Target Hospitality Corp 10-Q for FY2024 Q3

Target Hospitality Corp. (TH)

10-Q 2024-11-12 For: 2024-09-30

Added on April 12, 2026

About this 10-Q

Target Hospitality Corp filed this 10-Q on November 12, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).

Headline figures

Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $95.19M; down 34.8% from $145.94M a year earlier
Net income: $19.99M; down 56.1% from net income of $45.58M a year earlier
Diluted EPS: $0.20; down 53.5% from $0.43 a year earlier

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Delaware			98-1378631
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which is registered
Common stock, par value $0.0001 per share	TH	NASDAQ Capital Market


Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

PART I — FINANCIAL INFORMATION	5
Item 1. Financial Statements	5
Consolidated Balance Sheets	5
Unaudited Consolidated Statements of Comprehensive Income	6
Unaudited Consolidated Statements of Changes in Stockholders’ Equity	7
Unaudited Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	54
Item 4. Controls and Procedures	54
PART II — OTHER INFORMATION	54
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults upon Senior Securities	56
Item 4. Mine Safety Disclosures	56
Item 5. Other Information	56
Item 6. Exhibits	57
SIGNATURES	58

Consolidated Financial Statements

Consolidated Balance Sheets	5
Unaudited Consolidated Statements of Comprehensive Income	6
Unaudited Consolidated Statements of Changes in Stockholders’ Equity	7
Unaudited Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9


	September 30,		December 31,
	2024		2023
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	177,747	$	103,929
Accounts receivable, less allowance for credit losses of $762 and $550, respectively		47,288		67,092
Prepaid expenses and other assets		6,340		9,479
Total current assets		231,375		180,500

Specialty rental assets, net		331,581		349,064
Other property, plant and equipment, net		34,364		34,631
Operating lease right-of-use assets, net		13,224		19,698
Goodwill		41,038		41,038
Other intangible assets, net		56,179		66,282
Deferred financing costs revolver, net		2,024		2,479
Other non-current assets		—		661
Total assets	$	709,785	$	694,353

Liabilities
Current liabilities:
Accounts payable	$	16,922	$	20,926
Accrued liabilities		22,677		33,652
Deferred revenue and customer deposits		400		1,794
Current portion of operating lease obligations		8,005		11,914
Current portion of finance lease and other financing obligations (Note 8)		1,546		1,369
Current warrant liabilities		—		675
Current portion of long-term debt, net (Note 8)		179,743		—
Total current liabilities		229,293		70,330

Other liabilities:
Long-term debt (Note 8):
Principal amount		—		181,446
Less: unamortized original issue discount		—		(2,619)
Less: unamortized term loan deferred financing costs		—		(734)
Long-term debt, net		—		178,093
Long-term finance lease and other financing obligations		994		1,024
Long-term operating lease obligations		6,035		8,426
Deferred revenue and customer deposits		536		3,675
Deferred tax liability		52,760		53,074
Asset retirement obligations		2,532		2,424
Total liabilities		292,150		317,046

Commitments and contingencies (Note 12)
Stockholders' equity:
Common Stock, $0.0001 par, 400,000,000 authorized, 112,158,984 issued and 100,303,879 outstanding as of September 30, 2024 and 111,091,266 issued and 101,660,601 outstanding as of December 31, 2023.		10		10
Common Stock in treasury at cost, 11,855,105 shares as of September 30, 2024 and 9,430,665 shares as of December 31, 2023.		(45,977)		(23,559)
Additional paid-in-capital		146,379		142,379
Accumulated other comprehensive loss		(2,690)		(2,638)
Accumulated earnings		319,878		261,115
Total stockholders' equity attributable to Target Hospitality Corp. stockholders		417,600		377,307
Noncontrolling interest in consolidated subsidiaries		35		—
Total stockholders' equity		417,635		377,307
Total liabilities and stockholders' equity	$	709,785	$	694,353


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenue:
Services income	$	65,796	$	93,538	$	205,685	$	280,897
Specialty rental income		29,395		52,401		96,899		156,491
Total revenue		95,191		145,939		302,584		437,388
Costs:
Services		31,262		34,035		101,734		109,469
Specialty rental		4,662		7,495		16,059		23,592
Depreciation of specialty rental assets		14,057		17,653		43,643		53,242
Gross profit		45,210		86,756		141,148		251,085
Selling, general and administrative		13,319		15,273		41,632		43,929
Other depreciation and amortization		3,902		3,838		11,695		11,482
Other expense (income), net		(2)		(71)		(158)		1,244
Operating income		27,991		67,716		87,979		194,430
Loss on extinguishment of debt		—		—		—		2,128
Interest expense, net		3,813		4,953		12,673		17,726
Change in fair value of warrant liabilities		—		2,576		(675)		(1,809)
Income before income tax		24,178		60,187		75,981		176,385
Income tax expense		4,084		14,608		17,118		40,528
Net income		20,094		45,579		58,863		135,857
Less: Net income attributable to the noncontrolling interest		100		—		100		—
Net income attributable to Target Hospitality Corp. common stockholders		19,994		45,579		58,763		135,857
Change in fair value of warrant liabilities		—		—		—		(1,809)
Net income attributable to Target Hospitality Corp. common stockholders - diluted		19,994		45,579		58,763		134,048

Other comprehensive loss
Foreign currency translation		(12)		(21)		(52)		(47)
Comprehensive income	$	20,082	$	45,558	$	58,811	$	135,810


Weighted average number shares outstanding - basic		100,438,559		101,620,537		100,452,691		101,246,546
Weighted average number shares outstanding - diluted		101,296,504		105,093,694		101,744,462		105,632,139

Net income per share attributable to Target Hospitality Corp. common stockholders - basic	$	0.20	$	0.45	$	0.58	$	1.34
Net income per share attributable to Target Hospitality Corp. common stockholders - diluted	$	0.20	$	0.43	$	0.58	$	1.27


							Additional		Accumulated				Total Target Hospitality Corp.
	Common Stock			Common Stock in Treasury			Paid In		Other		Accumulated		Stockholders'		Noncontrolling		Total
	Shares	Amount		Shares	Amount		Capital		Comprehensive Loss		Earnings		Equity		Interest		Equity
Balances at December 31, 2022	100,316,701	$	10	9,430,665	$	(23,559)	$	139,287	$	(2,574)	$	87,683		200,847		—	$	200,847
Adoption of ASC 326	—		—	—		—		—		—		(268)		(268)		—		(268)
Balances at January 1, 2023	100,316,701	$	10	9,430,665	$	(23,559)	$	139,287	$	(2,574)	$	87,415	$	200,579	$	—	$	200,579
Net income	—		—	—		—		—		—		43,825		43,825				43,825
Stock-based compensation, net	643,662		—	—		—		2,112		—		—		2,112		—		2,112
Tax withholdings related to net share settlement of equity awards	—		—	—		—		(6,177)		—		—		(6,177)		—		(6,177)
Cumulative translation adjustment	—		—	—		—		—		(21)		—		(21)		—		(21)
Issuance of Common Stock from exercise of warrants	2,869		—	—		—		42		—		—		42		—		42
Issuance of Common Stock from exercise of stock options	410,226		—	—		—		1,252		—		—		1,252		—		1,252
Balances at March 31, 2023	101,373,458	$	10	9,430,665	$	(23,559)	$	136,516	$	(2,595)	$	131,240	$	241,612	$	—	$	241,612

Net income	—		—	—		—		—		—		46,453		46,453		—		46,453
Stock-based compensation, net	207,288		—	—		—		2,337		—		—		2,337		—		2,337
Tax withholdings related to net share settlement of equity awards	—		—	—		—		(241)		—		—		(241)		—		(241)
Cumulative translation adjustment	—		—	—		—		—		(5)		—		(5)		—		(5)
Issuance of Common Stock from exercise of warrants	14,500		—	—		—		167		—		—		167		—		167
Balances at June 30, 2023	101,595,246	$	10	9,430,665	$	(23,559)	$	138,779	$	(2,600)	$	177,693	$	290,323	$	—	$	290,323

Net income	—		—	—		—		—		—		45,579		45,579		—		45,579
Stock-based compensation, net	19,967		—	—		—		2,646		—		—		2,646		—		2,646
Tax withholdings related to net share settlement of equity awards	—		—	—		—		(400)		—		—		(400)		—		(400)
Cumulative translation adjustment	—		—	—		—		—		(21)		—		(21)		—		(21)
Issuance of Common Stock from exercise of stock options	45,388		—	—		—		144		—		—		144		—		144
Balances at September 30, 2023	101,660,601	$	10	9,430,665	$	(23,559)	$	141,169	$	(2,621)	$	223,272	$	338,271	$	—	$	338,271

Balances at December 31, 2023	101,660,601	$	10	9,430,665	$	(23,559)	$	142,379	$	(2,638)	$	261,115		377,307		—	$	377,307
Net income	—		—	—		—		—		—		20,383		20,383		—		20,383
Stock-based compensation, net	658,659		—	—		—		1,579		—		—		1,579		—		1,579
Tax withholdings related to net share settlement of equity awards	—		—	—		—		(2,615)		—		—		(2,615)		—		(2,615)
Cumulative translation adjustment	—		—	—		—		—		(20)		—		(20)		—		(20)
Issuance of Common Stock from exercise of warrants	1,079		—	—		—		3		—		—		3		—		3
Issuance of Common Stock from exercise of stock options	59,524		—	—		—		268		—		—		268		—		268
Repurchase of Common Stock as part of share repurchase program	(2,274,440)		—	2,274,440		(21,371)		—		—		—		(21,371)		—		(21,371)
Balances at March 31, 2024	100,105,423	$	10	11,705,105	$	(44,930)	$	141,614	$	(2,658)	$	281,498	$	375,534	$	—	$	375,534

Net income	—		—	—		—		—		—		18,386		18,386		—		18,386
Stock-based compensation, net	44,329		—	—		—		1,612		—		—		1,612		—		1,612
Cumulative translation adjustment	—		—	—		—		—		(20)		—		(20)		—		(20)
Issuance of Common Stock from exercise of stock options	280,929		—	—		—		1,546		—		—		1,546		—		1,546
Repurchase of Common Stock as part of share repurchase program	—		—	—		108		—		—		—		108		—		108
Balances at June 30, 2024	100,430,681	$	10	11,705,105	$	(44,822)	$	144,772	$	(2,678)	$	299,884	$	397,166	$	—	$	397,166

Net income	—		—	—		—		—		—		19,994		19,994		100		20,094
Stock-based compensation, net	15,262		—	—		—		1,618		—		—		1,618		—		1,618
Tax withholdings related to net share settlement of equity awards	—		—	—		—		(47)		—		—		(47)		—		(47)
Cumulative translation adjustment	—		—	—		—		—		(12)		—		(12)		—		(12)
Issuance of Common Stock from exercise of stock options	7,936		—	—		—		36		—		—		36		—		36
Distributions	—		—	—		—		—		—		—		—		(65)		(65)
Repurchase of Common Stock as part of share repurchase program	(150,000)		—	150,000		(1,155)		—		—		—		(1,155)		—		(1,155)
Balances at September 30, 2024	100,303,879	$	10	11,855,105	$	(45,977)	$	146,379	$	(2,690)	$	319,878	$	417,600	$	35	$	417,635


	For Nine Months Ended
	September 30,
	2024		2023
Balances at Beginning of the Period	$	5,469	$	125,519
Additions to deferred revenue		400		—
Revenue recognized		(4,933)		(106,112)
Balances at End of the Period	$	936	$	19,407


	For the Years Ended December 31,
	2024		2025		2026		2027		Total
Revenue expected to be recognized as of September 30, 2024	$	15,037	$	9,213	$	3,625	$	1,192	$	29,067


	HFS - South
Balance at January 1, 2023	$	41,038
Changes in Goodwill		-
Balance at December 31, 2023		41,038
Changes in Goodwill		-
Balance at September 30, 2024	$	41,038


	September 30, 2024
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	3.2	$	133,105	$	(93,556)	$	39,549
Non-compete agreement	3.3		349		(119)		230
Total			133,454		(93,675)		39,779
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	149,854	$	(93,675)	$	56,179


	December 31, 2023
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	3.9	$	133,105	$	(83,505)	$	49,600
Non-compete agreement	4.1		349		(67)		282
Total			133,454		(83,572)		49,882
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	149,854	$	(83,572)	$	66,282


Rest of 2024	$	3,372
2025		13,475
2026		12,879
2027		8,270
2028		778
Thereafter		1,005
Total	$	39,779


	September 30,
	2024
Principal amount of 10.75% Senior Secured Notes, due 2025	$	181,446
Less: unamortized original issue discount		(1,330)
Less: unamortized term loan deferred financing costs		(373)
Current portion of long-term debt, net	$	179,743


	September 30,		December 31,
	2024		2023
Land	$	30,741	$	31,111
Buildings and leasehold improvements		905		901
Machinery and office equipment		2,200		1,820
Other		9,664		8,589
		43,510		42,421
Less: accumulated depreciation		(9,146)		(7,790)
Total other property, plant and equipment, net	$	34,364	$	34,631


		Redemption
Date		Price
September 15, 2024		102.000%
March 15, 2025 and thereafter		101.000%


	September 30, 2024				December 31, 2023
Financial Assets (Liabilities) Not Measured at Fair Value	Carrying Amount			Fair Value	Carrying Amount		Fair Value
ABL Facility (See Note 8) - Level 2	$	—	$	—	$	—	$	—
Senior Secured Notes (See Note 8) - Level 1	$	(179,743)	$	(185,302)	$	(178,093)	$	(187,797)


	Private Placement Warrants
Balance at December 31, 2023	$	675
Change in fair value of warrant liabilities		(675)
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	$	—


	Number of Shares		Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2023	1,682,206	$	4.65
Granted	412,951		9.92
Vested	(1,001,998)		3.86
Forfeited	(125,792)		5.66
Balance at September 30, 2024	967,367	$	7.59


	Options		Weighted Average Exercise Price Per Share	Weighted Average Contractual Life (Years)		Intrinsic Value ($ in thousands)
Outstanding Options at December 31, 2023	740,439	$	6.55	5.17	$	2,570
Exercised	(348,389)		5.31	-		1,620
Vested and expired	(29,941)		10.83	-		-
Outstanding Options at September 30, 2024	362,109	$	7.38	5.07	$	646


		Assumptions
Weighted average expected stock volatility (range)	%	25.94 - 30.90
Expected dividend yield	%	0.00
Expected term (years)		6.25
Risk-free interest rate (range)	%	0.82 - 2.26
Exercise price (range)	$	4.51 - 10.83


	Number of Units		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)
Outstanding SARs at December 31, 2023	714,539	$	1.82	7.17
Exercised	(714,539)		1.82	-
Outstanding SARs at September 30, 2024	-	$	-	-


	HFS - South		Government		All Other			Total
For the Nine Months Ended September 30, 2024
Revenue	$	113,198	$	180,948	$	8,438	(a)	$	302,584
Adjusted gross profit	$	38,241	$	147,556	$	(1,006)		$	184,791
Total Assets	$	179,651	$	197,386	$	28,090		$	405,127

For the Three Months Ended September 30, 2024
Revenue	$	38,033	$	53,482	$	3,676	(a)	$	95,191
Adjusted gross profit	$	12,334	$	46,280	$	653		$	59,267


	September 30, 2024		December 31, 2023
Total reportable segment assets	$	377,037	$	391,862
Other assets		29,946		32,871
Other unallocated amounts		302,802		269,620
Total Assets	$	709,785	$	694,353


	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)%


							Percentage
	For the Three Months Ended September 30,				Amount of Increase		Change Increase
	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)



		For the Nine Months Ended September 30,			Amount of Increase		Percentage Change Increase
	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)


	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)


($ 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


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


Exhibit No.		Exhibit Description
3.1		Fourth Amended and Restated Bylaws of Target Hospitality Corp. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 31, 2024).

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.

	Target Hospitality Corp.

Dated: November 12, 2024	By:	/s/ JASON P. VLACICH
		Jason P. Vlacich
		Chief Financial Officer and Chief Accounting Officer