Target Hospitality Corp. Stock

Good morning, ladies and gentlemen, and welcome to the Target Hospitality Second Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded on Monday, August 10, 2026.

I would now like to turn the conference over to Mark Schuck, Senior Vice President of Finance and Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Target Hospitality's Second Quarter 2026 Earnings Call. The press release we issued this morning, outlining our second quarter results, is available in the Investors 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. This 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, August 10, 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 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 Investors section of our website to 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 Vlacich, 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.

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We delivered a strong second quarter, defined by disciplined execution on recent WHS contract awards and continued advancement of our growth pipeline. Our focus on converting commercial wins into operating results underscores the momentum driving Target's performance.

Since January 2026, we have secured over 9,000 contracted beds, representing more than $1.4 billion of multiyear contracts, supporting unprecedented growth in our WHS segment and reinforcing Target's role as a leading provider of essential mission-critical solutions for AI-driven data center development and critical power generation expansion. That commercial momentum is translating directly into operational execution with average WHS utilized beds surpassing 4,000 during the second quarter. We are delivering on recent contract wins while our Target Hyper/Scale platform improving operating capabilities support accelerating customer demand.

We continue to see expanding opportunities across North America with active discussions supporting a pipeline exceeding 20,000 beds. This breadth and durability of demand across our WHS end markets give us confidence in our ability to advance the largest commercial pipeline in our history, supported by a multitrillion-dollar long-term investment cycle.

Turning to our individual segments. Our HFS-South segment continues to support world-class customers through an established network of communities across an expansive operating region. Target's reliable service delivery, network scale and long-standing customer relationships consistently support an over 90% renewal rate, highlighting the value of our differentiated offering.

Moving to our Workforce Hospitality Solutions, or WHS, segment. The unprecedented growth in our WHS segment reflects building commercial momentum, disciplined operational execution and our intentional pivot toward high-value end markets. We continue to demonstrate the value of our Target Hyper/Scale platform and our scalable speed-to-market solutions, positioning Target to benefit from accelerating customer activity and long-term demand dynamics. Importantly, as we mobilize a growing number of contracted beds across concurrent community development, our focus remains on execution, delivering the essential solutions our customers need to advance complex, time-sensitive projects.

Together, accelerating end market demand, growing awareness of our mission-critical solutions and our proven ability to execute continue to drive advanced discussions on additional large-scale community development. Building on this momentum, we are finalizing multiple definitive agreements to establish large-scale workforce hubs supporting new customers' long-term AI data center development. As these customers face increasingly compressed development schedules, the urgency to secure workforce accommodations continues to grow, giving us confidence that we will see incremental contract awards in the coming quarters.

This expanding customer base and sustained commercial momentum further validates why customers choose Target, our proven ability to deliver scale, speed, customization and proven execution through our differentiated Target Hyper/Scale offering. These same capabilities are creating opportunities for incremental scope expansion within existing communities. As customers accelerate activity levels, they increasingly seek expanded solutions in fast-paced environments where reliability, flexibility and speed are critical.

As large-scale infrastructure developments grow more complex, remote and time-sensitive, Target is uniquely positioned to meet this demand through a vertically integrated turnkey model that gives customers a single partner for their dynamic requirements. These capabilities are supported by Target's multi-decade operational track record and full life cycle model, spanning design and development through full-service operations. This integrated approach enables us to deliver essential solutions for customers, support local communities and remain well positioned as demand continues to build.

Looking ahead, we continue to see expanding geographic opportunities across North America with active, ongoing discussions supporting a pipeline exceeding 20,000 beds. As our presence across these end markets grow, we are confident in our ability to capitalize on accelerating demand, advance our strategic growth initiatives and deliver durable long-term value.

I'll now turn the call over to Jason to discuss our financial results and 2026 outlook in more detail.

Thank you, Brad. Second quarter total revenue was approximately $86 million with adjusted EBITDA of approximately $18 million, driven primarily by significant growth in our WHS segment. This growth also strengthened year-to-date cash flows from operating activities, which exceeded $110 million and included more than $100 million of advance payments from customers tied to recent WHS segment contract awards. These payments underscore the strength of our contract fundamentals and the value customers place on our speed-to-market solutions. More broadly, our results reflect continued execution on recent contract awards, strong unit economics and increasing operating leverage as communities ramp. This supported more than 700 basis points of adjusted EBITDA margin expansion compared to the first quarter. As these awards come online and communities continue to scale, we expect revenue and adjusted EBITDA to build further through 2026 and into 2027.

Turning to our individual segment performance. Our WHS segment generated approximately $36 million of quarterly revenue, a 142% increase over the prior year as several communities advanced through their ramp-up phases and activity shifted from construction into full-service operations. Average WHS segment utilized beds surpassed 4,000 during the quarter, further demonstrating the depth of our operational platform, the scalability of our business model and our ability to execute multiple large-scale customer developments concurrently.

This operating momentum reflects accelerating demand across our WHS segment end markets and should translate into greater contribution as communities continue to scale, supported by strong unit economics, growing operational efficiencies and increased activity across recently announced large multiyear contract awards. Our WHS segment is positioned to become Target's largest segment for full year 2026, contributing more than 50% of consolidated revenues based on the current contracted portfolio.

Moving to our other operating segments. Our HFS-South segment generated approximately $33 million in quarterly revenue. While the segment experienced some moderation, it continues to deliver strategic value through its established presence in high activity regions and its long-standing customer relationships. We continue to evaluate opportunities to optimize this network while preserving flexibility to redeploy capacity towards high-return opportunities across our broader portfolio.

Our Government segment generated approximately $13 million in revenue during the quarter, driven by the reactivation of our Dilley, Texas assets. As we optimize certain Government segment assets to support recently announced WHS segment contract awards, we expect to incur approximately $5 million to $7 million of transitional costs over the next 2 quarters. These transitory costs will temporarily pressure Government segment margins, which is reflected in our 2026 outlook.

Recurring corporate expenses, excluding stock-based compensation and transaction expenses, were approximately $15 million for the quarter. As we advance Target's strategic initiatives, we remain focused on managing costs prudently while ensuring we have the resources needed to execute effectively. Our 2026 outlook reflects the recalibrated corporate expenses required to support this growth over the coming quarters.

Turning to capital management. Total capital spending for the quarter was approximately $132 million as mobilization and construction activity began on multiple large community developments tied to recent WHS segment contract awards. We ended the quarter with approximately $141 million in total available liquidity and a net leverage ratio of 0.6x. As previously announced on July 24, we replaced our $175 million revolving credit facility with a new $660 million credit facility, nearly quadrupling Target's committed borrowing capacity and meaningfully expanding the company's banking relationships.

This expanded capacity significantly enhances our financial flexibility and lowers our cost of capital, allowing us to execute on recent contract awards and capitalize on our robust multiyear growth pipeline. Driven by the depth of our Target Hyper/Scale offerings and accelerating customer demand, we continue to identify opportunities to expand our value-added solutions and address specific customer challenges. For example, we recently expanded our service offering for an existing customer by providing a temporary full-service workforce solution. This offering supports their ability to accelerate project development ahead of completing their customized multi-thousand bed community. It further demonstrates how we tailor solutions to customers' unique requirements.

Together, our ability to deliver flexible value-added solutions like this one, combined with growing contributions from recently announced WHS segment contracts, reflects the sustained operating momentum behind our increased 2026 outlook. This includes total revenue of $410 million to $420 million and adjusted EBITDA of $85 million to $95 million with capital spending, excluding acquisitions, of $490 million to $510 million to fund our long-term growth.

As I mentioned earlier, a meaningful portion of this capital spending is supported by customer advance payments associated with recently awarded WHS segment contracts, supporting efficient capital deployment and maintaining strong financial flexibility. As recent contract awards continue to scale, we expect revenue and adjusted EBITDA to build steadily through 2026 with additional operating leverage and improved unit economics supporting margin expansion into 2027. Together, these factors position us to exit 2027 with annualized revenue exceeding $700 million and adjusted EBITDA above $260 million. Importantly, this projection is supported by our existing contract portfolio and does not assume contribution from our broader commercial pipeline.

As we deploy capital to achieve these near-term financial objectives, these investments will temporarily increase our net leverage. However, our committed contract portfolio, customer advance payments and attractive unit economics are expected to support meaningful cash generation, particularly as communities continue to ramp. As a result, we expect leverage to decline as these communities open and anticipate exiting 2027 with net leverage well below 3x based on our current project schedule.

Target is well positioned with a flexible operating model and strong financial profile as we continue to evaluate a robust growth pipeline. Our focus remains on expanding the WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. Importantly, as we pursue these opportunities, we will remain focused on maintaining the strong financial profile we've built while maximizing margin contribution through our efficient operating structure.

With that, I will hand it back to Brad for closing remarks.

Thanks, Jason. Our second quarter results reflect the strong execution that has defined Target's performance this year as we translate commercial momentum into tangible operating results, finalize incremental contract awards and advance our strategic growth pipeline. Since January, this discipline has delivered more than 9,000 contracted beds and over $1.4 billion in multiyear contract awards, reinforcing Target's position as a trusted mission-critical partner across our WHS end markets. This momentum is underpinned by durable long-term contracts that provide greater revenue and cash flow visibility.

Combined with a well-capitalized balance sheet and significant financial flexibility, we are positioned to execute and fund an active pipeline of over 20,000 beds tied to power generation, AI-driven data centers and other critical infrastructure projects across North America. As industry adoption of our mission-critical workforce solutions continues to build, we anticipate incremental contract awards in the coming quarters.

Together, our proven Target Hyper/Scale platform, disciplined capital allocation and financial strength position us to capitalize on this multi-decade investment cycle and deliver sustainable long-term value creation for our shareholders.

Thank you for joining us on the call today. And once again, we appreciate your interest in Target Hospitality. We will now open the call for questions.

[Operator Instructions] Your first question comes from Faiza Alwy with Deutsche Bank.

I wanted to just ask about the revenue and EBITDA guidance increase first. The way I understand it is that you've had good execution and you're benefiting from timing potentially this year, but then you also talked about expansion at some of the existing projects and you've raised the 2027 exit year revenue and EBITDA. So I just wanted to get a little bit more color around what you're seeing, if it's one specific contract? Or just any additional color would be helpful.

Faiza, thanks for the question. This is Jason, CFO. I appreciate you calling in. So I would say, overall, what drove the outlook increase, both short term and long term, was essentially community enhancements, scope expansions from multiple customers actually, I would say, also just improved visibility, continued execution on our part. And the contract awards are progressing quite well ahead of our expectations. Customers have, again, expanded scope in certain areas. Some of that is temporary. Some of that is longer term, which fed into the longer-term increase to our outlook. And then just general operating efficiencies that are materializing faster than expected.

Yes. Maybe let me just touch on incremental scope expansion just for a minute as well, Faiza. As we bid off these massive workforce communities, our customers -- bottom line is they see the value we bring. We're bringing in a lot of staff in those areas. They're looking for us to do more. There's definitely a bigger portion of the wallet, if you will, the bigger portion of the spend, we think we can get more of, right? So there's some incremental things that we already do that we can do more of on the construction side and not just the workforce hub. We think over time, we continue to pick up some of that. And some of that's playing into what we're doing today on some of the guidance as well.

Great. That's very helpful. And then I wanted to ask about Dilley, because there's been some speculation in the media and elsewhere around potential divestiture. So just curious kind of what you're hearing about that and sort of if you could comment on that at all.

Yes. So we're not going to comment on any kind of monetization of assets or potential monetization of assets. What we can say with respect to the Government segment is it's tied to a contract that is expected to go through 2030. And that facility has been operating since 2014 with the same customer, we're focused on servicing that contract at this point. But we're -- in terms of growth, we're not focused on growing the government segment. Our capital is primarily focused on being deployed to grow the WHS segment because that's where the lion's share of the pipeline opportunities are at this point.

I appreciate it. And if I could just sneak one more in. You did raise your CapEx guide for the year. Could you talk to us a little bit about how you see the trend of operating cash flow this year?

Yes. So as you can see from our Q2 results and cash flows are flowing in ahead of adjusted EBITDA and full economics on the contract, and that's driven by those advance payments from customers that we talked about at the top of the call and alluded to on our last call as well. So cash flows this year are going to outpace adjusted EBITDA for this year as well.

And I would say with respect to the CapEx, the majority of the CapEx spend is anticipated to happen this year as evidenced by the outlook, and we increased that because of the community enhancements that the customers have requested. And so I would anticipate a lot of the CapEx spend to decelerate quite significantly as we move through 2027. And that's, again, based on what we've contracted to date that doesn't anticipate anything in our pipeline at this point in time.

Your next question comes from Scott Schneeberger with Oppenheimer.

I think for the first one, I'd like to ask on the ripeness of the pipeline. Could you please speak to what you're seeing there? And I guess a part B to this question is, what is it in your pipeline kind of speaking historically, who did you see competitively? How many competitors usually are bidding against you? And if you're aware of that in your current pipeline? If you could address it as well.

Yes, Scott, just high level on this. Pipeline for us continues to outperform our expectations as far as just the sheer numbers that we're seeing of beds being requested, beds that are coming in. Geography is also expanding outside of Texas into the Rockies, the Midwest and further. So number of beds, again, number of requests and then the growth in just the geography, right? I would tell you there's a growing industry adoption as the projects are going more remote.

When you look at some of the pushback across the country on the data centers, the companies that maybe thought they didn't need our type of solution are now being -- they're looking at this much differently. They're coming to us earlier to help them on the community engagement piece. They're asking us to get involved early on, just like you've seen in the Uinta County in Wyoming, right? We've been working on that with that customer shoulder to shoulder for a while. So we think some of the things that Governor Abbott put out, right, are a positive for our business and will help strengthen this pipeline.

As far as competition, sure, there are several out there that are competing. Some are just competing for the services and then some are saying they're a turnkey operator, right? We'll buy the land, develop the facility as we do. We have always seen competition on that. I would tell you it's not as great as what you might think, but there's definitely some competition out there. Most are regional players, some private equity owned on that side. But I'm not going to call out names, but definitely some competition out there.

And just on the guidance, kind of following up on a prior question. There's $30 million, and that was in there last time you provided guidance of variable revenue. It was termed data center hub contract last time. Now it's just referenced to the whole WHS segment. Could you speak if there's -- is it still just that? And could you speak about what level above committed minimum? Just kind of curious how aggressive or conservative that is looking out if it has -- if that includes others and is taken down within data center hub?

Yes. Sure, Scott. I'll take that one. So I appreciate the question. So in terms of the variable revenue that is attached to our longer-range outlook, which is the 2027 outlook, that is still attached to that data center hub contract, and that's the only variable revenue that's considered about $30 million of annual variable revenue is considered there. No other variable revenue is considered. However, as you know, from the other contracts that we talked about, there continues to be variable revenue upside above and beyond that $30 million for sure. We just want to be prudent about our long-range outlook there.

Now in terms of the short-term outlook, so 2026 outlook does not include any variable revenue above the contracted minimums for any of the new contracts. So relatively conservative there. It's definitely variable revenue upside. We want to be thoughtful about the contract ramp schedules and things of that nature in terms of how we thought about the variable revenue. But the 2026 outlook is geared towards the fixed minimum revenue commitments with no variable revenue considered.

I think, Jason, the variable starts to get a little clear as we start to open up more rooms, right, to see the pace that the customer puts heads in beds, right? But we didn't want to get too far ahead of ourselves on that until we start opening up these phases.

Yes. And as we talked about last time, the 2 most recent contracts that we announced, the larger ones take about a year to sort of fully ramp up, and that pretty much happens in 2027.

I appreciate that color. I'm going to sneak a follow-up to something Brad said earlier. Brad, the -- your ability to source, if you win a new contract or multiple new contracts, the geographical expansion is getting diverse, as you mentioned. And you've usually had some concentration in certain parts of the country. Just curious if you could comment on your ability to efficiently source assets for development, just your positioning.

Yes. Look, these communities, they scale quickly, right, after initial mobilization. But we went out early on. We've talked about this before. We secured line time. We're now executing on the projects that we've put out in the press months ago. In fact, we're making very good progress on this. So execution has been our strength since I've been here for 18 years. And I think you'll start to see even more of that flow through as we get through 2026 and 2027.

To answer your more pointedly on being able to source, at this point, we've locked up enough line time. We absolutely have the ability and bandwidth to take on more projects, multiple and continue to do what we're doing today. So we don't have an issue at this point with supply construction, getting these lights turned on and the facilities ramped up. And we expect to sign more quickly and execute on it.

Your next question comes from Stephen Gengaro with Stifel.

I think 2 for me. The first is when I think about -- you referenced a little bit earlier. When I think about the legacy oilfield service, HFS-South operations, you mentioned sort of optimizing beds. And I was curious, as it pertains to that, I know I've asked similar questions in the past. But what's the flexibility of moving some of those beds -- but maybe on top of that, like the contractual obligations you have to those customers given sort of your network approach in that region? And how does that kind of all play into the ability to mobilize assets that may be underutilized in the oil patch?

First, let me address the -- we have a lot of flexibility. But first and foremost, we have a lot of long-term customers there that we aren't going to kick out and not allow them to have a room, right? With that said, we are going to optimize the part of the HFS portion, right? I mean we all know that, that area in the Permian Basin, it's a hot bed for the data centers as well as the oil and gas, but more so the data centers at this point.

So we will continue to optimize there while taking care of our long-term customers. But I think that's the growth story. And Steve, I mean, you talked about this a year ago in New York. All Midland to Pecos to, you name it in the Permian Basin, we think the growth story there is the data center play, right, the power play that we're seeing, and we're starting to prove that out by signing contracts. And we think that's just getting started in that area.

Okay. Okay. The other question -- and I know you're not going to speculate too much, but in reference to the question earlier about Dilley -- if hypothetically, you sold an asset that brought in hundreds of millions of dollars, how would you deploy that cash?

Well, I would say we're not going to speculate on monetizing assets. However, we are focused on deploying our capital to grow the WHS segment because that's where our pipeline of opportunities is at this point, and that's the most accretive place to deploy our capital for the shareholders.

Okay. And then -- and maybe one more. And Brad has always been very careful about speculating on contracts, et cetera. But you seem very confident in the 20,000 bed pipeline opportunity. Is there any time frame like the contracts that you're in discussions with, are these things that could happen in the next month, the next half year? Like what's -- without sort of kind of committing to a time, what's the kind of cadence of the discussions and the timing on some of these projects?

Yes. I'll try to be less evasive for you on this one. So I would look on our kind of prepared remarks and what we've talked about here, I would look at 2 separate statements. First, being in advanced discussions. We continue to say we're in advanced discussions for multiple quarters. What we've added here is kind of a separate statement, finalizing multiple definitive agreements. That's separate and apart from advanced discussions.

I would tell you, we feel very comfortable near term that we're going to have some new projects come on board, right? I'm not going to get into sizes and terms and customers. I would tell you, 1,000-plus beds, right, each as we move forward, they're sizable projects that we feel comfortable giving you the information I just did. So again, kind of bifurcated advanced discussions and then finalizing multiple definitive agreements.

Your next question comes from Greg Gibas with Northland Securities.

One, I wanted to touch on the margins within WHS quite a bit stronger than we expected. And wondering if you could provide some context on whether there were any particular drivers of that strength there? Or if that -- I think it was 53.5% is fair go-forward expectation for that segment?

Yes. I think the margin profile on that is pretty much in line with the type of contract structures that we've outlined previously that we see in our pipeline. And what you're seeing there is just a ramp-up ahead of schedule, right? And operational efficiencies materializing quicker and execution, ultimately, right? And so those are long-term impacts that we anticipate going forward. It just happened a bit quicker.

And look, they continue to increase.

Fair. I appreciate that. And I wanted to follow up because I know you mentioned it, Brad, but nice to see the -- you guys secured the permit for the Uinta County, Wyoming data center opportunity. Wondering if you could provide maybe an update on where that opportunity stands and I guess, just where is that in the contracting process?

Yes. And I would say this one kind of fits in the advanced discussions piece, right? I would say, well, first, we're excited to be a part of this project and the eventual build-out of the workforce hub. What we did there is we worked with a customer for literally months and months the developer of the data center on site selection, community engagement, city planning. And ultimately, what you've seen in the press is we received an approval for the development of a workforce hub in support of the overall project.

So final terms, conditions as well as start date for first heads in beds still being worked through contractually. And I would say just as we have more details, we'll come back to you with that. But really excited about the project, large project, gets us in a different geography that we're used to working and we have a facility in Wyoming now. I feel very comfortable with executing on that, and we look forward to it.

Got it. Got it. And then I guess last one here. If you could maybe just speak to the pipeline, how that looks for non-data center opportunities, right? I know I would ask maybe the percentage of that 20,000-plus beds or so, but don't necessarily want to exclude oil and gas-related opportunities as well.

Yes, a lot of critical mineral in there. We're seeing in different parts of the U.S., lots of power, right, tied to data center, lots of that. That's being driven by a lot of the regulations. If you're going to build and they're definitely forcing you to bring your own power, which we've been dealing with that already. We have a couple of power contracts as we've noted earlier in the year. And we think that continues. Look, it's very strong on the power side and then critical minerals piece. I'm not going to break down the 20,000 beds. It's definitely a portion of it, but it's heavily weighted to data center and power when you look at the 20,000 beds.

[Operator Instructions] Your next question comes from Alex Rygiel with Texas Capital.

It's Alex Rygiel. A couple of quick questions and very nice quarter. Regarding the timing of additional workforce housing contracts, how has the pace of negotiations for future contracts changed in the last kind of 2 or 3 months? Have you seen them accelerate? Is it sort of moving at the same kind of pace that it's been at? Has it slowed?

I would say maybe the overall time from negotiation to signature is about the same. I would just tell you there's more of them, if you will, in discussions, in negotiations. Again, I mentioned earlier, the adoption of what we do is becoming stronger and stronger. So the pipeline is growing and it's getting upgraded as well, if you will. And so we're seeing good things come out of that.

And then your average bed utilization was 4,000 in the quarter. What is implied in your 2026 estimate and 2027 estimate where you'll be kind of exiting on the bed utilization rate in 2026?

Well, I would say we have, what, 9,000 beds contracted this year. That includes the last 2 large contracts, one for 3,300 beds, approximately another one for 4,000. Those are going to take about a year to fully ramp up. As we said on our last call, we expect those communities to be fully ramped up by mid-2027.

And so obviously, we anticipate the utilization to increase as we move through the year. Even on those 2 large contracts that will take about a year, we anticipate delivering about 1,000 beds a quarter. We're on track for that. And so you'll see a higher number than the 4,000 bed utilization, not the full 9,000 beds because that will basically happen in 2027.

There are no further questions at this time. I will now turn the call over to Brad Archer for closing remarks.

Thank you. In closing, I just wanted to reiterate a few points. Number one, industry adoption as well as federal, state and local municipality adoption around the services we offer continues to grow as they see our offering lessening any impact caused by the growth they are experiencing in their communities. Community relations is becoming a huge piece of all of this, right?

So number two, we are executing. You heard me and Jason talk about that. Revenue and profits are increasing and will continue to accelerate as we move through 2026 and 2027. Number three, sales pipeline continues to strengthen, and we fully expect new wins to flow from this. And my last point, as a company, Target Hospitality has the bandwidth to take on more, and we fully expect to do that in the near future.

Last but not least, I want to thank you for all joining the call today, and we look forward for your support in the future. Operator, that ends the call for today.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Target Hospitality First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference call over to Mark Schuck. Please go ahead.

Thank you. Good morning, everyone, and welcome to Target Hospitality's First Quarter 2026 Earnings Call. The press release we issued this morning outlining our first quarter results is available in the Investors 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. This 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, May 11, 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 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 Investors section of our website to 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 Vlacich, 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.

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We delivered a strong first quarter with continued progress on our strategic transformation and sustained momentum executing on recent contract awards.

Our focus remains straightforward: deliver for customers, scale responsibly and continue pivoting the portfolio towards durable, high-value end markets, where our integrated operating model and speed-to-market capabilities create clear competitive advantages.

Since February 2025, we have secured more than $2 billion of multiyear contracts, including approximately $1.8 billion in our rapidly expanding WHS segment. These wins underscore the strength of our differentiated service offering and validate our ability to pivot and expand our contract portfolio across strategic end markets. This momentum is being driven by powerful long-term demand dynamics supported by a multitrillion dollar investment cycle led by AI-driven data centers and related critical infrastructure development.

We believe our target Hyper/Scale platform and vertically integrated operating model uniquely positions us to help customers execute on this unprecedented build-out and become an increasingly critical component of overall project success.

Together, these elements support an active and expanding growth pipeline exceeding 20,000 beds, providing a strong foundation to continue advancing our strategic growth initiatives.

Turning to our segment and the continued execution on our strategic transformation. Our HFS South segment continues to deliver premium hospitality solutions to a base of world-class customers across our expansive network. These customers benefit from the scale of our network, which provides flexibility to support their dynamic workforce allocation needs. At the same time, they find added value in the consistency and reliability of hospitality solutions delivered across our communities. This performance is reflected in customer renewal rates that consistently exceed 90%, reinforcing both the strength of our relationships and our ongoing commitment to serving these customers.

Now moving to our Workforce Hospitality Solutions segment. Our WHS segment continues to expand as we execute on recent contract win and benefit from strong industry momentum across AI-driven data center and related critical infrastructure development. These end markets are supported by long duration demand and we believe our operating model positions us well to deliver where speed, reliability and on-site execution are essential.

These dynamics support today's announcement of our AI infrastructure community, further reinforcing our confidence in the expanding opportunity set ahead. This community, once complete, will support over 3,300 individuals and positions us to deepen our presence in the accelerating AI-driven capital investment cycle. We believe this momentum will continue to translate into additional multiyear contract awards as we leverage our differentiated platform to capture growing demand. As AI-driven infrastructure development expands into more remote geographies, the need for high-quality workforce accommodations and integrated services becomes increasingly critical to project success.

Target Hyper/Scale is purpose-built to meet this demand by delivering tailored scalable solution that can evolve across multiyear time lines, providing customers with a single partner to solve complex mobilization, housing and on-site service challenges. With over 2/3 of all planned nationwide data center development centered in rural areas, we continue to see a steady backfilling of organic growth opportunity across these rapidly expanding end markets. Target's embedded presence in many of these regions, along with our customer-centric model creates a differentiated competitive advantage.

Together, these strengths allow us to deliver highly customizable, scalable solutions supported by a vertically integrated platform enabling rapid mobilization, efficient operations and consistent service quality that help keep critical projects on schedule while creating a compelling value proposition for Target. This differentiated positioning is reinforced by our ability to execute at scale.

As we deliver on recent contract wins and advance an active growth pipeline, we maintain clear visibility into securing additional fleet to support customer needs on compressed time lines. With a diversified North America-based supplier network, we have the flexibility to expand inventory in line with demand while maintaining disciplined capital allocation. Our execution underpins our confidence in the path ahead. We remain focused on converting recent contract wins into durable performance while advancing our strategic transformation and sustaining momentum in our rapidly expanding WHS segment with strong customer demand and active discussions representing more than 20,000 beds, we believe Target is well positioned to drive long-term value creation through our focused strategic growth initiatives.

I will now hand the call over to Jason to discuss our financial results and the increased 2026 outlook in more detail.

Thank you, Brad. First quarter total revenue was approximately $73 million with adjusted EBITDA of approximately $10 million. The first quarter of 2026 marked a transitional period for Target with margins temporarily compressed as we incurred elevated operating expenses for services, mobilization and construction activities driven by the rapid expansion of our WHS segment.

As we continue to execute the most successful contracting period in Target's history and bring recent WHS contracts awards online, we expect revenue and adjusted EBITDA to build through 2026 and into 2027. Over this period, we also anticipate consistent and sustained margin expansion supported by the strong underlying unit economics of our WHS contract.

Turning to our segments. Our HFS South segment generated approximately $33 million in quarterly revenue. Customers in this segment continue to value our premium service offerings and expansive network, which delivers reliable, consistent hospitality solutions aligned with their evolving labor allocation needs. While we experienced some moderation in our HFS South segment, the network continues to deliver strategic value through its established presence in high activity regions, consistent cash flows and its ability to support our long-standing customer base.

Moving to the rapidly expanding WHS segment. Our WHS segment generated approximately $24 million of quarterly revenue driven by recent contract awards, including the Data Center Community and West Texas Power community with additional contributions from the Workforce Hub contract as activity continues to shift from the construction phase into the services phase. We continue to experience strong customer demand across this segment, supported by accelerating industry activity across AI infrastructure and data center development. This momentum has supported 2 multiyear contract awards since April, representing over 7,000 beds which combined are expected to generate approximately $1.3 billion of multiyear revenue over their initial term.

In April, we announced the 4,000-bed data center hub contract, which is expected to generate approximately $550 million of revenue over its initial term of approximately 5 years. As a reminder, we anticipate first occupancy at this community in the second half of 2026 with full completion anticipated by mid-2027.

And today, we announced the AI Infrastructure Community, which will be capable of supporting approximately 3,300 individuals and is expected to generate over $750 million of revenue over its 4-year term. We anticipate first occupancy at this community later in 2026 with full completion anticipated by mid-2027.

The AI Infrastructure Community will predominantly consist of new assets, resulting in a net capital investment of approximately $200 million to $210 million, with roughly 95% expected to be incurred in 2026. As these communities ramp and other recently announced WHS contracts continue to scale, we expect margin contribution across this segment to improve as we capture greater efficiencies from our fully integrated operating model and strong unit economics.

With the rapid expansion of this segment and increasing contributions from these contract awards, we expect WHS to become Target's largest operating segment for full year 2026. Our Government segment generated approximately $13 million in revenue during the quarter. The decline compared to the previous year were driven by the termination of the PCC contract, partially offset by the reactivation of our Dilley, Texas assets.

Additionally, we incurred certain community operating expenses related to assets successfully redeployed from our Government segment to support recently announced WHS contract awards, which compressed segment margins during the quarter. We expect to incur approximately $5 million to $7 million of transitional costs associated with ongoing network optimization initiatives over the next 2 quarters, which we anticipate will temporarily pressure the government segment margin.

Corporate expenses were approximately $15 million for the quarter. As we continue advancing Target's strategic growth initiatives, we remain focused on managing corporate costs prudently while ensuring we have the resources needed to execute effectively.

Accordingly, our 2026 outlook reflects modest increases in corporate expenses to support these growth initiatives over the coming quarters. Total capital spending for the quarter was approximately $46 million, focused on growth in our WHS segment, including the Data Center Community expansions.

Target's strong business fundamentals and durable operating model are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management. We ended the quarter with approximately $150 million in total available liquidity and a net leverage ratio of 0.6x.

Over the past year, we executed the largest commercial pivot in our history while maintaining a strong balance sheet and significant financial flexibility. Our disciplined capital allocation approach has been central to this progress. As we execute on recently announced WHS contract awards, we believe this foundation positions Target to appropriately scale its capital structure while maintaining a strong financial profile and the flexibility to advance our strategic growth initiatives with a scalable and sustainable operating model, robust financial profile and strong momentum, we are well positioned to continue executing.

This foundation supports our increased 2026 outlook which includes total revenue of $370 million to $380 million and adjusted EBITDA of $75 million to $85 million, with capital spending, excluding acquisitions between $460 million and $480 million. As recent contract awards and community expansions come online and scale through 2026, we expect revenue and adjusted EBITDA to build steadily throughout the year.

The additional operating scale and improved unit economics should support continued margin expansion through 2026 and into 2027. Together, these factors have positioned us to exit 2027 with annualized revenue of more than $680 million and adjusted EBITDA exceeding $240 million. This strong momentum is driven by significant growth in our WHS segment, which is projected to become our largest operating segment by the end of 2026, contributing more than 45% of consolidated revenue based on the current contract portfolio.

Target is well positioned with a flexible operating model and strong financial profile as we continue to evaluate a robust growth pipeline focused on continued expansion of our WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. As we pursue these opportunities, we will remain focused on maintaining the strong financial profile we've built while maximizing margin contribution through our efficient operating structure.

With that, I will hand it back to Brad for closing remarks.

Thanks, Jason. We have continued to advance our strategic transformation aligning our vertically integrated operating model with long duration demand across AI-driven data center, power generation and other critical infrastructure development.

Since February 2025, we've secured more than $2 billion of multiyear contracts, including approximately $1.8 million in our WHS segment. Our focus now is on executing these awards sustaining momentum and accelerating our growth initiatives. With an active growth pipeline exceeding 20,000 beds, our continued pivot toward durable, high-value end markets supported by strong secular tailwinds positions us to sustain momentum and drive meaningful growth.

Our customer-centric model and Target Hyper/Scale platform continue to resonate with customers and serve as a clear point of differentiation reinforcing our competitive advantage. Supported by a scalable operating platform and a robust, well-capitalized financial profile, we are well positioned to pursue an expanding addressable end market opportunity, deploy capital with discipline and execute at scale to deliver durable long-term value creation.

Thank you for joining us on the call today. And once again, we appreciate your interest in Target Hospitality. We will now open the call for questions.

[Operator Instructions] Your first question is from Scott Schneeberger from Oppenheimer.

Congratulations on your new win. You guys have been certainly quite busy. I'm going to ask a few questions on -- I guess, on that one, and then I'll turn it over, probably 3 or 4 specific to it. Could you speak to what type of customer the AI Infrastructure contract is and where it's located, just kind of the nature of who that is, where that is? And then I'll ask a second one here while we're at it. How much is committed revenue? What's variable? And what is the CapEx structure of the revenue, the CapEx consideration component?

Yes. I would say we're not going to disclose the customer or the location. What we've disclosed is what's out there, what we're allowed to disclose at this point. In terms of the contract structure, I think you asked about what is the committed revenue minimum. Assuming the term of 48 months, the committed revenue minimum is just above $750 million. None of that includes variable revenue. So we anticipate variable revenue above and beyond that. It could range from $20 million to $40 million per year once it's fully ramped up in mid-2027 or thereabouts. So I would say kind of the contract minimums range right around that, the over $750 million minimum obviously doesn't include any variable. So there's incremental variable revenue upside above and beyond that, not inconsistent with the last Data Center Hub contract that we announced in April.

Understood. A couple more on this one. Any consideration for the margin profile, how we would think about this contract maybe versus the last one or however you can give a little more insight if you're able. And then also, it looks like -- just -- yes, we'll do that and I'll just one more. Go ahead, Jason.

Yes. So the margin profile, very similar to the last contract we announced between 40% and 50% roughly on that. High ADR, you can obviously calculate that from the beds that are being deployed associated with this in the contracted minimum. So that's essentially the structure on that.

Great. And then just lastly for me, and I'll turn it over. Kind of the cadence on over the coming year of revenue of initial revenue. And then also the discussion of using predominantly new assets is -- I guess, just an open question on that. I infer that not near anything else, but you guys on the last contract use a lot of what was excess. So just some discussion of, are you in a good situation with your current supplier to get that up and ramped rapidly and anything else you can share?

Yes. I would say in terms of the cadence of revenue, very minimal revenue is anticipated for this year. That will start to ramp up pretty heavily as we move through 2027. And we think by the back half of 2027, all 3,370 beds are fully ramped up. That's what supports the annualized adjusted EBITDA number that we spoke of on the call of over $240 million. That's all contributing to that. And what was the other part of the question?

It was supply. I'll jump on that one.

Scott, this is Brad. Yes, on the supplier network, for us, we've been buying these buildings for many, many years. We have a very well-established, diversified North American supplier network, creates a lot of flexibility for us, right? Let's us expand the inventory as these customers ramp up. And if you look at the contract that we just announced today and the prior one, both of these build out about over 12-plus months, right? So it really gives us a lot of time to kind of get the product ready, get it built and delivered to site. And that goes along with hiring our own staff and everything. So it works really well for us staffing up, us building, us financing it as well. So it works well when you could build these out over kind of a year.

Your next question is from Jawad Bhuiyan from Stifel.

I'm on Stephen Gengaro. Could you talk a little bit about the supply chain for these new rooms and maybe what the timing would be to add incremental rooms going forward? And I just have another follow-up.

Yes. Just in general and just kind of what I touched on, we have a supplier network kind of spread out across the U.S., right, North American based. We have a lot of history with the folks that we build from. I don't see any issue in ramping up. And the contract, again, at a high level, builds out over 12 months, right? There will be some delivered in quarter-over-quarter going out for 12 months until the project is finished.

Got it. And maybe, I guess, in terms of the bidding landscape, what does that look like just because we're kind of seeing the -- it seems like the new award, it seems to be at a much higher average daily rate. Is this because you're building new rooms? Or is it related to the types of rooms and services?

Yes, all the above, right? When you're building new product, the basis is higher, but our return model stays the same, right? Whether we're using a used product or when we're buying brand new, we're not giving in on the return model.

Yes, we're definitely pretty disciplined about maintaining our minimum payback period. So obviously, new units are going to drive up rates.

Got it. And just one last one. Within the oilfield, I guess any signs of pricing activity that you guys are seeing or any sort of color on that would just be really appreciated.

So HFS South, I would say, we anticipate that segment to maintain an operating performance pretty consistent with Q1 for the rest of the year, slightly up margin-wise from Q4, driven by some operational efficiencies, but we view that segment as relatively stable as we pace through 2026, and that's what's baked into our outlook as well.

Your next question is from Raj Sharma from Texas Capital.

Congratulations on the new win and the continued solid execution. Some of my questions have been answered. I wanted to understand the need for the capital expenditures and how you intend to sort of allocate in terms of the funds raised? And how much of this new build is -- is it all new? Or is it some from existing inventory?

Yes, I'll take that one. So this is Jason. Thanks for the question. All of it is new. So they're all new units. This is going to phase over time. So we've outlined this at the top of the call, this 3,370 bed community will phase over the next the 12 to 14 months, essentially. We anticipate by mid-2027, it will be fully ramped up and our capital deployment is going to pace on that schedule as well.

I would say in terms of funding capacity for us, I would say, between the capital-efficient contract structure, our growing operating cash flows, which are going to continue to grow as we phase these beds and existing liquidity and our balance sheet capacity, we're pretty well positioned to fund our capital expenditure program.

The other thing is that this capital spend is aligned with fully executed contracts, right, and the related ramp-up schedule. So we're ensuring that the capital deployment is directly tied to long duration projects that meet our minimum payback requirements. So the economics and the support for the spend is already embedded in our contract structures that are fully executed. We're not speculatively spending.

Yes. And I think the down payments help a lot as well, right, that we're able to get from the customer.

Yes, absolutely. Certainly, there's customer funding mechanisms at the early phases of deployment, which reduce funding requirements.

Your next question is from Greg Gibas from Northland Securities.

Jason, congrats on the new win. I wanted to follow up on that structure to the degree that you can share. How -- I mean, nice to hear that what you've kind of the $750 million is all committed, no variable. Could you maybe provide a breakout of service versus any type of CapEx reimbursement?

Well, we don't disclose those contract-specific funding terms. What I would say is that contracts are designed to be capital efficient and aligned with long-duration cash flows.

Okay. Fair enough. And I wanted to follow up too on the government side of the business. I think you mentioned $5 million to $7 million in transition initiative costs over the next couple of quarters. I think you said related to the network optimization. Could you maybe elaborate on that? And then maybe what's kind of causing that?

Yes, essentially, there's basically legacy assets that were associated with the PCC contracts, and there's transitional costs associated with that, that we don't expect to recur, but we anticipate that they'll be incurred over the next couple of quarters and then fall off from there.

Okay. Makes sense. And then lastly, I just wanted to maybe get a better sense of the guidance raise. Is that a direct function of the new contract? Or are there any other moving parts there?

That is a direct function of the new contract.

Your next question is from Scott Schneeberger from Oppenheimer.

Just one more for me. The pipeline remains at 20,000 beds even though you just announced this large win, and this is the second time it happened, last large win, you announced maintaining this 20,000 bed pipeline. So could you just elaborate a little bit on the demand environment, what you're seeing and what's keeping it so strong?

Well, first, I promise you we can do math. So that wasn't a mistake on our part. Look, it's just a continual backfilling of this, right? When we say 20,000-plus beds, so there really is more than that. What we kind of put in the funnel and it comes out the bottom is what we believe, what we know is we're in discussions with these customers that make up this 20,000-plus bed in some form, right? We're in designs, we're in bid negotiations with them. We're in some advanced discussions with them. They've moved through a lot of different cycles and it's getting close to a decision point on some of them, right?

So we announced one in our -- in between now and our last call, then we announced this one, right, for another 3,300, and it's still over 20,000 beds. It continues to backfill. Over 2/3 of the data center developments are in rural areas, right, continues to support a backfilling of just growth opportunities for us. And we're seeing new deals every week that come in.

That's excellent. And just a quick follow-up on that. Of this 20,000 beds, you said it's in all various time stages. The least ripe, how far out there are they, are they -- before they may determine when to make an award? Is it a year? Or is it 2 years? Or is it longer than that? Just a sense of how the time frame of this pipeline is of its activity.

Yes. Scott, we haven't really put a time frame on it, but I'll give you one. I would say it's in that longest out there is probably 2 years, right? But most of that is, I would say, weighted towards much less time than that. I would say, in the next 12 months that some decisions could be made. Do they shut, do they go back, do they move to the right or to the left, we're not sure, but that's kind of where they sit today. But if you look at, again, overall over a 24-month period, some of these will drop off, some new ones will come on, right? There's going to be some winners and losers in these.

Maybe just one general comment, too, for everybody, Mark. Just when you look at the contracts we have recently signed, including the AI Infrastructure Community we announced today, we believe they have the ability to produce more wins for us in the future. All of these counterparties are expanding and spending capital across the U.S. And as we execute on these existing contracts, we're confident in becoming a preferred supplier on new sites.

And look, I say all of this to say there is a lot of thought on who we contract with and how that relationship can look into the future. We're not just -- we have the ability here. I wouldn't say solely to pick and choose who we do business with. But in some cases, the supply and demand are definitely in our favor, right? So when we're looking at these bids, we are saying what can -- how can this look in the future for us? Is this a customer we want to really do business with now and can it lead to more business in the future.

And we think the contracts we've signed here recently, including the power contracts have the ability to produce more wins for us long term. Thank you.

There are no further questions at this time. I will now hand the call back to Brad Archer for the closing remarks.

Yes. Thank you all for joining us today, and we look forward to talk to you again on our second quarter call. Operator, that will conclude the call for today.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the Target Hospitality Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, March 11, 2026. I would now like to turn the conference over to Mark Schuck. Please go ahead.

Thank you. Good morning, everyone, and welcome to Target Hospitality's Fourth Quarter and Full Year 2025 Earnings Call. The press release we issued this morning, outlining our fourth quarter and full year results is available in the Investors 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 this press release. This 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, March 11, 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 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 Investors section of our website to 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 Vlacich, 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.

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We entered 2025 with a clear mandate to advance our strategic growth priorities, diversifying our contract portfolio and accelerating our transition into high-growth end markets.

We made significant progress on these priorities, and our disciplined execution resulted in the most successful period of contract awards in Target's history. Since February 2025, we have secured more than $740 million in long-term contract awards across a broad range of end markets, including over $495 million supported by our expanding WHS segment. This strong momentum is driven by an unprecedented capital investment cycle across AI infrastructure, critical minerals and power generation development. To capture this opportunity, we launched Target Hyperscale, demonstrating our ability to deliver highly customized solutions through a vertically integrated accommodations platform that scales with customer requirements. Our vertically integrated capabilities unmatched across the U.S., combined with accelerating end market demand have established a core strategic growth vertical for the company.

We believe Target is at an inflection point, supported by strong execution and an unprecedented pipeline of opportunities. Strengthening market fundamentals have laid the foundation for a robust and expanding pipeline of more than 20,000 beds, creating meaningful opportunities to continue advancing our strategic growth priorities.

Turning to our segments and accelerating momentum on key strategic growth opportunities. Our HFS segment continues to support our world-class customers by meeting their evolving labor allocation needs through premium services delivered across our extensive network. Target's vertically integrated operating model and network scale enable us to serve customers through all phases of the business cycle, reflected in customer renewal rates consistently above 90% and average customer relationships of more than 5 years.

Moving to the rapidly expanding WHS segment. Our WHS segment continues to benefit from accelerating demand across large-scale AI infrastructure, critical minerals and power generation projects. Target's vertically integrated accommodations platform and scalable solutions are uniquely suited to support these increasingly remote infrastructure developments. These capabilities supported by our differentiated service offerings, including Target Hyperscale, position us to meet rising demand in this high-growth sector.

Since February 2025, we have secured more than $495 million in multiyear WHS awards, driving the reactivation of nearly 3,000 beds across our asset base and demonstrating the value of modular and highly customizable offerings. Our ability to deliver speed-to-market solutions and scale with customer needs has supported multiple expansions at our data center community, which has grown 320% from its initial 250-bed footprint in just a matter of months. Additionally, today's announcements of the West Texas Power Community and Pecos Power Community further underscore our ability to rapidly deploy assets to meet this accelerating end market demand. Combined, these awards immediately reactivate more than 1,800 beds in Pecos, Texas and represent over $150 million in multiyear contracts.

Across our WHS segment, we have reactivated nearly 3,000 beds in less than a year, supported by long-term committed revenue contracts across a diverse customer base. The successful reactivation of existing assets has reduced our remaining available inventory to approximately 3,000 to 4,000 beds, depending on customer-specific requirements and highlights the extraordinary momentum of the current AI-driven capital investment cycle.

As data center and power generation projects extend in more remote areas, the need for high-quality workforce accommodations has intensified and become essential to their success. Target's scale and fully integrated solutions uniquely position us to help customers attract and retain skilled labor nationwide and has established Target as a trusted partner. These dynamics have created the largest commercial pipeline in our history with active discussions representing more than 20,000 beds. The WHS segment has become a core strategic growth platform and a key driver of our strategic growth initiatives.

I will now hand the call over to Jason to discuss our financial results and 2026 outlook in more detail.

Thank you, Brad. Fourth quarter total revenue was approximately $90 million with adjusted EBITDA of approximately $7 million. A meaningful portion of quarterly revenue was generated by construction services tied to the Workforce Hub contract in our Workforce Hospitality Solutions or WHS segment. This lower margin revenue stream, combined with elevated initial operating and mobilization costs associated with recent WHS segment contract wins temporarily compressed margins.

As the Workforce Hub contract transitions to higher-margin services-based revenue and our new WHS awards continue to scale through 2024 -- and all other segments generated approximately $36 million in quarterly revenue. Target's customers in these segments continue to value our premium service offerings and extensive network scale, which provides consistent hospitality solutions aligned with their labor allocation demands. While we experienced some moderation in our HFS South segment, this network continues to provide strategic value and reliable cash flows. Its stability supports our long-standing customer base and provides consistent cash generation to advance our growth initiatives and further strengthen our balance sheet.

Moving to the expanding WHS segment. This segment's fourth quarter results, which include our Workforce Hub contract and the data center community contract generated approximately $40 million in revenue, primarily related to construction services activity associated with the Workforce Hub contract. As we announced today, the importance of the Workforce Hub contract led to additional modifications and scope expansion during the fourth quarter. The increased scope of the contract raises the total contract value to approximately $170 million, reflecting a 25% increase from the original contract value. With construction activity substantially complete, we anticipate the Workforce Hub contract will support margin expansion through 2026 as the contract shifts to higher-margin services-focused revenue.

Regarding the data center community contract, as we previously announced, the strong pace of customer development activity has supported two 400-bed expansions to this community. As a reminder, these expansions will be phased in 400-bed increments over the first half of 2026. The first 400-bed expansion is scheduled to be operational by April 2026, with the second 400-bed expansion scheduled to be operational in June of 2026. Following the completion of both expansions, the community will be capable of supporting over 1,000 individuals. In total, the data center community contract is expected to generate approximately $134 million of committed minimum revenue over its initial term through May of 2028.

Additionally, as the data center community expansions are completed, we anticipate enhanced margin contribution from this contract as the community scale will allow us to capture greater efficiencies from our fully integrated operating model and strong unit economics.

As we announced today, the accelerating industry activity across AI infrastructure and power generation development supported 2 new contract awards utilizing our existing West Texas assets. The West Texas Power Community contract is expected to generate approximately $129 million of minimum committed revenue over its 47-month term beginning March 2026, supporting a community of up to 1,400 individuals.

In the Pecos power community, which will support a community of up to 400 individuals while generating over $23 million of minimum committed revenue over its 26-month term beginning April 2026. In total, these contracts support the reactivation of over 1,800 beds with more than $150 million of multiyear committed minimum revenue serving multiple customers in a project dense region. While the Pecos and West Texas contracts are centered on fixed minimum revenue commitments, there is an opportunity to capture additional variable revenue from incremental customer demand above the committed minimum. Importantly, the Pecos and West Texas contract awards leverage our existing assets and community locations, enabling immediate customer use with a combined capital investment of only $4 million to $8 million. These contracts are expected to be immediately margin accretive and demonstrate our ability to rapidly deploy existing assets to support customer demand.

Our Government segment generated approximately $14 million of revenue during the quarter. The declines compared to the previous year were driven by the termination of the PCC contract, partially offset by the reactivation of our Dilly, Texas assets. Corporate expenses were approximately $18 million for the quarter, which includes a true-up to the 2025 short-term incentive plan to reflect the significant progress made on executing Target's strategic growth initiatives, including multiple fourth quarter contract awards.

Our 2026 outlook also accounts for potential incentive payments that may be implemented this year. Total capital spending for the quarter was approximately $16 million, focused on growth in our WHS segment, including the data center community expansions.

Target's strong business fundamentals and durable operating model supported strong cash conversion, resulting in over $74 million of cash flows from operations and $66 million of discretionary cash flow for the year ended December 31, 2025. These fundamentals are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management.

During 2025, we executed the largest commercial pivot in our history while maintaining a strong balance sheet and capital flexibility. We ended the quarter with 0 net debt and total available liquidity of approximately $183 million.

Target continues to advance its strategic growth initiatives focused on enhancing revenue visibility, supporting consistent cash flow and strengthening margin contribution. This momentum and positive operating environment support our 2026 outlook, which includes total revenue of between $320 million and $330 million and adjusted EBITDA of between $60 million and $70 million, with capital spending, excluding acquisitions of between $65 million and $75 million.

As recent contract awards and community expansions come online and scale through 2026, we expect revenue and adjusted EBITDA to build steadily throughout the year. The additional operating scale and improved unit economics should support continued margin expansion through 2026 and into 2027. Together, these factors are expected to position us to exit the year with an annualized revenue run rate of more than $360 million and adjusted EBITDA exceeding $90 million. This strong momentum is driven by significant growth in our WHS segment, which is projected to become our largest operating segment by the end of 2026, contributing more than 40% of consolidated revenue based on current contract portfolio.

Target is well positioned with a flexible operating model and an optimized balance sheet as we continue to evaluate a robust growth pipeline, focused on continued expansion of our WHS segment, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. As we pursue these opportunities, we will remain focused on maintaining the strong financial profile we've built while maximizing margin contribution through our efficient operating structure.

With that, I will hand it back to Brad for closing remarks.

Thanks, Jason. We made significant progress executing on our strategy in 2025, positioning Target to capitalize on powerful long-duration demand trends across AI infrastructure, power generation and critical minerals. This strong execution drove more than $740 million in new multiyear contracts, including over $495 million within our rapidly expanding WHS segment.

We are also engaged in advanced discussions on additional opportunities that reflect the accelerating development activity across AI and related power generation projects. These secular tailwinds are supported by a multitrillion dollar investment cycle to expand AI and data center infrastructure. Additionally, supporting this infrastructure development will require substantial growth in U.S. power generation capacity with national energy consumption expected to double by 2030. Against this backdrop, we continue to evaluate the most active and robust growth pipeline in Target's history. With strengthening market fundamentals, we are actively pursuing opportunities representing more than 20,000 beds, highlighting the depth and durability of demand in this end market.

Target's unique capabilities, combined with strong execution position us as a trusted provider in this rapidly expanding marketplace with a deep pipeline, strong balance sheet and a scalable, vertically integrated platform, we are well positioned to drive sustained growth and long-term value. We are excited about the opportunities ahead and believe they will play a central role in advancing our strategic initiatives and delivering continued value for our shareholders. Thank you for joining us on the call today. And once again, we appreciate your interest in Target Hospitality. We will now open the call for questions.

[Operator Instructions] Your first question comes from Scott Schneeberger with Oppenheimer.

It's Daniel on for Scott. Congratulations on the new contract wins. Starting off with the new contracts. Could you please elaborate a little bit on the pipeline. I mean, you still have some assets in West Texas. Good to see that reactivated some of it. But could you please discuss the pipeline, the potential to reactivate the remaining West Texas assets and how we should think about the wideness of that?

Yes, Daniel, this is Brad. Let me just give a high level on the pipeline. And we've said this many times over the past few quarters. But it's still -- it continues to grow, right? It's the strongest, most actionable pipeline we've ever seen. As we mentioned, 20,000-plus bed opportunity, that's after we removed almost several thousand beds, and we've added back to that, right? And it continues to grow.

So we've been alluding to this fact for several quarters that our pipeline is getting stronger and more mature, right? But this started over a year ago. We started planting seeds with the customers in these projects, having negotiations, and now we're beginning to harvest, right? It's in the way of executing contracts, what you've seen in our release. And it's just funny, those happened both in 1 week. I don't expect that always to happen in the future like that. But what I would tell you is we do expect to keep stacking wins throughout 2026.

We've mentioned we're in advanced late-stage negotiations with multiple customers. I'm not going to get into details there, but it's a very healthy pipeline. And if you look at available fleet, that's absolutely being quoted within those 20,000 beds, right? We expect that to be taken at some point. And then we would look to -- in the market, if there's available fleet to purchase. And we've secured line times at multiple factories as well. We have a great relationship with the manufacturing base out there.

So at some point, we would have to reach into that as well, just by the supply and demand that's out there at this point.

Got it. I think Jason mentioned earlier, there's potential for variable revenue contribution. Could you please elaborate on that?

Yes, absolutely. So that's related to the 2 new contracts that we announced today. So the over $150 million of contract value is literally just a fixed minimum amount. And within that, there's a lease component, which is relatively straight line and then there's a built-in fixed minimum Fed committed amount that is attached to a manning curve, so it's not exactly a straight line. And then on top of that, there is a variable component attached to those contracts.

So the all-in rate on those -- the head and bed for those 2 new contracts is right around $100 a night. So -- so there's definitely potential for variable upside. None of that is built into our outlook. So our outlook is materially based on fixed minimum amounts.

Got it. A final one for me. Any more color you can provide on how to think about the cadence as we move through this year? And any unique modeling dynamics we should think about this? In the early.

Yes, absolutely. So with respect to our outlook and how that's going to trend, Q1 is going to be the low point as these contracts start to ramp up. Obviously, the 2 new ones that we announced are immediately accretive. Those have already -- one of those has already started. Another one is going to start in April. But for example, the expanded data center community will ramp up kind of full force in Q3, Q2 and the power of community contract in Nevada will ramp up at the beginning of June. So you'll sort of see the full effects of that in Q3.

So I would say that's kind of how you would pace it is Q1 is the low point, and then it will continue to ramp up in Q2, much further in Q3 and Q4 until you get to that run rate that we announced on the call for everything that's been contracted, right? None of that includes the variable upside related to the 2 new contracts. So that over $360 million of annual run rate revenue over $90 million of adjusted EBITDA, on an annual basis is all based on fixed minimum revenue commitments for everything that's been contracted. And basically, you'll see that come to fruition in Q4. And none of that obviously includes the upside related to the pipeline.

Right. So in short, I mean, the low point is Q1, and it builds from there. Totally different by the end of the year, right and not taking into it now, like Jason said, any new projects or the upside on anything that we've signed.

Your next question comes from Stephen Gengaro with Stifel.

So a couple of things. The first -- just to follow-up on the point, and when you talk about the run rate exiting '26 that is just based on announced contracts to date? .

Absolutely. Yes.

Okay. And are you -- when you say run rate, do you mean December or fourth quarter? I don't want to get too granular, but is $22 million sort of the EBITDA guide for 4Q or...

Throughout fourth quarter. Yes. It's Q4.

Okay. Great. The 2 other kind of higher-level questions, you mentioned kind of the capacity you have in inventory of 3,000 to 4,000 beds, and you've been talking to a lot of customers about opportunities. Are you seeing urgency from the customers yet? Like is there any feedback you get or implications from customers that they're getting concerned about available capacity? Or is it still not a thing from their perspective yet?

Look, that is the fear, right? Not having the capacity for that not having the amount of rooms. If you even just look at the contracts we just signed, and you look at the 1,400 and the 400. If you look, those are existing beds, right? -- and they're paying to hold every one of those beds, different when you're building it new. You have time to kind of, if you will, put in 250, then another 250, then another 250, very similar to our other project on the data center side. But the fear is there, and it's real, right? I mean this pipeline, we're talking about this is not pie in the sky. It's an executable pipeline that we win it all, no, but they're real, they're funded. That's what's on this pipeline.

So folks, especially when you look in these clusters where multiple data centers, multiple power plants, you look at the Permian Basin, area. There's already a lack of rooms, if you will. And on top of that, you're starting to add new power plants, new data centers, it's fear, but it's warranted, right? The supply and demand, I would just say in a lot of those areas are very much in our favor.

Okay. Okay. That's helpful. And then the other quick question. the HFS South business, the oilfield had a sort of better-than-expected fourth quarter from kind of a completions perspective. But your numbers were down a little bit. Is that just seasonality and noise like I'm sort of expecting that business to be kind of flattish, '26 versus '25. Is that a reasonable starting point versus your guidance? .

Yes, that's absolutely right. So built into our guidance is HFS basically steady state year-over-year from '25 to '26. And the fluctuations you see there are just moderate seasonality, normal course not fluctuating outside of our expected ranges.

Your next question comes from Greg Gibas with Northern Securities.

Congrats on the new contract wins. I guess follow-up on what was just kind of discussed in terms of capacity in your remaining inventory. You mentioned 3,000 to 4,000 beds of remaining inventory. Wondering if you could maybe speak to rough plans on what you maybe intend to acquire just given the 20,000-or-so active pipeline? And I guess just the pricing you're seeing around it.

And maybe once you put those 3,000 to 4,000 beds to use, how you would maybe think about how you would work into future contracts that require the acquisition of new capacity in a way? Like how would I guess that be reflected in those contracts?

Yes. So I'll start off. Brad can certainly chime in on this. So in terms of incremental beds above and beyond our inventory, first of all, all of that is going to be built into the economics of the contract. Many of these contracts come with upfront capital requirements from the customer as well, and a lot of their projects do phase over time. So that allows us to sort of be measured in our approach towards capital allocation to these growth projects. And we also have multiple tools available. We've got secondary market purchase options that we've done in the past 2, year more beds, project level structures.

Again, as I said, contract terms that sort of bake in a lot of that upfront capital with it to meet our minimum return thresholds. So that's kind of how we would approach it, and that's how we've approached it in the past. And we've already had advanced discussions with our suppliers, as Brad mentioned earlier.

Yes, we have a very good relationship with suppliers across the U.S., right? So capacity-wise, for us, we don't believe will be an issue. I would just kind of take you back to our -- to the data center project that we started last year, the way it built up over time, Jason was talking about. We also got money down from the customer.

So on the finance side, that helps a lot. And they're not -- all those beds aren't put in at one time, even though that was quicker than what was anticipated, it still worked out. And then for the phases we got some money down and then we're able to bring in the buildings and set those up and get them performing for the customer, right? And we're still kind of in that mode of constructing that side and increasing the capacity. But on a true capacity from manufacturing, buying within the market, we feel pretty good about where we sit in that at this point.

That's great. I appreciate the color. And if I could just maybe more strategically as I'm kind of following the developments on that Campise, Montana at Fort Bliss and nearby government facility. Just given the strong demand you're seeing within the private sector, I guess I wanted to just kind of get a sense of are you even interested in pursuing those government-related opportunities at this point and kind of how you're thinking about that? .

Yes. I would -- to be blunt, we're focused on growing the WHS segment, right, which we believe offers the greatest value creation opportunities, right? Much more commercial when we're dealing with that. It's projects that are ready. It's much more predictable at this point. And that's where our focus is.

And I would just ask that strong contract structures and committed counterparty in...

Yes, it makes complete sense. I appreciate that. And then I guess, lastly, as it relates to the pipeline, I appreciate the color you provided there. If you could characterize it a little bit further, like I wanted to get a sense because I know that the previous data center contract, nice to see the expansion there where it started at 250 beds and is now over 1,000 and ability to get up to 1,500.

I guess I would just ask, like, as it relates to that 20,000 pipeline or so, would you say there that's maybe how things will be structured going forward with additional contracts and that starts small kind of see continued expansion? Or would it perhaps be more -- so we just saw like the 1,400 with the power community. So I guess just curious like if you could speak to the relative size of those opportunities in that pipeline.

Yes. I think size-wise, they range from smaller to us than 1,000 and much greater than 1,000. And we're seeing some really large projects, right, for long duration. So the range is big, right? So -- and then as far as they build up, when they get bigger, it just takes longer to put them in, right? They want this first initial wave and then it builds up over time, very similar to what we've already shown the market, right? I think it would probably be a little bit longer than that on the buildup. So I think you have time to get them done.

You just can't build everything that they're wanting all at once, nor can they hire 4,000, 5,000, 3,000 people all at once. But remember, they are not the only company doing the hiring. In these clusters, we're looking at 5 and 6 of these data centers around a 2-hour radius, if you will, on a drive. So they could be literally in the same 12-month, 18-month period, 30,000, 35,000 craftsman in that area. So -- and if there's one doing a Workforce Hub, the others are doing a Workforce Hub, right? So it takes time to get their own folks hired, and it takes time for us to build out the project.

So it kind of starts, if you will, very similar to what we've shown and then it continues to build up. However, the start could be bigger and the buildup could be longer as well because, again, we're seeing much bigger projects than 1,000 beds. And on the 1,400, that was a reactivation. So obviously, we're able to move really quickly on that because we didn't have to move any beds. It was strategically located for the customer, except, yes, it was literally signed and it started billing a few days late. That's what was great about activations are always going to be...

Now have a question from Raj Sharma with Texas Capital Bank.

Congratulations on the solid deal wins. I had -- I wanted to understand the 20,000 beds, the pipeline exceeding -- can you give how much of this pipeline in the next couple of years you think achievable versus the next 5 years. Can you give us some color on the cadence? And then I have some follow-on questions.

Yes. So the cadence here would be within the next 12 to 24 months, all of that 20,000, right? And then what happens is, are we talking to some that's longer out? Yes. but it kind of -- it doesn't make the pipeline at this point. They haven't been FID. They might not have the land. They might not have the power. But what we're talking about here is actionable within the next 12 to 24 months, so much sooner than that. I would say 1 to 24 months is how I would look at it.

Yes, these are advanced stage projects.

Got it. And then as the hyperscale, the data center and the power generation sort of accelerates, are you seeing situations? I know that there was an earlier question on the store? Are you seeing situations where workforce housing is becoming a bottleneck? And if so, is that giving you pricing power or longer durations when you negotiate these contracts?

Yes. We are definitely seeing workforce housing becoming a critical component to getting their project done, right? They're using it as a competitive tool to attract the workforce, keep the workforce, retain the workforce, get more productive. So that's definitely working in our favor, right? When I talk supply and demand, it absolutely helps on maximizing your price.

Got it. And then on the CapEx requirements you've given a guide for this year, is that to be assumed is that 65 to 75 if I am correct?

Yes, that's right. It's 65 to 75, and much of that is growth CapEx tied to contracts that we've already executed. And incidentally, that range is materially aligned with what we spent last year.

Got it. And do you expect that to continue for the next year as well given your pipeline? And also, could you talk about the cadence through the year and the financing of this CapEx?

Yes. So the CapEx range that we gave does not require any real incremental financing above and beyond our current liquidity. So we're well positioned to execute on that. And obviously, any incremental capital that would go above and beyond that would be related to pipeline wins. And then those would be built into the economics of those contracts. Obviously, we have multiple avenues to fund, including growing cash flows from operations.

We've got the strongest balance sheet that we've ever had as a public company, the first year as a public company that we've exited the year with no debt, lots of capacity. But that being said, the contract structures will be built such that the economics will help fund our minimum return thresholds for sure in the CapEx requirement. So there could be incremental CapEx for incremental wins, but certainly nothing we anticipate for the stuff that we've already executed on.

Got it. Just lastly, on the Pecos facility. I just wanted to clarify the 8,000 idle beds. Any news on reactivating or contracting to the government on those?

Yes. I would say a lot of those West Texas assets are very fungible, and we can use them for multiple customers, and a lot of them have been leased out on the new contract wins. And at this point, we're really focused on growth in the WHS segment and the pipeline around that, and that's where we see the most value added and the most accretive opportunities for our shareholder base.

Yes. And let me just kind of put something in there as well. We've already talked about almost 3,000 beds out of that 8,000, right? So there's 3,000 to 4,000 left just to get a math, right? And then when -- to your question, I would tell you just to be more direct. As we look throughout 2026. I would expect that to be -- those beds to be put in use under WHS, right? That's where the gross at, that's where we're focused, that's where the capital is going to go. But I'm pretty confident that's where they go.

Again, congratulations on the wins.

[Operator Instructions] You have another question from Stephen Gengaro with Stifel.

So are you -- so you have 3,000 to 4,000 idle beds. When you listen to sort of the contracts you're involved with right now, when you exit '26, would you be disappointed if the bulk of those beds were not under contract? .

100%. And let me just give you a little thought on how we look at these beds. Again, when you look at supply and demand, and again, it's in our industry's favor at this point, right? Spine-demand balance. We're setting with what we believe are some valuable assets, right? And we strategically want to place not all of them on one project. We would, right? But we think we have the ability and the pipeline to be strategic here.

And as we said, these projects build up over time. So the thought is, can you use 500 to help win a project? Can you use 750 to help win a project? Can you use a 1,000 or you not drop them all in one, right? And you get multiple contracts out of it versus one. So strategically, that's how we're looking at it, but absolutely would be upset and if we didn't have these out 2026. Based on our pipeline, based on -- we've been in this market now going over a year, planting the seeds, as I said, things are starting to grow, and we're starting to harvest, right? So we like where we sit in the market. I'd say, based on the strength of the pipeline, we certainly [Audio gap] .

Based on the network approach you take in that business? Or is there any idle capacity in HFS South that could be mobilized?

Yes. There's very -- there's a little bit. I would tell you, we think we're pretty optimized in that area, especially West Texas. I would also tell you, we have a great customer base there, right, with some really long-term 20-plus year customers that we're going to make sure we take care of.

Sure, there's a lot of work in the Permian. We think we can take that business in other ways besides continuing to deplete the HFS side even. But we will take every opportunity to high-grade those rates, high-grade those beds as needed while we still take care of the customer, right, that we've had for many, many years. But it's a great question.

There are no further questions at this time. So I will now turn the call over to Brad Archer for closing remarks. Please continue. .

Yes, in closing, I just wanted to reiterate again that Target Hospitality is at an inflection point. The hyperscalers are making trillion-dollar investments in remote American. They need us to make those investments work. There's no one else who does what we do at this scale in these locations. We're not an amenity, we're not a nice to have. These projects are remote and time lines are nonnegotiable. Workforce housing is as critical as the fiber in the ground.

We also didn't stumble into $740 million in contracts. We built the platform, proved the model and the market needs us. The build-out on AI infrastructure, data centers and power generation across this country is one of the most consequential investment cycles in American history that I've ever seen that most have ever seen, right? The problems we've solved and are solving now are helping transform that infrastructure. And in doing so, it is fundamentally transforming target hospitality. With that, I want to thank all of you who have joined us on our call today, and for your continued support of Target Hospitality. Operator, that concludes our call for today.

Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Target Hospitality Third Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025.

I would now like to turn the call over to Mr. Mark Schuck. Please go ahead.

Thank you. Good morning, everyone, and welcome to Target Hospitality's Third Quarter 2025 Earnings Call. The press release we issued this morning, outlining our third quarter results can be found in the Investors 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. This 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 6, 2025.

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 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 Investors section of our website to 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 Vlacich, Chief Financial Officer and Chief Accounting 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.

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. We continue to build on the progress we've made in advancing our strategic growth initiatives, which focus on expanding and diversifying Target's business portfolio. This focus has led to notable operational achievements for 2025, including multiple long-term contract awards across various end markets.

Since the second quarter, we have added over $55 million in committed revenue contracts, bringing the total value of new multiyear contract awards announced in 2025 to more than $455 million. These contracts accomplish multiple elements of our growth objectives by strengthening Target's business portfolio and expanding our reach in new end markets. Target's ability to deliver highly customized solutions that meet specific customer needs highlights our unique value proposition and has opened new growth opportunities in rapidly expanding markets.

Strong long-term growth trends and sustained momentum reinforce these opportunities, including the multitrillion dollar investment cycle in data center and AI infrastructure, power generation and critical mineral development. The strengthening market fundamentals have laid the groundwork for a robust and expanding growth pipeline, offering distinct opportunities to continue advancing our strategic growth initiatives.

Turning to our segments and specific growth opportunities. Our HFS segment continues to support our world-class customers evolving labor allocation needs by delivering premium services through our extensive network. Target's unique vertically integrated operating model, combined with the scale and efficiencies of our HFS network allow us to support our customers throughout business cycles. Additionally, these attributes continue to support customer renewal rates exceeding 90%, with the average existing customer relationship exceeding 5 years.

This proven operating model is key to Target's success, and has served as a blueprint for potential new customers, illustrating the benefit and distinct value propositions of our vertically integrated accommodations platform. These distinctive capabilities and highly customizable solutions have supported multiple contract awards in our WHS segment this year.

In February, we announced the Workforce Hub Contract to support the development of critical minerals in Nevada. Construction began this contract has been expanded several times to support community improvement and contract modifications, resulting in a 19% increase from the original contract value. These enhancements highlight the importance of this community to the project's success and demonstrate how Target's operating capabilities enable us to deliver tailored solutions that meet specific customer needs.

These unique capabilities and customizable solutions supported the data center community contract we announced in August. We have completed the initial construction mobilization of the 250-bed community and initial occupancy is beginning to increase. As a reminder, this community has the potential to expand and accommodate up to 1,500 individuals, a sixfold increase from the initial community.

Our customers' growth plans are accelerating, driven by rapidly growing demand for AI infrastructure. As a result, we are finalizing the first community expansion to keep pace with anticipated customer activity levels. We expect this expansion to add several hundred rooms to the community and plan to provide additional details soon.

With increasing demand for AI infrastructure, the pace of data center development and capital investment is accelerating. To meet this demand, estimates suggest that over $7 trillion in global capital investment will be required over the next 5 years as large-scale data center infrastructure becomes increasingly remote, a significant challenge in expanding these projects is attracting and retaining the skilled labor essential to their success.

Target's unique capabilities in creating highly customized, all-inclusive communities address this challenge and provide integrated solutions for our customer-specific needs. Aligned with these attributes, Target recently launched its Target Hyper/Scale brand, highlighting our ability to provide a central hospitality solutions supporting multiple facets of the data center value chain. This focused initiative showcases Target's unique ability to build communities that enable quick time-to-market solutions that can rapidly scale alongside customers' dynamic workforce housing needs. These factors have created the most significant commercial growth pipeline we have ever seen.

Our reputation as the leading provider of remote hospitality solutions uniquely positions Target to support this rapidly expanding end market demand. We are excited about these growth opportunities, which we believe establish a vital long-term commercial vertical capable of accelerating Target's strategic growth objectives.

Now moving to the Government segment. We completed the planned ramp-up of our Dilley, Texas assets in September, and the community is now fully operational and capable of supporting up to 2,400 individuals. The successful reopening of this facility highlights the importance of our decision to keep this community ready to reopen alongside our partner. We continue to actively remarket our West Texas asset and remain confident in this community's ability to provide a vital solution aligned with the government's policy goals to expand available bed capacity.

In summary, we have made significant progress toward our strategic goals by expanding and diversified in Target's business portfolio. We are encouraged by the strongest and most active growth pipeline we have ever seen, supported by solid market fundamentals and long-term growth trends. We are well positioned as we pursue these opportunities, which offer multiple pathways to expand our business portfolio and continue advancing our strategic objectives.

I will now hand the call over to Jason to discuss our financial results in more detail.

Thank you, Brad. Third quarter total revenue was approximately $99 million, with adjusted EBITDA of approximately $22 million. Our government segment generated approximately $24 million in revenue during the quarter. The declines compared to the previous year were mainly due to the termination of the PCC Contract partially offset by the reactivation of our Dilley, Texas assets.

Additionally, revenue for the quarter included approximately $11.8 million in reimbursements for certain closeout costs related to the PCC Contract termination. We do not expect any further payments related to the PCC Contract in future periods. We completed the planned ramp-up of the Dilley community in September, and it is now fully operational. As a result, subsequent quarters will reflect revenue contributions aligned with the entire 2,400-bed community.

As a reminder, this contract is based on fixed monthly revenue regardless of occupancy. It is projected to generate approximately $30 million in revenue in 2025 with over $246 million over its expected 5-year term. Excluding the impact of the PCC Contract closeout payment, we anticipate increased contributions from the government segment in the coming quarters following completion of the Dilley ramp-up.

Regarding our West Texas assets. As a reminder, we have decided to keep these assets in a ready state while actively remarketing them. This approach, similar to our strategy with the Dilley assets, will involve carrying costs of approximately $2 million to $3 million per quarter until a new contract is potentially awarded.

Turning to our HFS and all other segments. These segments generated approximately $39 million in quarterly revenue. Target's customers continue to value our premium service offerings and extensive network scale. These qualities, combined with Target's operational efficiencies enable us to provide unmatched solutions across our network in a competitive market. Additionally, we remain focused on finding opportunities to improve margin contribution while meeting customer demand.

Moving on to the expanding Workforce Hospitality Solutions segment, or WHS. This segment, which includes our Workforce Hub Contract and the data center contract generated approximately $37 million in revenue in the third quarter, primarily from construction activity related to the Workforce Hub contract.

As announced today, the importance of the Workforce Hub contract led to additional modifications and scope expansion during the third quarter. The increased scope of the contract raises the total contract value to approximately $166 million, reflecting a 19% increase from the original contract value. These community improvements will lead to more construction activity, which we expect to be substantially completed by the end of 2025. However, this will shift some previously forecasted services revenue into 2026 and slightly impact margins as construction revenue has a lower contribution profile.

As we finish construction, we expect increased services revenue to begin in 2026 and continue through 2027. The scope expansion and contract modifications highlight our ability to deliver customized and tailored solutions for our customers, creating long-term revenue streams that support large-scale remote operations.

Regarding the data center contract, we are pleased with the progress of this community and have completed the construction and mobilization of the initial 250-bed facility. As a reminder, this contract is expected to generate approximately $43 million in committed minimum revenue over its initial term through September 2027, with approximately $5 million of revenue in 2025.

As we discussed, we are finalizing the first community expansion to support our customers' growing demand. This expansion will have limited impacts in 2025, but will increase revenue in future years. We plan to share additional details once the expansion terms are finalized.

Recurring corporate expenses for the quarter were approximately $11 million. As a matter of practice, we continually look for opportunities to optimize our cost structure and enhance margin contributions.

Total capital spending for the quarter was approximately $29 million with net capital spending of approximately $15 million. Net capital spending reflects the upfront customer payments we received for the construction and mobilization of the initial 250-bed data center community.

Target's strong business fundamentals and durable operating model supported robust cash conversion, resulting in over $68 million of cash flows from operations and $61 million of discretionary cash flow for the 9 months ended September 30, 2025. These fundamentals are reflected in the strength of our balance sheet and our ability to maintain significant financial flexibility through prudent capital management.

We ended the quarter with $30 million in cash and 0 net debt resulting in total available liquidity of approximately $205 million. This strong liquidity position further enhances our financial flexibility and positions Target to continue executing its strategic growth initiatives. This momentum and positive operating environment support our reaffirmed 2025 outlook, which includes total revenue of $310 million to $320 million and adjusted EBITDA of $50 million to $60 million.

Target is well positioned with a flexible operating model and an optimized balance sheet as we continue to evaluate a robust growth pipeline, which we believe offers the greatest opportunity to accelerate value creation for our shareholders. Most importantly, as we pursue these opportunities, we will remain focused on maintaining the strong financial profile we've built while maximizing margin contribution through our efficient operating structure.

With that, I will hand it back to Brad for closing remarks.

Thanks, Jason. We continue to make significant progress on our strategic growth initiatives to expand and diversify our business portfolio. This year, we have announced long-term contracts within our existing segment and expanded our reach into new end markets, supporting the unprecedented surge in AI infrastructure and critical mineral investment.

These achievements have led to over $455 million in new multiyear contracts in 2025. Additionally, we are in advanced discussions on other opportunities to further expand our contract portfolio, supporting AI infrastructure development.

We remain focused on maintaining this momentum as we evaluate the strongest and most active growth pipeline we have ever seen, driven primarily by the extraordinary increase in data center and AI infrastructure investment. As market fundamentals and demand strengthen, we are actively exploring opportunities encompassing over 15,000 beds, underscoring the depth of demand in this end market.

Target's unique capabilities position us to become an essential partner providing critical solutions vital to the success of this rapidly expanding marketplace. We are excited about these opportunities and believe they offer multiple ways to further our strategic goals and accelerate value creation for our shareholders.

Thank you for joining us on the call today. And once again, we appreciate your interest in Target Hospitality. We will now open the call for questions.

[Operator Instructions] And your first question comes from Scott Schneeberger from Oppenheimer.

I guess, first question would be on repurposing of the Pecos, West Texas assets. Could you give us an update, please, on what you're hearing with government customers? And if there are other customers with whom you are speaking, please share perhaps some insight to the extent you would on the potential repurposing of those -- of that asset?

Scott, this is Brad. Yes, let me just touch quickly on the government and then give you some color around the assets kind of in West Texas. But really on the government, there's no new developments from our last call. We continue to have active dialogue with the government on the West Texas assets. Look, we believe these assets provide a solution aligned with the government's objective and their sentiments have not changed around the use of this equipment.

With that said, let me touch on the Permian Basin, as you suggested, and really West Texas in general. As we are in discussions on several large data center projects as well as the large-scale power projects, that would energize them. Several projects in that area have been announced already, and we expect several more to make final investment decisions very soon with others in the pipeline that we're talking to.

The capital spend in this area will be large. It's very big. And it will require many thousands of skilled workers coming into these areas. I say all of this to tell you, there is no other company in our industry, that is better positioned to take advantage of this unprecedented spend we're beginning to see in West Texas. The opportunity set in West Texas maximizes our chances to put underutilized or idle assets back on lease for long-term projects.

And look, I would tell you, I have very little doubt. The majority of the growth you will see in West Texas will come from data centers in the large-scale power projects that are required to energize them. This doesn't mean that we will not try to take care of the government as well. But as you are well aware, and we've talked about this many times over the years, our assets can be repurposed across many industries. And fortunately, for us today, it's a good problem to have. There are multiple paths to maximizing our assets and utilization other than just the government, right? And that pipeline continues to build. And again, fortunately, a lot of this work sets right in the Permian basin.

Great. I appreciate that. Following up on that, a question for you and then probably one for Jason, thematically on that segue. The Target Hyper/Scale brand, could you speak to what you're doing there as far as kind of putting a brand on your initiative there, how you're going forth with that marketing approach? And Brad, that would be for you.

And then, Jason, just on that theme, could you please speak to -- just the revenue and EBITDA run rate in the third quarter, what's expected for fourth quarter on the data center contract and maybe how you think about that run rate in 2026?

Yes. So Scott, let me take the Target Hyper/Scale kind of question and why we did it. Look, the unprecedented capital spend in this industry just across the U.S. and not just Texas, we feel requires a more focused and dedicated approach. We spent 2 years really researching this opportunity, the markets. We've hired several new people that are dedicated to this effort, that have a background in the data center world.

And just based on the scale of the opportunity that's in front of us and that we see really long term. We thought it was right to really have its own brand and focus there on the hyperscalers, the GCs that are there. This is a different group that are now being forced to move remote, right? A lot of these over the years have built in big cities. Most of them now are being built remote. So the education there takes time because they've never had to use facilities like us that they're being forced to look at today.

So again, we think that branding fits within that and who you're dealing with is different than we've ever dealt with in the past. So we think that branding -- it's been well received by our customers and potential customers, and we think that will continue to be the case.

And I think on the second question regarding the -- I think you said the data center contract run rates and revenue and adjusted EBITDA. So we anticipate on that contract to recognize about $5 million of revenue this year. I would say from a run rate standpoint, it's more forward-looking beyond this year. Approximately, I would say, the balance of that contract, which is $43 million less than $5 million will be relatively evenly split between 2026 and 2027.

The margin profile on that is very similar to Dilley because it's a lease and services agreement where we own the assets and we operate them, and it's exclusively for one customer. So as a matter of fact, a lot of the opportunities that we're looking at in our pipeline are very similar to that type of a margin profile that we're experiencing at Dilley.

Now Dilley, from a run rate standpoint, you'll see will come to life in Q4. But essentially, it's approximately $50 million a year on the full 2,400-bed community at a margin profile very similar to the previous contract.

And your next question comes from Greg Gibas.

Congrats on the results. I wanted to ask how maybe does your existing data center community contract compared to the other opportunities you're in advanced discussions with? From, I guess, a high level, how would you say it kind of stacks up to the relative scope and size of the opportunities that you're seeing?

Yes. And just to kind of across the board, I would tell you the scope of these are on an average well above 1,000 rooms that we're looking at if you're talking size, right? They go into these areas for 5, 6, 7, 8 years, they continue to scale up, it doesn't start like 1,000. It's very similar to how we're building this first contract.

250 and then we're looking to continually increase that. This next increase will -- we think, will be several hundred beds, right, followed on by more increases until they reach capacity on the construction side. And then it kind of levels out for quite a while on that. But that's very similar to the buildup.

Now look, some of these are a little smaller, and some of them are much bigger. It just depends on what they're doing. What we're seeing today is a lot of the -- not only are we dealing with the data center piece, we're dealing with the power piece as well, which just adds more of a need for rooms, right?

Got it. That's helpful. I appreciate that. And maybe for Jason, to dive into kind of the implications of guidance. Could you maybe speak to the quarter-to-quarter dynamics or expectations implied there? You already mentioned the data center contract and $5 million expected this year. But anything else as I think about Q4 versus Q3 from a modeling perspective?

Yes. I think Q4, you're going to see the full ramp-up for the Dilley contract, right, which as I said, is annualized $50 million a year in revenue, approximately 40% to 50% margin is what you could anticipate there, divide it up in a quarterly amount for Q4.

The item that you're not going to see recur is the $11.8 million that we recognized for the PCC closeout payment. That's kind of the biggest delta between Q3 and Q4 is going to be that combined with now we're fully ramped up on Dilley. And I think everything else will be relatively steady state.

Great. That's helpful. And if I could, I wanted to ask, given you were named on that $10 billion, WEXMAC DOD award. Wondering if there's anything you could share related to, I guess, how you could serve their efforts and then maybe what level of capacity you're positioned to provide?

Could you repeat that again? We didn't quite get all of that.

Yes, sorry. Just given you were named on that $10 billion WEXMAC DOD award, wondering if there's anything you could share related to how you can serve their efforts and maybe what level of capacity you're positioned to provide?

Yes. Look, first, we don't know exactly what's going to come out on those bids, but we're positioned there, right? We're on the contract vehicle, which was the first step. We'll see what comes out. And if it works for us, we'll definitely go after it, right? If we have available assets or we can structure it another way, we will take a look at that if it fits us. But we first wanted to get on the contract vehicle and then take a look at any bids that come from that.

And your next question comes from [ Rajiv Sharma ].

This is Raj. I wanted to ask about the workforce EBITDA. What can we -- how much of a shift in EBITDA can we see -- can we expect from this year to the next year? And also, could you talk about the community enhancements, the detail around that? Does that entail higher bed pricing or new service modules or client-funded CapEx?

Yes. So I'll take the first one right off the bat. So the community enhancements are not going to increase the number of expected beds. We're still going to be around 2,000 beds. So it doesn't impact any of the economics around the services piece that will largely kick in beginning next year. It's strictly related to the construction, the majority of that, we anticipate to be recognized this year as we hopefully have the construction substantially complete by the end of this year. I'll stop there and see if there's any other follow-up on that. Otherwise...

Go ahead. Yes, I'm sorry, go ahead. Yes. No, I wanted to understand the community enhancements, what does it entail?

Well, it doesn't entail building out more beds, and it certainly doesn't increase the economics on the services piece. The services piece, which is the balance of the contract that's roughly $75 million or so that will start to kick in next year through 2027. I would look at that as relatively evenly split between the 2 years at a margin profile closer to 30% on the services piece going forward as opposed to the construction piece where our margin profile is closer to 20% to 25%.

Got it. And then did I hear it right? So the Dilley facility is fully ramped now to 2,400 beds. Is that -- and the ramp of steady-state utilization, that is happening in Q4.

Yes. So we completed the ramp-up at the beginning of September, and you'll see the full quarterly economics on the 2,400 beds in Q4.

Right. And then just on the Pecos the PCC, any active RFPs or renewal discussions you are engaged in that could replace or supplement that?

Yes. As I mentioned earlier on the call, lots of activity in the Permian Basin, West Texas, right? So we have multiple paths there to utilize that equipment other than just the government on that for all of our equipment.

And look, to be clear, we're already utilizing some of our existing assets for the first data center. And we expect to use more of those assets in the future. We've always been very good. Look first, we're going to utilize our existing assets, right? We want to drive utilization and put those back to work. So that's our first look all the time. And we've been very good about that, and we'll continue to do that.

Okay. Great. And then just lastly, can you elaborate on the Target, the Hyper/Scale? How does that differentiate from the core workforce? And what type of clients or geographies are you targeting first?

Yes. And again, lots of focus on the data center, right, huge spend. We brought in some, if you will, specialists, folks that have worked in the data center business for many years as well. So we built a team up around this. We thought it needed more focus starting to prove that. That's a good decision for us. It's been well received in the industry.

When you talk about the client, a lot of the clients that we're talking to today have never been where they've needed -- where they work remote, if you will. And now they realize, hey, we're working remote. We need this. It's a bigger education process. It is a little bit different of a customer as well than, if you will, the oil and gas or your industrial customer or your mining customer. They've just never done this.

So -- it's more about -- I wouldn't say a different type of quality, kind of that works across all industries, but it's definitely a bigger education process. And it is a little bit different customer set than we've ever dealt with in the past in a good way, right? They're very receptive. They want to take care of their employees like our other customers do. And the great thing is they've got great counterparties on the other side of these contracts that we're working on. And their goal is to get this done on time, right? So they don't mind, again, spending the money, getting the rooms close to location, and it's all about safety and kind of derisking their project for them.

Yes. Raj, this is Mark. Just to kind of put a fine point. I think you asked, too, if there was any differentiation around the Hyper/Scale brand. And look, to be clear, it fits squarely in Target's core competencies, as Brad described, it is just really an intentional focus on the customers and the applications that Brad described.

Yes, buildings are the same, right? Like our same fleet that is being used for HFS can be used for the data centers as well, and we're doing that today. So that doesn't change to Mark's point.

Congratulations.

[Operator Instructions] And your next question comes from Stephen Gengaro.

So a couple for me, and I'm sorry if I missed any of this. I missed the beginning of the call. But I think going into next year, there's about 6,000 idle beds. I think that's roughly the right number. Can you -- can you talk about given what's going on with the government shutdown and the potential timing for new awards. Can you talk about any color on kind of the timing on some of these contracts, both within the government and outside the government and how they may come together as we start thinking about how '26 starts to unfold?

Well, I would just say on the beds, we have about 8,000 available beds going into next year, right? We've utilized some of those to build out the initial 250-bed data center community. In terms of timing, very difficult to nail down exact timing. But in terms of the data center opportunities, we're already in advanced discussions on expanding that contract. As a reminder, we said at the forefront of the call, and also in our announcement, the land base can accommodate up to 1,500 beds. That's obviously going to be driven by customer demand. But again, we're already in advanced discussions on increasing that bed count from 250 to several hundred more in terms of the opportunities.

I would say the pipeline, and Brad can certainly elaborate. It's growing in the area of data centers, the government we talked about, the opportunity set there. There's still a high degree of interest. The West Texas assets are still on the acquisition list for the government, obviously, the administrative process is something you can't exactly nail down from a timing standpoint in terms of approvals and when a contract award might come. But we are keeping those assets in a ready state. We continue to incur the cost to do that of $2 million to $3 million a quarter, because there continues to be a high degree of interest, but the timing is a little difficult to nail down.

Yes. Stephen, if you missed the first part of the call, one thing I talked about on another question, was just -- there's multiple paths here for us to maximize our assets and utilization other than the government in the Permian Basin, while we still expect to take care of the government, and they're very interested in this facility, the demand, as you know, covering the Permian is increasing a lot, right, for data centers and the large-scale power projects.

Several have been announced, several more in FID that we think gets announced. Some that we have NDAs signed with that haven't been announced that we think comes along as well. So we think we sit in a really good spot in the -- especially in the Permian and West Texas in general to increase utilization throughout our units that are sitting idle or underutilized. So again, it's not a one-legged stool here just on government. And I think fortunately for us, we sit in a really great position to act up on some of these projects.

Is there -- so when we think about like the availability of your capacity and when we think about the data center growth and what's going on in some of the critical minerals side, and obviously the government, is there any urgency from any of those customer bases as it pertains to a concern about lack of capacity in -- if they don't contract assets in the near term?

100%. When you look at how -- we'll just say the data centers are built, you'll see one large one being built and then pretty quickly behind that, they cluster around each other, right? So they definitely get -- there's a lack of qualified skills out there, whether that's electric or that's mechanical or whatever. And they're fighting a lot of times for that same person, right? So they get signing on equipment quicker than the next guy with -- because there's limited capacity out there, right? It can help derisk their project.

But the answer is absolutely, yes. And look, that fear, if you will, is well founded on their part. There's not a lot of excess capacity out there. And every day, there's new projects that are being announced, which just continue to increase that.

Yes. That's helpful because I hear clearly on the power gen side, and I was just curious if that urgency and sort of filtered down to take your business from at least part of the customer base.

Absolutely.

Great. And then just the final question I had was the economics of the different pieces, it sounds like the data center side from our prior conversations is kind of in a pretty similar to Dilley, like should we expect kind of those similar type economics as other opportunities surface?

Yes. I mean I would say a lot of the opportunities we're looking at in our pipeline have economics from a margin profile standpoint, very similar to Dilley. A lot of these are take-or-pay assets that we own and will operate exclusively for the customer. So those economics will tend to be very similar to the Dilley economics.

And actually on that -- I'm sorry, just one quick one. I think I know the answer to this, but on the longer-term deals, when you look at inflationary costs that we've seen, especially on things like food and labor, you are protected against a lot of that, I believe, in the contracts. Is that true?

It varies, right? In some on a go forward, we might have some type of cost increase across the years. And then some -- we're pretty limited on that, but we try to do that with the right type of rate -- operational efficiencies. And we've been very good about that.

There are no further questions at this time. Brad Archer, you may continue.

Yes. Thanks to all of you for joining our call today and for your continued support of Target Hospitality. We look forward to speaking to all of you again in the New Year. Operator, that will conclude our call for today.

Ladies and gentlemen, this does conclude today's conference call. Thank you very much for your participation. You may now disconnect. Have a great day.