Target Hospitality (TH) Raises 2022 Financial Outlook by 53%

Target Hospitality Corp. ("Target Hospitality", "Target" or the "Company") (NASDAQ: TH), one of North America's largest providers of vertically integrated modular accommodations and value-added hospitality services, today raised the range of its previously announced 2022 financial outlook 53% primarily related to the significantly expanded and enhanced lease and services agreement ("Expanded Humanitarian Contract") supporting domestic humanitarian aid efforts, previously announced on July 6, 2022.

The Expanded Humanitarian Contract consists of a meaningful increase in scope and service offerings from the initial contract executed in March of 2021 and illustrates the benefits of Target's strategic diversification efforts. With the inception of Target's Government segment in 2014, the Company has placed increasing focus on expanding its critical hospitality services supporting domestic humanitarian aid missions serving vulnerable populations. This intentional focus has resulted in Target expanding its end market portfolio while significantly increasing minimum revenue commitments that provide enhanced revenue visibility and cash flows.

The Expanded Humanitarian Contract operates with similar structure to Target's existing government services contracts, which are centered around minimum revenue commitments supported by the United States Government. Additionally, the Expanded Humanitarian Contract includes variable services revenue that will align with monthly community population. The minimum revenue commitments, which consist of annual recurring lease revenue and nonrecurring infrastructure enhancement revenue, provide for a minimum annual revenue contribution of approximately $390 million and is fully committed over its initial contract term. The services revenue component provides for a maximum initial annual total contract value of approximately $575 million.

Including the Expanded Humanitarian Contract, approximately 73% of Target's anticipated 2022 revenue will be derived from its Government segment with a substantial portion of consolidated revenue attributed to minimum revenue commitments.

Target's critical infrastructure enhancements and expansion of hospitality service offerings reflect the transition of this community to a comprehensive solution capable of providing ongoing critical humanitarian support to aid Target's leading national nonprofit partner. Target anticipates this critical service offering, and all-inclusive super-site community, will remain an ongoing fixture in supporting domestic humanitarian aid missions.

Target will make substantial infrastructure enhancements to the existing community that encompass over 1.7 million square feet of modular structures on over 280 acres. The significantly expanded and enhanced community site will result in a transitory increase to Target's anticipated 2022 capital spending. The increase in 2022 annual capital spending will initially be balance sheet neutral with the Company anticipating a total net leverage ratio below 3.0 times, with meaningful leverage improvement by year end 2022.

As a result of operating cash flow materially exceeding the Company's initial 2022 business plan, Target's enhanced balance sheet will allow the Company to continue evaluating a range of capital allocation initiatives focused on maximizing long-term shareholder value. Additionally, Target's strong financial profile creates the optimal platform to continue pursuing strategic growth aspirations that focus on expanding the Company's long-term growth opportunities and accelerating its value creation opportunity set.

The Company continues to benefit from its strategic positioning as North America's market leader in premier vertically integrated modular and hospitality solutions serving a suite of world-class customers. This strong momentum supports Target's 2022 financial outlook and marks a 74% increase in revenue and a 152% increase in Adjusted EBITDA from full year 2021.

Approximately 99% of the Company's anticipated 2022 revenue is under contract with approximately 73% of contracted revenue having minimum revenue commitments.

These positive business fundamentals support Target's 2022 financial outlook of:

Full Year 2022 Financial Outlook:

• Total revenue between $500 and $510 million
• Adjusted EBITDA(1) between $295 and $305 million
• Interest expense(2) between $33 and 35 million
• Effective corporate cash tax rate between 13% and 15%
• Discretionary Cash Flow(1) between $320 and $330 million
• Total capital spending between $190 and $200 million, excluding acquisitions
• Maintain total net leverage(3) ratio below 3.0x throughout 2022

Second Quarter 2022 Financial Outlook:

• Total revenue between $102 and $107 million
• Adjusted EBITDA(1) between $50 and $55 million

(Consensus sees Q2 revenue of $83 million and FY revenue of $333 million)

(2) Interest expense excludes amortization of deferred financing cost and original issue discount

(3) Total net leverage ratio is defined in the credit facility as consolidated total debt to consolidated EBITDA for the preceding four fiscal quarters

The Company has scheduled a conference call for July 12, 2022, at 8:00 a.m. Central Time (9:00 am Eastern Time) to provide additional details on the Expanded Humanitarian Contract and its 2022 financial outlook.

Conference Call Details

Date: Tuesday, July 12, 2022

Time: 9:00 AM ET / 8:00 AM CT

Domestic: 1-888-317-6003

International: 1-412-317-6061

Passcode: 2810328

Please register for the webcast or dial into the conference call approximately 15 minutes prior to the scheduled start time.

A replay of the conference call will be available through the Investors section of Target Hospitality's website.

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