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What changed in Target Hospitality Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Target Hospitality Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+358 added−355 removedSource: 10-K (2025-03-26) vs 10-K (2024-03-13)

Top changes in Target Hospitality Corp.'s 2024 10-K

358 paragraphs added · 355 removed · 276 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

68 edited+17 added−26 removed78 unchanged
Biggest changeThe South Texas Family Residential Center includes 524,000 square feet of building space including residential housing units with 2,400 beds, as well as classrooms, a library, chapels, an infirmary with full medical, dental, pharmaceutical and x-ray capabilities, a dining hall, offices and an industrial laundry center. 12 Table of Contents In March 2021, the Company entered into a lease and services agreement with our NP Partner, backed by a committed United States Government contract, to provide a suite of comprehensive service offerings in support of their humanitarian aid efforts at a residential housing facility.
Biggest changeThe Dilley Facility includes 524,000 square feet of building space including residential housing units with 2,400 beds (excluding employee beds), as well as classrooms, a library, chapels, an infirmary with full medical, dental, pharmaceutical and x-ray capabilities, a dining hall, offices and an industrial laundry center.
The investment profile of our rental assets underpins our industry leading unit economics. Our contract discipline underpins our investment decision making and any spending on new growth investments is underwritten by contracts, with no speculative building. Generally, we do not invest capital unless we expect to meet our internal return thresholds.
The investment profile of our rental assets underpins our industry leading unit economics. Our contract discipline underpins our investment decision making and any spending on new growth investments is generally underwritten by contracts, with no speculative building. Generally, we do not invest capital unless we expect to meet our internal return thresholds.
We continue to focus on strengthening our balance sheet through strong cash flow generation and debt reduction to provide flexibility to execute upon targeted acquisitions and business combinations that would be accretive to us while also diversifying our customer base, reducing customer concentration, and expanding our end markets. ​ 9 Table of Contents ● Maintaining and Expanding Existing Customer Relationships .
We continue to focus on strengthening our balance sheet through strong cash flow generation and debt reduction to provide flexibility to execute upon targeted acquisitions and business combinations that would be accretive to 9 Table of Contents us while also diversifying our customer base, reducing customer concentration, and expanding our end markets. ​ ● Maintaining and Expanding Existing Customer Relationships .
The chart below sets out certain key milestones for each business. 1978-2010 ​ 2011-Present ● 1978: Target Logistics was founded ​ ● 2011: Target expanded capacity in Williston, Stanley and Tioga with long-term customers Halliburton, Hess, ONEOK, Schlumberger, Superior Well Service, Key Energy Services and others ● 1990: Signor Farm and Ranch Real Estate was founded ​ ● 2011: Signor Lodge opened in Midland, TX (84 rooms) ● Target awarded contracts for logistics services for Olympics in 1984 (Sarajevo), 1992 (Barcelona), 1996 (Atlanta), 2000 (Sydney), 2002 (Salt Lake City), 2004 (Athens), 2006 (Turin) and 2010 (Vancouver) ​ ● 2011: Signor Barnhart Lodge opened in Barnhart, TX (160 beds) ● The Vancouver project consisted of a 1,600 bed facility, a portion of which was subsequently transferred to North Dakota and remains in use today ​ ● 2012: Target developed additional North Dakota facilities in Dunn County (Q1), Judson Lodge(Q3), Williams County (Q3) and Watford City (Q4) ● 2005: Target operated 1,100-bed cruise ship anchored in the Gulf of Mexico to support relief efforts during aftermath of Hurricane Katrina ​ ● 2012: Target expanded service into Texas with the opening of Pecos Lodge (90 beds) in Q4 ● In addition, built and managed 700-person modular camp in New Orleans with running water, electricity and on-site kitchen services ​ ● 2013: Target awarded TCPL Keystone KXL pipeline project to house and feed over 6,000 workers (project terminated July 23, 2021) ● 2007: Target hired by Freeport-McMoRan to build and operate 425-bed facility in Morenci, AZ in support of copper mining operations (re-opening 10/2012) ​ ● 2014: Target awarded lodge contract for new 200-bed community in the HFS – South region ● 2008: Target provided catering/food services for 600 personnel in support of relief operations in aftermath of Hurricane Ike ​ ● 2014: Target awarded contract and built 2,400-bed community for U.S. federal government ● 2009: Target provided housing and logistics services for 1,500 workers during a refurbishment of a refinery in St.
The chart below sets out certain key milestones for each business. 1978-2010 ​ 2011-Present ● 1978: Target Logistics was founded ​ ● 2011: Target expanded capacity in Williston, Stanley and Tioga with long-term customers Halliburton, Hess, ONEOK, Schlumberger, Superior Well Service, Key Energy Services and others ● 1990: Signor Farm and Ranch Real Estate was founded ​ ● 2011: Signor Lodge opened in Midland, TX (84 rooms) ● Target awarded contracts for logistics services for Olympics in 1984 (Sarajevo), 1992 (Barcelona), 1996 (Atlanta), 2000 (Sydney), 2002 (Salt Lake City), 2004 (Athens), 2006 (Turin) and 2010 (Vancouver) ​ ● 2011: Signor Barnhart Lodge opened in Barnhart, TX (160 beds) ● The Vancouver project consisted of a 1,600 bed facility, a portion of which was subsequently transferred to North Dakota and remains in use today ​ ● 2012: Target developed additional North Dakota facilities in Dunn County (Q1), Judson Lodge(Q3), Williams County (Q3) and Watford City (Q4) ● 2005: Target operated 1,100-bed cruise ship anchored in the Gulf of Mexico to support relief efforts during aftermath of Hurricane Katrina ​ ● 2012: Target expanded service into Texas with the opening of Pecos Lodge (90 beds) in Q4 ● In addition, built and managed 700-person modular camp in New Orleans with running water, electricity and on-site kitchen services ​ ● 2013: Target awarded TCPL Keystone KXL pipeline project to house and feed over 6,000 workers (project terminated July 23, 2021) ● 2007: Target hired by Freeport-McMoRan to build and operate 425-bed facility in Morenci, AZ in support of copper mining operations (re-opening 10/2012) ​ ● 2014: Target awarded lodge contract for new 200-bed community in the HFS – South region ● 2008: Target provided catering/food services for 600 personnel in support of relief operations in aftermath of Hurricane Ike ​ ● 2014: Target awarded contract and built 2,400-bed community for U.S. federal government (contract terminated August 9, 2024) ● 2009: Target provided housing and logistics services for 1,500 workers during a refurbishment of a refinery in St.
We have designated sales-related resources that focus on special finite life cycle projects and maintain a dynamic business pipeline which includes but is not limited to special projects across end markets. ​ ● Enhance Financial Strength and Create Shareholder Value . The Company follows a disciplined approach to maintaining and enhancing financial strength to create shareholder value.
We have designated sales-related resources that focus on special finite life cycle projects and maintain a dynamic business pipeline which includes, but is not limited to, special projects across end markets. ​ ● Enhance Financial Strength and Create Shareholder Value . The Company follows a disciplined approach to maintaining and enhancing financial strength to create stockholder value.
We have built, own and operate the two largest specialty rental and hospitality services networks available to customers operating in the regions served by our HFS – South segment. These networks allow our customers to utilize one provider across a large and expansive geographic area.
We have built, own and operate the largest specialty rental and hospitality services networks available to customers operating in the regions served by our HFS – South segment. These networks allow our customers to utilize one provider across a large and expansive geographic area.
On May 15, 2023, the Company executed a six-month extension of the Expanded Humanitarian Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms. The Expanded Humanitarian Contract terminated as of November 15, 2023.
On May 15, 2023, the Company executed a six-month extension of the Expanded Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms. The Expanded Contract terminated as of November 15, 2023.
On May 15, 2023, the Company executed a six-month extension of the Expanded Humanitarian Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms.
On May 15, 2023, the Company executed a six-month extension of the Expanded Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms.
Government related contractors, investment grade natural resource development companies and other workforce accommodation providers operating in the regions served by our HFS – South segment. The Company’s specialty rental and hospitality and management services are highly customizable and are tailored to each customer’s needs and requirements. Target Hospitality is also an approved U.S.
The Company’s primary customers are U.S. government related contractors, investment grade natural resource development companies and other workforce accommodation providers operating in the regions served by our HFS – South segment. The Company’s specialty rental and hospitality and management services are highly customizable and are tailored to each customer’s needs and requirements. Target Hospitality is also an approved U.S.
We have long standing relationships with our diversified base of approximately 290 customers, which includes some of the largest blue-chip, investment grade natural resource development and integrated infrastructure companies in North America. We believe we have also established strong relationships in our U.S. government end market with our contract partners and the federal agencies we serve.
We have long standing relationships with our diversified base of approximately 330 customers, which includes some of the largest blue-chip, investment grade natural resource development and integrated infrastructure companies in North America. We believe we have also established strong relationships in our U.S. government end market with our contract partners and the federal agencies we serve.
Our world-class culinary and catering professionals serve approximately 16,000,000 meals on average each year with fresh ingredients and many of our meals are made from scratch. We self-manage most culinary and hospitality services, which provides us with greater control over service quality as well as incremental revenue and profit potential.
Our world-class culinary and catering professionals serve approximately 15,000,000 meals on average each year with fresh ingredients and many of our meals are made from scratch. We self-manage most culinary and hospitality services, which provides us with greater control over service quality as well as incremental revenue and profit potential.
In the U.S. natural resource development industry, many of the largest hydrocarbon reservoirs are in remote and expansive geographic locations, like the Southwestern portion of the United States and North Dakota where limited infrastructure exists. We support the development of these necessary natural resources by providing the fully-integrated and value-added hospitality services described above.
In the U.S. natural resource development industry, many of the largest hydrocarbon reservoirs are in remote and expansive geographic locations, like the Southwestern portion of the U.S. and North Dakota where limited infrastructure exists. We support the development of these necessary natural resources by providing the fully-integrated and value-added hospitality services described above.
During the year ended December 31, 2022, the Company executed the Expanded Humanitarian Contract with our NP Partner that became effective on May 16, 2022, which represented a significantly expanded lease and services agreement to provide enhanced infrastructure and comprehensive facility services supporting the NP Partner and the U.S. Government in their humanitarian aid missions.
During the year ended December 31, 2022, the Company executed the Expanded Contract with our NP Partner that became effective on May 16, 2022, which represented a significantly expanded lease and services agreement to provide enhanced infrastructure and comprehensive facility services supporting the NP Partner and the U.S. government in their missions.
Our assets are well-suited to support the full lifecycle of development plans and we are able to scale our facility size to meet customers’ growing needs. We are well-positioned to continue serving our customers throughout the full cycle of their projects, which typically last for several decades.
S. government. Our assets are well-suited to support the full lifecycle of development plans and we are able to scale our facility size to meet customers’ growing needs. We are well-positioned to continue serving our customers throughout the full cycle of their projects, which typically last for several decades.
Additionally, we offer a wide array of training solutions (classroom, hands-on and e-learning) for our employees. In 2023, our employees enhanced their skills through training, including safety training, leadership training and equipment-related training from our suppliers.
Additionally, we offer a wide array of training solutions (classroom, hands-on and e-learning) for our employees. In 2024, our employees enhanced their skills through training, including safety training, leadership training and equipment-related training from our suppliers.
We currently provide Facilities Management, culinary and catering services and site services for one facility located in Wyoming for which we do not own the specialty rental accommodation assets. 15 Table of Contents ​ Segment information for December 31, 2023 and 2022 ​ For additional information on our segments, including Government, HFS - South, and All Other, related to December 31, 2023 and 2022, refer to Note 20 of our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K. ​ Customers and Competitors The Company’s principal customers include U.S.
We currently provide Facilities Management, culinary and catering and site services for one facility located in Wyoming for which we do not own the specialty rental accommodation assets. 15 Table of Contents ​ Segment information for December 31, 2024 and 2023 ​ For additional information on our segments, including Government, HFS - South, and All Other, related to December 31, 2024 and 2023, refer to Note 19 of our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K. ​ Customers and Competitors For the year ended December 31, 2024, the Company’s principal customers include U.S.
Our performance process encourages performance and development check-ins throughout the year to provide for development at all levels across the Company. ​ Intellectual Property Target Hospitality owns a number of trademarks important to the business. Its material trademarks are registered or pending registration in the U.S. Patent and Trademark Office. The business operates primarily under the Target Hospitality brand.
Our performance process encourages performance and development check-ins throughout the year to provide for development at all levels across the Company. ​ Intellectual Property Target Hospitality owns a number of trademarks important to the business. Its material trademarks are registered or pending registration in the U.S. Patent and Trademark Office.
Our specialty rental modular assets and hospitality services deliver the essential services and accommodations when and where there is a lack of sufficient accessible or cost-effective housing, infrastructure or local labor. Many of the geographic areas near the southern U.S. border lack sufficient temporary housing and infrastructure for asylum-seeking immigrants or may require additional infrastructure in the future.
Our specialty rental modular assets and hospitality services deliver the essential services and accommodations when and where there is a lack of sufficient accessible or cost-effective housing, infrastructure or local labor. Many of the geographic areas near the southern U.S. border lack sufficient temporary housing and infrastructure and may require additional infrastructure in the future.
Our HFS competitors primarily include small, independent businesses with a few locations, often with little to no contracts and with significantly fewer rooms, or RV parks that offer no turn-key services or modular accommodation solutions. ​ The accommodations market within our government business is generally segmented into competitors that primarily serve as temporary facilities with seasonal contracts, and tent providers with limited scale and services.
Our HFS-South competitors primarily include small, independent businesses with a few locations, often with little to no contracts and with significantly fewer rooms, or RV parks that offer no turn-key services or modular accommodation solutions. ​ The accommodations market within our Government segment is generally divided into competitors that primarily serve as temporary facilities with seasonal contracts, and tent providers with limited scale and services.
For additional information on our revenue related to December 31, 2023 and 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Part II, Item 7 of this Annual Report on Form 10-K. ​ Target Hospitality, though initially founded in 1978, began operating as a specialty rental and hospitality services company in 2006.
For additional information on our revenue related to the years ended December 31, 2024 and 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” located in Part II, Item 7 of this Annual Report on Form 10-K. ​ Target Hospitality, though initially founded in 1978, began operating as a specialty rental and hospitality services company in 2006.
Croix ​ ● 2015: Opened new community in Mentone, TX in Q4 for Anadarko Petroleum Company ● 2009: Signor Lodging was formed ​ ● 2016: Signor expanded Midland Lodge several phased expansions 1,000 beds ● 2010: Target opened Williston Lodge, Muddy River, Tioga and Stanley Cabins in western North Dakota ​ ● 2016: Signor Kermit Lodge opens with 84 rooms ​ ​ ● 2017: Signor opened Orla Lodge with 208 rooms ​ ​ ● 2017: Target expanded network with the expansion of both Wolf Lodge and Pecos Lodge in Q2 ​ ​ ● 2017: Target expanded presence in New Mexico and West Texas with the acquisition of 1,000-room Iron Horse Ranch in Q3 ​ ​ ● 2017: Signor opened El Reno Lodge with 345 rooms ​ ​ ● 2017: Target expanded presence with 280-room Blackgold Lodge in Q3 ​ ​ ● 2018: Target Logistics rebranded as Target Lodging in March 2018 ​ ​ ● 2018: Target opened new 600-room community in Mentone, Texas ​ ​ ● 2018: Target added approximately 1,600 rooms across HFS – South network ​ ​ ● 2018: Target expanded community network in the HFS – South region through acquisition of Signor, adding 7 locations and approximately 4,500 beds to the network ​ ​ ● 2019: Target announced new 400-bed community in the HFS – South network ​ ​ ● 2019: Target expanded its community network in the HFS – South region through the acquisitions of Superior and ProPetro, adding 4 locations and approximately 758 beds to the network. ​ ​ ● 2019: El Capitan 200 beds ​ ​ ● 2019: El Capitan expansion 100 beds ​ ​ ● 2019: Seven Rivers expansion 200 beds ​ ​ ● 2021: Government Segment expansion 4,000 beds ​ ​ ● 2022: Government Segment expansion 2,375 beds ​ ​ ● 2023: HFS – South Segment expansion 665 beds ​ We are one of the few vertically integrated specialty rental and hospitality services providers that service the entire value chain from site identification to long-term community development and facilities management.
Croix ​ ● 2015: Opened new community in Mentone, TX in Q4 for Anadarko Petroleum Company ● 2009: Signor Lodging was formed ​ ● 2016: Signor expanded Midland Lodge several phased expansions 1,000 beds ● 2010: Target opened Williston Lodge, Muddy River, Tioga and Stanley Cabins in western North Dakota ​ ● 2016: Signor Kermit Lodge opens with 84 rooms ​ ​ ● 2017: Signor opened Orla Lodge with 208 rooms ​ ​ ● 2017: Target expanded network with the expansion of both Wolf Lodge and Pecos Lodge in Q2 ​ ​ ● 2017: Target expanded presence in New Mexico and West Texas with the acquisition of 1,000-room Iron Horse Ranch in Q3 ​ ​ ● 2017: Signor opened El Reno Lodge with 345 rooms ​ ​ ● 2017: Target expanded presence with 280-room Blackgold Lodge in Q3 ​ ​ ● 2018: Target Logistics rebranded as Target Lodging in March 2018 ​ ​ ● 2018: Target opened new 600-room community in Mentone, Texas ​ ​ ● 2018: Target added approximately 1,600 rooms across HFS – South network ​ ​ ● 2018: Target expanded community network in the HFS – South region through acquisition of Signor, adding 7 locations and approximately 4,500 beds to the network ​ ​ ● 2019: Target announced new 400-bed community in the HFS – South network ​ ​ ● 2019: Target expanded its community network in the HFS – South region through the acquisitions of Superior and ProPetro, adding 4 locations and approximately 758 beds to the network. ​ ​ ● 2019: El Capitan addition of 200 beds ​ ​ ● 2019: El Capitan expansion 100 beds ​ ​ ● 2019: Seven Rivers expansion 200 beds ​ ​ ● 2021: Government Segment expansion 4,000 beds ​ ​ ● 2022: Government Segment expansion approximately 2,000 beds ​ ​ ● 2023: HFS – South Segment expansion 665 beds ​ ​ ● 2024: Entered into partnership with Chard Métis Dene Group to further expand business in Canada ​ We are one of the few vertically integrated specialty rental and hospitality services providers that service the entire value chain from site identification to long-term community development and facilities management.
We make available, free of charge through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the United States Securities and Exchange Commission (the “SEC”).
We make available, free of charge through our website, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the U.S.
Our employees are focused on the “other 12 hours”—the time our customers and their 4 Table of Contents employees are not working—making sure we deliver a well fed, well rested, happier, loyal, safer and more productive employee every day.
Our employees are focused on the “other 12 hours”—the time our customers and their employees are not working—making sure we deliver a well fed, well rested, happier, loyal, safer and more productive employee every day.
During the year ended December 31, 2023, the Company executed the New PCC Contract, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the United States Government, that replaced the Expanded Humanitarian Contract and became effective on November 16, 2023.
During the year ended December 31, 2023, the Company executed the New PCC Contract, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the U.S. government, that replaced the Expanded Contract and became effective on November 16, 2023.
We have established a leadership position in providing a fully integrated service offering to our large customer base, which is comprised of United States government service providers, and major companies supporting natural resource development. Our company is built on the foundation of the following core values: elevate the experience, pursue excellence, act with integrity and collaboration.
We have established a leadership position in providing a fully integrated service offering to our large customer base, which is comprised of U.S. government service providers, and major companies supporting natural resource development. Our Company is built on the foundation of the following core values: serve others with empathy, elevate the experience, pursue excellence, act with integrity and collaboration.
For the year ended December 31, 2021, we had two customers, who accounted for approximately 35% and 19% of our revenue, respectively. ​ Generally, the Company competes based on factors including quality and breadth of available locations and room utilization, modular construction time and development expertise, proactive logistics management, geographic areas serviced, average daily rate, facility quality, and food management. ​ The accommodation facilities market in our HFS business is segmented into competitors that serve components of the overall value chain, but very few offer the entire suite of hospitality services to our customers.
For the year ended December 31, 2022, we had two customers, who accounted for approximately 61% and 11% of our revenue, respectively. ​ Generally, the Company competes based on factors including quality and breadth of available locations and room utilization, modular construction time and development expertise, proactive logistics management, geographic areas serviced, average daily rate, facility quality, and food management. ​ The accommodation facilities market in our HFS-South segment is divided into competitors that serve components of the overall value chain, but very few offer the entire suite of hospitality services to our customers.
The Company's disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing risk, with the nearest significant debt maturity of $181.4 million occurring in June 2025 consisting of our approximately $181.4 million in aggregate principal amount of 10.75% senior secured notes due June 15, 2025 (the “2025 Senior Secured Notes”).
The Company's disciplined financial approach also allows it to maintain sufficient liquidity and to reduce refinancing risk, with the nearest significant debt maturity of $181.4 million occurring in June 2025 consisting of our approximately $181.4 million in aggregate principal amount of 10.75% senior secured notes due June 15, 2025 (the “2025 Senior Secured Notes”), which were redeemed in full on March 25, 2025.
The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding Target Hospitality Corp. 20 Table of Contents
Securities and Exchange Commission (the “SEC”). The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding Target Hospitality Corp. 20 Table of Contents
Target’s customers’ willingness to enter into multi-year 8 Table of Contents committed contracts, and our historical client retainment rate of over 90%, demonstrates the strength of these long-standing relationships. ​ ● Committed Revenue and Exclusivity Produce Highly Visible, Recurring Revenue.
Target’s customers’ willingness to enter into multi-year committed contracts, and our historical client retainment rate of over 85%, demonstrates the strength of these long-standing relationships. ​ ● Committed Revenue and Exclusivity Produce Highly Visible, Recurring Revenue.
The New PCC Contract includes a one year base period through November 15, 2024, an option to extend for up to four additional one year periods, and an option to extend for up to six months upon the conclusion of the base period or any of the option periods.
The New PCC Contract included a one year base period through November 15, 2024, an option to extend for up to four additional one 17 Table of Contents year periods, and an option to extend for up to six months upon the conclusion of the base period or any of the option periods.
Our rental assets have an average life of approximately 15 years, and we typically recover our initial investment within the first few years of initial capital deployment. Our maintenance capital between 2019 and 2023 has ranged from approximately 0.4% to 4.0% of annual revenue with an average of 2% of annual revenue.
Our rental assets have an average life of approximately 15 years, and we typically recover our initial investment within the first few years of initial capital deployment. Our maintenance capital between 2020 and 2024 has ranged from approximately 0.4% to 5.4% of annual revenue with an average of 2.9% of annual revenue.
Lease and Services Agreements The Company’s operations in the HFS – South segment are conducted through several different types of agreements with customers. Certain customer agreements include committed contractual revenue arrangements, some of which contain minimum revenue commitments.
Customer Agreements The Company’s operations in the HFS – South segment are conducted through several different types of agreements with customers. Certain customer agreements include committed contractual revenue arrangements, some of which contain minimum revenue amounts.
Government in their humanitarian aid missions. The Expanded Humanitarian Contract provided for a significant scope expansion and term extension for the continuation of services provided under the agreement that originated in March 2021 with approximately 6,375 beds.
The Expanded Contract provided for a significant scope expansion and term extension for the continuation of services provided under the agreement that originated in March 2021 with approximately 6,375 beds.
As of December 31, 2023, with 16 communities and approximately 7,900 beds across HFS – South, we offer the largest network of turnkey specialty rental accommodations and hospitality services. The HFS – South segment generated approximately 26% or $148.7 million of the Company’s revenue for the year ended December 31, 2023.
As of December 31, 2024, with 16 communities and approximately 7,900 beds across HFS – South, we offer the largest network of turnkey specialty rental accommodations and hospitality services. The HFS – South segment generated approximately 39% or $149.9 million of the Company’s revenue for the year ended December 31, 2024.
Government sites 16 Table of Contents typically do not own and operate the full suite of hospitality solutions, but contract out to third-parties for more limited offerings and on a shorter-term basis. ​ The Company’s Community and Services Contracts For the year ended December 31, 2023, revenue related to the HFS – South segment represented approximately 26% of our revenue, revenue related to our Government segment represented 72% of our revenue, and All Other revenue represented 2% of our revenue.
U.S. government sites 16 Table of Contents typically do not own and operate the full suite of hospitality solutions, but contract out to third-parties for more limited offerings and on a shorter-term basis. ​ The Company’s Community and Services Contracts For the year ended December 31, 2024, revenue related to the HFS – South segment represented approximately 39% of our revenue, revenue related to our Government segment represented 58% of our revenue, and All Other revenue represented 3% of our revenue.
During the year ended December 31, 2022, the Company executed a new contract with our NP Partner that became effective on May 16, 2022, which represented a significantly expanded lease and services agreement (“Expanded Humanitarian Contract”) to provide enhanced infrastructure and comprehensive facility services that support the critical hospitality solutions the Company provides to the NP Partner and the U.S.
During the year ended December 31, 2023, the Company executed a new contract with our NP Partner that became effective on May 16, 2022, 12 Table of Contents which represented a significantly expanded lease and services agreement (“Expanded Contract”) to provide enhanced infrastructure and comprehensive facility services that support the critical hospitality solutions the Company provides to the NP Partner and the U.S. government in their missions.
Our Company operates across the U.S., primarily in the Southwest and the Midwest. We also own and operate the largest family residential center in the U.S. Target Hospitality provides comprehensive turnkey solutions to customers’ unique needs, from the initial planning stages through the full cycle of development and ongoing operations.
Our Company operates across the U.S. and Canada, primarily in the Southwest and the Midwest U.S.. Target Hospitality provides comprehensive turnkey solutions to customers’ unique needs, from the initial planning stages through the full cycle of development and ongoing operations.
Government contractors, and investment grade natural resource development companies. For the year ended December 31, 2023, we had one customer, who accounted for approximately 62% of our revenue. ​ For the year ended December 31, 2022, we had two customers, who accounted for approximately 61% and 11% of our revenue, respectively.
Government contractors, and investment grade natural resource development companies. For the year ended December 31, 2024, we had one customer, who accounted for approximately 48% of our revenue. ​ For the year ended December 31, 2023, we had one customer, who accounted for approximately 62% of our revenue.
Additionally, we utilize the same asset base across our operating segments, which allows us to efficiently optimize our modular assets and redeploy them, as warranted by customer demand. ​ ● Long-lived Assets Requiring Minimal Maintenance Capital Expenditures. Our long-lived specialty rental assets support robust cash flow generation.
We believe our business model is generally well insulated from economic cycles because we utilize the same asset base across our operating segments, which allows us to efficiently optimize our modular assets and redeploy them, as warranted by customer demand. ​ ● Long-lived Assets Requiring Minimal Maintenance Capital Expenditures. Our long-lived specialty rental assets support robust cash flow generation.
Business Model ​ Our business model allows our customers to focus their efforts and resources on their core businesses. This makes us an integral part of the planning and execution phases for all customers. We provide a safe, comfortable, and healthy environment to our guests, employees and workers across the U.S. and anywhere our customers need our facilities and services.
This makes us an integral part of the planning and execution phases for all customers. We provide a safe, comfortable, and healthy environment to our guests, employees and workers across the U.S. and Canada and anywhere our customers need our facilities and services.
Business Strengths & Strategies Strengths ​ ● Market Leader in Strategically Located Geographies . We are one of North America’s largest providers of turnkey specialty rental units with premium catering and hospitality services including 28 strategically located communities with approximately 16,800 beds primarily in the highest demand regions of the southwestern United States.
Business Strengths & Strategies Strengths ​ ● Market Leader in Strategically Located Geographies . We are one of North America’s largest providers of turnkey specialty rental units with premium catering and hospitality services including 26 strategically located communities with 16,865 beds primarily in the highest demand regions of the southwestern U. S. as of December 31, 2024.
Generally, natural resource development customers require larger workforces during construction and expansionary periods and therefore have a higher demand for accommodations. Due to the contiguous nature of their land positions, a “hub and spoke” model is utilized.
Another factor that influences demand for our rooms and services is the type of customer we are supporting. Generally, natural resource development customers require larger workforces during construction and expansionary periods and therefore have a higher demand for accommodations. Due to the contiguous nature of their land positions, a “hub and spoke” model is utilized.
The LSAs obligate customers to pay for a fixed amount of rooms over a term regardless of occupancy with terms that can range from one month to multiple years. LSAs generally do not have termination provisions in favor of the customer.
The LSAs obligate customers to pay a fixed minimum revenue amount, generally for a fixed amount of rooms over a term regardless of occupancy with terms that can range from one month to multiple years.
Our workforce is primarily comprised of full-time employees. Of the total population as of December 31, 2023, approximately 570 of our employees worked in the HFS – South segment, approximately 287 of our employees worked in the Government segment, and approximately 59 of our employees worked in the All Other segment. The remaining 68 employees worked in Corporate.
Our workforce is primarily comprised of full-time employees. Of the total population as of December 31, 2024, approximately 600 of our employees worked in the HFS – South segment, approximately 41 of our employees worked in the Government segment, and approximately 66 of our employees worked in the All Other segment. The remaining 63 employees worked in Corporate.
The Government segment generated approximately 72% or $403.7 million of the Company’s revenue for the year ended December 31, 2023.
The Government segment generated approximately 58% or $224.7 million of the Company’s revenue for the year ended December 31, 2024.
We initially won our large government sub-contract in 2014 based upon our differentiated ability to develop and open a permanent large-scale facility on an accelerated timeline. This contract was renewed and extended in 2016 and 2020, demonstrating our successful execution and customer satisfaction.
We initially won one of our largest government sub-contracts in 2014 based upon our differentiated ability to develop and open a permanent large-scale facility in Dilley, Texas on an accelerated timeline, which was renewed and extended in 2016 and 2020 and ultimately led to an expansion of the Government segment, demonstrating our successful execution and customer satisfaction.
Under the New PCC Contract, the Company will maintain similar facility size and operational scope compared to the Expanded Humanitarian Contract. The New PCC Contract operates with similar structure to the Company’s prior and existing government services subcontracts, which are centered around minimum revenue commitments supported by the United States Government.
Under the New PCC Contract, the Company maintained similar facility size and operational scope compared to the Expanded Contract. The New PCC Contract operates with similar structure to the Company’s prior government services subcontracts, which centered around minimum revenue amounts supported by the U.S. government.
For the year ended December 31, 2023, we generated revenues of approximately $564 million. Approximately 64.9% of our revenue was earned from specialty rental with vertically integrated hospitality, specifically lodging and related ancillary services, whereas the remaining 35.1% of revenues were earned through leasing of lodging facilities for the year ended December 31, 2023.
Approximately 68.8% of our revenue was earned from specialty rental with vertically integrated hospitality, specifically lodging and related ancillary services, whereas the remaining 31.2% of revenues were earned through leasing of lodging facilities for the year ended December 31, 2024.
To support these objectives, the Company’s human resources programs are designed to: keep employees safe and healthy; enhance the Company’s culture through efforts aimed at making the workplace more inclusive; acquire and retain diverse talent; reward and support employees through competitive pay and benefit programs; develop talent to prepare them for critical roles and leadership positions; and facilitate internal talent mobility to create a high-performing workforce. ​ The Company employed approximately 984 people as of December 31, 2023.
To support these objectives, the Company’s human resources programs are designed to: keep employees safe and healthy; reward and support employees through competitive pay and benefit programs; develop talent to prepare them for critical roles and leadership positions; and facilitate internal talent mobility to create a high-performing workforce. 18 Table of Contents ​ The Company employed approximately 770 people as of December 31, 2024.
The map below shows the Company’s primary community locations in the HFS – South segment (including five locations outside of this segment). ​ 11 Table of Contents The table below presents the Company’s communities in the HFS – South, Government, and All Other segments as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment ​ Community Name ​ Location ​ Status ​ Number of Beds Government ​ Dilley (STFRC) ​ Dilley, Texas ​ Own ​ 2,556 Government ​ Pecos Children's Center ​ Pecos, Texas ​ Own ​ 2,000 Government ​ Pecos Blue Lodge ​ Pecos, Texas ​ Own ​ 1,000 Government ​ Delaware Lodge ​ Orla, Texas ​ Own/Operate ​ 425 Government ​ Lodge 118 ​ Pecos, Texas ​ Own/Operate ​ 1,402 Government ​ Pecos Trail Lodge ​ Pecos, Texas ​ Own/Operate ​ 558 Government & HFS - South ​ Skillman Station Lodge ​ Mentone, Texas ​ Own/Operate ​ 1,038 Government & HFS - South ​ Pecos South Lodge ​ Pecos, Texas ​ Own/Operate ​ 772 HFS - South ​ Orla North Lodge ​ Orla, Texas ​ Own/Operate ​ 169 HFS - South ​ Orla South Lodge ​ Orla, Texas ​ Own/Operate ​ 240 HFS - South ​ El Capitan Lodge ​ Orla, Texas ​ Own/Operate ​ 429 HFS - South ​ Odessa West Lodge ​ Odessa, Texas ​ Own/Operate ​ 805 HFS - South ​ Odessa East Lodge ​ Odessa, Texas ​ Own/Operate ​ 280 HFS - South ​ Mentone Wolf Lodge ​ Mentone, Texas ​ Own/Operate ​ 530 HFS - South ​ Midland Lodge ​ Midland, Texas ​ Own/Operate ​ 843 HFS - South ​ Midland East Lodge ​ Midland, Texas ​ Own/Operate ​ 168 HFS - South ​ Kermit Lodge ​ Kermit, Texas ​ Own/Operate ​ 232 HFS - South ​ Kermit North Lodge ​ Kermit, Texas ​ Own/Operate ​ 180 HFS - South ​ Carlsbad Lodge ​ Carlsbad, New Mexico ​ Own/Operate ​ 496 HFS - South ​ Seven Rivers Lodge ​ Carlsbad, New Mexico ​ Own/Operate ​ 640 HFS - South ​ Jal Lodge ​ Jal, New Mexico ​ Own/Operate ​ 466 HFS - South ​ Big Spring Lodge ​ Big Spring, Texas ​ Own/Operate ​ 665 All Other ​ Williams County Lodge ​ Williston, North Dakota ​ Own/Operate ​ 300 All Other ​ Judson Executive Lodge ​ Williston, North Dakota ​ Own/Operate ​ 100 All Other ​ Watford City Lodge ​ Watford City, North Dakota ​ Own/Operate ​ 334 All Other ​ Cheecham Lodge ​ Alberta, Canada ​ Own/Operate ​ 215 Total Number of Beds ​ ​ ​ ​ ​ ​ ​ 16,843 ​ ​ Government The Government segment includes, but is not limited to, two primary end markets which make up approximately 72% of our revenue for the year ended December 31, 2023: ● Residential Facilities .
The map below shows the Company’s primary community locations in the HFS – South segment (including five locations outside of this segment). ​ 11 Table of Contents The table below presents the Company’s communities in the HFS – South, Government, and All Other segments as of December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ Segment ​ Community Name ​ Location ​ Status ​ Number of Beds Government ​ Dilley (Dilley Immigration Processing Center) (1) ​ Dilley, Texas ​ Own ​ 2,556 Government ​ PCC (2) ​ Pecos, Texas ​ Own ​ 2,000 Government ​ Pecos Blue Lodge (2) ​ Pecos, Texas ​ Own ​ 1,000 Government ​ Delaware Lodge (2) ​ Orla, Texas ​ Own/Operate ​ 425 Government ​ Lodge 118 (2) ​ Pecos, Texas ​ Own/Operate ​ 1,402 Government ​ Pecos Trail Lodge (2) ​ Pecos, Texas ​ Own/Operate ​ 558 Government & HFS - South ​ Skillman Station Lodge (2) ​ Mentone, Texas ​ Own/Operate ​ 1,048 Government & HFS - South ​ Pecos South Lodge (2) ​ Pecos, Texas ​ Own/Operate ​ 772 HFS - South ​ Orla North Lodge ​ Orla, Texas ​ Own/Operate ​ 169 HFS - South ​ Orla South Lodge ​ Orla, Texas ​ Own/Operate ​ 240 HFS - South ​ El Capitan Lodge ​ Orla, Texas ​ Own/Operate ​ 429 HFS - South ​ Odessa West Lodge ​ Odessa, Texas ​ Own/Operate ​ 805 HFS - South ​ Odessa East Lodge ​ Odessa, Texas ​ Own/Operate ​ 280 HFS - South ​ Mentone Wolf Lodge ​ Mentone, Texas ​ Own/Operate ​ 530 HFS - South ​ Midland Lodge ​ Midland, Texas ​ Own/Operate ​ 870 HFS - South ​ Midland East Lodge ​ Midland, Texas ​ Own/Operate ​ 197 HFS - South ​ Kermit Lodge ​ Kermit, Texas ​ Own/Operate ​ 232 HFS - South ​ Kermit North Lodge ​ Kermit, Texas ​ Own/Operate ​ 180 HFS - South ​ Carlsbad Lodge ​ Carlsbad, New Mexico ​ Own/Operate ​ 496 HFS - South ​ Seven Rivers Lodge ​ Carlsbad, New Mexico ​ Own/Operate ​ 640 HFS - South ​ Jal Lodge ​ Jal, New Mexico ​ Own/Operate ​ 466 HFS - South ​ Big Spring Lodge ​ Big Spring, Texas ​ Own/Operate ​ 621 All Other ​ Williams County Lodge ​ Williston, North Dakota ​ Own/Operate ​ 300 All Other ​ Judson Executive Lodge ​ Williston, North Dakota ​ Own/Operate ​ 100 All Other ​ Watford City Lodge ​ Watford City, North Dakota ​ Own/Operate ​ 334 All Other ​ Cheecham Lodge ​ Alberta, Canada ​ Own/Operate ​ 215 Total Number of Beds ​ ​ ​ ​ ​ ​ ​ 16,865 (1) South Texas Family Residential Center Contract (as defined below) terminated on August 9, 2024.
The vast majority of our revenues are generated under multi-year contracts that include committed payment terms or exclusivity provisions, under which our customers agree to use our network for all their accommodation needs within the geographies we serve. In 2023, approximately 73% of our revenues had committed payment provisions and approximately 99% were under contract, including exclusivity.
The vast majority of our revenues are generated under multi-year contracts that include minimum revenue amounts or exclusivity provisions during the active contract term, under which our customers agree to use our network for all their accommodation needs within the geographies we serve.
The majority of our revenues are generated under committed contracts which provide visibility to future earnings and cash flows. We believe our customers enter into contracts with us because of our differentiated scale and ability to deliver premier accommodations and in-house culinary and hospitality services across many key geographies in which they operate.
We believe our customers enter into contracts with us because of our differentiated scale and ability to deliver premier accommodations and in-house culinary and hospitality services across many key geographies in which they operate. For the year ended December 31, 2024, we generated revenues of approximately $386 million.
Target Hospitality operates its business in two key end markets: (i) government (“Government”), which includes the facilities, services and operations of (a) the family residential center and the related support communities in Dilley, Texas (the “South Texas Family Residential Center”) provided pursuant to its lease and services agreement with a national provider of migrant programming; and (b) several facilities in West, Texas provided pursuant to its lease and services agreement with a leading national nonprofit organization (“NP Partner”) in support of their humanitarian aid efforts, both locations backed by committed United States Government contracts; and (ii) HFS – South, which includes the facilities and operations in sixteen communities located across Texas and New Mexico.
Target Hospitality operates its business in two key end markets: (i) government (“Government”), which includes the facilities, services and operations of (a) the residential center and the related support communities in Dilley, Texas (the “South Texas Family Residential Center” or the “Dilley Immigration Processing Center”) previously provided pursuant to a lease and services agreement with a national provider of migrant programming which was terminated effective August 9, 2024 and which was reactivated on March 5, 2025; and (b) several facilities in West, Texas previously provided pursuant to its lease and services agreement with a leading national nonprofit organization (“NP Partner”) in support of their aid efforts, backed by a U.
The minimum revenue commitments, which consisted of annual recurring lease revenue and nonrecurring infrastructure enhancement revenue, provided for a minimum annual revenue contribution of approximately $390 million and was fully committed over its initial contract term.
Additionally, the Expanded Contract included occupancy-based variable services revenue that aligned with active community population. The minimum revenue amount, which consisted of annual lease revenue and nonrecurring infrastructure enhancement revenue, provided for a minimum annual revenue contribution of approximately $390 million and was fully committed over its initial contract term.
Government, that became effective on November 16, 2023, with a one year base period through November 15, 2024, with an option to extend for up to four additional one year periods and an option to extend for up to six months upon the conclusion of the base period or any of the option periods.
During the year ended December 31, 2023, the Company executed a new contract with our NP Partner (“New PCC Contract”), pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the U.S. government, that became effective on November 16, 2023, with a one year base period through November 15, 2024, with an option to extend for up to four additional one year periods and an option to extend for up to six months upon the conclusion of the base period or any of the option periods.
If we fail to maintain compliance with these requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under its contracts or under the Federal Civil False Claims Act (the “False Claims Act”). 18 Table of Contents To the extent that these laws and regulations impose more stringent requirements or increased costs or delays upon the Company’s customers in the performance of their operations, the resulting demand for the Company’s services by those customers may be adversely affected.
To the extent that these laws and regulations impose more stringent requirements or increased costs or delays upon the Company’s customers in the performance of their operations, the resulting demand for the Company’s services by those customers may be adversely affected.
What we provide our customers’ workforce “off the clock” optimizes their performance when they are “on the clock.” The investment our customers make in their employees the “other 12 hours” is an essential part of their strategy and overall business and operations execution plan.
What we provide our customers’ workforce “off the clock” optimizes their performance when they are “on the clock.” The investment our customers make in their employees the “other 12 hours” is an essential part of their strategy and overall business and operations execution plan. 4 Table of Contents Using our expansive community network, unique core competencies and full-service turnkey hospitality solutions, we provide critical facilities and hospitality support services for fully integrated natural resource development companies and contractors of the U.
Community facilities providing a suite of comprehensive service offerings supporting humanitarian aid efforts. ​ Target Hospitality built and currently leases and operates the South Texas Family Residential Center through a sub-lease and services agreement with a national provider of migrant programming, which provides management services.
Target Hospitality built, leased and operated the South Texas Family Residential Center through a former sub-lease and services agreement with a national provider of migrant programming, which provided management services (“STFRC Contract”).
The Company also operates several facilities in connection with a lease and services agreement with the NP Partner, backed by a committed United States Government contract, to provide a suite of comprehensive service offerings in support of their humanitarian aid efforts.
For the year ended December 31, 2024, the Company’s operations in the Government segment consisted primarily of several facilities in connection with a lease and services agreement with the NP Partner, backed by a committed U.S. government contract, to provide a suite of comprehensive service offerings.
Item 1. Business Unless the context otherwise requires, references to “we”, “us”, “our”, “the Company”, or “Target Hospitality” refer to Target Hospitality Corp. and its consolidated subsidiaries. During 2021, the Company changed the names of select reportable segments to appropriately align with its diversified hospitality and facilities service offerings.
Item 1. Business Unless the context otherwise requires, references to “we”, “us”, “our”, “the Company”, or “Target Hospitality” refer to Target Hospitality Corp. and its consolidated subsidiaries. Overview ​ Our company, Target Hospitality, is one of the largest vertically integrated specialty rental and hospitality services companies in North America.
Also, competing locations and services influence demand for our assets and services. Demand within our government end market is primarily influenced by immigration, including the ongoing need to accommodate asylum seekers and unaccompanied minors as well as federal governmental policy and budgets.
Also, competing locations and services influence demand for our assets and services. Demand within our government end market is primarily influenced by immigration and deportation as well as federal governmental policy and budgets. Continued increases in immigration or deportation activity have influenced government spending on infrastructure in impacted regions, and, consequentially, demand for accommodations and related services.
The Expanded Humanitarian Contract provided for a significant scope expansion and term extension for the continuation of services provided under the agreement that originated in March 2021.
The Expanded Contract provided for a significant scope expansion and term extension for the continuation of services provided under the agreement that originated in March 2021. The Expanded Contract operated with similar structure to the Company’s prior and existing government services subcontracts, which are centered around minimum revenue amounts supported by the U.S. government.
Properties Target Hospitality’s corporate headquarters are located in The Woodlands, Texas. Its executive, financial, accounting, legal, administrative, management information systems and human resources functions operate from this single, leased office. For a list of real property owned material to the operations of Target Hospitality, refer to Part I Item 2 within this Annual Report on Form 10-K.
The business operates primarily under the Target Hospitality brand. 19 Table of Contents Properties Target Hospitality’s corporate headquarters is located in The Woodlands, Texas. Its executive, financial, accounting, legal, administrative, management information systems and human resources functions operate from this single, leased office.
The Company had total liquidity of approximately $278.9 million as of December 31, 2023, which consisted of up to $175 million of unused capacity under its ABL Facility, and cash and cash equivalents of $103.9 million.
The Company had total liquidity of approximately $365.7 million as of December 31, 2024, which consisted of up to $175 million of unused capacity under its ABL Facility, and cash and cash equivalents of $190.7 million. 10 Table of Contents Business Operations Target Hospitality provides specialty rental and hospitality services, temporary specialty rental and hospitality services solutions and facilities management services across North America.
The weighted average length of our contracts is approximately 45 months and we have maintained a consistent client renewal rate of over 90% for the last 5 years. Our customers enter into long-term agreements and consistently renew their contracts to ensure that sufficient accommodations and hospitality services are in place to properly care for their large workforces.
Our customers enter into long-term agreements and consistently renew their contracts to ensure that sufficient accommodations and hospitality services are in place to properly care for their large workforces. Our multi-year contracts and consistent renewal rates provide recurring revenue and high visibility on future financial performance. ​ ● Proven Performance and Resiliency Through the Various Economic Cycles.
Overview ​ Our company, Target Hospitality, is one of the largest vertically integrated specialty rental and hospitality services companies in North America. We have an extensive network of geographically relocatable specialty rental accommodation units with 16,843 beds across 26 communities. We also operate 2 communities not owned or leased by the Company.
We have an extensive network of geographically relocatable specialty rental accommodation units with 16,865 beds across 26 communities. We also operate 2 communities not owned or leased by the Company. The majority of our revenues are generated under contracts that include minimum revenue amounts over the active contract term which provides visibility to future earnings and cash flows.
Business section in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed on May 24, 2021 and is incorporated herein by reference. ​ Upon completion of the business combination on March 15, 2019, the Nasdaq trading symbols of our common stock, par value $0.0001 per share (the “Common Stock”), and our Warrants (as defined below) were changed to “TH” and “THWWW,” respectively.
Business section in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed on May 24, 2021 and is incorporated herein by reference. ​ Business Model ​ Our business model allows our customers to focus their efforts and resources on their core businesses.
Diversity, Equity and Inclusion are core to our culture, and we believe that a diverse workforce is critical to our success. ​ • Compensation programs and employee benefits: Our compensation and benefits programs provide a package designed to attract, retain and motivate employees.
Approximately 45% of eligible employees participated in the Health & Safety program in 2024. ​ • Compensation programs and employee benefits: Our compensation and benefits programs provide a package designed to attract, retain and motivate employees.
Removed
The segments formerly known as Permian Basin and Bakken Basin are now referred to as Hospitality & Facilities Services – South (“HFS – South”) and Hospitality & Facilities Services – Midwest (“HFS – Midwest”), respectively. All other reportable segment names remained unchanged.
Added
As of December 31, 2024 we also operated 2 communities not owned or leased by the Company.
Removed
Furthermore, as discussed in Note 20 (Business Segments) of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K, during 2023, the Company reduced the number of reportable segments from four to two, as the additional two previously reportable segments (“TCPL Keystone” and “HFS – Midwest”) became quantitatively immaterial and are now combined in the “All Other” category for all periods presented.
Added
Although the original contract to this facility was terminated effective August 9, 2024, we renewed our partnership with the 8 Table of Contents contractor on March 5, 2025 to reactivate our existing assets in Dilley, Texas.
Removed
Using our expansive community network, unique core competencies and full-service turnkey hospitality solutions, we provide critical facilities and hospitality support services for fully integrated natural resource development companies and contractors of the United States Government.
Added
In 2024, approximately 64% of our revenues were comprised of minimum revenue amounts and approximately 99% were under contract, including exclusivity. The weighted average length of our existing customer relationships is approximately 60 months and we have maintained a consistent client renewal rate of over 85% for the last 5 years.
Removed
Continued increases in immigration activity have influenced government spending on infrastructure in immigration-impacted regions, and, consequentially, demand for accommodations and related services. Another factor that influences demand for our rooms and services is the type of customer we are supporting.
Added
S. government contract, which was terminated effective February 21, 2025 and (ii) HFS – South, which includes the facilities and operations in sixteen communities located across Texas and New Mexico.
Removed
Our multi-year contracts and consistent renewal rates provide recurring revenue and high visibility on future financial performance. ​ ● Proven Performance and Resiliency Through the Various Economic Cycles. Our business model is generally well insulated from economic cycles.
Added
These community assets in Dilley, Texas previously leased under the South Texas Family Residential Center Contract were reactivated as of March 5, 2025 under a new contract with the same national provider of migrant programming.
Removed
For example, we secured a major new contract in November 2023 for the continued operation of the humanitarian community in Pecos, Texas as well as a renewal and extension in 2020 for another contract, each under our Government Segment which together represents approximately 72% of Target Hospitality’s 2023 revenue.
Added
(2) The New PCC Contract (as defined below) associated with these communities terminated on February 21, 2025. ​ Government The Government segment includes, but is not limited to, two primary end markets which make up approximately 58% of our revenue for the year ended December 31, 2024: ● Immigration Aid Efforts.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+19 added−15 removed178 unchanged
Biggest changeThe loss of, or a significant decrease in revenues from, any customer in this concentrated segment could seriously harm our financial condition and results of operations. ● We are subject to extensive procurement laws, regulations and procedures, including those that enable the U.S. government to terminate contracts for convenience. ● Our business may be adversely affected by periods of low commodity prices or unsuccessful exploration results which may decrease customers’ spending and our results. ● Demand for our products and services is sensitive to changes in demand within a number of key industry end-markets and geographic regions ● We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in revenues and profitability ● Increased operating costs and obstacles to cost recovery due to the pricing and cancellation terms of our specialty rental and hospitality services contracts may constrain its ability to make a profit. ● Our future operating results may fluctuate, fail to match past performance, or fail to meet expectations. ● Public health crises such as the COVID-19 pandemic and their impact on business and economic conditions and government requirements could adversely affect our business, financial condition or results of operations.
Biggest changeThe loss of, or a significant decrease in revenues from, our customer in this concentrated segment could seriously harm our financial condition and results of operations. ● We are subject to extensive procurement laws, regulations and procedures, including those that enable the U.S. government to terminate contracts for convenience. ● Our natural resource development customers are exposed to a number of unique operating risks and challenges which could also adversely affect us. ● Our business is contract intensive.
As a result of its ability to control a significant percentage of the voting power of our outstanding Common Stock, TDR Capital may have substantial control over matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation and bylaws, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions.
As a result of its ability to control a significant percentage of the voting power of our outstanding Common Stock, TDR Capital may have substantial control over matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation, any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions.
In addition, rules that the SEC is implementing or is required to implement pursuant to the Dodd-Frank Act may require additional change. Compliance with these and other similar laws, rules and regulations, including compliance with Section 404 of SOX, will substantially increase our expenses, including legal and accounting costs, and make some activities more time-consuming and costly.
In addition, rules that the SEC is implementing or is required to implement pursuant to the Dodd-Frank Act may require additional change. Compliance with these and other similar laws, rules and regulations, including compliance with Section 404 of SOX, may substantially increase our expenses, including legal and accounting costs, and may make some activities more time-consuming and costly.
However, there can be no assurance that we will accurately predict the outcomes of potential examinations, and the amounts ultimately paid upon resolution of examinations could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on its results of operations and cash flows.
However, there can be no assurance that we will accurately predict the outcomes of potential examinations, and the amounts ultimately paid upon resolution of examinations could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on results of operations and cash flows.
These risks include: ● multiple regulatory requirements that are subject to change and that could restrict our ability to build and operate our communities and other sites; ● inflation or other increases in costs relating to personnel, utilities, insurance, medical and food, recessions, fluctuations in interest rates; ● compliance with applicable export control laws and economic sanctions laws and regulations; ● trade protection measures, including increased duties and taxes, and import or export licensing requirements; ● ownership regulations; ● compliance with applicable antitrust and other regulatory rules and regulations relating to potential future acquisitions; ● different local product preferences and product requirements; ● challenges in maintaining, staffing and managing national operations; 22 Table of Contents ● bankruptcy or insolvency of our customers, thereby reducing demand for our services; ● different labor regulations; ● potentially adverse consequences from changes in or interpretations of tax laws; ● political and economic instability; ● federal government budgeting and appropriations; ● enforcement of remedies in various jurisdictions; ● the risk that the business partners upon whom we depend for technical assistance or management and acquisition expertise will not perform as expected; and ● differences in business practices that may result in violation of our policies including but not limited to bribery and collusive practices.
These risks include: ● multiple regulatory requirements that are subject to change and that could restrict our ability to build and operate our communities and other sites; ● inflation or other increases in costs relating to personnel, utilities, insurance, medical and food, recessions, fluctuations in interest rates; ● compliance with applicable export control laws and economic sanctions laws and regulations; ● trade protection measures, including increased duties and taxes, and import or export licensing requirements; ● ownership regulations; ● compliance with applicable antitrust and other regulatory rules and regulations relating to potential future acquisitions; ● different local product preferences and product requirements; ● challenges in maintaining, staffing and managing national operations; ● bankruptcy or insolvency of our customers, thereby reducing demand for our services; ● different labor regulations; ● potentially adverse consequences from changes in or interpretations of tax laws; ● political and economic instability; ● federal government budgeting and appropriations; ● enforcement of remedies in various jurisdictions; ● the risk that the business partners upon whom we depend for technical assistance or management and acquisition expertise will not perform as expected; and ● differences in business practices that may result in violation of our policies including but not limited to bribery and collusive practices.
Accordingly, we could be impacted by disruptions to our customers’ operations caused by, among other things, any one of or all of the following singularly or in combination: ● worldwide economic activity including growth in developing countries, U.S. and international tax policies, pricing and demand for the natural resources being produced at a given project (or proposed project); ● national government political requirements, including the ability of the Organization of Petroleum Exporting Companies (“OPEC”) to set and maintain production levels and government policies which could nationalize or expropriate natural resource development exploration, production, refining or transportation assets; ● the level of activity in U.S. shale development; ● unexpected problems, higher costs and delays during the development, construction, and project start-up which may delay the commencement of production; ● unforeseen and adverse geological, geotechnical, and seismic conditions; ● lack of availability of sufficient water or power to maintain their operations; ● lack of availability or failure of the required infrastructure necessary to maintain or to expand their operations; ● the breakdown or shortage of equipment and labor necessary to maintain their operations; ● risks associated with the natural resource industry being subject to various regulatory approvals.
Accordingly, we could be impacted by disruptions to our customers’ operations caused by, among other things, any one of or all of the following singularly or in combination: ● worldwide economic activity including growth in developing countries, U.S. and international tax policies, pricing and demand for the natural resources being produced at a given project (or proposed project); 26 Table of Contents ● national government political requirements, including the ability of the Organization of Petroleum Exporting Companies (“OPEC”) to set and maintain production levels and government policies which could nationalize or expropriate natural resource development exploration, production, refining or transportation assets; ● the level of activity in U.S. shale development; ● unexpected problems, higher costs and delays during the development, construction, and project start-up which may delay the commencement of production; ● unforeseen and adverse geological, geotechnical, and seismic conditions; ● lack of availability of sufficient water or power to maintain their operations; ● lack of availability or failure of the required infrastructure necessary to maintain or to expand their operations; ● the breakdown or shortage of equipment and labor necessary to maintain their operations; ● risks associated with the natural resource industry being subject to various regulatory approvals.
The ABL Facility and the Indenture, as well as any instruments that will govern any future debt obligations, contain covenants that impose significant restrictions on the way the Arrow Bidco and its subsidiaries can operate, including restrictions on the ability to: ● incur or guarantee additional debt and issue certain types of stock; ● create or incur certain liens; ● make certain payments, including dividends or other distributions, with respect to our equity securities; 38 Table of Contents ● prepay or redeem junior debt; ● make certain investments or acquisitions, including participating in joint ventures; ● engage in certain transactions with affiliates; ● create unrestricted subsidiaries; ● create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to, and on the transfer of, assets to the issuer or any restricted subsidiary; ● sell assets, consolidate or merge with or into other companies; ● sell or transfer all or substantially all our assets or those of our subsidiaries on a consolidated basis; and ● issue or sell share capital of certain subsidiaries.
The ABL Facility and the Indenture, as well as any instruments that will govern any future debt obligations, contain covenants that impose significant restrictions on the way the Arrow Bidco and its subsidiaries can operate, including restrictions on the ability to: ● incur or guarantee additional debt and issue certain types of stock; ● create or incur certain liens; ● make certain payments, including dividends or other distributions, with respect to our equity securities; ● prepay or redeem junior debt; ● make certain investments or acquisitions, including participating in joint ventures; ● engage in certain transactions with affiliates; ● create unrestricted subsidiaries; ● create encumbrances or restrictions on the payment of dividends or other distributions, loans or advances to, and on the transfer of, assets to the issuer or any restricted subsidiary; ● sell assets, consolidate or merge with or into other companies; ● sell or transfer all or substantially all our assets or those of our subsidiaries on a consolidated basis; and ● issue or sell share capital of certain subsidiaries.
Tax authorities may disagree with our intercompany charges, or other tax positions and assess additional taxes. We regularly assess the likely outcomes of examinations in order to determine the appropriateness of its tax provision.
Tax authorities may disagree with our intercompany charges, or other tax positions and assess additional taxes. We regularly assess the likely outcomes of examinations in order to determine the appropriateness of our tax provision.
Risks Related to Our Indebtedness Our leverage may make it difficult for us to service our debt and operate our business. As of December 31, 2023, we, through our wholly-owned indirect subsidiary, Arrow Bidco, LLC (“Arrow Bidco”), had $181.4 million of total indebtedness consisting of $0 borrowings under the ABL Facility and $181.4 million of our 2025 Senior Secured Notes.
Risks Related to Our Indebtedness Our leverage may make it difficult for us to service our debt and operate our business. As of December 31, 2024, we, through our wholly-owned indirect subsidiary, Arrow Bidco, LLC (“Arrow Bidco”), had $181.4 million of total indebtedness consisting of $0 borrowings under the ABL Facility and $181.4 million of our 2025 Senior Secured Notes.
Future food product recalls and health concerns associated with food contamination may also increase our raw materials costs and, from time to time, disrupt its business.
Future food product recalls and health concerns associated with food contamination may also increase our raw materials costs and, from time to time, disrupt business.
We monitor the financial strength of our larger customers, derivative counterparties, lenders, and insurance carriers on a periodic basis using publicly-available information in order to evaluate its exposure to those who have or who it believes may likely experience significant threats to their ability to adequately perform their obligations to it.
We monitor the financial strength of our larger customers, lenders, and insurance carriers on a periodic basis using publicly-available information in order to evaluate its exposure to those who have or who it believes may likely experience significant threats to their ability to adequately perform their obligations to it.
During periods of rising prices for labor or raw materials, and in particular, when the prices increase rapidly or to levels significantly higher than 29 Table of Contents normal, we may incur significant increases in our costs for new facilities and incur higher operating costs that we may not be able to recoup from customers through changes in pricing, which could have a material adverse effect on our business, results of operations and financial condition.
During periods of rising prices for labor or raw materials, and in particular, when the prices increase rapidly or to levels significantly higher than normal, we may incur significant increases in our costs for new facilities and incur higher operating costs that we may not be able to recoup from customers through changes in pricing, which could have a material adverse effect on our business, results of operations and financial condition.
See “ We are exposed to various possible claims relating to our business and our insurance may not fully protect us. ” and “ Management’s Discussion and Analysis of Financial Condition and Results of 27 Table of Contents Operations—Factors Affecting Results of Operations—Natural Disasters or Other Significant Disruption .” In addition, the occurrence and threat of terrorist attacks may directly or indirectly affect economic conditions, which could in turn adversely affect demand for our communities and services.
See “ We are exposed to various possible claims relating to our business and our insurance may not fully protect us. ” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Results of Operations—Natural Disasters or Other Significant Disruption .” In addition, the occurrence and threat of terrorist attacks may directly or indirectly affect economic conditions, which could in turn adversely affect demand for our communities and services.
We believe that we have adequate insurance coverage for the protection of our assets and operations. However, our insurance may not fully protect us for certain types of claims such as dishonest, fraudulent, criminal or malicious acts; terrorism, war, hostile or warlike action during a time of peace; automobile physical damage; natural disasters; and certain cyber-crime.
We believe that we have adequate insurance coverage for the protection of our assets and operations. However, our insurance may not fully protect us for certain types of claims such as dishonest, fraudulent, 31 Table of Contents criminal or malicious acts; terrorism, war, hostile or warlike action during a time of peace; automobile physical damage; natural disasters; and certain cyber-crime.
Social, Political and Regulatory Risks ● Failure to comply with government regulations related to food and beverages may subject us to liability. ● Unanticipated changes in our tax obligations, the adoption of a new tax legislation, or exposure to additional income tax liabilities could affect profitability. 21 Table of Contents ● We are subject to various laws and regulations including those governing our contractual relationships.
Social, Political and Regulatory Risks ● Failure to comply with government regulations related to food and beverages may subject us to liability. ● Unanticipated changes in our tax obligations, the adoption of a new tax legislation, or exposure to additional income tax liabilities could affect profitability. ● We are subject to various laws and regulations including those governing our contractual relationships.
As a result, we may not achieve the benefits we may have been anticipating from any new technology or system 36 Table of Contents Like other companies, our information systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, telecommunications failures, computer viruses, security breaches (including cyber-attacks), and other security issues.
As a result, we may not achieve the benefits we may have been anticipating from any new technology or system. Like other companies, our information systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, telecommunications failures, computer viruses, security breaches (including cyber-attacks), and other security issues.
Our financial results may fluctuate as a result of a number of factors, some of which are beyond our control, including but not limited to: ● general economic conditions in the geographies and industries where we own or operate communities; ● natural disasters, including pandemics and endemics, and business interruptions; ● executive and legislative policies where we provide our services; ● the budgetary constraints of the government and/or our customers; ● the success of our strategic growth initiatives; ● the costs associated with the launching or integrating new or acquired businesses; ● the cost, type, and timing of customer orders; ● the nature and duration of the needs of our customers; ● the raw material or labor costs of servicing our facilities; ● the timing of new product or service introductions by us, our suppliers, and our competitors; ● changes in end-user demand requirements, including variable occupancy levels associated with contracts in the Government segment; ● the mix, by state and region, of our revenue, personnel, and assets; ● movements in interest rates, or tax rates; ● changes in, and application of, accounting rules; ● changes in the regulations applicable to us; ● litigation matters; ● the success of large scale capital intensive projects; ● liquidity, including the impact of our debt service costs; and ● attrition and retention risk. 30 Table of Contents As a result of these factors, our historical financial results are not necessarily indicative of our future results.
Our financial results may fluctuate as a result of a number of factors, some of which are beyond our control, including but not limited to: ● general economic conditions in the geographies and industries where we own or operate communities; ● natural disasters, including pandemics and endemics, and business interruptions; ● executive and legislative policies where we provide our services; ● the budgetary constraints of the government and/or our customers; ● the success of our strategic growth initiatives; ● the costs associated with the launching or integrating new or acquired businesses; ● the cost, type, and timing of customer orders; ● the nature and duration of the needs of our customers; ● the raw material or labor costs of servicing our facilities; ● the timing of new product or service introductions by us, our suppliers, and our competitors; ● changes in end-user demand requirements, including variable occupancy levels associated with contracts in the Government segment; ● the mix, by state and region, of our revenue, personnel, and assets; ● movements in interest rates, or tax rates; ● changes in, and application of, accounting rules; ● changes in the regulations applicable to us; ● litigation matters; ● the success of large scale capital intensive projects; ● liquidity, including the impact of our debt service costs; and ● attrition and retention risk.
Violations of the FCPA or other anti- 33 Table of Contents corruption laws may result in severe criminal or civil sanctions and penalties, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities which could have a material adverse effect on our business, results of operations and financial condition.
Violations of the FCPA or other anti-corruption laws may result in severe criminal or civil sanctions and penalties, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities which could have a material adverse effect on our business, results of operations and financial condition.
While we do not believe any reviews, audits, delayed payments, or other such matters should result in material 26 Table of Contents adjustments, if a large number of our customer arrangements were modified or payments withheld in response to any such matter, the effect could be materially adverse to our business or results of operations.
While we do not believe any reviews, audits, delayed payments, or other such matters should result in material adjustments, if a large number of our customer arrangements were modified or payments withheld in response to any such matter, the effect could be materially adverse to our business or results of operations.
These types of contracts customarily contain provisions that give the U.S. government substantial rights and remedies, many of which are not typically found in 32 Table of Contents commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our customers’ federal government contracts, in whole or in part, at the government’s convenience.
These types of contracts customarily contain provisions that give the U.S. government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our customers’ federal government contracts, in whole or in part, at the government’s convenience.
In connection with acquisitions we may assume liabilities or acquire damaged assets, some of which may be unknown at the time of such acquisitions; record goodwill and non-amortizable intangible assets that will be subject to future 35 Table of Contents impairment testing and potential periodic impairment charges; or incur amortization expenses related to certain intangible assets.
In connection with acquisitions, we may assume liabilities or acquire damaged assets, some of which may be unknown at the time of such acquisitions; record goodwill and non-amortizable intangible assets that will be subject to future impairment testing and potential periodic impairment charges; or incur amortization expenses related to certain intangible assets.
A decline or slowed growth in any of these sectors or geographic regions could result in reduced 28 Table of Contents demand for our products and services, which may materially adversely affect our business, results of operations, and financial condition. Certain of our major communities are located on land subject to leases.
A decline or slowed growth in any of these sectors or geographic regions could result in reduced demand for our products and services, which may materially adversely affect our business, results of operations, and financial condition. Certain of our major communities are located on land subject to leases.
Although the Indenture governing our 2025 Senior Secured Notes and the ABL Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial.
Although the Indenture governing our 2025 Senior Secured Notes and the ABL Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these 38 Table of Contents restrictions could be substantial.
Our or any of our customers’ failure to comply with applicable environment laws and regulations may result in any of the following: ● issuance of administrative, civil and criminal penalties; ● denial or revocation of permits or other authorizations; ● reduction or cessation of operations; and ● performance of site investigatory, remedial or other corrective actions.
Our or any of our customers’ failure to comply with applicable environment laws and regulations may result in any of the following: ● issuance of administrative, civil and criminal penalties; 34 Table of Contents ● denial or revocation of permits or other authorizations; ● reduction or cessation of operations; and ● performance of site investigatory, remedial or other corrective actions.
For a broader discussion of the indirect exposure to statutes and regulations applicable to U.S. government contractors please see “ We are subject to various laws and regulations including those governing our contractual 25 Table of Contents relationships with the U.S. government and U.S. government contractors and the health and safety of our workforce and our customers.
For a broader discussion of the indirect exposure to statutes and regulations applicable to U.S. government contractors please see “ We are subject to various laws and regulations including those governing our contractual relationships with the U.S. government and U.S. government contractors and the health and safety of our workforce and our customers.
In addition, complying with these covenants may also cause us to take actions that are not favorable to our securityholders and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions. 39 Table of Contents Credit rating downgrades could adversely affect our businesses, cash flows, financial condition and operating results.
In addition, complying with these covenants may also cause us to take actions that are not favorable to our securityholders and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions. Credit rating downgrades could adversely affect our businesses, cash flows, financial condition and operating results.
A variety of regulations at various governmental levels relating to the handling, preparation, and serving of food (including, in some cases, requirements relating to the temperature of food), and the cleanliness of food production facilities and the hygiene of food-handling personnel are enforced primarily at the local public health department level.
A variety of regulations at various governmental levels relating to the handling, preparation, and serving of food (including, in some cases, requirements relating to the temperature of food), and the cleanliness of food production facilities and the 32 Table of Contents hygiene of food-handling personnel are enforced primarily at the local public health department level.
If our relationship with, or the business of a primary distributor were to be disrupted, we would have to arrange alternative distributors and our operations and cost structure could be adversely affected in the short term.
If our relationship with, or the business of a primary distributor were to be disrupted, we would have to arrange alternative distributors and 30 Table of Contents our operations and cost structure could be adversely affected in the short term.
Our principal stockholder has substantial control over our business, which may be disadvantageous to other stockholders. Arrow Holdings and MFA Global S.a r.l., entities controlled by TDR Capital, together beneficially owned approximately 64% of our outstanding shares of Common Stock as of December 31, 2023.
Our principal stockholder has substantial control over our business, which may be disadvantageous to other stockholders. Arrow Holdings and MFA Global S.a r.l., entities controlled by TDR Capital, together beneficially owned approximately 65% of our outstanding shares of Common Stock as of December 31, 2024.
Any renewals or new agreements we may enter may be on terms that are materially less favorable to us than those in our current agreements. We are subject to extensive procurement laws, regulations and procedures, including those that enable the U.S. government to terminate contracts for convenience.
Any renewals or new agreements we may enter may be on terms that are materially less favorable to us than those in our current agreements. 25 Table of Contents We are subject to extensive procurement laws, regulations and procedures, including those that enable the U.S. government to terminate contracts for convenience.
Although our competition varies significantly by market, the specialty rental and hospitality services industry, in general, is highly competitive. We compete on the basis of a number of factors, including equipment availability, quality, price, service, reliability, appearance, functionality and delivery terms.
Although our competition varies significantly by market, the specialty rental and hospitality services industry, in general, is competitive. We compete on the basis of a number of factors, including equipment availability, quality, price, service, 23 Table of Contents reliability, appearance, functionality and delivery terms.
Any future impasse or struggle impacting the federal government’s ability to reach agreement on the federal budget, debt ceiling or any future federal government shut downs could result in material payment delays, payment reductions or contract terminations.
Any future impasse or struggle impacting the federal government’s ability to reach agreement on the federal budget, debt ceiling or any future federal government shutdowns could result in material payment delays, payment reductions or contract terminations.
If we are unable to renew leases on similar terms, it may have an adverse effect on our business. Third parties may fail to provide necessary services and materials for our communities and other sites. We are often dependent on third parties to supply services and materials for our communities and other sites.
If we are unable to renew leases on similar terms, it may have an adverse effect on our business. 29 Table of Contents Third parties may fail to provide necessary services and materials for our communities and other sites. We are often dependent on third parties to supply services and materials for our communities and other sites.
There can be no assurance that the continued spread of COVID-19, or any future health public crisis, and efforts to contain such public health crisis (including, but not limited to, vaccination, social distancing and masking policies, restrictions on travel and reduced operations) will not materially impact our results of operations and financial position.
There can be no assurance that any future public health crisis, and efforts to contain such public health crisis (including, but not limited to, vaccination, social distancing and masking policies, restrictions on travel and reduced operations) will not materially impact our results of operations and financial position.
We are subject to risks related to public health crises, such as the COVID-19 pandemic and the various measures that are implemented to protect public health, which can adversely affect the economy and financial markets.
We are subject to risks related to public health crises, such as pandemics and the various measures that are implemented to protect public health, which can adversely affect the economy and financial markets.
Additionally, our current and potential future government contractor customers may request in the future that we reduce our contract rates or forego increases to those rates as a way for those contractors to control costs and help their government customers to control their 24 Table of Contents spending and address their budgetary shortfalls.
Additionally, our current and potential future government contractor customers have requested and may request in the future that we reduce our contract rates or forego increases to those rates as a way for those contractors to control costs and help their government customers to control their spending and address their budgetary shortfalls.
Increased competition could result in lower profit margins, substantial pricing pressure, and reduced market share. Price competition, together with other forms of competition, may materially adversely affect our business, results of operations, and financial condition. We depend on several significant customers.
Increased competition could result in lower profit margins, substantial pricing pressure, and reduced market share. Price competition, together with other forms of competition, may materially adversely affect our business, results of operations, and financial condition.
We may be unable to fully recover costs, and such increases would negatively impact its profitability on contracts that do not contain such inflation protections. Our future operating results may fluctuate, fail to match past performance, or fail to meet expectations.
We may be unable to fully recover costs, and such increases could negatively impact profitability on contracts that do not contain such inflation protections. Our future operating results may fluctuate, fail to match past performance, or fail to meet expectations. Our operating results may fluctuate, fail to match past performance, or fail to meet the expectations of analysts and investors.
The carrying value of our communities could be reduced by extended periods of limited or no activity by our customers, which would require us to record impairment charges equal to the excess of the carrying value of the communities over fair value.
The carrying value of our communities could be reduced by extended periods of limited or no activity by our customers, which would require us to record impairment charges equal to the excess of the carrying value of the communities over fair value. We may incur asset impairment charges in the future.
Public health crises such as the COVID-19 pandemic and their impact on business and economic conditions and government requirements could adversely affect our business, financial condition or results of operations.
Public health crises such as pandemics and their impact on business and economic conditions and government requirements could adversely affect our business, financial condition or results of operations.
We derive a substantial portion of our revenue from the Government segment. The loss of, or a significant decrease in revenues from, any customer in this concentrated segment could seriously harm our financial condition and results of operations. We derive a significant portion of our revenues from our subcontracts with government contractors.
We derive a substantial portion of our revenue from the Government segment. The loss of, or a significant decrease in revenues from, new customers in this concentrated segment could seriously harm our financial condition and results of operations. We historically have derived a significant portion of our revenues from our subcontracts with government contractors.
In addition, the concentration of customers in the industries in which we operate may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic, political and industry conditions.
In addition, the concentration of customers in the industries in which we operate may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic, political and industry conditions. Our business depends on the quality and reputation of the Company and its communities.
As of December 31, 2023, we had approximately $41.0 million and $66.3 million of goodwill and other intangible assets, net, respectively, in our statement of financial position, which represents approximately 5.9% and 9.5% of total assets, respectively. We review goodwill and intangible assets at least annually for impairment.
As of December 31, 2024, we had approximately $41.0 million and $52.8 million of goodwill and other intangible assets, net, respectively, in our statement of financial position, which represents approximately 5.6% and 7.3% of total assets, respectively. We review goodwill and intangible assets at least annually for impairment.
The ability to meet these tests could be affected by deterioration in our operating results, as well as by events beyond our control, including increases in raw materials prices and unfavorable economic conditions, and we cannot assure you that these tests will be met.
The ABL Facility also requires our subsidiaries to satisfy specified financial maintenance tests. The ability to meet these tests could be affected by deterioration in our operating results, as well as by events beyond our control, including increases in raw materials prices and unfavorable economic conditions, and we cannot assure you that these tests will be met.
These requirements include, for example: ● specialized disclosure and accounting requirements unique to U.S. government contracts; ● financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; ● public disclosures of certain contract and company information; and ● mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements.
These requirements include, for example: ● specialized disclosure and accounting requirements unique to U.S. government contracts; ● financial and compliance audits that may result in potential liability for price adjustments, recoupment of government funds after such funds have been spent, civil and criminal penalties, or administrative sanctions such as suspension or debarment from doing business with the U.S. government; ● public disclosures of certain contract and company information; and ● mandatory socioeconomic compliance requirements, including labor requirements, non-discrimination and affirmative action programs and environmental compliance requirements. 33 Table of Contents If we fail to maintain compliance with these requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under its contracts or under the False Claims Act.
Item 1A. Risk Factors Risk Factors Summary Below is a summary of the principal factors that make an investment in our Common Stock speculative or risky. This summary does not address all of the risks that we face.
Item 1A. Risk Factors Risk Factors Summary Below is a summary of the principal factors that make an investment in our common stock, par value $0.0001 per share (the “Common Stock”), speculative or risky. This summary does not address all of the risks that we face.
In the event impairment is identified, a charge to earnings would be recorded. Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results.
In the event impairment is identified, a charge to earnings would be recorded. Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results. Any impairment charges could adversely affect our reported results of operations and financial condition.
Customer contract cancellations, the failure to renew a significant number of our existing contracts, or the failure to obtain new business would have a material adverse effect on our business, results of operations and financial condition. We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in revenues and profitability.
Customer contract cancellations, the failure to renew a significant number of our existing contracts, or the failure to obtain new business would have a material adverse effect on our business, results of operations and financial condition if the Company is unable to secure new contracts for an extended period of time. 27 Table of Contents We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in revenues and profitability.
Our leverage could have important consequences, including: ● making it more difficult to satisfy our obligations with respect to our various debt (including the 2025 Senior Secured Notes) and liabilities; ● requiring us to dedicate a substantial portion of our cash flow from operations to debt payments, thus reducing the availability of cash flow to fund internal growth through working capital and capital expenditures on our existing communities or new communities and for other general corporate purposes; ● increasing our vulnerability to a downturn in our business or adverse economic or industry conditions; ● limiting our flexibility in planning for or reacting to changes in our business and industry; ● restricting us from pursuing strategic acquisitions or exploiting certain business opportunities or causing us to make non-strategic divestitures; and ● limiting, among other things, our ability to borrow additional funds or raise equity capital in the future and increasing the costs of such additional financings. 37 Table of Contents Our ability to meet our debt service obligations, including those under the ABL Facility and the 2025 Senior Secured Notes, or to refinance our debt depends on our future operating and financial performance, which will be affected by our ability to successfully implement our business strategy as well as general economic, financial, competitive, regulatory and other factors beyond our control.
If our leverage increases, it could have important consequences, including: ● making it more difficult to satisfy our obligations with respect to our various debt (including the 2025 Senior Secured Notes) and liabilities; ● requiring us to dedicate a substantial portion of our cash flow from operations to debt payments, thus reducing the availability of cash flow to fund internal growth through working capital and capital expenditures on our existing communities or new communities and for other general corporate purposes; ● increasing our vulnerability to a downturn in our business or adverse economic or industry conditions; ● limiting our flexibility in planning for or reacting to changes in our business and industry; ● restricting us from pursuing strategic acquisitions or exploiting certain business opportunities or causing us to make non-strategic divestitures; and ● limiting, among other things, our ability to borrow additional funds or raise equity capital in the future and increasing the costs of such additional financings.
If the debt under the ABL Facility, the Indenture or any other material financing arrangement that we enter into were to be accelerated, our assets may be insufficient to repay in full the ABL Facility, the 2025 Senior Secured Notes and our other debt. The ABL Facility also requires our subsidiaries to satisfy specified financial maintenance tests.
If the debt under the ABL Facility, the 39 Table of Contents Indenture or any other material financing arrangement that we enter into were to be accelerated, our assets may be insufficient to repay in full the ABL Facility, the 2025 Senior Secured Notes and our other debt.
For example, while the U.S. government is currently using private immigration sites like the South Texas Family Residential Center, federal, state or local governmental partners may in the future choose to undertake a review of their utilization of privately operated facilities, or may cancel or decide not to renew existing contracts with their government contractors, who may, in turn, cancel or decide not to renew their contracts with us.
For example, federal, state or local governmental partners may in the future choose to undertake a review of their utilization of privately operated facilities, or may cancel or decide not to renew existing contracts with their government contractors, who may, in turn, cancel or decide not to renew their contracts with us.
These adverse economic conditions may reduce commercial activity, cause disruption and volatility in global financial markets, and increase rates of default and bankruptcy. Reduced commercial activity has historically resulted in reduced demand for our products and services. For example, reduced commercial activity in the natural resource development sector in certain markets in which we operate may negatively impact our business.
These adverse economic conditions may reduce commercial activity, cause disruption and volatility in global financial markets, and increase rates of default and bankruptcy. Reduced commercial activity has historically resulted in reduced demand for our products and services.
Financial Accounting Risks ● If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our reported operating results. ● The valuation of our Private Warrants could cause volatility in our net income (loss).
Financial Accounting Risks ● If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our reported operating results.
We may incur asset impairment charges in the future, which charges may affect negatively our results of operations and financial condition as well as our borrowing base. Our business is contract intensive.
Such charges may negatively affect our results of operations and financial condition as well as our borrowing base. Our business is contract intensive.
For a more detailed explanation of our customers, see the section of this Annual Report on Form 10-K entitled “Business.” The loss of any one of our largest customers in any of our business segments or a sustained decrease in demand by any of such customers could result in a substantial loss of revenues and could have a material adverse effect on our results of operations.
For a more detailed explanation of our customers, see the section of this Annual Report on Form 10-K entitled “Business.” Following the termination of the New PCC Contract, the loss of any one of our largest remaining customers or a sustained decrease in demand by any of such customers could result in a substantial loss of revenues and could have an adverse effect on our results of operations if the Company is unable to secure new replacement customers or contracts for an extended period of time.
Financial Accounting Risks If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our reported operating results. We have goodwill, which represents the excess of the total purchase price of our acquisitions over the fair value of the assets acquired, and other intangible assets.
Financial Accounting Risks If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our reported operating results.
Any adoption of these or similar proposals by U.S. federal, regional, provincial, or state governments mandating a substantial reduction in greenhouse gas emissions could have far-reaching and significant impacts on the energy industry. 34 Table of Contents Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business or demand for our services.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business or demand for our services.
These rules and regulations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by the U.S. and foreign governments, making compliance more difficult and uncertain. The increase in costs to comply with such evolving expectations, rules and regulations, as well as any risk of noncompliance, could adversely impact us.
These rules and regulations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by the U.S. and foreign governments, making compliance more difficult and uncertain.
We are exposed to various possible claims relating to our business, and our insurance may not fully protect us. We are exposed to various possible claims relating to our business, and our operations are subject to many hazards.
As a result of these factors, our historical financial results are not necessarily indicative of our future results. We are exposed to various possible claims relating to our business, and our insurance may not fully protect us. We are exposed to various possible claims relating to our business, and our operations are subject to many hazards.
Maintaining and promoting our brand will depend largely on our ability to differentiate ourselves from the direct participants in the ongoing conflict around immigration policy. If we are portrayed negatively in the press or associated with the ongoing social and political debates around immigration policy, our public image and reputation could be irreparably tarnished and our brand could be harmed.
If we are portrayed negatively in the press or 24 Table of Contents associated with the ongoing social and political debates around immigration policy, our public image and reputation could be irreparably tarnished, and our brand could be harmed.
The loss of one or more of such customers or the inability of one or more such customers to meet their obligations could adversely affect our results of operations. ● Our business depends on the quality and reputation of the Company and its communities, and any deterioration in such quality or reputation could adversely impact its market share, business, financial condition or results of operations. ● We derive a substantial portion of our revenue from the Government segment.
Operational Risks ● Our operations are and will be exposed to operational, economic, political and regulatory risks. ● We face significant competition in the specialty rental sector. ● The loss of our most significant customer or any of our largest customers in any of our business segments could adversely affect our results of operations. ● Our business depends on the quality and reputation of the Company and its communities, and any deterioration in such quality or reputation could adversely impact its market share, business, financial condition or results of operations. ● We derive a substantial portion of our revenue from the Government segment.
Risks Related to Ownership of Our Common Stock We have incurred and expect to continue to incur significantly increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance efforts.
For more information on our dividends and share repurchase programs, see “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchase of Equity Securities”. We have incurred and expect to continue to incur significantly increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance efforts.
Breaches, thefts, losses or fraudulent uses of customer, employee or company data could cause consumers to lose confidence in the security of our website, point of sale systems and other information technology systems and choose not to stay in our communities or contract with us in the future.
Breaches, thefts, losses or fraudulent uses of customer, employee or company data could cause consumers to lose confidence in the security of our website, point of sale systems and other information technology systems and choose not to stay in our communities or contract with us in the future. 37 Table of Contents While we have a cybersecurity program designed to protect and preserve the integrity of our information systems, the Company also maintains cybersecurity insurance in line with industry standards to manage potential liabilities resulting from specific cyber-attacks.
More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the global economy and worldwide financial markets. Any of these occurrences could have a material adverse effect on our business, results of operations and financial condition. Construction risks exist which may adversely affect our results of operations.
More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the global economy and worldwide financial markets.
These revenues depend on the U.S. government and its contractors receiving sufficient funding and providing it with timely payment under the terms of our contracts.
Despite the termination of each of the STFRC Contract and the New PCC Contract, we continue to pursue a pipeline of growth opportunities of subcontracts with government contractors such as the new DIPC Contract. These revenues depend on the U.S. government and its contractors receiving sufficient funding and providing it with timely payment under the terms of our contracts.
These functions enhance our ability to optimize facility utilization, occupancy, costs of goods sold, and average daily rate. The failure of our management information systems to perform as anticipated could damage our reputation with our customers, disrupt our business or result in, among other things, decreased revenue and increased overhead costs.
The failure of our management information systems to perform as anticipated could damage our reputation with our customers, disrupt our business or result in, among other things, decreased revenue and increased overhead costs. For example, an inaccurate utilization rate could cause us to fail to have sufficient inventory to meet consumer demand, resulting in decreased sales.
If economic conditions worsen, we may face reduced demand and an increase, relative to historical levels, in the time it takes to receive customer payments. If we are not able to adjust our business in a timely and effective manner to changing economic conditions, our business, results of operations and financial condition may be materially adversely affected.
Disruptions in financial markets could negatively impact the ability of our customers to pay their obligations to us in a timely manner and increase our counterparty risk. If economic conditions worsen, we may face reduced demand and an increase, relative to historical levels, in the time it takes to receive customer payments.
Obligations and liabilities under these laws and regulations may materially harm our business. ● We are subject to evolving public disclosure, financial reporting and corporate governance expectations and regulations that impact compliance costs and risks of noncompliance.
Obligations and liabilities under these laws and regulations may materially harm our business. ● We are subject to various anti-corruption laws and we may be subject to other liabilities which could have a material adverse effect on our business, results of operations and financial condition. ● We may be exposed to certain regulatory and financial risks related to climate change and other environmental laws and regulations. ● We may be subject to litigation, judgments, orders or regulatory proceedings that could materially harm our business. ● We are subject to evolving public disclosure, financial reporting and corporate governance expectations and regulations that impact compliance costs and risks of noncompliance.
Growth, Development and Financing Risks We may not be able to successfully acquire and integrate new operations, which could cause our business to suffer. We may not be able to successfully complete potential strategic acquisitions for various reasons. We anticipate that we will consider acquisitions in the future that meet our strategic growth plans.
We may not be able to successfully complete potential strategic acquisitions for various reasons. We anticipate that we will consider acquisitions in the future that meet our strategic growth plans. We cannot predict whether or when acquisitions will be completed, and we may face significant competition for certain acquisition targets.
If we fail to maintain compliance with these requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under its contracts or under the False Claims Act. The False Claims Act’s “whistleblower” provisions allow private individuals, including present and former employees, to sue on behalf of the U.S. government.
The False Claims Act’s “whistleblower” provisions allow private individuals, including present and former employees, to sue on behalf of the U.S. government.
It remains unclear what additional actions President Biden, or a future administration, will take and what support he will have for any potential legislative changes from Congress.
There are a number of legislative and regulatory proposals to address greenhouse gas emissions, which are in various phases of discussion or implementation, but it remains unclear what additional actions the current or future administration will take and what support the President will have for any potential legislative changes from Congress.
U.S. federal spending cuts or further limitations that may result from presidential or congressional action or inaction may also negatively impact our arrangements with government contractor customers. Disruptions in financial markets could negatively impact the ability of our customers to pay their obligations to us in a timely manner and increase our counterparty risk.
For example, reduced 36 Table of Contents commercial activity in the natural resource development sector in certain markets in which we operate may negatively impact our business. U.S. federal spending cuts or further limitations that may result from presidential or congressional action or inaction may also negatively impact our arrangements with government contractor customers.
Risks Related to Our Indebtedness ● Our leverage may make it difficult for us to service our debt and operate our business. ● Global capital and credit markets conditions could materially adversely affect our ability to access the capital and credit markets or the ability of key counterparties to perform their obligations to it. ● We are, and may in the future become, subject to covenants that limit our operating and financial flexibility and, if we default under our debt covenants, we may not be able to meet our payment obligations.
Risks Related to Our Indebtedness ● Our leverage may make it difficult for us to service our debt and operate our business. ● Global capital and credit markets conditions could materially adversely affect our ability to access the capital and credit markets or the ability of key counterparties to perform their obligations to it. ● We are, and may in the future become, subject to covenants that limit our operating and financial flexibility and, if we default under our debt covenants, we may not be able to meet our payment obligations. ● Restrictions in Arrow Bidco’s existing and future debt agreements could limit our growth and our ability to respond to changing conditions. ● Credit rating downgrades could adversely affect our businesses, cash flows, financial condition and operating results. 22 Table of Contents Risks Related to Ownership of Our Common Stock ● Our stock price has been and may continue to be subject to volatility, and this and other factors may affect elements of our capital allocation strategy such as share repurchases, acquisitions and debt reduction. ● We have incurred and expect to continue to incur significantly increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance efforts. ● Our principal stockholder has substantial control over our business, which may be disadvantageous to other stockholders.
Information Technology and Privacy Risks Any failure of our management information systems could disrupt our business and result in decreased revenue and increased overhead costs. We depend on our management information systems to actively manage our facilities and provide facility information, and availability of our services.
If we are not able to adjust our business in a timely and effective manner to changing economic conditions, our business, results of operations and financial condition may be materially adversely affected. Information Technology and Privacy Risks Any failure of our management information systems could disrupt our business and result in decreased revenue and increased overhead costs.
For example, an inaccurate utilization rate could cause us to fail to have sufficient inventory to meet consumer demand, resulting in decreased sales. Any such failure could harm our business, results of operations and financial condition.
Any such failure could harm our business, results of operations and financial condition.
The loss of one or more of such customers or the inability of one or more such customers to meet their obligations could adversely affect our results of operations. We depend on several significant customers. For the year ended December 31, 2023, our five largest customers accounted for approximately 83% of our total revenue.
For the year ended December 31, 2024, our largest customer accounted for approximately 48% of our total revenue, and our five largest customers accounted for approximately 74% of our total revenue.
Removed
Operational Risks ● Our operations are and will be exposed to operational, economic, political and regulatory risks. ● We face significant competition in the specialty rental sector. ● We depend on several significant customers.
Added
Servicing existing contracts may lead to customer disputes or delays in receipt of payments, and failure to retain our current customers, renew existing customer contracts, and obtain new customer contracts, or the termination of existing contracts, could adversely affect our business. ● We are subject to fluctuations in occupancy levels, and a decrease in occupancy levels could cause a decrease in revenues and profitability. ● We may be adversely affected if customers reduce their specialty rental and hospitality services outsourcing. ● Our operations could be subject to natural disasters and other business disruptions, which could materially adversely affect our future revenue and financial condition and increase its costs and expenses. ● Construction risks exist which may adversely affect our results of operations. ● Demand for our products and services is sensitive to changes in demand within a number of key industry end-markets and geographic regions. ● Certain of our major communities are located on land subject to leases.
Removed
Risks Related to Ownership of Our Common Stock ● We have incurred and expect to continue to incur significantly increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance efforts. ● Our principal stockholder has substantial control over our business, which may be disadvantageous to other stockholders.
Added
If we are unable to renew a lease, we could be materially and adversely affected. ● Third parties may fail to provide necessary services and materials for our communities and other sites. ● It may become difficult for us to find and retain qualified employees, and failure to do so could impede our ability to execute our business plan and growth strategy. ● Significant increases in operating costs, including raw material and labor costs, could increase our operating costs significantly and harm our profitability. ● Our future operating results may fluctuate, fail to match past performance, or fail to meet expectations. 21 Table of Contents ● We are exposed to various possible claims relating to our business, and our insurance may not fully protect us. ● Public health crises such as pandemics and their impact on business and economic conditions and government requirements could adversely affect our business, financial condition or results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe internal business owners of cloud-based applications are required to perform and document user access reviews at least quarterly. 41 Table of Contents Risks from Cybersecurity Threats We are exposed to, and may be adversely affected by, interruptions to our computer and IT systems and sophisticated cyber-attacks.
Biggest changeThe internal business owners of cloud-based applications are required to perform and document user access reviews at least quarterly. 42 Table of Contents Risks from Cybersecurity Threats We are exposed to, and may be adversely affected by, interruptions to our computer and IT systems and sophisticated cyber-attacks, including third-party compromise.
The Cybersecurity Risk Management & Oversight Committee (consisting of the Senior Vice President of Business Applications & Digital Transformation, Vice President of IT, a member of our IT department, a senior member of our Legal department, and a member of Operations) sets IT risk strategy and makes risk-informed decisions related to our technology, which includes the assessment and response to cybersecurity risk. 40 Table of Contents The Company has integrated cybersecurity into its broader internal controls framework.
The Cybersecurity Risk Management & Oversight Committee (consisting of the Senior Vice President of Business Applications & Digital Transformation, Vice President of IT, a member of our IT department, a senior member of our Legal department, and a member of Operations) sets IT risk strategy and makes risk-informed decisions related to our technology, which includes the assessment and response to cybersecurity risk. 41 Table of Contents The Company has integrated cybersecurity into its broader internal controls framework.
For more information about the cybersecurity risks we face, refer to the section titled “Risk Factors” in Part I Item 1A of this Annual Report on Form 10-K. ​ 42 Table of Contents
For more information about the cybersecurity risks we face, refer to the section titled “Risk Factors” in Part I Item 1A of this Annual Report on Form 10-K. ​ 43 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor a discussion about how each of our business segments utilizes its respective properties, see Item 1, “Business” of this Annual Report on Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ ​ Location ​ Description Government ​ ​ ​ ​ ​ ​ Dilley, Texas (leased land) ​ Dilley (STFRC) ​ ​ Pecos, Texas (owned and leased land) ​ Pecos Children’s Center ​ ​ Pecos, Texas (leased land) ​ Pecos Blue Lodge ​ ​ Orla, Texas ​ Delaware Lodge ​ ​ Mentone, Texas (leased land) ​ Skillman Station Lodge (1) ​ ​ Pecos, Texas ​ Lodge 118 ​ ​ Pecos, Texas ​ Pecos Trail Lodge ​ ​ Pecos, Texas ​ Pecos South Lodge (1) ​ ​ ​ ​ ​ HFS – South ​ ​ ​ ​ ​ ​ Pecos, Texas ​ Pecos South Lodge (1) ​ ​ Orla, Texas ​ Orla North Lodge ​ ​ Orla, Texas ​ Orla South Lodge ​ ​ Orla, Texas (leased land) ​ El Capitan Lodge ​ ​ Odessa, Texas (owned and leased land) ​ Odessa West Lodge ​ ​ Odessa, Texas ​ Odessa East Lodge ​ ​ Mentone, Texas (leased land) ​ Mentone Wolf Lodge ​ ​ Mentone, Texas (leased land) ​ Skillman Station Lodge (1) ​ ​ Midland, Texas ​ Midland Lodge ​ ​ Midland, Texas (leased land) ​ Midland East Lodge ​ ​ Kermit, Texas (leased land) ​ Kermit Lodge ​ ​ Kermit, Texas ​ Kermit North Lodge ​ ​ Carlsbad, New Mexico (leased land) ​ Carlsbad Lodge ​ ​ Carlsbad, New Mexico (leased land) ​ Seven Rivers Lodge ​ ​ Jal, New Mexico (owned and leased land) ​ Jal Lodge ​ ​ Big Spring, Texas ​ Big Spring Lodge ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Canada (leased land) ​ Cheecham Lodge ​ ​ Williston, North Dakota ​ Williams County Lodge ​ ​ Williston, North Dakota ​ Judson Executive Lodge ​ ​ Watford City, North Dakota (leased land) ​ Watford City Lodge (1) Location is shared between the HFS – South and Government segments. ​ ​
Biggest changeFor a discussion about how each of our business segments utilizes its respective properties, see Item 1, “Business” of this Annual Report on Form 10-K. ​ ​ ​ ​ ​ ​ ​ ​ ​ Location ​ Description Government ​ ​ ​ ​ ​ ​ Dilley, Texas (leased land) ​ Dilley (Dilley Immigration Processing Center (2) ) ​ ​ Pecos, Texas (owned and leased land) ​ PCC (3) ​ ​ Pecos, Texas (leased land) ​ Pecos Blue Lodge (3) ​ ​ Orla, Texas ​ Delaware Lodge (3) ​ ​ Mentone, Texas (leased land) ​ Skillman Station Lodge (1) (3) ​ ​ Pecos, Texas ​ Lodge 118 (3) ​ ​ Pecos, Texas ​ Pecos Trail Lodge (3) ​ ​ Pecos, Texas ​ Pecos South Lodge (1) (3) ​ ​ ​ ​ ​ HFS – South ​ ​ ​ ​ ​ ​ Pecos, Texas ​ Pecos South Lodge (1) ​ ​ Orla, Texas ​ Orla North Lodge ​ ​ Orla, Texas ​ Orla South Lodge ​ ​ Orla, Texas (leased land) ​ El Capitan Lodge ​ ​ Odessa, Texas (owned and leased land) ​ Odessa West Lodge ​ ​ Odessa, Texas ​ Odessa East Lodge ​ ​ Mentone, Texas (leased land) ​ Mentone Wolf Lodge ​ ​ Mentone, Texas (leased land) ​ Skillman Station Lodge (1) ​ ​ Midland, Texas ​ Midland Lodge ​ ​ Midland, Texas ​ Midland East Lodge ​ ​ Kermit, Texas (leased land) ​ Kermit Lodge ​ ​ Kermit, Texas ​ Kermit North Lodge ​ ​ Carlsbad, New Mexico (leased land) ​ Carlsbad Lodge ​ ​ Carlsbad, New Mexico (leased land) ​ Seven Rivers Lodge ​ ​ Jal, New Mexico (owned and leased land) ​ Jal Lodge ​ ​ Big Spring, Texas ​ Big Spring Lodge ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Canada (leased land) ​ Cheecham Lodge ​ ​ Williston, North Dakota ​ Williams County Lodge ​ ​ Williston, North Dakota ​ Judson Executive Lodge ​ ​ Watford City, North Dakota (leased land) ​ Watford City Lodge (1) Location is shared between the HFS – South and Government segments.
Added
(2) STFRC Contract terminated on August 9, 2024. These community assets in Dilley, Texas previously leased under the STFRC Contract were reactivated as of March 5, 2025 under the DIPC Contract. (3) The New PCC Contract (as previously defined) associated with these locations terminated on February 21, 2025. ​ ​ ​ 44 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are involved in various lawsuits, claims and legal proceedings, most of which arise out of the ordinary course of business. The nature of the Company’s business is such that disputes occasionally arise with vendors including suppliers 43 Table of Contents and subcontractors, and customers over contract specifications and contract interpretations among other things.
Biggest changeItem 3. Legal Proceedings We are involved in various lawsuits, claims and legal proceedings, most of which arise out of the ordinary course of business. The nature of the Company’s business is such that disputes occasionally arise with vendors including suppliers and subcontractors, and customers over contract specifications and contract interpretations among other things.
The company assesses these matters on a case-by-case basis as they arise. Reserves are established, as required, based on its assessment of exposure. We have insurance policies to cover general liability and workers’ compensation related claims.
The company assesses these matters on a case-by-case basis as they arise. Reserves are established, as required, based on assessment of exposure. We have insurance policies to cover general liability and workers’ compensation related claims.
Because litigation is subject to inherent uncertainties including unfavorable rulings or developments, it is possible that the ultimate resolution of our legal proceedings could involve amounts that are different from our currently recorded accruals, and that such differences could be material. ​ Item 4. Mine Safety Disclosures Not applicable. ​ 44 Table of Contents Part II
Because litigation is subject to inherent uncertainties including unfavorable rulings or developments, it is possible that the ultimate resolution of our legal proceedings could involve amounts that are different from our currently recorded accruals, and that such differences could be material. ​ Item 4. Mine Safety Disclosures Not applicable. ​ 45 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation on our equity compensation plans can be found in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Compensation Plan Information Plan Category Common shares to be issued upon Exercise of Outstanding Options, Restricted Stock Units, and Performance Stock Units (a) ​ Weighted Average Exercise Price of Outstanding Options ​ Common Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in the first column in this table) Equity compensation plan approved by Target Hospitality stockholders (1) ​ 3,781,513 ​ $ 6.55 ​ ​ 1,207,138 Equity compensation plans not approved by security holders ​ — ​ ​ — ​ ​ — Total ​ 3,781,513 ​ $ 6.55 ​ ​ 1,207,138 (1) The number of common shares reported in Column (a) excludes liability-based stock appreciation right awards of 714,539 and shares associated with grants that were withheld for tax liabilities and grants that were forfeited or expired on or before December 31, 2023, as shares associated with grants that were withheld for tax liabilities and forfeited and expired grants are available for reissuance under the Plan.
Biggest changeAs of December 31, 2024, 10,919,715 securities had been granted under the Plan, excluding 116,837 Restricted Stock Units (“RSUs”) paid in cash, and including 1,578,537 of Stock Appreciation Right Awards (“SARs”), which were settled in cash. 48 Table of Contents Information on our equity compensation plans can be found in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Compensation Plan Information Plan Category Common shares to be issued upon Exercise of Outstanding Options, Restricted Stock Units, and Performance Stock Units (a) ​ Weighted Average Exercise Price of Outstanding Options ​ Common Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in the first column in this table) Equity compensation plan approved by Target Hospitality stockholders (1) ​ 2,748,593 ​ $ 7.38 ​ ​ 953,569 Equity compensation plans not approved by security holders ​ — ​ ​ — ​ ​ — Total ​ 2,748,593 ​ $ 7.38 ​ ​ 953,569 (1) The number of common shares reported in Column (a) excludes shares associated with grants that were withheld for tax liabilities and grants that were forfeited or expired on or before December 31, 2024, as shares associated with grants that were withheld for tax liabilities and forfeited and expired grants are available for reissuance under the Plan.
See Note 9 and 17 of the audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Warrant Exchange On December 22, 2022, the Company closed on an offer to exchange the Warrants for shares of its Common Stock in a cashless transaction (the “Warrant Exchange”).
See Note 9 and 16 of the audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Warrant Exchange On December 22, 2022, the Company closed on an offer to exchange the Warrants for shares of its Common Stock in a cashless transaction (the “Warrant Exchange”).
We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. ​ ​ ​ 48 Table of Contents Item 6. Res erved
We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. ​ ​ ​ 50 Table of Contents Item 6. Res erved
Please refer to Note 18 in the audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for details of the forms of Executive Nonqualified Stock Option Award Agreements, the forms of Executive Restricted Stock Unit Agreements, the form of Executive Stock Appreciation Rights Award Agreement, and the forms of Executive Performance Stock Unit Agreements.
Please refer to Note 17 in the audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for details of the forms of Executive Nonqualified Stock Option Award Agreements, the forms of Executive Restricted Stock Unit Agreements, the form of Executive Stock Appreciation Rights Award Agreement, and the forms of Executive Performance Stock Unit Agreements.
See Note 9 and 17 of the audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. 45 Table of Contents Performance Graph The following stock price performance graph should not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
See Note 9 and 16 of the audited consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. 46 Table of Contents Performance Graph The following stock price performance graph should not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
For additional information on the awards outstanding under the Plan, see Note 18 in the audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K. ​ ​ 47 Table of Contents Cautionary Statement Regarding Forward-Looking Statements This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act , and Section 21E of the Exchange Act.
For additional information on the awards outstanding under the Plan, see Note 17 in the audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K. ​ ​ 49 Table of Contents Cautionary Statement Regarding Forward-Looking Statements This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act , and Section 21E of the Exchange Act.
The Company may repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company's discretion. The repurchase program, which has no expiration date, may be increased, suspended, or terminated at any time.
The Company may repurchase its shares in open market transactions from time to time or through privately negotiated transactions in accordance with federal securities laws, at the Company's discretion. The repurchase program, which has 47 Table of Contents no expiration date, may be increased, suspended, or terminated at any time.
Under the Plan, the Compensation Committee may grant an aggregate of 4,000,000 shares of Common Stock in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance compensation awards.
The Plan is administered by the Compensation Committee. Under the Plan, the Compensation Committee may grant an aggregate of 4,000,000 shares of Common Stock in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance compensation awards.
The Public Warrants are classified as equity based on the guidance outlined in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity . Each Warrant entitles its holder to purchase Common Stock in accordance with its terms.
The Public Warrants were classified as equity based on the guidance outlined in ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity . Each Warrant entitled its holder to purchase Common Stock in accordance with its terms.
Specifically, forward-looking statements may include statements relating to: ● operational, economic, including inflation, political and regulatory risks; ● our ability to effectively compete in the specialty rental accommodations and hospitality services industry, including growing the HFS and Government segments; ● effective management of our communities; ● natural disasters and other business disruptions including outbreaks of epidemic or pandemic disease; ● the duration of any future public health crisis, related economic repercussions and the resulting negative impact to global economic demand; ● the effect of changes in state building codes on marketing our buildings; ● changes in demand within a number of key industry end-markets and geographic regions; ● changes in end-user demand requirements, including variable occupancy levels associated with contracts in the Government segment; ● our reliance on third party manufacturers and suppliers; ● failure to retain key personnel; ● increases in raw material and labor costs; ● the effect of impairment charges on our operating results; ● 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; ● unanticipated changes in our tax obligations; ● 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 or any future administration; ● federal government budgeting and appropriations; ● our ability to effectively manage our credit risk and collect on our accounts receivable; ● our ability to fulfill our public company obligations; ● any failure of our management information systems; ● fluctuations in the fair value of warrant liabilities; ● our ability to refinance debt on favorable terms and meet our debt service requirements and obligations; and ● risks related to Arrow Bidco’s obligations under the 2025 Senior Secured Notes; These forward-looking statements are based on information available as of the date of this Annual Report on Form 10-K and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties.
Specifically, forward-looking statements may include statements relating to: ● operational, economic, including inflation, political and regulatory risks; ● our ability to effectively compete in the specialty rental accommodations and hospitality services industry, including growing the HFS and Government segments; ● effective management of our communities; ● natural disasters and other business disruptions including outbreaks of epidemic or pandemic disease; ● the duration of any future public health crisis, related economic repercussions and the resulting negative impact to global economic demand; ● the effect of changes in state building codes on marketing our buildings; ● changes in demand within a number of key industry end-markets and geographic regions; ● changes in end-user demand requirements that could lead to cancellation of contracts for convenience in the Government segment; ● our reliance on third party manufacturers and suppliers; ● failure to retain key personnel; ● increases in raw material and labor costs; ● the effect of impairment charges on our operating results; ● 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; ● unanticipated changes in our tax obligations; ● 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 Trump administration or any future administration; ● federal government budgeting and appropriations; ● our ability to effectively manage our credit risk and collect on our accounts receivable; ● our ability to fulfill our public company obligations; ● any failure of our management information systems; ● our ability to refinance debt on favorable terms and meet our debt service requirements and obligations; and ● risks related to Arrow Bidco’s debt obligations; These forward-looking statements are based on information available as of the date of this Annual Report on Form 10-K and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties.
The graph below compares the cumulative total return of our Common Stock from December 31, 2018, through December 31, 2023, with the comparable cumulative return of two indices, the Russell Broadbased Total Returns and the Nasdaq US Benchmark TR Index.
The graph below compares the cumulative total return of our Common Stock from December 31, 2019, through December 31, 2024, with the comparable cumulative return of two indices, the Russell Broadbased Total Returns and the Nasdaq US Benchmark TR Index.
Unregistered Sales of Equity Securities and Use of Proceeds None. ​ Issuer Purchases of Equity Securities ​ On November 3, 2022, the Company’s Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $100 million of its outstanding shares of Common Stock.
Issuer Purchases of Equity Securities ​ On November 3, 2022, the Company’s Board of Directors approved a stock repurchase program that authorizes the Company to repurchase up to $100 million of its outstanding shares of Common Stock.
Holders As of December 31, 2023, there were eleven holders of record of our Common Stock and one holder of record of our Warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Common Stock or Warrants are held of record by banks, brokers and other financial institutions.
Holders As of December 31, 2024, there were twelve holders of record of our Common Stock. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Common Stock are held of record by banks, brokers and other financial institutions.
The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, business, legal, accounting, and other considerations.
The stock repurchase program does not obligate the Company to purchase any particular number of shares, and the timing and exact amount of any repurchases will depend on various factors, including market pricing and conditions, applicable legal requirements, contractual obligations, and other factors.
During the year ended December 31, 2022, holders of Public Warrants exercised 7,101 Public Warrants for shares of Common Stock resulting in the Company receiving cash proceeds of approximately $0.1 million and issuing 7,101 shares of Common Stock.
During the year ended December 31, 2024, holders of Public Warrants exercised 1,079 Public Warrants for shares of Common Stock resulting in the Company receiving cash proceeds of less than $0.1 million and issuing 1,079 shares of Common Stock.
The Warrants expire at 5:00 pm New York City time on March 15, 2024. As of December 31, 2023, there were 8,044,287 Warrants outstanding. Of the 8,044,287 outstanding, 1,533,334 are Private Warrants and 6,510,953 are Public Warrants. The Private Warrants are classified as liabilities under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity guidance.
The Warrants expired at 5:00 pm New York City time on March 15, 2024. As of December 31, 2024, there were no Warrants outstanding. The Private Warrants expired unexercised on March 15, 2024 and are no longer outstanding. The Private Warrants were classified as liabilities under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity guidance.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on the Nasdaq Capital Market under the symbol “TH.” Through March 15, 2019, our common stock, warrants and units were quoted under the symbols “EAGL,” “EAGLW” and “EAGLU,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on the Nasdaq Capital Market under the symbol “TH.”. Our Warrants (as defined below), which expired by their terms on March 15, 2024, traded on Nasdaq under the ticker symbol “THWWW”.
The amounts and values in Column (a) comprise 1,682,206 equity-based RSUs at a weighted average grant price of $4.65, 1,358,868 equity-based PSUs (assumed at a payout of 100% of Target) at a weighted average grant price of $5.23, and 740,439 stock options at a weighted average exercise price of $6.55.
The amounts and values in Column (a) comprise 985,077 equity-based RSUs at a weighted average grant price of $7.60, 1,401,407 equity-based PSUs (assumed at a payout of 100% of Target) at a weighted average grant price of $6.02, and 362,109 stock options at a weighted average exercise price of $7.38.
We can give no assurances that we will pay a dividend in the future. Warrants Platinum Eagle issued warrants to purchase its common stock as components of units sold in the Public Offering (the “Public Warrants”, together with the Private Warrants, the “Warrants”). Platinum Eagle also issued, in connection with the Public Offering, the Private Warrants.
Warrants Platinum Eagle Acquisition Corp., our legal predecessor (“Platinum Eagle”), issued warrants to purchase its common stock as components of units sold in its initial public offering (the “Public Warrants”) and the warrants issued in a private placement concurrently with its initial public offering (the Private Warrants and, together with the Public Warrants, the “Warrants”).
The program is expected to be implemented 46 Table of Contents over the course of several years and is conducted subject to the covenants in the agreements governing the Company's indebtedness.
The program is expected to be implemented over the course of several years and is conducted subject to the covenants in the agreements governing the Company's indebtedness. During the year ended December 31, 2024, the Company repurchased 3,866,265 shares of Common Stock for an aggregated price of approximately $33.4 million (exclusive of estimated excise taxes of approximately $0.2 million).
Removed
Upon consummation of the business combination on March 15, 2019, (i) our public units automatically separated into their component securities and, as a result, no longer trade as a separate security and were delisted; (ii) our Common Stock (into which Platinum Eagle’s ordinary shares were converted) continued to trade on Nasdaq under the ticker symbol “TH”; and (iii) the Warrants continued to trade on Nasdaq under the ticker symbol “THWWW”.
Added
We can give no assurances that we will pay a dividend in the future.
Removed
The share price performance shown on the graph is not necessarily indicative of future price performance.
Added
The share price performance shown on the graph is not necessarily indicative of future price performance. Unregistered Sales of Equity Securities and Use of Proceeds On December 12, 2024, the Company issued an aggregate of 90,000 unregistered, restricted shares of Common Stock to Jeff Sagansky, a former director of the Company, in settlement of Mr.
Removed
No share repurchases were made during the years ended December 31, 2023 and 2022, respectively. ​ Securities Authorized for Issuance under Equity Compensation Plans On March 6, 2019, our shareholders approved a long-term incentive award plan (the "Plan") in connection with the business combination. The Plan is administered by the Compensation Committee.
Added
Sagansky’s purported exercise of certain warrants held by him. With respect to such issuance, the Company relied on an exemption from the registration requirements under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereunder.
Removed
As of December 31, 2023, 10,082,940 securities had been granted under the Plan, excluding 116,837 Restricted Stock Units (“RSUs”) paid in cash, and including 1,578,537 of Stock Appreciation Right Awards (“SARs”), which are intended to settle in cash.
Added
As of December 31, 2024, the stock repurchase program had a remaining capacity of approximately $66.6 million. ​ The following table summarizes all of the share repurchases during the year ended December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 plans (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 October 1, 2024 through October 31, 2024 ​ 1,112,719 ​ $ 7.63 ​ 1,112,719 ​ 9,291,496 November 1, 2024 through November 30, 2024 ​ 329,106 ​ $ 8.19 ​ 329,106 ​ 8,050,899 Total ​ 3,866,265 ​ ​ ​ ​ 3,866,265 ​ ​ ​ Securities Authorized for Issuance under Equity Compensation Plans On March 6, 2019, our shareholders approved a long-term incentive award plan (the “Plan”) in connection with the business combination.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+2 added−0 removed0 unchanged
Biggest changeItem 6. Reserved 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 68 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 115 Item 9A. Controls and Procedures 115
Biggest changeItem 6. Reserved 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 67 Item 8. Financial Statements and Supplementary Data 71 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 119 Item 9A. Controls and Procedures 119 Item 9B.
Added
Other Information 122 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 122 ​ ​ PART III ​ Item 10. Directors, Executives, Officers and Corporate Governance 123 Item 11. Executive Compensation 123 Item 12. Security Ownership of Certain Beneficial Owners and Management Related Shareholder Matters 123 Item 13. Certain Relationships and Related Transactions, and Director Independence 123 Item 14.
Added
Principal Accounting Fees and Services 123 ​ ​ PART IV ​ Item 15. Exhibits and Financial Statement Schedules 124 SIGNATURES 130 ​ ​ ​ Table of Contents Part I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+37 added−29 removed52 unchanged
Biggest changeThe following table presents a reconciliation of Target Hospitality’s consolidated gross profit to Adjusted gross profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2023 ​ 2022 2021 Gross Profit ​ $ 313,324 ​ $ 247,128 ​ $ 101,350 Depreciation of specialty rental assets ​ ​ 68,626 ​ ​ 52,833 ​ ​ 53,609 Adjusted gross profit ​ $ 381,950 ​ $ 299,961 ​ $ 154,959 ​ The following table presents a reconciliation of Target Hospitality’s consolidated net income (loss) to EBITDA and Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2023 ​ 2022 2021 Net income (loss) ​ $ 173,700 ​ $ 73,939 ​ $ (4,576) Income tax expense ​ ​ 51,050 ​ ​ 32,370 ​ ​ 1,904 Interest expense, net ​ ​ 22,639 ​ ​ 36,323 ​ ​ 38,704 Loss on extinguishment of debt ​ ​ 2,279 ​ ​ - ​ ​ - Other depreciation and amortization ​ ​ 15,351 ​ ​ 14,832 ​ ​ 16,910 Depreciation of specialty rental assets ​ ​ 68,626 ​ ​ 52,833 ​ ​ 53,609 EBITDA ​ ​ 333,645 ​ ​ 210,297 ​ ​ 106,551 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustments ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expense, net ​ ​ 1,241 ​ ​ 36 ​ ​ 878 Transaction expenses ​ ​ 4,875 ​ ​ 283 ​ ​ 1,198 Stock-based compensation ​ ​ 11,174 ​ ​ 19,121 ​ ​ 5,082 Change in fair value of warrant liabilities ​ ​ (9,062) ​ ​ 31,735 ​ ​ 1,067 Other adjustments ​ ​ 2,344 ​ ​ 3,242 ​ ​ 4,400 Adjusted EBITDA ​ $ 344,217 ​ $ 264,714 ​ $ 119,176 ​ 63 Table of Contents The following table presents a reconciliation of Target Hospitality’s Net cash provided by operating activities to Discretionary cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2023 ​ 2022 2021 Net cash provided by operating activities ​ $ 156,801 ​ $ 305,612 ​ $ 104,599 Less: Maintenance capital expenditures for specialty rental assets ​ ​ (14,218) ​ ​ (12,314) ​ ​ (11,659) Discretionary cash flows ​ $ 142,583 ​ $ 293,298 ​ $ 92,940 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase of specialty rental assets ​ ​ (60,808) ​ ​ (120,287) ​ ​ (35,488) Purchase of property, plant and equipment ​ ​ (3,066) ​ ​ (20,556) ​ ​ (427) Acquired intangible assets ​ ​ (4,547) ​ ​ - ​ ​ - Proceeds from sale of specialty rental assets and other property, plant and equipment ​ ​ 241 ​ ​ 615 ​ ​ - Net cash used in investing activities ​ $ (68,180) ​ $ (140,228) ​ $ (35,915) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal payments on finance and finance lease obligations ​ ​ (1,404) ​ ​ (1,008) ​ ​ (4,172) Principal payments on borrowings from ABL ​ ​ - ​ ​ (70,000) ​ ​ (76,000) Proceeds from borrowings on ABL ​ ​ - ​ ​ 70,000 ​ ​ 28,000 Repayment of Senior Notes ​ ​ (153,054) ​ ​ (5,500) ​ ​ - Payment of issuance costs from warrant exchange ​ ​ (1,504) ​ ​ (774) ​ ​ - Proceeds from issuance of Common Stock from exercise of warrants ​ ​ 209 ​ ​ 80 ​ ​ - Proceeds from issuance of Common Stock from exercise of stock options ​ ​ 1,396 ​ ​ 225 ​ ​ - Payment of deferred financing costs ​ ​ (5,194) ​ ​ - ​ ​ - Taxes paid related to net share settlement of equity awards ​ ​ (6,818) ​ ​ (121) ​ ​ (99) Net cash used in financing activities ​ $ (166,369) ​ $ (7,098) ​ $ (52,271) ​ ​
Biggest changeTarget Hospitality’s management believe that Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows provide 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. 65 Table of Contents The following table presents a reconciliation of Target Hospitality’s consolidated gross profit to Adjusted gross profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2024 ​ 2023 2022 Gross Profit ​ $ 178,179 ​ $ 313,324 ​ $ 247,128 Depreciation of specialty rental assets ​ ​ 57,164 ​ ​ 68,626 ​ ​ 52,833 Adjusted gross profit ​ $ 235,343 ​ $ 381,950 ​ $ 299,961 ​ The following table presents a reconciliation of Target Hospitality’s consolidated net income to EBITDA and Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2024 ​ 2023 2022 Net income ​ $ 71,407 ​ $ 173,700 ​ $ 73,939 Income tax expense ​ ​ 21,430 ​ ​ 51,050 ​ ​ 32,370 Interest expense, net ​ ​ 16,619 ​ ​ 22,639 ​ ​ 36,323 Loss on extinguishment of debt ​ ​ - ​ ​ 2,279 ​ ​ - Other depreciation and amortization ​ ​ 15,642 ​ ​ 15,351 ​ ​ 14,832 Depreciation of specialty rental assets ​ ​ 57,164 ​ ​ 68,626 ​ ​ 52,833 EBITDA ​ ​ 182,262 ​ ​ 333,645 ​ ​ 210,297 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustments ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (income) expense, net ​ ​ (502) ​ ​ 1,241 ​ ​ 36 Transaction expenses ​ ​ 4,899 ​ ​ 4,875 ​ ​ 283 Stock-based compensation ​ ​ 7,306 ​ ​ 11,174 ​ ​ 19,121 Change in fair value of warrant liabilities ​ ​ (675) ​ ​ (9,062) ​ ​ 31,735 Other adjustments ​ ​ 3,427 ​ ​ 2,344 ​ ​ 3,242 Adjusted EBITDA ​ $ 196,717 ​ $ 344,217 ​ $ 264,714 ​ 66 Table of Contents The following table presents a reconciliation of Target Hospitality’s Net cash provided by operating activities to Discretionary cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ ​ 2024 ​ 2023 2022 Net cash provided by operating activities ​ $ 151,675 ​ $ 156,801 ​ $ 305,612 Less: Maintenance capital expenditures for specialty rental assets ​ ​ (20,747) ​ ​ (14,218) ​ ​ (12,314) Discretionary cash flows ​ $ 130,928 ​ $ 142,583 ​ $ 293,298 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase of specialty rental assets ​ ​ (29,557) ​ ​ (60,808) ​ ​ (120,287) Purchase of property, plant and equipment ​ ​ (687) ​ ​ (3,066) ​ ​ (20,556) Acquired intangible assets ​ ​ - ​ ​ (4,547) ​ ​ - Proceeds from sale of specialty rental assets and other property, plant and equipment ​ ​ 1,402 ​ ​ 241 ​ ​ 615 Net cash used in investing activities ​ $ (28,842) ​ $ (68,180) ​ $ (140,228) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal payments on finance and finance lease obligations ​ ​ (1,695) ​ ​ (1,404) ​ ​ (1,008) Principal payments on borrowings from ABL ​ ​ - ​ ​ - ​ ​ (70,000) Proceeds from borrowings on ABL ​ ​ - ​ ​ - ​ ​ 70,000 Repayment of Senior Notes ​ ​ - ​ ​ (153,054) ​ ​ (5,500) Payment of issuance costs from warrant exchange ​ ​ - ​ ​ (1,504) ​ ​ (774) Repurchase of Common Stock ​ ​ (33,496) ​ ​ - ​ ​ - Distributions paid to noncontrolling interest ​ ​ (65) ​ ​ - ​ ​ - Proceeds from issuance of Common Stock from exercise of warrants ​ ​ 3 ​ ​ 209 ​ ​ 80 Proceeds from issuance of Common Stock from exercise of stock options ​ ​ 1,850 ​ ​ 1,396 ​ ​ 225 Payment of deferred financing costs ​ ​ - ​ ​ (5,194) ​ ​ - Taxes paid related to net share settlement of equity awards ​ ​ (2,661) ​ ​ (6,818) ​ ​ (121) Net cash used in financing activities ​ $ (36,064) ​ $ (166,369) ​ $ (7,098) ​ ​
We have identified two reportable business segments: HFS – South and Government: HFS - South The HFS – South segment reflects our facilities and operations in the HFS – South region from customers in the natural resources development industry and includes our 16 communities located across Texas and New Mexico.
Segments We have identified two reportable business segments: HFS – South and Government: HFS - South The HFS – South segment reflects our facilities and operations in the HFS – South region from customers in the natural resources development industry and includes our 16 communities located across Texas and New Mexico.
During the year ended December 31, 2023, the Company executed the New PCC Contract, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the U.S. Government, that replaced the Expanded Humanitarian Contract and became effective on November 16, 2023.
During the year ended December 31, 2023, the Company executed the New PCC Contract, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our NP Partner and the U.S. government, that replaced the Expanded Contract and became effective on November 16, 2023.
Inclusive of all potential occupancy-based variable services revenue, the Expanded Humanitarian Contract provided for a maximum initial annual total contract amount of approximately $575 million.
Inclusive of all potential occupancy-based variable services revenue, the Expanded Contract provided for a maximum initial annual total contract amount of approximately $575 million.
(2) Represents interest on operating lease obligations calculated using the appropriate discount rate for each lease as noted in Note 13 of the notes to our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K. ​ 60 Table of Contents Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).
(2) Represents interest on operating lease obligations calculated using the appropriate discount rate for each lease as noted in Note 13 of the notes to our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K. ​ Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).
On May 15, 2023, the Company executed a six-month extension of the Expanded Humanitarian Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms. The Expanded Humanitarian Contract terminated as of November 15, 2023.
On May 15, 2023, the Company executed a six-month extension of the Expanded Contract, which extended the period of performance through November 15, 2023 and increased the contract value, with no change to contract structure or any other existing economic terms. The Expanded Contract terminated on November 15, 2023.
The Company had no significant contracts with lease terms or contract terms determined to have been over or under-estimated during the reporting periods included herein. ​ Principles of Consolidation Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for a discussion of principles of consolidation. ​ Recently Issued and Adopted Accounting Standards ​ Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for our assessment of recently issued and adopted accounting standards. ​ Non-GAAP Financial Measures We have included Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows which are measurements not calculated in accordance with US GAAP, in the discussion of our financial results because they are key metrics used by management to assess financial performance.
The Company had no significant contracts determined to have been over or under-allocated during the reporting periods included herein. ​ Principles of Consolidation Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for a discussion of principles of consolidation. ​ Recently Issued and Adopted Accounting Standards ​ Refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K for our assessment of recently issued and adopted accounting standards. ​ Non-GAAP Financial Measures We have included Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows which are measurements not calculated in accordance with US GAAP, in the discussion of our financial results because they are key metrics used by management to assess financial performance.
Interest is payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2024. Following this issuance and related transactions, approximately $28.1 million aggregate principal amount of 2024 Senior Secured Notes remained outstanding, which were subsequently redeemed on November 21, 2023 resulting in an outstanding balance of $0 as of December 31, 2023.
Interest is payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2024. Following this issuance and related transactions, approximately $28.1 million aggregate principal amount of 2024 Senior Secured Notes remained outstanding, which were subsequently redeemed on November 21, 2023 resulting in an outstanding balance of $0.
Adjusted EBITDA is a non-GAAP measure. The GAAP measure most comparable to Adjusted EBITDA is Net income (loss).
Adjusted EBITDA is a non-GAAP measure. The GAAP measure most comparable to Adjusted EBITDA is Net income.
We primarily review the following profit and loss information when assessing our performance: Revenue We analyze our revenues by comparing actual revenues to our internal budgets and projections for a given period and to prior periods to assess our performance. We believe that revenues are a meaningful indicator of the demand and pricing 51 Table of Contents for our services.
We primarily review the following profit and loss information when assessing our performance: Revenue We analyze our revenues by comparing actual revenues to our internal budgets and projections for a given period and to prior periods to assess our performance. We believe that revenues are a meaningful indicator of the demand and pricing for our services.
The following section is a summary of certain aspects of those accounting policies involving estimates or assumptions that (1) involve a significant level of estimation uncertainty and (2) have had or are reasonably likely to have a material impact on our financial condition or results of operations.
The following section is a summary of certain aspects of those accounting policies involving estimates or assumptions that (1) 63 Table of Contents involve a significant level of estimation uncertainty and (2) have had or are reasonably likely to have a material impact on our financial condition or results of operations.
Maintenance capital expenditures for specialty rental assets amounted to approximately $14.2 million, $12.3 million, and $11.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. As we pursue growth, we monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements.
Maintenance capital expenditures for specialty rental assets amounted to approximately $20.7 million, $14.2 million, and $12.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. As we pursue growth, we monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements.
Regulatory Compliance We are subject to extensive federal, state, local, and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid, and hazardous waste handling and disposal and 50 Table of Contents the investigation and remediation of contamination.
Regulatory Compliance We are subject to extensive federal, state, local, and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid, and hazardous waste handling and disposal and the investigation and remediation of contamination.
Additionally, the Expanded Humanitarian Contract included occupancy-based variable services revenue that aligned with active community population. The minimum revenue commitments, which consisted of annual recurring lease revenue and nonrecurring infrastructure enhancement revenue, provided for a minimum annual revenue contribution of approximately $390 million and was fully committed over its initial contract term.
Additionally, the Expanded Contract included occupancy-based variable services revenue that aligned with active community population. The minimum revenue amount, which consisted of annual lease revenue and nonrecurring infrastructure enhancement revenue, provided for a minimum annual revenue contribution of approximately $390 million and was fully committed over its initial contract term.
Loss on extinguishment of debt was $2.3 million for the year ended December 31, 2023 as compared to $0 for the year ended December 31, 2022.
Loss on extinguishment of debt was $0 for the year ended December 31, 2024 as compared to $2.3 million for the year ended December 31, 2023.
While reviewing this section, refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K, including terms defined herein. ​ Revenue Recognition ​ For contracts that contain both a lease component and a services or non-lease component, the Company adopted an accounting policy to account for and present the lease component under ASC 842 and the non-lease component under ASC 606.
While reviewing this section, refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 within this Annual Report on Form 10-K, including terms defined herein. ​ Revenue Recognition ​ For contracts that contain both a lease component and a services or non-lease component, the Company adopted an accounting policy to account for and present the lease component under ASC 842 and the non-lease component under the authoritative guidance for revenue recognition (“ASC 606” or “Topic 606”).
Public Policy We derive a significant portion of our revenues from our subcontracts with government contractors. The U.S. government and, by extension, our U.S. government contractor customers, may from time to time adopt, implement or modify certain policies or directives that may adversely affect our business.
Public Policy We have derived, and in the future may derive, a significant portion of our revenues from our subcontracts with U.S. government contractors. The U.S. government and, by extension, our U.S. government contractor customers, may from time to time adopt, implement or modify certain policies or directives that may adversely affect our business.
The Company’s finance lease and other financing obligations as of December 31, 2022, consisted of approximately $2.2 million of finance leases related to commercial-use vehicles with the same terms as described above.
The Company’s finance lease and other financing obligations as of December 31, 2023, consisted of approximately $2.4 million of finance leases related to commercial-use vehicles with the same terms as described above.
Comparison of the Years Ended December 31, 2022 and 2021 ​ For discussion of the comparison of our operating results for the years ended December 31, 2022 and 2021, please read the “Comparison of Years Ended December 31, 2022 and 2021” section located in the Management Discussion & Analysis section in the our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 10, 2023 and is incorporated herein by reference.
Comparison of the Years Ended December 31, 2023 and 2022 ​ For discussion of the comparison of our operating results for the years ended December 31, 2023 and 2022, please read the “Comparison of Years Ended December 31, 2023 and 2022” section located in the Management Discussion & Analysis section in the our Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 13, 2024 and is incorporated herein by reference.
Assuming all option periods are exercised, the 5-year cumulative minimum revenue commitment of the New PCC Contract is expected to be approximately $892 million through 2028.
Assuming all option periods are exercised, the 5-year cumulative minimum revenue amount of the New PCC Contract is expected to be approximately $851 million through 2028.
Refer to Note 8 of the notes to our audited consolidated financial statements in Part II, Item 8 within this Annual Report on Form 10-K for further discussion regarding extinguishment of debt and the Notes Exchange Offer. Interest expense, net.
No such activity occurred in the current period. Refer to Note 8 of the notes to our audited consolidated financial statements in Part II, Item 8 within this Annual Report on Form 10-K for further discussion regarding extinguishment of debt and the Notes Exchange Offer. Interest expense, net.
Although growth capital expenditures are largely discretionary, our long-lived specialty rental assets require a certain level of maintenance capital expenditures, which have ranged from approximately 0.4% to 4.0% of annual revenue between 2019 and 2023, with an average cost of approximately 2% of annual revenue.
Although growth capital expenditures are largely discretionary, our long-lived specialty rental assets require a certain level of maintenance capital expenditures, which have ranged from approximately 0.4% to 5.4% of annual revenue between 2020 and 2024, with an average cost of approximately 2.9% of annual revenue.
Adjusted Gross Profit We analyze our adjusted gross profit, which is a Non-GAAP measure, which we define as revenues less cost of sales, excluding impairment and depreciation of specialty rental assets to measure our financial performance. Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure.
Adjusted Gross Profit We analyze our adjusted gross profit, which is a Non-GAAP measure, which we define as revenues less services and specialty rentals costs, excluding impairment, certain severance costs, and depreciation of specialty rental assets to measure our financial performance. Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure.
Liquidity and Capital Resources We depend on cash flow from operations, cash on hand and borrowings under our ABL Facility to finance our acquisition strategy, working capital needs, and capital expenditures. As of December 31, 2023, the ABL Facility had unused available borrowing capacity of $175 million.
Liquidity and Capital Resources We depend on cash flow from operations, cash on hand and borrowings under our ABL Facility to finance our acquisition strategy, working capital needs, principal debt payments, debt service requirements, and capital expenditures. As of December 31, 2024, the ABL Facility had unused available borrowing capacity of $175 million.
The change in fair value of the warrant liabilities was ($9.1) million for the year ended December 31, 2023 as compared 55 Table of Contents to $31.7 million for the year ended December 31, 2022. The change in the fair value of the warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
The change in fair value of the warrant liabilities was ($0.7) million for the year ended December 31, 2024 as compared to ($9.1) million for the year ended December 31, 2023. The change in the fair value of the warrant liabilities is the result of changes in market prices deriving the value of the financial instruments.
Net cash used in financing activities was $166.4 million for the year ended December 31, 2023 compared to $7.1 million for the year ended December 31, 2022.
Net cash used in financing activities was $36.1 million for the year ended December 31, 2024 compared to $166.4 million for the year ended December 31, 2023.
The Expanded Humanitarian Contract provided for a significant scope expansion and term extension for the continuation of services provided under the agreement that originated in March 2021. The Expanded Humanitarian Contract operated with similar structure to the Company’s prior and existing government services subcontracts, which are centered around minimum revenue commitments supported by the United States Government.
The Expanded Contract provided for a significant scope expansion and term extension for the continuation of services provided under the prior agreement that originated in March 2021. The Expanded Contract operated with similar structure to the Company’s prior government services subcontracts, which are centered around minimum revenue amounts supported by the U.S. government.
The remainder of the change relates to the write-off of approximately $0.2 million of the remaining unamortized deferred financing costs and unamortized original issue discount associated with the redemption on November 21, 2023 of the remaining portion of the 2024 Senior Secured Notes that were not exchanged for the new 2025 Senior Secured Notes in the Notes Exchange Offer.
The remainder of the change relates to the write-off of approximately $0.2 million of the remaining unamortized deferred financing costs and unamortized original issue discount associated with the redemption on November 21, 2023 of the remaining portion of the 2024 Senior Secured Notes that were not exchanged for the new 2025 Senior Secured Notes in Arrow Bidco’s offer to exchange (the “Notes Exchange Offer”) any and all of its outstanding 2024 Senior Secured Notes for cash and for the 2025 Senior Secured Notes.
Additionally, this segment also includes facilities and operations provided under a lease and services agreement with our NP Partner, backed by a committed U.S. Government contract, to provide a suit of comprehensive service offerings in support of their humanitarian aid efforts.
Government The Government segment includes facilities and operations provided under a lease and services agreement with our NP Partner, backed by a committed U.S. government contract, to provide a suite of comprehensive service offerings in support of their aid efforts.
The increase in loss on extinguishment of debt is primarily due to the partial redemption of the 2024 Senior Secured Notes on March 15, 2023, which was accounted for as a partial extinguishment of debt and resulted in a charge of approximately $1.7 million related to the write-off of unamortized deferred financing costs and unamortized original issue discount.
The decrease in loss on extinguishment of debt is due to the partial redemption of Arrow Bidco’s 9.50% Senior Secured Notes due 2024 (the “2024 Senior Secured Notes”) on March 15, 2023, which was accounted for as a partial extinguishment of debt and resulted in a charge of approximately $1.7 million related to the write-off of unamortized deferred financing costs and unamortized original issue discount.
Income tax expense. Income tax expense was $51.1 million for the year ended December 31, 2023 as compared to $32.4 million for the year ended December 31, 2022.
Income tax expense was $21.4 million for the year ended December 31, 2024 as compared to $51.1 million for the year ended December 31, 2023.
Interest expense, net was $22.6 million for the year ended December 31, 2023 as compared to interest expense, net of $36.3 million for the year ended December 31, 2022.
Interest expense, net was $16.6 million for the year ended December 31, 2024 as compared to interest expense, net of $22.6 million for the year ended December 31, 2023.
The change in interest expense, net was primarily driven by a decrease in interest expense on the Senior Secured Notes driven by a lower average outstanding debt balance in current year compared to the prior year as approximately $153.1 million of the Senior Secured Notes were paid off during the year ended December 31, 2023, whereas approximately $5.5 million of the Senior Secured Notes were repaid during the year ended December 31, 2022.
The change in interest expense, net was primarily driven by a decrease in interest expense on the Senior Secured Notes by approximately $2.9 million driven by a lower outstanding debt balance in current year as approximately $153.1 million of the Senior Secured Notes were paid off during the year ended December 31, 2023.
Indebtedness The Company’s finance lease and other financing obligations as of December 31, 2023 consisted of $2.4 million of finance leases. The finance leases pertain to leases entered into during 2019 through 2023, for commercial-use vehicles with 36-month terms (and continue on a month-to-month basis thereafter) expiring through 2026.
Indebtedness The Company’s finance lease and other financing obligations as of December 31, 2024 consisted of $3.3 million of finance leases. The finance leases pertain to leases entered into during 2022 through December 31, 2024, for commercial-use vehicles with 48 to 36-month terms (and continue on a month-to-month basis thereafter) expiring through 2028.
Approximately 64.9% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 35.1% of revenues were earned through leasing of lodging facilities for the year ended December 31, 2023.
Approximately 68.8% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 31.2% of revenues were earned through leasing of lodging facilities for the year ended December 31, 2024.
We enter into arrangements with multiple deliverables for which arrangement consideration is allocated between lodging and services based on the relative estimated standalone selling price of each deliverable. The estimated price of lodging and services deliverables is based on the prices of lodging and services when sold separately or based upon the best estimate of selling price.
We enter into arrangements with multiple deliverables for which arrangement consideration is allocated between lodging and services based on the relative estimated standalone selling price of each deliverable.
This decrease in net cash used in investing activities was partially offset by an increase in growth capital expenditures in the HFS – South segment with the largest single driver being the $18.6 million acquisition of community assets and related intangibles in January 2023, supporting continued customer demand.
This decrease in net cash used in investing activities was primarily related to a decrease in growth capital expenditures in the HFS – South segment with the largest single driver being the $18.6 million acquisition of community assets and related intangibles in January 2023, 61 Table of Contents supporting continued customer demand.
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 expense, net: Other 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 transaction costs during 2021, 2022 and 2023, including legal and professional fees, associated with the Proposal (previously defined in the Item 7.
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, and other immaterial expenses and non-cash items. ● Transaction expenses: Target Hospitality incurred certain transaction costs during 2022, 2023 and 2024, including immaterial items during 2022.
Net cash provided by operating activities was $156.8 million for the year ended December 31, 2023 compared to $305.6 million for the year ended December 31, 2022.
Net cash provided by operating activities was $151.7 million for the year ended December 31, 2024 compared to $156.8 million for the year ended December 31, 2023.
The following table sets forth general information derived from our audited consolidated statements of cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ 2023 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 156,801 ​ $ 305,612 ​ $ 104,599 Net cash used in investing activities ​ (68,180) ​ (140,228) ​ ​ (35,915) Net cash used in financing activities ​ (166,369) ​ (7,098) ​ ​ (52,271) Effect of exchange rate changes on cash and cash equivalents ​ ​ 4 ​ ​ (19) ​ ​ 14 Net increase (decrease) in cash and cash equivalents ​ $ (77,744) ​ $ 158,267 ​ $ 16,427 ​ Comparison of Years Ended December 31, 2023 and 2022 ​ Cash flows provided by operating activities .
The following table sets forth general information derived from our audited consolidated statements of cash flows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ($ in thousands) ​ December 31, ​ 2024 2023 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ $ 151,675 ​ $ 156,801 ​ $ 305,612 Net cash used in investing activities ​ (28,842) ​ (68,180) ​ ​ (140,228) Net cash used in financing activities ​ (36,064) ​ (166,369) ​ ​ (7,098) Effect of exchange rate changes on cash and cash equivalents ​ ​ (30) ​ ​ 4 ​ ​ (19) Net increase (decrease) in cash and cash equivalents ​ $ 86,739 ​ $ (77,744) ​ $ 158,267 ​ Comparison of Years Ended December 31, 2024 and 2023 ​ Cash flows provided by operating activities .
Total revenue was $563.6 million for the year ended December 31, 2023 as compared to $502.0 million for the year ended December 31, 2022, and consisted of $365.6 million of services income and $198.0 million of specialty rental income.
Total revenue for the year ended December 31, 2023 consisted of $365.6 million of services income and $198.0 million of specialty rental income.
Selling, general and administrative was $56.1 million for the year ended December 31, 2023 as compared to $57.9 million for the year ended December 31, 2022.
Selling, general and administrative. Selling, general and administrative was $54.3 million for the year ended December 31, 2024 as compared to $56.1 million for the year ended December 31, 2023.
This decrease was partially offset by an increase in average daily rate. ​ Comparison of the Years Ended December 31, 2022 and 2021 ​ For discussion of the comparison of our operating results for the years ended December 31, 2022 and 2021, please read the “Comparison of Years Ended December 31, 2022 and 2021” section located in the Management Discussion & Analysis section in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 10, 2023 and is incorporated herein by reference.
The increase in revenue noted above also partially offset this decrease. ​ Comparison of the Years Ended December 31, 2023 and 2022 ​ For discussion of the comparison of our operating results for the years ended December 31, 2023 and 2022, please read the “Comparison of Years Ended December 31, 2023 and 2022” section located in the Management Discussion & Analysis section in our Annual Report on Form 10-K for the year ended December 31, 2023 filed on March 13, 2024 and is incorporated herein by reference.
During the year ended December 31, 2022, $70 million was drawn and $70 million was repaid on the ABL Facility resulting in an outstanding balance of $0 as of December 31, 2022.
During the year ended December 31, 2022, $70 million was drawn and $70 million was repaid on the ABL Facility. During the years ended December 31, 2024 and 2023, respectively no amounts were drawn or repaid on the ABL Facility resulting in an outstanding balance of $0 as of December 31, 2024 and 2023, respectively.
Hospitality & Facilities Services - South Revenue for the HFS – South segment was $148.7 million for the year ended December 31, 2023, as compared to $132.4 million for the year ended December 31, 2022. ​ Adjusted gross profit for the HFS – South segment was $51.4 million for the year ended December 31, 2023, as compared to $54.6 million for the year ended December 31, 2022.
Hospitality & Facilities Services - South Revenue for the HFS – South segment was $149.9 million for the year ended December 31, 2024, as compared to $148.7 million for the year ended December 31, 2023. ​ Adjusted gross profit for the HFS – South segment was $50.8 million for the year ended December 31, 2024, as compared to $51.4 million for the year ended December 31, 2023.
Cost of services was $151.6 million for the year ended December 31, 2023 as compared to $174.2 million for the year ended December 31, 2022.
Cost of services. Cost of services was $132.1 million for the year ended December 31, 2024 as compared to $151.6 million for the year ended December 31, 2023.
Under the New PCC Contract, the Company will maintain similar facility size and operational scope compared to the Expanded Humanitarian Contract. The New PCC Contract operates with similar structure to the Company’s prior and existing government services subcontracts, which are centered around minimum revenue commitments supported by the United States Government.
Under the New PCC Contract, the Company maintains similar facility size and operational scope compared to the Expanded Contract. The New PCC Contract operates with similar structure to the Company’s prior government services subcontracts, which are centered around minimum revenue amounts supported by the U. S. government.
The increase in net cash used in financing activities was driven primarily by approximately $153.1 million of combined repayments related to the 2024 Senior Secured Notes on March 15, 2023 and November 21, 2023, whereas the prior period only included an elective $5.5 million repayment of the 2024 Senior Secured Notes.
The decrease in net cash used in financing activities was driven primarily by the prior year including approximately $153.1 million of combined repayments related to the 2024 Senior Secured Notes on March 15, 2023 and November 21, 2023.
Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights. ​ Comparison of Years Ended December 31, 2023 and 2022 ​ Government Revenue for the Government segment was $403.8 million for the year ended December 31, 2023 as compared to $360.3 million for the year ended December 31, 2022. 56 Table of Contents Adjusted gross profit for the Government segment was $332.5 million for the year ended December 31, 2023 as compared to $246.6 million for the year ended December 31, 2022.
Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights. ​ Comparison of Years Ended December 31, 2024 and 2023 ​ Government Revenue for the Government segment was $224.7 million for the year ended December 31, 2024 as compared to $403.8 million for the year ended December 31, 2023.
The current period had payment of deferred financing costs of approximately $5.2 million associated with the First Amendment and Third Amendment to the ABL Facility on February 1, 2023 and October 12, 2023, respectively, and the issuance of the 2025 Senior Secured Notes on November 1, 2023 in connection with the Notes Exchange Offer, whereas the prior period had no such payments.
The prior year also included payments of deferred financing costs of approximately $5.2 million associated with the ABL Facility amendments and the issuance of the 2025 Senior Secured Notes on November 1, 2023 in connection with the Notes Exchange Offer, whereas the current year had no such payments.
Specialty rental income consists primarily of revenues from leasing rooms and other facilities at certain communities that include contractual arrangements with customers that are considered leases under the authoritative accounting guidance for leases. Specialty rental income increased primarily as a result of growth in the Government segment. Cost of services.
Specialty rental income consists primarily of revenues from leasing rooms and other facilities at certain communities that include contractual arrangements with customers that are considered leases under the authoritative accounting guidance 56 Table of Contents for leases.
Target Hospitality defines Adjusted gross profit, as gross profit plus depreciation of specialty rental assets, loss on impairment, and certain severance costs. 61 Table of Contents 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.
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.
To a lesser extent, the net decrease in net cash used in investing activities was partially offset by a $5.0 million acquisition of community assets in April 2023 and $1.3 million worth of land acquisitions during 2023, supporting Government segment growth. Cash flows used in financing activities .
To a lesser extent, the net decrease was related to a $5.0 million acquisition of community assets in April 2023 and $1.3 million worth of land acquisitions during the year ended December 31, 2023, supporting Government segment growth.
Total revenue for the year ended December 31, 2022 consisted of $333.7 million of services income and $168.3 million of specialty rental income. Services income consists primarily of specialty rental and vertically integrated and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, security, overall workforce community management services, health and recreation facilities, concierge services, and laundry service.
Services income consists primarily of specialty rental and vertically integrated and comprehensive hospitality services including room revenue, catering and food services, maintenance, housekeeping, grounds-keeping, security, overall workforce community management services, health and recreation facilities, concierge services, and laundry service.
The table below presents information on payments coming due under the most significant categories of our needs for cash (excluding operating cash flows pertaining to normal business operations, other than operating lease obligations) as of December 31, 2023 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total 2024 ​ 2025 ​ 2026 ​ 2027 Interest Payments (1) ​ $ 31,696 ​ $ 17,067 ​ $ 14,629 ​ $ — ​ $ — 2025 Senior Secured Notes ​ 181,446 ​ ​ — ​ ​ 181,446 ​ ​ — ​ ​ — Operating lease obligations, including imputed interest (2) ​ ​ 21,838 ​ ​ 12,518 ​ ​ 5,429 ​ ​ 3,283 ​ ​ 608 Total ​ $ 234,980 ​ $ 29,585 ​ $ 201,504 ​ $ 3,283 ​ $ 608 (1) We will incur and pay interest expense at 10.75% of the face value of $181.4 million annually, or $19.5 million in connection with our 2025 Senior Secured Notes due June 15, 2025.
The table below presents information on payments coming due under the most significant categories of our needs for cash (excluding operating cash flows pertaining to normal business operations, other than operating lease obligations) as of December 31, 2024 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total 2025 ​ 2026 ​ 2027 ​ 2028 ​ 2029 Interest Payments (1) ​ $ 14,629 ​ $ 14,629 ​ $ — ​ $ — ​ $ — ​ $ — 2025 Senior Secured Notes ​ 181,446 ​ ​ 181,446 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Operating lease obligations, including imputed interest (2) ​ ​ 30,948 ​ ​ 8,927 ​ ​ 9,325 ​ ​ 6,181 ​ ​ 5,467 ​ ​ 1,048 Total ​ $ 227,023 ​ $ 205,002 ​ $ 9,325 ​ $ 6,181 ​ $ 5,467 ​ $ 1,048 (1) We will incur and pay interest expense at 10.75% of the remaining face value of $181.4 million annually in connection with our 2025 Senior Secured Notes due June 15, 2025.
There was also a lower number of average outstanding Private Warrants throughout the current year compared to the prior year as a result of the Warrant Exchange that closed on December 22, 2022 as discussed in Note 17 of the notes to our audited consolidated financial statements in Part II, Item 8 within this Annual Report on Form 10-K.
There was also a lower number of outstanding Private Warrants in the current year compared to the prior year given the Private Warrants expired March 15, 2024 as discussed in Note 9 of the notes to our audited consolidated financial statements in Part II, Item 8 within this Annual Report on Form 10-K. Income tax expense.
Discretionary cash flows indicate the amount of cash available after maintenance capital expenditures for specialty rental assets for, among other things, investments in our existing business. 62 Table of Contents Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows are not measurements of Target Hospitality’s financial performance under GAAP and should not be considered as alternatives to gross profit, net income (loss) or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of Target Hospitality’s liquidity.
Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows are not measurements of Target Hospitality’s financial performance under GAAP and should not be considered as alternatives to Gross profit, Net income (loss) or other performance measures derived in accordance with GAAP, or as alternatives to Cash flow from operating activities as measures of Target Hospitality’s liquidity.
Segment Results The following table sets forth our selected results of operations for each of our reportable segments for the years ended December 31, 2023, 2022 and 2021 ($ in thousands, except for Average Daily Rate amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) Revenue: 2023 ​ 2022 ​ 2021 ​ ​ 2023 vs. 2022 ​ 2023 vs. 2022 ​ ​ 2022 vs. 2021 ​ 2022 vs. 2021 Government $ 403,724 ​ $ 360,294 ​ $ 156,250 ​ $ 43,430 ​ 12% ​ $ 204,044 ​ 131% HFS - South ​ 148,677 ​ ​ 132,373 ​ ​ 116,958 ​ ​ 16,304 ​ 12% ​ ​ 15,415 ​ 13% All Other ​ 11,207 ​ ​ 9,318 ​ ​ 18,129 ​ ​ 1,889 ​ 20% ​ ​ (8,811) ​ (49)% Total revenues $ 563,608 ​ $ 501,985 ​ $ 291,337 ​ $ 61,623 ​ 12% ​ $ 210,648 ​ 72% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted Gross Profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government $ 332,480 ​ $ 246,598 ​ $ 94,801 ​ $ 85,882 ​ 35% ​ $ 151,797 ​ 160% HFS - South ​ 51,444 ​ ​ 54,558 ​ ​ 52,344 ​ ​ (3,114) ​ (6)% ​ ​ 2,214 ​ 4% All Other ​ (1,974) ​ ​ (1,195) ​ ​ 7,814 ​ ​ (779) ​ 65% ​ ​ (9,009) ​ (115)% Total Adjusted Gross Profit $ 381,950 ​ $ 299,961 ​ $ 154,959 ​ $ 81,989 ​ 27% ​ $ 145,002 ​ 94% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Daily Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ HFS - South $ 75.22 ​ $ 73.39 ​ $ 74.64 ​ $ 1.83 ​ ​ ​ $ (1.25) ​ ​ ​ Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets, certain severance costs, and loss on impairment.
Segment Results The following table sets forth our selected results of operations for each of our reportable segments for the years ended December 31, 2024, 2023 and 2022 ($ in thousands, except for Average Daily Rate amounts). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) Revenue: 2024 ​ 2023 ​ 2022 ​ ​ 2024 vs. 2023 ​ 2024 vs. 2023 ​ ​ 2023 vs. 2022 ​ 2023 vs. 2022 Government $ 224,650 ​ $ 403,724 ​ $ 360,294 ​ $ (179,074) ​ (44)% ​ $ 43,430 ​ 12% HFS - South ​ 149,931 ​ ​ 148,677 ​ ​ 132,373 ​ ​ 1,254 ​ 1% ​ ​ 16,304 ​ 12% All Other ​ 11,691 ​ ​ 11,207 ​ ​ 9,318 ​ ​ 484 ​ 4% ​ ​ 1,889 ​ 20% Total revenues $ 386,272 ​ $ 563,608 ​ $ 501,985 ​ $ (177,336) ​ (31)% ​ $ 61,623 ​ 12% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted Gross Profit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government $ 185,268 ​ $ 332,480 ​ $ 246,598 ​ $ (147,212) ​ (44)% ​ $ 85,882 ​ 35% HFS - South ​ 50,822 ​ ​ 51,444 ​ ​ 54,558 ​ ​ (622) ​ (1)% ​ ​ (3,114) ​ (6)% All Other ​ (747) ​ ​ (1,974) ​ ​ (1,195) ​ ​ 1,227 ​ (62)% ​ ​ (779) ​ 65% Total Adjusted Gross Profit $ 235,343 ​ $ 381,950 ​ $ 299,961 ​ $ (146,607) ​ (38)% ​ $ 81,989 ​ 27% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Daily Rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ HFS - South $ 73.57 ​ $ 75.22 ​ $ 73.39 ​ $ (1.65) ​ ​ ​ $ 1.83 ​ ​ ​ Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets, certain severance costs, and loss on impairment.
The increase in net cash used in financing activities was also driven by an increase in taxes paid related to net share settlement of equity awards of approximately $6.7 million, an increase in payment of accrued issuance costs from the warrant exchange that closed on December 22, 2022 of approximately $0.7 million, and increased principal payments on vehicle finance leases of approximately $0.4 million.
The decrease in net cash used in financing activities was also driven by the prior year including the payment of accrued issuance costs from the warrant exchange of $1.5 million that closed in December of 2022, and taxes paid related to net share settlement of equity awards of approximately $6.8 million.
Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure. ​ Our Government segment, including the South Texas Family Residential Center and several communities in West, Texas supporting critical United States government humanitarian aid efforts, deliver essential services and accommodations near the southern United States border where there is insufficient housing and infrastructure solutions to appropriately care for asylum-seeking families and unaccompanied minor immigrants.
Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure. ​ Our Government segment, including several communities in West, Texas supporting critical U.S. government efforts, deliver essential services and accommodations near the southern U.S. border where there is insufficient housing and infrastructure solutions to appropriately address immigration and deportation. ​ Our proximity to customer activities influences occupancy and demand.
Commodity prices are volatile and influenced by numerous factors beyond our control, including the domestic and global supply of and demand for natural resources, the commodities trading markets, as well as other supply and demand factors that may influence commodity prices.
Commodity prices are volatile and influenced by numerous factors beyond our control, including the domestic and global supply of and demand for natural resources, the commodities trading markets, as well as other supply and demand factors that may influence commodity prices. 52 Table of Contents Availability and Cost of Capital Capital markets conditions could affect our ability to access the debt and equity capital markets to the extent necessary to fund our future growth.
For additional discussion of risks related to our liquidity and capital resources, refer to the section titled “ Risk Factors ” in Part I Item 1A of this Annual Report on Form 10-K . 57 Table of Contents Capital Requirements During the year ended December 31, 2023, we incurred approximately $65.6 million in capital expenditures, which decreased by approximately $75.3 million compared to the year ended December 31, 2022 as the prior period included growth projects to increase community capacity, mainly in the Government segment, which was largely completed in the prior year .
For additional discussion of risks related to our liquidity and capital resources, refer to the section titled “ Risk Factors ” in Part I Item 1A of this Annual Report on Form 10-K . 60 Table of Contents Capital Requirements During the year ended December 31, 2024, we incurred approximately $32.5 million in capital expenditures, which decreased by approximately $33.1 million compared to the year ended December 31, 2023 largely driven by lower growth capital expenditures, led by the HFS-South segment and partially driven by the Government segment, partially offset by higher maintenance capital expenditures of approximately $6.5 million, and an increase in finance lease assets of approximately $1 million.
Other depreciation and amortization expense was $15.4 million for the year ended December 31, 2023 as compared to $14.8 million for the year ended December 31, 2022. The increase in other depreciation and amortization is primarily driven by an increase in depreciation associated with an increase in finance leases. Other expense, net.
The increase in other depreciation and amortization is primarily driven by an increase in depreciation associated with an increase in finance leases for commercial use vehicles. 57 Table of Contents Other expense, net. Other expense (income), net was ($0.5) million for the year ended December 31, 2024 as compared to $1.2 million for the year ended December 31, 2023.
Approximately $2.6 million of this decrease was driven by interest income earned on cash equivalents funded by the increase in available cash due to growth of the business, led by the Government segment.
Approximately $2.6 million of this decrease was driven by an increase in interest income earned on cash equivalents funded by the increase in available cash as a result of cash flows from operations.
Results of Operations The period to period comparisons of our results of operations have been prepared using the historical periods included in our audited consolidated financial statements.
Additionally, the termination of the STFRC Contract as well as the change from the prior Expanded Contract to the New PCC Contract impacts comparability between periods. Results of Operations The period to period comparisons of our results of operations have been prepared using the historical periods included in our audited consolidated financial statements.
Refer to Note 8 of the notes to our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K for additional information on the ABL Facility.
Refer to Note 8 of the notes to our audited consolidated financial statements located in Part II, Item 8 within this Annual Report on Form 10-K for additional information on the ABL Facility. 62 Table of Contents Senior Secured Notes On March 15, 2019, Arrow Bidco issued $340 million in aggregate principal amount of 2024 Senior Secured Notes under an indenture dated March 15, 2019 (the “2024 Notes Indenture”).
The increase in income tax expense is primarily attributable to an increase in income before income tax as well as an increase in state tax expense based off of gross receipts as a result of the increase in revenues due to improvements in overall operations and growth in the business from the Government segment. ​ Comparison of the Years Ended December 31, 2022 and 2021 ​ For discussion of the comparison of our operating results for the years ended December 31, 2022 and 2021, please read the “Comparison of Years Ended December 31, 2022 and 2021” section located in the Management Discussion & Analysis section in our Annual Report on From 10-K for the year ended December 31, 2022 filed on March 10, 2023 and is incorporated herein by reference.
The decrease in income tax expense is primarily attributable to a decrease in income before income tax for the year ended December 31, 2024 led by a decrease in revenue, partially offset by cost decreases previously mentioned. ​ 58 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 ​ For discussion of the comparison of our operating results for the years ended December 31, 2023 and 2022, please read the “Comparison of Years Ended December 31, 2023 and 2022” section located in the Management Discussion & Analysis section in our Annual Report on From 10-K for the year ended December 31, 2023 filed on March 13, 2024 and is incorporated herein by reference.
Interest was not capitalized during the year ended December 31, 2023 as there were no such expansion activities during that period. Change in fair value of warrant liabilities. Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end.
Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end.
The following discussion should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this document. 53 Table of Contents Consolidated Results of Operations for the years ended December 31, 2023, 2022 and 2021($ in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) Revenues: 2023 ​ 2022 ​ 2021 ​ 2023 vs. 2022 ​ 2023 vs. 2022 ​ 2022 vs. 2021 ​ 2022 vs. 2021 Services income $ 365,627 ​ $ 333,702 ​ $ 203,134 ​ $ 31,925 ​ 10% ​ $ 130,568 ​ 64% Specialty rental income ​ 197,981 ​ ​ 168,283 ​ ​ 76,909 ​ ​ 29,698 ​ 18% ​ ​ 91,374 ​ 119% Construction fee income ​ - ​ ​ - ​ ​ 11,294 ​ ​ - ​ 0% ​ ​ (11,294) ​ (100)% Total revenues ​ 563,608 ​ ​ 501,985 ​ ​ 291,337 ​ ​ 61,623 ​ 12% ​ ​ 210,648 ​ 72% Costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Services ​ 151,574 ​ ​ 174,200 ​ ​ 120,192 ​ ​ (22,626) ​ (13)% ​ ​ 54,008 ​ 45% Specialty rental ​ 30,084 ​ ​ 27,824 ​ ​ 16,186 ​ ​ 2,260 ​ 8% ​ ​ 11,638 ​ 72% Depreciation of specialty rental assets ​ 68,626 ​ ​ 52,833 ​ ​ 53,609 ​ ​ 15,793 ​ 30% ​ ​ (776) ​ (1)% Gross profit ​ 313,324 ​ ​ 247,128 ​ ​ 101,350 ​ ​ 66,196 ​ 27% ​ ​ 145,778 ​ 144% Selling, general and administrative ​ 56,126 ​ ​ 57,893 ​ ​ 46,461 ​ ​ (1,767) ​ (3)% ​ ​ 11,432 ​ 25% Other depreciation and amortization ​ 15,351 ​ ​ 14,832 ​ ​ 16,910 ​ ​ 519 ​ 3% ​ ​ (2,078) ​ (12)% Other expense, net ​ 1,241 ​ ​ 36 ​ ​ 880 ​ ​ 1,205 ​ 3347% ​ ​ (844) ​ (96)% Operating income ​ 240,606 ​ ​ 174,367 ​ ​ 37,099 ​ ​ 66,239 ​ 38% ​ ​ 137,268 ​ 370% Loss on extinguishment of debt ​ 2,279 ​ ​ - ​ ​ - ​ ​ 2,279 ​ 100% ​ ​ - ​ 0% Interest expense, net ​ 22,639 ​ ​ 36,323 ​ ​ 38,704 ​ ​ (13,684) ​ (38)% ​ ​ (2,381) ​ (6)% Change in fair value of warrant liabilities ​ (9,062) ​ ​ 31,735 ​ ​ 1,067 ​ ​ (40,797) ​ (129)% ​ ​ 30,668 ​ 2874% Income (loss) before income tax ​ 224,750 ​ ​ 106,309 ​ ​ (2,672) ​ ​ 118,441 ​ 111% ​ ​ 108,981 ​ (4,079)% Income tax expense ​ 51,050 ​ ​ 32,370 ​ ​ 1,904 ​ ​ 18,680 ​ 58% ​ ​ 30,466 ​ 1600% Net income (loss) $ 173,700 ​ $ 73,939 ​ $ (4,576) ​ $ 99,761 ​ 135% ​ $ 78,515 ​ (1,716)% ​ Comparison of Years Ended December 31, 2023 and 2022 ​ Total Revenue.
Consolidated Results of Operations for the years ended December 31, 2024, 2023 and 2022($ in thousands) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) ​ Amount of Increase (Decrease) ​ Percentage Change Increase (Decrease) Revenues: 2024 ​ 2023 ​ 2022 ​ 2024 vs. 2023 ​ 2024 vs. 2023 2023 vs. 2022 ​ 2023 vs. 2022 Services income $ 265,912 ​ $ 365,627 ​ $ 333,702 ​ $ (99,715) ​ (27)% ​ $ 31,925 ​ 10% Specialty rental income ​ 120,360 ​ ​ 197,981 ​ ​ 168,283 ​ ​ (77,621) ​ (39)% ​ ​ 29,698 ​ 18% Total revenues ​ 386,272 ​ ​ 563,608 ​ ​ 501,985 ​ ​ (177,336) ​ (31)% ​ ​ 61,623 ​ 12% Costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Services ​ 132,142 ​ ​ 151,574 ​ ​ 174,200 ​ ​ (19,432) ​ (13)% ​ ​ (22,626) ​ (13)% Specialty rental ​ 18,787 ​ ​ 30,084 ​ ​ 27,824 ​ ​ (11,297) ​ (38)% ​ ​ 2,260 ​ 8% Depreciation of specialty rental assets ​ 57,164 ​ ​ 68,626 ​ ​ 52,833 ​ ​ (11,462) ​ (17)% ​ ​ 15,793 ​ 30% Gross profit ​ 178,179 ​ ​ 313,324 ​ ​ 247,128 ​ ​ (135,145) ​ (43)% ​ ​ 66,196 ​ 27% Selling, general and administrative ​ 54,258 ​ ​ 56,126 ​ ​ 57,893 ​ ​ (1,868) ​ (3)% ​ ​ (1,767) ​ (3)% Other depreciation and amortization ​ 15,642 ​ ​ 15,351 ​ ​ 14,832 ​ ​ 291 ​ 2% ​ ​ 519 ​ 3% Other (income) expense, net ​ (502) ​ ​ 1,241 ​ ​ 36 ​ ​ (1,743) ​ (140)% ​ ​ 1,205 ​ 3347% Operating income ​ 108,781 ​ ​ 240,606 ​ ​ 174,367 ​ ​ (131,825) ​ (55)% ​ ​ 66,239 ​ 38% Loss on extinguishment of debt ​ - ​ ​ 2,279 ​ ​ - ​ ​ (2,279) ​ (100)% ​ ​ 2,279 ​ (100)% Interest expense, net ​ 16,619 ​ ​ 22,639 ​ ​ 36,323 ​ ​ (6,020) ​ (27)% ​ ​ (13,684) ​ (38)% Change in fair value of warrant liabilities ​ (675) ​ ​ (9,062) ​ ​ 31,735 ​ ​ 8,387 ​ (93)% ​ ​ (40,797) ​ (129)% Income before income tax ​ 92,837 ​ ​ 224,750 ​ ​ 106,309 ​ ​ (131,913) ​ (59)% ​ ​ 118,441 ​ 111% Income tax expense ​ 21,430 ​ ​ 51,050 ​ ​ 32,370 ​ ​ (29,620) ​ (58)% ​ ​ 18,680 ​ 58% Net income $ 71,407 ​ $ 173,700 ​ $ 73,939 ​ $ (102,293) ​ (59)% ​ $ 99,761 ​ 135% Less: Net income attributable to the noncontrolling interest ​ 142 ​ ​ - ​ ​ - ​ ​ 142 ​ 100% ​ ​ - ​ 0% Net income attributable to Target Hospitality Corp. common stockholders $ 71,265 ​ $ 173,700 ​ $ 73,939 ​ $ (102,435) ​ (59)% ​ $ 99,761 ​ 135% ​ Comparison of Years Ended December 31, 2024 and 2023 ​ Total Revenue.
Over the remaining term of the 2025 Senior Secured Notes, interest payments total approximately $31.7 million, which includes any accrued interest due at the maturity date.
Over the remaining term of the 2025 Senior Secured Notes, interest payments total approximately $14.6 million.
When analyzing adjusted gross profit, we compare actual adjusted gross profit to our budgets and internal projections and to prior period results for a given period in order to assess our performance. We also use Non-GAAP measures such as EBITDA, Adjusted EBITDA, and Discretionary cash flows to evaluate the operating performance of our business.
We also use Non-GAAP measures such as EBITDA, Adjusted EBITDA, and Discretionary cash flows to evaluate the operating performance of our business. For a more in-depth discussion of the Non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section.
Management Discussion and Analysis of Financial Condition and Results of Operations section in our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 10, 2023 and is incorporated herein by reference) and Warrant restatement in 2021, legal, advisory and underwriter fees, associated with debt related transaction activity and other business development project related transaction activity in 2023 as well as other immaterial items in 2022. ● 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, claim settlement, business development, accounting standard implementation costs and certain severance costs.
During 2024, such transaction costs were primarily driven by the Proposal described in “Recent Developments” in Note 1 of the notes to our audited consolidated financial statements in Part II, Item 8 within this Annual Report on Form 10-K. 64 Table of Contents ● 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, claim settlement, business development, accounting standard implementation costs and certain severance costs.
Net cash used in investing activities was $68.2 million for the year ended December 31, 2023 compared to $140.2 million for the year ended December 31, 2022. This decrease in net cash used in investing activities was primarily related to a decrease in growth capital expenditures in the Government segment compared to the prior period.
Net cash used in investing activities was $28.8 million for the year ended December 31, 2024 compared to $68.2 million for the year ended December 31, 2023.
During the year ended December 31, 2022, the Company executed the Expanded Humanitarian Contract to provide enhanced infrastructure and comprehensive facility services that support the critical hospitality solutions the Company provides to the NP Partner and the U.S. Government in their humanitarian aid missions.
Key Factors Impacting the Comparability of Results The historical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations, for the reasons described below: Government Segment During the year ended December 31, 2022, the Company executed the Expanded Contract that went into effect in May 2022 to provide enhanced infrastructure and comprehensive facility services that support the critical hospitality solutions the Company provides to the NP Partner and the U.S. government in their missions.
All Other Our other facilities and operations which do not meet the criteria to be a separate reportable segment are consolidated and reported as “All Other” which represents the facilities and operations of one community in Canada, three communities in North Dakota, and the catering and other services provided to communities and other workforce accommodation facilities for the natural resource development industries not owned by us. 52 Table of Contents Key Factors Impacting the Comparability of Results The historical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations, for the reasons described below: Termination of the TCPL Keystone Contract In January 2021, the TCPL project was suspended due to the Keystone XL Presidential Permit being revoked.
Additionally, this segment includes the facilities and operations of the DIPC provided under the STFRC Contract, which was terminated effective August 9, 2024, but was reactivated under the DIPC Contract effective March 5, 2025. 54 Table of Contents All Other Our other facilities and operations which do not meet the criteria to be a separate reportable segment are consolidated and reported as “All Other” which represents the facilities and operations of one community in Canada, three communities in North Dakota, and the catering and other services provided to communities and other workforce accommodation facilities for the natural resource development industries not owned by us.
The decrease in selling, general and administrative expenses of $1.8 million was primarily driven by a decrease in stock compensation expense of approximately $8 million largely from the liability-based stock appreciation right awards (“SARs”) led primarily by vesting and exercises of approximately 50% of the prior period outstanding awards that occurred during March 2023, which reduced the number of liability-based SAR awards outstanding in the current year and generated lower expense, while a portion of this decrease was driven by a reduction in the estimated value of the SARs year over year.
The decrease in selling, general and administrative expenses of ($1.9) million was primarily driven by a decrease in stock compensation expense of approximately $3.9 million largely from the liability-based stock appreciation right awards (“SARs”) driven by a lower number of SAR awards outstanding during the current period compared to the prior period as approximately 50% of such awards were outstanding as of December 31, 2023 compared to 0% in the current period as there are no remaining awards outstanding as of December 31, 2024 as these awards vested and were exercised as of December 31, 2024.
The prior period included expansion related activities associated with the Expanded Humanitarian Contract that became effective on May 16, 2022 and drove a significant amount of capital expenditure 58 Table of Contents spend, which was largely incurred and paid by the end of the third quarter in 2022 as the Company received the upfront payment for the construction in August 2022.
The remainder of the decrease was driven by a decrease in other growth capital expenditures in the Government segment as the prior period included expansion related activities associated with the Expanded Contract that became effective on May 16, 2022 and drove a significant amount of capital expenditure spend into 2023. Cash flows used in financing activities .
We believe adjusted gross profit is a meaningful metric because it provides insight on financial performance of our revenue streams without consideration of company overhead. Additionally, using adjusted gross profit gives us insight on factors impacting cost of sales, such as efficiencies of our direct labor and material costs.
We believe adjusted gross profit is a meaningful metric because it provides insight on financial performance of our revenue streams without consideration of company overhead, noncash impairment and depreciation expenses, and certain severance costs not reflective of the ongoing results of Target Hospitality.
The increase in specialty rental costs is primarily due to an increase in costs related to growth in the Government segment. 54 Table of Contents Depreciation of specialty rental assets. Depreciation of specialty rental assets was $68.6 million for the year ended December 31, 2023 as compared to $52.8 million for the year ended December 31, 2022.
Depreciation of specialty rental assets was $57.2 million for the year ended December 31, 2024 as compared to $68.6 million for the year ended December 31, 2023.
Changes in government policy, presidential administration or other changes in the political landscape relating to immigration policies may similarly result in a decline in our revenues in the Government segment. Natural Disasters or Other Significant Disruption An operational disruption in any of our facilities could negatively impact our financial results.
Natural Disasters or Other Significant Disruption An operational disruption in any of our facilities could negatively impact our financial results.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−5 removed9 unchanged
Biggest changeAuditing this assessment required a higher degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence relating to the determination of the expected lease end date. ​ How We Addressed the Matter in Our Audit To test management’s determination of the expected lease end date we performed audit procedures that included, among others, evaluating the reasonableness of significant judgments utilized by management in determining whether the NP Partner was reasonably certain to exercise the May 2023 extension option.
Biggest changeAuditing lease terms required a higher degree of auditor 69 Table of Contents judgment when evaluating evidence related to the determination of the reasonably certain lease end date. ​ How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls relating to management’s determination of the expected lease term and recording of the right of use assets and lease liabilities. ​ Our audit procedures included, among others, evaluating the reasonableness of significant judgments utilized by management by reviewing contract terms, understanding the utility of the lease in the context of the Company’s operations, and considering historical experience with lease extension options.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
As of December 31, 2023, we had $0 of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates.
As of December 31, 2024, we had $0 of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates.
If floating interest rates increased by 100 basis points, our consolidated interest expense would not be impacted, however, based on our floating-rate debt obligations, which had no outstanding balances as December 31, 2023.
If floating interest rates increased by 100 basis points, our consolidated interest expense would not be impacted, however, based on our floating-rate debt obligations, which had no outstanding balances as December 31, 2024.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 13, 2024 expressed an unqualified opinion thereon.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 26, 2025 expressed an unqualified opinion thereon.
(the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).
(the Company) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).
We do not currently hedge our exposure to commodity prices. ​ ​ 64 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ TABLE OF CONTENTS Page ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID:42) ​ 66 ​ ​ ​ Consolidated Balance Sheets ​ 68 ​ ​ ​ Consolidated Statements of Comprehensive Income (Loss) ​ 69 ​ ​ ​ Consolidated Statements of Changes in Stockholders’ Equity ​ 70 ​ ​ ​ Consolidated Statements of Cash Flows ​ 71 ​ ​ ​ Notes to the Consolidated Financial Statements ​ 72 ​ ​ ​ 65 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and the Board of Directors of Target Hospitality Corp.
We do not currently hedge our exposure to commodity prices. ​ ​ 67 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ TABLE OF CONTENTS Page ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID:42) ​ 69 ​ ​ ​ Consolidated Balance Sheets ​ 71 ​ ​ ​ Consolidated Statements of Comprehensive Income ​ 72 ​ ​ ​ Consolidated Statements of Changes in Stockholders’ Equity ​ 73 ​ ​ ​ Consolidated Statements of Cash Flows ​ 74 ​ ​ ​ Notes to the Consolidated Financial Statements ​ 75 ​ ​ ​ 68 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Stockholders and the Board of Directors of Target Hospitality Corp.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. ​ ​ ​ ​ ​ ​ ​ ​ Determination of Expected Lease End Date for the Expanded Humanitarian Contract ​ Description of the Matter As described in Note 2 to the consolidated financial statements, revenue recognized for the year ended December 31, 2023, included approximately $118.2 million of revenue from the amortization of the advanced payment associated with the Expanded Humanitarian Contract with the NP Partner.
The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. ​ ​ ​ ​ ​ ​ ​ ​ Accounting for Operating Leases ​ Description of the Matter As discussed in Note 13 to the consolidated financial statements, the Company’s operating lease right of use assets, net and operating lease liabilities as of December 31, 2024 totaled $24.9 million and $26 million, respectively. ​ As discussed in Note 1 to the consolidated financial statements, the Company used judgment to determine whether it is reasonably certain to exercise extension options when determining the term of the leases.
Removed
The advanced payment was amortized over the estimated term of the contract ending November 2023. The term ending November 2023 included an extension option that the Company concluded to be reasonably certain of exercise.
Added
In addition, we compared management’s judgment utilized for the operating lease terms to the judgment utilized in determining the term of related revenue contracts.
Removed
Approximately $62.5 million of the $118.2 million of revenue was recognized 66 Table of Contents as services income under Topic 606, while approximately $55.7 million of the $118.2 million of revenue was recognized as specialty rental income under ASC 842. In May 2023, the NP Partner Expanded Humanitarian Contract was modified to include an additional extension option, through May 2024.
Added
Further, for a sample of operating leases, we compared terms in the contract to the terms used by management and recalculated the right of use assets and operating lease liabilities. ​ ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 2018. Houston, Texas March 26, 2025 70 Table of Contents
Removed
The Company concluded the additional lease extension was not reasonably certain of exercise and continued to recognize the advance payment as revenue over the term ending November 2023. ​ Auditing management’s determination of the expected lease end date was complex due to the judgmental nature of assumptions used by management in assessing whether the NP Partner was reasonably certain to exercise the May 2023 extension option, including judgment in contemplating the significance of any penalties the NP Partner may have incurred should it have chosen not to exercise the extension option.
Removed
For example, we evaluated whether the unamortized portion of the advanced payment represented a penalty to the NP Partner should it have chosen not to exercise the May 2023 extension option, and whether that penalty affected the conclusion regarding whether the NP Partner was reasonably certain to exercise the extension option. ​ ​ /s/ Ernst & Young LLP We have served as the Company’s auditor since 2018.
Removed
Houston, Texas March 13, 2024 67 Table of Contents

Other TH 10-K year-over-year comparisons