Target Hospitality (TH) Updates 2024 Guidance, Issues Business Update

Target Hospitality Corp. (NASDAQ: TH), one of North America's largest providers of vertically integrated modular accommodations and value-added hospitality services, today provided the following revised 2024 outlook and business update.

As previously announced, on June 10, 2024, the Company received notice that the U.S. government intends to terminate the South Texas Family Residential Center contract ("STFRC Contract"), effective in 60 days, or on or about August 9, 2024 ("Effective Date"). The STFRC Contract was based on a fixed minimum lease revenue commitment and for the year ended December 31, 2023, contributed approximately $55.9 million in total consolidated revenue.

Regarding Target's Pecos Children's Center ("PCC") community, since 2021, the PCC community has served as a cornerstone to the U.S. government's domestic humanitarian aid mission and the Company anticipates a normal course renewal of this contract in November of 2024. However, given the dynamic fluctuations in community population, Target believes it prudent to exclude from the revised 2024 outlook any incremental PCC variable revenue.

Target's robust operating platform, network flexibility and commitment to maximize operational efficiencies has established an enhanced financial position. These attributes support a highly durable and flexible operating model centered on an optimized balance sheet and robust liquidity profile.

As of May 31, 2024, the Company had approximately $147 million of cash and cash equivalents with approximately $322 million of total available liquidity, no outstanding borrowings on the Company's $175 million credit facility and a net leverage ratio of 0.1 times. Target anticipates achieving zero net debt by year end 2024, with over $350 million of total available liquidity.

Target's contract portfolio provides a high degree of revenue visibility, coupled with an efficient operating structure, these elements support strong cash generation and an optimized balance sheet. After giving effect to the recent STFRC Contract termination, PCC variable revenue contribution and continued positive operational momentum, the Company is providing a revised 2024 outlook, of:

• Total revenue between $375 and $385 million
• Adjusted EBITDA⁽¹⁾ between $184 and $190 million
• Total capital spending between $25 and $30 million, excluding acquisitions
• Anticipates zero net debt by year end 2024
• Year end 2024 total available liquidity exceeding $350 million

TDR Proposal Update

On March 25, 2024 Target announced that the Board of Directors of Target Hospitality ("the Board") received an unsolicited non-binding proposal from Arrow Holdings S.àr.l. ("Arrow"), an affiliate of TDR Capital LLP ("TDR"), to acquire all of the outstanding shares of common stock of Target Hospitality that are not owned by any of Arrow, any investment fund managed by TDR or any of their respective affiliates, for cash consideration of $10.80 per share (the "Proposal").

The Board has established a special committee of independent directors (the "Special Committee"), and the Special Committee has retained Centerview Partners LLC and Ardea Partners LP as its financial advisors and Cravath, Swaine & Moore LLP as its legal advisor. The Special Committee is in the process of reviewing and evaluating the Proposal.

The Special Committee has made no decision at this time with respect to the Proposal, and the Company does not undertake any obligation to provide any updates with respect to the Proposal or any other transaction, except as required by applicable law or other regulatory requirements. There can be no assurance that any transaction will result from the Special Committee's evaluation of the Proposal, or, if so, the timing, terms and conditions of such transaction.

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