Target Hospitality Corp (TH) 2020 Q3 法說會逐字稿

Good day and welcome to the Target Hospitality third quarter earnings call. (Operator Instructions) Please note this event is being recorded.

美好的一天，歡迎來到 Target Hospitality 第三季度財報電話會議。 （操作員說明）請注意正在記錄此事件。

I'll now like to turn the conference to Mark Schuck. Please go ahead.

我現在想把會議轉給 Mark Schuck。請繼續。

Thank you. Good morning, everyone, and welcome to Target Hospitality's third quarter 2020 earnings call. The press release we issued this morning, outlining our third quarter results, can be found in the Investors section of our website. In addition, a replay of this call will be archived on our website for a limited time.

謝謝你。各位早上好，歡迎來到 Target Hospitality 2020 年第三季度財報電話會議。我們今天上午發布的新聞稿概述了我們的第三季度業績，可以在我們網站的投資者部分找到。此外，此次通話的重播將在我們的網站上限時存檔。

Please note, the cautionary language regarding forward-looking statements contained in this press release. This same language applies to statements made on today's conference call. This call will contain time-sensitive information as well as forward-looking statements which are only accurate as of today, November 9, 2020. Target Hospitality expressly disclaims any obligation to update or amend the information contained in this conference call to reflect events or circumstances that may arise after today's date, except as required by applicable law. For a complete list of risks and uncertainties that may affect future performance, please refer to Target Hospitality's periodic filings with the SEC.

請注意，有關本新聞稿中包含的前瞻性陳述的警示性語言。同樣的語言也適用於今天電話會議上的發言。本次電話會議將包含時效性信息以及前瞻性陳述，這些信息僅在 2020 年 11 月 9 日今天才准確。Target Hospitality 明確表示不承擔任何更新或修改本次電話會議中包含的信息以反映事件或情況的義務除非適用法律要求，否則可能會在今天之後出現。有關可能影響未來業績的風險和不確定性的完整列表，請參閱 Target Hospitality 定期向美國證券交易委員會提交的文件。

We will discuss non-GAAP financial measures on today's call. Please refer to the table in our earnings release posted in the Investors section of our website to find a reconciliation of non-GAAP financial measures referenced in today's call and their corresponding GAAP measures.

我們將在今天的電話會議上討論非 GAAP 財務措施。請參閱我們網站“投資者”部分發布的收益報告中的表格，以查找今天電話會議中引用的非 GAAP 財務指標及其相應的 GAAP 指標的對賬。

Finally, as previously announced on November 5, 2020, Arrow Holdings, an affiliate of TDR Capital, proposed to acquire all outstanding shares of common stock of Target Hospitality it or affiliates do not already own. The Board of Directors of Target Hospitality intends to establish a special committee of independent directors to evaluate this proposal. Management will be unable to comment on this proposal or the evaluation process during today's call. In view of this ongoing process, following today's call, we will not open the line for questions.

最後，正如此前於 2020 年 11 月 5 日宣布的那樣，TDR Capital 的關聯公司 Arrow Holdings 提議收購其或關聯公司尚未擁有的 Target Hospitality 的所有已發行普通股。 Target Hospitality 董事會擬成立一個獨立董事特別委員會來評估該提議。在今天的電話會議中，管理層將無法對此提議或評估過程發表評論。鑑於這個正在進行的過程，在今天的電話會議之後，我們將不會打開提問熱線。

Leading the call today will be Brad Archer, President and Chief Executive Officer; followed by Eric T. Kalamaras, Executive Vice President and Chief Financial Officer.

總裁兼首席執行官 Brad Archer 將主持今天的電話會議；隨後是執行副總裁兼首席財務官 Eric T. Kalamaras。

I will now turn the call over to our Chief Executive Officer, Brad Archer.

我現在將把電話轉給我們的首席執行官布拉德阿徹。

Thanks, Mark. Good morning, everyone, and thank you for joining us on the call today. In addition to discussing our third quarter performance, I will touch on the recent trends we have seen across our business as well as our continued priorities amidst persistent macro uncertainties.

謝謝，馬克。大家早上好，感謝您今天加入我們的電話會議。除了討論我們第三季度的業績外，我還將談談我們在整個業務中看到的近期趨勢，以及在持續存在的宏觀不確定性中我們的持續優先事項。

Target's third quarter results are a testament to the company's ability to successfully navigate a challenging and uncertain operating environment. We have taken the appropriate steps to align with customer demand while creating a more efficient operating structure. These steps have allowed us to meet increased customer demand with little incremental cost, providing support for margin expansion during the third quarter. This allowed us to deliver strong third quarter adjusted EBITDA of $17 million. Equally impressive, we reduced our outstanding borrowings by $15 million in the third quarter, further enhancing our liquidity position.

Target 的第三季度業績證明了該公司有能力成功應對充滿挑戰和不確定的運營環境。我們已採取適當的步驟來滿足客戶需求，同時創建更高效的運營結構。這些步驟使我們能夠以很少的增量成本滿足不斷增長的客戶需求，為第三季度的利潤率擴張提供支持。這使我們能夠實現強勁的第三季度調整後 EBITDA 1700 萬美元。同樣令人印象深刻的是，我們在第三季度將未償還借款減少了 1500 萬美元，進一步增強了我們的流動性狀況。

While our focus remains on preserving our financial strength, our first priority is always the health and well-being of our employees and customers. With COVID-19 cases continuing to rise, we have remained vigilant on adhering to our operational response plan. And as a result, we have not had any cases of COVID-19 impact our business.

雖然我們的重點仍然是保持我們的財務實力，但我們的首要任務始終是我們員工和客戶的健康和福祉。隨著 COVID-19 病例的持續增加，我們一直保持警惕，遵守我們的運營響應計劃。因此，我們沒有任何 COVID-19 案例影響我們的業務。

Now turning to the recent trends we have seen across the business. We remain encouraged by the continuing positive trends in customer activity levels, which contributed to steady increases in occupancy and utilization during the quarter. These trends, along with our contract structure, including exclusivity, has allowed us to benefit from improving demand for our premium accommodations. Further, the increase in customer activity resulted in the reopening of several communities during the quarter to meet increased demand.

現在轉向我們在整個業務中看到的最新趨勢。我們仍然對客戶活動水平的持續積極趨勢感到鼓舞，這有助於本季度入住率和利用率的穩步增長。這些趨勢以及我們的合同結構（包括獨家經營權）使我們能夠從對我們優質住宿的需求增加中受益。此外，客戶活動的增加導致本季度多個社區重新開放以滿足不斷增長的需求。

We continue to benefit from our network scale and first-class customer base, who find increased value in allocating labor to our premium hospitality and accommodation service offerings.

我們繼續受益於我們的網絡規模和一流的客戶群，他們發現將勞動力分配給我們的優質酒店和住宿服務產品會增加價值。

As it relates to our Government segment, we are pleased with the outcome of contract renewal discussion with CoreCivic. We were able to renew, and extend our lease and services agreement, servicing the STFRC for an additional 5 years through September 2026. The extension adds approximately $265 million in committed revenue over the contract term.

由於它與我們的政府部門有關，我們對與 CoreCivic 續簽合同的討論結果感到滿意。我們能夠續籤和延長我們的租賃和服務協議，為 STFRC 提供額外 5 年的服務，直至 2026 年 9 月。該延期在合同期限內增加了約 2.65 億美元的承諾收入。

As we move into the fourth quarter and begin looking into 2021, the path of the global economic recovery remains unclear. While we have seen meaningful increases in key operating metrics, we are aware of the continued economic uncertainty surrounding the recovery. As COVID-19 cases continue to rise, some countries have resumed restrictions on economic activity, causing the pace and trajectory of the demand recovery to remain volatile and fragile. If the persistent global pandemic results in additional heightened control measures for a prolonged period of time, further demand disruption could occur.

隨著我們進入第四季度並開始展望 2021 年，全球經濟復甦的道路仍不明朗。雖然我們看到關鍵運營指標出現顯著增長，但我們意識到圍繞復甦的持續經濟不確定性。隨著 COVID-19 病例繼續增加，一些國家恢復了對經濟活動的限制，導致需求復甦的速度和軌跡仍然不穩定和脆弱。如果持續的全球大流行導致在較長時間內採取額外的加強控制措施，則可能會出現進一步的需求中斷。

Amidst these market uncertainties, we remain focused on what we can control, effectively managing our cost structure to match network demand, continuing to provide our first-class customer base premium service offerings, and prioritizing the health and safety of our employees and customers.

在這些市場不確定性中，我們仍然專注於我們可以控制的事情，有效地管理我們的成本結構以滿足網絡需求，繼續提供我們一流的客戶群優質服務，並將我們員工和客戶的健康與安全放在首位。

We have positioned Target to be successful through a variety of business cycles. Target's network has achieved significant scale in its operating areas. This scale, along with a focus on cost containment, has allowed Target to benefit from a more efficient operating structure. These attributes, along with our premium accommodations, set us apart and positions Target to continue benefiting as market demand increases for its hospitality and accommodation services.

我們已將 Target 定位為在各種商業周期中取得成功。 Target 的網絡在其經營範圍內取得了顯著的規模。這種規模以及對成本控制的關注使 Target 能夠從更高效的運營結構中受益。這些屬性以及我們的優質住宿使我們脫穎而出，並使 Target 能夠隨著市場對其酒店和住宿服務的需求增加而繼續受益。

I'll now turn the call over to Eric to discuss our third quarter results in more detail.

我現在將電話轉給埃里克，更詳細地討論我們第三季度的業績。

Thank you, Brad, and good morning, everyone. In the third quarter, we experienced continued improvements in utilization from lows experienced during the second quarter. Combined with meaningful reductions in both cost of services and corporate expenses, we delivered strong third quarter financial results.

謝謝你，布拉德，大家早上好。在第三季度，我們的利用率從第二季度的低點持續改善。結合服務成本和公司開支的顯著降低，我們實現了強勁的第三季度財務業績。

Third quarter 2020 total revenue was approximately $48 million and adjusted EBITDA was approximately $17 million. Third quarter discretionary cash flow was approximately $3 million, contributing to over $27 million in year-to-date discretionary cash flow.

2020 年第三季度總收入約為 4800 萬美元，調整後的 EBITDA 約為 1700 萬美元。第三季度的可自由支配現金流量約為 300 萬美元，貢獻了年初至今的可自由支配現金流量超過 2700 萬美元。

Turning to our segment performance. The Permian accommodations delivered third quarter revenue of $19 million compared to $57 million in the same period last year. This decrease was driven by lower utilization as customer accommodation demand was sharply reduced in response to the global pandemic and declining oil prices and the impact it had on regional headcount needs for our end customers.

轉向我們的細分市場表現。二疊紀酒店第三季度的收入為 1900 萬美元，而去年同期為 5700 萬美元。這一下降的原因是由於全球大流行病和油價下跌以及它對我們最終客戶的區域員工需求的影響導致客戶住宿需求急劇減少，因此利用率較低。

Our Bakken accommodations segment delivered revenue of approximately $1 million during the quarter compared to $6 million in the same period last year. During the third quarter, we continued to see incremental improvements in customer activity and demand across our accommodations assets, and have reopened several lodges across our network in response to increased demand.

我們的 Bakken 住宿部門在本季度實現了約 100 萬美元的收入，而去年同期為 600 萬美元。在第三季度，我們繼續看到客戶活動和我們住宿資產需求的逐步改善，並在我們的網絡中重新開放了幾家旅館以應對不斷增長的需求。

Our Government segment produced quarterly revenue of approximately $16 million. And we are pleased with the successful outcome of our contract renewal discussions with a 5-year extension adding approximately $265 million in committed revenue into 2026. The combination of this Government services contract renewal and the recent contract modifications has added, in total, over $325 million in committed revenue from 2021 into 2026.

我們的政府部門產生了大約 1600 萬美元的季度收入。我們很高興我們的合同續簽討論取得成功，延長 5 年，到 2026 年增加了約 2.65 億美元的承諾收入。這份政府服務合同續籤和最近的合同修改相結合，總共增加了超過 325 美元百萬的承諾收入從 2021 年到 2026 年。

Our all other segment, which consists primarily of construction fee revenue from the TC Energy pipeline project, had revenue of approximately $12 million for the third quarter compared to $2 million in the same period last year. Revenue increased as a result of TC Energy's continued construction activity on the project during the quarter. With the full project scope still pending, we anticipate limited activity associated with this project in the fourth quarter of 2020.

我們的所有其他部門，主要包括來自 TC Energy 管道項目的建築費收入，第三季度的收入約為 1200 萬美元，而去年同期為 200 萬美元。由於 TC Energy 在本季度繼續進行該項目的建設活動，收入有所增加。由於整個項目範圍仍懸而未決，我們預計 2020 年第四季度與該項目相關的活動有限。

Recurring corporate expenses for the quarter were approximately $7 million. We anticipate recurring corporate expenses to remain around $7 million to $8 million per quarter into 2021.

該季度的經常性公司開支約為 700 萬美元。我們預計到 2021 年每季度經常性企業支出將保持在 700 萬至 800 萬美元左右。

Capital expenditures for the third quarter were approximately $1 million, including minimal maintenance capital. Target has established a premium network with a substantial scale in its core operating regions. This allows Target to meet increasing demand for its hospitality and accommodation services with minimal capital spending, supporting strong margins and cash flow generation. Target anticipates capital expenditures to be less than $1 million through the remainder of 2020 or $8 million to $12 million for the full year.

第三季度的資本支出約為 100 萬美元，其中包括最低限度的維護資本。 Target已在其核心運營區域建立了具有相當規模的優質網絡。這使得 Target 能夠以最少的資本支出滿足對其酒店和住宿服務日益增長的需求，從而支持強勁的利潤率和現金流產生。 Target 預計，到 2020 年剩餘時間，資本支出將低於 100 萬美元，即全年 800 萬至 1200 萬美元。

We ended the quarter with $410 million of total long-term debt, including $70 million drawn on our revolving credit facility, and consolidated net leverage of 4.1x. And we continue to focus on debt reduction and utilized $15 million of third quarter's discretionary cash flow to reduce Target's outstanding borrowings, further enhancing our liquidity position.

本季度結束時，我們的長期債務總額為 4.1 億美元，其中包括從我們的循環信貸額度中提取的 7,000 萬美元，以及 4.1 倍的綜合淨槓桿率。我們繼續專注於減少債務，並利用第三季度可支配現金流量中的 1500 萬美元來減少 Target 的未償還借款，進一步增強我們的流動性狀況。

Even in this challenging environment, we expect to continue generating robust operating and discretionary cash flow, providing sufficient capacity to fund our business objectives and further reduce our outstanding borrowings in subsequent quarters.

即使在這個充滿挑戰的環境中，我們也希望繼續產生強勁的運營和可自由支配的現金流，提供足夠的能力來為我們的業務目標提供資金，並在隨後的幾個季度進一步減少我們的未償還借款。

As a reminder, our long-term debt consists of $340 million in senior secured notes due 2024 and $125 million asset-based lending facility, which has no near-term maturities or immediate financial covenants. That provides us significant flexibility and liquidity within our capital structure.

提醒一下，我們的長期債務包括 3.4 億美元的 2024 年到期的優先擔保票據和 1.25 億美元的基於資產的貸款工具，它們沒有短期到期或即時財務契約。這為我們的資本結構提供了顯著的靈活性和流動性。

As demand for Target's premium accommodations continues to improve, we have realized margin expansion as a result of our cost reduction initiatives, network scale and efficient operating structure. These positive trends have provided greater clarity on our 2020 financial outlook. As a result, we recently provided a revised 2020 financial outlook and are encouraged with the continued performance of the business.

隨著對 Target 優質住宿的需求不斷增加，我們通過降低成本的舉措、網絡規模和高效的運營結構實現了利潤率的增長。這些積極趨勢使我們對 2020 年的財務前景更加清晰。因此，我們最近提供了修訂後的 2020 年財務展望，並對業務的持續表現感到鼓舞。

Our cumulative response to these economic uncertainties has been taken with the focus of preserving liquidity, protecting our balance sheet and retaining financial flexibility. These principles will provide Target the ability to continue succeeding amidst prevailing macro uncertainties and be well positioned to take advantage of a more balanced market.

我們對這些經濟不確定性的累積反應一直以保持流動性、保護我們的資產負債表和保持財務靈活性為重點。這些原則將使 Target 有能力在普遍存在的宏觀不確定性中繼續取得成功，並有能力利用更加平衡的市場。

With that, I will now turn the call back over to Brad for his closing comments.

有了這個，我現在將把電話轉回給布拉德，聽取他的結束評論。

Thanks, Eric. As the economic outlook became increasingly uncertain earlier this year, we took decisive action to appropriately position the business with a heightened focus on preserving our financial strength. Target's strong third quarter results are a testament to the team's ability to quickly react to an uncertain operating environment.

謝謝，埃里克。由於今年早些時候經濟前景變得越來越不確定，我們採取了果斷行動來適當定位業務，更加註重保持我們的財務實力。 Target 強勁的第三季度業績證明了該團隊對不確定的運營環境做出快速反應的能力。

As we continue to navigate market uncertainty, we will remain focused on protecting our balance sheet with an emphasis on enhancing our liquidity position through continued debt reduction. We have created an expansive network with premium hospitality and services offerings, while partnering with high-quality, best-in-class customers. These attributes underpin our ability to continue succeeding even in challenging environment.

隨著我們繼續應對市場不確定性，我們將繼續專注於保護我們的資產負債表，重點是通過持續減少債務來增強我們的流動性狀況。我們創建了一個廣泛的網絡，提供優質的款待和服務，同時與高質量、一流的客戶合作。這些屬性鞏固了我們即使在充滿挑戰的環境中也能繼續取得成功的能力。

While the pace and trajectory of the economic recovery remain unclear, Target is well positioned and will continue to adapt to changing market conditions, ensuring the long-term success of the business.

雖然經濟復甦的步伐和軌跡仍不明朗，但 Target 已做好準備並將繼續適應不斷變化的市場條件，確保業務的長期成功。

I appreciate everyone joining on the call today and thank you again for your interest in Target Hospitality.

我感謝今天加入電話會議的每一個人，並再次感謝您對 Target Hospitality 的關注。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連接。