Executive Summary

Q1 2025 revenue was $69.9M with adjusted EBITDA of $21.6M; the quarter reflected a pivot from prior government contracts to new awards, producing a net loss of $6.5M and diluted EPS of ($0.07) .
Company reiterated FY2025 guidance: total revenue $265–$285M and adjusted EBITDA $47–$57M, despite near-term margin dilution from government contract transitions; no change versus prior update .
Strategic catalysts: 5-year $246M Dilley contract (fixed monthly revenue, full run-rate by September), ~$65M Workforce Hub construction revenue with 25–30% margin in 2025, and redemption of $181.4M Senior Notes cutting annual interest by ~$19.5M .
Additional upside optionality from seat on DHS/ICE’s $4.0B Strategic Sourcing Vehicle (SSV), expanding eligibility for immigration-related awards beyond existing assets .

What Went Well and What Went Wrong

What Went Well

Secured two multi-year wins: $246M Dilley (fixed monthly revenue; ~$30M in 2025; full economics in September as 2,400 beds are activated) and $140M Workforce Hub through 2027; construction cadence drives ~$65M in 2025 at 25–30% margin .
Liquidity and capital structure strengthened: redeemed all $181.4M Senior Notes, expected annual interest savings of ~$19.5M; ended Q1 with ~$169M total available liquidity and net leverage of 0.1x .
Management emphasized diversification and pipeline breadth (critical minerals, data centers, other industrial projects): “We are excited about these opportunities and believe Target’s capabilities and proven reputation uniquely position the company” .

What Went Wrong

Government segment reset drove steep YoY declines: revenue fell to $69.9M from $106.7M, adjusted EBITDA to $21.6M from $53.7M, and consolidated utilization to 60% from 87%, following PCC and STFRC terminations .
HFS-South ADR pressure: ADR declined to $70.07 from $74.89 YoY amid competitive conditions; CFO expects similar dynamics through the year .
Carrying costs on idle West Texas assets ($2–$3M per quarter) and phased Dilley reopening will weigh on margins in Q2/Q3 before normalizing post full activation .

Financial Results

Consolidated P&L Snapshot

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$95.191	$83.688	$69.897
Net Income ($USD Millions)	$20.094	$12.544	($6.459)
Diluted EPS ($USD)	$0.20	$0.12	($0.07)
Adjusted EBITDA ($USD Millions)	$49.705	$41.147	$21.571

Notes: YoY declines driven by PCC and STFRC terminations; sequential declines reflect transition phase before Dilley and Workforce Hub ramp .

Segment Breakdown (Q1 2025 vs Q1 2024)

Segment	Q1 2024 Revenue ($M)	Q1 2025 Revenue ($M)	Q1 2024 Adj. Gross Profit ($M)	Q1 2025 Adj. Gross Profit ($M)
Government	$67.607	$25.717	$52.433	$19.178
HFS – South	$36.934	$36.068	$12.842	$11.033
All Other (incl. WHS)	$2.131	$8.112	($1.426)	$1.425

HFS – South KPIs

KPI	Q1 2024	Q1 2025
ADR ($)	$74.89	$70.07
Average Utilized Beds	5,363	5,653
Utilization (%)	72%	76%

Consolidated Utilization KPIs

KPI	Q1 2024	Q1 2025
Average Utilized Beds	14,049	9,898
Utilization (%)	87%	60%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($M)	FY2025	$265–$285	$265–$285	Maintained
Adjusted EBITDA ($M)	FY2025	$47–$57	$47–$57	Maintained
Dilley Revenue ($M)	FY2025	N/A	~$30	New
Workforce Hub Construction Revenue ($M)	FY2025	N/A	~$65 (25–30% margin)	New
Annual Interest Expense Savings ($M)	Ongoing	N/A	~$19.5	New

Management also noted recurring corporate expense of ~$10M in Q1, with ongoing cost optimization focus; not formal guidance but directional context .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Government segment and immigration policy	YoY declines tied to PCC amortization end and STFRC termination; strong liquidity	Revised FY2025 outlook reflecting PCC termination and Dilley award	Dilley fixed-revenue contract ramping; full economics by September; West Texas asset interest persists pending funding	Stabilizing-to-Improving post ramp
Diversification (critical minerals)	Early commentary on pipeline strength	Workforce Hub awarded; ~$68M minimum 2025 revenue cited in outlook narrative	WHS construction driving ~$65M 2025 revenue with 25–30% margin; services revenue through 2027	Improving
AI/data centers industrial cycle	Limited explicit reference	Discussion focused on diversification and growth pipeline	Heightened focus on data center projects (3–6+ year builds); “moved the ball down the field” on several opportunities	Improving
ADR and HFS pricing	Solid HFS demand; ADR mid-70s	HFS ADR ~$72; utilization ~73%	ADR pressure ($70.07) in competitive market; similar cadence expected through 2025	Slightly Deteriorating
Capital structure and liquidity	Total liquidity ~$353M; zero net leverage	Cash $191M; total liquidity ~$366M; Senior Notes redemption plan	Senior Notes redeemed; total liquidity ~$169M; net leverage 0.1x	Optimized, lower interest burden
Regulatory/SSV	N/A	N/A	Awarded seat on $4.0B DHS/ICE SSV, expanding award eligibility	Improving optionality

Management Commentary

CEO tone: “We delivered a strong first quarter marked by sound business fundamentals and continued momentum executing on recent contract wins... We remain focused on executing our strategy… to deliver consistent results through a variety of business cycles” .
CFO detail: “First quarter total revenue was approximately $70 million with adjusted EBITDA of approximately $22 million… Government segment produced approximately $26 million… declines offset by Dilley ramp” .
Strategic pipeline: “Expansion and diversification further illustrate our ability to utilize our distinct core competencies… opportunities include large industrial projects: technology infrastructure, critical minerals…” .
Government assets: “The community [Dilley] was able to receive an active population ahead of schedule… West Texas facility is ready for immediate occupancy… timing remains uncertain pending funding” .

Q&A Highlights

Government idle assets and West Texas: Multiple tours and strong interest; expectation West Texas fits acquisition plan once funding is approved; broader pipeline across DHS/ICE and DoD noted .
Dilley ramp and margins: Accelerated revenue rent schedule as neighborhoods open; margins bottom in Q2 during ramp; full 2,400-bed economics in September; Q4 likely best quarter from contract run-rate .
Workforce Hub cadence: ~$65M construction revenue recognized mostly in Q2/Q3 (wrap in Q4) with 25–30% margin; services revenue through 2027; potential multi-phase project extends beyond 2027 .
HFS ADR trends: Competitive pricing environment; ADR down YoY; utilization slightly up; CFO expects remaining quarters to look similar to Q1 .
Asset flexibility and M&A: Ability to repurpose HFS assets to data centers/mining; near-term focus on organic growth; inorganic considered medium/long term .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2025 revenue and EPS was unavailable for the requested periods; therefore, we cannot assess beats/misses versus Street for this quarter.
Near-term estimate updates should incorporate fixed-monthly Dilley revenue cadence (full economics from September) and ~$65M Workforce Hub construction revenue concentrated in Q2/Q3 with 25–30% margin, plus ~$19.5M annual interest savings from note redemption .

Key Takeaways for Investors

The transition in the Government segment created near-term revenue/margin pressure, but fixed-revenue Dilley and the WHS construction/services cadence should improve run-rate metrics starting late Q3/Q4; watch September activation milestone for inflection timing .
Capital structure now cleaner post Senior Notes redemption; the ~$19.5M annual interest savings boosts EPS/FCF leverage to contract ramp timing .
HFS-South remains resilient with higher utilization offsetting ADR pressure; management expects similar pricing dynamics for the remainder of 2025 .
Pipeline breadth is notable (data centers, critical minerals, government SSV), expanding addressable market beyond existing asset base; the SSV seat is a tangible eligibility catalyst .
FY2025 guidance maintained despite transition headwinds, signaling confidence in ramp schedules and cost control; monitor execution against Dilley phased milestones and WHS construction delivery .
Carrying costs on idle assets ($2–$3M/quarter) and competitive ADRs are the main near-term drags; resolution of West Texas funding could swing margins positively .
Trading lens: Near-term volatility likely around quarterly margin cadence; catalysts include SSV-related awards, confirmation of full Dilley activation by September, and visibility on multi-phase WHS expansion .

Target Hospitality Corp. (TH)·Q1 2025 Earnings Summary