Investor Presentation June 2020 Disclaimer Cautionary Statement - - PowerPoint PPT Presentation

Investor Presentation

June 2020

Disclaimer

Cautionary Statement Regarding Forward-Looking Statements This presentation contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements.” You can identify these statements by the fact that they do not relate strictly to historical or current facts. Management cautions that any or all of Target Hospitality’s forward-looking statements may turn out to be wrong. Please read Target Hospitality’s annual, quarterly and current reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, including first quarter 2020 Form 10-Q and 2019 Form 10-K filed on March 13, 2020 for additional information about the risks, uncertainties and other factors affecting these forward-looking statements and Target Hospitality generally. Target Hospitality’s actual future results may vary materially from those expressed or implied in any forward-looking statements. All of Target Hospitality’s forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward- looking statements. In addition, Target Hospitality disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof. Non-GAAP Financial Measures This presentation contains non-GAAP financial measures including EBITDA and Adjusted EBITDA. Reconciliations of these historical measures to the most directly comparable GAAP financial measures are contained herein. To the extent required, statements disclosing the definitions, utility and purposes of these measures are set forth in our earnings press release for the first quarter 2020, which is available on our website free of charge at www.TargetHospitality.com.

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Permian 9,208 Gov't 2,400 Bakken 1,025 Other 345

12,978

Permian 68% Gov't 22% Bakken 6% Other(2) 4%

$310.8

Target Hospitality (NASDAQ: TH)

Largest provider of full turnkey accommodations Key differentiating attributes

▪ TH owns an extensive network of geographically relocatable assets with 12,978 average available beds across 25 locations ▪ TH leverages a large network with increased visibility from committed payment contracts and exclusivity provisions

Largest network 1 Premier customers with exclusive long-termrelationships Premium in-house catering + value-added hospitality services Long-standing and exclusive customer relationships; > 3 years wtd. avg. contract duration drives visibility 2 3 > 90% contract renewal rates; customer pull drives favorable pricing and long-term trusting partnerships

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(1) $ in millions, Total consolidated revenue for the twelve months ended March 31, 2020 (2) “Other” segment operations consist primarily of revenue from the construction phase of the contract with TransCanada Pipelines as well as specialty rental and vertically integrated hospitality services revenue from customers in the oil and gas industry located outside of the Permian and Bakken basins

LTM Total Revenue(1) Average Available Beds Strategically located network creates scale and flexibility that continues to drive profitability

Differentiated, Value-Added Business Model

Largest network serving … … premier customers through exclusive LT relationships with … … premium in-house catering + value-added hospitality services 2 1 3

Investor Presentation | 4 WHAT WE PROVIDE ENHANCES THEIR YOUR WORKERS PERFORMANCE OFF THE CLOCK ON THE CLOCK

01

FOOD ENGAGEMENT

07 02

REST PERFORMANCE

08 03

CONNECTION SAFETY

09 04

WELLNESS LOYALTY

10 05

COMMUNITY PRODUCTIVITY

11 06

HOSPITALITY PREPAREDNESS

12

TARGET 12

Significant Growth Milestones

May 7, 2019 Announces a new 200-bed community for a major, integrated E&P customer (Delaware Basin) February 26, 2019 Announces a new 400-bed community in Carlsbad, NM anchored by a major producer (Delaware Basin) March 15, 2019 Target Hospitality goes public July 1, 2019 Acquires Midland community from ProPetro (168 beds) June 25, 2019 Expands capacity by 200 beds at two new Delaware Basin communities June 19, 2019 Acquires 3 communitiesfrom Superior Lodging (575 beds)

M&A Organic

January 31, 2019 Renews and expands several multi-year contracts

A vailable Beds:

6,770 11,825 11,560 11,930 12,505 12,705 12,873

September 7, 2018 Acquires Signor Lodging

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Long-Standing Relationships with Blue-Chip Customers

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✔ Multi-year Investment horizons ✔ Value TH’s scale, network and first-class offerings ✔ Multi-year history of +90% contract renewal rates

Energy 78% Government 22%

$310.8

(1) $ in millions, Total consolidated revenue for the twelve months ended March 31, 2020

Strength of Customer Base Drives Continued Success

LTM Total Revenue(1)

Reliable Mutually Beneficial Partnership

✔ Strong, well capitalized, credit worthy, customer base ✔ Top 5 energy customers avg. enterprise value ~$24Bn ✔ Representing +45% of LTM energy revenue ✔ Contract modifications demonstrate strength in customer relationships ✔ Term extensions provide TH with greater visibility on long-term revenue ✔ Maintained contract integrity

✔Unique, hard to replicate asset ✔ Best-in-class facility ✔ Local community support ✔ Long-term land lease ✔ Stable revenue stream ✔ Expansion opportunity

TH Provides CoreCivic Provides

Attractive Exposure to Government End Market

South Texas Family Residential Center (STFRC)

▪

STFRC established in 2015 in Dilley, Texas

–

85-acre open complex

–

Four neighborhood communities

• Each consisting of individual family unit accommodations, a playground and recreational facilities, as well as 24-hour

access to snacks and refreshments –

State of the art education facilities

• K-12 full service interactive classrooms
• ~ 7,000 sq. ft. library with over 26,000 books

▪

Ideal solution meeting government need to house asylumseeking women and children family units

–

2,400 average available beds with a multi-year lease through2021

–

Opportunity for facility expansion ▪

Provide catering and facility maintenance servicesonly

–

Over 9 million scratch meals served since inception ▪

Approved GSA vendor status; sub-contractor ofCoreCivic

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12 hour catering services

▪

24/7 snacks and refreshments

▪

Cafeteria maintenance/management

▪

Maintenance of employee facilities

▪

Admission processing

▪

Healthy and safe accommodations

▪

Maintenance of resident facilities

▪

Schooling and educational resources

▪

Recreational and medical facilities

▪

TV, telephone and email access

▪

On-site immigration courts

▪

All other contracted services

Key Investment Highlights

Nation’s Largest Vertically-Integrated Specialty Hospitality and Services Provider

Generating Significant Operating Cash Flow

Ability to Quickly React to Changing Market Conditions; Preserving Liquidity and Maintaining Operational Flexibility Strong Capital Structure Provides Financial Flexibility in Current Environment

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~$78 million(1)

✔ ✔ ✔

~$48 Million in Liquidity(2) 2.8x Net Leverage(2)

(1) Net cash provided by operating activities for the twelve months ended March 31, 2020 (2) As of March 31, 2020

= = =

✔

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Financial Strength

Financial Update

▪ Generated revenue of ~$72 million and adjusted EBITDA(1) of ~$32 million ▪ Meaningful operating cash flow of ~$11 million ▪ Implemented significant cost reductions aimed at reducing cash expenses by +30% ▪ Dynamically managed business to remove variable cost and align with customer demand ▪ Proactively modified select commercial contracts to ensure continued revenue and cash flow visibility

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Strong First Quarter 2020 Performance

Continued Strong Cash Generation Creates Significant Flexibility

$26.2 $60.5 $77.8 2018 2019 Q1 2020 LTM

+62% CAGR

(1) Adjusted EBITDA is a non-GAAP measure; see appendix for a reconciliation to GAAP measures

First Quarter Highlights Operating Cash Flow

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Focused Strategy Promotes Financial Flexibility

TH Remains Focused on Preserving Liquidity to Retain Operational and Financial Flexibility in the Current Environment

✔ Reduced 2020 growth capital by 50% to $5 - $10 million ✔ Minimal 2020 maintenance capital of $2 - $4 million ✔ Preserving robust cash generation, supporting continued financial flexibility ✔ Meaningful variable cost structure provides ability to quickly react to changing demand ~70% of cost of service has variable components, offsetting reduced utilization ✔ Meaningful reduction to cash corporate expenses Voluntary cash salary reductions, reductions in workforce and discretionary spending ✔ Anticipated +30% reduction in cash expenses over the remainder of 2020 ✔ Maintaining strong capital structure, while adapting to changing market conditions ✔ No near-term maturities within capital structure provides additional flexibility ✔ Asset based credit facility has no immediate covenant, liquidity or minimum credit rating ✔ Approximately $48 million of liquidity as of March 31, 2020

Capital Discipline Cost Reduction Balance Sheet and Liquidity

• $85

$340 $40 $125 ABL 9.5% - Notes

$- $50 $100 $150 $200 $250 $300 $350 $400 2020 2021 2022 2023 2024 $ in millions Outstanding Available

Strong Balance Sheet and Liquidity

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(1) Net Leverage, as defined in the Credit Facility, is Net debt divided by consolidated LTM Adjusted EBITDA, as of 3/31/2020 (2) Excludes unamortized discount and deferred financing costs

▪ Net Leverage(1) of 2.8x ▪ Liquidity of ~$48 million ▪ $340 million of 9.5% senior secured notes, maturing March 2024 ▪ $85 million outstanding on $125 million asset-based credit facility, maturing September 2023

No Near-Term Maturities

TH Debt Maturity Profile ($MM)

$ in millions 3/31/2020 Cash and Cash Equivalents 7.5 $ ABL Facility - $125 million capacity 85.0 Senior Secured Notes (2) 340.0 Capital Leases 2.7 Total Debt 427.7 $ Net Debt 420.2 $ Total Liquidity 47.5 $

TH Capitalization and Liquidity

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Appendix

Appendix

Full Turnkey Hospitality Services

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✓ Fast Food Lounges ✓ Full & Self-Service DiningAreas ✓ TV Entertainment Lounges ✓ Training / Conference Rooms ✓ New Innovative Modular Design ✓ Core Passive RecreationAreas ✓ Single Occupancy Design ✓ Active Fitness Centers ✓ Swimming Pool, Volleyball, ✓ Lodge Reception Areas Basketball ✓ Locker / Storage / Boot-upAreas ✓ ParkingAreas ✓ Waste Water Treatment Facility ✓ On-Site Commissary

Largest network of geographically relocatable and flexible accommodation space …

▪

Extensive network of geographically relocatable accommodation assets serves customers in highest demand regions

▪

Serving business and governmental needs where availability of space and flexibility are essential

▪

Turnkey solutions with integrated design and installation, catering, security, recreational, and other hospitality services

▪

Offering premium customer experience (Target 12) for enterprise clients with long-term relationships

... with premium catering andhospitality value added services

✓ Media Lounges & WiFi throughout ✓ 24-hour No-LimitDining ✓ Individual Xbox/PSII Pods ✓ Free DVD Rentals ✓ Flat-screen TV’s in Each Room ✓ Self-Dispensing FreeLaundry ✓ 40+ Premium TV channel line-up ✓ Transportation to ProjectSite ✓ Personal Laundry Service ✓ 24-hour GatedSecurity ✓ Individually Controlled HVAC ✓ Daily Cleaning / CustodialService ✓ Hotel Access Lock Systems ✓ Professional UniformedStaff

Non-GAAP Reconciliations

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Total revenue $ 71,655 $ 81,982 Net income $ 3,801 $ (13,979) Interest expense, net 10,022 4,032 Loss on extinguishment of debt — 907 Income tax expense 233 (1,850) Other depreciation and amortization 4,116 3,763 Depreciation of specialty rental assets 12,897 9,901 EBITDA $ 31,069 $ 2,774 Adjustments: Restructuring costs — 168 Transaction expenses 24 8,048 Stock-based compensation 884 — Transaction bonus amounts — 28,519 Officer loan expense — 1,583 Other expense (income), net (734) (38) Other adjustments 1,109 — Target parent selling, general, and administrative costs — 246 Adjusted EBITDA $ 32,352 $ 41,300

Reconciliation of Net Income to EBITDA, Adjusted EBITDA Target Hospitality Corp.

Three Months Ended March 31, 2020 2019

($ in thousands)

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