TH - Earnings call transcript Q1 2024 | Target Hospitality Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the Target Hospitality First Quarter 2024 Earnings Call Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 8, 2024. I would now like to turn the conference over to Mr. Mark Schuck. Please go ahead.

Mark Schuck

Thank you. welcome Hospitality's and Earnings Quarter everyone, Call. morning, to 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 the 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

respect At proposal. collectively, the outside XX, Capital,, committee Finally, Target and outstanding Directors have special proposal. Target the on Committee review Holdings, announced this this own. and Board commenced March evaluate of to already committee proposal. and or decision made a retained The affiliates TDR it Hospitality no Special established of of own Arrow directors special they of hospitality, of as of the time, evaluation affiliate with common proposed previously an all has financial independent to acquire of has has to XXXX, shares their stock do legal not advisers, The independent their

be today's process to result, comment the a will management call. proposal the during or As on unable evaluation

Chief by Officer Vlacich, the be Chief Chief Executive call followed and and Brad open Accounting their the we prepared will President remarks, Officer. for Officer; Jason will Leading questions. today After Financial Archer, call

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

James Archer

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

the solutions Our network customers. while world-class our operating allow benefits and The of performance efficient efficiencies us impressive support of simultaneously scale first maximize continues to which to providing customer operational structure through our sheet, seamless flexible have balance cycles. quarter capabilities, margins changes significantly reflects to alignment operating our and preserve our position with operating in durable highly financial us allowing a These and demand, attributes model. strong strengthened enhanced materially to our flexibility supporting

care unaccompanied to a U.S. network. and presence children ] the in these partners which This government's inception elements portfolio. of the ICF currently of have the mills creation other [ with established its the the Target's supported PCC longest year States. in community United In million segment, served this influx XXXX, Since approximately operations its our supports the X the government's influx facility to has facility government community, to is fourth pursue longevity cornerstone not the care government of operating continued in jointly site, has and third strategic engagement entered

with engaged this opportunity. and continued pleased We remain actively are dialogue regarding

As site ICF half anticipate third back regarding of we previously the XXXX. details have we additional in the stated,

evolved of X its XXth exemplifying renewals different In operations, to that Texas through U.S. its is success government. administrations, Family addition, contract Residential a our humanitarian federal Center solution testament This across for the multiple community. South as entering operational a importance year the has critical of community

the solutions world-class customers strong premium find which from of customer benefit to flexibility continue demand, we the value illustrates supported and the momentum we segment, positive network has year. hospitality This HFS over in past our Regarding demand provide. our

enhanced evaluate to taken steps opportunities optimization. network we'll to segment, this contribution continue efficiencies through across have and margin operational enhance deliberate to We optimize

impressive continue our evaluating elements utilize to We long-term ability adjacent to growth continue supported consistently service These focus opportunity and operating to conversion, with significant the to and industry-leading strong Target's multiple materially initiatives. of which scale establishing cash ideal will results. these balance income complement financial establishes network liquidity. strengthened a support sheet opportunities of the align This while position a Our offer, changes position has customer with to has our expand pipeline growth existing believe naturally set. demand financial avenues seamlessly our established in robust

remain In agencies multiple are variety solutions with along pertaining federal increased the of to addition activity we to the they engaged to third on seeking ICF, U.S. a implement

of to continue robust we pipeline initiatives. pursue a Further, growth border. Southern nongovernment actively

in have industrial large As U.S., energy throughout and the technology include we domestic previously increase transition rare-earth the discussed, projects these development. including infrastructure, opportunities

tend As sales have growth longer opportunities these cycles. a reminder, to

While to we are are progress the with discussions, dialogue and outcomes be timing difficult predict. active and final can pleased the of uncertain and

evaluate we defined growth remain As these to initiatives, our we strategy. committed objectives of achieving

diversifying and focused strong believe focused is and we repeatable growth we our on income and foundation on contract this, execute identify essential broadening consistently cash while objective accomplishing which portfolio, is By in operating conversion. growth opportunities, establish industry-leading a pipeline. to long-term customer base primary our generating will Our remaining

balance customers, a enhanced sheet we our efficient strong ability offering financial an our delivering premier structure. results simultaneously support and position attractive These while provide service of to to summary, In established centered have growth on opportunities. and the elements pursuing an financial strength operating our

more our now I'll to financial discuss the in quarter Jason call detail. results turn first to over

Jason Vlacich

by in enhanced results Brad. offering. support our service the you, strong operating the us our core to quarter, efficiencies Thank platform continued operational across first our financial allowing network, strength produce In driven to

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

the enhancement of $XX significant revenue period which decrease noncash, was in at approximately XXXX. million. The fully PCC in community November that nonrecurring Government Our prior quarterly XXXX, driven expansion as produced the from revenue was the by with segment revenue amortized associated our occurred infrastructure of

$XX increase driven year. sustained by premier compared solutions. of quarterly customer segments in Target's hospitality offerings, illustrating HFS momentum to service our customers premium revenue our find $XX demand value same last the in delivered in million Our was and This for the million other period all

the Recurring anticipate was we for $X quarter efficiencies operational spending remain the of were the quarter million million, $XX remainder Total equipment. per purchase focused quarter leased corporate for $XX to for million, around of approximately the capital and these enhancing the on the $XX will million approximately expenses year. with majority through previously

These financial a facility leverage impressive $XXX The momentum our net and under X.Xx. the the and million results $XXX million $XX $XXX quarter zero to service $XXX the XXXX ended in our elements strength with generation borrowings $XXX strong $XX between and liquidity platform the financial operating of support sustained of the financial of continues of core of support enhanced and million, and have in our million. XXXX with with We which These $XXX last preliminary reiterated EBITDA total revenue $XXX consists an and several million adjusted created ratio company's years. cash million million outlook, cash anticipated of between profile. million over of and million we illustrate expenditures revolving between credit offering and strength capital

adjusted Regarding EBITDA ranges. our and revenue

achieved outlook variable As of the quarter there ranges, materially of during contemplated end revenue contribution the PCC a was is at and first XXXX. our reminder, this revenue minimal low

likely the XXXX uneven it's the over half inherently in PCC year. However, PCC variable contribution year. additional of will revenue that balance to revenue Any of variable occur the important remember contributions be back the will

March our financial XXXX. X stock common enhanced the our This to approximately to during return supported XX, $XX approximately profile million ended months repurchasing ability X.X million by shareholders shares of

conversion commercial the to expertise provides addition, offering sheet, actively In establish degree strength visibility to initiatives. competencies robust our operating evaluating ability U.S. strong government applications. the various to continue designed service organic revenue growth of leverage a and Target's across pipeline existing of pursuing continued a agencies jointly are balance and opportunities cash strong high These and and core of

hospitality These also focusing initiatives while full Target's broaden portfolio. existing offering turnkey to and on opportunities customer encompass base service Target's solutions

diversifying We repeatable focused creating establishing growth simultaneously a to while revenue are streams continue our vectors. on platform

opportunities of years. the capital Target to over over stated, previously several million next seeking As $XXX growth to is net these allocate

achieved as conversion. we initiatives, discretionary remain cash the strong these profile evaluate and financial Importantly, on disciplined allocation we will flow through focused maintaining have we enhanced capital

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

James Archer

Thanks, Jason.

platform. a in results. and premium deliver strong Our illustrate benefits our operating to position. the enhanced to and of financial of enhanced offering to This scale network reflected flexibility sheet us our customers, results The continue strong quarter service execution while first financial is strength balance the allow established supporting our have we simultaneously consistent

thank you everyone With this Target expanding opportunities focused offering. growth we for I the interest Hospitality. to and the your we remain joining seen years foundation, evaluate on strongest pursue many on service pipeline appreciate and and and have today, of call us in our are in diversifying again continuing

Operator

Schneeberger first Your [Operator Oppenheimer. Instructions] Scott from from question comes

Daniel Hultberg

opportunities Daniel organic be? It's Could new see elaborate you please help for you pipeline could and the you Scott. how the on opportunities maybe see, about the on little some where think the ones, us on color most ripe a and bit

James Archer

well, outside we buckets. government government, the still about And look But as agencies. progress. a of different as Look, at this if opportunities, other Thanks. making March of Yes. organic of with ICF kind mentioned, here, in the you and couple talked we

the say into ICF. So radar, I'd still multiple on the they're with that's there get different kind the agencies. won't and it's discussions but center, not of -- lots of just with front hot I agencies,

With still half after pursuing in of going we're expect XXXX. that sometime the that, ICF, the award back still ICF, to third the

from last our nothing's So changed call there.

some bids. the mentioned if as rare of earlier, at again, some remarks our then, technologies, large of you very in earth, some And the look

these -- to really going dialogues award. tell some a hard I we very well predict when But of timing from on these. over feel for about been year. had of some We've would you, So kind on of good have they

point, positive some we we we think we at So should a some to be these. looked conclusion, of they come think -- and on

the built we've of you continue if when hard that projects, been some organic successful to build you over the the we'll growth. not do how organic that's Target, history to the on predict say It's of we growth, off talk We'll the always look timing, hard and to these company. of company large continue it's just backs that. but And to

Daniel Hultberg

mentioned efficiency. Got release the on was operational focused it I it. you in saw

pursuing that in mentioned is Could you remarks incremental as could speak accretive look be initiatives as any you that you're think that, prepared at? to margin please, I we there well. the

Jason Vlacich

are today. operational with evaluate continuing Yes, move on we saw released some efficiencies to operating the performance in gained opportunities. always be We executed year. the the believe as release earlier efficiency through in operational QX, sure. We those we've We're you those that to as there still of

additional there are So we do opportunities. feel

highly currently. being That efficient running said, we platform are a

but all bit but to [ additional little will we to ] challenging and a becomes identify marginal. on some, it execute opportunities, So are there continue those,

Operator

Stephen next from Your Stifel. question comes Gengaro from

Stephen Gengaro

I actually fourth pretty were, help government sequentially things is, me. can you We that. the government those probably up mean a for utilization little we But us gross should I guess give Pecos? gross had the quarter, flat the assuming around low from margins? mix shift think, new about that the in the But contract margins relatively how first two would color at think they some and I affect bit. assumed

Jason Vlacich

Yes.

So good question.

working this years obviously, really and we've occupancy level to with Over response controlling good costs gotten, our contract, at fluctuations. in the

is what strategy essentially been the seeing including since we've in executing that move place, we the QX place from into has that's you're efficiency in on operational there that had contract old QX So contract. as

we to expect bit control move there's levels as continue expansion margins, lower healthy So through associated occupancy we with the margin obviously, a our year. to we as costs. our of And be

Stephen Gengaro

Okay.

there the and XX.X% nothing mix was that in first was quarter, just the So anomaly. that an was efficiency. That in quarter,

Jason Vlacich

Yes. Correct.

Stephen Gengaro

kind Is from then the feels you sure on I next see sort levels And second these for quarters. if are mean with that going activity in just the I flat HFS-South. Great. like mean, the levels Okay. around what's there agree couple that acting act? flattish, we of Permian. is not one of I'm that it of there or obligations does not. Or or of contracts But or should of is we like assume completion anything those sort activity the are not in if any revenues there and how Permian? environment affect the HFS-South in pay? would take that drilling in or

Jason Vlacich

Yes.

obviously So of levels utilization. seen improved we've moderate

the that the rest We of expect the case to remain for year.

otherwise, somewhat continue. trend us additional last as to expect overall, would to year, believe that's mean, respect the utilization I utilization with what material and move So that to through we There's year changes cause no will trends. we to similar

Stephen Gengaro

Okay. one Great. just And final for then one me.

they're knowledge you're The contract that mix ICF real award and not to it is successful? Or question third considering of is is government the whether with about, of that just awarded? your a will something that or it's get there not Is might certainty awarding? that that part you out yet the talked that

James Archer

they and So and definitely all the based on award need our want ICF. discussions, of plan third to

us, going of after we can't For bidding we it, XXXX. right? going this We're aggressively, have on to say to one. the and it. expect sometime it But be half we're awarded get So back we're we in one

Operator

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

Gregory Gibas

Brad quarter. Jason, nice and

Just a that opportunity. follow-up site on ICF third

it? you been You've in on look similar to we safe first are additional it hear of kind is we're that for seeing pretty half same clear Is will being should when contract players the assumption the that to back assume X it likely a the bid And kind details. of awards? going

James Archer

Yes.

and similar, yet types of size early it look, things. will be structure. design it So those think if Too exact will in if in you say will, to and I be

we'll more as where right we'll it into little well. early. we're it's this. further a especially sit August, in a nature, look, to value going we very look the have But at in And But too would in chain how info. say similar let's take get maybe So -- now, some I

Jason Vlacich

Yes, terms very of mechanically, it'll similar. revenue the streams, in be

James Archer

Yes.

Gregory Gibas

targeting I that know priority resources enough. Fair is discuss, opportunities? Could maybe it. shifting or just how sounds contributors emphasis there's nongovernment year of more longer could a an being potentially more putting if it Got utilizing the like cycles, no And little now just you you curious more like I but a typically of longer Pecos opportunity? you discuss said you're that of renewal just or longer-term resources. towards your those And think it. sounds commentary you're from guess for on like emphasis perspective, you it they're reason, this about do a these kind sales

James Archer

you there. tell that that emphasis if would that across And been way, always not I case. Well, that's has came the

government. team everything to dedicated of outside a We that's have

it's that's -- been to fact, dedicated In government. a that's larger team

meaning is So I pipeline things. It's the they're investment getting that just actually decisions large. been. types those active, more and has of It really closer. tell you getting final would

are get they're Timing, if very uncertain, still They right? impactful them. we large,

that's going very right? depends, I of than it put really -- not to technology the I'm emphasis-wise, where governments priority. on is our our I they're we well you And -- sought after today, So as in working there's the as things forward, outside government into of tell comment where kind or where some of where going other. kind the government. we being But wouldn't earth folks rare But or that Lots we after, moving pretty go of They're high side kind timing. do on just of shift. do really tell you, see What's that the front-and-center everything we're would balanced. hotspots? as So effort we

Gregory Gibas

Okay. and That's fair helpful.

up follow I multiple I on around government. if your the guess within agencies could So commentary

border. sense don't finish want agencies comment understand in the of what near but said any or the of provide opportunities also that see I you you closer can these line, are to maybe color until in of or kind you're to terms like discussions with? any think I with being -- them you

James Archer

It's will. Yes. rather lot it those. unaccompanied I about talk Look, a children you of not network, the I'd definitely ICF not if you, the would agency-specific. outside tell is on

Gregory Gibas

authorization? just continued could your right? see it on then an one could what Wondering repurchases and we the last guess on So guess you as us I Okay. you us remind it. repurchases. to the I just continued if nice share capital then current relates give or to Got expect priorities, -- for share are update me continued

Jason Vlacich

Yes.

the at was to of in continue initiated program a million which million authorized we've which $XXX place, purchased $XX we right, have of level, So that.

long-term saw strategy we on with So roughly in respect allocation be there opportunities million. not place, prospective repurchasing we program $XX opportunities And capital it sort left a and to remain because that $XX on we at the comment as through continues see million but executed reminder, We're where shares for to that be tune of continue $XX to it. execute program. it of time us in and million, authorized on will QX activity, going we to to as a will move in

Operator

Stephen follow-up a from Stifel. have from question Gengaro You

Stephen Gengaro

structure I'm government How ask how the XXX they're is a How not of sort or about opportunities, other in where other of do you fit? around do commercial to a of network this. think we the business of family guys to when kind these certain are the X it exactly do facilities. the you pieces business? sure one they did Or compare HFS-South more similar Is What magnificent business, they facilities rooms? they different. to? a And But XX it with versus clearly with area? like Texas of your job

James Archer

would to if tell will, set you similar if you're structural -- way operated. the they're I and Yes. up and structures talking you the type they're physical more HFS model,

Stephen Gengaro

of come some or assets? either term And along would mobilization type to of support contract they with construction

Jason Vlacich

Yes, absolutely. contract right? goal, expansion, of be that the comes along our support certainly term They support with construction would million definitely to certainly So... part all $XXX of would

James Archer

models. return our And

Jason Vlacich

flow consistently And that have profile overall business. we our strong support It in return our the would currently models. cash

of like. these what guaranteed talking. that's is long-term contracts kind So we're look what

Stephen Gengaro

Okay. Great. one And then just one. quick

in stock Does the pending return of capital while impact bid considered? being million to your $XX repurchased You quarter. the it's ability

Jason Vlacich

on not disclosed than to or other release. that, on future we've certainly what decision-making comment activity going impact our any offer has We're that potential the in

Stephen Gengaro

asking? there there's of guess, no you to, or is a allowed regulation legal is I'm versus here it Are a decision? ruling But sort doesn't I what --

James Archer

right -- possibility or going bought we the the we'll on -- quarter think to on market in continue be not buyback in place going don't The the to plans if just what we're to the stock in be we're now. just I Look, first opportunistic. comment

Operator

this There Please back Brad Archer. questions the continue. I time. further over are turn would to like to call no at now

James Archer

Thank that We again will conclude all call look August second you on Operator, for the our report. quarter to our today. for today. joining you in call forward to us speaking for earnings

Operator

Thank Sure. participation. That concludes today's for you conference your call.

You disconnect. may now

Target Hospitality (TH) 8 May 242024 Q1 Earnings call transcript