Target Hospitality Corp. Revenue Disclosure

2. Revenue

Total revenue under contracts recognized under ASC 606 was approximately $265.9 million for the year ended December 31, 2024, while $120.4 million was specialty rental income subject to the guidance of ASC 842 for the year ended December 31, 2024. Total revenue under contracts recognized under ASC 606 was $365.6 million for the year ended December 31, 2023, while $198 million was specialty rental income subject to the guidance of ASC 842 for the year ended December 31, 2023. Total revenue under contracts recognized under ASC 606 was $333.7 million for the year ended December 31, 2022, while $168.3 million was specialty rental income subject to the guidance of ASC 842 for the year ended December 31, 2022.

The following table disaggregates our services income by our two reportable segments as well as the All Other category: Hospitality and Facility Services-South (“HFS – South”), Government, and All Other for the years indicated below:  

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During the year ended December 31, 2024, the STFRC Contract in the Company’s Government segment was terminated effective August 9, 2024. The STFRC Contract was based on a fixed minimum lease revenue amount and for the years ended December 31, 2022 and 2023, contributed approximately $55.9 million and $55.9 million, respectively, in total consolidated revenue compared to approximately $38.3 million of revenue for the year ended December 31, 2024. As discussed in Note 20, the assets associated with the STFRC Contract were reactivated under the DIPC Contract effective March 5, 2025.

During the year ended December 31, 2023, the NP Partner executed the New PCC Contract that became effective on November 16, 2023, and included a term with a one-year base period through November 15, 2024, with an option to extend for up to four additional one-year periods and an option to extend for up to six months upon the conclusion of the base period or any of the option periods. The New PCC Contract did not result in any advanced payments that required an assessment of the amortization period. The New PCC Contract operates with similar structure to the Company’s prior government services contracts, which centered around minimum revenue amounts supported by the U.S. government. Additionally, this New PCC Contract includes occupancy-based variable services revenue that may fluctuate with active community population fluctuations. During the year ended December 31, 2024, the Company executed the first of four one-year extension options on the New PCC Contract along with an amendment, effective November 16, 2024, which supports a community capable of serving up to 6,000 individuals. The minimum revenue amount provides for a minimum annual revenue contribution of approximately $168 million, which decreased from $178 million pursuant to the amendment on November 16, 2024. The New PCC contract contains both a lease component under ASC 842 and a service or non-lease component under ASC 606.  The November 16, 2024 amendment of the New PCC Contract resulted in a re-assessment of the allocation of the contract consideration to the lease component under ASC 842 and the services or non-lease component under ASC 606, which did not result in a material change from the previous allocation of contract consideration done at the origination date of the New PCC Contract on November 15, 2023, other than allocating a lower minimum annual revenue contribution of $168 million compared to the prior $178 million amount.  All revenue associated with the New PCC contract and the related amendment, is attributable to the Government reportable segment. In February 2025, the Company received notice that the U.S. government terminated the New PCC Contract with the NP Partner and the NP Partner terminated the New PCC Contract as discussed in Note 20.

Allowance for Credit Losses

The Company maintains allowances for credit losses. These allowances reflect our estimate of the amount of our receivables that we will be unable to collect based on historical write-off experience and, as applicable, current conditions and reasonable and supportable forecasts that affect collectability. Our estimate could require a change based on changing circumstances, including changes in the economy or in the circumstances of individual customers.

Contract Assets and Liabilities

We do not have any contract assets.

Contract liabilities primarily consist of deferred revenue that represent payments for room nights that the customer may use in the future as well as an advanced payments for community builds, and mobilization of asset activities related to community expansions that are being recognized over the related contract period. Activity in the deferred revenue accounts as of the dates indicated below was as follows:

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As a result of the termination of the STFRC Contract effective August 9, 2024 in the Company’s Government Segment, the Company recognized the $4.9 million of deferred revenue remaining at December 31, 2023 associated with this contract during the year ended December 31, 2024 as is reflected in the above table, as no further service obligations exist.

As of December 31, 2024, the following table discloses the estimated revenues under ASC 606 related to performance obligations that are unsatisfied (or partially unsatisfied) and when we expect to recognize the revenue, and only represents revenue expected to be recognized from contracts where the price and quantity of the product or service are fixed (in thousands):

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The Company applied some of the practical expedients in ASC 606, including the “right to invoice” practical expedient, and does not disclose consideration for remaining performance obligations for contracts without minimum revenue amounts or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Due to the application of these practical expedients as well as excluding rental income revenue subject to the guidance included in ASC 842, the table above represents only a portion of the Company’s expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues.