In This Article:
Release Date: March 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Target Hospitality Corp (NASDAQ:TH) reported strong financial results with a total revenue of approximately $84 million and adjusted EBITDA of approximately $41 million for Q4 2024.
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The company successfully re-contracted the Dilly assets, expected to generate over $246 million in revenue over a five-year term.
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Target Hospitality Corp (NASDAQ:TH) maintained a strong financial position with $191 million in cash and $366 million in total liquidity, achieving zero net debt by the end of 2024.
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The company redeemed all outstanding senior notes due June 2025, resulting in expected annual interest expense savings of $19.5 million.
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Target Hospitality Corp (NASDAQ:TH) is actively pursuing growth opportunities in both government and non-government sectors, including a multi-year workforce subcontract with Lithium Americas.
Negative Points
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The government segment experienced a revenue decrease due to the termination of the South Texas Family Residential Center contract and lower PCC variable services revenue.
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The PCC community contract was canceled effective February 21, 2025, leading to carrying costs of approximately $2 to $3 million per quarter.
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The company faces longer sales cycles for large industrial opportunities, which could delay revenue realization.
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Target Hospitality Corp (NASDAQ:TH) anticipates a short-term carrying balance on the revolver of around $40 to $50 million due to working capital requirements.
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The company's revised 2025 financial outlook reflects the impact of the PCC contract termination and the ramp-up period for the new Dilly contract.
Q & A Highlights
Q: When remarketing the West Texas Pecos assets, how do the economics compare to the Dilly contract? A: (CFO) The best proxy for the economics at this point are the Dilly assets. It's possible they could be slightly better, but that would be what I would point you to at this point.
Q: Regarding the Lithium America's contract, what is the potential size of this market opportunity? A: (CFO) There is potential to go beyond 2027 in multiple phases. We feel well-positioned, and the project is pacing well. The best proxy for economics is what we've already announced. (CEO) The plan is to do a second phase, and the area has significant potential for more work.
Q: How should we think about revenue and EBIT in the first quarter and run rates for major contracts? A: (CFO) The run rate for Dilly is similar to the prior contract, roughly $50 to $55 million of annual revenue with a 40 to 50% margin. The LAC deal will have about $65 million recognized this year at a 25 to 30% margin. Q1 will have minimal Dilly contract revenue and a prorated portion of the PCC contract.