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

Eric Kalamaras: Yes, great question. So like we’ve said, it will be — these things do take a little bit of time. This is a little bit of a process. I think what we need to get surety of is any scope modification that could be a result of the changes, right? So the first step is to create the funding mechanism in the appropriated dollars, which is effectively what this means, right? The next step then is for the government to finalize its scope. Now if you recall last year, we increased the scope from 4,000 beds up to an additional 2,400, so it increased dramatically. Now again, that’s a reflection of I think one, the built in progress nature of the facility, which is truly I love to say it’s best in class that would be unfair.

It’s actually absolute world class and by far the absolute best facility out there. The other thing that needs to come into play here is you have to bear in mind, the government is reimagining how they think about its capacity. They have 22 shelter locations across the United States. Those tend to be very small. They’re logistically challenging. And our understanding is that they’re seeking additional alternatives. And so the point being is that there could very well be other locations that come into play here. And so we’ll just have to see what the scope changes look like if there are any, any locations increase if there are any, and then just go from there. But I think that process is going to take — as we mentioned, it’s going to take a few months.

Brad Archer: Yes, which is much shorter than what we’ve been doing. We started this process in September with the IDIQ when we submitted. Even before that, we’ve been talking about it. So we think this is a huge hurdle for us to get over. We did that. And just to reiterate, I think it’s probably a couple of months, as Eric said. There’ll be discussions immediately that are already happening and then we should conclude this I would say in the next few months. And my point there, just not a long — you’re not talking 6, 8, 9, 10 months here.

Gregory Gibas: Yes, great point. And it’s very helpful, guys. And just to follow up there again, as we think about them thinking about perhaps changing the scope on that contract. If we think about Fort Bliss being mothballed, like you said, is that a safe assumption to assume that they would require more scope?

Brad Archer: Look, I think when you look at Title 42 supposedly coming off in May, I would just tell you high level, I think the need for our types of services are going to be greater. We think there’ll be more deals out there. We would have to win those. I’m not sure there’ll be more scope, if you will, at our West Texas facility. But I think overall on the border across the U.S., some of the things that we’re dealing on now, I think there will be a greater need. It doesn’t mean we’re going to end up with them. But I think our pipeline, and we touch on this, is more active and more real than it’s been ever in our company.

Eric Kalamaras: I think that’s a great point. I think to add on to that, as Brad mentioned a great point, which is our pipeline is exceptionally active in and around these types of things. But in addition to that, Greg, just for clarification, the government as part of this process has clearly indicated that they are net short capacity, right, and they know it. And so to Brad’s point, what the ultimate outcome of that is still yet to be determined, but I would submit to say it’s not a far stretch that looks much better for Target. So we’ll just leave it at that, but it’s certainly not — it’s certainly very positive.