THE WOODLANDS, Texas, May 8, 2024 /PRNewswire/ -- Target Hospitality Corp. ("Target Hospitality", "Target" or the "Company") (NASDAQ:TH), one of North America's largest providers of vertically-integrated modular accommodations and value-added hospitality services, today reported results for the three months ended March 31, 2024. Financial and Operational Highlights Revenue of $106.7 million for the three months ended March 31, 2024. Net income of $20.4 million for the three months ended March 31, 2024. Basic and diluted income per share of $0.20 for the three months ended March 31, 2024. Adjusted EBITDA(1) of $53.7 million for the three months ended March 31, 2024. Strong cash generation with approximately $50.6 million of Net Cash Provided by Operating Activities and $47.5 million of Discretionary Cash Flow(1) ("DCF") for the three months ended March 31, 2024. Significant financial flexibility with approximately $299 million of total available liquidity and a net leverage ratio of 0.2x as of March 31, 2024. Materially enhanced financial position supports growing pipeline of potential growth opportunities, seeking to allocate over $500 million of net growth capital through 2027. Returned approximately $21.2 million to shareholders through the repurchase of approximately 2.3 million shares of common stock during the three months ended March 31, 2024. Executive Commentary "Our first quarter results reflect the strength of our operating platform and network capabilities, which consistently support strong financial performance.  We continue to focus on maximizing operational efficiencies, while simultaneously providing world-class solutions to our customers," stated Brad Archer, President and Chief Executive Officer. "This commitment has strengthened our balance sheet and materially enhanced our financial position.  These attributes create the ideal position to continue providing premier hospitality solutions to our customers, while delivering strong financial results and simultaneously pursuing attractive growth opportunities focused on diversifying our service offerings," concluded Mr. Archer.  Financial Results First Quarter Summary Highlights For the Three Months Ended ($ in '000s, except per share amounts) - (unaudited) March 31, 2024 March 31, 2023 Revenue $ 106,672 $ 147,819 Net income $ 20,383 $ 43,825 Income per share – basic $ 0.20 $ 0.44 Income per share – diluted $ 0.20 $ 0.38 Adjusted EBITDA(1) $ 53,688 $ 90,597 Average utilized beds 14,049 14,490 Utilization 87 % 93 % Revenue was $106.7 million for the three months ended March 31, 2024, compared to $147.8 million for the same period in 2023. Net income was $20.4 million for the three months ended March 31, 2024, compared to $43.8 million for the same period in 2023.  Adjusted EBITDA was $53.7 million for the three months ended March 31, 2024, compared to $90.6 million for the same period in 2023. The year over year decreases were primarily driven by non-cash, nonrecurring, infrastructure enhancement revenue amortization ("Infrastructure Revenue Amortization") associated with the Company's Pecos Children's Center ("PCC") community within the government segment.  As previously announced, on July 8, 2022, the Infrastructure Revenue Amortization was associated with material expansion and enhancement of the PCC community and was fully amortized as of November 2023. Capital Management The Company had approximately $9.7 million of capital expenditures for the three months ended March 31, 2024.  Capital expenditures were predominantly focused on enhancing operational efficiencies through the purchase of previously leased equipment, further optimizing Target's operational footprint across its network of modular accommodations. As of March 31, 2024, the Company had approximately $124 million of cash and cash equivalents with approximately $299 million of total available liquidity, no outstanding borrowings on the Company's $175 million credit facility, and a net leverage ratio of 0.2 times.  As of March 31, 2024, the Company repurchased approximately 2.3 million shares of its common stock for approximately $21.2 million. The stock repurchases, which commenced in January 2024, were executed pursuant to the $100 million stock repurchase program announced in November 2022 and represent approximately 21.2% of total share repurchase authorization executed to date. This repurchase program may be suspended from time to time, modified, extended or discontinued at certain times. Purchases under the repurchase program may be made from time to time in open market or privately negotiated transactions, and will be subject to market conditions, applicable legal requirements, contractual obligations and other factors. Any shares of common stock repurchased will be held as treasury shares. Business Update The strength in Target's core service offering continues to support a high degree of revenue visibility, strong cash generation and a robust liquidity profile.  These attributes have established an enhanced financial position, centered on an optimized balance sheet supporting meaningful financial flexibility.  Target's optimized financial profile allows the Company to pursue capital allocation opportunities focused on diversifying and broadening the Company's customer base and contract portfolio.  Importantly, as Target evaluates these opportunities there remains a sharp focus on maintaining its strong financial position through disciplined capital deployment.  Target continues to actively evaluate a robust pipeline of strategic growth opportunities and seeks to allocate over $500 million of net growth capital through 2027. These opportunities encompass Target's existing full-turnkey hospitality solutions, as well as broadening Target's value chain participation through individual elements of existing core competencies. The strength in Target's core service offering and enhanced financial profile supports the company's reiterated preliminary 2024 outlook, excluding acquisitions of: Total revenue between $410 and $425 million Adjusted EBITDA(1) between $195 and $210 million Total capital spending between $25 and $30 million, excluding acquisitions Recent Developments On March 25, 2024 Target announced that the Board of Directors of Target Hospitality ("the Board") received an unsolicited non-binding proposal from Arrow Holdings S.à r.l. ("Arrow"), an affiliate of TDR Capital LLP ("TDR"), to acquire all of the outstanding shares of common stock of Target Hospitality that are not owned by any of Arrow, any investment fund managed by TDR or any of their respective affiliates, for cash consideration of $10.80 per share (the "Proposal").  The Board has established a special committee of independent directors (the "Special Committee"), and the Special Committee has retained Centerview Partners LLC and Ardea Partners LP as its financial advisors and Cravath, Swaine & Moore LLP as its legal advisor.  The Special Committee has commenced its review and evaluation of the Proposal. The Special Committee has made no decision at this time with respect to the Proposal, and the Company does not undertake any obligation to provide any updates with respect to the Proposal or any other transaction, except as required by applicable law or other regulatory requirements.  There can be no assurance that any transaction will result from the Special Committee's evaluation of the Proposal, or, if so, the timing, terms and conditions of such transaction. Segment Results – First Quarter 2024 Government Refer to exhibits to this earnings release for definitions and reconciliations of Non-GAAP financial measures to GAAP financial measures For the Three Months Ended ($ in '000s) - (unaudited) March 31, 2024 March 31, 2023 Revenue $ 67,607 $ 109,503 Adjusted gross profit(1) $ 52,433 $ 88,774 Revenue for the three months ended March 31, 2024, was $67.6 million compared to $109.5 million for the same period in 2023. Adjusted gross profit for the period was $52.4 million compared to $88.8 million in the same period in 2023. These decreases were primarily driven by non-cash, nonrecurring, Infrastructure Revenue Amortization associated with the Company's PCC community, which was fully amortized as of November 2023.  Hospitality & Facilities Services - South  Refer to exhibits to this earnings release for definitions and reconciliations of Non-GAAP financial measures to GAAP financial measures For the Three Months Ended ($ in '000s, except ADR) - (unaudited) March 31, 2024 March 31, 2023 Revenue $ 36,934 $ 35,772 Adjusted gross profit(1) $ 12,842 $ 11,656 Average daily rate (ADR) $ 74.89 $ 73.42 Average utilized beds 5,363 5,339 Utilization 72 % 86 % Revenue for the three months ended March 31, 2024, was $36.9 million compared to $35.8 million for the same period in 2023. Average available beds increased to 7,440, a 19% increase from the prior period, as the Company continues to optimize network availability to align with strong customer demand.  Average utilized beds increased to 5,363 for the three months ended March 31, 2024, with ADR of $74.89.  Target continues to benefit from increasing customer demand, as the Company's expansive network provides added value and superior flexibility in labor allocation while offering world-class service offerings. All Other Refer to exhibits to this earnings release for definitions and reconciliations of Non-GAAP financial measures to GAAP financial measures For the Three Months Ended ($ in '000s) - (unaudited) March 31, 2024 March 31, 2023 Revenue $ 2,131 $ 2,544 Adjusted gross profit(1) $ (1,426) $ (870) This segment's operations consist of hospitality services revenue not included in other segments. Revenue for the three months ended March 31, 2024, was $2.1 million compared to $2.5 million for the same period in 2023. Conference Call The Company has scheduled a conference call for May 8, 2024, at 8:00 a.m. Central Time (9:00 am Eastern Time) to discuss the first quarter 2024 results. The conference call will be available by live webcast through the Investors section of Target Hospitality's website at www.TargetHospitality.com or by connecting via phone through one of the following options: Please utilize the Direct Phone Dial option to be immediately entered into the conference call once you are ready to connect. Direct Phone Dial(RapidConnect URL):     https://emportal.ink/3xslxuA Or the traditional, operator assisted dial-in below. Domestic:                       1-800-836-8184 Please register for the webcast or dial into the conference call approximately 15 minutes prior to the scheduled start time. About Target Hospitality Target Hospitality is one of North America's largest providers of vertically integrated modular accommodations and value-added hospitality services in the United States. Target builds, owns and operates a customized and growing network of communities for a range of end users through a full suite of value-added solutions including premium food service management, concierge, laundry, logistics, security and recreational facilities services. Cautionary Statement Regarding Forward Looking Statements Certain statements made in this press release (including the financial outlook contained herein) are "forward looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words "estimates," "projected," "expects," "anticipates," "forecasts," "plans," "intends," "believes," "seeks," "may," "will," "should," "future," "propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: 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 – South and Government segments; effective management of our communities; natural disasters and other business distributions 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-market demand requirements including variable occupancy levels associated with subcontracts 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 Biden administration or any future administration; federal government budgeting and appropriations; our ability to effectively manage our credit risk and collect on our accounts receivable; our ability to fulfill Target Hospitality's 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 our outstanding obligations in connection with the Senior Notes.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.  (1)   Non-GAAP Financial Measures This press release contains historical non-GAAP financial measures including Adjusted gross profit, Discretionary Cash Flow, EBITDA, and Adjusted EBITDA, 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.  Reconciliations of these measures to the most directly comparable GAAP financial measures are contained herein. To the extent required, statements disclosing the definitions, utility and purposes of these measures are also set forth herein. This press release also contains a forward-looking non-GAAP financial measure Adjusted EBITDA. Reconciliations of this forward-looking measure to its most directly comparable GAAP financial measures is unavailable to Target Hospitality without unreasonable effort. We cannot provide a reconciliation of forward-looking Adjusted EBITDA to GAAP financial measures because certain items required for such reconciliation are ...