Target Hospitality Corp. (NASDAQ:TH) Q4 2022 Earnings Call Transcript

Eric Kalamaras: Sure, another great question. I’ll say holistically that the capacity that we’re seeing is exactly what we would expect to see. In fact, it’s very similar to what we saw last year as well. And so the contractual mechanism we have in place and the occupancy levels we have are doing what we would expect them to do. The one shift that we had that I mentioned was the expectation of Title 42 being lifted by the administration on December 21, 2022, which ultimately delays things. Now that’s relevant because we also in and around that time were just completing PCC and the expansion. So because of the timing of this in Title 42, the government delayed the — I was thinking about Fort Bliss that was relevant because that allowed Fort Bliss contract to stay a little bit longer than what we would have otherwise anticipated.

So effectively what’s happened is that capacity has been shared, if you will, between PCC and Fort Bliss. So as we move forward with Title 42 being lifted, with the typical seasonality we would expect from the children’s specifically, right, because that’s the census population that really impacts us, and then the movement of Fort Bliss this summer and the termination of that, that shifts a lot of things really to the second half. So I would love to give you a quantum of number, which is probably what you would for I do, but unfortunately I cannot do that. Suffice it to say that, look, I would just say that it’s — I think a lot of things are being positioned towards the second half. It’s hard to say what that quantum is because as you know, migration flows are not clear, albeit we can say and I think we may have touched on this at some point in the past is that over half of the entire touch points on the immigration flows in 2022 alone were rejected specifically due to Title 42 and the rest came in through Title 8, which is the typical asylum claim.

The reason why that’s relevant is because once that’s lifted, you would effectively see, as it relates to 2022 at least just using that as a precursor, you would have expected to see the immigration flows double from where they would have been actually. And so I think that’s relevant as opposed to where we are now. We’ll see what happens in the balance of the year. But my expectation would be that the inflows would be pretty significant.

Scott Schneeberger: Thanks. And just one more for me, and I’ll turn it over. And it goes back to the first topic I raised and one of your comments during prepared remarks or in response to that first question was with your partner and the IDIQ award, should we anticipate now that it looks like it would be a five-year base and five-year extension, it sounds like that is being established in this new development? I inferred from something that one of you mentioned that it would probably be the same structure as a base lease payment and then a variable utilization component. Is that how we should think about the future contracts, or may it be structured in another fashion? Thanks.

Brad Archer: Scott, when we submitted with our partner on the IDIQ, that’s exactly how we submitted, the way it’s set up today. We haven’t heard any change as the way the IDIQ at this point was given to them. So we had to put in a base concept pricing and all of that to be awarded this.

Scott Schneeberger: Understood. All right, I’ll turn it over. Thank you.

Eric Kalamaras: Thank you.

Brad Archer: Thanks, Scott.

Operator: The next question comes from Greg Gibas with Northland. Please go ahead.

Gregory Gibas: Hi. Good morning, Brad and Eric. Thanks for taking the questions. Congrats on the quarter as well. If I really could just follow up on that, that IDIQ from the non-profit partner, what are the next steps there? And when would we expect to see an update on that contract?