Good morning. And welcome to the Target Hospitality Fourth Quarter and Full Year 2024 Earnings Call. At this time all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Wednesday, March 26th, 2025. I would now like to turn the conference over to Mark Schuck, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning everyone and welcome to Target Hospitality's fourth quarter and full year 2024 earnings call. The press release we issued this morning outlining our fourth quarter and full year results can be found in the investor section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward-looking statements contained in the press release. This same language applies to statements made on today's conference call. This call will contain time-sensitive information, as well as forward-looking statements which are only accurate as of today, March 26, 2025. Target expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date, except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality's periodic filings with the SEC. We will discuss non-GAAP financial measures on today's call. Please refer to the tables in our earnings release posted in the investor section of our website to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Jason Vlacich, Chief Financial Officer and Chief Accounting Officer. After their prepared remarks, we will open the call for questions. I'll now turn the call over to our Chief Executive Officer, Brad Archer.

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. Target's 2024 results illustrate the benefits of our established network capabilities and strong operating platform. Our efficient operating structure, together with our approach to disciplined capital allocation, form the basis of a highly flexible and resilient business model. These elements support our ability to provide premium service offerings to customers across our network, while producing strong financial results and maintaining financial flexibility to quickly react to growth opportunities. These characteristics consistently support our ability to successfully navigate through cycles, while maintaining focus on key strategic growth and diversification initiatives. Turning to our segments, regarding our HFS segment, we continue to benefit from consistent customer activity and constructive market dynamics. Additionally, we remain focused on identifying opportunities to strengthen margin contribution through enhanced network optimization and operational efficiencies. This segment continues to exhibit positive momentum where our customers find added value in our network capabilities and unmatched hospitality solutions. These attributes supported the expansion of existing customer relationships in 2024, as well as adding new customers who find incremental value in our unique capabilities and strategically located assets. These distinct core competencies supported the recent announcement of our multi-year workforce hub contract supporting Lithium Americas' development of Thacker Pass. We have referenced this opportunity and growth initiative for some time, and we were excited to finalize this contract. As we have consistently stated, these large industrial opportunities inherently have longer sales cycles prior to contract award. However, the workforce hub contract exemplifies Target's focus and commitment in utilizing its existing service offering to deliver on strategic diversification initiatives. We're excited about this partnership and establishing a regional presence as we continue evaluating additional growth opportunities in the area. Now moving to the government segment. Our government segment experienced a transition as we moved through the election cycle of 2024 and into a new administration in January. However, amidst this disruption, Target has illustrated its ability to provide unmatched solutions supporting a range of critical U.S. Government initiatives. The reactivation of our Dilley community earlier this month exemplifies the importance of our proven reputation, unmatched capabilities, and strategically located assets. These elements have supported a seamless reactivation of this community and further illustrate the benefits of our flexible operating model and ability to quickly respond to customer demand. In addition, the current administration has indicated the need for a significant increase in facility and hospitality solutions required to adequately implement their stated immigration policy initiatives. Target's existing government-focused network capacity and operational capabilities align with this increased demand, providing a natural solution to support this critical mission. Further, our strong operational reputation and partnerships with industry-leading companies uniquely position Target to quickly and effectively implement these mission-critical solutions. Specifically, Target's existing West Texas assets offer the benefit of purpose-built, readily accessible solutions. We believe this establishes a distinct advantage as we actively pursue opportunities to recontract these assets in support of these critical U.S. Government initiatives. We are actively engaged in discussions with industry-leading partners and U.S. Government agencies regarding opportunities to reactivate our West Texas community. These conversations have included proposals regarding our capability and tours of the facility. We are encouraged by the level of interest in the West Texas community and believe it can quickly satisfy a portion of the government's significant demand for appropriate housing solutions. While final outcomes remain uncertain, we are encouraged by the frequency and substance of ongoing dialogue. While we're actively engaged in pursuing these unique opportunities supporting the U.S. Government, we are also continuing to evaluate non-government growth initiatives. As we have previously discussed, these opportunities center on Target's existing capabilities and include a variety of large industrial projects throughout the U.S. As illustrated by the Lithium Americas workforce hub contract award, the size of these growth opportunities inherently leads to longer sales cycles. However, we believe pursuing these non-government growth initiatives is an important element of our diversification strategy, and we remain committed to pursuing these opportunities. In summary, the strength of our existing customer base, network capabilities, and proven operational flexibility support a resilient business model. These elements have consistently supported our ability to navigate through cycles while maintaining focus on our strategic objectives. This foundation supports our continued focus of providing premium services to our customers while simultaneously pursuing attractive growth opportunities. I'll now turn the call over to Jason to discuss our financial results in more detail.

Thank you, Brad. Our fourth quarter results continue to reflect the benefits of our flexible and efficient operating model. Fourth quarter 2024 total revenue was approximately $84 million with adjusted EBITDA of approximately $41 million. Our government segment produced quarterly revenue of approximately $44 million. The decrease from the prior period was primarily driven by lower PCC variable services revenue and no infrastructure revenue amortization, which was fully amortized as of November 2023. In addition, the decrease was partially a result of the termination of the South Texas Family Residential Center contract, effective August 9, 2024. However, the Dilley assets associated with the prior South Texas Family Residential Center contract were recently re-contracted effective March 5, 2025, under a new contract that is expected to provide over $246 million of revenue over its anticipated five-year term. Regarding the PCC community, as we previously announced, Target's contract for this community was canceled effective February 21, 2025. However, as a reminder, Target owns the modular assets and real property associated with this community, and we are actively remarketing these assets to prospective customers. We are encouraged by the ongoing conversations and interest in these assets. As a result, we have elected to keep this community in a ready state. We believe maintaining these assets in a readily accessible manner provides a distinct advantage as we pursue growth opportunities, particularly in the government market. This decision, which is similar to the approach we took regarding our Dilley assets, will result in carrying costs prior to a potential new contract award of approximately $2 million to $3 million per quarter. Turning to our HFS segment, our HFS and all other segments delivered quarterly revenue of approximately $40 million. These segments continue to benefit from consistent customer demand, illustrating the value our customers find in our premium service offering and network capabilities. Recurring corporate expenses for the quarter were approximately $9 million. As we move through the year, we will continue to look for opportunities to optimize our cost structure and strengthen margin contribution. Total capital spending for the quarter was approximately $4 million, primarily focused on enhancing and maintaining Target's asset base across our expansive network. We have continued to prudently manage our capital allocation initiatives while benefiting from strong cash generation. We ended the quarter with $191 million in cash and $366 million in total liquidity with zero borrowings under the company's $175 million revolving credit facility and a net leverage ratio of 0.0 times. This focus supported the achievement of zero net debt as of year-end 2024. Our strong financial position supported our ability to return approximately $33 million to our shareholders during 2024 by repurchasing approximately 3.8 million shares of common stock. These repurchases illustrate our focus on utilizing a broad range of initiatives to pursue value-enhancing opportunities for our shareholders. Regarding the 2025 senior notes, on March 25, 2025, we redeemed all outstanding senior notes due June 2025 at a redemption price of 101% of par, resulting in expected annual interest expense savings of $19.5 million. Our decision to redeem all outstanding senior notes was focused on maintaining a balanced capital structure and financial flexibility as we continue pursuing a pipeline of strategic growth initiatives. We believe the current structure supports our ability to react to value-enhancing growth opportunities as they arise while appropriately balancing our obligations. Target's strong business fundamentals, including an efficient operating structure and commitment to network optimization, have established a flexible and durable operating model. These elements support the company's revised 2025 financial outlook, which consists of total revenue of between $265 million and $285 million and adjusted EBITDA of between $47 million and $57 million. Our revised 2025 outlook gives effect to the previously announced PCC contract termination effective February 21, 2025 and the recently announced Dilley contract award effective March 5, 2025. Target is well positioned with a flexible operating model and distinct core competencies as we continue pursuing value-enhancing growth initiatives. Importantly, as we evaluate these opportunities, we will remain focused on maintaining a strong financial profile centered on disciplined capital allocation while optimizing margin contribution through our efficient operating structure. With that, I will turn the call back over to Brad for closing comments.

Thanks Jason. Our 2024 performance benefited from the strong operating platform and durable business model we have established. Target's flexible and efficient network provides the ability to appropriately match customer demand while simultaneously remaining focused on strategic growth initiatives. We are excited about the government in-market opportunity and we believe we are well positioned to support the U.S. Government's increased demand for hospitality solutions. In addition, we remain intentionally focused on pursuing opportunities to grow and diversify our customer reach and contract portfolio. We are encouraged as we pursue these growth initiatives intent on further strengthening Target's business fundamentals and contract portfolio while accelerating value creation for our shareholders. I appreciate everyone joining us on the call today and thank you again for your interest in Target Hospitality. We would now like to open the call for questions.

Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from the line of Stephen Gengaro with Stifel. Please go ahead.

Thanks. Good morning, everybody. Two things from me. The first one would be when you think about remarketing the West Texas Pecos assets, and we think about the economics of the Dilley contract versus where Pecos was, is there anything about the specific assets or the application that would warrant a higher economic contract for the West Texas assets versus Dilley? Just maybe help us understand if there's any difference in the assets and the application.

Yeah, good question, Stephen. I would say the best proxy for the economics at this point are the Dilley assets. It's possible they could be slightly better, but that would be what I would point you to at this point.

I think it depends on the population and what you put on there, but Jason's right. The model is similar to where Dilley is at. The upside could be if there's a little bit of a different population mix on the West Texas assets.

Okay, good. That's helpful. And then the second question I had was when you look at the Lithium Americas contract and the opportunity set there over multiple years, is there any way to think about the size opportunity of that market and what we would need to see from a development perspective by them or others that would accelerate their demand needs?

Yeah, I would say that there is potential to go beyond 2027 in multiple phases. We feel pretty well positioned in that regard. No guarantees, obviously, but we've expanded our workforce hub capacity there with some asset purchases in Q1, as we outlined in our release of $15 million to $20 million. The project is pacing quite well, and so we feel we're well positioned to potentially go into multiple phases beyond 2027. It's tough to quantify the total market size at this point. I'd say the best proxy is what we've already announced.

A little bit on that project: it's publicly out there. Their idea is not to do just one phase of this project. As late as last week, the governor of Nevada was out there. We were on site for that tour, and their CEO was there and talked about their plan to do a second phase. If you look at the resource play itself, it's some of the best dirt that there is out there in the world. Their plan is not to stick with just one phase for sure. Nothing's guaranteed, but we liked this project from day one; we think there's more years in it than what we've contracted to date. When you look at the resource play within a 150-mile radius, there are a lot of other mines and a lot of capital being invested in that area. We think it can be a launching point for more work. Our sales force is actively contacting potential customers. We're gathering capital project information, so we look for this to be more of a long-term area to generate growth.

Great, thanks. And just a follow-up to that, and I'm not sure how to exactly ask this, but when we think about the lithium opportunity, when I think about HFS South and the oil and gas network approach you took, which was an excellent way to approach that business because these projects tend to be short term and your customers move around a lot, versus some other markets where the customers are more stationary, is this a market where the customer moves around and you need more of a network approach, or is this a market where the labor force is more in one location and you can have a single facility that houses a number of employees? Do you understand what I'm asking?

Yes. We like the mining industry—lithium, copper, gold—because there are long-term investments. Usually if there's one mine, there are multiple mines around. It's similar to areas like the Permian from an investment standpoint, but the workforce there is not as transient. For our type of assets, we've invested in capacity that can house multiple different contractors. Not so much on the Lithium Americas side, but the thought was to spend some capital to get that going, and it won't just serve Lithium Americas; we believe others will use it. That area could look like the Permian in investment terms, but the workforce itself is more stationary. The difference is the long-term nature of these mining projects; they're often 10, 15, or 20 years and they continually receive investment.

I sort of think of it more like oil sands than Permian oil and gas. Is that reasonable?

That is reasonable.

And your next question comes from the line of Scott Schneeberger with Oppenheimer. Please go ahead.

Thanks very much. Good morning, all. I think it would be helpful with all the moving parts in the new contract wins and losses in the first quarter. We appreciate the guidance for 2025. Could you speak as kind of a two-parter to the first quarter as things you're starting? How should we think about revenue and EBITDA in the first quarter upcoming and then also, not asking for 2026 guidance, but how should we think about run rate for the contracts, the major contracts you have set at this point? Thanks.

Sure. To take the second question first: on run rate, for example, on Dilley once we get through the ramp-up phase, it's very similar to the prior contract. So roughly $50 million to $55 million of annual revenue and approximately a 40% to 50% margin on that. Slightly less than the last contract because on the last one we had some minor deferred revenue amortization that we had burned off in the last contract of a couple million dollars a year. Outside of that, the economics from a run rate standpoint should be pretty similar. On the Lithium Americas deal, the bulk of the revenue is going to be recognized this year on the construction—about $65 million of that is recognized this year for the construction at a 25% to 30% margin. The remaining portion of the contract would be recognized at approximately a 30% margin, not materially dissimilar from the HFS margin profile. In terms of Q1, you'll have a very minimal amount of the Dilley contract in Q1 as it just started on March 5, and there's a ramp-up period. So for whatever revenue we end up recognizing on that in Q1, it'll be minimal, but largely at a 40% to 50% margin. You'll have a prorated portion of the PCC contract through February 21 at the same margin profile as we had last year. HFS will be pretty steady. I would say the utilization trends on HFS are slightly ahead of last year, but I would estimate pretty similar utilization to last year for Q1.

And hey, Scott, this is Mark. Just to follow on Jason's comment as well specifically related to the Lithium Americas piece, it is going to be a little lumpy through 2025, and the majority of that is going to be back half-weighted. We can get into more details offline, but I would not assume that's straight line through 2025.

So to follow on to that, I would say Q1 will have very minimal activity on the Lithium Americas contract and it ramps up in the latter half of the year, as Mark said.

Excellent. Thanks. Appreciate all that color for both horizons, guys. I guess I'll follow with the more fundamental: the asset that was acquired back in May of 2023. Could you give us an update on how that's being marketed right now? What purposes you're looking at for that? Thanks.

Scott, let me give a high-level update that may answer your question and touch on our government segment as a whole. While we recently lost a major contract in this segment, we've never in my 30-year career had this many real opportunities in front of us. The government has publicly stated that to manage their mission around immigration they need somewhere between 110,000 to 150,000 beds. Today they have around 50,000 beds. We are actively quoting and have quoted many different opportunities ranging in size from 250 beds all the way up to 5,000 beds and anywhere in between. These opportunities vary in term from one year to five years, with most being a three- to five-year term, very similar to the recent Dilley award. We've quoted using any and all of our existing and available fleet, including the assets you mentioned. But with the demand for beds being so high, we're also quoting projects that would require us to source new equipment or readily available equipment that we can obtain on the open market. All of these opportunities are active to some degree—some have moved to formal bid processes, some we've already submitted formal bids, some are in the request for information stage. As mentioned earlier, Dilley has already been awarded, so they are becoming more active in awarding projects. We expect other decisions to be made on these projects over the next six months, although timing will depend on funding. When I say it's very active, our pipeline continues to build weekly. So new government projects are continually entering our pipeline. Suffice to say, very busy: the assets you mentioned are in play, as are our West Texas assets and other available equipment. We've pulled thousands of existing beds and can source much more new equipment in the market.

Maybe the only thing to add is a little more color on our West Texas assets: there is very strong interest around these assets. That facility checks a lot of boxes for the administration when it comes to their mission around immigration—speed and availability, location, past performance, and acceptance of the local community where we've operated for more than 10 years. There are a lot of easy buttons for them to put this back into their portfolio and increase beds quickly, so we feel good about where that's headed.

Great, thanks, Brad and Jason. I appreciate the color.

Your next question comes from the line of Greg Gibas with Northland Securities. Please go ahead.

Great. Good morning, Brad and Jason. Thanks for taking the questions. One follow-up on that last one regarding liquidity post-redemption: do you expect that $15 million or so drawn on the revolver to be enough to bridge the gap on liquidity? Also, could you provide CapEx expectations for 2025 and how you're thinking about free cash flow with that $19.5 million of interest savings?

Sure. With respect to the draw on the ABL, it was a very minimal draw—about $15 million was used to pay off the notes. We had an abundance of cash at the end of Q4; we had $191 million. There was a small additional draw for working capital timing differences, but relatively minimal. We feel really good about the balance sheet. With the $19.5 million of expected annual interest savings, that will help drive free cash flow. Free cash flow is expected to be positive. CapEx is projected to be lower than last year. We reported about $32.5 million of CapEx last year; we expect it to be lower this year unless we get an opportunity with accretive economics that requires investment. If that happens, we'll invest, but otherwise expect lower CapEx and positive free cash flow.

Got it. And do you expect to draw any more on the revolver or are we assuming no changes? What should we expect the average outstanding balance to be?

I would anticipate a short-term carrying balance on the revolver of around $40 million to $50 million. That includes the $15 million draw and some working capital timing differences related primarily to the Lithium Americas construction project. With construction projects, there are milestones and timing that create those balances. So no more than about $40 million to $50 million of an outstanding average balance on the ABL.

Perfect. That's what I was trying to get to. Thanks very much. If I could follow up on the West Texas PCC, given you're seeing a lot of opportunities there and it makes sense that you're not closing down the facility completely, would you expect much in terms of modifications needed to those assets based on the opportunities you're seeing? You mentioned some opportunities are getting closer—do you have visibility on what changes need to be made? And do you expect announcements to be dependent on government funding timing?

On capital to get that project back open, very little to none. That project is in good condition for the use cases we're discussing. We don't see material capital required. If the customer requests changes, we would get them to fund those changes. So we don't expect significant capital expense on the West Texas assets to reactivate them.

Got it. And one last quick one: thoughts on the core HFS business—excluding the Lithium Americas work—what should we assume for HFS for the full year implied in guidance?

The HFS business is expected to perform relatively similar to last year.

We do have a follow-up question coming from the line of Stephen Gengaro with Stifel. Please go ahead.

Thank you. A follow-up on HFS: performance there seems more stable than what we've seen from activity level perspective. Can you talk about visibility there? Is most of that stability from contracted arrangements with larger customers or is it from your read on activity levels?

The majority of that stability is contracted under long-term arrangements with our customers, and that's what gives us the visibility.

Okay, that's what I thought. Thanks.

Thanks, Stephen. Welcome.

I'm showing no further questions at this time. I would like to turn it back to Brad Archer for closing remarks.

Thanks to all of you who joined today, and we look forward to speaking again very soon on our first quarter call in early May. Operator, that will conclude the call for today.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.