- Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to the Target Hospitality Third Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mark Schuck, Senior Vice President of Investor Relations. Please go ahead.

Mark Schuck

you. Thank and Hospitality's everyone, Earnings Quarter to Call. welcome morning, Third Target XXXX Good we outlining of this results press issued The release morning, found the can in our Investors website. section our be quarter third

website well time-sensitive forward-looking on replay disclaims language except only a contain applies This or by call applicable as note November will on events conference time. as this as required In the accurate as today's X, XXXX. this statements, in This for which date, reflect language forward-looking the will addition, are limited regarding of a to circumstances amend cautionary same of made that Target conference any or contained in be to today, call. to call Hospitality law. update information may contained expressly archived statements arise our information statements call the today's release. Please press obligation after

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

Chief to by discuss financial Brad Schrenk, Financial the call and President call turn financial GAAP their today to release Archer, to earnings Leading Troy today's Executive Kalamaras, for our Eric Officer tables on prepared Investors the be in non-GAAP referenced and questions. Chief Officer, Chief the be of Executive will Officer. call After Chief measures joined call. now we by Vice corresponding President the our refer and Officer; over in Archer. Executive reconciliation I'll followed remarks, open non-GAAP will Commercial of a Brad Please our in find the section and website their measures today's posted call will measures. We

James Archer

across debt XXXX, value our and our segments operating to our which while demand. these for quarter while continue their million from HFS through revenue customers of We highlighting during momentum generated strong Target's position, requirements. liquidity. direct of for asset illustrate these long-standing contracts our XXXX, and anticipate existing materially extensions fully utilization represented over quarter Target's increase our $XXX Target's quarter rate will of call our experience million for cumulative over and quarterly since third returns, reduction meaningful maximize achieved HFS network the chose partnership intrinsic strengthen continue dynamic XX% to by increases contracts commitment XX% multiple Thanks, a $XX thank of executed an has strength in over operating HFS assets. infrastructure cumulative critical committed To at customers. of we meet XXXX. we customer XX% contribute that platform provides strategic complete years, contracts to with on unable of been scenarios These priority initiatives to preserving a third contract third flexibility, enhancements, a consecutive creating over the These have network, a revenue. record-setting continued world-class the customer was our during the the segments. facilitate trends evaluated returns. use and activity, increasing on has allocation size solutions materially to and base segment, more to increase a economic record value-enhancing commitment In for years the capitalizing growing joining the Mark. portion utilization. HFS the our the Government large range labor of Target's financial The Good the diversifying supported enhanced our to aimed particularly in completion for desired $XXX enhance these reflection substantially in of the supported of to the deliberately to over July. been Community, with logistical customer We which increase continue our a HFS ideal the quarter simultaneously results recent but and utilized financial rationalizing efficiencies to network, and are the Expanded renewal inquired in X to we positive maximizing announced of morning, us premium have of position from business. operating resulting In flexibility X decade, scale customers the service region. in serving and benefit extensions This to premier This resulting hospitality over multiple everyone, Humanitarian HFS long-term customer cash flow, created project Target's objective Midwest accomplishments operational today. our network decision of you quarter in In we within timely Midwest assets, have million

a had we reallocate significantly assets the We on and higher to return the accomplished Government opportunity have was than now assets previously objective. these ideal outcome that Ultimately, to in segment resulted anticipated. the

medium- revenue commitment ideal we markets critical for shareholders. accomplishments progress value We pleased continue over XXXX now structure. the a was purpose-built to counterparty service. in solidifies while designed reinforces I'll the of States campus. or it objectives, and it to allocation substantial contract aid humanitarian domestic providing are is is the of the missions. Further, this XX% position this customized the establish at long-term mission expand represent exceed call Expanded year achievement Humanitarian platform remain long-term nonprofit ongoing national joint of the that believe agreement to meet of revenue. fixture third while XXXX in our exposure the collective entered humanitarian government Target's commitment community supporting and of with Target's our third Target's track high-grading to and United continuing Eric turn objective Community our on partner. Government to This detail. results, critical an is discuss financial have believe will highly this over with to services capital humanitarian an belief quarter outlook In full to infrastructure our supported completion pursuing on segment over and financial with in XX-year our to end we simultaneously the illustration partnership fuel materially enhancements, connection the and These diversify our The expected focused clear of -- and represented strategic XX% the initiatives and continue to our creation financial quarter to strategic more strengthen accelerating Target's this to

Eric Kalamaras

the year. activity, materially Humanitarian Expanded you, demand earlier strong quarter, continued momentum fundamentals positive we we announced driven this by Brad. Thank predominantly customer the In experienced in third and Community

was adjusted was EBITDA million. $XX and total XXXX revenue $XXX approximately quarter million, Third

Government attributed $XX quarterly the Community The $XXX same the million Our period million in increase was revenue segment announced approximately we produced July. year. Humanitarian Expanded significant to of compared last to in

As revenue a minimum reminder, commitments. Government around Target's annual the segment, including Humanitarian Community, Expanded centered

Community with community variable that aligns revenue changes Additionally, includes the services population. Expanded monthly Humanitarian to

offerings, ability approximately and business, incremental segment quarter increase of demand incurring the in driven Our demand service the premium third in year. were significantly was fundamentals. $XX by same $XX last sustained corporate Target's revenue our HFS costs. delivered to momentum to the expenses for This Recurring quarter minimal while constructive period grow illustrate $XX million million economic supported compared by million customer for

around the the quarter expenditures the to the year. million, remainder million enhancements $XX As million a $XX Humanitarian the substantial quarter related we to anticipate were for of of result $XX per the at model, recurring capital Total business Expanded scalable for corporate with remain infrastructure approximately expenses required Community.

X.Xx. $XXX of balance pace more sheet completion year by the Target XXXX, X anticipates liquidity, ratio moderate the second of with strengthening facility of capital and credit a revolving having the cash expectation million net a we under expect with the year-end community $XXX net debt $XXX continuing With XXXX. million into We of company's borrowings ended additional half with over leverage enhancements of XXXX. the expenditures into the million available of and by X Further, of next quarter

turning and versus chose equipment. we acquiring has most the larger outlook balanced the asset Humanitarian efficient enhanced operating more decision in new a a portion complete Now structure. of This initiatives. and our to To Community capital created Expanded assets way, existing optimization allocation utilize to deliberately significantly financial

returns substantial project resulted In a existing anticipated. addition, in in assets the use of originally than increase

the treatment in for will onetime previously expenses anticipated expenses capitalized decision periods. XXXX. and resulted costs in accounting modified These mobilization this not However, impact subsequent

full discretionary spending $XXX million; financial which As XXXX $XXX between have outlook, million; our updated $XXX between million year and million between and EBITDA consists of $XXX $XXX revenue a $XXX between $XXX capital adjusted result, and cash flow and we million. now million and $XXX million million;

a its carryforwards remaining has consolidated experienced increase income, a XXXX net significant significant net intends utilize loss While associated it revenue offset and to in tax portion cash of obligations. its to operating Target

and has million increased $X flow. between of market Target's X% cash an enhanced payments and tax cash million, XXXX X%. greater revenue anticipates long-term supported rate revenue Target tax in provided such, and between portfolio As cash resulting contract visibility and structure on commitments and $X end minimum effective

the $XXX minimum maximum million. with As $XXX of million $XXX adjusted minimum company of and XXXX result, financial of includes is a a revenue outlook, providing which a million preliminary revenue EBITDA

approximately while minimum $XX of Turning between Target's continue of as variable $XX per revenue of the evaluating pursue with opportunities. possible Target more XXXX range simultaneously strengthen reflects diversifying amount and of Community. million XX% contribute depend initiatives year, will to focused Expanded U.S. our scale approach growth allocated end nominations. the variable market $XXX growth allocation company sheet to government a end balance contribution of portfolio. Humanitarian growth the variable the and These service anticipated acquisitions, million. between and revenue adjacent additional continuing anticipates market maximizing towards allow select as revenue preliminary on of timing revenue, The will $XXX existing XXXX opportunities long-term capital value, million The with on million range acquisitions revenue above associated XXXX revenue shareholder long-term capital. to the service will service to normal should capital levels million include $XX spending well opportunities of expanding enhanced

value-enhancing available continue has into to I through With value-enhancing Target's maximizing repurchase financial million. up a believe to these creation focusing of opportunities will back to over creates program allocation platform XXXX. of evaluate $XXX means. holistic comments. strength the that, ideal Brad the sheet range capital broaden call for potential a to the In set, for to stock plan turn pursuing while and We on Target's company capital This will Board addition balance value initiatives, closing Directors enhanced opportunity all allocation the allow authorized position more

James Archer

Eric. Thanks,

to Our record-setting operational the results maximize value illustrate utilization and achievement has our to strategic which provide our flexibility, third objectives. unmatched supported enhance customers, commitment our quarter asset of

everyone appreciate and call joining us entering focused momentum value continue utilize will for positioned again interest for XXXX shareholders. well accelerating this to initiatives you on thank are your I the creation and on in Hospitality. We today, our pursuing Target

Operator

Instructions]. [Operator

The Scott comes first Schneeberger from Oppenheimer. with question

Scott Schneeberger

get expansion Texas I guess I'll by the Could with you're to that update? an of that start on the theme. mentioned then and in year. the West provide want government track, out It of And completed the couple an just facility. of you release, sounds of the It update press end the was is. on the follow-ups on complete like but how status a contract, that

James Archer

up this pretty speaking quarter. finish your is this to We're in And we're site. answer tying up question, morning. few But track Brad. fourth than on loose quickly a the that, on we're Scott, here ends other substantially Yes, to you with Nice complete. look,

Scott Schneeberger

Good.

things, -- from And is get so off, you you if done may clarity? are in to of a when indication might different a see levels the facility point you're at expansion? couple now you because you in. largely of go a anticipate customer -- can an don't -- that Texas few the where clarity I it the first that government the guess, going But now West you of And what have the forward type utilization yet, with directions

Eric Kalamaras

Thanks Eric. it's morning. for this joining Scott,

dependent August seeing flows upon about regarding that couple the they're is in the So there in and amount and levels to July, and times to of portfolio. the talked we nominate how the as of how in just government really the want a terms allocations across occupancy variability then in, question they largely the variability

So it's to say. always hard

at itself. that out think it's, time, think, give I manifests figure a in little more And to so I us time how point this

new As a facility even everyone. opened is for program Brad the It's mentioned, not yet. fully

forward. going And learning what all we're around like going exactly about that's so look to

the wait think is bear mind I flows things try in we of clarity a couple migration. to and of bit seasonality through and to that while is of get terms a more there little in time though,

mind. in that do bear we so And all

And you government well. And information will accordingly have hopefully, provide with something so we updated the when allocate as we specific, all that. will

James Archer

to color -- maybe that. a everything. look, finish as little Eric's Definitely need well Scott, bit have point, around to there's just we we -- more

utilize well the over our ramp-up facilities will first But when back a United there holding fully. ICF temporary we So was contract over be to you this period year -- States. started taking only first this before X throughout a there they contract, nationwide. there's year kids ago, XX Today, a more facilities

they So the this X purpose-built. that start only United facilities, using the to States purpose-built facilities. And is again, in use where cull and construction get temporary permanent to the only into purpose-built we're start facility the

really here. But for a making there's the everything we've that about. that they're are us period positive and of So ramp-up all moves talked

So...

Scott Schneeberger

Excellent.

I finish But in -- -- Brad take to with it and tying the there you included? being in prior may And how prior kind you into quarter charge, this little more press next the but goes Eric this the you're is HFS the it bit And remarks, this is extended elaboration kind and into not-for-profit contract. partnership said, clearly, but partnership Midwest, facilities release your year prepared your Midwest also, there, guess not from -- the sounds up Eric, your this onetime then elaborate was thought with discuss I'll heard versus more I government a quarter HFS expectations? mobilization Brad, it sounds expense. get fourth believe I versus want versus we'll Midwest like it's here the impacted I just -- with like -- into Could it -- of it partner Sounds over. onetime good. for and further impact what turn it don't on I now could you going a how expectations, your how little But of impact there.

James Archer

Yes.

moved been chipping this utilized North the for underutilized years. in, on had X cost Scott, have units were would We'd that some rebalancing, it project, or not So get a Dakota. we away either we at in we and

to allowed So around. And XXX%. product but ago the we actually rebalance a North few in This we moved months we've project use and made in well. They Dakota, really fell own to swoop. not decision them our some Texas around moved us our not in one itself utilized, portfolio assets only as were

country is, this to out project off company. going a going it. great pay et allowed for think it at we it say, So large our look how assets, to to as holistically us it's We us, for to rebalance of It's really as move revenue get all and term anywhere the in this more the long cetera. are the investors, of

do. rebalancing much pretty it we're now of again, with today, what it. the us So allowed to done That's

Eric Kalamaras

is million about a through, payoff -- in that trade I -- so, shift, in onetime or expense Scott, call mobilization $XX financial would right? capital that close X:X let's every say, that make here's that's if an this related to right, we $XX reduction we look QX. just has impact to of, perspective. that And think your one a which effectively to it mean a at more juxtapose to spend day. then million, instance, against of Look, akin you question expense on this it -- a call from is kind the calculus a is --

QX. that, as of we impacts mentioned, you de when course, minimis so nothing And into about XXXX. think there's into And

impact we kind think to of that. the calibrate the that in And effectively return that, calculus on so was about how just

QX. impact you clarity your of little question a hopefully, terms the in in bit and that gives of So

Scott Schneeberger

you're Okay. exactly I'm share, this is on Dakota? if to I you into And, over will rebalancing? in able North guess, just I the it tied yes, curious, Just happening government be but this -- rebalancing. Brad, assets what I'm down know those turn don't to I moving to curious, Or Texas? but and the in are is going assets

James Archer

Texas And then a government or getting the as Yes, the the are location, to one in right? of from Dakota status, And rooms moved if right? We comes actually moved that at into piece variability some deal. point, paid project, always some you the and several across absolutely. we well the North units all now locations will, warm

to can this get be So paid moved, was said, up it it us buying paid week and project we for looked that. et it product. the again, us And rooms, payment where at for from we and day every set to of on -- simple the as new be saved money this cetera, allowed

Eric Kalamaras

has to was you're because, shift not market there been significant Scott, the underutilized high has the grading were as this a -- really pretty a pretty mix you're where you're important like of you where modification and shift up when mentioned, for on grading taking shift that only is permanent, contract, right? something Brad also period way And ever is now that's allowing, Brad's important -- high but assets time. make that was an was in pretty not grading structural that, it. a that high that But you point, So in customer, exponentially margin on are nothing substantial been worked this that asset a getting

James Archer

as your Yes. right, helps utilization goes well, it in efficiencies And when up.

last Midwest, you If today, flow what through on starting you're just that to it year at look is utilization. see

out operations, a as allowed types great was we get those the think should us in the It things this So that market. as move to pricing, project taking on do. us efficiencies you're into of of rooms government future the help We well.

Scott Schneeberger

share. and these categorization. can And they to sounds Dakota you to Or it if HFS But now they It And Texas. infer, will -- I are you And North remain is from I went occurred? from can down where you share, if government moved was that what a... assets turn just is over. it it to just clarify, like they

James Archer

moved yes, use Dakota installed on the They they North project, and government Texas relocated. were were -- from in today. and they're You're down to

Operator

from question Stephen next The with is Stifel. Gengaro

Stephen Gengaro

things The So -- from pretty the revenue Does a for me. of include the couple contribution EBITDA I guess guidance. variable portion? any first, XXXX straightforward,

Eric Kalamaras

include $XX it does, allocated revenue amount of It there. million does. We've does there. it approximately Yes, small a

through again, we it realizing the XXXX. So to XXXX, given time. felt in try to But of the spot to runway just that can change have at a to appropriate that business, a least was in through million move we fair was we at bit look we the material something market as But with. $XX start guide

Stephen Gengaro

Okay. a about -- get been customer about question, a concentration is this think with the there's think ask level But I'd all And the potential from sure about but then when the think patch, time, the investors there's big business, not away I when commentary and risk I interest big your I'm I we contract. exactly government and now this diversification investors which from oil good. and

and rooms milestones trying can down can be you going But to about in we big partnership reallocating to you is any color -- out think in color should from clearly, figure positive. points the So us add add data any comfortable comfort level, and extension to there what this meaningful that energy here a road? is help of a get I'm your is, sort the side, how and fact,

James Archer

Yes.

looked is XX-year But our provide this the that as and the requested recently I'll partnership. in think proposal bigger on know, providing solidifies past in with We then jump we it discussed this the conjunction by is this for of by of a our lease and But address the but the partnership. to thing haven't kind to recently, Eric a the partnership were U.S. XX-year continue here that -- are at -- I with too, this, me we commitment services calls, partner, here but it's a nonprofit in government. facility. address government care XX-year needed joint here let you I'll let the So

partnership XX-year the that. as something a at playing like look really to It's I out larger. precursor So

facilities. government Construction in I is first. this partnership a already nonprofit the We've to check asking us XX-year on is few been going permanent to of It's said was partner. network. fixture a boxes for as their And this this signed more about a these our got We've XX second there in earlier, finished. turn, remember, down X. our And make to proposal with in year. You've

So getting pace slow, the point. about deal some we long-term this we moving a feel at really like little months at actually We're into good do They point. only this contract. a it's done X move but

that forward term. So good long feel about very moving

Stephen Gengaro

No, color. great that's Great.

little when pieces, debt of CapEx or like mean EBITDA moving there's any debt us levels had flow? parameters we right? think you're don't next think getting your from think to The mean, capital, -- your flow year cash guide other cash of I we -- as I between think, But it How next sort not consistently year, about about least working do free and net pretty I bit. question is provide free is at a 'XX I down, baseline maybe a can EBITDA you feels lot lowering we about levels.

Eric Kalamaras

No, would pretty Stephen, you of actually are expect moving you're right, conversion pieces a to be and cash not that substantial. lot there

there amortization, talk in and need it which the we Certainly the this I talked X to. to million extent think happy is is I you know to that $XXX to release. thing before. we offline the It's about think the remember, about

that cash will to operating obviously, So flow. be an adjustment the

that capital status normal for taking quo. everything think pretty then and much adjusted once you consideration, else I have into is working

And with into so of a and and amount XXXX cash into beyond. up to XXXX your generation point, certainly you significant end

the once adjusted at to probably terms going allocation. so obviously as is you're you seeing begs model, you've host other what that, you're what capital And for questions of that a But in of get. look

Stephen Gengaro

Permian reallocate available one, then quarter. rooms rooms and over. rooms give the of tighten just -- the you it thought in in oil I'll the power? and you think I patch does final the then When And capacity to this pass and And South of think was and underlying utilization like the your pricing one XX% government, I HFS you about when move any Permian in the

James Archer

in It does. right? bit some And earlier, builds efficiencies. I mentioned It this a little

we're your look equipment up, gives also and in areas, more you up away We're to business Look, is it. as bring we a some As some not the there. utilization grow and us continuing It's goes running opportunity an power should that great from well. great HFS. pricing a definitely some It get out margin, It's it efficient great there great a have business. contracts. to produces

So we'll continue to But problem. look at some that things there as the to business pricing on continue to well. grow yes,

Operator

The question with next Greg Securities. from Northland Instructions]. [Operator comes Gibas

Gregory Gibas

to the work about I is think level -- Just kind with more? on does a it the maybe of competition on I'm of your to just wanted follow up Congrats from XX-year -- kind Or it it that that. risks? we partnership. encouraging removing significance should that. of significance high-level partner more government of high maybe

James Archer

product. produce a great Yes. we both I that solidarity, it service, look, government knows great shows a High right, think The level, that.

shows is be We've we our We're -- something And nonprofit going think the said will, a We them have have take only we They've that we than up. opening we were doing government. the of, going if for for their this knew do. checking time, long-term the were step. proven showing long-term now This We proposal it to just And But think we've that's asked not proven performance significant It's something. work a is alignment. we in partnership this plans. look, they working solution very does is again, submitted. in the to Pecos. in in terms partner right. more their XX-year next just our in always relationship. Remember, think to boxes you just

work able to this their partnership what other to with them in as but willingness to not it with it's work us. does well, So be locations show covers,

more specifically, to it's us has for think go. further a outcome big So to that, continue we'll but and we

Eric Kalamaras

Yes.

-- think Greg, I is this Eric.

now is other is the it from drafted provided, but necessarily partner exclusivity too think applications, is nonprofit with so there pointed framework over are time, explicitly, perspective, not a And that Brad opportunities cover business that there is, something and a contractually whereby as that's doesn't other this this I necessarily in development right? out, agreement. other our thing to

I do that, that a However, together. commercial and parties other right, go opportunities is among absolutely just and explore there commitment out would say to to

certainly also just from So important this it's is but important a from arrangement a perspective. contract perspective, a commercial -- it's

Gregory Gibas

do lot I makes is there million Yes, expected know a maybe the already that I sense range? make or over wide of have variable you from revenue EBITDA up, the to I kind kind better know -- if expectations. could regarding -- pretty of it talk how into you range. sense. to -- I $XX of anything the bit little outlook, like or said follow revenue end you And does year's that. From or of Great. But range think component just the an standpoint maybe within you wide visibility a on investor assume can low spoke of something the next midpoint

Eric Kalamaras

obvious that saying to XX put we the get So least to months, at felt that, some at least some still of albeit directionality, goalposts be ultimately I we out on right? to a kind through revenue and a by put appreciate could it's have to frame, question. a designed great give an there Look, months provide we Sure. out The was to it sense things that as of time company. that couple points. of question. It's the that guideposts The -- range is -- to where important question. is look, XX

thought at time. know don't certainly that be exactly As higher the to just EBITDA provide level, something was in portion, point what materially than realizing also this it appropriate that. it we But could at albeit a minimum will we be

think we modify it It's too I all, look, And do to look, to presuppose may all what can or we were government to I be just over accordingly. the tell. if we so think provided. time. want I to may sensitive would time forward, as not But early not And shifts towards be I you and what

conservative a team we And say so management and I deliver. operate with think going we're to this deliver what we

time. you so how that's I in at would position this point And

Gregory Gibas

up completely last, the result Great. factors guidance. there Is is Very just well? that year, follow a helpful. wanted guess -- I expense? this I of are mobilization Or in updated other EBITDA reduction to as on the the

Eric Kalamaras

big it. lion's really was -- the I There's of piece. mean, the that It's share

Gregory Gibas

Have guess, Okay. the, quantified you expense there? I

Eric Kalamaras

Sure.

$XX said we've perspective. net but an we We haven't, million I will. certainly -- about from $XX said that or EBITDA so to So is impact, million

Operator

back over like This would to concludes to closing session. I remarks. our turn the Brad conference any for in-and-answer Archer

James Archer

you. Thank

how to Before proud alone, powder we generation, ever accomplishments of want cash people and express liquidity. this before $XXX achieved and sit we records our XXXX I team, past than and In with with dry have set more am more I our close, than revenues, many EBITDA million we've for year. the of today,

than the EBITDA We increasing adjusted from including are $XXX record-setting the results, outlook. XXXX proud more which business, by million our of of have original doubled size the

diversify into can't about Hospitality we and as continue excited deliver the XXXX. business said of Lastly, Target more that future we our promise. on have, we would I to and head we we be will

and I Operator, Hospitality for today. today, joining the that brighter. call our XXXX. the created, the no there's accomplished While proud I of more call first extremely for we to Target on forward make have are strong doubt to is in concludes But future what speaking have with the of to even no us Thanks momentum quarter again mistake, we've date, do. we look

Operator

conference presentation. now attending concluded. today's Thank has The for you

You disconnect. may now

Target Hospitality (TH) 9 Nov 222022 Q3 Earnings call transcript