Market Overview

Target Hospitality Announces First Quarter 2019 Results

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  • Total revenues more than doubled to $82.0 million
  • Announcing start of construction of a new 200-bed community in the
    Delaware Basin for a major, integrated E&P customer; option to expand
    up to 400 beds
  • Affirm full year 2019 revenue and Adjusted EBITDA outlook

Target Hospitality Corp. ("Target Hospitality" or the "Company")
(NASDAQ:TH), the largest provider of vertically-integrated specialty
rental accommodations with premium catering and value-added hospitality
services in the U.S., today reported results for the first quarter ended
March 31, 2019.

On March 15, 2019, Target Hospitality was formed through the previously
announced business combination (the "Business Combination") of Platinum
Eagle Acquisition Corp. ("Platinum Eagle"), Target Logistics Management,
LLC ("Target Lodging") and RL Signor Holdings, LLC ("Signor"). In
connection with the closing of the Business Combination, Platinum Eagle
was renamed Target Hospitality. Prior to the Business Combination, the
businesses of Target Lodging and Signor were under common control and as
a result, Target Lodging began the integration of Signor into its
business on September 7, 2018. The results presented in this press
release reflect the combined results of Target Lodging and Signor for
the first quarter of 2019 and exclude the results of Signor for the
first quarter of 2018.

Financial and Operational Highlights for the First Quarter 2019

  • Total revenues of $82.0 million, up 112%, led by growth in the Permian
  • Net loss of $(14.0) million or $(0.18) per diluted share
  • Adjusted net income(1) of $17.0 million or $0.21 per
    diluted share excluding after-tax charges and (credits) of $31.0
    million or $0.39 per diluted share
  • Adjusted EBITDA(1) of $41.3 million, up 127%, with Adjusted
    EBITDA margin(1) of 50.4%
  • Average daily rate, or ADR, and utilization increased by 2.0% and
    10.0% respectively; both at the highest levels since the first quarter
    of 2017
  • Announcing start of construction of a new 200-bed community in the
    Delaware Basin of the Permian underpinned by multi-year contract;
    reflects favorable market outlook by anchor tenant, a major integrated
    E&P company
  • Started construction of a previously announced 400-bed community
    located in Carlsbad, New Mexico backed by guaranteed multi-year
    contracts providing compelling unit economics
  • Signor acquisition integration progressing well with high-grading of
    communities and continued conversion of customer contracts
  • Affirm full year 2019 revenue and Adjusted EBITDA outlook driven by
    strong visibility with approximately 86% of estimated 2019 revenue
    under contract

Brad Archer, President and Chief Executive Officer of Target
Hospitality, stated, "We delivered strong results in the first quarter
driven by customer renewals, community expansions, operational
enhancements, and benefits from our Signor integration. These results
were in line with our expectations as we drove broad-based performance
improvement across key metrics, including positive contributions from
higher utilization and ADR. This was directly attributable to our
durable customer contracts, which provide us with great visibility and
underpin the stability and resiliency of our business. Furthermore,
additional progress was made with the integration of full turnkey
services at Signor communities as we realized the benefit of more
favorable contract renewals and extensions."

Mr. Archer continued, "We are pleased by the solid start to the year, in
what is our seasonally smallest quarter, and look forward to delivering
on our affirmed outlook for 2019. Demand in the Permian Basin remains
robust and supports our identified project pipeline of new communities
to add to what is already the largest network of workforce
accommodations in the region. These community expansions along with
revenue and cost savings synergies from the Signor integration combined
with our solid track record of execution further strengthens our
confidence in the growth trajectory of our business."

Summary Financial Results – First Quarter 2019

Refer to exhibits to this earnings release for reconciliation of
non-GAAP to GAAP financial measures

             
Three Months Ended

($ in ‘000s, except ADR and per share amounts)

  March 31, 2019   March 31, 2018   Change
Revenue   $81,982   $38,646   112.1%
Net loss   $(13,979)   $(4,194)   (233.3%)
Net loss per share   $(0.18)   $(0.16)   (12.5%)
 
Adjusted gross profit(1)   $47,655   $22,706   109.9%
Adjusted gross profit margin(1)   58.1%   58.8%  

(0.7%)

Adjusted EBITDA(1)   $41,297   $18,200   126.9%
Adjusted EBITDA margin(1)   50.4%   47.1%   3.3%
             
Adjusted net income(1)   $17,044   $4,545   275.0%
Adjusted diluted earnings per share(1)   $0.21   $0.18   16.7%
 
Average daily rate (ADR)   $82.4   $80.8   2.0%
Average available beds   11,160   6,552   70.3%
Utilization   87%   77%   10.0%
     

Total revenue for the first quarter of 2019 was $82.0 million, an
increase of 112%, compared to $38.6 million in the prior year quarter.
This revenue growth was driven by community expansions, increased
utilization rates, and higher ADR. Average available beds were 11,160
and the utilization rate was 87%, compared to 6,552 average available
beds and a utilization rate of 77% in the prior year quarter. ADR
increased to $82.4 from $80.8 in the prior year quarter, primarily
attributable to favorable customer contract renewals.

Net loss was $(14.0) million, or $(0.18) per diluted share in the first
quarter of 2019, as compared to a net loss of $(4.2) million, or $(0.06)
per diluted share in the first quarter of 2018. Net loss in the first
quarter of 2019 was impacted by certain costs related to acquisition and
transaction expenses, primarily in connection with the Business
Combination. Net loss in the first quarter of 2018 was also impacted by
costs related to restructuring activities. Excluding after-tax charges
and (credits) of $31.0 million or $0.39 per diluted share, Adjusted net
income(1) was $17.0 million or $0.21 per diluted share. On
March 31, 2019, the Company had 100,217,035 shares of common stock
outstanding, excluding 5,015,898 shares of common stock issued and held
in escrow. The weighted average shares of common stock outstanding in
the first quarter of 2019 was 79,589,905 shares.

Gross profit margin was 46.1%, compared to 41.7% in the prior year
quarter. Adjusted gross profit margin(1), which excludes
depreciation on specialty rental assets, was 58.1%, compared to 58.8% in
the prior year quarter, largely attributable to a higher number of
communities under construction or expansion, partially offset by
favorable cost leverage on higher total revenues.

Adjusted EBITDA for first quarter of 2019 increased by 127% to $41.3
million, compared to $18.2 million in the prior year quarter. Adjusted
EBITDA in the first quarter of 2019 excludes, among other items, certain
expenses in connection with the Business Combination, including
transaction expense of $8.0 million, along with bonus payments as a
result of the Business Combination being consummated in the aggregate
amount of $28.5 million. Adjusted EBITDA margin grew by approximately
3.3% to 50.4%, compared to 47.1% in the prior year quarter. Growth in
Adjusted EBITDA and Adjusted EBITDA margin was primarily due to higher
total revenues coupled with operating improvements, Signor integration
synergies, and favorable customer contract renewals.

Capital expenditures were $21.8 million for the first quarter of 2019.
This included approximately $21.3 million in capital expenditures for
new community development and expansions, along with upgrades and
conversions at Signor communities. As of March 31, 2019, the Company had
$23.1 million of cash and cash equivalents, and $380.0 million in gross
amount of total long-term debt, which included $340.0 million in
aggregate principal amount of Senior Secured Notes due March 2024 and
borrowings of $40.0 million under the $125.0 million ABL revolving
credit facility.

Segment Results – First Quarter 2019

Permian Basin

Financial Highlights

 

Refer to exhibits to this earnings release for reconciliation
of non-GAAP to GAAP financial measures

 
Three Months Ended

($ in ‘000s, except ADR)

  March 31, 2019   March 31, 2018   Change
Revenue   $52,712   $15,663   236.5%
Adjusted gross profit(1)   $32,594   $9,458   244.6%
Adjusted gross profit margin(1)   61.8%   60.4%   1.4%
 
Average daily rate (ADR)   $86.3   $88.8   (2.8%)
Average available beds   7,279   2,070   251.6%
Utilization   90%   94%   (4.0%)
     

Revenues in the Permian Basin grew over two times to $52.7 million,
compared to $15.7 million in the prior year quarter. The revenue growth
was attributable to a higher number of average available beds through
Signor integration and expansion of communities in response to strong
demand for turnkey services year-over-year. The reduction in ADR and
utilization each reflect the mix impact of Signor communities, partially
offset by improvement at legacy Target Lodging communities. Adjusted
gross profit margin was 61.8%, compared to 60.4% in the prior year
quarter largely reflecting the impact of operational improvements and
improved cost leverage.

Portfolio Expansions

Today, the Company announced a new 200-bed community in the Delaware
Basin further advancing its strategy to further grow the expansive
Permian lodging network. Construction started on this new community in
the first quarter of 2019. It is being built to accommodate a major
integrated E&P company, an existing customer with significant operations
in the Delaware Basin, a high-growth region within the Permian Basin.
Like the Company's other communities, this new community is under a new
multi-year contract that includes Target Hospitality's full suite of
services, and can be expanded for up to 400 beds. The new facility is
expected to be operational in the third quarter of 2019.

As previously announced in February 2019, the Company was awarded
contracts to build a new 400-bed community in Carlsbad, New Mexico,
located in the Delaware Basin region of the Permian Basin. The new
community, already under construction, will further enhance our ability
to support production, development, and capital investment by major
energy producers in the region. Underwritten by multi-year contracts
with a major producer and several large oil and gas companies, the new
facility will include our full suite of services, including high-quality
accommodations, culinary services, amenities, and hospitality services.
The new facility is expected to be operational in the third quarter of
2019.

Bakken Basin

Financial Highlights
 

Refer to exhibits to this earnings release for reconciliation
of non-GAAP to GAAP financial measures

     
Three Months Ended

($ in ‘000s, except ADR)

  March 31, 2019   March 31, 2018   Change
Revenue   $4,772   $5,570   (14.3%)
Adjusted gross profit(1)   $1,635   $1,831   (10.7%)
Adjusted gross profit margin(1)   34.3%   32.9%   1.4%
 
Average daily rate (ADR)   $77.8   $79.2   (1.8%)
Average available beds   1,024   1,607   (36.3%)
Utilization   60%   40%   20.0%
 

Revenues were $4.8 million, compared to $5.6 million in the prior year
quarter. The revenue reduction was attributable to a lower number of
available beds due to closure of Dunn county community in the fourth
quarter of 2018. Utilization improved to 60% from 40% due to a reduction
in the average available beds. Adjusted gross profit margin was 34.3%,
compared to 32.9% in the prior year quarter largely due to effective
cost controls and a reduction in average available beds.

Government

Financial Highlights
 

Refer to exhibits to this earnings release for reconciliation
of non-GAAP to GAAP financial measures

     
Three Months Ended

($ in ‘000s, except ADR)

  March 31, 2019   March 31, 2018   Change
Revenue   $16,555   $16,521   0.2%
Adjusted gross profit(1)   $11,851   $11,514   2.9%
Adjusted gross profit margin(1)   71.6%   69.7%   1.9%
 
Average daily rate (ADR)   $74.7   $74.6   0.1%
Average available beds   2,400   2,492   (3.7%)
Utilization   100%   96%   4.0%
 

Revenues were consistent year-over-year at approximately $16.5 million.
Average available beds of 2,400 were fully utilized in the first quarter
of 2019, while ADR at $74.7 was essentially flat compared to prior year
quarter. Adjusted gross profit margin increased to 71.6% compared to
69.7% in the prior year quarter mainly due to reduced occupancy compared
to utilization in the current year quarter.

All Other

Financial Highlights
 

Refer to exhibits to this earnings release for reconciliation
of non-GAAP to GAAP financial measures

     
Three Months Ended

($ in ‘000s)

  March 31, 2019   March 31, 2018   Change
Revenue   $7,943   $892   790.5%
Adjusted gross profit(1)   $1,575   ($97)   nm
Adjusted gross profit margin(1)   19.8%   (10.9%)   30.7%
 

This segment operations consist primarily of revenue from the
construction phase of the TransCanada Pipelines ("TCPL") as well as
vertically-integrated specialty rental and hospitality services revenue
from customers in the energy industry located outside of the Permian and
Bakken Basins. Revenues increased to $7.9 million, of which $7.2 million
is due to construction fee income from TCPL related to offsite planning
and procurement activities for long-lead items. Adjusted gross profit
margin was 19.8% compared to (10.9%) in the prior year quarter mainly
attributable to TCPL. Note that a full contract release remains
outstanding pending final investment decision by TransCanada. Key
operating metrics – average daily rate, average available beds, and
utilization – are not meaningful for this segment.

2019 Outlook

Based on our first quarter results and current expectations, the Company
affirms its full year 2019 outlook for revenues to be in the range of
$340 million to $350 million and Adjusted EBITDA to be in the range of
$175 million to $180 million. This outlook is supported by its strong
revenue visibility with approximately 86% of our estimated 2019 revenue
currently under contract. Our new community expansions are expected to
result in additional contribution to the Company's financial outlook,
once operational.

The Company expects maintenance capital expenditures for the full year
2019 to approximate 1% of total revenues, with the remainder of capital
expenditures primarily to fund organic growth initiatives that are
underwritten by multi-year customer contracts.

"We expect the momentum in our business to continue as we move through
the year. Customer demand remains firm and we are well positioned in all
of our segments to continue generating solid results. With a strong
balance sheet and capital allocation priorities in place, we look
forward to continuing to execute our growth strategies and drive value
for our shareholders," concluded Mr. Archer.

Audio Conference Call

The Company has scheduled an audio conference call for Wednesday, May 8,
2019 at 8:00 a.m. Central Time (9:00 am Eastern Time) to discuss the
first quarter 2019 results.

To participate in the audio conference call, dial-in to any of the
following telephone numbers at least 5 minutes prior to scheduled start
time:

Domestic:       1-877-423-9813
International: 1-201-689-8573
Reference: Target Hospitality
 

The audio conference call will be available by live webcast and can be
accessed through the Investors section of Target Hospitality's website
at www.TargetHospitality.com.
Those interested in listening to the webcast should go to the website at
least 15 minutes prior to the scheduled start time in order to register,
download and install any necessary audio software.

An archived audio replay will be available after the event at the same
website address or by using the following dial-in information:

Domestic:       1-844-512-2921
International: 1-412-317-6671
Passcode: 13689659#

The archived audio replay can be accessed through August 8, 2019.

(1) Non-GAAP Financial Measures

This press release contains non-GAAP financial measures including
Adjusted net income, Adjusted diluted earnings per share, Adjusted gross
profit, Adjusted gross profit margin, Adjusted EBITDA, and Adjusted
EBITDA margin. Reconciliations of these measures to the most directly
comparable GAAP financial measures to the extent available without
unreasonable effort are contained herein. To the extent required,
statements disclosing the definitions, utility and purposes of these
measures are also set forth herein.

Information reconciling forward-looking Adjusted EBITDA to GAAP
financial measures is unavailable to Target Hospitality without
unreasonable effort. We cannot provide reconciliations of
forward-looking Adjusted EBITDA to GAAP financial measures because
certain items required for such reconciliations are outside of our
control and/or cannot be reasonably predicted, such as the provision for
income taxes. Preparation of such reconciliations would require a
forward-looking balance sheet, statement of income and statement of cash
flow, prepared in accordance with GAAP, and such forward-looking
financial statements are unavailable to us without unreasonable effort.
Although we provide a range of Adjusted EBITDA that we believe will be
achieved, we cannot accurately predict all the components of the
Adjusted EBITDA calculation. Target Hospitality provides Adjusted EBITDA
guidance because we believe that Adjusted EBITDA, when viewed with our
results under GAAP, provides useful information for the reasons noted
below.

We have included Adjusted net income, Adjusted diluted earnings per
share, Adjusted gross profit, Adjusted gross profit margin, Adjusted
EBITDA, and Adjusted EBITDA margin which are measurements not calculated
in accordance with US GAAP, in the discussion of our financial results
because they are key metrics used by management to assess financial
performance. Our business is capital-intensive, and these additional
metrics allow management to further evaluate our operating performance.

Definitions:

Target Hospitality defines Adjusted net income, as Net income (loss)
plus the following adjustments to exclude certain non-cash items and the
effect of what management considers transactions or events not related
to its core business operations:

  • Transaction bonus amounts: Algeco US Holdings LLC ("Target Parent")
    paid certain transaction bonuses to certain executives and employees
    related to the closing of the Business Combination.
  • Transaction expenses: Target Hospitality incurred certain transaction
    costs, including legal and professional fees, associated with the
    Business Combination.
  • Officer loan expense: Loans to certain executive officers of the
    Company were forgiven and recognized as selling, general, and
    administrative expense upon consummation of the Business Combination.
    Such amounts are not expected to recur in the future.
  • Target Parent selling, general and administrative costs: Target Parent
    incurred certain costs in the form of legal and professional fees as
    well as transaction bonus amounts, primarily associated with a
    restructuring transaction that originated in 2017.
  • Restructuring costs: Target Parent incurred certain costs associated
    with restructuring plans designed to streamline operations and reduce
    costs.
  • Other income, net: Other income, net includes consulting expenses
    related to certain projects, financing costs not classified as
    interest expense, gains and losses on disposals of property, plant,
    and equipment, and other immaterial non-cash charges.
  • Income tax benefits: The above described amounts are offset by the
    related income tax benefits at the Company's effective tax rate for
    the above items.

Target Hospitality defines Adjusted diluted earnings per share as
Adjusted net income divided by diluted weighted average shares
outstanding for the period.

Target Hospitality defines Adjusted gross profit, as Gross profit plus
depreciation of specialty rental assets and loss on impairment. Target
Hospitality defines Adjusted gross profit margin as Adjusted gross
profit divided by total revenue for the same period.

Target Hospitality defines EBITDA as net income (loss) before interest
expense, income tax expense (benefit), depreciation of specialty rental
assets, and other depreciation and amortization.

Adjusted EBITDA reflects the following further adjustments to EBITDA to
exclude certain non-cash items and the effect of what management
considers transactions or events not related to its core business
operations:

  • Transaction bonus amounts: Target Parent paid certain transaction
    bonuses to certain executives and employees related to the closing of
    the Business Combination.
  • Transaction expenses: Target Hospitality incurred certain transaction
    costs, including legal and professional fees, associated with the
    Business Combination.
  • Officer loan expense: Loans to certain executive officers of the
    Company were forgiven and recognized as selling, general, and
    administrative expense upon consummation of the Business Combination.
    Such amounts are not expected to recur in the future.
  • Target Parent selling, general and administrative costs: Target Parent
    incurred certain costs in the form of legal and professional fees as
    well as transaction bonus amounts, primarily associated with a
    restructuring transaction that originated in 2017.
  • Restructuring costs: Target Parent incurred certain costs associated
    with restructuring plans designed to streamline operations and reduce
    costs.
  • Other income, net: Other income, net includes consulting expenses
    related to certain projects, financing costs not classified as
    interest expense, gains and losses on disposals of property, plant,
    and equipment, and other immaterial non-cash charges.

Target Hospitality defines Adjusted EBITDA margin as Adjusted EBITDA
divided by total revenue for the same period.

Utility and Purposes:

We believe that EBITDA is a meaningful indicator of operating
performance because we use it to measure our ability to service debt,
fund capital expenditures, and expand our business. We also use EBITDA,
as do analysts, lenders, investors, and others, to evaluate companies
because it excludes certain items that can vary widely across different
industries or among companies within the same industry. For example,
interest expense can be dependent on a company's capital structure, debt
levels, and credit ratings. Accordingly, the impact of interest expense
on earnings can vary significantly among companies. The tax positions of
companies can also vary because of their differing abilities to take
advantage of tax benefits and because of the tax policies of the
jurisdictions in which they operate. As a result, effective tax rates
and provision for income taxes can vary considerably among companies.
EBITDA also excludes depreciation and amortization expense, because
companies utilize productive assets of different ages and use different
methods of both acquiring and depreciating productive assets. These
differences can result in considerable variability in the relative costs
of productive assets and the depreciation and amortization expense among
companies.

Target Hospitality also believes that Adjusted EBITDA is a meaningful
indicator of operating performance. Our Adjusted EBITDA reflects
adjustments to exclude the effects of additional items, including
non-routine items, that are not reflective of the ongoing operating
results of Target Hospitality. In addition, to derive Adjusted EBITDA,
we exclude gains or losses on the sale of depreciable assets and
impairment losses because including them in EBITDA is inconsistent with
reporting the ongoing performance of our remaining assets. Additionally,
the gain or loss on sale of depreciable assets and impairment losses
represents either accelerated depreciation or excess depreciation in
previous periods, and depreciation is excluded from EBITDA.

Adjusted net income, Adjusted diluted earnings per share, Adjusted gross
profit, Adjusted gross profit margin, Adjusted EBITDA, and Adjusted
EBITDA margin are not measurements of Target Hospitality's financial
performance under GAAP and should not be considered as alternatives to
Net income (loss), Gross profit, Diluted earnings per share, or other
performance measures derived in accordance with GAAP. In addition, these
non-GAAP measures may not be comparable to similarly titled measures of
other companies. Target Hospitality's management believe that Adjusted
net income, Adjusted diluted earnings per share, Adjusted gross profit,
Adjusted gross profit margin, Adjusted EBITDA, and Adjusted EBITDA
margin provide useful information to investors about Target Hospitality
and its financial condition and results of operations for the following
reasons: (i) they are among the measures used by Target Hospitality's
management team to evaluate its operating performance; (ii) they are
among the measures used by Target Hospitality's management team to make
day-to-day operating decisions, (iii) they are frequently used by
securities analysts, investors and other interested parties as a common
performance measure to compare results across companies in Target
Hospitality's industry.

About Target Hospitality

Target Hospitality is the largest provider of vertically integrated
specialty rental accommodations and value-added hospitality services
company in the United States. Target Hospitality builds, owns and
operates customized housing communities for a range of end users, and
offers a full suite of cost-effective hospitality solutions including
culinary, catering, concierge, laundry and security services as well as
recreational facilities. Target Hospitality primarily serves the energy
and government sectors and its growing network of communities is
designed to maximize workforce productivity and satisfaction.

Cautionary Statement Regarding Forward Looking Statements

Certain statements made in this press release are "forward looking
statements" within the meaning of the "safe harbor" provisions of the
United States Private Securities Litigation Reform Act of 1995. When
used in this press release, the words "estimates," "projected,"
"expects," "anticipates," "forecasts," "plans," "intends," "believes,"
"seeks," "may," "will," "should," "future," "propose" and variations of
these words or similar expressions (or the negative versions of such
words or expressions) are intended to identify forward-looking
statements. These forward-looking statements are not guarantees of
future performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside our control, that could cause actual
results or outcomes to differ materially from those discussed in the
forward-looking statements. Important factors, among others, that may
affect actual results or outcomes include: operational, economic,
political and regulatory risks; our ability to effectively compete in
the specialty rental accommodations and hospitality services industry;
effective management of our communities; natural disasters and other
business disruptions; the effect of changes in state building codes on
marketing our buildings; changes in demand within a number of key
industry end-markets and geographic regions; our reliance on third party
manufacturers and suppliers; failure to retain key personnel; increases
in raw material and labor costs; the effect of impairment charges on our
operating results; our inability to recognize deferred tax assets and
tax loss carry forwards; our future operating results fluctuating,
failing to match performance or to meet expectations; our exposure to
various possible claims and the potential inadequacy of our insurance;
unanticipated changes in our tax obligations; our obligations under
various laws and regulations; the effect of litigation, judgments,
orders or regulatory proceedings on our business; our ability to
successfully acquire and integrate new operations; global or local
economic movements; our ability to effectively manage our credit risk
and collect on our accounts receivable; our ability to fulfill Target
Hospitality's public company obligations; any failure of our management
information systems; and our ability to meet our debt service
requirements and obligations. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.

 

Exhibit 1

Target Hospitality Corp.
Unaudited Consolidated Statements of Comprehensive Loss
($ in thousands, except per share amounts)
 
For the Three Months Ended
March 31,
2019   2018
Revenue:
Services income $ 61,073 $ 24,916
Specialty rental income 13,730 13,730
Construction fee income   7,179      
Total revenue 81,982 38,646
Costs:
Services 32,009 13,510
Specialty rental 2,318 2,430
Depreciation of specialty rental assets 9,901   6,603  
Gross profit 37,754 16,103
Selling, general and administrative 44,752 10,182
Other depreciation and amortization 3,763 1,290
Restructuring costs 168 6,256
Other income, net   (38 )   (450 )
Operating loss (10,891 ) (1,175 )
Loss on extinguishment of debt 907
Interest expense, net   4,031     3,945  
Loss before income tax (15,829 ) (5,120 )
Income tax benefit   (1,850 )   (926 )
Net loss (13,979 ) (4,194 )
Other comprehensive loss
Foreign currency translation       (907 )
Comprehensive loss $ (13,979 ) $ (5,101 )
 
 
Weighted average shares outstanding 79,589,905 25,686,327
 
Net loss per share $ (0.18 ) $ (0.16 )
 
   

Exhibit 2

Target Hospitality Corp.
Consolidated Balance Sheets
($ in thousands)
 
March 31, December 31,
2019 2018
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 23,120 $ 12,194
Accounts receivable, less allowance for doubtful accounts of $35 and
$39, respectively
55,132 57,106
Prepaid expenses and other assets 4,387 3,965
Notes due from affiliates 638
Notes due from officers       1,083  
Total current assets 82,639 74,986
 
Restricted cash 257 257
Specialty rental assets, net 305,458 293,559
Other property, plant and equipment, net 18,678 18,882
Goodwill 34,180 34,180
Other intangible assets, net 123,857 127,383
Deferred tax asset 14,457 12,420
Deferred financing costs revolver, net 5,782 2,865
Notes due from officers 500
Other non-current assets   78      
Total assets $ 585,386   $ 565,032  
 
Liabilities
Current liabilities:
Accounts payable $ 40,940 $ 21,597
Accrued liabilities 21,591 23,300
Deferred revenue and customer deposits 16,852 17,805
Current portion of capital lease and other financing obligations 971   2,446  
Total current liabilities 80,354 65,148
 
Other liabilities:
Long-term debt:
Principal amount 340,000
Less: unamortized original issue discount (3,281 )
Less: unamortized term loan deferred financing costs (16,232 )  
Long-term debt, net 320,487
Revolving credit facility 40,000 20,550
Long-term capital lease and other financing obligations 14
Note due to affiliates 108,047
Deferred revenue and customer deposits 16,699 19,571
Asset retirement obligations 2,664 2,610
Other non-current liabilities       101  
Total liabilities $ 460,204 $ 216,041
 
Commitments and contingencies
Stockholders' Equity

Common Stock, $0.0001 par, 380,000,000 authorized, 105,232,933
issued and
outstanding as of March 31, 2019 and 74,786,327
issued and outstanding at December 31, 2018

10 7
Additional paid-in-capital 110,139 319,968
Accumulated other comprehensive loss (2,463 ) (2,463 )
Accumulated earnings   17,496     31,479  
Total stockholders' equity   125,182     348,991  
Total liabilities and stockholders' equity $ 585,386   $ 565,032  
 
 

Exhibit 3

Target Hospitality Corp.
Unaudited Consolidated Statements of Cash Flows
($ in thousands)
 
For the Three Months Ended
March 31,
2019   2018
Cash flows from operating activities:
Net loss $ (13,979 ) $ (4,194 )
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation 10,138 6,649
Amortization of intangible assets 3,526 1,244
Accretion of asset retirement obligation 54 35
Amortization of deferred financing costs 315
Amortization of original issue discount 21
Officer loan compensation expense 1,583 295
Gain on involuntary conversion (450 )
Loss on extinguishment of debt 907
Deferred income taxes (2,037 ) (1,156 )
Provision for loss on receivables 86
Changes in operating assets and liabilities
Accounts receivable 1,974 654
Prepaid expenses and other assets (422 ) 778
Accounts payable and other accrued liabilities (4,801 ) 3,526
Deferred revenue and customer deposits (3,825 ) (1,730 )
Other non-current assets and liabilities   (199 )   (2,222 )
Net cash (used in) provided by operating activities   (6,745 )   3,515  
Cash flows from investing activities:
Purchase of specialty rental assets (14,623 ) (21,888 )
Purchase of property, plant and equipment (37 ) (162 )
Repayments from (advances to) affiliates 638 (500 )
Receipt of insurance proceeds       2,250  
Net cash used in investing activities   (14,022 )   (20,300 )
Cash flows from financing activities:
Proceeds from borrowings on Senior Secured Notes, net of discount 336,699
Principal payments on finance and capital lease obligations (1,475 ) (3,527 )
Proceeds from notes with affiliates 10,000
Principal payments on borrowings from ABL (27,790 ) (1,076 )
Proceeds from borrowings on ABL 47,240 5,500
Repayment of affiliate note (3,762 )
Contributions from affiliate 39,107
Recapitalization 218,752
Recapitalization - cash paid to Algeco Seller (563,134 )
Payment of deferred financing costs   (13,944 )    
Net cash provided by financing activities   31,693     10,897  
 
Net increase (decrease) in cash and cash equivalents 10,926 (5,888 )
Cash and cash equivalents - beginning of period   12,194     12,533  
Cash and cash equivalents - end of period $ 23,120   $ 6,645  
 
Non-cash investing and financing activity:
Non-cash change in accrued capital expenditures $ (7,177 ) $ (3,716 )
Non-cash change in accrued deferred financing cost $ (6,424 ) $
Non-cash contribution from affiliate - forgiveness of affiliate note $ 104,285 $
Non-cash distribution to PEAC - liability transfer from PEAC, net $ (8,840 ) $
Non-cash change in specialty rental assets due to effect of exchange
rate changes
$ $ 907
 
 

Exhibit 4

Target Hospitality Corp.
Reconciliation of Net loss to Adjusted net income and Adjusted
diluted earnings per share
($ in thousands, except per share amounts)
 
For the Three Months Ended
March 31,
2019   2018
Net loss $ (13,979 ) $ (4,194 )
Restructuring costs 168 6,256
Target Parent selling, general, and administrative costs 246 5,192
Other income, net (38 ) (450 )
Transaction expenses 8,046 484
Transaction bonus amounts 28,519
Officer loan expense 1,583
Less: Income tax benefits   (7,501 )   (2,743 )
Adjusted net income $ 17,044   $ 4,545  
 
Weighted average shares outstanding 79,589,905 25,686,327
 
Net loss per share, as reported $ (0.18 ) $ (0.16 )
 
Adjusted diluted earnings per share $ 0.21 $ 0.18
 
 

Exhibit 5

Target Hospitality Corp.
Reconciliation of Gross profit to Adjusted gross profit and
Adjusted gross profit margin
($ in thousands)
 
For the Three Months Ended
March 31,
2019   2018
Gross profit $ 37,754 $ 16,103
Depreciation of specialty rental assets   9,901   6,603
Adjusted gross profit $ 47,655 $ 22,706
 
Total revenue $ 81,982 $ 38,646
 
Gross profit margin 46.1% 41.7%
 
Adjusted gross profit margin 58.1% 58.8%
 
 

Exhibit 6

Target Hospitality Corp.
Reconciliation of Net Loss to EBITDA, Adjusted EBITDA and
Adjusted EBITDA margin
($ in thousands)
 
For the Three Months Ended
March 31,
2019   2018
Net loss $ (13,979 ) $ (4,194 )
Interest expense, net 4,031 3,945
Loss on extinguishment of debt 907
Income tax benefit (1,850 ) (926 )
Other depreciation and amortization 3,763 1,290
Depreciation of specialty rental assets   9,901     6,603  
EBITDA $ 2,773   $ 6,718  
 
Adjustments
Transaction bonus amounts 28,519
Transaction expenses 8,046 484
Officer loan expense 1,583
Target Parent selling, general, and administrative costs 246 5,192
Restructuring costs 168 6,256
Other income, net   (38 )   (450 )
Adjusted EBITDA $ 41,297   $ 18,200  
 
Total revenue $ 81,982 $ 38,646
 
Adjusted EBITDA margin 50.4 % 47.1 %
 

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