Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Target Hospitality First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [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 first Target XXXX Good we outlining of this results press issued The release morning found the can in our Investors website. section our be quarter first

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

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

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

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

Brad by Leading After Vice will and today for be Officer; call remarks questions. we’ll followed prepared President their the and Executive Chief Eric call Chief Executive Kalamaras, Officer. T. Archer, President Financial open the

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

Brad Archer

us today. on Thanks, Mark. call Good and morning the everyone, joining for you thank

Our positive strategic has supported many sustained strong momentum which first year, performance past over quarter reflects the the have business achievements. we

United committed of diversified contracts revenue revenue from derived over States meaningfully with and XX% business the have government. We backed by the now mix

cash net with over of flow and balance yield leverage enhanced last contracts million cash approximately XX% improvement revenue graded representing flow to an discretionary accomplishments visibility, have debt cash $XXX solidified supporting over Target’s XXXX, since that in an over and the past of revenue sheet XX% time. year. discretionary months, These XX These reduction Target’s the impressive have provided cumulative million ratio flow over $XXX over of high

transformed significantly positioning quickly the to while continuing growth our customers have to We platform respond existing Target’s to in opportunities. world-class operating strategic simultaneously business serve

segment, solutions premium our remained on world-class providing our customers, to focused HFS-South a whom hospitality customers have for service many full have we of In decade. over been

demand, As over XX%, continues year-over-year over a in from result, consistent Target a benefit with quarterly resulting enjoyed have XX% customer in seven consecutive we increases utilization in renewal to for customer years. increase rates which

continued our in acquisition This to outlooks the with allocation assets appropriate requirements. positive customer’s an growing quarter strong of the demand and labor select supported first community align customer network capacity existing

assets our of expand the addition, these premier opportunities and provides enhances strategic In to customer regional presence location base. further Target’s

customer meet strong We year. demand with ability utilization benefiting HFS fully our the created are pleased network to optimized and our more its the we past have while from current over

community individuals urgent additional Regarding our our to purpose-built anticipated U.S. first in which was government the in XXXX. critical impending capacity, for state substantial humanitarian continue result U.S. to humanitarian Further, established portfolio mission a to the XX, serve exceeding they segment, partners our that has of removal its continued increase has Title housing the with the particularly of U.S. need while expectation designed government since were aid assets to of the support Government in of our the crossing

Southwest border.

to exercise ensure demand being to access as solutions, uninterrupted contract a the for housing existing preparation This bridge it long-term option. the allow month for intends and specification six has finalized. service U.S. the of seamless this contract expanded humanitarian humanitarian decision Target’s humanitarian community will expanded continuity offering meaningful the prior and existing at increase government serve indicated to to In in including community,

to the our related was partner non-profit [ph]. humanitarian As in our Pecos community previously discussed, extension quantity indefinite of contract awarded indefinite delivery,

As vehicle with a U.S. the by an term five-year additional government of the base option contracting this establishes awards. award multi-year reminder, required contract consists a to five-year consisting appropriately fund

humanitarian of is through to definitive the the discussions non-profit and longevity likely steps final We was prior year. U.S. award solidifying non-profit process, to one remain mission ongoing working working months contract the to pleased of support. in purpose-built IDIQ through the over the with this to award in The of we anticipate community government’s government with additional and forward agreements. the the highly the this coming our partner We specifications partner, contract look and culmination with fall critical our it

objectives and continuing strategic shareholders. our position creation our achieved accelerate for value financial while Target’s have simultaneously we diversifying summary, to to materially strengthen base In customer our

to I’ll the and Eric XXXX to discuss call outlook turn detail. first results, financial in over capital more our allocation quarter initiatives now

Eric T. Kalamaras

Brad. which customer activity, In solidified experienced you, we quarter, and first in Thank further demand strong strong fundamentals positive the continued financial position. momentum our

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

million quarterly $XXX to the Our increase same approximately A last the to compared in humanitarian produced segment expanded million of community. Government attributable period revenue significant year. $XX was

Government commitments. the humanitarian annual community Target’s expanded around segment, reminder, a As centers including minimum revenue

humanitarian the services monthly aligns revenue changes expanded includes that with population. to variable Additionally, community community

time, flow This structure revenue commitments Target. revenue ideal significant visibility create for as cash their for while and our occupancy providing flexibility meaningful contract requirements customers that over provides fluctuate minimum

sustainable the operational is for parties optimal for basis found while all We flexibility. a creating structure longevity the contract have maximizing outcome

was anticipate same compared HFS Our last around $X million quarter for remain $XX million million Target’s million This $XX year. delivered per million, momentum quarter will to the the $X the for the offerings. remainder of $XX of increase recurring first Recurring and period year. service customer in corporate expenses demand and by segment we approximately sustained for to revenue expenses driven corporate quarter premium were

quarter increasing demand. asset spending majority the match to on for Total focused to select related capital appropriately HFS-South approximately growing but the million, acquisition $XX capacity was customer

excluding year, acquisitions. remainder a the We capital spending expect more potential of pace of moderate the through

with the company’s cash under ended $XXX of with $XXX We quarter million liquidity credit revolving borrowings leverage ratio million that times. $XX and in of the million facility zero X.X and of over

million redeemed the free secured as return. March $XXX As which we previously cash risk senior XX, view of we high we a announced partially X.X% on notes,

as As financial relates strengthening range quickly financial we further senior to while initiatives approach rise. a maximizing balancing enhancing the to to opportunities. management position opportunities is value our continue to focused pipeline evaluate us strategic on possible of notes, This react centered growth outstanding the on growth liability flexibility, they enabling expanding of

outlook revenue to awards. flow. contract by provided visibility to commitments to initiatives. this and award greater partner establishing portfolio non-profit market enhanced IDIQ solidifies and Turning has government’s fund long-term the mechanism capital revenue the structure cash sustainability to decision our financial increase issue minimum and Target’s necessary and allocation supported end contract our specific believe of contract the an to multi-year We purpose-built facility on

option of the lifting increase Further, a this government the community the following demand month of exercise in significant importance Title government’s six as prepares for desire contract’s supports the the XX. existing to for housing humanitarian

with continue non-profit hospitality solutions related partner work contracts We closely this specifics finalized additional and to to later year. anticipate our to be Target’s critical

will solutions, these the strategic for urgent humanitarian government’s and asset, we allow react solutions. response for of believe to Target housing government’s support humanitarian additional need the in recently a to quickly we demand Further, humanitarian stated acquired compelling which in

XXXX the project revenue the years, with revenue seen outlook, preliminary has strongest pipeline million. in company minimum adjusted the Coupled several reiterating company of ongoing million, which $XXX EBITDA of million, our have that its includes business is maximum $XXX of created financial development efforts $XXX minimum the

and $XX approach capital spending normal should acquisitions organic million on focused predominantly between more Excluding $XX capital. levels per year, XXXX, million growth

reflects the revenue expanded second revenue revenue contribution of associated The along possible variable weighted catalyst. service other potential XXXX range humanitarian with community, preliminary the of with half

a expanding of opportunities Target projects growth are leverage transition humanitarian opportunities various support Target’s U.S. other it U.S. government pursuing with the number of across agencies to projects solutions contracting Target’s for is vehicles strategic national operating As designed defense, and These pipeline relates will government. for an that expertise energy and that jointly to initiatives, partnerships. create

opportunities growth years. the prepared these over million previously over stated, is several net next As Target in to allocate high to capital return $XXX

tangible We updates as look forward the opportunities are in progress additional scale the for projects. projects large the progress. we with these partnerships pleased of regarding quarters of have fully discussions providing to We milestones many these coming achieved of and some

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

Brad Archer

Eric. Thanks,

our sustain and to Our our ability continue momentum quarter reflect objectives. results strong strategic achieving first

expectations. managed several prudently the Over flexibility. our the past accomplished and years, we financial exponentially our These balance have enhanced exceeded have our significantly grown business, sheet,

created the while about we to excited on our pursuing are operating accelerate for have growth expanding value opportunities pipeline are and of an platform creation We continuing shareholders. focused

in again Target on the call us and joining your everyone appreciate for interest hospitality. thank I you today,

Operator

ahead. question Oppenheimer. [Operator from comes from first go Scott Please Schneeberger Instructions] The

Unidentified Analyst

statement, the on related Could Daniel Thanks guys, questions you X the on It’s update May morning. elaborate please good Hey, Scott. the our please? taking on for work here. for to

Brad Archer

what morning, in we’re Daniel, submit the we’re it’s what’s providing, government sets work It is to this what into it’s talk it’s a performance statement, to see we before partner. performance reading what there Good order, describing to aligned statement. so be that And material happy task going requirements the out order. it very is, out already the will Sure. our task that. to comes What this Look, Brad. about but we work

this task out. here at come look few point So next some months, over the order will

then will be and We will an submit that to made. award

step next we’ve been there, the on long So and this just waiting get out that a that agreement. is term really to get

Unidentified Analyst

it. Thank you. Got

been Title status And facility? of removing XX the the has with any good. Pecos removal warm about Sounds conversations

Brad Archer

we’re some asking than moving given There’s quickly they’re away back on up PCC, them we’ve Furthermore, just anticipation I that, in to in of been then asking board, be status. us we the filled. specifically amount the there’s calls could Title having Title us, just been across of weeks for conversations on going so and XX XX lots the for has those on in and to do need conversations Yes, the about yet PCC, over talks this different agencies beds them. other them. going can into be how or of the calls question staggering. coming to past we with There’s hot what probably been about with that been know ramp few Nothing

the on agencies active well different going board PCC. for through So the conversations as across as

Unidentified Analyst

related an quarter made the the strategic you implications that? a about may to financial get it, Got please when that can you. the And segment, the help we thank elaborate us you and on little Government bit purchase and update asset think in on regarding

second And the the the in part question is CapEx segment. in million quarter the spend of $XX of the HFS-South

could going about, well. should If help we please as how us view forward that think you

Eric T. Kalamaras

morning. Good Eric. It’s Sure.

we the And use So regarding sites that’s to being any same was part additional and for government. need been and and try desire they’re we was keep that, there asset offer permanent has immediate to stated influx similar other theme. priorly that additional to on consistent the extension the do Government a capacity a sort hearing space been as, chose What that capacity of strategic asset, government solution more a I opportunities. evaluate really by portfolio. influx Because of well for think that of acquire influx the we know as an something are trying to asset,

to I them give et of opportunities, options, want lots lots cetera. of different different So, geographic

So that. that was of purpose the

this performance what right? part of IDIQ at we effectively well that be look, that to point But have the So addition in and today. can in very time, statement, work the

could of to certainly saying the it one reasons wanted I’m was that. we but That acquire So, not will be. that the strategically be why case,

So flow we we at contribution, future, some point report have although, cash what relates can I yet, would the to here specifically say. to can hopeful we’re is, say in near a that – we that nothing that something it as on

Specifically our some in to net we Permian your bit capacity. talked we question had transaction, felt were we becoming regarding time that a the little like for short

at asset So we and go we’ve have so, the opportunity looking ahead while. Permian the take with we and share to expand a for been to that Basin increase an in market that did the wanted and

additional to comes And like can addition so It to defend that see, as not you that the nice an feel and market It’s share. was a it’s cash transaction one breadth, to a flow. one, continues current and large super additional important we that portfolio. give customers but us

that. tuck-ins and wouldn’t wouldn’t for your asset with But it’s from opportunity do and we in us have expense some and the we’ll I modifications a a think I such modeling look, and that still as size see to continue it’s fit create much we I growth we in nice future. those are integrating terms because in EBITDA, ascribe from So, of that it perspective,

Brad Archer

Yep.

one more agencies add is the this, evolved out in continue just thing other to Eric government. what’s me about, a ICFs, kind of talks to we when on CPP to the was Let from of did of expand strategic conversations acquisition. multiple facility it lot first the others with this

a So, multiple on lay we us this, acquire agencies discussions different about and different increased agencies. of Lots we Title design, once you we out being front with do this XX facility away. in going go throughout this of up had out awareness

talk ICF, ends up we something wouldn’t surprised point. else I while be at that this maybe this So even

quickly, So, it times to to and Eric’s large how types of this. but have you’d ready to to the to be need like these projects that’s be government, point, respond to in us especially ready for help set able on

So we that. this do will help think us

Unidentified Analyst

Got it. much. Thank you so

Operator

from from Please Northland Greg go ahead. comes question The next Securities. Gibas

Greg Gibas

quarter, Thanks results as a side kind full I Eric. questions. to do ask if of you breakout wondering $XX think was year? the Wanted assumption. I maybe guess humanitarian guess for I baseline the in QX. million fixed for just previously Brad it revenue and on changed and the Good Great. expectations in to the on variable taking between with anything’s the variable revenue – strong the Congrats and your just your, morning, respect

trying whether a sense changed. Just anything’s to get of

Eric T. Kalamaras

Yes, sure.

a So, refrain that we we variable at quarter. want specific consider levels Certainly to But minimum what for from look, that I to to not we was giving the right? we on would It numbers Greg. what always, large would is at would that. higher, on there be the like see component

a, the important we We expected right? think kind that, seasonal was I slowdown, that that, is is actually very of this point in the got much line.

move it’s that, held have with are how that status so for think, the the as to now think to quickly the that and being wait I border at question hot is, what we into XX, we many, thing to I then Title extent. people

we variable and to fall time not it know the surge into of months and to So early the the reason, because allocated approximately because change for of year, because $XX period, the during as be. million what of see relates summer we of just our that, and revenue anything the to through we’ve that’s extent that And revenue that we don’t chosen going outlook. warm

expecting quarter roughly only to be and Now anyway. of somewhere we I the frankly, neighborhood We it, revenue of call just the in early. think a first variable too were the contribution XX% half first in it’s the

a And the so through little – we’ve eaten upside lot we’ve left my point very of still is, into that year. and there’s opportunities

Brad Archer

The thought business changed. hasn’t on the

Eric T. Kalamaras

to are, the one Hasn’t at partner influx changed and contract, was, look minimum the the the revenue of join capacity. request right? those And when the the that facility of definition in No. set we up this our bit. when and component, with And for government And this, the the look for nonprofit was that’s keep between waiting happens. surge concept ready

that. for and it meaningful. hits, when can be and ready that are we waiting so And comes And revenue

a perhaps now, at bit Would’ve weighted? not more all. timing back a little but expected by more that maybe for alarmed shifted reason, by has little frankly that to So the half

Greg Gibas

I back helps was Great. component how ask to Really appreciate kind I small it. the the of I on status realize lot that that compared thinking discussions but a of hot kind getting variable yes think already there. you’re in warm, color, kind going – fix. about is do And, from compete a in addressed to to of that you

we of multi see mentioned before contract discuss we extension the maybe steps contract, need remaining guess what steps, get are Could forward completion. the you before finalizing to towards final step another that that finalized? being one I the Regarding, multi-year you

Brad Archer

actually on Yes, order. the the government PWFS goes task performance our in will to The work to initial right? [ph] it from look putting order, statement numbers an task this issue

We quarter. of then the latter that, we for bid part will would and will third our put award if our in the RFQ an you towards think, what

Eric T. Kalamaras

Yes.

– to that comments defining, which what take statement, and think addition when which, I think any. Brad’s and right? that is weren’t the of further in Greg is this important work would is you we, a performance scope To one modifications, the to back any about step thing and I add you there

that’s And helps nicely process that fairly… right? speed allows along There’s that fit, an – nothing today, that that – be facility there think with that, dovetails think important so I as it, incremental there’s Because we it I I point, today. needs the really needs to see this which that done

Brad Archer

status, hot of warm same the designed number that it’s is the Yes backwards…

Eric T. Kalamaras

three okay, part process. look say, it does I it’s is So because the down it function so does to to through at – road? of months, continue why as think, really you look, of I the a influx their need to to logically earlier, the mentioned well the months it, order working task few getting, want why of wants more And be, sites. part government reason And

not, those not And it’s thing. so expanding a sites bad is

Brad Archer

come could more these, back not They one. just of one

Eric T. Kalamaras

just that’s I point the influx think about this PCC; that’s is overall And the important, demand. decision Yes. the about site

And Okay. PCC. and above over

there’s so there’s say, or back come three. than Brad’s not going our just well asset one, today. more go, And specific it’s it’s point, more And two it they and very to on to

Greg Gibas

of lot don’t being lot Got from the strategic relating of comments of a seems just just on But used? And term, timing to kind there that said, when trying of see about, recent are year, financials we’re facility I government what of up guessing use expect and sense there. of to think you it. how your would demand that asset terms expecting you about to short capacity be something follow the with kind If beginning you given that contributions to government to in now That’s you’re right not in could too discussions that? this that acquisition make if that, near in helpful. terms to anything, still to a of think hearing being

Brad Archer

I this touch Yes, earlier. on conversations. Yes, mentioned just I’ll

We it. this a And right around May Title XX that in agencies, facility. level kind are with leave having with up interest different I’ll of corner there is kind so XXth, going interest on the away. multiple in high is picked even Lots more of discussions activity just of where in

becomes the this accretive estate while goal, we some in at some the anything real us have actually acquisition. don’t at right? point, hope not to is It So That’s point. is just the numbers, a

Eric T. Kalamaras

say, And my don’t misspoke may wasn’t anything expect you that if I and not. this Yes. may Greg, I year or said, would necessarily intention,

I think ready the anything the I’m that so and – now, saying right? doesn’t happen. is, point something asset point, have it is we, But look, mean to Brad’s we mean can’t put doesn’t what available, I’m

we work of as process, that happen asset through mean with can’t that performance process. something As of this work part doesn’t it

Greg Gibas

Okay, the perfect. for color Thanks clarifying and guys. appreciate

Operator

go [Operator from ahead. Scheibelhoffer comes Instructions] question from The next Please Stifel. Alec

Alec Scheibelhoffer

morning taking everyone. good Thanks question. Hi, for my

the just in that’s earnings, we’ve for over you about quarters? few line current to So the based on and Permian can the is flat from activity say you with demand activity your and it just a likely view Permian levels pressure get balance in been in the for pump [indiscernible] at expectations XXXX. Would start of here, that hearing, is about and talk appears next

Eric T. Kalamaras

Sure.

I start as level. then we’ve said, gross goes. probably some and do I we we profit growth steady it’s that as think have, pretty Well, say would that we good from as probably off to the for past few seen So, quarters, perspective, she came look a

mentioned, an down from some, did as I This we slight did continue increasing to continues see have impact that margin a bit asset very to purchase, some think improvement to little and articulate. that expenses have I the cost. integration past bring an we quarter, so probably, some

I business fantastic It amount But beyond look cash continues for of business. that to is significant that, think generate a a us.

mid fairly look, continue as capital there to as their too consolidation, there’s single low marketplace other the as continue, growth are they digit maintain and well. integrated companies spending. additional As expecting, They producers to

really but with follow that, So, fine works just think I us. well for really, business. if – think along that out tends It for to I actually that’s

that same here. while and to side we’re do in capital the continue of type on at think the we many right now both environment prefer time I an ways, that, as well can we allocate government really

anything So Brad, say you else? what’d

Brad Archer

be that operated there, I great not out think, as a giving It’s for just and and area stick excited that you hot well, on that business it’ll I like, we’re growth a consistent. to keeps a long It’s something be we’ve I’m say, think always. but it’s it’s customer as It’s time. be great and to as in base. something what going

But It I we rates costs won’t mentioned time To up takes was drive up. to one there come those you a onetime to while rates these subsides. as the it point, have Eric’s inflation over will long-term as contracts that be think the continue hit. ongoing. some

definitely there. that profits at downplayed continues this a tick think on So up to overall I decent But the rate.

Eric T. Kalamaras

would that, on I expand to efforts, – in haven’t commercial about that touched they’re The we one we’ve hold. take is, some really to HFS we thing before And areas, really starting talked our say the diversification continue to morning right? look of other that’s do this business and call though

to so in we’ve be that’s growth And so it not there. at some we’re my that we’re all as pretty drivers are things that are that expect that is, a looking point other in lost there But very HFS-South however, and XXX% business, steady, nice it far in is that, in saying growth and is true.

continue to So in the do hopefully But more a to come time. to there’s HFS lot those over segment. on

Brad Archer

Yes.

the look few Let’s much some profitable more the when past when you the government, HFS of we at a years. totally different, we time company fact up the than it right? on at rooms, get lost of, more was added whole took So

the like in point this at. at where the direction we it’s mix So

Alec Scheibelhoffer

color. I’ll back. excellent for Thank that. And you That’s it turn

Operator

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

Brad Archer

August. call our again us on joining again Thanks and in for to Thank we you. today, speaking look forward

Target Hospitality (TH) 9 May 232023 Q1 Earnings call transcript