,XXX nearly nights, provider sheets, core XXXX, of we X.X more lean pounds million we This served many than in X.X of more over that XX bananas. fresh our service linens, a expert XXX,XXX pounds consisting million and protein, provided

rested, we the for their know, customers and fed, next prepared workday. keep Our people well well well

XXXX, for results the while we we momentum able success. reflect on we are headwinds positioned As Target navigating are year with pleased still have continued we late and and sustain to

I'll to to XXXX detail. outlook our in now our Eric more and over call turn quarter year full discuss as well fourth financial as the results,

Eric Kalamaras

execution full I outlook. Thank and discussion recently year, morning, we everyone. will with continued integration to from you, expansions the operational assets and In of new including these conclude network. focused our quarter capital good details begin our on of announced benefit on and into results, our our review builds Brad, remain network, the our and fourth and XXXX and the growing with program, acquisitions,

pipeline as a discretionary quarter by achieved modestly pace to network energy with fourth a and. the headwinds than TransCanada we beds flow. the of results excellent persisted project, expected that generate impacted as the slower end margins available importantly, within were significant still our well continue growing While cash market,

bed EBITDA last XXXX. XX%, same full Adjusted an to in increase period utilized primarily an adjusted adjusted For was XX%. available $XXX additions XX% revenue a approximately of year-over-year of growth acquisition with both from X,XXX the increase new year of was average was communities XX% expansions, total contributed full approximately additions result EBITDA compared to Signor compared and X,XXX XXXX, of the in year EBITDA driven The average new and year beds $XXX margin beds. as and million, over by an which million, growth new with bed

million, This Basin primarily as prior an increase of fourth increase new of average segment of in the community expansions. result by performance. a was quarter The additions well Signor as X% driven delivered beds our to Permian the as revenue quarter. Turning utilized and year versus $XX increase an integration,

over increased $X.XX or X,XXX uncontracted average decreased of the portion acquired beds at primarily Signor ADRs XX% compared by by from communities to business. in the XXXX. ADR lower available Average softness and

have completed to to customers We program Signor and more a pricing focus model continue enhancement Target convert to the on these legacy over time. typical opportunities

last period average which at the Revenue lower drove our In in utilization decline beds improving lower XX%, compared we expected the the to cost utilized activity efficiencies. decrease reflecting the in in in levels, while to creating due average mainly declined significantly utilized Bakken, same by footprint beds ADR, XXXX, right-sized year.

$XX remains segment contractual revenue. revenue consistent slightly for million. with fixed quarter and relatively government utilization provides nature this up of asset Our The stable the very ADR, to

All Other activities. adjusted fee Our This million for of driven was by primarily had gross $X of consist and profit fourth lower of revenue significantly revenue anticipated from margin the the which quarter. TransCanada segment, construction XX% than pre-FID project,

are this outlook. in XXXX, our a approach While have for project we that hopeful we contract in associated taken start revenue XXXX with included not a conservative

to infrastructure public $X well primarily becoming Recurring business the scale transition corporate will growth from year expenses to investments respectively. additional associated and the allow million the The quarter $XX with and a were incremental approximately is with us last for full that costs. as year million increase support as to minimal company,

to flow our capital fourth much recurring needs, full quarter quarter provides generation $XX cash of for cash flow nominal with quarter. a around respectively exceptional to We fourth Since XXXX maintenance of the corporate from and given million ability picture clear remain $X full year. is operations costs $X $XX of of capital approximately generated spending along We the million year million business. our and per our discretionary expect million

capital continue flow to cash on meaningful We the value-creating predominantly structure to other of accretive opportunities, expect initiatives. focused on or a our execute debt generate to stakeholder variety flexibility reduction enhancing through providing

a opportunities, Target's pipeline In which diversifying of strategy. in including core and adjacent competencies strategic growth acquisitions addition, we business have markets, aligned with developed

to to if over growth evaluate does criteria. time, it's it our [paramount] continue return rigorous execute we remember will we not opportunities on these As not opportunities meet

grading community Almost in well all of communities, Superior high of was Capital $XXX capital revenue million and as and including of for expansions legacy $XX as were XXXX for acquisitions investments, million. $XX new Signor ProPetro spending the this enhancing and related to developments launches. million expenditures

long-term $X leverage spending total $XXX with drawn was revolving credit million. facility net million capital the million X.X consolidated We of ended year times. of debt, including and $XX Maintenance our on

due $XXX maturities near-term no within million significant or As consists immediate million notes debt XXXX a covenants, reminder, in which flexibility asset-based of $XXX had capital senior financial facility, long-term providing our and structure. secured our lending

we XXXX, total repurchased shares August Since for share commencing authorization. $XX have repurchase in the share XX% approximately or the approximately of repurchase program million

Turning financial to our full-year XXXX outlook.

Our core committed revenue approximately we have with XX% business expect contracts XXXX long-term renewal have and an Brad is XX% of payment for provisions, XXXX. under have XX% additional resilient mentioned, due material provisions. with as exclusivity no Further, approximately in to contracts

did and in headwinds markets events global have uncertainties exiting accounted energy which not experience our throughout previously near-term markets, announced XXXX, for The recent created were the macro outlook. XXXX

monitor provides cash-generating impact continue business, of uncertainties, a core its to remain these cash, which confident to Target, impact the We potential our effect and macro degree in customers, of on our but high any capability. will contracted

the the of current high level expenditures cash discretionary will allow of us market to generate The navigate events. and as a our flow of discretionary the recent environment capital we effects nature

our to We creation. ensure capital our in continued will moderate allocation growth remain value and capital prudent spending

advantages our also to us but allow not the generation structural of only control [indiscernible] a of The capital cash our for provides model spending. significant and pace business the

long-run Target's continuing Our deploying while allocation for aligns capital disciplined create initiatives, to value approach shareholders. capital our to value into enhancing with objectives of

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

Brad Archer

Eric. Thanks,

has our we acknowledge I concern and the hospitality employees to the coronavirus to our provide the seriously services ongoing take want over or impacted the customers. not close, customers, Before safe to commitment coronavirus. lodges, very healthy We global and

necessary all workforce to lodges. We continue ensure in a take healthy steps monitor the to situation and our

our shareholders sustained half business. In competitive positive this back headwinds created. entered through of the with while in the excellent XXXX an experience have XXXX, the through value our momentum We provided we’re we did illustration proposition able advantages provide we summary, core of to

believe truly remain While capital we the customers, and we allocation aligning cash focused flow, to discretionary right on we Target. continue significant with disciplined which generate differentiates

focus large long-standing committed is relationship capitalized of well Our truly win-win parties. an customers for provides developing mutually relationships that a unmatched both with beneficial

and attractive execute to with strategy, have maintaining while which from our for a financial returns We foundation positioned on Target solid consistent its shareholders.

call again may I Target joining Operator, your open for us questions. Hospitality. and in the you interest everyone today line on up now you appreciate the thank for

Operator

first Our state your Stephen from Instructions] [Operator Please Stifel. you. question. Thank Gengaro comes question with

Stephen Gengaro

Thanks and good morning. The...

Brad Archer

morning. Good

Eric Kalamaras

Good morning.

Stephen Gengaro

the provided, $XXX me about guys guidance – I think, of kind with help that revenue. of to help could of you the When I million you XX% guess, the we of, the of sort definitions midpoint of using of is, so think guidance and but triangulate, maybe terms your sort you're

revenue? be difference taking between unwavering. loaded So, in XX% much that room the locked I'm and and and that to the and XX% is how What's XX% of the wiggle there

Eric Kalamaras

morning. Hi, is Eric. Good Stephen. This

of them. that XX% are there is agreements, referencing the you're provisions are contract have really tied – So, under that to most really customers which exclusivity

determine rooms timing to that are rooms of connected they're that though take. eventually the yet those they to So, network, have necessarily or amount our would while the they

if use but define they're going them in in they differently, an time use said are or many going specifically have they yet rooms, our network, – cases, if amount. So, to to to are they

Brad Archer

just exclusivity. little today. me add XXX these are large Let cases be Brad. using most in in Eric could and the of in folks could That is not to used committing talks on time are XX rooms, the maybe that these be that bit. amount; This rooms about in used it companies; some a

you has down when four happened just wiggle let's we So, to in going the to about if guy room the we five What that see, zero. here, employees all days. – what don't XXX know talk past

us in the Basin. if loses number he movement be use Permian he still But Yes. there his will – he work? to some some if there's is require So in

Okay? room So that's in wiggle kind of the that.

in lodge hotel, ours. XX miles stay to another can't stay XX within of competitor's a You you can't in

So his go there, of all it away just all there is unless some wiggle but he room loses of it business. can't

between contractual that So, but nature a that there depends it us both customer, on really is and group. definitely

Stephen Gengaro

almost So, on almost is level, – say regardless fair whereas it – dependent to it's XX% is XX% levels? activity the that is customer's paid get activity completely that you'll that of

Eric Kalamaras

to can be amount. activity regardless facilities. today, based have It do meant their mentioned, when is usage XX%, can but Brad going is of in they XX% as those be The to designate to just level. have variable customers Yes. really upon The that activity be we that our happens

Stephen Gengaro

Okay. And…

Brad Archer

one. just Yes, and

service this under these some lines your of many business, companies of are oilfield of with Some right, largest exclusivity agreement.

view all a it's go that the take to it's contract just them. are long-term I beneficial of These flexibility. under they're And going some business where that's that So, been gives exclusivity away. mutually on now more not an them relationships, there XX-plus years some

Stephen Gengaro

So, sure part and follow-up I there customers, both the are part are and understand question, just part XX% just – of other one XX%? and that make both of say completely, then I of try the one buckets, let's

Eric Kalamaras

Generally not, no.

Stephen Gengaro

Okay.

When what's give going come up, government the forward? does us status update side, it do And you can the discussions the feel Okay. the etcetera? then, just you a of contract? How on about quick renewal

Brad Archer

this in the but perform point, changes renewal feel this It's business, it always for a catering when sometime discussions predictable we'll in the we pieces, in Look, until late no great say contract. start up and in We come counterparty, there I Yes. It the those XXXX with have call. management, year-after-year. at year facilities next that doesn't on right. XXXX to the and the very into It's is about year early continues just facility. do is to after that so late government

Stephen Gengaro

Great, thank you.

Operator

question. Capital Jeff Markets. Grampp question with state Our your comes Please from Northland next

Jeff Grampp

is just when kind you see it the or to you with cycle this question, Good predicated Just I on the how at more view, term the timeline of the wondering on Maybe is topic playing based of sticking election – that, those morning, guys is kind – are out this upcoming on contract guys. guess, all discussions how related government that with to of last in timing you of up? relation ending the guys

Brad Archer

This a it. only like We much. was the in don't into There President. one it U.S. need. definitely playing see built too democratic a We're the that is under

contract about you more Presidential is not just when race. start about will, the if and it and when more, those negotiations, we So the ends

Jeff Grampp

ADR you the Got your in it. talk have have you you obviously guys tend about talk environment. about on do touch kind could in with terms guys type in Understood. revisiting of super-volatile whether has And for in of any conversations Can guys in contract, contract? you the I oil periods, terms beds past was kind of that's come maybe that terms of customers. When these back hoping pricing just can of number the the if experience gone they process or empirically to in see asking And they of modifications contract. of maybe how or past you of

Brad Archer

Yes.

that just being for the team Let we'll well. the management through us just happened, but, and action to XX of look, OPEC we this It the say, what, me is monitor events, we been before taken first by impact ago early ago. it, days continue fared the have to years determine as too

contracts to long-term to customers of of be right now them. I there's a look, mean, long-term believe have us how with be We how we're figure shrinkage deep those And there discussions. think but – and trying activity, out of will I going some wide, all right.

back they continue go we making we'll to to business, looking at happen, discussions flow. those cash when And how do sure

rate. both that at, discussions There give get we're for we past. continue will kind back with win-win free And will that's trading to contract. in rates customers going flow some that, to it's how maybe on that the triggers to of we them, sides. be and always anything to down have those Absolutely, but setting the We we'll for generate going some with there is cash a again, term in looked do up, it to we continue, know you be got be then, did

Jeff Grampp

guys. it. Got Understood. comments, appreciate I the

Operator

The Credit Kevin your Suisse. comes Please state you. Thank McVeigh with from question next question.

Kevin McVeigh

the you outlook what Great, a ultimately the real then, just at XXXX kind or thanks. of outlook, debt And And exposure? guess, an uptick levels? contract is just Hi. XXXX thinking how utilization on in any there's expense around price about oil on to that then, the are history on? I based bad you debt of not would based of you in thoughts see expect lot bad such past

Eric Kalamaras

Sure. Hi. Hi, Good morning. Kevin.

Kevin McVeigh

Hi, Eric.

Eric Kalamaras

a address expense, which and on comments good a debt Yes. is then the I couple the mean, bad outlook of question.

the So lot ago. from weeks Look, from lot Saturday it clearly world a quite frankly. a two changed changed I mean,

will so, We have mind, past and couple are about update the we to had we the just things do events outlook if it as the over two. or week of outlook, we'll A there and are, like in bear there thoughtfully. think XXXX

haven't are seen and There so to, need our reactions second effects here these to third we order yet. that customers react

We we'll customers. will work monitor those that with our and process

aspects variable healthy have at forward manage keep we we've manage margin, able to here. levels, We been employ as and also see margin types margins some cost can through really which to which cycles surprisingly of think how is that these move historically you'll here we I

in all some take into take we get that [indiscernible] at some point into that the we'll time we'll So, look here. clarity additional and when account

cash generate in meantime, think Target margin our markets. a in cash the recall flow difficult of profile that I the even of profile, of we I lot because just

our base. have of not that, see to back see bad is that. tend customer could of expense. meaningful see we a tend end did because amount nature we We amount the what QX, We of not a to not not which meaningful in seen, Now, of the debt in we did see

going extent monitor said, wouldn't forward, should we see And we'll when I the I have but like to update expect to it. the we market continue we to lot modifications, can. So, a

Kevin McVeigh

terms particularly quick, the reacted in business the about the helpful. the within in the And or a maybe overall? stocks the cash. business near-term any of – the of Stephen, lot thoughts That's obviously near-term then, allocation are on, given just way you context thinking M&A buyback generates uncertainty, real of versus just How capital

Brad Archer

Sure.

back you When capital into were allocation that on So, we and I'll of the was entered we'll supplied felt then fully a some give XXXX, to market to the and and context, really into shifting more we've step Greenfield like it. dovetail we we aspect take that on supply past focus optimizing of a And utilization business [work years. scale more the whole our approach optimization] over the few the from built objective and development focus. of effectively the that was

posture the XXXX. And coming so, was we into that had

did what moving value had what that function forward put we outlook we look, What forth. of a the from today, is in demonstrated fast capital we think was, forward. meaningfully be that down kind And will discounted the we when pulled is we absolutely spending, which as equity realistic of ultimately levels to we

say So a value lot here but maintain to a strength. important even position and I sheet I challenging certainly significant today, of conditions, think in cash we though generated would it's of balance

So, activities specific be and buybacks I capital comment while stock an market can can't option. on

at think focus versus optionality balance I to optimization sheet really the needs be point. this near-term

to So, to put whatever share part approach, capital spot advantage a best do really we'd do able over of commercial think themselves we'll take repurchases in but time to what ourselves evaluate our to that. opportunities be allocation the of like as is present and I just continue

Kevin McVeigh

Understood. Thank you.

Operator

you. Thank

Scott question. question with from Schneeberger comes Our state next Oppenheimer. your Please

Daniel Hultberg

into is with what bit couple some This we next trends? far on quarters into perspective us might on the and XXXX Daniel how the develop a dwell your far Discuss been as in for Could underlying outlook? here and you've help morning. little Permian ADR as utilization we Good on Scott. so what's of seeing

Brad Archer

Sure.

about So, the we think outlook. when

our customers in think really I changed need take, of past the A in like mentioned had are? you the past the we before, has just week. to lot where temperature I take

customer own. have I cases, of our in our of of representing a a in of lot a producers, nature number to a integrated you service customers, mind and very base, so large of, are they number think E&Ps, that many their them the right. so, clients direct bear of And about number customers are we are our think large Most of firms, not

evaluate are I that they And so, third second they well. need there kind order of like to as their about as and before, labor movements mentioned think effects here

And that what chance can response thoughtful and so, and evaluate point give I come a they've then and we've in to looks when survey react think, time, a let that to well. with at a had we chance our like, this as back us you customers had

Daniel Hultberg

Got as and think it. think you. of the it quarterly flow do we Thank cadence That's If cash helpful. now, about how stands cadence to XXXX? about EBITDA you that in recommend us

Brad Archer

So, from I'll activity thoughts week outlook to ramp you nice up even expecting my from QX prior were a really We QX we're seeing back a are to around seeing through of how were and We progression ago. QX develop seeing initially. a the take levels. we see and

would QX. we movement build of and a gradual in QX, see seasonal kind bit so, And through always which to QX, a up of have see QX expected little to we culminating

would So we that's expected. have what

of heading kind natural into seen this and a QX. would path you QX So, of up glide have progression

a And in expectations or to two week we even the trends to than less all and see were glide I path. can the think, weeks and past that seen given week ago. so, certainly past, in move feeling Certainly, are certainly ago that even are our likely less I how think what point we we or positive we've

market just the it's and then go where there I update we to accordingly. see evaluate will to, we'll think to conditions important like, mentioned from and as look So, just I have what before, continue

Daniel Hultberg

your me, Got spread attempt you with as also, area the starting the your to what it. keep test at customers your to from final from And your a outside doing you're with work from to at new virus one are occurring locations? communities

Brad Archer

is questions? Troy. Can that you repeat This

Daniel Hultberg

hi. Yes,

Sorry.

curious test starting attempt the I'm from from to keep coronavirus you communities So, customers are outside on question. it occurring a your your So doing at you to if locations? the virus it's with the area work, what spread is guys new just

Troy Schrenk

Thanks, Daniel. Yes.

situation monitor in and with safety So, advance continue major our for for customer's communication the engaged look, in we've of several actively to environmental with We're very such and weeks closely. customers their been teams active issues. preparation health, the

documents and with weeks worked have in related the CDC the containing that leaned become very and been the flu cold our prevention working very very and really and to have We with very customers. steps viruses on information closely the closely publishing recent we've such guidance familiar from all

said not for thus to his is, to our prepared have on any our coronavirus to we incidents had high-quality prepared employees customers. with And which far, remarks, I has customers a the want the environment and line Brad and reiterate related our maintain fully what is safe

Brad Archer

and yourself I'd in what the normal have is on we a even is do in we things your of we to Daniel, your right. be make hospitality do, to today, or doing that you to business. have into you years Troy take people back a Look, bit simple coughing aware add just the continually this are the little you were cleaning, the reinforce it is when done sleeve have Yes. in it but to for And said. something in growing this the more that it's business. to that should Services Food but and business of It's things – the – have It into the up, you is kind napkin.

daily don't I to involved it and is years big, a like, we're do weekly are our I it's want don't downplay to focused more even it for customers is to now basis. making on sound as at we something sure we've to looked continue it, and and something it's want but have

calls, we X, level level We level have scenarios. have X X,

hasn't it's plan but pandemic to in on continue said, place Troy affected going while, and a forward. for have pushing plan. We a We have little We're continue it all we been. over it and have a but as us this, yet, we'll think

Daniel Hultberg

Thank your time. you much Got very it. for

state question. comes question Sabadra your next Ashish Deutsche Our from Bank. Please with

Ashish Sabadra

[My question].

portion on you truly question could good percentage is do about the of potentially variable, if you down does I was cost? open? a talked boil So, like utilization much to of or how even if what being wondering Do cost fixed variable optionality launches have a versus have versus variable fixed, the just the is So, you the closing cost, truly significantly. keep you talk about it those

Brad Archer

business question. at level. is Yes, goods, is thing Right. our Brad. about of One there variable this your is, of your good Thanks. Good cost cost large a in lot really

If our to drop, you defend those is biggest some do cash things to you labor, and start can see of your quickly flow, utilization right. food very things help

– few So, within literally within a days.

as even to have up this to electricity, see locations you goes that when things flow. it many we water, So, as do add you start if

cash percentage, kind more of talked about go a start a lot XXXX on can to pull what there as will, specifics, we start to I'll is playbook, I to help far the we but if again flows, we in in up, margins of levers you utilization. to to exactly the on that is to variability this this let fund As see had the the but back if keep there's we – talk deteriorate Eric

Eric Kalamaras

Sure.

and short-term probably short operating cost say, So, the you of that run are efficiencies lines, the intermediate numbers, you efficiencies can to well look there there to there variable look costs about When basis, would run I cost you're at cost Brad's more talking we are on are of half then point, can in short at you can When a the are pull. Ashish long-term a take. you take, number kind operating nature. levers more and

occupancy camp call, and actual down labor think can what food fairly, So, up supply themselves. we fairly about the with costs which certain levels move quickly you costs, costs,

through There that lead are as through. tend to time, longer time, cost costs have efficiently that to have manage are And other be but done. those not moderated a they can quite be

on of cost intermediate kind of on XX% weekly variable basis, an roughly the XX% operating you've done a variable. I We're basis. longer a term, initial quarter a and I or would right. is and we're you run the a but or when generally longer – That's they're the delta of that, look bit bucket not, not got talking there three, XX% more the years, cost talking sometimes literally short little that total almost say, is two of terms line, is say, would at there. term on So,

Ashish Sabadra

helpful. lot out your flow a very discretionary. pointed expenses as That's question side. maybe A of similar are the And you on cash

the you For of a ability costs the flow coming can cash also color perspective, provide front? Thanks. you even that cash down, Are can utilization other if that around. any example, on incremental growth scenario sustain there CapEx your flex to free in from

Brad Archer

Sure.

you're So, right.

my about million that bit market ago think you an into positioning is If can the probably out look that regarding comments to of capital about there we of even $XX provided the and that million and XXXX still two-thirds and of we is would and We nature. number, are a discretionary I that quarters maybe thinking we how $XX outlook. that to three supply were say had us at how spending, in coming

Today, spending then of meaning we decent reasonably that amount flow discretionary and we can, obviously a flow bring which back the cash will can into line.

So, further enhancing that, right.

we is have So flexibility nice so a – positive, there. and which do

spending. curtailing already of some And we the are and measures discretionary evaluating actively now that right of begun have

perspective, to take from an you provided. on our now. additional number I of it about we we'll XX% to XX% flow from that right look, wealth So, see there cash to some already outlook that we'll much would have with discretionary and And flexibility work give more how the have but we have, flexibility

Ashish Sabadra

lot. That's very helpful. a Thanks

Operator

state Our Stifel. next question. Stephen comes from Gengaro question with Please your

Stephen Gengaro

Thanks.

mean, the question. this is I but like free draconian case, thinking XX% reasonably for statement. flow that have is it, given we leverage take about – probably to think work figure run missing or free you Just you're your million back the trying of one as pull right, to flow your to is I mean, generate still cash, I'm given XX% we the and how a generate I triangulate, is, something just It income numbers, published the a reasonable. mean, as a know just $XX hard in of I $XX good guidance. revenue way you of to cash but the still I out if I sort of utilization looks you through the, you're basically sort cash to follow-up and where and

If like want not that or something or… you

Brad Archer

Yes.

numbers have on to quoted, more conservative of will appreciate I tell We, I based think you that on feel can't awfully the you you've would those tell you’ve numbers the [indiscernible] this, it look, to certainly I what margin, a maintenance So I the the and question. lot me, environment I but would it's that like There described but but expansion, comment margin is specifically look, have business flexibility. generates ability cash call for not we margin here. exist I does

note. saw look, so, we your And think you're I –

and little color, see some maybe You can give let's more right timing. just but things out on you track, how through bit and the wait we play a are

Stephen Gengaro

Great. Thank you.

Brad Archer

You're welcome.

Operator

we question-and-answer session. have end ladies turn Thank now will over Brad call Archer reached the the for Thank I closing and you. you, remarks. to of gentlemen, the

Brad Archer

you. Thank

end I Target customer. deliver just a the at of like for work to Hospitality hard of employees would the and I we could XXX not call be dedication. they the thank effort more their Before proud our today, day] [years to

Finally, quarter and updating few we have Thanks first just in call. on you a look to forward day. months our good a

Operator

All Thank you. today’s good Have a day. concludes disconnect. can conference. This parties

Target Hospitality (TH) 14 Mar 202019 Q4 Earnings call transcript