Target Hospitality (TH) Misses Q1 EPS by 2c, Revenues Miss

Target Hospitality (NASDAQ: TH) reported Q1 EPS of $0.04, $0.02 worse than the analyst estimate of $0.06. Revenue for the quarter came in at $71.7 million versus the consensus estimate of $72.03 million.

Financial and Operational Highlights for the First Quarter 2020

• Revenues of $71.7 million for the three months ended March 31, 2020 as compared to $82.0 million for the same period in 2019
• Net income of $3.8 million for the three months ended March 31, 2020, compared to a net loss of $14.0 million for the first quarter of 2019
• Basic and diluted earnings per share of $0.04 for the three months ended March 31, 2020
• Adjusted EBITDA(1) of $32.4 million, compared to $41.3 million for the first quarter of 2019
• Meaningful cash generation, with net cash provided by operating activities of $10.6 million and Discretionary Cash Flow (“DCF”) (1) of $10.0 million for the three months ended March 31, 2020
• Strong balance sheet with liquidity of $47.5 million and net leverage of 2.8 times as of March 31, 2020
• Maintaining financial flexibility with no near-term debt maturities, immediate covenants, liquidity or minimum credit rating on the Company’s Senior Secured Notes or revolving credit facility
• Implemented meaningful cost reductions, including reducing anticipated 2020 capital spending by 50% and other measures aimed at reducing total 2020 cash expenses by greater than 30%
• Expected increase in 2020 project revenue, following the announcement that TC Energy Corporation will proceed with the construction of the Keystone XL pipeline project

Executive Commentary

“Despite a challenging macro environment exiting the first quarter, we produced solid results across our business and generated DCF of approximately $10 million. However, the COVID-19 pandemic has significantly reduced global economic activity and exacerbated a rapid deterioration in commodity markets. These dual shocks to the global economy have created an unprecedented scenario, which will likely persist through much of 2020,” stated Brad Archer, President and Chief Executive Officer.

“As we navigate the current environment, including the COVID-19 pandemic, our first priority is the health and safety of our employees and customers, and we continue to take all appropriate precautions to ensure their health and well-being. We have taken decisive action to defend our business and cash flow. We remain anchored to preserving our liquidity, while ensuring we retain our operational and financial flexibility, through disciplined capital allocation and meaningful cost reductions. We have taken proactive measures to appropriately modify certain aspects of select commercial contracts to strengthen revenue visibility for the long-term benefit of Target. These modifications will ensure consistent cash flow and solidify contract commitments from 2021 into 2024. These measures will allow us to mitigate the effect of lower utilization levels, while ensuring we maintain a strong capital structure and financial position to take advantage of the eventual economic recovery,” concluded Mr. Archer.

For earnings history and earnings-related data on Target Hospitality (TH) click here.

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