Good afternoon, everyone. I'm Scott Schneeberger, the Senior Industrial Services Analyst at Oppenheimer. Thank you all for joining us today. It's my pleasure to have with us from Target Hospitality CFO Jason Vlasic and from Investor Relations Mark Schuch to speak on the company's investment story. We'll be using a fireside chat format where I'll ask management some high-level questions up front and get us an overview of the business. Later in the session, I'll pivot to questions asked by you from the audience via Zoom. So feel free to submit those through the system. Target is a stock that we rate outperform. It's gone through a very interesting and very successful pivot of its business model on end markets served recently. And we're excited to hear more about that today. So jumping into it, gentlemen, could you please provide us with an overview of Target Hospitality's service offerings and the company's business segments?

Yeah, sure, Scott. This is Jason. Happy to be here today and welcome, everyone. Thanks for your interest in Target Hospitality. So Target Hospitality is the largest provider of remote accommodations and hospitality services in North America. We went public in March of 2019. We have three reportable segments. Our longest running segment is the hospitality and facility services south segment. That's where the company started in its current form. And if you were to look at our investor deck, you'll see illustrative customers that are in that segment that drive a lot of that stability for our company. Those include folks like Chevron, Halliburton, Liberty, etc. A lot of those communities are heavily concentrated in the Permian Basin, where we provide remote accommodations for their employees in the oil fields. That business is relatively stable, very mature, pretty much started in its current form back in 2009, has matured over time. it's pretty stable in terms of its utilization that does around $130 million to $140 million of annual revenue at about a 25% to 30% margin. A lot of the contract structures are very much driven based on actual usage, but they include network agreements as well, and they're generally multi-year committed rate amounts that in the revenue is driven based on actual usage but it feels like a take or pay just because of the stability of the the customer base and many of those customers in that segment have been with us for decades and in many cases the other segment that is the second longest running segment is the government segment that started in 2014 with our DILI community. Currently, that segment consists of the DILI community with one contract in there that is a five-year basically fixed minimum revenue amount that's anticipated to go through March of 2030 has about a $246 million minimum revenue committed amount over that term. That structure of that segment typically has been driven based on fixed take-or-pay committed contracts where the communities are dedicated to one customer. In that particular case of Dilley, it services the immigration needs of the government, and we sit in a subcontractor position. And the other newest kind of growth story segment for us is the workforce hospitality solution segment. And that is really where a lot of the growth engine is at this point in time for the company. That segment started in the beginning of 2025. Since the dawn of that segment, we've announced over $1 billion of new contracts in that segment. Many of those contract structures are fixed minimum taker pay committed amounts. And that's where a lot of the pipeline of opportunities is driven off of, is really the activity and the demand in that segment, primarily to support critical mineral development, data center infrastructure projects, and the power aspect of supporting those data center infrastructure projects.

Great. Thanks, Jason. Target typically contracts with customers for multi-year periods, often with guaranteed payment provisions. Please discuss the company's contract structures and revenue visibility across the segments, and it doesn't have to be tied, just segments, just your normal contract structures and which segments there are affecting each the most. Also, if I could sneak it in, just as part of the theme here, maybe some conversation about payback period and IRR on a typical contract. Thanks.

Yeah, absolutely. So, typically our contract structures are multi-year committed fixed minimum taker pay amounts that give us a tremendous amount of revenue visibility into the future. That's illustrated by our most recent contract announcement in the data center space where we contracted with the top five hyperscaler for 4,000 beds that has a five-year term and a minimum committed amount of $550 million with some variable revenue upside. So much of our contract structures now and historically have been that kind of a structure, right, where we have a fixed minimum taker pay committed amount to make sure that it meets our minimum return profile. Our minimum payback period that we typically target for that, which is what the minimum is based on, is less than 36 months of a payback period. Recently, with a lot of more recent contract announcements, we're seeing even less than that, driven by the size of the upfront customer payments that we've been able to secure, which we typically do on a new community build out to help fund the initial capital deployment to build out that community. I mentioned earlier about our contract structures and our HFSL segment. Those are primarily master service rate agreements that are driven, the revenue is driven based on actual usage versus a fixed minimum taker pay. However, as I mentioned earlier, because of the stability and the longstanding customer base, it acts as if it is somewhat of a taker pay because it provides

pretty consistent utilization. Excellent. Thanks. Appreciate that. So over the past four years, Target's government segment has been quite dynamic. You obviously addressed it in the overview, but could you discuss your strategic approach for this segment at this juncture as it was very lively and now it seems you've pivoted to some more interesting and substantial opportunities?

Yeah, I would say at this point in time, the government segment, as I described, it consists of one contract. It's five years with one customer for the Dilley facility. But in terms of future opportunities, we don't see a lot of opportunity. We're certainly not focused on growing that segment at this point in time. Much of the pipeline is driven based on our new WHS segment and off of the data center infrastructure activity and support thereof. The one thing I will say, though, is I may not have touched upon this in the overview, is the flexibility of our asset base. I think that's important to emphasize that much of our assets are modular in nature, and we've been able to redeploy those through all of our segments throughout our public company and our company history without really having to buy any new assets because we very much maintain them very well. Our employees actually live with the customers on site, so that helps to continuously maintain those assets to be redeployable across many different end markets, many different contract life cycles. So, for example, a lot of the opportunities that we've announced in our WHS segment where we've spun up communities of 250 to thousands of beds, we've been able to recycle the assets that may have been originally used in our HFS oil and gas segment to now the customers in this WHS segment. So just to emphasize the interchangeability of our assets and the flexibility of that asset base, right now we're really focused on growing the WHS segment and not focused on really growing the government segment at this point in time.

All right, thanks. That's a great point you make on the mobility of the assets. As those more familiar with the story have witnessed that you have moved assets, in fact, across states to fulfill new contracts, and it's been a pretty efficient process. And that is occurring with a great segue to my next question. You recently won a 4,000-bed contract related to a hyperscaler's data center development. It's a five-year contract, two two-year extension options. If you could please elaborate on the contract structure and economics in more detail, as well as how future contracts may likely be structured.

Yeah, absolutely. You know, I would say that's a reasonable proxy for how future contracts are likely to be structured for the majority of the pipeline of opportunity. So, I'll elaborate on that one a bit to give folks an idea of what that looks like and what that contract structure looks like from an economic standpoint. So, I mentioned this earlier. It's a fixed minimum taker pay committed amount with a minimum revenue amount of $550 million and includes no variable revenue whatsoever. However, that's over the initial anticipated term of five years, does not include the two two-year extension options. If you were to add in those two two-year extension options, then that minimum contract value goes up from there to probably over $750 million of value. The other aspect of that contract that's built into it is within that minimum amount, there's a minimum level of expected occupancy. It's quite low. But that being said, the contract has variable revenue upside opportunity built into it as well. So for every head in bed that goes above that minimum level of occupancy, it will generate additional variable revenue above that $550 million amount, right? And we outlined this in our most recent announcement for that contract where we sort of outlined potential variable revenue annually of $20 to $40 million per year that's incremental to that $550 million. We do anticipate that to be realized. You know, we don't necessarily leverage that to beat our return profile. Our return profile is primarily based on the fixed minimum amount. So that variable revenue is all upside. That being said, based upon the trends that we've seen in our, you know, our first data center contract, the beds fill up quite quickly as these projects scale and the construction workers are hired and they start populating the community. So, you know, we do anticipate some material portion of that variable revenue to be realized as we move through the contract term and the contract structure. Now, in terms of the ramp up on that, it's 4,000 beds. We anticipate it's going to take about a year to fully ramp up all 4,000 beds, and it's going to be done in phases. So we anticipate that we'll start in Q3 of this year and call it mid-2027. We'll have all the beds delivered and operational is what we anticipate to happen. And then you'll see the full economics on that contract, kind of the back half of 2027. But as we deliver in those phases, we will generate incremental revenue and profitability on that contract. So pivoting to kind of what the return on that looks like, what the margin profile looks like, we have an illustrated unit economics slide in our investor deck. This kind of fits that return profile where it's a less than 36-month payback period. The margin profile is between 40% and 50% if you exclude the upfront payment. If you include the upfront payment and the amortization of how that works out from an accounting standpoint, the margin goes up above 50% from there. In terms of the CapEx spend, built into this contract within that $550 million is an upfront payment to help fund the CapEx spend. So we've outlined the net CapEx spend number of around $120 million. And that being said, that's not going to be all spent day one. You know, that's going to phase in over time. So it allows us to be quite disciplined in our capital deployment because the phasing on that is going to be over a year as we deliver those beds, call it a thousand beds a quarter. And so that allows us to be phased as well on our capital allocation and deployment.

And, Scott, if I may here, excuse me. So just to kind of dovetail from Jason's comment, I think it's important as you think about potential future contracts and really just the growth within the WHS segment is, as Jason outlined, the return profile associated with that contract. I think paramount in all of our discussions going forward is maintaining those return thresholds, particularly around a payback period. And so, while all future contracts may be nuanced to some degree, I think one of our, again, key tenets there in all contract discussions is making sure that we meet, particularly that payback period, within the first initial set of the contract, right? And so, exclusive of potential extension options within that first term of the contract, achieving those return thresholds.

Good point, Mark. And, yeah, thanks, Jason. Very good overview of it. But before I get to the I want to stay on this theme, but digging in a little bit more and just what are some of the things that drive the nice margins in this business? It's interesting. And I think the audience would like to hear these aren't just standard dormitories in a basic cafeteria with with the new opportunity in workforce hospitality. It's a little bit more than that. And maybe just kind of speak about how some of the features and offerings of the remote accommodation will afford a little bit better margin profile.

Yeah, absolutely. So what we're seeing with this customer base is an increase in premium quality of culinary offerings, increased amenities. Golf simulators is one thing that we've seen time and again. And what we're seeing now more recently is saunas being requested. So it's definitely an increase in amenities that's really driving the average daily rate up on these contracts, justifiably so. And so that's what also plays into the margin profile as well. And also really the margin profile is based also on the fact that it is a committed level of beds to that one customer for that entire contract lifecycle. So there's a premium attached to that as well, which plays into the margin profile of 40 to 50 percent above 50 percent when you put the amortization of the upfront payment. But we're definitely seeing a lot of requests for increased amenities, and that's really driven by the competition for the workforce that they need to secure for their data center projects. And so that's what's driving them.

Excellent. Thanks. Sounds like a nice place to be. Next, let's go to your pipeline, which is predominantly, I think it's all workforce hospitality solutions. of 20,000 beds. That's a lot, considering that's more than double, I think, what you had utilized at the end of 2025. So some significant opportunity out there. Maybe just some history of the pipeline. What size was it six months ago? What size is it now? And then I have a few questions on this, as you can tell. How confident are you in securing a portion of this sizable pipeline? And then you've publicly indicated an $18 billion target addressable market related to new contract opportunities. If you can discuss the components and assumptions framing this

very sizable opportunity. Thanks. Absolutely. So it's interesting, the history of the pipeline, we've never had this kind of an active pipeline in our company's history, certainly not something that we've talked about in 2024, 2023, et cetera. So we started announcing that pipeline on our Q3 earnings call, really. And at that time, it was over 15,000 beds of opportunity. And then our Q4 earnings call that quickly increased to 20,000. That all being said, since our Q4 earnings call, we announced the 4,000-bed community contract that I just talked about, and we've continued to advertise that over 20,000 beds of opportunity because it continues to backfill with new demand across this data center infrastructure space, whether it's in support of power stuff associated with our power plants that need to be built to support this, or some other ancillary infrastructure support, or certainly driven by the data center investment. And that's also what plays into the $18 billion of total addressable markets, really our estimate of the percentage of total capital investment in this space, which includes critical mineral development as well. So we did announce a contract, for example, back in November, I think it was, for in Nevada in support of the power community there, which is supporting both data center infrastructure as well as critical mineral development around lithium mining. So, you know, that's kind of what the pipeline consists of. So it is very active. It continues to backfill. We're well positioned to win a large portion of that because there really aren't, we can get into this, but there really aren't a lot of formidable competitors. And a lot of the bids that we're winning on this in terms of how that looks, we're really kind of sitting across from the customer and negotiating directly with them. It's not necessarily we're not seeing a lot of competitive bids. There's definitely competition out there, but we're by far the largest where we have the proven capabilities. We have the speed to market. You know, we're definitely not the lowest price. That's that's for sure. But in our conversations with a lot of these customers that are in advanced discussions for the pipeline of opportunities, I would say prices kind of last on the list. If you were to list out top five, it's really more, how quickly can you get those beds secured and delivered to our site, and how quickly can you make them operational? And we have that proven capability, and that seems to be the most important factor. So that all being said, we're well positioned to win a good portion of that work. We're not going to win it all, but we'll definitely win our fair share.

Great. Thanks. Yeah, no, it's certainly our well positioned to get it. And like we mentioned, that is a very sizable opportunity. Just a couple of follow-ons that you've already addressed a little bit. I want to talk about competitors. You just broke it down a little, but it's interesting. Aramark, a very large company, has recently emerged as a competitor with a relatively vague press release about a win, seemingly sizable win that they have in the space. Who are your primary competitors? Names that we might recognize like that one, as well as others, and how extensive is it? It sounds like from what you just said, Jason, it's not too extensive based on the capabilities you offer but just any more you can share there would be appreciated yeah what we're

seeing and experiencing is is our competitors are primarily smaller more regionalized i would describe in some cases as mom and pop they might have started in the last three to five years they don't necessarily provide the full turnkey capabilities that we provide so obviously we're able to provide the design of the community the construction the build out and then we operate it deliver the hospitality services whereas some of these competitors might provide one of those aspects and for example um we know a competitor that provides just the hospitality services but they don't have the assets or the modular units so if the customer wanted to contract with them they may have to deal with multiple vendors whereas they just have to deal with us from start to finish for the fully integrated project and the other aspect of the competition that we've seen is the per diem for the construction workers and hotels. But generally, the per diem has been higher than what we charge, because we're able, obviously, scale. We have economies of scale and a lot of experience in delivering these services. And, you know, in terms of the hotels, they're significantly further out from their construction site, right? And so, in some cases, They're driving three or four hours from a hotel to get to the construction site for the data center because they're building a lot of these data centers, obviously, now in remote locations, which is why we've seen so much opportunity for us and so much demand. So that's generally what we've seen in the competitive landscape. You know, certainly it might be some customers are going to take a risk on a smaller provider, maybe because they're cheaper. And, you know, we have seen instances of that, but their ability to deliver and speed to market just doesn't match our capabilities.

Thanks. Also, one other thing I wanted to revisit you mentioned was back last year, you won the rare earth mining opportunity and you touched upon that. But I think what's interesting in that and then in data centers, there's often a need for power generation development in the same area. So can you kind of speak to the different contracts you're winning? What is directly with, say, a hyperscaler on a data center? And then maybe some other type contracts that you've won recently in the new workforce hospitality solutions category.

Yeah, so I can go through the history briefly of those contracts. So the first one that we announced, I think that you mentioned was the support of lithium mining. So that contract's a little different than the most recent one that announced. And it's also different from kind of how I would describe the contract structures in the pipeline. That one is actually purely construction and hospitality services where we do not own the assets in support of lithium mining. So we were contracted by Lithium Americas, that's public announced, to build out a community of 2,000 beds to house construction workers that are essentially building out lithium mining processing centers. So that contract has kind of two phases to it. We're ending the first phase of that, you know, this year, and we've already started to enter the second phase. But the first phase of that is really construction services because we do have that ability. So they asked us to basically design and build out a community of 2,000 beds that they happen to own, but we have that capability. So we've generated, you know, revenue on that construction fee income. You'll see that in our filings. That's all driven by that contract. And then the second phase of that is basically as we make the beds operational, we go ahead and our employees move in there and they start delivering the hospitality services that we normally would deliver, which includes culinary maintenance, et cetera, and all the full suite of hospitality services that you would expect us to deliver as if we had owned the assets. So that's an opportunity that's a little different in that we don't own the assets and we're also providing construction services. So the margin profile on that is a bit different. It generally ranges from 20% to 30% margin profile. The contract value on that is around $175 million or so in total. About $100 million of that relates to the construction fee income and the balance of that relates to the services for the hospitality service delivery. um but uh you know the next contract that was announced in our workforce hospitality solution segment was in support of data data center infrastructure right and that was one that was announced in august um started out at an initial 250 beds we built out a community of 250 beds within less than two months um using existing assets that were underutilized at one point they may have been used in our oil and gas segment uh so we're able to relocate those and spin up that community and become fully operational at the end of Q3 of last year. And then that quickly expanded within the contract structure to touch upon that a little bit more were expandable bed options for the customer as their project continued to scale. And so they had the option to expand beyond just the 250 beds and they did that. And at this point, that facility, that community, which started out at 250 beds has now expanded to over a thousand. Just to give you an idea of how quickly these data center infrastructure projects do scale, driven by basically, you know, procurement of the power needs that the customer needs to get to support their data center community build outs and, you know, the investment, et cetera. So as that happens, they go ahead, we build in the flexibility in the contract for them to expand with us and for us to scale with them. And that also has a, you know, we've already executed a term extension on that as well. And that also built into it. It has four one-year extension options on it. And then on the power aspect, we did, and I touched upon this earlier, we did announce a power community contract in Nevada to build out a power plant to support lithium mining and data center infrastructure projects as well. And then, you know, sort of along those same lines on our Q4 earnings call, we did announce two new contract wins, which were reactivations of underutilized government assets, essentially, in that we didn't have to relocate those assets at all. customers need and demand, you know, didn't require us to relocate anything. And we went ahead and reactivated about 1800 beds or so. And that is housing construction workers that are building out a power plant that will support data center infrastructure projects in the future. And that's also what we're seeing as kind of follow ons as well. So that particular set of contracts that we announced to support that power build may eventually scale into construction housing for building out the data centers, which will come thereafter. So we're seeing a lot of opportunity there as well, both in the power space and then follow-ons with the data centers. In terms of the customers that we're securing contracts with, so far we've hit one hyperscaler right? With the 4,000 bed community. And in some cases, it's a contract with the owner of the land, the owner of the data center community, not necessarily the hyperscalers. In some cases, it's the EPC. And so it's sort of a mixed bag, but we're in conversations with all of the top five hyperscalers at this point, as it relates to our pipeline and the opportunity set.

Excellent. Thanks. Looks like we have about five minutes left. So kind of wrapping this up, just a couple more questions here. But there's a throwback question here on your business in West Texas, the Permian Basin, with housing oil workers. If you could provide an update on that business and how you anticipate that performs, particularly with the price of oil increase to given the Middle East conflict.

Yeah. So I think a lot of those aspects, because of the stability of the customer base and their long range capital plans, a lot of those events don't necessarily move that segment materially one way or another. There's generally a pretty stable utilization trend in that segment because of the stability of the asset base. So it's relatively mature. We don't expect it to move materially one way or another at this point in time. And it's been a nice, stable segment for us. And it's generated cash flows that have helped us support our growth in, for example, the WHS segment.

And then I want to touch upon the free cash flow generation of the business. Please provide perspective on your CapEx profile. And I know that's elaborate with how it ties into the contract. So some elaboration on that and then what you expect for a free cash flow on a go forward basis, as well as some discussion of capital allocation as well.

Yeah, absolutely. So free cash flow negative this year is what we anticipate because of the investments that we're making. And, for example, all the contracts that we've announced, including the 4,000-bed community contract with the top five hyperscaler. And then we expect that to pivot to positive free cash flow going forward, moving into 2027 as all of those communities are built out and the economics of those contracts are fully realized. And then you'll see that incremental free cash flow trend increase exponentially, sort of the back half of 2027. And in our most recent announcement, we did illustrate kind of assuming all of these contracts are fully ramped up, which we anticipate the back half of 2027 that really supports an annualized adjusted even a number of around 160 million annualized revenue of around 500 million. And our maintenance CapEx historically has ranged from about 2% to 4% of revenue. So in terms of free cash flow and what that looks like when all of our contracts are ramped up, I would point you to that annualized adjusted even a number of $160 million haircutted for the estimated maintenance CapEx based on annualized revenue number.

Yeah, and from a capital allocation standpoint, Scott, I think that was part of the question as well. Look, it's predominantly focused on organic growth opportunities, right? I mean, we've been pretty straightforward about that, and I think that's likely where all decisions will kind of center going forward here in the near term.

Yeah, that preempts a final question here, actually, Mark. That is basically any M&A to be expected, what and where. So I think you just kind of summed it up. But if you want to elaborate maybe in the final minute that we have of just that since I came in.

Yeah, I would say M&A is not at the forefront of our focus right now. We're focused on the organic growth pipeline, which is quite robust and continues to backfill. So focus on that in the immediate term. I would say M&A, we still hover around that a bit. We certainly would look opportunistically at that. The way we look at M&A right now is really to support our growth pipeline, our organic growth pipeline in terms of asset acquisitions where we can secure more beds, for example, or community of beds on the secondary market to really help service that growth need at this point. So in terms of M&A, I would categorize it right now as strategic opportunistic asset acquisitions to really feed that growth, that organic growth pipeline of over 20,000 beds. That being said, you know, medium and long term, certainly on the horizon there. But right now, really focused on the organic growth.

Great. Logical. Well, guys, we're going to wrap it up there. Thank you very much. Nice job. And thank you, audience. And, again, if you want to learn more about the Target Hospitality story, please contact me or contact Mark directly, or we can put you in touch with him. Thanks, all. We're going to go ahead and wrap it up now. Yeah, thanks, Scott. Thanks for having us. Thanks again. Take care, all.