Market Overview

Target Hospitality Announces Second Quarter 2019 Results

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  • 79% increase in total revenues to $81.4 million
  • 139% increase in Net income to $10.6 million
  • 80% increase in Adjusted EBITDA to $41.2 million
  • Announced additions of 943 rooms via acquisitions and expansions since the start of second quarter 2019
  • Reaffirmed full year 2019 revenue and Adjusted EBITDA outlook, excluding new build expansions and recent acquisitions

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 second quarter ended June 30, 2019.

As previously announced, on March 15, 2019, Target Hospitality was formed upon the consummation of the 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 second quarter of 2019 and exclude the results of Signor for the second quarter of 2018.

Financial and Operational Highlights for the Second Quarter 2019

  • 79% increase in total revenues to $81.4 million, led by growth in the Permian Basin
  • 139% increase in Net income to $10.6 million, or $0.11 per diluted share
  • 92% increase in Adjusted net income(1) to $12.8 million, or $0.13 per diluted share excluding after-tax charges and (credits) of $2.2 million
  • 80% increase in Adjusted EBITDA(1) to $41.2 million, with Adjusted EBITDA margin(1) of 50.7%
  • Utilization increased 2% to 86%
  • Average daily rate, or ADR, of $80.9 compared to $83.7, primarily attributable to the unfavorable mix impact of the Company's 2018 Signor acquisition
  • YTD net cash provided by operating activities of $18.8 million; Adjusted free cash flow of $75.3 million
  • Announced addition of 200 rooms to two previously announced communities under construction within the Delaware Basin, supported by multi-year contracts
  • Acquired three communities in the Delaware Basin, adding 575 rooms across three strategic locations; all properties converted to full turnkey services
  • In July 2019, acquired a 168-room community located in Midland, Texas

Brad Archer, President and Chief Executive Officer of Target Hospitality, stated, "In the past two years we have more than doubled our bed count while expanding our customer base to include some of the largest operators in our markets. Our proven record of growth continued in the second quarter with revenue up 79% year-over-year. We delivered significant improvement in net income and Adjusted EBITDA as we continued to realize the benefit of our growing network of communities."

Mr. Archer added, "During 2019, we have continued to build out the Target Hospitality network with the addition of six communities through acquisitions and expansions. These exciting additions reinforce the compelling unit economics for our customers and for our Company. Combined with our sharp focus on execution, we remain well-positioned to continue to deliver value-enhancing opportunities for our business."

 

Summary Financial Results – Second Quarter 2019

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

Three Months Ended

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

June 30, 2019

June 30, 2018

Change

Revenue

$81,358

$45,476

78.9%

Net income

$10,580

$4,424

139.2%

Earnings per share

$0.11

$0.17

(35.3%)

 

Adjusted gross profit(1)

$49,132

$28,534

72.2%

Adjusted gross profit margin(1)

60.4%

62.7%

(2.4%)

Adjusted EBITDA(1)

$41,236

$22,929

79.8%

Adjusted EBITDA margin(1)

50.7%

50.4%

0.3%

 

 

 

 

Adjusted net income(1)

$12,805

$6,679

91.7%

Adjusted diluted earnings per share(1)

$0.13

$0.26

(50.0%)

 

Average daily rate (ADR)

$80.9

$83.7

(3.3%)

Average available beds

11,401

6,770

68.4%

Utilization

86%

84%

2%

Total revenue for the second quarter of 2019 was $81.4 million, an increase of 79%, compared to $45.5 million in the prior year quarter. This revenue growth was driven by community expansions and increased utilization rates. Average available beds were 11,401 and the utilization rate was 86%, compared to 6,770 average available beds and a utilization rate of 84% in the prior year quarter. ADR was $80.9 compared to $83.7 in the prior year quarter, with the decrease primarily attributable to the mix impact of Signor communities, partially offset by improvement in ADR at legacy Target Lodging communities.

Net income was $10.6 million, or $0.11 per basic and diluted share in the second quarter of 2019, as compared to net income of $4.4 million, or $0.17 per basic and diluted share in the second quarter of 2018. Net income in the second quarter of 2019 was impacted by transaction expenses, primarily in connection with the Business Combination. Net income in the second quarter of 2018 was also impacted by Superior Lodging acquisition-related expenses, and certain severance and other costs. Excluding after-tax charges and (credits) of $2.2 million, Adjusted net income(1) was $12.8 million or $0.13 per diluted share. On June 30, 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.

Gross profit margin was 48.1%, compared to 47.8% in the prior year quarter. Adjusted gross profit margin(1), which excludes depreciation on specialty rental assets, was 60.4%, compared to 62.7% in the prior year quarter, largely attributable to a higher number of communities under construction or expansion.

Adjusted EBITDA increased by 80% to $41.2 million compared to $22.9 million in the prior year quarter. Adjusted EBITDA margin was 50.7% compared to 50.4% 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 and acquisitions were $57.1 million for the second quarter of 2019. Capital expenditures were entirely related to investments in new community development and expansions, along with upgrades and conversions at Signor communities, plus $30.0 million for the acquisition of Superior Lodging. As of June 30, 2019, the Company had $10.4 million of cash and cash equivalents, and $410.0 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 $70.0 million under the $125.0 million ABL revolving credit facility.

 

Segment Results – Second Quarter 2019

Permian Basin

Financial Highlights

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

Three Months Ended

($ in ‘000s, except ADR)

June 30, 2019

June 30, 2018

Change

Revenue

$52,037

$20,569

153.0%

Adjusted gross profit(1)

$32,588

$13,634

139.0%

Adjusted gross profit margin(1)

62.6%

66.3%

(3.7%)

 

Average daily rate (ADR)

$84.5

$92.5

(8.8%)

Average available beds

7,520

2,360

218.6%

Utilization

86%

103%

(17%)

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