Target Hospitality (TH) Earnings Call Transcript

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DATE

Thursday, November 6, 2025 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Brad Archer
• President and Chief Financial Officer — Gregory Gibas

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TAKEAWAYS

• Government Segment Performance -- President and CFO Gregory Gibas stated, "the government's been a little slower than we would have liked it, you know, over the last quarter," indicating reduced activity in the segment during the reporting period.
• Pipeline for Government Contracts -- Management reported that government entities "are going out for bids" that may support long-term projects, specifically referencing the Pecos and Cotulla projects.
• Non-Government Asset Strategy -- Management is "actively market" a top-tier non-government asset near Eagle Ford and high-density Texas areas, aiming to "repurpose" it to meet emerging demand.
• Hospitality Demand from AI/Data Center Sector -- Gibas described the opportunity to "going deeper into AI with these centers," highlighting increased demand for hospitality services in remote areas supporting large data centers.
• Growth in WHS Segment -- Expanded contracts in the WHS segment led to "increased contract values," with expectations for ongoing momentum through contract modifications and operational efficiency improvements.
• Cost Management -- CEO Brad Archer noted that inflation in "materials and equipment" presented pressures, but stated the company keeps "cost variances minimal" via strategic vendor contracts and optimization efforts.
• Margin Outlook -- Archer explained that improved "operational efficiencies" and tighter control over fixed costs create "opportunities to improve margins" as operations scale.

SUMMARY

The earnings call revealed slow government segment activity but highlighted a developing pipeline of contract bid opportunities that could enhance long-term revenue streams. Management emphasized ongoing strategic asset repurposing and its ability to meet specialty hospitality demand, particularly in regions driven by data center and AI-related expansion. Margin enhancement remains a focus, with leadership addressing inflationary pressures through vendor contract management and cost structure optimization.

• Management reported ongoing expansion of contract values in the WHS segment through enhanced contract terms and efficiency gains.
• Increased demand for hospitality services associated with remote AI and data center developments was cited as a driver for future growth.
• Leadership outlined a disciplined approach to handling inflationary pressures without quantifying specific margin improvement targets.

INDUSTRY GLOSSARY

• WHS segment: Hospitality and Facilities Services segment serving workforce housing and related markets with short- and long-term accommodation, catering, and support services.

Full Conference Call Transcript

Gregory Gibas: the non-government side. So, you know, the government's been a little slower than we would have liked it, you know, over the last quarter, but we are hearing and know that they have some needs when it comes to hospitability as they increase more likely in the border areas.

Scott Schneeberger: And so, we are hearing that they are going out for bids on some of this business. So, we expect that would help us long-term with both our Pecos project and potentially our Cotulla project. Sorry about that.

Gregory Gibas: No, that is okay. And then, on the non-government side, we continue to actively market that asset and feel very confident in our ability to repurpose it. It is a top tier asset with a lot of amenities, and it is got proximity to both Eagle Ford and high density areas within Texas that create the demand for additional host facilities.

Scott Schneeberger: Got it. That is really helpful. Thank you for that. And just one quick follow-up on I've heard AI. I've heard it mentioned multiple times on the call. Can you give us some sense of how Target's services mingle with AI? And what potential hydro opportunities do you see arising given your growing focus on that area?

Gregory Gibas: Sure, Scott. As we touched on in the prepared remarks, it is about understanding the needs of these communities. They like to congregate in the larger hospitality communities, meal service, and all of those dynamics. And we are noticing these big centers getting built in these remote areas. Our centers then obviously become a place where they can visit, live, and use amenities. And we are really excited about going deeper into AI with these centers and access managing logistical support that is needed in those areas.

Scott Schneeberger: Very interesting. I appreciate that and look forward to hearing more about it as it progresses. Thanks so much.

Gregory Gibas: Thanks, Scott.

Operator: Next question, we have from James Bradley Archer from Wells Fargo. Please, go ahead.

James Archer: Thank you. Good morning, everyone.

Gregory Gibas: Good morning, James.

James Archer: My question is about the WHS segment mentioned earlier. Could you provide a bit more detail on your expectations for continued growth and what is likely to drive the segment significantly forward going into 2026?

Gregory Gibas: Absolutely, James. We view the WHS segment as one of our key growth areas. As we mentioned, we have successfully expanded contracts resulting in increased contract values, and we expect this momentum to continue. Our strategy includes enhancing our existing contracts with further modifications and leveraging our operational efficiencies to drive growth. With demand in hospitality regularly growing into sectors like AI integration and broader data center expansions, we are confident that we can sustain and build upon the success we have achieved thus far.

James Archer: Thank you for that insight. Looking forward to hearing more updates in the future.

Gregory Gibas: Certainly, we will keep everyone updated on how this develops. Thanks, James.

Operator: Next question comes from Stephen Gengaro from Stifel. Please, go ahead.

Stephen Gengaro: Thank you. Good morning, everyone.

Brad Archer: Good morning, Stephen.

Stephen Gengaro: My question concerns recent cost trends that may have impacted your operating model. How have you been addressing potential cost pressure, and is the outlook positive looking forward, especially into fiscal year 2026?

Brad Archer: Thanks for the question, Stephen. Our focus has always been on maintaining a robust cost structure, and as mentioned earlier, we continuously optimize our cost mechanisms to enhance margins. We've noticed inflationary pressures, especially in materials and equipment, but through strategic vendor contracts, we keep cost variances minimal. Our outlook indicates opportunities to improve margins by increasing operational efficiencies and managing fixed costs diligently, which is crucial as we scale and expand our operations.

Stephen Gengaro: Thank you very much, Brad. I appreciate it. Looking forward to continued updates.

Brad Archer: Absolutely, Stephen. Thanks for your continued interest.

Operator: Ladies and gentlemen, we have no other questions at this time. I would like to turn the conference back over to Brad Archer for closing remarks.

Brad Archer: Thank you all for joining our call today. We remain excited and encouraged by the growth prospects before us and our ability to execute our strategic initiatives with precision. We look forward to sharing our further progress and seeing you in our future updates. Thank you.

Operator: Thank you for participating in today's conference call. You may now disconnect.

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