On August 7, 2024, Target Hospitality Corp (TH, Financial) released its 8-K filing detailing the financial results for the second quarter ended June 30, 2024. Target Hospitality Corp is a vertically integrated specialty rental and hospitality services company in the United States, providing comprehensive hospitality services including catering, maintenance, housekeeping, and more. The company operates through segments such as HFS-South, HFS-Midwest, Government, TCPL Keystone, and others, with the majority of its revenue generated from government contracts in Texas.
Performance Overview
For the second quarter of 2024, Target Hospitality Corp reported revenue of $100.7 million, a significant decline from $143.6 million in the same period of 2023. Net income also saw a sharp decrease, coming in at $18.4 million compared to $46.5 million in the previous year. The company’s earnings per share (EPS) for the quarter were $0.18, down from $0.46 in Q2 2023. Adjusted EBITDA was $52.2 million, a drop from $90.9 million in the same period last year.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenue | $100.7 million | $143.6 million |
| Net Income | $18.4 million | $46.5 million |
| EPS (Basic) | $0.18 | $0.46 |
| Adjusted EBITDA | $52.2 million | $90.9 million |
Segment Performance
The Government segment, which is the largest revenue generator for Target Hospitality, reported revenue of $59.9 million for Q2 2024, down from $101.2 million in Q2 2023. Adjusted gross profit for this segment was $48.8 million, compared to $87.5 million in the same period last year. The decline was primarily driven by the non-cash, nonrecurring Infrastructure Revenue Amortization associated with the Pecos Children’s Center (PCC) community, which was fully amortized as of November 2023.
The Hospitality & Facilities Services - South segment reported revenue of $38.2 million, slightly down from $39.2 million in Q2 2023. The average daily rate (ADR) was $74.33, with an average of 5,595 utilized beds and a utilization rate of 76%.
Capital Management and Liquidity
Target Hospitality had approximately $8.6 million in capital expenditures for Q2 2024, primarily focused on enhancing and maintaining its modular accommodations. As of June 30, 2024, the company had $154 million in cash and cash equivalents, with a total available liquidity of $329 million. The company had no outstanding borrowings on its $175 million credit facility and maintained a net leverage ratio of 0.1 times.
Executive Commentary
“The second quarter performance illustrates the benefits of our efficient operating model and network capabilities which allow us to provide premium solutions to our world-class customers, while simultaneously delivering strong financial results,” stated Brad Archer, President and Chief Executive Officer.
Challenges and Outlook
Target Hospitality faces challenges, including the termination of the South Texas Family Residential Center contract, effective August 9, 2024. Despite these challenges, the company remains optimistic about its financial position and continues to evaluate opportunities to grow and diversify its contract portfolio. The company anticipates a normal course renewal of the PCC community contract in November 2024 but has prudently excluded any incremental PCC variable revenue from its 2024 outlook.
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Explore the complete 8-K earnings release (here) from Target Hospitality Corp for further details.
