Target Hospitality Corp. Segments Disclosure
19. Business Segments
The Company has two reportable operating segments as defined below. The aggregate external revenues of these reportable segments exceeded 75% of the Company’s consolidated revenues for all periods presented. The remaining operating segments were combined in the “All Other” category.
The Company is organized primarily on the basis of geographic region and customer industry group and operates in two reportable segments. These reportable segments are also operating segments. Resources are allocated, and performance is assessed by our CEO, whom we have determined to be our Chief Operating Decision Maker (CODM).
Our remaining operating segments have been consolidated and included in an “All Other” category.
The following is a brief description of our reportable segments and a description of business activities conducted by All Other.
HFS – South — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers in the natural resources and development industry located primarily in Texas and New Mexico.
Government — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers with Government contracts located in Texas.
All Other — Segment operations consist primarily of revenue from specialty rental and vertically integrated hospitality services revenue from customers primarily in the natural resources and development industry located outside of the HFS – South segment.
The accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies” for the Company in Note 1. The Company evaluates performance of their segments and allocates resources to them based on revenue and adjusted gross profit. Adjusted gross profit and Adjusted cost of sales for the CODM’s analysis includes the services and specialty rental costs in the financial statements and excludes depreciation, loss on impairment, and certain severance costs.
As discussed in Note 1, the Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. As such, the below information about our reportable segments now reflects significant expense categories based on the requirements of this newly adopted ASU 2023-07.
The table below presents information about reported segments for the years ended December 31:
2024 | ||||||||||||
|
| HFS – South |
| Government |
| All Other |
| Total | ||||
Revenue | $ | 149,931 | $ | 224,650 | $ | 11,691 | (a) | $ | 386,272 | |||
Less: Adjusted Cost of Sales (b) | ||||||||||||
Labor costs | $ | 40,044 | $ | 10,706 | $ | 5,066 | $ | 55,816 | ||||
Outside service | 293 | 100 | 1 | 394 | ||||||||
Community operating costs | 51,286 | 23,979 | 5,833 | 81,098 | ||||||||
Repairs and maintenance | 5,144 | 3,375 | 680 | 9,199 | ||||||||
Other costs | 2,342 | 1,222 | 858 | 4,422 | ||||||||
Adjusted gross profit | $ | 50,822 | $ | 185,268 | $ | (747) | $ | 235,343 | ||||
Depreciation of specialty rental assets | $ | 21,577 | $ | 32,010 | $ | 3,577 | $ | 57,164 | ||||
Capital expenditures | $ | 15,806 | $ | 15,498 | $ | 445 | ||||||
Total Assets | $ | 176,907 | $ | 190,751 | $ | 27,389 | $ | 395,047 | ||||
2023 | ||||||||||||
|
| HFS – South |
| Government |
| All Other |
| Total | ||||
Revenue | $ | 148,677 | $ | 403,724 | $ | 11,207 | (a) | $ | 563,608 | |||
Less: Adjusted Cost of Sales (b) | ||||||||||||
Labor costs | $ | 37,652 | $ | 18,643 | $ | 4,681 | $ | 60,976 | ||||
Outside service | 497 | 148 | 10 | 655 | ||||||||
Community operating costs | 50,592 | 43,265 | 6,474 | 100,331 | ||||||||
Repairs and maintenance | 4,464 | 5,673 | 579 | 10,716 | ||||||||
Other costs | 4,028 | 3,515 | 1,437 | 8,980 | ||||||||
Adjusted gross profit | $ | 51,444 | $ | 332,480 | $ | (1,974) | $ | 381,950 | ||||
Depreciation of specialty rental assets | $ | 24,557 | $ | 39,984 | $ | 4,085 | $ | 68,626 | ||||
Capital expenditures | $ | 33,729 | $ | 30,363 | $ | 514 | ||||||
Total Assets | $ | 184,453 | $ | 207,409 | $ | 30,987 | $ | 422,849 | ||||
2022 | ||||||||||||
| HFS – South |
| Government |
| All Other |
| Total | |||||
Revenue | $ | 132,373 | $ | 360,294 | $ | 9,318 | (a) | $ | 501,985 | |||
Less: Adjusted Cost of Sales (b) | ||||||||||||
Labor costs | $ | 29,474 | $ | 26,417 | $ | 3,730 | $ | 59,621 | ||||
Outside service | 726 | 645 | 23 | 1,394 | ||||||||
Community operating costs | 42,183 | 57,056 | 6,077 | 105,316 | ||||||||
Repairs and maintenance | 3,300 | 5,638 | 499 | 9,437 | ||||||||
Other costs | 2,132 | 23,940 | 184 | 26,256 | ||||||||
Adjusted gross profit | $ | 54,558 | $ | 246,598 | $ | (1,195) | $ | 299,961 | ||||
Depreciation of specialty rental assets | $ | 25,934 | $ | 22,165 | $ | 4,734 | $ | 52,833 | ||||
Capital expenditures | $ | 8,686 | $ | 130,871 | $ | 339 | ||||||
A reconciliation of total segment adjusted gross profit to total consolidated income before income taxes for years ended as of the dates indicated below, is as follows:
| December 31, 2024 |
| December 31, 2023 |
| December 31, 2022 | ||||
Total reportable segment adjusted gross profit | $ | 236,090 | $ | 383,924 | $ | 301,156 | |||
Other adjusted gross profit | (747) | (1,974) | (1,195) | ||||||
Depreciation and amortization | (72,806) | (83,977) | (67,665) | ||||||
Selling, general, and administrative expenses | (54,258) | (56,126) | (57,893) | ||||||
Other income (expense), net | 502 | (1,241) | (36) | ||||||
Loss on extinguishment of debt | - | (2,279) | - | ||||||
Interest expense, net | (16,619) | (22,639) | (36,323) | ||||||
Change in fair value of warrant liabilities | 675 | 9,062 | (31,735) | ||||||
Consolidated income before income taxes | $ | 92,837 | $ | 224,750 | $ | 106,309 | |||
A reconciliation of total segment assets to total consolidated assets as of the dates indicated below is as follows:
|
| December 31, | December 31, | |||
2024 | 2023 | |||||
Total reportable segment assets | $ | 367,658 | $ | 391,862 | ||
Other assets | 29,167 | 32,871 | ||||
Other unallocated amounts | 328,949 | 269,620 | ||||
Total Assets | $ | 725,774 | $ | 694,353 | ||
Other unallocated assets are not included in the measure of segment assets provided to or reviewed by the CODM for assessing performance and allocating resources, and as such, are not allocated. Other unallocated assets consist of the following as reported in the consolidated balance sheets of the Company as of the dates indicated below:
|
| December 31, | December 31, | |||
2024 | 2023 | |||||
Total current assets | $ | 249,336 | $ | 180,500 | ||
Other intangible assets, net | 52,807 | 66,282 | ||||
Operating lease right-of-use assets, net | 24,935 | 19,698 | ||||
Deferred financing costs revolver, net | 1,871 | 2,479 | ||||
Other non-current assets | - | 661 | ||||
Total other unallocated amounts of assets | $ | 328,949 | $ | 269,620 | ||
For 2024, 2023, and 2022, revenues from the Company’s Government segment were from two customers and represented approximately $224.7 million, $403.7 million, and $360.3 million of the Company’s consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. Revenues from one customer within the Government segment represented approximately 48%, 62%, and 61% of the Company’s consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. Revenues from another customer within the Government segment represented approximately 9.9%, 9.9%, and 11% of the Company’s consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, the Government segment was comprised of a single customer following the termination of the STFRC Contract effective August 9, 2024 as discussed in Note 2. As discussed in Note 20, the contract associated with the remaining customer included in the Government segment as of December 31, 2024, was terminated on February 21, 2025. Additionally, as discussed in Note 20, the community of assets associated with the prior STFRC Contract within the Government segment were reactivated on March 5, 2025 under the new DIPC Contract defined in Note 20 and the operating results and related assets associated with the new DIPC Contract will continue to be reported within the Governmenmt segment.
There were no single customers from the HFS – South segment for the years ended December 31, 2024, 2023 and 2022 that represented 10% or more of the Company’s consolidated revenues. There were no revenues generated from transactions between reportable operating segments for the years ended December 31, 2024, 2023, and 2022, respectively.
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About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.