TH - Target Hospitality Announces Details of $3.3 Billion Contract Award for Pecos Humanitarian Community | Benzinga
THE WOODLANDS, Texas, Dec. 13, 2023 /PRNewswire/ -- 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 announced certain contract terms associated with the November 6, 2023 humanitarian contract award for the Influx Care Facility ("ICF") located at Target's Pecos Children's Center ("PCC") community ("ICF Contract").
The $75 billion Indefinite Delivery, Indefinite Quantity ("IDIQ") contract adheres to the customary funding process noted in contracts of a similar nature and has a five-year period of performance with the ability to extend for an additional five years. The ICF Contract, funded through the IDIQ, has a standard one-year base period of performance, with four one-year option periods, and allows for up to $3.3 billion of potential funding through 2028, with the opportunity of additional funding access through 2033, if the IDIQ 5-year option is exercised. Starting in 2021, PCC remains one of the only active ICF sites in the U.S. and the IDIQ award establishes the foundation for 13 years of continuous humanitarian solutions at PCC.
In conjunction with the ICF Contract, Target and its non-profit partner have entered into a new PCC contract ("New PCC Contract") which continues to leverage the unique strengths of both organizations. Under the New PCC Contract, PCC will maintain similar facility size and operational scope compared to the previous contract, commenced in May 2022. In addition, the New PCC Contract will operate similarly to the previous contract, which centered around annual minimum lease revenue commitments with additional occupancy-based variable revenue based on active community census. Annual funding commitments are expected to be completed through normal course annual governmental appropriations as provided within the IDIQ.
The New PCC Contract has an effective date of November 16, 2023, and is expected to provide for approximately $178 million of minimum annual lease revenue commitments with expected 5-year cumulative minimum lease revenue commitments of approximately $892 million through 2028, assuming the U.S. government exercises all option periods.
Inclusive of all potential occupancy-based variable revenue, total potential value of the New PCC Contract could exceed $1.7 billion of cumulative revenue through 2028, assuming the U.S. government exercises all option periods.
"We are pleased with the outcome of our contract under the multi-year IDIQ award for our highly customized PCC community. This contract validates the critical nature of our PCC community, while illustrating the benefits of our focused strategic diversification efforts over the past several years. Target has served as a trusted provider of critical humanitarian solutions to the U.S government for nearly a decade and we are excited to continue pursuing an expanding pipeline of growth opportunities focused on broadening our portfolio of long-term contract commitments supporting the U.S. government and our partners," stated Brad Archer, President and Chief Executive Officer.
As a result of the effective date of the New PCC Contract, the Company is providing an updated full year 2023 financial outlook, excluding acquisitions of:
- Total revenue between $550 and $560 million
- Adjusted EBITDA(1) between $330 and $340 million
- Total capital spending between $30 and $35 million, excluding acquisitions
- Approaching zero net debt by year end 2023
The 2023 financial outlook includes non-cash infrastructure revenue amortization of approximately $117 million associated with the PCC community enhancements and will not recur ...