UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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There were
第一部分 – 基本报表
项目1. 基本报表
目标酒店公司。
合并资产负债表
(以千美元计)
2023年9月30日， | 截至12月31日， | |||||
| 2024 |
| 2023 | |||
资产 |
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流动资产： |
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现金及现金等价物 | $ | | $ | | ||
应收账款，减去信用损失准备金 $ |
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预付费用和其他资产 |
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总流动资产 |
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专用租赁资产，净值 |
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其他物业、厂房和设备，净值 |
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经营租赁使用权资产，净额 | | | ||||
商誉 |
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其他无形资产，净值 |
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递延融资成本循环信贷，净额 |
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其他非流动资产 | — | | ||||
总资产 | $ | | $ | | ||
负债 |
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流动负债： |
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应付账款 | $ | | $ | | ||
应计负债 |
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递延营收和客户存款 |
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运营租赁义务的当前部分 | | | ||||
融资租赁和其他融资义务的当前部分（注释8） |
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当前的认股权证负债 | — | | ||||
长期债务的当前部分，净额（注释8） | | — | ||||
总流动负债 |
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其他负债项： |
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长期债务（注意8）: |
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本金金额 | — | | ||||
减：未摊销的原始发行折扣 | — | ( | ||||
减：未摊销的定期贷款递延融资成本 | — | ( | ||||
长期负债，净额 | — | | ||||
长期融资租赁及其他融资义务 | | | ||||
长期经营租赁义务 | | | ||||
递延营收和客户存款 |
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递延所得税负债 | | | ||||
资产退休义务 |
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总负债 |
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承诺和或有事项（注释12） |
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股东权益： |
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普通股，$ | | | ||||
占用成本的普通股， | ( | ( | ||||
新增已实收资本 |
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累计其他综合损失 |
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累计盈余 |
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归属于Target Hospitality Corp.股东的总股东权益 |
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合并子公司中的非控制性权益 | | — | ||||
股东权益总额 | | | ||||
总负债和股东权益 | $ | | $ | | ||
请参阅未经审计的合并基本报表附带说明。
5
目标酒店公司。
未经审计的综合收益合并报表
(单位：千美元，除每股金额外)
截止三个月至 | 截至九个月 | |||||||||||
2023年9月30日， | 2023年9月30日， | |||||||||||
| 2024 |
| 2023 | 2024 |
| 2023 | ||||||
营业收入: |
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服务收入 | $ | | $ | | $ | | $ | | ||||
特殊租赁收入 |
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总营业收入 |
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成本： |
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服务 |
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专业租赁 |
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专业租赁资产的折旧 |
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毛利润 |
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销售、一般和行政 |
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其他折旧和摊销 |
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其他费用（收益），净额 |
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营业收入 |
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债务灭失损失 | — | — | — | | ||||||||
利息费用，净额 |
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Warrants负债公允价值的变动 | — | | ( | ( | ||||||||
Income before income tax |
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所得税费用 |
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净利润 |
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减：归属于非控制性权益的净利润 | | — | | — | ||||||||
归属于目标酒店CORP普通股股东的净利润 | | | | | ||||||||
Warrants负债公允价值的变动 | — | — | — | ( | ||||||||
归属于Target Hospitality Corp.普通股股东的净利润 - 摊薄 | | | | | ||||||||
其他综合损失 |
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外币折算 |
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综合收益 | $ | | $ | | $ | | $ | | ||||
基本每股加权平均流通股数 |
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摊薄后的加权平均流通股数 | | | | | ||||||||
归属于Target Hospitality Corp.普通股股东的每股净利润 - 基本 | $ | | $ | | $ | | $ | | ||||
归属于Target Hospitality Corp.普通股股东的每股净利润 - 稀释 | $ | | $ | | $ | | $ | | ||||
请参阅未经审计的合并基本报表附带说明。
6
目标酒店公司。
未经审计的股东权益变动合并报表
截至2024年和2023年9月30日的三个月和九个月
(以千美元计)
额外 | 累计 | 总目标酒店CORP. | ||||||||||||||||||||||||||
普通股 | 库存普通股 | 已支付 | 其他 | 累计 | 股东权益 | 非控股 | 总计 | |||||||||||||||||||||
| 股份 |
| 金额 |
| 股份 |
| 金额 |
| 资本 |
| 综合亏损 |
| 收益 |
| 股权 |
| 利息 |
| Equity | |||||||||
截至2022年12月31日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | | — | $ | | ||||||||||||
采纳ASC 326 | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||
2023年1月1日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
净利润 | — | — | — | — | — | — | | | | |||||||||||||||||||
基于股票的补偿，净 | | — | — | — | | — | — | | — | | ||||||||||||||||||
与股票奖励的净分享结算相关的税收扣留 | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
通过行使Warrants发行普通股 | — | — | — | | — | — | | — | | |||||||||||||||||||
因行使股票期权而发行普通股 | — | — | — | | — | — | | — | | |||||||||||||||||||
截至2023年3月31日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
净利润 | — | — | — | — | — | — | | | — | | ||||||||||||||||||
基于股票的补偿，净 | — | — | — | | — | — | | — | | |||||||||||||||||||
与股权奖励的净分享结算相关的税务扣缴 | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
通过行使Warrants发行普通股 | — | — | — | | — | — | | — | | |||||||||||||||||||
截至2023年6月30日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
净利润 | — | — | — | — | — | — | | | — | | ||||||||||||||||||
基于股票的补偿，净 | — | — | — | | — | — | | — | | |||||||||||||||||||
与股权奖励净股份结算相关的税款扣除 | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
因行使股票期权而发行普通股 | — | — | — | | — | — | | — | | |||||||||||||||||||
截至2023年9月30日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
截至2023年12月31日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | | — | $ | | ||||||||||||
净利润 | — | — | — | — | — | — | | | — | | ||||||||||||||||||
基于股票的补偿，净 | | — | — | — | | — | — | | — | | ||||||||||||||||||
与权益奖励净分享结算相关的税收扣缴 | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
因行使Warrants而发行普通股 | | — | — | — | | — | — | | — | | ||||||||||||||||||
通过行使股票期权发行普通股 | | — | — | — | | — | — | | — | | ||||||||||||||||||
作为股份回购计划的一部分，回购普通股 | ( | — | | ( | — | — | — | ( | — | ( | ||||||||||||||||||
截止到2024年3月31日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
净利润 | — | — | — | — | — | — | | | — | | ||||||||||||||||||
基于股票的补偿，净 | | — | — | — | | — | — | | — | | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
行使期权发行普通股 | | — | — | — | | — | — | | — | | ||||||||||||||||||
作为股票回购计划的一部分，回购普通股 | — | — | — | | — | — | — | | — | | ||||||||||||||||||
截至2024年6月30日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | — | $ | | ||||||||||
净利润 | — | — | — | — | — | — | | | | | ||||||||||||||||||
基于股票的补偿，净 | | — | — | — | | — | — | | — | | ||||||||||||||||||
与股票奖励的净股份结算相关的税收扣缴 | — | — | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||
累计汇率调整 | — | — | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||
通过行使期权发行普通股 | | — | — | — | | — | — | | — | | ||||||||||||||||||
分配 | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
作为股份回购计划的一部分回购普通股 | ( | — | | ( | — | — | — | ( | — | ( | ||||||||||||||||||
截至2024年9月30日的余额 | | $ | | | $ | ( | $ | | $ | ( | $ | | $ | | $ | | $ | | ||||||||||
请参阅未经审计的合并基本报表附带说明。
7
目标酒店公司。
未经审计合并现金流量表
(以千美元计)
截至九个月 | ||||||
2023年9月30日， | ||||||
| 2024 |
| 2023 | |||
经营活动产生的现金流： |
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净利润 | $ | | $ | | ||
调整净利润与由事件提供的净现金之间的对账： |
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折旧 |
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无形资产摊销 |
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非现金操作租赁费用 | | | ||||
资产退休义务的增值 |
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递延融资费用摊销 |
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原始发行折扣的摊销 | | | ||||
Warrants负债公允价值的变动 | ( | ( | ||||
基于股票的补偿费用 | | | ||||
专用租赁资产和其他物业、厂房及设备处置损失 | | | ||||
债务灭失损失 | — | | ||||
递延所得税 |
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应收款项的信用损失准备，净额为回收款项 | | | ||||
运营资产和负债的变动 |
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应收账款 |
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预付费用和其他资产 |
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应付账款及其他应计负债 |
| ( |
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递延营收和客户存款 |
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经营租赁义务 | ( | ( | ||||
其他非流动资产和负债 |
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经营活动提供的净现金 |
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投资活动的现金流： |
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专用租赁资产的购买 |
| ( |
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购置物业、厂房和设备 |
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获得的无形资产 | — | ( | ||||
特殊租赁资产和其他物业、厂房及设备的销售所得 | | | ||||
投资活动中使用的净现金 |
| ( |
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融资活动产生的现金流: |
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融资和融资租赁义务的本金支付 |
| ( |
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优先票据的偿还 | — | ( | ||||
回购普通股 | ( | — | ||||
通过Warrants交易所支付发行成本 | — | ( | ||||
从Warrants行使中发行普通股的收益 | | | ||||
从期权行使中发行普通股的收益 | | | ||||
递延融资成本的支付 | — | ( | ||||
与股权奖励净股份结算相关的税款 | ( | ( | ||||
融资活动中使用的净现金 |
| ( |
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汇率变化对现金及现金等价物的影响 | ( | | ||||
现金及现金等价物的净增加（减少） |
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现金及现金等价物 - 期初余额 |
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现金及现金等价物 - 期末 | $ | | $ | | ||
非现金投资和融资活动： | ||||||
非现金累积资本支出的变更 | $ | ( | $ | ( | ||
非现金累积回购普通股的变更 | $ | ( | $ | — | ||
非现金融资租赁义务的变更 | $ | ( | $ | ( | ||
非现金变动在权益奖励的净股份结算税款的应计中 | $ | ( | — | |||
非现金变动在对非控股权益的应计分配中 | $ | ( | $ | — | ||
请参阅未经审计的合并基本报表附注.
8
目标酒店公司。
未经审计的合并基本报表附注
(金额以千为单位，除非另有说明)
1. 组织及运营性质、呈报基础及重要会计政策概述
组织和运营性质
Target Hospitality Corp.（“Target Hospitality”及其子公司统称为“公司”）成立于2019年3月15日，是北美最大的垂直整合专业租赁及增值酒店服务提供商之一。公司提供垂直整合的专业租赁及综合酒店服务，包括：餐饮服务、维护服务、客房服务、场地管理、安全、健康与娱乐服务、整体劳动力社区管理及洗衣服务。Target Hospitality为位于德克萨斯州西部、德克萨斯州南部、新墨西哥州及Midwest地区的自然资源开发及政府部门的客户提供服务。
公司证券在纳斯达克资本市场上市，及其全资子公司Topaz Holdings LLC（特拉华州有限责任公司，“Topaz”）和Arrow Bidco, LLC（特拉华州有限责任公司，“Arrow Bidco”）作为Target Logistics Management, LLC及其子公司（“Target”或“TLM”）及RL Signor Holdings, LLC（“Signor”）业务的控股公司。TDR Capital LLP（“TDR Capital”或“TDR”）间接拥有约
财务报表的基础
附带的未经审计合并基本报表已根据证券交易委员会（“SEC”）有关临时财务信息的规则和规定编制。根据这些规则和规定，通常包括在符合美国公认会计原则（“US GAAP”）编制的财务报表中的一些信息在脚注披露中已被简化或省略。本报告中包含的财务报表应与Target Hospitality截至2023年12月31日的10-K表年度报告一起阅读（“2023年10-K表”）。
截至2024年9月30日的三个月和九个月的经营结果不一定反映截至2024年12月31日的完整财年或未来任何期间可能预期的经营结果。
附带的未经审计合并基本报表包含所有调整，仅包括正常的经常性调整，必要的以公平地表述截至2024年9月30日的财务状况，以及截至2024年和2023年9月30日的三个月和九个月的经营结果，以及截至2024年和2023年9月30日的现金流量。合并资产负债表截至2023年12月31日来源于公司的审计合并资产负债表，但不包含那些年度财务报表中的所有脚注披露。
估计的使用
根据US GAAP编制财务报表需要管理层在确定合并财务报表日期的资产和负债的报告金额以及在报告期间的收入和费用的报告金额时使用估计和假设。如果作为财务报表基础的基本估计和假设在未来期间发生变化，实际金额可能与本附带未经审计的合并基本报表中包含的金额有所不同。
9
合并原则
合并基本报表包括公司及其由于拥有多数投票权而控制的子公司的基本报表，或如果子公司是变动利益实体（“VIE”），则公司被判断为主要受益人。对于非全资控制的子公司，第三方的所有权权益代表非控制性权益，单独在合并基本报表中列示。子公司从被收购之日起完全合并，即公司获得控制权之日，并持续合并直到该控制权停止。子公司的基本报表是为与公司相同的报告期编制的。所有内部公司余额和交易都已被消除。
收入确认
公司从专业租赁和酒店服务中获得营业收入，具体包括住宿及相关的附属服务。根据与客户的合同关系所规定的条款，在提供住宿和服务的期间确认收入。某些安排包含将住宿设施租赁给客户。根据关于租赁的权威指导（“ASC 842”），这些租赁被视为经营租赁，收入在租赁协议的期限内根据收入的实现进行确认。
在租赁开始时，公司评估租赁以判断其是否符合租赁会计指导中规定的分类为销售型租赁或直接融资租赁的标准；如果租赁不符合这些标准，则公司将其分类为经营租赁。如前所述，包含公司住宿设施租赁的安排被视为经营租赁，其中基础资产保留在我们的资产负债表上，并与其他拥有的资产一致地进行折旧，收入在租赁协议的期限内根据实现进行确认。对于同时包含租赁成分和提供服务或非租赁成分的合同，公司已采用会计政策，在ASC 842下对租赁成分进行核算和列示，而在关于收入确认的权威指导（“ASC 606”或“Topic 606”）下处理非租赁成分。有关每个标准下营业收入的分解，请参见注释2。公司在客户经营租赁的期限内确认经营租赁的最低租金。租赁期限的开始时间为：（1）客户对租赁空间拥有控制权（合法使用物业的权利）；和（2）公司根据租赁条款要求将物业交付给客户。租赁的期限包括不可取消的租赁期限以及以下情况的覆盖期限：（1）如果客户合理确定行使该选项，则可以延长租赁的客户选项；（2）如果客户合理确定不行使该选项，则可以终止租赁的客户选项；以及（3）延长租赁（或不终止租赁）的选项，其行使由公司作为出租方控制。在评估预期的租赁结束日期时，在考虑以下方面的重要性时需要判断：客户选择不行使任何现有租赁延长选项或不行使任何现有终止选项时可能会遭受的任何罚款；以及租赁中客户的经济激励。此外，在根据ASC 606评估具有延长选项的合同的预期结束日期时，需要判断该选项是否包含实质性权利。
由于与专业租赁和酒店服务相关的履约义务是随着时间的推移而完成的，因此我们大部分的营业收入是在合同期内，基于合同固定的最低金额和定义的履行时间均匀确认的。我们的部分营业收入是基于客户住宿的每晚在合同日费率上确认的。我们的客户通常会根据承诺合同预定住宿服务，合同期限通常从几个月到多年不等。我们的付款条款因客户类型和服务地点而异。开票与付款到期之间的时间并不长。
当住宿和服务提前开具账单并收款时，营业收入的确认会延迟，直到服务提供为止。
服务成本包括劳动力、食品、水电、供应品、租赁和与经营住宿单元相关的其他直接成本，以及维修和维护费用。租赁成本包括租赁费用、水电费以及维护住宿单元的其他直接成本。与合同相关的成本包括按实际产生计入费用的销售佣金，并在综合收益表中的销售、一般和管理费用中反映。
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此外，公司收集销售、使用、占用及类似税款，公司在综合收益表中以净额（不包含在营业收入中）呈现此类税款。
最近发布的会计标准
报告性板块披露的改进。 2023年11月，FASB 发布了ASU 2023-07，扩大了报告性板块的披露要求，主要通过增强对重要板块费用的披露。该修订要求，除其他事项外，披露定期提供给实体首席运营决策者（“CODM”）的重要板块费用，以及按报告性板块披露其他板块项目的描述（即每个报告的板块利润或亏损的报告度量减去在重要费用原则下披露的板块费用之间的差额），同时需要披露CODM的头衔和职位，并解释CODM如何利用报告的板块利润或亏损的度量来评估板块表现以及决定如何分配资源。对2023年12月15日后开始的财政年度要求年度披露，而对2024年12月15日后开始的财政年度期间则要求临时披露。要求进行追溯适用，允许提前采用。这些要求预计不会对我们的基本报表产生影响，但将导致报告性板块披露的扩大。公司无意提前采用ASU 2023-07。
所得税披露的改进。 2023年12月，FASB发布了ASU 2023-09，要求披露已支付的分拆所得税，规定有效税率调节的标准类别，并修改其他与所得税相关的披露。ASU 2023-09适用于2024年12月15日后开始的财政年度，可追溯适用或前瞻适用，并允许提前采用。这些要求预计不会对我们的基本报表产生影响，但将影响我们的所得税披露。公司无意提前采用ASU 2023-09。
最近的进展
2024年3月25日，公司宣布其董事会（“董事会”）收到Arrow Holdings S.à r.l.（“Arrow”），TDR的关联公司，提出无约束力的非正式收购提案，拟收购公司未被Arrow、TDR管理的任何投资基金或其相关联公司拥有的所有未关联股（“未关联股份”），现金价格为每股$
董事会成立了一个独立董事特别委员会（“特别委员会”），特别委员会聘请了Centerview Partners LLC和Ardea Partners LP作为其财务顾问，以及Cravath, Swaine & Moore LLP作为其法律顾问。特别委员会的成立旨在考虑和评估提案，并探索和考虑其他战略选择。
在审查提案的过程中，特别委员会启动了一个正式的流程，以征求对公司的报价，并邀请Arrow参与该过程。继之前宣布的合同损失后，没有收到正式报价，Arrow也未重申提案或提出任何其他可行的建议，以便特别委员会与其独立的财务和法律顾问进行协商后得出的结论，认为会比公司独立前景更具吸引力。因此，董事会决定解散特别委员会，如2024年9月25日已公布的内容。
2. 营业收入
根据ASC 606确认的总营业收入约为$
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百万和$
下表将我们的服务收入按我们的
截止三个月至 | 截至九个月 | |||||||||||
2023年9月30日， | 2023年9月30日， | |||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
HFS – 南部 | $ | | $ | | $ | | $ | | ||||
政府 | $ | | $ | | $ | | $ | | ||||
所有其他 | $ | | $ | | $ | | $ | | ||||
总服务营业收入 | $ | | $ | | $ | | $ | | ||||
信用损失准备金
公司维持信用损失准备金。这些准备金反映了我们对无法收回的应收账款金额的估计，基于历史坏账经验，以及适用的当前条件和合理可支持的影响可收回性的预测。我们的估计可能需要根据变化的情况进行调整，包括经济变化或个别客户情况的变化。
合同资产和负债
我们没有任何合同资产。
合同负债主要包括递延营业收入，代表了客户可能在未来使用的房晚付款，以及社区建设的预付款和与社区扩展相关的资产活动的动员费用，这些费用在相关合同期内被确认。以下日期的递延收入账户活动如下：
截至九个月 | ||||||
2023年9月30日， | ||||||
| 2024 | 2023 | ||||
期初余额 | $ | | $ | | ||
递延收益的增加 |
| |
| — | ||
收入确认 |
| ( |
| ( | ||
期末余额 | $ | | $ | | ||
由于公司政府部门南德克萨斯州家庭住宿中心合同于2024年8月9日终止，公司确认了截至2023年12月31日剩余的$
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在2024年9月30日结束的三个月期间，合同终止时确认的金额，因为在此期间没有进一步的服务义务。
截至2024年9月30日，以下表格披露了根据ASC 606估计的未履行（或部分履行）业绩义务相关的营业收入，以及我们预计何时会确认这些收入，并仅代表预计将从价格和数量固定的合同中确认的收入：
截至12月31日的年度 | |||||||||||||||
| 2024 |
| 2025 | 2026 | 2027 |
| 总计 | ||||||||
预计截至2024年9月30日确认的营业收入 | $ | $ | $ | $ | |||||||||||
公司应用了ASC 606中的一些实用简化，包括“开具发票的权利”实用简化，并且不披露没有最低收入承诺的合同或与未满足（或部分未满足）业绩义务相关的可变对价的剩余履约义务的考虑。由于这些实用简化的应用，以及排除了受ASC 842指导的租金收入营业收入，上述表格仅代表公司的预期未来合并营业收入的一部分，并不一定反映总营业收入的预期趋势。
3. 专用租赁资产，净额
以下日期的专用租赁资产净额包括如下内容：
| 2023年9月30日， | 12月31日 | ||||
2024 | 2023 | |||||
专业租赁资产 | $ | | $ | | ||
建造中的固定资产 |
| |
| | ||
减：累计折旧 |
| ( |
| ( | ||
专用租赁资产，净值 | $ | | $ | | ||
与专业租赁资产相关的折旧费用为$
在截止2023年9月30日的九个月期间，公司处置了累计折旧大约为$
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4. 其他物业、厂房和设备，净值
在以下所示日期，其他物业、厂房和设备的净值包括以下内容：
| 2023年9月30日， | 12月31日 | ||||
2024 |
| 2023 | ||||
土地 | $ | | $ | | ||
建筑物和租赁改进 |
| |
| | ||
机械和办公设备 |
| |
| | ||
其他 |
| |
| | ||
| |
| | |||
减：累计折旧 |
| ( |
| ( | ||
其他资产、厂房及设备的总额，净值 | $ | | $ | | ||
截至2024年9月30日和2023年9月30日的九个月中，其他资产、厂房及设备相关的折旧费用为$
5. 商誉和其他无形资产，净额
财务报表反映了来自于之前收购的商誉，全部归属于HFS – South 业务板块和报告单位。
商誉的账面价值变化如下：
| HFS - 南方 | ||
2023年1月1日余额 | $ | | |
商誉的变动 | - | ||
截至2023年12月31日的余额 | | ||
商誉变动 | - | ||
截至2024年9月30日的余额 | $ | | |
截至下面所示日期的其他无形资产包括以下内容：
2024年9月30日 | |||||||||||
加权 | 总计 | ||||||||||
平均 | 账面 | 累计 | 净账面 | ||||||||
| 剩余生命 |
| 金额 |
| 摊销 |
| 价值 | ||||
需摊销的无形资产 |
|
|
|
|
|
|
|
| |||
客户关系 |
| $ | | $ | ( | $ | | ||||
竞业禁止协议 | | ( | | ||||||||
总计 | | ( | | ||||||||
无限期使用的资产： |
|
|
|
|
|
|
|
| |||
商标 |
|
|
| |
| — |
| | |||
总计无形资产（不包括商誉） |
|
| $ | | $ | ( | $ | | |||
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2023年12月31日 | |||||||||||
加权 | 总计 | ||||||||||
平均 | 账面 | 累计 | 净账面 | ||||||||
| 剩余生命 |
| 金额 |
| 摊销 |
| 价值 | ||||
可摊销的无形资产 | |||||||||||
客户关系 |
|
| $ | |
| $ | ( |
| $ | | |
竞业禁止协议 | | ( | | ||||||||
总计 | | ( | | ||||||||
无限期使用的资产: |
|
|
|
|
|
|
|
| |||
商标 |
|
|
| |
| — |
| | |||
除商誉外的所有无形资产 |
|
| $ | | $ | ( | $ | | |||
截至2024年和2023年9月30日的九个月内，相关于无形资产的摊销费用为$
截至2024年9月30日，预计未来五年及之后的累计摊销费用如下：
2024年剩余部分 |
| $ | |
2025 | | ||
2026 | | ||
2027 | | ||
2028 | | ||
之后 | | ||
总计 | $ | |
6. 其他非流动资产
其他非流动资产包括云计算服务商实施系统的资本化软件实施成本。截至下面指示的日期，合并资产负债表中其他非流动资产的资本化实施成本及相关累计摊销金额如下：
| 2023年9月30日， | 截至12月31日， | ||||
2024 |
| 2023 | ||||
云计算服务商实施成本 | $ | | $ | |||
减：累计摊销 | ( | ( | ||||
其他非流动资产 | $ | — | $ | |||
此类系统大多数于2020年1月开始投入使用，届时公司开始对这些资本化成本进行直线法摊销，摊销周期为剩余服务协议的期限，长度为
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7. 应计负债
截至下述日期的应计负债包括以下内容：
|
| 2023年9月30日， | 截至12月31日， | |||
2024 |
| 2023 | ||||
员工应计补偿费用 | $ | | $ | | ||
其他应计负债 |
| |
| | ||
应计债务利息 | | | ||||
总计应计负债 | $ | | $ | | ||
上述表格中的其他应计负债主要与应计公用事业费、房地产业和销售税、州和联邦所得税有关， 截至2023年12月31日的基于负债的股票奖励（见注释15）为$
8. 债务
2024年高级担保票据
在2019年3月15日，Arrow Bidco发行了$
2025年高级担保票据
关于票据交易所要约，如前所述，在2023年11月1日（“票据交易所要约结算日”），大约$
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请参阅下面的表格，以了解与2025年高级担保票据相关的金额，这些金额在截至2024年9月30日的合并资产负债表中被列为长期债务的当前部分，净额。
| 2023年9月30日， | ||
2024 | |||
本金金额为 | $ | | |
减：未摊销的原始发行折扣 | ( | ||
减：未摊销的定期贷款递延融资成本 | ( | ||
长期负债及偿还计划的流动部分，净额 | $ | | |
如果Arrow Bidco经历控股权变更或出售其某些资产，Arrow Bidco可能需要提供回购2025年高级担保票据的机会。从2024年9月15日及以后，Arrow Bidco可以选择全部或部分赎回任何未偿还的2025年高级担保票据，提前通知不少于 （15）不超过 （60）天的书面通知提前告知持有人，不少于 （20）天的书面通知提前告知受托人（或受托人同意的更短时间），以赎回价格（以要赎回的2025年高级担保票据的本金金额百分比表示）列示于下方，以及应计但未支付的利息（如有），直至但不包括适用的赎回日期（在相关记录日期持有人有权在赎回日期之前的利息支付日收到应支付的利息），如果在以下列出的赎回价格内，在下列日期开始的六个月期间内赎回：
赎回 | ||
日期 |
| 价格 |
2024年9月15日 | ||
2025年3月15日及以后的日期 |
2025年高级担保票据由Topaz无条件担保，以及Arrow Bidco的每一个直接和间接全资国内子公司（统称为“2025票据担保人”）。Target Hospitality不是2025年高级担保票据的发行人或担保人。2025票据担保人是ABL融资的借款人或担保人。在ABL融资的贷方解除任何2025票据担保人的担保的情况下，该2025票据担保人也从2025年高级担保票据的义务中被解除。这些担保由Arrow Bidco及2025票据担保人几乎所有资产的第二优先担保权益担保（受常规排除的影响）。TLm Equipment, LLC，一家持有Target Hospitality某些资产的特拉华有限责任公司，对2025年高级担保票据的担保是从属于其在ABL融资下的义务（如下文定义）。
2025年高级担保票据契约包含限制Arrow Bidco及其子公司能力的条款，诸如：（i）承担或担保额外债务和发行某些类型的股票，（ii）创建或承担某些留置权，（iii）进行某些支付，包括分红派息或其他分配，（iv）提前偿还或赎回次级债务，（v）进行某些投资或收购，包括参与合资企业，（vi）与关联方进行某些交易，以及（vii）卖出资产，合并或与其他公司合并。这些条款受到许多重要限制和例外的约束。此外，一旦发生特定的控制权变更事件，Arrow Bidco必须提议以
Arrow Bidco的最终母公司Target Hospitality除作为2025年高级担保票据的担保人外，没有重大独立资产或运营，2025年高级担保票据下的担保是完全无条件的，连带责任的，而任何不是2025年高级担保票据子公司担保人的Target Hospitality的子公司都是次要的。Target Hospitality或任何担保人从其子公司通过分红派息或贷款获得资金的能力也没有重大限制。请参见上述对某些负面契约的讨论。因此，根据SEC规则，不认为需要对任何单独的担保人财务报表披露。
与2025年高级担保票据的发行相关，原始发行折扣约为$
17
在附带的合并资产负债表中，长期债务的当前部分本金的减少。折扣是在2025年高级担保票据的生命周期内使用有效利息法进行摊销。
融资租赁和其他融资义务
截至2024年9月30日，公司的融资租赁和其他融资义务约为$
截至2023年12月31日，公司的融资租赁和其他融资义务约为$
ABL融资便利
2019年3月15日，Topaz、Arrow Bidco、Target、Signor及其各自的国内子公司签订了一项ABL信贷协议，该协议提供了总本金金额高达$的高级担保资产基础循环信用额度。
根据2023年2月1日对ABL融资设施的第一次修正案（“第一次修正案”），LIBOR借款的参考利率从LIBOR变更为期限SOFR（自第一次修正案的生效日期起生效）。
根据相关借款人的（在ABL融资设施下的借款人，称为“借款人”）选择，ABL融资设施下的借款将按（1）期限SOFR或（2）基准利率计息，各自加上适用的利润率。适用的利润率为
根据第三修正案，ABL设施提供的借款额度为以下两者中的较小者(a) $
借款基础在任何时候的确定金额（扣除储备）等于以下各项的总和：
| ● |
| ● | 以下两者中的较小者(i) |
| ● | 惯常储备 |
ABL设施包括可用于备用信用证的借款能力高达$
此外，ABL设施将为借款人提供选择，以增加ABL设施下的承诺，总金额不得超过$
18
ABL融资设施的终止日期延长至2028年2月1日，须遵循触发到期的条件，即如果：(i) 2024年高级担保票据在其规定到期日的九十一天前仍然未偿还，或(ii) 2025年高级担保票据（或为了再融资2025年高级担保票据而产生的任何债务）在其规定到期日的九十一天前仍然未偿还。正如前面提到的，
ABL融资设施下的义务由Topaz及每个现有和后续收购或组织的直接或间接全资美国限制子公司无条件担保（连同Topaz，被称为“ABL担保人”），但不包括某些排除的子公司。ABL融资设施的担保包括：(i) 对Topaz、Arrow Bidco、Target和Signor（统称为“借款人”）及任何借款人或任何ABL担保人的每个直接全资美国限制子公司的股权利益的首要质押，(ii) 对任何借款人或ABL担保人的每个非美国限制子公司中的投票股权利益的最多百分之，
正如第三次修正中所述，ABL融资设施要求借款人维持(i) 最低固定费用覆盖比率不低于
ABL融资设施还包含若干惯常的负面契约。这些契约在其他事项中限制或禁止每位借款人、其受限子公司以及在适用情况下的Topaz的以下行为：
| ● | 增加额外的债务，发行不合格股票和提供担保； |
| ● | 对资产设定留置权； |
| ● | 进行合并或整合或进行重大变更； |
| ● | 卖出资产; |
| ● | 支付分红派息和分配或回购资本库存； |
| ● | 进行投资、贷款和预付款，包括收购； |
| ● | 修改组织文件和主租赁文件； |
| ● | 签订某些协议，这将限制支付分红派息的能力； |
| ● | 偿还某些次级债务；和 |
| ● | 改变其业务的开展。 |
上述限制有某些例外，包括(i) 在遵循某些财务指标和其他条件的情况下，承担额外的债务、设定留置权、投资、分红派息和分配，以及偿还次级债务的能力；(ii) 一些其他传统例外，允许借款者继续灵活地运营和发展其业务。ABL设施还包含某些惯常的陈述和保证、积极契约和违约事件。
截至以下日期，未偿还债务的账面价值包括：
| 2023年9月30日， | 12月31日 | ||||
2024 |
| 2023 | ||||
融资租赁及其他融资义务 | $ | | $ | | ||
| |
| | |||
减：未摊销的原始发行折扣 | ( | ( | ||||
减：未摊销的定期贷款递延融资成本 | ( | ( | ||||
总债务，净额 |
| |
| | ||
减：流动负债 |
| ( |
| ( | ||
所有长期债务 | $ | | $ | | ||
19
Interest expense, net
The components of interest expense, net (which includes interest expense incurred) recognized in the unaudited consolidated statements of comprehensive income for the periods indicated below consist of the following, including the components of interest expense, net on the 2024 and 2025 Senior Secured Notes (collectively, the “Notes”):
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2024 |
| 2023 | 2024 |
| 2023 | |||||||
Interest incurred on finance lease and other financing obligations | $ | | $ | | $ | | $ | | ||||
Interest expense incurred on ABL Facility and Notes | | | | | ||||||||
Amortization of deferred financing costs on ABL Facility and Notes | | | | | ||||||||
Amortization of original issue discount on Notes |
| | |
| | | ||||||
Interest income | ( | ( | ( | ( | ||||||||
Interest expense, net | $ | | $ | | $ | | $ | | ||||
Deferred Financing Costs and Original Issue Discount
The Company presents unamortized deferred financing costs and unamortized original issue discount as a direct deduction from the principal amount of the 2025 Senior Secured Notes on the consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively. Accumulated amortization expense related to the deferred financing costs was approximately $
Accumulated amortization related to revolver deferred financing costs for the ABL Facility was approximately $
Refer to the components of interest expense in the table above for the amounts of the amortization expense related to the deferred financing costs and original issue discount recognized for each of these debt instruments for the three and nine months ended September 30, 2024 and 2023, respectively.
20
Future maturities
The aggregate annual principal maturities of debt and finance lease obligations for each of the next five years, based on contractual terms are listed in the table below.
The schedule of future maturities as of September 30, 2024, consists of the following:
Rest of 2024 |
| $ | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
Total | $ | |
9. Warrant Liabilities
On January 17, 2018, Harry E. Sloan, Joshua Kazam, Fredric D. Rosen, the Sara L. Rosen Trust and the Samuel N. Rosen 2015 Trust, purchased from PEAC an aggregate of
The Company evaluated the Private Warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity and should be classified as liabilities. Since the Private Warrants meet the definition of a derivative under ASC 815, the Company recorded the Private Warrants as liabilities on the balance sheet at their estimated fair value.
Subsequent changes in the estimated fair value of the Private Warrants are reflected in the change in fair value of warrant liabilities in the accompanying consolidated statements of comprehensive income. The change in the estimated fair value of the Private Warrants resulted in a gain of approximately $(
The Company determined the following estimated fair values for the outstanding Private Warrants as of the dates indicated below:
September 30, | December 31, | |||||
2024 | 2023 | |||||
Warrant liabilities | $ | — | $ | | ||
Total | $ | — | $ | | ||
10. Income Taxes
Income tax expense was approximately $
21
respectively, results primarily from the relationship of income before income tax for the nine months ended September 30, 2024 and 2023, respectively.
The effective tax rates for the three and nine months ended September 30, 2024 and 2023, respectively, differs from the US federal statutory rate of
The Company accounts for income taxes in interim periods under ASC 740-270, Income Taxes – Interim Reporting, which generally requires us to apply an estimated annual consolidated effective tax rate to consolidated pre-tax income. In addition, the guidance under ASC 740 further provides that, in establishing the estimated annual effective tax rate, the Company excludes losses from jurisdictions in which no tax benefit is expected to be recognized for such losses.
11. Fair Value of Financial Instruments
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Company has assessed that the fair value of cash and cash equivalents, trade receivables, trade payables, other current liabilities, and other debt approximates their carrying amounts largely due to the short-term maturities or recent commencement of these instruments. The fair value of the ABL Facility is primarily based upon observable market data, such as market interest rates, for similar debt. The fair value of the Notes is based upon observable market data.
The Company measured the Private Warrant liabilities at fair value on a recurring basis at each reporting period end as more fully discussed below. Changes in the fair value of the Private Warrants at each reporting period end date were recognized within the accompanying consolidated statements of comprehensive income in the change in fair value of warrant liabilities.
Level 1 & 2 Disclosures:
The carrying amounts and fair values of financial assets and liabilities, which are either Level 1 or Level 2, are as follows:
| September 30, 2024 |
| December 31, 2023 | |||||||||
Financial Assets (Liabilities) Not Measured at Fair Value |
| Carrying |
| Fair Value |
| Carrying |
| Fair Value | ||||
ABL Facility (See Note 8) - Level 2 | $ | — | $ | — | $ | — |
| $ | — | |||
Senior Secured Notes (See Note 8) - Level 1 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
22
Recurring fair value measurements
Level 3 Disclosures:
There were
September 30, | December 31, | ||||||
2024 | 2023 | ||||||
Exercise Price | $ | $ | |||||
Stock Price | $ | $ | |||||
Dividend Yield | % | % | |||||
Expected Term (in Years) | |||||||
Risk-Free Interest Rate | % | % | |||||
Expected Volatility | % | % | |||||
Per Share Value of Warrants | $ | $ |
The following table presents changes in Level 3 liabilities measured at fair value for September 30, 2024:
Private Placement Warrants | |||
Balance at December 31, 2023 | $ | | |
Change in fair value of warrant liabilities | ( | ||
Balance at March 31, 2024 | — | ||
Change in fair value of warrant liabilities | — | ||
Balance at June 30, 2024 | — | ||
Change in fair value of warrant liabilities | — | ||
Balance at September 30, 2024 | $ | — | |
There were no transfers of financial instruments between the three levels of the fair value hierarchy during the nine months ended September 30, 2024 and 2023 and the year ended December 31, 2023. The Private Warrants expired unredeemed on March 15, 2024 and are
12. Commitments and Contingencies
The Company is involved in various lawsuits or claims in the ordinary course of business. Management is of the opinion that there is no pending claim or lawsuit which, if adversely determined, would have a material impact on the financial condition of the Company.
13. Earnings (Loss) per Share
Basic earnings (loss) per share (“EPS” or “LPS”) is calculated by dividing net income or loss attributable to Target Hospitality by the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. We apply the treasury stock method in the calculation of diluted earnings per share. During periods when net losses are incurred, potential dilutive securities would be anti-dilutive and are excluded from the calculation of diluted loss per share for that period. Net income was recorded for the three and nine months ended September 30, 2024 and 2023.
23
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2024 | 2023 | 2024 |
| 2023 |
| |||||||
Numerator | ||||||||||||
Net income attributable to Target Hospitality Corp. Common Stockholders - basic | $ | | $ | | $ | | $ | | ||||
Change in fair value of warrant liabilities | — | — | — | ( | ||||||||
Net income attributable to Target Hospitality Corp. Common Stockholders - diluted | $ | | $ | | $ | | $ | | ||||
Denominator | ||||||||||||
Weighted average shares outstanding - basic | | | | | ||||||||
Dilutive effect of outstanding securities: | ||||||||||||
Warrants | — | | — | | ||||||||
PSUs | | | | | ||||||||
SARs | | | | | ||||||||
Stock Options | | | | | ||||||||
RSUs | | | | | ||||||||
Weighted average shares outstanding - diluted | | | | | ||||||||
Net income per share attributable to Target Hospitality Corp. Common Stockholders- basic | $ | | $ | | $ | | $ | | ||||
Net income per share attributable to Target Hospitality Corp. Common Stockholders - diluted | $ | | $ | | $ | | $ | | ||||
When liability-classified warrants are in the money and the impact of their inclusion on diluted EPS is dilutive, diluted EPS also assumes share settlement of such instruments through an adjustment to net income available to common stockholders for the fair value (gain) loss on common stock warrant liabilities and inclusion of the number of dilutive shares in the denominator. The Public and Private Warrants representing a total of
As discussed in Note 15, stock-based compensation awards were outstanding for the three and nine months ended September 30, 2024 and 2023. These stock-based compensation awards were included in the computation of diluted EPS for the three and nine months ended September 30, 2023 because their effect is dilutive as noted in the above table. For the three and nine months ended September 30, 2024, stock-based compensation awards were included in the computation of diluted EPS because their effect is dilutive as noted in the above table. However, approximately
Shares of treasury stock have been excluded from the computation of EPS.
24
14. Stockholders’ Equity
Common Stock
As of September 30, 2024 and December 31, 2023, Target Hospitality had
Preferred Shares
Target Hospitality is authorized to issue
Public Warrants
On January 17, 2018, PEAC sold
Each Public Warrant entitled the holder to purchase
During the three months ended March 31, 2024, holders of Public Warrants exercised
Common Stock in Treasury
In August 2022, the Inflation Reduction Act of 2022 was enacted into law and imposed a nondeductible
On November 3, 2022, the Company’s Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $
The Company may repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company's discretion. The repurchase program, which has no expiration date, may be increased, suspended, or terminated at any time. The program is expected to be implemented over the course of several years and is conducted subject to the covenants in the agreements governing the Company's indebtedness. During the nine months ended September 30, 2024, the Company repurchased
25
approximately $
15. Stock-Based Compensation
On February 29, 2024, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company adopted a new form 2024 Executive Restricted Stock Unit Agreement (the “RSU Agreement”) and a new form 2024 Executive Performance Stock Unit Agreement (the “PSU Agreement” together with the RSU Agreement, the “Award Agreements”) with respect to the granting of restricted stock units (“RSUs”) and performance stock units (“PSUs”), respectively, under the Target Hospitality Corp. 2019 Incentive Plan (as amended, the “Plan”). The new Award Agreements will be used for all awards to executive officers made on or after February 29, 2024.
The RSU Agreement has material terms that are substantially similar to those in the form 2023 Executive Restricted Stock Unit Agreement last approved by the Compensation Committee and previously disclosed by the Company in the 2023 Form 10-K.
Each PSU awarded under the PSU Agreement represents the right to receive
Restricted Stock Units
On February 29, 2024, the Compensation Committee awarded an aggregate of
On May 23, 2024, the Compensation Committee awarded an aggregate of
The table below represents the changes in RSUs:
| Number of |
| Weighted | |||
Balance at December 31, 2023 | | $ | | |||
Granted | | | ||||
Vested | ( | | ||||
Forfeited | ( | | ||||
Balance at September 30, 2024 | | $ | |
Stock-based compensation expense for these RSUs recognized in selling, general and administrative expense in the consolidated statements of comprehensive income for the nine months ended September 30, 2024 and 2023, was approximately $
26
expense for RSUs was approximately $
Performance Stock Units
On February 29, 2024, the Company awarded an aggregate of
The table below represents the changes in PSUs:
| Number of |
| Weighted | |||
Balance at December 31, 2023 | | $ | | |||
Granted | | | ||||
Forfeited | ( | | ||||
Balance at September 30, 2024 | | $ | |
Stock-based compensation expense for these PSUs recognized in selling, general and administrative expense in the consolidated statement of comprehensive income for the nine months ended September 30, 2024 and 2023, was approximately $
Stock Option Awards
During the nine months ended September 30, 2024, there were changes in stock options as shown in the following table.
| Options |
| Weighted Average |
| Weighted Average |
| Intrinsic Value ($ in thousands) | ||||
Outstanding Options at December 31, 2023 | | $ | | $ | | ||||||
Exercised | ( | | - | | |||||||
Vested and expired | ( | | - | - | |||||||
Outstanding Options at September 30, 2024 | | $ | | $ | |
Stock-based compensation expense for these stock option awards recognized in selling, general and administrative expense in the consolidated statements of comprehensive income for the nine months ended September 30, 2024 and 2023, was approximately $
27
than $
The fair value of each option award at the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:
| Assumptions | |
Weighted average expected stock volatility (range) | % | |
Expected dividend yield | % | |
Expected term (years) | ||
Risk-free interest rate (range) | % | |
Exercise price (range) | $ |
The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility as the Company did not have a sufficient trading history as a stand-alone public company to calculate volatility at the time of estimating the fair value of each option at the grant date. Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a dividend on its shares of Common Stock.
Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur.
Stock Appreciation Right Awards
As approved by the Compensation Committee,
As approved by the Compensation Committee,
During the nine months ended September 30, 2024, as approved by the Compensation Committee,
The table below represents the changes in SARs:
Number of Units | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | |||||
Outstanding SARs at December 31, 2023 | | $ | | ||||
Exercised | ( | | - | ||||
Outstanding SARs at September 30, 2024 | - | $ | - | - |
There were
Under the authoritative guidance for stock-based compensation, these SARs are considered liability-based awards. The Company recognized a liability associated with its SARs of $
28
outstanding and unexercised as of September 30, 2024. The liability associated with these SAR awards recognized as of December 31, 2023 was approximately $
The estimated weighted-average fair value of each SAR as of September 30, 2024 and December 31, 2023 was $
The volatility assumption used in the Black-Scholes option-pricing model for purposes of estimating the fair value as of December 31, 2023 and the grant date, is based on peer group volatility as the Company did not have a sufficient trading history as a stand-alone public company to calculate volatility as of December 31, 2023 and as of the grant date. Additionally, due to an insufficient history with respect to stock appreciation right activity and post vesting cancellations, the expected term assumption on the grant date was based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award. The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a dividend on its shares of common stock.
Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur.
16. Retirement plans
We offer a defined contribution 401(k) retirement plan to substantially all of our U.S. employees. Participants may contribute from
17. Business Segments
The Company is organized primarily on the basis of geographic region and customer industry group and operates in
Our remaining operating segments have been consolidated and included in an “All Other” category.
29
The following is a brief description of our reportable segments and a description of business activities conducted by All Other.
HFS – South — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers in the natural resources and development industry located primarily in Texas and New Mexico.
Government — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers with Government contracts located in Texas.
All Other — Segment operations consist primarily of revenue from specialty rental and vertically integrated hospitality services revenue from customers primarily in the natural resources and development industry located outside of the HFS – South segment.
The table below presents information about reported segments for the dates indicated below:
2024
HFS - South | Government | All Other |
| Total | ||||||||
For the Nine Months Ended September 30, 2024 |
|
| ||||||||||
Revenue | $ | | $ | | $ | | (a) | $ | | |||
Adjusted gross profit | $ | | $ | | $ | ( | $ | | ||||
Total Assets | $ | | $ | | $ | | $ | | ||||
For the Three Months Ended September 30, 2024 | ||||||||||||
Revenue | $ | | $ | | $ | | (a) | $ | | |||
Adjusted gross profit | $ | | $ | | $ | | $ | | ||||
2023
HFS - South | Government | All Other |
| Total | ||||||||
For the Nine Months Ended September 30, 2023 | ||||||||||||
Revenue | $ | | $ | | $ | | (a) | $ | | |||
Adjusted gross profit | $ | | $ | | $ | ( | $ | | ||||
Total Assets (as of December 31, 2023) | $ | | $ | | $ | | $ | | ||||
For the Three Months Ended September 30, 2023 | ||||||||||||
Revenue | $ | | $ | | $ | | (a) | $ | | |||
Adjusted Gross Profit | $ | | $ | | $ | ( | $ | | ||||
| (a) | Revenues from segments below the quantitative thresholds are reported in the “All Other” category previously described. |
30
A reconciliation of total segment adjusted gross profit to total consolidated income before income taxes for the dates indicated below, is as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, 2024 |
| September 30, 2023 | September 30, 2024 |
| September 30, 2023 | ||||||||
Total reportable segment adjusted gross profit | $ | | $ | | $ | | $ | | |||||
Other adjusted gross profit |
| |
| ( |
| ( |
| ( | |||||
Depreciation and amortization |
| ( |
| ( |
| ( |
| ( | |||||
Selling, general, and administrative expenses |
| ( |
| ( |
| ( |
| ( | |||||
Other income (expense), net |
| |
| |
| |
| ( | |||||
Loss on extinguishment of debt | — | — | — | ( | |||||||||
Interest expense, net |
| ( |
| ( |
| ( |
| ( | |||||
Change in fair value of warrant liabilities | — | ( | | | |||||||||
Consolidated income before income taxes | $ | | $ | | $ | | $ | | |||||
A reconciliation of total segment assets to total consolidated assets as of the dates indicated below, is as follows:
|
| September 30, 2024 | December 31, 2023 | |||
Total reportable segment assets | $ | | $ | | ||
Other assets |
| |
| | ||
Other unallocated amounts |
| |
| | ||
Total Assets | $ | | $ | | ||
Other unallocated assets consist of the following as reported in the consolidated balance sheets of the Company as of the dates indicated below:
|
| September 30, 2024 |
| December 31, 2023 | ||
Total current assets | $ | | $ | | ||
Other intangible assets, net |
| |
| | ||
Operating lease right-of-use assets, net | | | ||||
Deferred financing costs revolver, net |
| |
| | ||
Other non-current assets |
| — |
| | ||
Total other unallocated amounts of assets | $ | | $ | | ||
31
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the business. Specifically, forward-looking statements may include statements relating to:
| ● | operational, economic, including inflation, political and regulatory risks; |
| ● | our ability to effectively compete in the specialty rental accommodations and hospitality services industry, including growing the HFS and Government segments; |
| ● | effective management of our communities; |
| ● | natural disasters and other business disruptions including outbreaks of epidemic or pandemic disease; |
| ● | the duration of any future public health crisis, related economic repercussions and the resulting negative impact to global economic demand; |
| ● | the effect of changes in state building codes on marketing our buildings; |
| ● | changes in demand within a number of key industry end-markets and geographic regions; |
| ● | changes in end-user demand requirements, including variable occupancy levels associated with contracts in the Government segment; |
| ● | our reliance on third party manufacturers and suppliers; |
| ● | failure to retain key personnel; |
| ● | increases in raw material and labor costs; |
| ● | the effect of impairment charges on our operating results; |
| ● | our future operating results fluctuating, failing to match performance or to meet expectations; |
| ● | our exposure to various possible claims and the potential inadequacy of our insurance; |
| ● | unanticipated changes in our tax obligations; |
| ● | our obligations under various laws and regulations; |
| ● | the effect of litigation, judgments, orders, regulatory or customer bankruptcy proceedings on our business; |
| ● | our ability to successfully acquire and integrate new operations; |
| ● | global or local economic and political movements, including any changes in policy under the Trump administration or any future administration; |
| ● | federal government budgeting and appropriations; |
| ● | our ability to effectively manage our credit risk and collect on our accounts receivable; |
32
| ● | our ability to fulfill our public company obligations; |
| ● | any failure of our management information systems; |
| ● | our ability to refinance debt on favorable terms and meet our debt service requirements and obligations; and |
| ● | risks related to Arrow Bidco’s obligations under the 2025 Senior Secured Notes. |
These forward-looking statements are based on information available as of the date of this Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
TARGET HOSPITALITY CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of Target Hospitality Corp. and is intended to help the reader understand Target Hospitality Corp., our operations and our present business environment. This discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.
Executive Summary
Target Hospitality Corp. is one of North America’s largest providers of vertically integrated specialty rental and value-added hospitality services including: catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation facilities, overall workforce community management, concierge services and laundry service. As of September 30, 2024, our network included 28 communities, to better serve our customers across the US and Canada.
Economic Update
On June 10, 2024, the Company received notice that the U.S. government intended to terminate the South Texas Family Residential Center contract (“STFRC Contract”), effective in 60 days, on August 9, 2024. As such, effective on August 9, 2024, the STFRC Contract was terminated and no longer contributed to total consolidated revenue of the Company from that termination date of August 9, 2024. The STFRC Contract was based on a fixed minimum lease revenue commitment and for the year ended December 31, 2023, contributed approximately $55.9 million in total consolidated revenue, all of which is related to the Company’s Government segment. The Company will retain ownership of the South Texas Family Residential Center assets enabling the Company to continue utilizing these modular solutions to support customer demand across its existing operating segments and other potential growth opportunities. The Company’s Government segment continued to benefit from the Pecos Children’s Center (“PCC”) and the New PCC Contract that became effective November 16, 2023. The PCC Community contributed lower revenues as compared to the third quarter of 2023 driven primarily by lower non-cash revenue amortization of an advanced payment for community expansion associated with the prior contract that became fully amortized as of November 2023, and to a lesser extent, by a decrease in the minimum lease revenue component of the New PCC Contract compared to the prior contract that ended in November 2023. The Company generated cash inflows from operations for the nine months ended September 30, 2024 of approximately $121.1 million compared to approximately $118.5 million for the nine months ended September 30, 2023, representing an increase in cash flows from operations of approximately $2.6 million or 2% driven by an increase in cash collections, a decrease in operating expenses, partially offset by an increase in cash paid for income taxes, an $8.7 million decrease in cash paid for interest driven by a significant reduction in debt outstanding during the current period compared to the prior period, and an increase in interest income. During the nine months ended September 30, 2024, the Company also purchased 2,424,440 shares of Common Stock for an aggregate purchase price of approximately $22.3 million (exclusive of estimated excise taxes of approximately $0.1 million).
For the three months ended September 30, 2024, other key drivers of financial performance included:
| ● | Decreased revenue of $50.7 million, or 35% compared to the same period in 2023, driven by lower revenue generated from the Government segment primarily from lower non-cash revenue amortization of an advanced payment for community build-out and mobilization of asset activities associated with the Company’s PCC community, which was fully amortized as of November 2023. |
| ● | Generated net income of approximately $20.1 million for the three months ended September 30, 2024 as compared to a net income of approximately $45.6 million for the three months ended September 30, 2023, which is primarily attributable to a decrease in revenue and the change in the estimated fair value of warrant liabilities, partially offset by a decrease service costs driven primarily by lower costs in the Government segment as a result of operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the |
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| PCC Community, a decrease in specialty rental costs, a decrease in depreciation of specialty rental assets, a decrease in selling, general and administrative expenses led by a decrease in stock compensation expense, an increase in interest income earned on cash equivalents funded by the increase in available cash as a result of cash flows from operations, and a decrease in income tax expense led by a decrease in income before income tax. |
| ● | Generated consolidated Adjusted EBITDA of $49.7 million representing a decrease of $45.4 million, or 48% as compared to the same period in 2023, driven primarily by the decrease in revenue led by the lower non-cash revenue amortization mentioned above that ended in November 2023 associated with the prior PCC Contract, partially offset by a 13% decrease in operating expenses comprised of a decrease in services costs and specialty rental costs. |
Adjusted EBITDA is a non-GAAP measure. The GAAP measure most comparable to Adjusted EBITDA is Net Income. Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure.
Our Government segment, including several communities in West, Texas supporting critical United States government humanitarian aid efforts, delivers essential services and accommodations near the southern United States border where there is insufficient housing and infrastructure solutions to appropriately care for unaccompanied minor immigrants. Demand for these communities and services is influenced by immigration activity, where continued increases in migrant populations has increased government spending and demand for appropriate government supported solutions. Demand for these communities and services is also impacted by federal government budgeting, appropriations, and federal government administration policy decisions.
Our proximity to customer activities influences occupancy and demand. We have built, own and operate the largest specialty rental and hospitality services network available to customers operating in the HFS – South region. Our broad network often results in us having communities that are the closest to our customers’ job sites, which reduces commute times and costs, and improves the overall safety of our customers’ workforce. Our communities provide customers with cost efficiencies, as they are able to jointly use our communities and related infrastructure (i.e., power, water, sewer and IT) services alongside other customers operating in the same vicinity. Demand for our services is dependent upon activity levels, particularly our customers’ capital spending on natural resource development activities.
Factors Affecting Results of Operations
We expect our business to continue to be affected by the key factors discussed below, as well as factors discussed in the section titled “Risk Factors” included in our 2023 Form 10-K. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove to be incorrect, our actual results may vary materially from our expected results.
Supply and Demand for Natural Resources
As a provider of vertically integrated specialty rental and hospitality services, we are not directly impacted by commodity price fluctuations. However, these price fluctuations indirectly influence our activities and results of operations because the natural resource development workforce is directly affected by price fluctuations and the industry’s expansion or contraction as a result of these fluctuations. Our occupancy volume depends on the size of the workforce within the natural resources industry and the demand for labor. Commodity prices are volatile and influenced by numerous factors beyond our control, including the domestic and global supply of and demand for natural resources, the commodities trading markets, as well as other supply and demand factors that may influence commodity prices.
Availability and Cost of Capital
Capital markets conditions could affect our ability to access the debt and equity capital markets to the extent necessary to fund our future growth. Interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly, and could limit our ability to raise funds, or increase the price of raising funds, in the capital markets and may limit our ability to expand.
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Regulatory Compliance
We are subject to extensive federal, state, local, and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid, and hazardous waste handling and disposal and the investigation and remediation of contamination. In addition, we may be subject, indirectly, to various statutes and regulations applicable to doing business with the U.S. government as a result of our contracts with U.S. government contractor clients. The risks of substantial costs, liabilities, and limitations on our operations related to compliance with these laws and regulations are an inherent part of our business, and future conditions may develop, arise, or be discovered that create substantial compliance or environmental remediation liabilities and costs.
Public Policy
We derive a significant portion of our revenues from our subcontracts with government contractors. The U.S. government and, by extension, our U.S. government contractor customers, may from time to time adopt, implement or modify certain policies or directives that may adversely affect our business. Changes in government policy, presidential administration or other changes in the political landscape relating to immigration policies may similarly result in a decline in our revenues in the Government segment.
Natural Disasters or Other Significant Disruption
An operational disruption in any of our facilities could negatively impact our financial results. The occurrence of a natural disaster, such as earthquake, tornado, severe weather including hail storms, flood, fire, or other unanticipated problems such as public health threats or outbreaks, labor difficulties, equipment failure, capacity expansion difficulties or unscheduled maintenance could cause operational disruptions of varied duration. These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative solutions.
Overview of Our Revenue and Operations
We derive the majority of our revenue from specialty rental accommodations and vertically integrated hospitality services. Approximately 68% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 32% of revenues were earned through leasing of lodging facilities the nine months ended September 30, 2024. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with our customers. In certain of our contracts, rates may vary over the contract term, in these cases, revenue is generally recognized on a straight-line basis over the contract term. We enter into arrangements with multiple deliverables for which arrangement consideration is allocated between lodging and services based on the relative estimated standalone selling price of each deliverable. The estimated price of lodging and services deliverables is based on the prices of lodging and services when sold separately or based upon the best estimate of selling price.
Key Indicators of Financial Performance
Our management uses a variety of financial and operating metrics to analyze our performance. We view these metrics as significant factors in assessing our operating results and profitability and tend to review these measurements frequently for consistency and trend analysis. We primarily review the following profit and loss information when assessing our performance:
Revenue
We analyze our revenues by comparing actual revenues to our internal budgets and projections for a given period and to prior periods to assess our performance. We believe that revenues are a meaningful indicator of the demand and pricing for our services. Key drivers to change in revenues may include average utilization of existing beds, levels of development activity in the HFS – South segment, the consumer price index impacting government contracts, and government spending on housing programs.
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Adjusted Gross Profit
We analyze our adjusted gross profit, which is a Non-GAAP measure, which we define as revenues less cost of sales, excluding impairment and depreciation of specialty rental assets to measure our financial performance. Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure. We believe adjusted gross profit is a meaningful metric because it provides insight into the financial performance of our revenue streams without consideration of company overhead. Additionally, using adjusted gross profit gives us insight on factors impacting cost of sales, such as efficiencies of our direct labor and material costs. When analyzing adjusted gross profit, we compare actual adjusted gross profit to our budgets and internal projections and to prior period results for a given period in order to assess our performance.
We also use Non-GAAP measures such as EBITDA, Adjusted EBITDA, and Discretionary cash flows to evaluate the operating performance of our business. For a more in-depth discussion of the Non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section.
Segments
We have identified two reportable business segments: HFS – South and Government:
HFS – South
The HFS – South segment reflects our facilities and operations in the HFS – South region from customers in the natural resources development industry and includes our 16 communities located across Texas and New Mexico.
Government
The Government segment includes the facilities and operations of the family residential center and the related support communities in Dilley, Texas (the “South Texas Family Residential Center”) provided under a lease and services agreement with a national provider of migrant programming (the “FRCC Partner”). As previously mentioned, the contract for the South Texas Family Residential Center with the FRCC Partner terminated on August 9, 2024. The Company retains ownership of the assets associated with the South Texas Family Residential Center enabling the Company to continue utilizing these modular solutions to support customer demand across its existing operating segments and other potential growth opportunities. Additionally, this segment also includes facilities and operations provided under a lease and services agreement with our NP Partner, backed by a committed U.S. Government contract, to provide a suite of comprehensive service offerings in support of their humanitarian aid efforts.
All Other
Our other facilities and operations which do not meet the criteria to be a separate reportable segment are consolidated and reported as “All Other” which represents the facilities and operations of one community in Canada, three communities in North Dakota, and the catering and other services provided to communities and other workforce accommodation facilities for the natural resource development industries not owned by us.
Key Factors Impacting the Comparability of Results
The historical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations, for the reasons described below:
Government Segment
During the year ended December 31, 2022, the Company executed the Expanded Humanitarian Contract that went into effect in May 2022 to provide enhanced infrastructure and comprehensive facility services that support the critical hospitality solutions the Company provides to the NP Partner and the United States Government in their humanitarian aid missions. The Expanded Humanitarian Contract provided for a significant scope expansion and term extension for the
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continuation of services provided under the agreement that originated in March 2021. The Expanded Humanitarian Contract operated with similar structure to the Company’s prior government services subcontracts, which are centered around minimum revenue commitments supported by the United States Government. Additionally, the Expanded Humanitarian Contract included occupancy-based variable services revenue that aligned with active community population. The minimum revenue commitments, which consisted of annual recurring lease revenue and nonrecurring infrastructure enhancement revenue, provided for a minimum annual revenue contribution of approximately $390 million and was fully committed over its initial contract term. Inclusive of all potential occupancy-based variable services revenue, the Expanded Humanitarian Contract provided for a maximum initial annual total contract amount of approximately $575 million. On May 15, 2023, the Company executed a six-month extension of the Expanded Humanitarian Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms. The Expanded Humanitarian Contract expired as of November 15, 2023. The non-recurring infrastructure enhancement revenue was generated from an advance payment made during the year ended December 31, 2022 for the community build-out, and mobilization of asset activities related to the community expansion associated with the Expanded Humanitarian Contract. The advanced payment was determined to be related to future services to be amortized to revenue over the estimated term of the Expanded Humanitarian Contract. This advance payment revenue amortization ended when the Expanded Humanitarian Contract expired on November 15, 2023. As such, the prior period for the three and nine months ended September 30, 2023 included this revenue amortization in the amount of approximately $35.3 million and $104.8 million, respectively. whereas the current period does not. Additionally, the Expanded Humanitarian Contract included an annual minimum lease revenue commitment of approximately $196 million that impacted the prior period compared to the current period being impacted by an annual minimum lease revenue commitment of approximately $178 million under the New PCC Contract explained below.
During the year ended December 31, 2023, the Company executed the New PCC Contract, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the United States Government, that replaced the Expanded Humanitarian Contract and became effective on November 16, 2023. The New PCC Contract includes a one-year base period through November 15, 2024, an option to extend for up to four additional one-year periods, and an option to extend for up to six months upon the conclusion of the base period or any of the option periods. Under the New PCC Contract, the Company will maintain similar facility size and operational scope compared to the Expanded Humanitarian Contract. The New PCC Contract operates with similar structure to the Company’s prior and existing government services subcontracts, which are centered around minimum revenue commitments supported by the United States Government. Additionally, the New PCC Contract includes occupancy-based variable services revenue that will align with active community population. The minimum revenue commitments, which consist of annual recurring lease revenue, provide for a minimum annual revenue contribution of approximately $178 million. Assuming all option periods are exercised, the 5-year cumulative minimum revenue commitment of the New PCC Contract is expected to be approximately $892 million through 2028.
Additionally, as previously mentioned, the STFRC Contract terminated on August 9, 2024 and no longer contributed to total consolidated revenue of the Company from that termination date of August 9, 2024.
As such, the termination of the STFRC Contract as well as the change from the prior Expanded Humanitarian Contract to the New PCC Contract impacts comparability between periods.
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Results of Operations
The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our unaudited consolidated financial statements. The following discussion should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this document.
Consolidated Results of Operations for the three months ended September 30, 2024 and 2023 ($ in thousands):
For the Three Months Ended | Amount of | Percentage Change | |||||||||
September 30, | Increase | Increase | |||||||||
| 2024 |
| 2023 |
| (Decrease) |
| (Decrease) | ||||
Revenue: | |||||||||||
Services income | $ | 65,796 | $ | 93,538 | $ | (27,742) |
| (30)% | |||
Specialty rental income |
| 29,395 |
| 52,401 |
| (23,006) |
| (44)% | |||
Total revenue |
| 95,191 |
| 145,939 |
| (50,748) |
| (35)% | |||
Costs: | |||||||||||
Services |
| 31,262 |
| 34,035 |
| (2,773) |
| (8)% | |||
Specialty rental |
| 4,662 |
| 7,495 |
| (2,833) |
| (38)% | |||
Depreciation of specialty rental assets |
| 14,057 |
| 17,653 |
| (3,596) |
| (20)% | |||
Gross Profit |
| 45,210 |
| 86,756 |
| (41,546) |
| (48)% | |||
Selling, general and administrative |
| 13,319 |
| 15,273 |
| (1,954) |
| (13)% | |||
Other depreciation and amortization |
| 3,902 |
| 3,838 |
| 64 |
| 2% | |||
Other income, net |
| (2) |
| (71) |
| 69 |
| (97)% | |||
Operating income |
| 27,991 |
| 67,716 |
| (39,725) |
| (59)% | |||
Interest expense, net |
| 3,813 |
| 4,953 |
| (1,140) |
| (23)% | |||
Change in fair value of warrant liabilities | — | 2,576 | (2,576) | (100)% | |||||||
Income before income tax |
| 24,178 |
| 60,187 |
| (36,009) |
| (60)% | |||
Income tax expense |
| 4,084 |
| 14,608 |
| (10,524) |
| (72)% | |||
Net income | 20,094 | 45,579 | (25,485) |
| (56)% | ||||||
Less: Net income attributable to the noncontrolling interest | 100 | — | 100 | 100% | |||||||
Net income attributable to Target Hospitality Corp. common stockholders | $ | 19,994 | $ | 45,579 | $ | (25,585) | (56)% | ||||
For the three months ended September 30, 2024 compared to the three months ended September 30, 2023
Total Revenue. Total revenue was $95.2 million for the three months ended September 30, 2024 and consisted of $65.8 million of services income and $29.4 million of specialty rental income. Total revenue for the three months ended September 30, 2023 was $145.9 million, which consisted of $93.5 million of services income and $52.4 million of specialty rental income.
Services income consists primarily of specialty rental and vertically integrated and comprehensive hospitality services, including room revenue, catering and food services, maintenance, housekeeping, grounds-keeping, security, overall workforce community management, health and recreation facilities, concierge services, and laundry service. The main driver of the decrease in services income revenue year over year was lower revenue in the Government segment in the current period from the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from the prior Expanded Humanitarian Contract that expired on November 15, 2023, partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current period, and the termination of the STFRC Contract.
Specialty rental income consists primarily of revenues from leasing rooms and other facilities at certain communities that include contractual arrangements with customers that are considered leases under the authoritative accounting guidance for leases. Specialty rental income decreased primarily as a result of lower revenue in the Government segment from the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from
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the prior Expanded Humanitarian Contract that expired on November 15, 2023, partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current period, and the termination of the STFRC Contract.
Cost of services. Cost of services was $31.3 million for the three months ended September 30, 2024 as compared to $34.0 million for the three months ended September 30, 2023. The decrease in services costs is primarily due to a decrease in services costs from the Government segment driven by operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC Community, including lease terminations as a result of the purchase of certain previously leased equipment and partially by the termination of the STFRC contract in the Government segment as previously discussed. These decreases were partially offset by an increase in costs of approximately $2.2 million in the HFS-South segment to support increased customer demand.
Specialty rental costs. Specialty rental costs were $4.7 million for the three months ended September 30, 2024 as compared to $7.5 million for the three months ended September 30, 2023. The decrease in specialty rental costs is primarily due to a decrease in costs from the Government segment driven by operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC Community, and partially by the termination of the STFRC contract in the Government segment as previously discussed.
Depreciation of specialty rental assets. Depreciation of specialty rental assets was $14.1 million for the three months ended September 30, 2024 as compared to $17.7 million for the three months ended September 30, 2023. The decrease in depreciation expense is primarily attributable to a decrease in depreciation on certain specialty rental assets and related leasehold improvements acquired or built in 2022 to support growth of the Government segment related to the contract that originated in May of 2022 with the NP Partner, which became fully depreciated during the year ended December 31, 2023. Decreases in depreciation expense associated with HFS-South specialty rental assets also partially contributed to this decrease in depreciation of specialty rental assets for certain site work assets that became fully depreciated during 2024.
Selling, general and administrative. Selling, general and administrative was $13.3 million for the three months ended September 30, 2024 as compared to $15.3 million for the three months ended September 30, 2023. The decrease in selling, general and administrative expense from the prior period as a result of a decrease in stock compensation expense of approximately $3.2 million led primarily by the liability-based stock appreciation right awards (“SARs”) driven by a lower number of SAR awards outstanding during the current period compared to the prior period as approximately 50% of such awards were outstanding as of September 30, 2023 compared to 0% in the current period as there are no remaining awards outstanding as of September 30, 2024 as these awards vested and were exercised as of September 30, 2024. This was offset by an increase in transaction fees of approximately $1.5 million associated primarily with the Proposal described in “Recent Developments” in Note 1 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q. The remaining change was primarily driven by a decrease in non-cash amortization of capitalized system implementation costs that became fully amortized during 2024.
Other depreciation and amortization. Other depreciation and amortization expense was $3.9 million for the three months ended September 30, 2024 as compared to $3.8 million for the three months ended September 30, 2023. The increase in other depreciation and amortization is primarily driven by an increase in depreciation associated with an increase in finance leases for commercial use vehicles.
Other expense (income), net. Other expense (income), net was less than $(0.1) million for the three months ended September 30, 2024 as compared to ($0.1) million for the three months ended September 30, 2023.
Interest expense, net. Interest expense, net was $3.8 million for the three months ended September 30, 2024 as compared to $5.0 million for the three months ended September 30, 2023. The change in interest expense, net was primarily driven by an increase in interest income earned on cash equivalents funded by the increase in available cash as a result of cash flows from operations.
Change in fair value of warrant liabilities. Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end.
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The change in fair value of the warrant liabilities was $0 for the three months ended September 30, 2024 as compared to $2.6 million for the three months ended September 30, 2023 as a result of the Private Warrants expiring unredeemed on March 15, 2024 as discussed in Note 9 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q.
Income tax expense. Income tax expense was $4.1 million for the three months ended September 30, 2024 as compared to $14.6 million for the three months ended September 30, 2023. The decrease in income tax expense is primarily attributable to the decrease in income before taxes for the three months ended September 30, 2024 led by a decrease in revenue, partially offset by cost decreases previously mentioned.
Consolidated Results of Operations for the nine months ended September 30, 2024 and 2023($ in thousands):
For the Nine Months Ended | Amount of | Percentage Change | |||||||||
September 30, | Increase | Increase | |||||||||
| 2024 |
| 2023 |
| (Decrease) |
| (Decrease) | ||||
Revenue: | |||||||||||
Services income | $ | 205,685 | $ | 280,897 | $ | (75,212) |
| (27)% | |||
Specialty rental income |
| 96,899 |
| 156,491 |
| (59,592) |
| (38)% | |||
Total revenue |
| 302,584 |
| 437,388 |
| (134,804) |
| (31)% | |||
Costs: | |||||||||||
Services |
| 101,734 |
| 109,469 |
| (7,735) |
| (7)% | |||
Specialty rental |
| 16,059 |
| 23,592 |
| (7,533) |
| (32)% | |||
Depreciation of specialty rental assets |
| 43,643 |
| 53,242 |
| (9,599) |
| (18)% | |||
Gross Profit |
| 141,148 |
| 251,085 |
| (109,937) |
| (44)% | |||
Selling, general and administrative |
| 41,632 |
| 43,929 |
| (2,297) |
| (5)% | |||
Other depreciation and amortization |
| 11,695 |
| 11,482 |
| 213 |
| 2% | |||
Other expense (income), net |
| (158) |
| 1,244 |
| (1,402) |
| (113)% | |||
Operating income |
| 87,979 |
| 194,430 |
| (106,451) |
| (55)% | |||
Loss on extinguishment of debt | — | 2,128 | (2,128) | (100)% | |||||||
Interest expense, net |
| 12,673 |
| 17,726 |
| (5,053) |
| (29)% | |||
Change in fair value of warrant liabilities | (675) | (1,809) | 1,134 | (63)% | |||||||
Income before income tax |
| 75,981 |
| 176,385 |
| (100,404) |
| (57)% | |||
Income tax expense |
| 17,118 |
| 40,528 |
| (23,410) |
| (58)% | |||
Net income | 58,863 | 135,857 | (76,994) | (57)% | |||||||
Less: Net income attributable to the noncontrolling interest | 100 | — | 100 | 100% | |||||||
Net income attributable to Target Hospitality Corp. common stockholders | $ | 58,763 | $ | 135,857 | $ | (77,094) |
| (57)% | |||
For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
Total Revenue. Total revenue was $302.6 million for the nine months ended September 30, 2024 and consisted of $205.7 million of services income and $96.9 million of specialty rental income. Total revenue was $437.4 million for the nine months ended September 30, 2023 and consisted of $280.9 million of services income and $156.5 million of specialty rental income.
Services income consists primarily of specialty rental and vertically integrated and comprehensive hospitality services, including room revenue, catering and food services, maintenance, housekeeping, grounds-keeping, security, overall workforce community management, health and recreation facilities, concierge services, and laundry service. The main driver of the decrease in services income revenue year over year was lower revenue in the Government segment in the current period from the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from the prior Expanded Humanitarian Contract that expired on November 15, 2023, partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current
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period, and the termination of the STFRC Contract, partially offset by an increase in revenue in the HFS – South segment led by an increase in customer activity.
Specialty rental income consists primarily of revenues from leasing rooms and other facilities at certain communities that include contractual arrangements with customers that are considered leases under the authoritative accounting guidance for leases. Specialty rental income decreased primarily as a result of lower revenue in the Government segment from the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from the prior Expanded Humanitarian Contract that expired on November 15, 2023, partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current period, and the termination of the STFRC Contract.
Cost of services. Cost of services was $101.7 million for the nine months ended September 30, 2024 as compared to $109.5 million for the nine months ended September 30, 2023.
The decrease in services costs is primarily due to a decrease in services costs in the Government segment driven by operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC Community, including lease terminations as a result of the purchase of certain previously leased equipment. Approximately $1 million of this decrease was driven by a community in the All Other category that incurred lodge removal and transportation costs in the prior period that didn’t recur in the current period, while approximately $0.3 million of this decrease was driven by the termination of the STFRC Contract. These decreases were partially offset by an increase of approximately $1.7 million in the HFS-South segment related to an increase in operational costs from community expansion to support increased customer demand in the HFS-South segment, partially offset by the prior period including asset mobilization and integration costs associated with a new community acquired in January 2023 that didn’t recur in the current period and operational efficiencies achieved in the current period.
Specialty rental costs. Specialty rental costs were $16.1 million for the nine months ended September 30, 2024 as compared to $23.6 million for the nine months ended September 30, 2023. The decrease in specialty rental costs is primarily due to a decrease in costs from the Government segment driven by operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC Community, termination of the STFRC Contract in the Government segment, and partially by operational efficiencies achieved in the current period in the HFS-South segment.
Depreciation of specialty rental assets. Depreciation of specialty rental assets was $43.6 million for the nine months ended September 30, 2024 as compared to $53.2 million for the nine months ended September 30, 2023. The decrease in depreciation expense is primarily attributable to a decrease in depreciation on certain specialty rental assets and related leasehold improvements acquired or built in 2022 to support growth of the Government segment related to the contract that originated in May of 2022 with the NP Partner, which became fully depreciated during the year ended December 31, 2023, while approximately $1.8 million of this decrease was driven by a decrease in depreciation of specialty rental assets in the HFS-South segment for certain assets that became fully depreciated during 2024.
Selling, general and administrative. Selling, general and administrative was $41.6 million for the nine months ended September 30, 2024 as compared to $43.9 million for the nine months ended September 30, 2023. The decrease in selling, general and administrative expense of $(2.3) million was primarily driven by a decrease in stock compensation expense of approximately $8.3 million led primarily by the liability-based stock appreciation right awards (“SARs”) driven by a lower number of SAR awards outstanding during the current period compared to the prior period as approximately 50% of such awards were outstanding as of September 30, 2023 compared to 0% in the current period as there are no remaining awards outstanding as of September 30, 2024 as these awards vested and were exercised as of September 30, 2024. Other corporate costs (i.e. recruiting, market research, and outside services) also decreased by approximately $0.5 million from the prior period. These decreases were partially offset by an increase in severance of approximately $1 million for certain terminated employees during the nine months ended September 30, 2024, other compensation and benefits cost increases of approximately $0.8 million, audit fee increases of approximately $0.4 million, other professional fee increases of approximately $0.5 million, insurance expense increase of approximately $0.3 million, and an increase in transaction fees of approximately $3.5 million associated with certain transactions, including primarily the Proposal described in “Recent
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Developments” in Note 1 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q.
Other depreciation and amortization. Other depreciation and amortization expense was $11.7 million for the nine months ended September 30, 2024 as compared to $11.5 million for the nine months ended September 30, 2023. The increase in other depreciation and amortization is primarily driven by an increase in depreciation associated with an increase in finance leases for commercial use vehicles.
Other expense (income), net. Other expense (income), net was $(0.2) million for the nine months ended September 30, 2024 as compared to $1.2 million for the nine months ended September 30, 2023. The decrease in expense is primarily driven by costs incurred on the disposal of assets in the All Other segment category in the prior period, which didn’t recur in the current period.
Loss on extinguishment of debt. Loss on extinguishment of debt was $0 for the nine months ended September 30, 2024 as compared to $2.1 million for the nine months ended September 30, 2023. The decrease in loss on extinguishment of debt is due to the partial redemption of the 2024 Senior Secured Notes on March 15, 2023, which was accounted for as a partial extinguishment of debt and resulted in a charge of approximately $1.7 million related to the write-off of unamortized deferred financing costs and unamortized original issue discount. Approximately $0.4 million of the change related to the write-off of unamortized deferred financing costs for non-continuing lenders in connection with the First Amendment to the ABL Facility on February 1, 2023. No such activity occurred in the current period.
Interest expense, net. Interest expense, net was $12.7 million for the nine months ended September 30, 2024 as compared to $17.7 million for the nine months ended September 30, 2023. The change in interest expense, net was primarily driven by a decrease in interest expense on the Senior Secured Notes of approximately $2.7 million driven by the lower outstanding debt balance in the current period as approximately $153.1 million of the Senior Secured Notes were paid off during the year ended December 31, 2023. Approximately $1.7 million of this decrease was driven by lower deferred financing cost amortization on the Senior Secured Notes during the current period due to the write-off of unamortized deferred financing costs during the nine months ended September 30, 2023 driven by the partial extinguishment of debt associated with the partial redemption of the 2024 Senior Secured Notes on March 15, 2023 discussed above. Approximately $1.8 million of this decrease was driven by an increase in interest income earned on cash equivalents funded by the increase in available cash as a result of cash flows from operations. These decreases were partially offset by an increase in Senior Secured Note original issue discount amortization of approximately $0.9 million driven by fees incurred in connection with the Senior Note Exchange that closed on November 1, 2023 as more fully discussed in Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q. Additionally, these decreases were partially offset by an increase in ABL Facility deferred financing costs amortization and unused line fee expenses combined of approximately $0.3 million driven by the ABL Facility amendments completed in the prior year as more fully discussed in Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q.
Change in fair value of warrant liabilities. Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end. The change in fair value of the warrant liabilities was $(0.7) million for the nine months ended September 30, 2024 as compared to $ (1.8) million for the nine months ended September 30, 2023. The change in the fair value of the warrant liabilities is the result of changes in market prices deriving the value of the financial instruments. The estimated value of the Private Warrants decreased in the current period, generating an increase to income in the current period. There is also a lower number of outstanding Private Warrants in the current period compared to the prior period given the Private Warrants expired on March 15, 2024 as discussed in Note 9 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q.
Income tax expense. Income tax expense was $17.1 million for the nine months ended September 30, 2024 as compared to $40.5 million for the nine months ended September 30, 2023. The decrease in income tax expense is primarily attributable to the decrease in income before taxes for the nine months ended September 30, 2024 led by a decrease in revenue, partially offset by cost decreases previously mentioned.
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Segment Results
The following table sets forth our selected results of operations for each of our reportable segments and All Other for the three months ended September 30, 2024 and 2023 ($ in thousands, except for Average Daily Rate).
Percentage | |||||||||||
For the Three Months Ended September 30, | Amount of Increase | Change | |||||||||
| 2024 |
| 2023 |
| (Decrease) |
| (Decrease) | ||||
Revenue: | |||||||||||
Government | $ | 53,482 | $ | 105,541 | $ | (52,059) |
| (49)% | |||
HFS - South |
| 38,033 |
| 37,527 |
| 506 |
| 1% | |||
All Other |
| 3,676 |
| 2,871 |
| 805 |
| 28% | |||
Total Revenues | $ | 95,191 | $ | 145,939 | $ | (50,748) |
| (35)% | |||
Adjusted Gross Profit | |||||||||||
Government | $ | 46,280 | $ | 90,516 | $ | (44,236) |
| (49)% | |||
HFS - South |
| 12,334 |
| 14,078 |
| (1,744) |
| (12)% | |||
All Other |
| 653 |
| (185) |
| 838 |
| (453)% | |||
Total Adjusted Gross Profit | $ | 59,267 | $ | 104,409 | $ | (45,142) |
| (43)% | |||
Average Daily Rate | |||||||||||
HFS - South | $ | 72.96 | $ | 75.71 | $ | (2.75) | |||||
Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets, certain severance costs, and loss on impairment. Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights.
Government
Revenue for the Government segment was $53.5 million for the three months ended September 30, 2024, as compared to $105.5 million for the three months ended September 30, 2023.
Adjusted gross profit for the Government segment was $46.3 million for the three months ended September 30, 2024, as compared to $90.5 million for the three months ended September 30, 2023.
Revenue decreased primarily due to the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from the prior Expanded Humanitarian Contract that expired on November 15, 2023 and partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current period. This was also partially driven by a decrease in revenue of approximately $5.4 million from the South Texas Family Residential Center led by the STFRC Contract termination as previously discussed.
Adjusted gross profit decreased as a result of the decrease in revenue mentioned above, partially offset by lower costs due to operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC Community, including lease terminations as a result of the purchase of certain previously leased equipment. This was also partially offset by a decrease in costs of approximately $2.4 million from the South Texas Family Residential Center led by the STFRC Contract termination previously discussed.
HFS – South
Revenue for the HFS – South segment was $38.0 million for the three months ended September 30, 2024, as compared to $37.5 million for the three months ended September 30, 2023.
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Adjusted gross profit for the HFS – South segment was $12.3 million for the three months ended September 30, 2024, as compared to $14.1 million for the three months ended September 30, 2023.
The increase in revenue of approximately $0.5 million was primarily attributable to an increase in customer activity.
The decrease in adjusted gross profit of approximately $ (1.7) million was primarily attributable to an increase in operational costs to support increased customer demand.
Segment Results
The following table sets forth our selected results of operations for each of our reportable segments and All Other for the nine months ended September 30, 2024 and 2023 ($ in thousands, except for Average Daily Rate).
For the Nine Months Ended September 30, | Amount of Increase | Percentage Change | |||||||||
| 2024 |
| 2023 |
| (Decrease) |
| (Decrease) | ||||
Revenue: | |||||||||||
Government | $ | 180,948 | $ | 316,223 | $ | (135,275) |
| (43)% | |||
HFS - South |
| 113,198 |
| 112,452 |
| 746 |
| 1% | |||
All Other |
| 8,438 |
| 8,713 |
| (275) |
| (3)% | |||
Total Revenues | $ | 302,584 | $ | 437,388 | $ | (134,804) |
| (31)% | |||
Adjusted Gross Profit | |||||||||||
Government | $ | 147,556 | $ | 266,825 | $ | (119,269) |
| (45)% | |||
HFS - South |
| 38,241 |
| 39,028 |
| (787) |
| (2)% | |||
All Other |
| (1,006) |
| (1,526) |
| 520 |
| (34)% | |||
Total Adjusted Gross Profit | $ | 184,791 | $ | 304,327 | $ | (119,536) |
| (39)% | |||
Average Daily Rate | |||||||||||
HFS - South | $ | 74.04 | $ | 74.80 | $ | (0.76) | |||||
Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets, certain severance costs, and loss on impairment. Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights.
Government
Revenue for the Government segment was $180.9 million for the nine months ended September 30, 2024, as compared to $316.2 million for the nine months ended September 30, 2023.
Adjusted gross profit for the Government segment was $147.6 million for the nine months ended September 30, 2024, as compared to $266.8 million for the nine months ended September 30, 2023.
Revenue decreased primarily due to the decrease in the non-cash revenue amortization that ended in November 2023 associated with the advanced payment from the prior Expanded Humanitarian Contract that expired on November 15, 2023 and partially by lower minimum lease revenue as well as lower variable services revenue generated by the New PCC contract in the current period. This was also partially driven by a decrease in revenue of approximately $3.5 million from the South Texas Family Residential Center led by the STFRC Contract termination as previously discussed.
Adjusted gross profit decreased as a result of the decrease in revenue mentioned above, partially offset by lower costs due to operational efficiencies and reduced leasing costs associated with certain leases that were terminated at the PCC
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Community, including lease terminations as a result of the purchase of certain previously leased equipment. This was also partially offset by a decrease in costs of approximately $1 million from the South Texas Family Residential Center led by the STFRC Contract termination previously discussed.
HFS – South
Revenue for the HFS – South segment was $113.2 million for the nine months ended September 30, 2024, as compared to $112.5 million for the nine months ended September 30, 2023.
Adjusted gross profit for the HFS – South segment was $38.3 million for the nine months ended September 30, 2024, as compared to $39.1 million for the nine months ended September 30, 2023.
The increase in revenue of $0.7 million was primarily attributable to an increase in customer activity, which led to more communities in operation during the current period, including a new community acquired in January 2023 to support growth in the HFS – South segment.
The decrease in adjusted gross profit of $ (0.8) million was primarily attributable to an increase in operational costs from community expansion to support increased customer demand, partially offset by a decrease in service costs driven by the prior period including asset mobilization and integration costs associated with the new community acquired in January 2023 that didn’t recur in the current period and by operational efficiencies achieved in the current period. The increase in revenue noted above also partially offset this decrease.
Liquidity and Capital Resources
We depend on cash flow from operations, cash on hand and borrowings under our ABL Facility to finance our acquisition strategy, working capital needs, and capital expenditures. As of September 30, 2024, the ABL Facility had unused available borrowing capacity of $175 million. We currently believe that our cash on hand, along with these sources of funds will provide sufficient liquidity to fund debt service requirements, support our growth, acquisition, and diversification strategy discussed in Item 1, “Business” of the Company’s 2023 Form 10-K, lease obligations, contingent liabilities and working capital investments for at least the next 12 months. However, we cannot assure you that we will be able to obtain future debt or equity financings adequate for our future cash requirements on commercially reasonable terms or at all.
If our cash flows and capital resources are insufficient, we may be forced to reduce or delay additional acquisitions, future investments and capital expenditures, and seek additional capital. Significant delays in our ability to finance planned acquisitions or capital expenditures may materially and adversely affect our future revenue prospects.
We continue to review available acquisition opportunities with the awareness that any such acquisition may require us to incur additional debt to finance the acquisition and/or to issue shares of our Common Stock or other equity securities as acquisition consideration or as part of an overall financing plan. We will continue to evaluate alternatives to optimize our capital structure, which could include the issuance or repurchase of unsecured and secured debt, equity securities and/or equity-linked securities. There can be no assurance as to the timing of any such issuance or repurchase. From time to time, we may also seek to streamline our capital structure and improve our financial position through refinancing or restructuring our existing debt or retiring certain of our securities for cash or other consideration.
Capital Requirements
During the nine months ended September 30, 2024, we incurred approximately $28.1 million in capital expenditures, with approximately $14.3 million driven by capital expenditures in the Government segment. Maintenance capital expenditures for specialty rental assets amounted to approximately $18 million for the nine months ended September 30, 2024. As we pursue growth, we monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. However, future cash flows are subject to a number of variables, including the ability to maintain existing contracts, obtain new contracts and manage our operating expenses. The failure to achieve anticipated revenue and cash flows from operations could result in a
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reduction in future capital spending. We cannot assure you that operations and other needed capital will be available on acceptable terms or at all. In the event we make additional acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures or seek additional capital. We cannot assure you that needed capital will be available on acceptable terms or at all.
The following table sets forth general information derived from our unaudited consolidated statements of cash flows:
| For the Nine Months Ended | |||||
($ in thousands) | September 30, | |||||
| 2024 |
| 2023 | |||
Net cash provided by operating activities | $ | 121,123 | $ | 118,512 | ||
Net cash used in investing activities |
| (23,421) |
| (60,909) | ||
Net cash used in financing activities |
| (23,879) |
| (134,177) | ||
Effect of exchange rate changes on cash and cash equivalents | (5) | 5 | ||||
Net increase (decrease) in cash and cash equivalents | $ | 73,818 | $ | (76,569) | ||
For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
Cash flows provided by operating activities. Net cash provided by operating activities was $121.1 million for the nine months ended September 30, 2024 compared to $118.5 million for the nine months ended September 30, 2023.
The current period is up by approximately $2.6 million when compared to 2023 driven by an increase in cash collections from customers of approximately $2.5 million, and a net decrease in payments for operating expenses and payroll of approximately $9.7 million driven by a decrease of approximately $3.9 million in cash payments for the vested SAR awards, and by a decrease in operating expenses led by the Government segment, partially offset by an increase in cash paid for severance, and an increase in cash paid for audit and other professional fees. There was also an increase in interest received by approximately $2.3 million (driven by a higher average outstanding cash balance in the current period that generated interest income), and a decrease in cash paid for interest during the period of approximately $8.7 million driven by lower debt as a result of a decrease in the outstanding balance of the Senior Secured Notes. These increases in net cash flows from operations were partially offset by an increase in cash paid for income taxes of approximately $20.5 million as our United States federal tax loss carryforward deductions were fully utilized during the year ended December 31, 2023.
Cash flows used in investing activities. Net cash used in investing activities was $23.4 million for the nine months ended September 30, 2024 compared to $60.9 million for the nine months ended September 30, 2023. This decrease in net cash used in investing activities was primarily related to a decrease in growth capital expenditures in the HFS – South segment with the largest single driver being the $18.6 million acquisition of community assets and related intangibles in January 2023, supporting continued customer demand. To a lesser extent, the decrease was related to a $5.0 million acquisition of community assets in April 2023 and $1.3 million worth of land acquisitions during the three months ended September 30, 2023, supporting Government segment growth. The remainder of the decrease was driven by a decrease in other growth capital expenditures in the Government segment as the prior period included expansion related activities associated with the Expanded PCC Community contract that became effective on May 16, 2022 and drove a significant amount of capital expenditure spend into 2023.
Cash flows used in financing activities. Net cash used in financing activities was $23.9 million for the nine months ended September 30, 2024 compared to $134.2 million for the nine months ended September 30, 2023. This decrease in net cash used in financing activities was primarily driven by the $125 million partial redemption of the 2024 Senior Secured Notes on March 15, 2023 combined with the prior period including the payment of deferred financing costs of $1.4 million associated with the ABL Facility amendment, payment of accrued issuance costs from the warrant exchange of $1.5 million that closed in December of 2022, and taxes paid related to net share settlement of equity awards of approximately $6.8 million, partially offset by the current period increase in net cash used in financing activities of approximately $21.9 million for the repurchase of Common Stock as part of the share repurchase program, combined with taxes paid related to net share settlement of equity awards of $2.6 million in the current period.
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Indebtedness
Finance lease and other financing obligations
The Company’s finance lease and other financing obligations as of September 30, 2024 consisted of approximately $2.5 million of finance leases. The finance leases pertain to leases entered into during 2017 through September 30, 2024, for commercial-use vehicles with 36-month terms (and continue on a month-to-month basis thereafter) expiring through 2027.
The Company’s finance lease and other financing obligations as of December 31, 2023 consisted of approximately $2.4 million of finance leases related to commercial-use vehicles with the same terms as described above.
ABL Facility
During the nine months ended September 30, 2024, no amounts were drawn or repaid on the ABL Facility resulting in an outstanding balance of $0 as of September 30, 2024. The maturity date of the ABL Facility is February 1, 2028, which extended termination date is subject to a springing maturity that will accelerate the maturity of the ABL Facility if any of the 2025 Senior Secured Notes remain outstanding on the date that is ninety-one days prior to the stated maturity date thereof. Refer to Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q for additional discussion of the ABL Facility.
Senior Secured Notes
On March 15, 2019, Arrow Bidco issued $340 million in aggregate principal amount of 2024 Senior Secured Notes under the 2024 Notes Indenture by and among Arrow Bidco, the Note Guarantors, and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest was payable semi-annually on September 15 and March 15 and began September 15, 2019. During the year ended December 31, 2022, the Company made an elective repayment of approximately $5.5 million on the 2024 Senior Secured Notes, reducing the principal balance outstanding to $334.5 million from an original principal balance of $340 million. On March 15, 2023, Arrow Bidco redeemed $125 million in aggregate principal amount of the outstanding 2024 Senior Secured Notes. In connection with the Notes Exchange Offer (as defined in the Company’s 2023 Form 10-K), on November 1, 2023, approximately $181.4 million of 2024 Senior Secured Notes were exchanged by Arrow Bidco and Arrow Bidco issued approximately $181.4 million in aggregate principal amount of the 2025 Senior Secured Notes under the 2025 Senior Secured Notes Indenture by and among Arrow Bidco, the guarantors from time to time party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent. Interest is payable semi-annually on March 15 and September 15 of each year, and began on March 15, 2024. Following this issuance and related transactions, approximately $28.1 million aggregate principal amount of 2024 Senior Secured Notes remained outstanding, which were subsequently redeemed on November 21, 2023 resulting in an outstanding balance of $0. As of September 30, 2024, none of the 2024 Senior Secured Notes remain outstanding and the 2025 Senior Secured Notes had an outstanding principal balance of $181.4 million. Refer to Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q for additional discussion of the 2024 Senior Secured Notes, the Notes Exchange Offer, and the 2025 Senior Secured Notes.
Cash requirements
We expect that our principal short-term (over the next 12 months) and long-term needs for cash relating to our operations and obligations will be to primarily fund (i) operating activities and working capital, (ii) maintenance and growth capital expenditures for specialty rental and other property, plant, and equipment assets, (iii) payments due under finance and operating leases, (iv) principal payments on the 2025 Senior Secured Notes, and (v) debt service interest payments. We plan to fund such cash requirements from our existing sources of liquidity as previously discussed.
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The table below presents information on payments coming due under the most significant categories of our needs for cash (excluding operating cash flows pertaining to normal business operations, other than operating lease obligations) as of September 30, 2024:
($ in thousands) |
| Total |
| Rest of 2024 | 2025 | 2026 | 2027 | ||||||||
Interest Payments(1) | $ | 14,629 | $ | — | $ | 14,629 | $ | — | $ | — | |||||
2025 Senior Secured Notes |
| 181,446 |
| — | 181,446 | — | — | ||||||||
Operating lease obligations, including imputed interest(2) | 14,634 | 2,889 | 6,254 | 4,274 | 1,217 | ||||||||||
Total | $ | 210,709 | $ | 2,889 | $ | 202,329 | $ | 4,274 | $ | 1,217 | |||||
| (1) | We will incur and pay interest expense at 10.75% of the remaining face value of $181.4 million annually in connection with our 2025 Senior Secured Notes. Over the remaining term of the Notes, interest payments total approximately $14.6 million. |
| (2) | Represents interest on operating lease obligations calculated using the appropriate discount rate for each lease. |
Concentration of Risks
In the normal course of business, we grant credit to customers based on credit evaluations of their financial condition and generally require no collateral or other security. Major customers are defined as those individually comprising more than 10% of our revenues or accounts receivable. For the nine months ended September 30, 2024, we had two customers, who accounted for 47% and 13% of revenues, respectively, while no other customers accounted for more than 10% of revenues. The largest customers accounted for 31% and 10% of accounts receivable, respectively, while no other customers accounted for more than 10% of the accounts receivable balance as of September 30, 2024.
Our largest customer for the nine months ended September 30, 2023 accounted for 63% of revenues, while no other customer accounted for more than 10% of revenues. The largest customer accounted for 21% of accounts receivable, respectively, while no other customers accounted for more than 10% of the accounts receivable balance as of September 30, 2023.
Major suppliers are defined as those individually comprising more than 10% of the annual goods purchased by the Company. For the nine months ended September 30, 2024, we had one major supplier representing 20% of goods purchased. For the nine months ended September 30, 2023, we had one major supplier that represented 16.6% of goods purchased.
We provide services almost entirely to customers in the government and natural resource industries and as such, are almost entirely dependent upon the continued activity of such customers.
Commitments and Contingencies
The Company leases certain land, buildings, offices, modular units, and equipment under non-cancellable operating leases, the terms of which vary and generally contain renewal options. Such operating lease obligations are recognized in the Company’s accompanying consolidated balance sheet as of September 30, 2024 as current portion of operating lease obligations and long-term operating lease obligations. Refer to the Company’s unaudited consolidated balance sheet included elsewhere in this Quarterly Report on Form 10-Q for the amounts recognized as current portion of operating lease obligations and long-term operating lease obligations as of September 30, 2024.
Rent expense included in services costs in the unaudited consolidated statements of comprehensive income for cancelable and non-cancelable leases was $9.6 million and $18.0 million for the nine months ended September 30, 2024 and 2023, respectively. Rent expense included in services costs in the unaudited consolidated statements of comprehensive income for cancelable and non-cancelable leases was $2.9 million and $5.6 million for the three months ended September 30, 2024 and 2023, respectively. Rent expense included in the selling, general, and administrative expenses in the unaudited consolidated statements of comprehensive income for cancelable and non-cancelable leases was $0.4 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively. Rent expense included in the selling, general, and administrative expenses in the unaudited consolidated statements of comprehensive income for cancelable
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and non-cancelable leases was $0.1 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).
For a discussion of the critical accounting policies and estimates, refer to the “Critical Accounting Policies and Estimates” section in Part II, Item 7 of our 2023 Form 10-K. There have been no material changes during the three and nine months ended September 30, 2024 to the judgments, assumptions and estimates upon which our critical accounting estimates are based.
Additionally, refer to Note 1 of our notes to our unaudited consolidated financial statements included in this Form 10-Q for additional discussion of our summary of significant accounting policies and use of estimates. These estimates require significant judgments and assumptions.
Principles of Consolidation
Refer to Note 1 of the notes to our unaudited consolidated financial statements included in this Form 10-Q for a discussion of principles of consolidation.
Recently Issued Accounting Standards
Refer to Note 1 of the notes to our unaudited consolidated financial statements included in this Form 10-Q for our assessment of recently issued accounting standards.
Non-GAAP Financial Measures
We have included Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows which are measurements not calculated in accordance with US GAAP, in the discussion of our financial results because they are key metrics used by management to assess financial performance. Our business is capital-intensive and these additional metrics allow management to further evaluate our operating performance.
Target Hospitality defines Adjusted gross profit, as gross profit plus depreciation of specialty rental assets and loss on impairment, and certain severance costs.
Target Hospitality defines EBITDA as net income (loss) before interest expense and loss on extinguishment of debt, income tax expense (benefit), depreciation of specialty rental assets, and other depreciation and amortization.
Adjusted EBITDA reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what management considers transactions or events not related to its core business operations:
| ● | Other expense (income), net: Other expense (income), net includes miscellaneous cash receipts, gains and losses on disposals of property, plant, and equipment, and other immaterial expenses and non-cash items. |
| ● | Transaction expenses: Target Hospitality incurred advisory fees associated with certain transactions during 2023. During 2024, Target Hospitality incurred expenses associated with certain transactions, primarily driven by the Proposal described in “Recent Developments” in Note 1 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q. |
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| ● | Stock-based compensation: Charges associated with stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy. |
| ● | Change in fair value of warrant liabilities: Non-cash change in estimated fair value of warrant liabilities. |
| ● | Other adjustments: System implementation costs, including non-cash amortization of capitalized system implementation costs, business development, accounting standard implementation costs and certain severance costs. |
We define Discretionary cash flows as cash flows from operations less maintenance capital expenditures for specialty rental assets.
EBITDA reflects net income (loss) excluding the impact of interest expense and loss on extinguishment of debt, provision for income taxes, depreciation, and amortization. We believe that EBITDA is a meaningful indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors, and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization expense, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
Target Hospitality also believes that Adjusted EBITDA is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects adjustments to exclude the effects of additional items, including certain items, that are not reflective of the ongoing operating results of Target Hospitality. In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale or disposal of depreciable assets and impairment losses because including them in EBITDA is inconsistent with reporting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale or disposal of depreciable assets and impairment losses represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.
Target Hospitality also presents Discretionary cash flows because we believe it provides useful information regarding our business as more fully described below. Discretionary cash flows indicate the amount of cash available after maintenance capital expenditures for specialty rental assets for, among other things, investments in our existing business.
Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows are not measurements of Target Hospitality’s financial performance under GAAP and should not be considered as alternatives to gross profit, net income or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of Target Hospitality’s liquidity. Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows should not be considered as discretionary cash available to Target Hospitality to reinvest in the growth of our business or as measures of cash that is available to it to meet our obligations. In addition, the measurement of Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows may not be comparable to similarly titled measures of other companies. Target Hospitality’s management believes that Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows provides useful information to investors about Target Hospitality and its financial condition and results of operations for the following reasons: (i) they are among the measures used by Target Hospitality’s management team to evaluate its operating performance; (ii) they are among the measures used by Target Hospitality’s management team to make day-to-day operating decisions, (iii) they are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results across companies in Target Hospitality’s industry.
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The following table presents a reconciliation of Target Hospitality’s consolidated gross profit to Adjusted gross profit:
For the Three Months Ended | For the Nine Months Ended | ||||||||||
($ in thousands) | September 30, | September 30, | |||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
Gross Profit | $ | 45,210 | $ | 86,756 | $ | 141,148 | $ | 251,085 | |||
Depreciation of specialty rental assets | 14,057 | 17,653 | 43,643 | 53,242 | |||||||
Adjusted gross profit | $ | 59,267 | $ | 104,409 | $ | 184,791 | $ | 304,327 | |||
The following table presents a reconciliation of Target Hospitality’s consolidated net income to EBITDA and Adjusted EBITDA:
| For the Three Months Ended |
| For the Nine Months Ended | |||||||||
($ in thousands) | September 30, | September 30, | ||||||||||
| 2024 |
| 2023 |
| 2024 | 2023 | ||||||
Net income | $ | 20,094 | $ | 45,579 | $ | 58,863 | $ | 135,857 | ||||
Income tax expense |
| 4,084 |
| 14,608 | 17,118 | 40,528 | ||||||
Interest expense, net |
| 3,813 |
| 4,953 | 12,673 | 17,726 | ||||||
Loss on extinguishment of debt | — | — | — | 2,128 | ||||||||
Other depreciation and amortization |
| 3,902 |
| 3,838 | 11,695 | 11,482 | ||||||
Depreciation of specialty rental assets |
| 14,057 |
| 17,653 | 43,643 | 53,242 | ||||||
EBITDA |
| 45,950 |
| 86,631 | 143,992 | 260,963 | ||||||
Adjustments | ||||||||||||
Other expense (income), net |
| (2) |
| (71) | (158) | 1,244 | ||||||
Transaction expenses |
| 1,958 |
| 504 | 4,119 | 593 | ||||||
Stock-based compensation | 1,600 | 4,835 | 5,683 | 13,948 | ||||||||
Change in fair value of warrant liabilities | — | 2,576 | (675) | (1,809) | ||||||||
Other adjustments | 199 | 569 | 2,609 | 1,619 | ||||||||
Adjusted EBITDA | $ | 49,705 | $ | 95,044 | $ | 155,570 | $ | 276,558 | ||||
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The following table presents a reconciliation of Target Hospitality’s Net cash provided by operating activities to Discretionary cash flows:
For the Nine Months Ended | ||||||
($ in thousands) | September 30, | |||||
2024 | 2023 | |||||
Net cash provided by operating activities | $ | 121,123 | $ | 118,512 | ||
Less: Maintenance capital expenditures for specialty rental assets | (17,982) | (10,725) | ||||
Discretionary cash flows | $ | 103,141 | $ | 107,787 | ||
Purchase of specialty rental assets | (23,638) | (53,662) | ||||
Purchase of property, plant and equipment | (324) | (2,941) | ||||
Acquired intangible assets | — | (4,547) | ||||
Proceeds from sale of specialty rental assets and other property, plant and equipment | 541 | 241 | ||||
Net cash used in investing activities | $ | (23,421) | $ | (60,909) | ||
Principal payments on finance and finance lease obligations | (1,223) | (1,037) | ||||
Repayment of Senior Notes | — | (125,000) | ||||
Repurchase of Common Stock | (21,894) | — | ||||
Payment of issuance costs from warrant exchange | — | (1,504) | ||||
Proceeds from issuance of Common Stock from exercise of warrants | 3 | 209 | ||||
Proceeds from issuance of Common Stock from exercise of options | 1,850 | 1,396 | ||||
Payment of deferred financing costs | — | (1,423) | ||||
Taxes paid related to net share settlement of equity awards | (2,615) | (6,818) | ||||
Net cash used in financing activities | $ | (23,879) | $ | (134,177) | ||
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our principal market risks are our exposure to interest rates and commodity risks.
Interest Rates
We are exposed to interest rate risk through our ABL Facility, which is subject to the risk of higher interest charges associated with increases in interest rates. As of September 30, 2024, we had $0 of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates. If floating interest rates increased by 100 basis points, our consolidated interest expense would not be impacted, however, based on our floating-rate debt obligations, which had no outstanding balances as of September 30, 2024.
Commodity Risk
Commodity price fluctuations also indirectly influence our activities and results of operations over the long-term because they may affect production rates and investments by natural resource development companies in the development of commodity reserves.
We have limited direct exposure to risks associated with fluctuating commodity prices. However, both our profitability and our cash flows are affected by volatility in commodity prices. We do not currently hedge our exposure to commodity prices.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company’s management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, the Company’s management and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024, at the reasonable assurance level.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various lawsuits, claims and legal proceedings, the majority of which arise out of the ordinary course of business. The nature of the Company’s business is such that disputes occasionally arise with vendors including suppliers and subcontractors, and customers over contract specifications and contract interpretations among other things. The company assesses these matters on a case-by-case basis as they arise. Reserves are established, as required, based on its assessment of exposure. We have insurance policies to cover general liability and workers’ compensation-related claims. In the opinion of management, the ultimate amount of liability not covered by insurance, if any, under such pending lawsuits, claims and legal proceedings will not have a material adverse effect on its financial condition or results of operations. Because litigation is subject to inherent uncertainties including unfavorable rulings or developments, it is possible that the ultimate resolution of our legal proceedings could involve amounts that are different from our currently recorded accruals, and that such differences could be material.
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Item 1A. Risk Factors
The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control and which may cause actual performance to differ materially from historical or projected future performance. “Item 1A. Risk Factors” of our 2023 Form 10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our 2023 Form 10-K. Except as presented below, there have been no material changes from the risk factors described in our 2023 Form 10-K.
We depend on our most significant customer. The loss of our largest customer, or any one of our largest customers in any of our business segments, could adversely affect our results of operations.
As a result of the previously announced termination of the contract for the South Texas Family Residential Center in Dilley, Texas, we depend on our most significant customer. For the nine months ended September 30, 2024, our largest customer accounted for approximately 47% of our total revenue, and our five largest customers accounted for approximately 75% of our total revenue. For a more detailed explanation of our customers, see the “Item 1. Business” of our 2023 Form 10-K. The loss of our largest customer or any one of our largest customers in any of our business segments or a sustained decrease in demand by any of such customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
The Company did not sell any securities during the quarter ended September 30, 2024 that were not registered under the Securities Act of 1933, as amended (the "Securities Act").
Issuer Purchases of Equity Securities
On November 3, 2022, the Company’s Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $100 million of its outstanding shares of Common Stock. The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, applicable legal requirements, contractual obligations, and other factors. Any shares of common stock repurchased will be held as treasury shares.
The Company may repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company's discretion. The repurchase program, which has no expiration date, may be increased, suspended, or terminated at any time. The program is expected to be implemented over the course of several years and is conducted subject to the covenants in the agreements governing the Company's indebtedness. During the nine months ended September 30, 2024, the Company repurchased 2,424,440 shares of Common Stock for an aggregated price of approximately $22.3 million (exclusive of estimated excise taxes of approximately $0.1 million). During the three months ended September 30, 2024, the Company repurchased 150,000 shares of Common Stock for an aggregate price of approximately $1.1 million (exclusive of estimated excise taxes of less than $0.1 million). As of September 30, 2024, the stock repurchase program had a remaining capacity of approximately $77.7 million.
The following table summarizes all of the share repurchases during the three and nine months ended September 30, 2024:
Period | Total number of shares |
| Average price paid per share |
| Total number of shares purchased as part of publicly announced plan or program |
| Maximum number of shares yet to be purchased under the plan (1) | ||
January 1, 2024 through January 31, 2024 | 903,444 | $ | 9.37 | 903,444 | 9,465,382 | ||||
February 1, 2024 through February 29, 2024 | 754,556 | $ | 9.47 | 754,556 | 8,717,615 | ||||
March 1, 2024 through March 31, 2024 | 616,440 | $ | 8.89 | 616,440 | 7,259,287 | ||||
September 1, 2024 through September 30, 2024 | 150,000 | $ | 7.61 | 150,000 | 9,995,668 | ||||
Total | 2,424,440 | 2,424,440 |
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| (1) | The maximum number of shares that may be repurchased under the stock repurchase program is calculated by dividing the total dollar amount available to repurchase shares by the closing price of our Common Stock on the last business day of the respective month. |
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
Exhibit No. |
| Exhibit Description |
3.1 | ||
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
* | Filed herewith |
** | The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Target Hospitality Corp. | ||
Dated: November 12, 2024 | By: | /s/ JASON P. VLACICH |
Jason P. Vlacich | ||
Chief Financial Officer and Chief Accounting Officer | ||
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