Target Hospitality Corp. Goodwill & Intangibles Disclosure
5. Goodwill and Other Intangible Assets, net
The financial statements reflect goodwill from previous acquisitions that is all attributable to the HFS – South business segment and reporting unit.
Changes in the carrying amount of goodwill were as follows:
| HFS – South | ||
Balance at December 31, 2022 | $ | 41,038 | |
Changes in Goodwill | - | ||
Balance at December 31, 2023 | 41,038 | ||
Changes in Goodwill | - | ||
Balance at December 31, 2024 | $ | 41,038 | |
In connection with our annual assessment on October 1, we performed a qualitative assessment based on information currently available in determining if it was more likely than not that the fair value of the Company’s HFS – South reporting unit was less than the carrying amount. This assessment considered various factors, including changes in the carrying value of the reporting unit, forecasted operating results, other qualitative key events and circumstances, including the macroeconomic environment, the industry, market conditions, cost factors, and events specific to the reporting unit. Based on the results of this qualitative assessment, management concluded that it is not more likely than not that the fair value of the Company's HFS – South reporting unit was less than its carrying amount.
Intangible assets other than goodwill at the dates indicated below consisted of the following:
December 31, 2024 | |||||||||||
Weighted | Gross | ||||||||||
average | Carrying | Accumulated | Net Book | ||||||||
| remaining lives |
| Amount |
| Amortization |
| Value | ||||
Intangible assets subject to amortization |
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Customer relationships |
| 2.9 | $ | 133,105 | $ | (96,911) | $ | 36,194 | |||
Non-compete agreement | 3.1 | 349 | (136) | 213 | |||||||
Total | 133,454 | (97,047) | 36,407 | ||||||||
Indefinite lived assets: |
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Tradename |
|
|
| 16,400 |
| — |
| 16,400 | |||
Total intangible assets other than goodwill |
|
| $ | 149,854 | $ | (97,047) | $ | 52,807 | |||
December 31, 2023 | |||||||||||
Weighted | Gross | ||||||||||
average | Carrying | Accumulated | Net Book | ||||||||
| remaining lives |
| Amount |
| Amortization |
| Value | ||||
Intangible assets subject to amortization | |||||||||||
Customer relationships |
| 3.9 | $ | 133,105 | $ | (83,505) | $ | 49,600 | |||
Non-compete agreement | 4.1 | 349 | (67) | 282 | |||||||
Total | 133,454 | (83,572) | 49,882 | ||||||||
Indefinite lived assets: |
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|
|
|
| |||
Tradename |
|
|
| 16,400 |
| — |
| 16,400 | |||
Total intangible assets other than goodwill |
|
| $ | 149,854 | $ | (83,572) | $ | 66,282 | |||
The aggregate amortization expense for intangible assets subject to amortization was $13.5 million, $13.4 million and $13.3 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included in other depreciation and amortization in the consolidated statements of comprehensive income.
In January of 2023, the Company purchased a group of assets consisting of land, specialty rental assets (modular units, site work, and furniture & fixtures) and intangibles for approximately $18.6 million, of which approximately $4.5 million is included within this intangible asset group comprised of approximately $4.2 million of customer relationships and approximately $0.3 million related to a non-compete agreement. This acquisition was completed in order to support growth of the HFS – South segment discussed in Note 19, which was funded by cash on hand. The acquisition was accounted for as an asset acquisition. The Company allocated the total purchase price to identifiable tangible and intangible assets based on their relative fair values, which resulted in the entire purchase price being allocated to land, specialty rental assets and intangible assets.
The estimated aggregate amortization expense as of December 31, 2024 for each of the next five years and thereafter is as follows:
2025 | $ | 13,475 |
2026 | 12,879 | |
2027 | 8,270 | |
2028 | 778 | |
2029 | 525 | |
Thereafter | 480 | |
Total | $ | 36,407 |
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.