Target Hospitality Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide standalone fourth-quarter results. Target Hospitality operates specialty workforce lodging and hospitality services, with 15,528 beds across its communities. Its largest markets are U.S. government-related services and natural-resource customers.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $291.3 million | $225.1 million |
| Gross profit | $101.4 million; 34.8% margin | $57.2 million; 25.4% margin |
| Operating income | $37.1 million; 12.7% margin | $4.1 million |
| Net loss | $4.6 million; $0.05 per diluted share | $25.1 million; $0.26 per diluted share |
| Adjusted EBITDA | $119.2 million; 40.9% of revenue | $78.5 million |
| Cash from operations | $104.6 million | $46.8 million |
| Capital expenditures | $36.8 million | $9.1 million |
Adjusted EBITDA and its margin are non-GAAP measures. Revenue comprised $203.1 million of services income, $76.9 million of specialty rental income, and $11.3 million of construction fee income. Approximately 69.7% came from specialty rental with vertically integrated hospitality services; facility leasing and construction fees accounted for the balance.
Liquidity, debt, and financial position
- Cash and cash equivalents were $23.4 million at year-end, versus $7.0 million a year earlier. Current assets were $60.5 million and current liabilities $72.8 million.
- Debt included $340 million of 9.50% senior secured notes due March 2024. The ABL revolver had no borrowings at year-end and $125 million of stated undrawn capacity; its maturity is September 2023. Capital lease and other financing obligations were $1.4 million.
- Net cash used in investing activities was $35.9 million, primarily reflecting higher capital spending, including Government-segment growth. Net cash used in financing activities was $52.3 million.
- Management said cash on hand, operating cash flow, and available ABL capacity were expected to fund obligations and working capital needs for at least the next 12 months, while noting future financing may not be available on acceptable terms.
Changes versus FY2020
- Revenue rose $66.2 million, or 29%, and net loss narrowed by $20.6 million. Management attributed the improvement principally to Government-segment growth and stronger HFS–South customer demand, along with lower interest expense.
- Government revenue increased to $156.3 million from $63.3 million and represented 53.6% of FY2021 revenue. HFS–South revenue rose 4% to $117.0 million. HFS–Midwest revenue fell 37% to $4.2 million, with adjusted gross profit turning negative at $0.7 million.
- TCPL Keystone revenue declined to $12.3 million from $41.9 million. The Keystone XL project was suspended, then terminated in July 2021; no further activity or revenue is expected.
- Adjusted EBITDA increased 51.8% to $119.2 million. Operating cash flow increased 123.6% to $104.6 million.
Outlook, risks, and unusual items
- No specific revenue, earnings, or capital-spending guidance is provided. Management described continued improvement in HFS–South demand and significant Government-segment growth, but noted HFS utilization had not returned to pre-pandemic levels.
- A Government-segment contract with a nonprofit partner began in March 2021, had an initial one-year term, and was fully committed at approximately $129 million. Renewal discussions were ongoing; potential outcomes included extensions and expansion. The filing does not establish a completed renewal.
- Revenue concentration is significant: the top five customers generated approximately 68% of FY2021 revenue, and two customers accounted for 34.7% and 18.9%, respectively. Government-related revenue also depends on government funding, policy, and contract continuity.
- Other principal risks include customer and commodity-cycle exposure, COVID-19 and workforce requirements, labor and input-cost inflation, regulatory and environmental compliance, competition, and the ability to refinance or repay the 2024 notes. The company does not hedge commodity-price exposure.
- The TC Energy termination settlement generated approximately $5.0 million in cash and included recognition of approximately $4.9 million of deferred revenue. The filing states that FY2021 construction fee income consisted almost entirely of revenue associated with this settlement.
- The company reported a $1.1 million loss from the change in fair value of warrant liabilities. Management found no goodwill impairment in its annual assessment. The auditor issued an unqualified opinion on the financial statements; it was not engaged to audit internal control effectiveness.
Important facts for investors to verify
- Whether the nonprofit-partner Government contract was renewed, on what terms, and whether anticipated expansions became committed work.
- How Government-segment concentration and federal funding or immigration-policy changes could affect revenue and cash collections.
- The company’s plan and funding capacity for the $340 million notes due in March 2024, including refinancing terms and covenant constraints.
- Whether HFS–South utilization and pricing continue to recover, and whether HFS–Midwest can return to positive segment profitability.
- How much of reported growth and cash generation is recurring versus related to the temporary Government contract ramp-up and Keystone termination settlement.