Target Hospitality(TH) - 2023 Q3 - Quarterly Report

Revenue Performance - For the three months ended September 30, 2023, the company experienced a revenue decrease of $13.6 million, or 9%, compared to the same period in 2022, primarily due to lower revenue from the Government segment [168]. - Total revenue for Q3 2023 was $145.9 million, a decrease of 9% from $159.6 million in Q3 2022, driven by a decline in both services income and specialty rental income [191]. - Services income decreased to $93.5 million in Q3 2023 from $103.0 million in Q3 2022, primarily due to lower variable services revenue in the Government segment [192]. - Specialty rental income fell to $52.4 million in Q3 2023 from $56.6 million in Q3 2022, attributed to lower variable leasing revenue in the Government segment [195]. - Total revenue for the nine months ended September 30, 2023, was $437.4 million, a 25% increase from $349.5 million in the same period of 2022 [207]. - Revenue for the Government segment was $316.2 million for the nine months ended September 30, 2023, a 29% increase from $245.0 million in the same period of 2022 [232]. - The HFS - South segment reported revenue of $112.5 million for the nine months ended September 30, 2023, a 15% increase from $97.8 million in the prior year [234]. Profitability - The company generated net income of approximately $45.6 million for the three months ended September 30, 2023, compared to approximately $19.0 million for the same period in 2022, attributed to decreased service costs and lower interest expenses [168]. - Net income for Q3 2023 was $45.6 million, a significant increase of 140% from $19.0 million in Q3 2022 [191]. - Net income for the nine months ended September 30, 2023, was $135.9 million, reflecting a 221% increase from $42.4 million in the same period of 2022 [206]. - Gross profit increased by 5% to $86.8 million in Q3 2023, compared to $82.8 million in Q3 2022 [191]. - Operating income rose by 13% to $67.7 million in Q3 2023, up from $59.9 million in Q3 2022 [191]. - Adjusted gross profit for the Government segment increased to $266.8 million for the nine months ended September 30, 2023, compared to $159.5 million in the prior year, reflecting a 67% growth [233]. Cash Flow and Debt Management - Cash inflows from operations for the nine months ended September 30, 2023, were approximately $118.5 million, a decrease of $139.3 million or 54% from $257.8 million for the same period in 2022 [167]. - The company reduced its outstanding debt balance on the 2024 Senior Secured Notes by $125 million or 37% during the nine months ended September 30, 2023 [167]. - Interest expense, net, decreased by approximately $3.9 million or 44% during the three months ended September 30, 2023, compared to the same period in 2022 [167]. - Interest expense, net decreased to $17.7 million for the nine months ended September 30, 2023, from $28.1 million in the prior year, driven by a lower outstanding debt balance after redeeming $125 million of the 2024 Senior Secured Notes [217]. - The company incurred a net decrease in cash and cash equivalents of $76.6 million for the nine months ended September 30, 2023, compared to an increase of $153.6 million in the prior year [243]. - Net cash used in financing activities increased significantly to $134.2 million for the nine months ended September 30, 2023, compared to $0.6 million in the same period of 2022 [246]. Capital Expenditures and Investments - Capital expenditures for the nine months ended September 30, 2023, totaled approximately $60.8 million, with $27.8 million attributed to the Government segment [240]. - The Company made an $18.6 million acquisition of community assets in January 2023, contributing to growth capital expenditures in the HFS – South segment [245]. - Net cash used in investing activities decreased to $60.9 million for the nine months ended September 30, 2023, from $103.7 million in the same period of 2022, primarily due to reduced growth capital expenditures in the Government segment [245]. Future Outlook and Risks - The company expects its business to continue to be influenced by factors such as capital spending on natural resource development and government housing programs [171]. - One major customer accounted for 63% of revenues for the nine months ended September 30, 2023, indicating a high concentration of revenue risk [255]. - The company does not currently hedge its exposure to commodity prices, which may affect profitability and cash flows due to volatility in commodity prices [283].