TH Q3 2026 earnings call transcript, November 9, 2026

Good morning, ladies and gentlemen, and welcome to the Target Hospitality Third Quarter 2026 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will continue.

Conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Monday, November 9th, 2026. I would now let's turn the conference. It's over to Mark Shuck. Please go ahead.

Thank you.

Good morning, everyone, and welcome to Target Hospitality's third quarter, 2026 earnings call. The press release we issued. This morning, outlining our third quarter results, is available in the investor section of our website. In addition, a replay of this call will be archived on our website for a limited time. Please note the cautionary language regarding forward-looking statements contained in the press release. The same language applies to statements made on today's conference call. This call will contain time-sensitive information, as well as forward-looking statements, which are only accurate as of today, November 9th. 2026. Target Hospitality expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's conference call. Today's date, except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality's periodic filings. with the SEC. We will discuss non-GAAP financial measures on today's call. Please refer to the tables in our earnings release posted in the Investor section of our website to find- find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures. Leading the call today will be Brad Archer, President and Chief Executive Officer, followed by Jason-

Jason Vlasich, Chief Financial Officer. After their prepared remarks, we will open the call for questions. I'll now turn the call over to our Chief Executive Officer, Brad Archer.

Brad Archer Thanks, Mark.

Thank you, Brad.

Target delivered strong financial performance and significant growth in the third quarter. Total revenue increased 30% year-over-year to approximately $129 million, while adjusted EBITDA grew 59% to approximately $34 million. These results were driven by expanding contributions from our high-quality WHS contract portfolio. That performance is also translating- into robust cash generation. Year-to-date cash flows from operating activities exceeded $150 million, supported by a sharp increase in customer advance payments- tied to recent WHS contract awards. These payments reflect the strength of our customer commitments and the value they place on our ability to rapidly scale communities at the- pace of their development activity. Profitability improved meaningfully as well. Adjusted EBITDA margin expanded approximately 480 basis- points year-over-year to 27%, driven by continued execution on recent contract awards, strong unit economics, and increasing operating leverage across our communities. According to our individual segment performance, our WHS segment generated approximately $80 million of quarterly revenue, a 116% increase over the prior year. That growth reflects multiple community developments advancing through their ramp-up phases, supported by strong unit economics and operational efficiencies. Based on our current contract portfolio, WHS is on track to generate more than 55% of consolidated revenue in 2026. Average WHS utilized beds

exceeded 6,200 in the quarter. That demonstrates the depth of our operating platform and our ability to bring multiple large-scale communities online at once. Beyond 2026, our execution track record and growing customer adoption position WHS for continued expansion. The long-duration projects we support typically come- with favorable contract terms, including minimum take-or-pay revenue commitments. Those commitments give us greater revenue visibility and tie our capital deploy- directly to contracted customer demand. Paired with attractive unit economics and margin contribution, these contract terms support efficient capital investment with strong returns. Because we- in these terms with our customers' multi-phase project plans, we are building long-term partnerships that we believe will keep WHS the primary driver of Target's growth. Moving on to our other operating section- Our HFS South segment generated approximately $33 million in quarterly revenue. The moderation in this segment partly reflects our intentional reallocation of existing- assets to support a high-return WHS contract award. We remain focused on reliably serving our longstanding HFS customers while preserving the flexibility to optimize capacity and maximize- value across our broader portfolio. Our government segment generated approximately $14 million in revenue during the quarter. The year-over-year decline primarily reflects the approximately-

$12 million PCC contract closeout payment included in the prior year period, which did not recur in the current period. We also incurred trans- additional costs during the quarter related to ongoing network optimization initiatives, and we expect additional costs of approximately $3 to $5 million of this nature over the balance of 2026. These costs will temporarily pressure government segment margins, and are reflected in our 2026 outlook. Recurring corporate expenses, excluding stock-based compensation and transaction expenses, were approximately $17 million for the quarter. Our 2026 outlook reflects a recalibrated corporate cost structure that provides the resources needed to execute on target strategic initiatives. We remain focused on managing these costs prudently. Turning to capital management, total capital spending for the quarter was approximately $246 million. Primarily supporting long-term customer contracts tied to recent WHS Segment Contract Awards. This investment was funded... ...in part by customer advance payments. As these contracts scale, we expect them to generate significant revenue in operating cash flow, supporting leading returns on capital investment. We ended the quarter with about $140 million in total available liquidity and a net leverage ratio of 1.4 times. As a reminder, the total net leverage ratio is calculated on a last quarter annualized basis.

As permitted under our credit facility through the second quarter of 2028. Supported by growing contributions from recently announced WHS segment contracts and our ability to deliver flexible value. Value added solutions. We are reaffirming our 2026 outlook today. This includes total revenue of 435 to 445 million dollars. An adjusted EBITDA of 105 to 115 million dollars with capital spending excluding acquisitions of 490 to 510 million dollars to fund our long-term growth. Meaningful port- portion of this capital spending is supported by customer advance payments tied to recently awarded WHS segment contracts, enabling efficient capital deployment while maintaining strong financial flexibility. As recent contract awards continue to scale, we expect revenue and adjusted EBITDA to continue building through the balance of 2026 and into 2027 with greater operation. In scale and strong unit economics, supporting further margin expansion. The ramp positions us to exit 2027 with annualized revenue exceeding $750 million and adjusted EBITDA above $300 million. Importantly, this outlook is based entirely on our existing

near-term capital investment, which will temporarily increase our net leverage. As communities open and ramp, we expect our committed contracted portfolio, customer advance payments, and attractive unit economics to drive meaningful cash generation. That cash generation, in turn, supports deleveraging. Based on our current project schedule, we anticipate exiting 2027 with net leverage well below two times. With a flexible operating model and strong financial profile, Target is well-positioned to pursue a robust growth pipeline. Our priority remains expanding the WHA

we have built while maximizing margin contribution through our efficient operating model. With that, I will hand it back to Brad for closing remarks.

Thanks, Jason.

Now open the call for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star. Followed by the one on your touchtone phone, you will hear a prompt that your hand has been raised. If you wish to plan from the polling process, please press star followed by the two. And if you are using the speakerphone, please lift the handset before pressing any keys.

Hey, good morning, guys.

It's Daniel on for Scott.

Thank you for taking our questions. Following the recent midterm elections, could you please discuss the political backdrop, particularly in Texas, permitting and the impacts to Target's pipeline? Thanks.

Yeah, thanks, Daniel. And a great question to kick off the Q&A with following last week's election, as there are some understandable questions about how an evolving political landscape may affect a man in search. Certain regions, particularly Texas, where we have an established presence. Let me address that directly for everybody. You know, our conversations over the past several days with existing and. prospective customers have not slowed. If anything, they reinforce the continued demand for our critical solutions, supporting AI data center and critical infrastructure development. Those discussions remain centered on urgency, ensuring adequate. and reliable workforce accommodations are in place to support their development plans, not on pausing or delaying them. As a regulatory and permitting backdrop evolves, where our customers' build may shift, we don't believe their development plans have changed. Our customers operate across large geographic footprints, and they will pursue the most favorable environments for their large scale projects. Our commercial pipeline will follow them, as we have in the past. The flexibility of our asset base and the speed with which we can stand up a full turnkey solution extend coast to coast. Our established presence in Texas reflects where customer demand has been. Not the limits of our operational reach. Simply put, our pipeline is not geographically constrained. It follows the customer demand.

We expect Texas to remain a significant market for data center and power development. At the same time, we do anticipate that future development will increasingly extend into other regions and our coach to coach. To reach positions, target to support customers wherever that growth occurs. More importantly, as these dynamics evolve, we believe Target is part of the solution. Our ability to reduce strain on local housing, infrastructure. and other community resources directly addresses key concerns of state and local stakeholders. By meeting our customers evolving needs nationwide while easing those concerns, we help ensure that critical infrastructure is developed in a way that supports communities and the public interest. We believe this could be a meaningful tailwind for Target and it further underscores the value of a vertically integrated single partner solution, both for our customers and for the communities where they build. In short, or really in summary, our customers' plans remain intact. is national and our value proposition has never been more relevant. Thank you. Great caller. Could you also please elaborate on the drivers of the increased bed pipeline, you know, now exceeding 25,000 bed from 20,000 previously, and any color you're able to provide to help us think. about geographies and markets, contract duration, ADR is appreciate.

Thank you so much.

Yeah, look, the pipeline has always had multiple geographies in it. This is not, you know, was never just built around Texas, if you will. That's kind of where the demand has been. But case in point, if you look, I think everybody knows about. The one in Wyoming, right? We're still working with that. But increasingly, more and more of this is outside of the Texas region, from Midwest to Nevada, Indiana. You name it, Ohio, some of the, you know, definitely different regions. It's kind of why we say coast to coast on some of this. And then if you look at the increase in just 5,000, we've always talked about behind that 20,000 or even behind this 25,000 bed pipeline, there's other vets behind that that just hadn't made it to this cut. And this is truly just the impact of the customers coming to us, more demand. We're not seeing less demand. We're seeing more. since last quarter. And it was time to kind of move that pipeline up and get it more real around the incremental growth we're seeing on the pipeline. And the contract economics are very similar to the contracts that we've already announced. For example, the most recent contract was a fixed minimum take or pay contract for approximately four years with an ADR of around $150 a night. So we're seeing similar opportunities in our pipeline. Again, we're focused on fixed minimum contracts over multi-year periods with minimum revenue guarantees to support the spend and meaningful advanced customer payments.

Yeah. And I think let me just add one thing for that, Daniel. too, when you talk about, you know, now we have multiple contracts out there in this segment and, you know, the easy kind of shift for them as well is once you have the land, once you have the permit, is to continue expanding on that site. That's part of what makes up this pipeline as well. New and then existing increases, if you will, build out on the same land. that we're already doing work on. Got it. Great.

Thank you so much.

I'll turn it over. Thank you. Next question comes from Steven Ginjarro.

Steven, please go ahead.

Thank you. Next question from Greg Gibbous with Northline Securities. Please go ahead.

Great.

Thanks for taking the question.

Congrats on the quarter. Could you discuss the scope expansions you're seeing as it relates to the opportunities to broaden scope and add service offerings to existing customer contracts? Sure. Look, the scope expansion. They're definitely a meaningful growth driver for target. They create incremental opportunities across the entire platform, from site development to value-added services. And, look, our customers today, they're increasing. Increasingly asking us to support them, which I think this is important, right? Not only at the workforce hub, but at the project site itself. And those solutions, they can be enhanced site. Development, comprehensive transportation, job site catering, and additional security. It's a natural extension for us in what we already do. So it's an adjacency. That we're already very good at, and that we've done in the past, in the oil and gas side, in the mining side. So together, they create a more, I would say, fully bundled solution that extends our reach well beyond the community, and it positions us to capture. a much greater share of the customer total development spend. Got it. Very helpful. And, you know, given there will be more capacity for data. Centers in 2027 with more gigawatts coming online. Is it fair or reasonable to assume the contracting environment will be more favorable relative to 26 positioning? Or get to exceed contracting activities that you achieved this year?

I'll take that. Jason's over here looking at me, smiling. But look, I would tell you, and I kind of what I mentioned earlier, the cadence of awards for us hasn't changed. Our excitement about the industry hasn't changed. We think we're going to have a really good 2027. We've got a lot of tailwinds behind us, a lot of momentum, nothing to happen. the past week has changed our mind on that. Fair enough. If I could do one more, I wanted to just ask outside of WHS, if you could maybe speak to opportunities. Seeing there that are perhaps similar in bed or I guess size and scope that you're seeing are excited about. Yeah, look, it's not just data centers, right? The critical mineral development, large scale infrastructure development, it makes up part of our pipeline, but I would also say the large scale power generation projects and not. Not so much 100% tied to just data centers, right? I think there's a bifurcation when you look at nuclear and some of the others. We know that the national grid has been under stress for a long, long time. So with or without data centers, this needs to get built out, right? So we're seeing a lot of interest in that already because a lot of the power providers are doing work for the data centers that are also looking to expand, again, just the power generation projects themselves across the U.S. We think that has a lot of legs. We already have a few contracts earlier in the year that were power projects, which we've told everybody, and we think there's more of that to come.

Good to hear. Appreciate it, guys.

Thank you. Next question from Faisa Alvi with Dental Bank. Please go ahead.

Yes. Hi. Thank you.

Good morning.

You talked about, you know, incremental service offerings and opportunities to expand into value-added adjacencies. I'm curious how we should think about you know the impact to EBITDA margins from that because it sounds like you know maybe relative to prior contracts there's more of an opportunity so just curious how that impacts you know the profitability. these contracts. yeah it'll be it'll be a creative we're already seeing that in some of our contracts where that's coming into play and you see. some of that come through in the operating results in Q3. so you know overall it's it's relatively in line with the blended margin that you see there in the WHS segment. 50% for those enhanced services that Brad talked about with respect to transportation, job site catering, security, site development, some of which have already started. and some I think one of the differences on some of these is it's capital-wide as well on that yeah makes sense and then just curious if you've seen any kind of changes in terms of the competitive backdrop over the last few months. I wouldn't say we've seen any changes. I think it's some of the same competitors. that have been out there, right? We're not going after every project. If we said supply and demand, it's still in our favor. We want to go with the larger projects that are multi-year projects that we think can continue to stay in place for a long time, right? And cluster areas that where there's other things building.

Around it, not just one data center, but multiple power, et cetera. And as you do the larger projects, it starts to limit the competition, right? They're there. They're going to bid on it. They're going to win some of them. But we think we have a pretty good moat built around the business, especially on the types of projects we like to go after. Great.

Thank you so much.

Thank you. Next question from Angel Castillo with Mook and Stanley. Please go ahead.

Hi.

Good morning.

This is Oliver on for Angel. Today, can we just touch on, you know, you added over 5,000 beds to the pipeline, right? Maybe it's one project, maybe it's five, but, you know, how should we think about just, you know, these projects, are they fully permitted? Do you have air permits? Like, how far along in that development do you say, okay, well, this is now actionable, you know, in the next 18 months and we should add it to the pipeline? Yeah, so the ones that make it to this list definitely have their permits, they have their land, they have what they're going- to do on power, especially if you're talking about Texas, right? And- but I would tell you all of the 25,000 on there are actionable, meaning if they wanted to go and sign us tomorrow and us go to work, we- do that, right? So they're- they're really far down the line or they just don't make- make this list. That's what we talk about. There's another list behind this that just hasn't made the cut. And hopefully it does over time. But this is a very actionable 25,000-bed setting, I would tell you, with permits and ready to go. And these are- Multiple contract potential awards, right, with multiple different customers. It's geographically diverse. You know, some are, you know, several thousand beds. Some are a little bit less than that. So it's size-wise also diverse as well. I would say if you were to try to estimate it, you'd look back at the contracts that we've announced this year, which are pretty diverse in size.

where you have some that are 4,000, 3,300, 1,100, et cetera. So it's relatively diverse, and some are several thousand, and some are a little bit less than that. Yeah, that's helpful. And then, you know, obviously, we've kind of followed along as you kind of get the . roaming site online. I mean, any learnings you're seeing there? I mean, you know, do you think your community engagement becomes more remote over time?

And we tell customers this, but we've been doing this for 20-plus years on the oil and gas side. You know, the data center folks are facing the same exact thing that oil and gas has faced over many years. We're very, very good at the customer relations piece, the community relations piece in small.

We think, look, at the end of it, they're going to be forced in some areas where maybe they thought they could get around letting people just come to town and hit hotels and RVs. We think there's going to be regulations around that at some point. And it's a benefit, right, for them and how they're going to control their workforce, how they're going. to make sure they have adequate housing, how they do the busing so there's not 4,000 cars going through a one red light down. Those types of things are really starting to take hold. And we think that helps in the future for sure.

Got it. Thank you. Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one. Question from Alex Riegel with Texas Capital. Please go ahead.

Thank you. Just one quick one. Your supply chain, can you talk to how is it keeping up with your pace and, you know, obviously that includes your access to labor on these facilities? Yeah, no issue. At this point, and in fact, you know, we're in both the big jobs right now, far down the road. We have excess capacity. We could do multiple other jobs at the same time. And be fine on manufacturing. And then remember, it's the build up over time. It's worked out really well. Got about a year on these large projects to build them out. That's really helped. We've gotten the factories in line.

And no issues at this point. And could take on more. And one other question. If there is a shift from nonunion to union, any impact to your business at all? What's the question? I think the question was if there's a shift from nonunion to union. Well, a lot of the projects were on, but we're not. from the site already, but a lot of the projects were on are already built by union trades, the data centers themselves. We don't see that as an issue. Great. Thank you. Thank you.

We have no further questions.

I will turn the call back over to Brad Archer for closing comments. Thank you.

Thank you all. Joining us today. Look, the continued execution on all fronts shows our strategy is sound and it's working. As we close out 2026 and enter 2027, we expect to continue executing on existing. contracts as well as deliver new wins. While we acknowledge the political backdrop surrounding data centers, our enthusiasm has not wavered at all. And in fact, we believe the focus on community engagement strengthens our offering and will become an even more critical component of planning and execution when hyperscalers look to build in remote locations. Target hospitality, target hyperscale has never been in a better position to create long-term value for our team. members customers and investors and we are laser focused on the execution of our plan last but not least I want to thank all of our team members that target hospitality no better team in the industry the relentless effort they have put in and 20 26 and the high level of execution it amazes me every day proud to be a part of the team thanks again for doing what you do operator that will conclude the call for today thank you

thank you ladies and gentlemen this concludes your conference call for today we thank you for participating and we ask that you please disconnect your lines