THE
WOODLANDS, Texas, Dec. 13,
2023 /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 announced certain contract
terms associated with the November 6,
2023 humanitarian contract award for the Influx Care
Facility ("ICF") located at Target's Pecos Children's Center
("PCC") community ("ICF Contract").
The $75 billion Indefinite
Delivery, Indefinite Quantity ("IDIQ") contract adheres to the
customary funding process noted in contracts of a similar nature
and has a five-year period of performance with the ability to
extend for an additional five years. The ICF Contract, funded
through the IDIQ, has a standard one-year base period of
performance, with four one-year option periods, and allows for up
to $3.3 billion of potential funding
through 2028, with the opportunity of additional funding access
through 2033, if the IDIQ 5-year option is exercised. Starting in
2021, PCC remains one of the only active ICF sites in the U.S.
and the IDIQ award establishes the foundation for 13 years of
continuous humanitarian solutions at PCC.
In conjunction with the ICF Contract, Target and its non-profit
partner have entered into a new PCC contract ("New PCC Contract")
which continues to leverage the unique strengths of both
organizations. Under the New PCC Contract, PCC will maintain
similar facility size and operational scope compared to the
previous contract, commenced in May
2022. In addition, the New PCC Contract will operate
similarly to the previous contract, which centered around annual
minimum lease revenue commitments with additional occupancy-based
variable revenue based on active community census. Annual funding
commitments are expected to be completed through normal course
annual governmental appropriations as provided within
the IDIQ.
The New PCC Contract has an effective date of November 16, 2023, and is expected to provide for
approximately $178 million of minimum
annual lease revenue commitments with expected 5-year cumulative
minimum lease revenue commitments of approximately $892 million through 2028, assuming the U.S.
government exercises all option periods.
Inclusive of all potential occupancy-based variable revenue,
total potential value of the New PCC Contract could exceed
$1.7 billion of cumulative revenue
through 2028, assuming the U.S. government exercises all option
periods.
"We are pleased with the outcome of our contract under the
multi-year IDIQ award for our highly customized PCC community. This
contract validates the critical nature of our PCC community, while
illustrating the benefits of our focused strategic diversification
efforts over the past several years. Target has served as a trusted
provider of critical humanitarian solutions to the U.S government
for nearly a decade and we are excited to continue pursuing an
expanding pipeline of growth opportunities focused on broadening
our portfolio of long-term contract commitments supporting the U.S.
government and our partners," stated Brad
Archer, President and Chief Executive Officer.
As a result of the effective date of the New PCC Contract, the
Company is providing an updated full year 2023 financial outlook,
excluding acquisitions of:
- Total revenue between $550 and
$560 million
- Adjusted EBITDA(1) between $330 and $340
million
- Total capital spending between $30 and $35
million, excluding acquisitions
- Approaching zero net debt by year end 2023
The 2023 financial outlook includes non-cash infrastructure
revenue amortization of approximately $117
million associated with the PCC community enhancements and
will not recur with the New PCC Contract.
Since 2021, Target's PCC community has served as a cornerstone
to the U.S. government's domestic humanitarian aid mission. The ICF
Contract and subsequent New PCC Contract, highlight the importance
of this critical ICF site and provide the basis for Target's
preliminary 2024 financial outlook of:
- Total revenue between $410 and
$425 million
- Adjusted EBITDA(1) between $195 and $210
million
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 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," "could,"
"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; federal government's determination to exercise
option periods associated with the ICF Contract; our ability to
effectively compete in the specialty rental accommodations and
hospitality services industry; effective management of our
communities; natural disasters and other business distributions
including outbreaks of epidemic or pandemic disease; changes in
demand within a number of key industry end-markets and geographic
regions; failure to retain key personnel; increases in raw material
and labor costs; 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; 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; federal government budgeting and
appropriations. 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 the 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 outside of our
control and/or cannot be reasonably predicted, such as the
provision for income taxes. Preparation of such reconciliation
would require a forward-looking balance sheet, statement of income
and statement of cash flow, prepared in accordance with GAAP, and
such forward-looking financial statements are unavailable to us
without unreasonable effort. Although we provide a range of
Adjusted EBITDA that we believe will be achieved, we cannot
accurately predict all the components of the Adjusted EBITDA
calculation. Target Hospitality provides an Adjusted EBITDA outlook
because we believe that this measure, when viewed with our results
under GAAP, provide useful information for the reasons noted
below.
Definitions:
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 (income) expense, net: Other (income) expense, net
includes miscellaneous cash receipts, gains and losses on disposals
of property, plant, and equipment, COVID-19 related expenses, and
other immaterial expenses and non-cash items.
- Transaction expenses: Target Hospitality incurred certain
advisory fees associated with certain transactions during the
periods presented.
- 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
primarily non-cash amortization of capitalized system
implementation costs, business development, accounting standard
implementation costs and certain severance costs.
Utility and Purposes:
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 and
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 and disposal of depreciable assets and impairment losses
represents either accelerated depreciation or excess depreciation
in previous periods, and depreciation is excluded from EBITDA.
EBITDA and Adjusted EBITDA 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. EBITDA and Adjusted EBITDA 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, these non-GAAP measures may not be comparable to
similarly titled measures of other companies. Target Hospitality's
management believe that EBITDA and Adjusted EBITDA 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.
Investor Contact
Mark Schuck
(832) 702 – 8009
ir@targethospitality.com
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SOURCE Target Hospitality