10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to

Commission file number 001-38343

TARGET HOSPITALITY CORP.

(Exact name of registrant as specified in its charter)

Delaware	98-1378631
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2170 Buckthorne Place, Suite 440

The Woodlands, TX 77380-1775

(Address, including zip code, of principal executive offices)

(800) 832-4242

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which is registered
Common stock, par value $0.0001 per share	TH	NASDAQ Global Market
Warrants to purchase common stock	THWWW	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☐
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  ⌧.

There were 101,837,297 shares of Common Stock, par value $0.0001 per share, outstanding as of November 8, 2021.

Target Hospitality Corp.

TABLE OF CONTENTS

FORM 10-Q

September 30, 2021

PART I — FINANCIAL INFORMATION	5
Item 1. Financial Statements	5
Consolidated Balance Sheets	5
Unaudited Consolidated Statements of Comprehensive Income (Loss)	6
Unaudited Consolidated Statements of Changes in Stockholders’ Equity	7
Unaudited Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	53
Item 4. Controls and Procedures	53
PART II — OTHER INFORMATION	54
Item 1. Legal Proceedings	54
Item 1A. Risk Factors	55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults upon Senior Securities	55
Item 4. Mine Safety Disclosures	55
Item 5. Other Information	56
Item 6. Exhibits	56
SIGNATURES	57

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Target Hospitality Corp.

Unaudited Consolidated Financial Statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020

Target Hospitality Corp.

Unaudited Consolidated Financial Statements

Contents

Consolidated Financial Statements
Consolidated Balance Sheets	5
Unaudited Consolidated Statements of Comprehensive Income (Loss)	6
Unaudited Consolidated Statements of Changes in Stockholders’ Equity	7
Unaudited Consolidated Statements of Cash Flows	8
Notes to Unaudited Consolidated Financial Statements	9

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Target Hospitality Corp.

Consolidated Balance Sheets

($ in thousands)

	September 30,		December 31,
	2021		2020
Assets		(Unaudited)		(Restated)
Current assets:
Cash and cash equivalents	$	30,641	$	6,979
Accounts receivable, less allowance for doubtful accounts of $1,089 and $2,977, respectively		33,373		28,183
Prepaid expenses and other assets		5,765		7,195
Related party receivable		—		1,205
Total current assets		69,779		43,562
Specialty rental assets, net		294,372		311,487
Other property, plant and equipment, net		10,192		11,019
Goodwill		41,038		41,038
Other intangible assets, net		92,153		103,121
Deferred tax asset		15,984		15,179
Deferred financing costs revolver, net		2,477		3,422
Other non-current assets		3,961		5,409
Total assets	$	529,956	$	534,237
Liabilities
Current liabilities:
Accounts payable	$	12,321	$	10,644
Accrued liabilities		21,215		24,699
Deferred revenue and customer deposits		60,986		6,619
Current portion of capital lease and other financing obligations (Note 8)		148		3,571
Total current liabilities		94,670		45,533
Other liabilities:
Long-term debt (Note 8):
Principal amount		340,000		340,000
Less: unamortized original issue discount		(1,847)		(2,319)
Less: unamortized term loan deferred financing costs		(8,908)		(11,182)
Long-term debt, net		329,245		326,499
Revolving credit facility (Note 8)		—		48,000
Long-term capital lease and other financing obligations		—		269
Other non-current liabilities		1,569		479
Deferred revenue and customer deposits		6,857		11,752
Asset retirement obligations		2,036		2,284
Warrant liabilities		2,133		533
Total liabilities		436,510		435,349
Commitments and contingencies (Note 12)
Stockholders' equity:
Common Stock, $0.0001 par, 400,000,000 authorized, 106,252,064 issued and 101,837,297 outstanding as of September 30, 2021 and 105,585,682 issued and 101,170,915 outstanding as of December 31, 2020.		10		10
Common Stock in treasury at cost, 4,414,767 shares as of September 30, 2021 and December 31, 2020, respectively.		(23,559)		(23,559)
Additional paid-in-capital		108,511		106,551
Accumulated other comprehensive loss		(2,461)		(2,434)
Accumulated earnings		10,945		18,320
Total stockholders' equity		93,446		98,888
Total liabilities and stockholders' equity	$	529,956	$	534,237

See accompanying notes to the unaudited consolidated financial statements.

5

Target Hospitality Corp.

Unaudited Consolidated Statements of Comprehensive Income (loss)

($ in thousands, except per share amounts)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue:				(Restated)				(Restated)
Services income	$	57,221	$	24,331	$	143,806	$	103,526
Specialty rental income		22,099		12,827		54,547		42,379
Construction fee income		9,849		11,105		11,294		27,634
Total revenue		89,169		48,263		209,647		173,539
Costs:
Services		37,064		21,990		85,835		82,456
Specialty rental		4,203		2,560		11,032		6,864
Depreciation of specialty rental assets		14,294		11,995		40,642		37,158
Gross profit		33,608		11,718		72,138		47,061
Selling, general and administrative		12,827		8,508		35,835		28,599
Other depreciation and amortization		4,008		4,341		12,100		12,555
Other expense (income), net		91		(183)		781		(752)
Operating income (loss)		16,682		(948)		23,422		6,659
Interest expense, net		9,465		9,913		29,058		30,113
Change in fair value of warrant liabilities		(1,120)		(267)		1,600		(2,453)
Income (loss) before income tax		8,337		(10,594)		(7,236)		(21,001)
Income tax expense (benefit)		1,662		(2,991)		139		(5,187)
Net income (loss)		6,675		(7,603)		(7,375)		(15,814)
Other comprehensive income (loss)
Foreign currency translation		(15)		89		(27)		23
Comprehensive income (loss)	$	6,660	$	(7,514)	$	(7,402)	$	(15,791)
Weighted average number shares outstanding - basic and diluted		96,814,970		96,138,459		96,539,703		95,997,647
Net income (loss) per share - basic and diluted	$	0.07	$	(0.08)	$	(0.08)	$	(0.16)

See accompanying notes to the unaudited consolidated financial statements

6

Target Hospitality Corp.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2021 and 2020

($ in thousands)

	Common Stock			Common Stock in Treasury
	Shares	Amount		Shares	Amount		Additional Paid In Capital		Accumulated Other Comprehensive Loss		Accumulated Earnings		Total Stockholders' Equity
Balances at December 31, 2019, as restated	100,840,162	$	10	4,414,767	$	(23,559)	$	103,178	$	(2,558)	$	43,451	$	120,522
Net income	—		—	—		—		—		—		5,454		5,454
Stock-based compensation	83,831		—	—		—		884		—		—		884
Shares used to settle payroll tax withholding	—		—	—		—		(83)		—		—		(83)
Cumulative translation adjustment	—		—	—		—		—		(111)		—		(111)
Balances at March 31, 2020, as restated	100,923,993	$	10	4,414,767	$	(23,559)	$	103,979	$	(2,669)	$	48,905	$	126,666
Net loss	—		—	—		—		—		—		(13,667)		(13,667)
Stock-based compensation	184,224		—	—		—		1,038		—		—		1,038
Shares used to settle payroll tax withholding	—		—	—		—		(74)		—		—		(74)
Cumulative translation adjustment	—		—	—		—		—		45		—		45
Balances at June 30, 2020, as restated	101,108,217	$	10	4,414,767	$	(23,559)	$	104,943	$	(2,624)	$	35,238	$	114,008
Net loss	—		—	—		—		—		—		(7,603)		(7,603)
Stock-based compensation	97,415		—	—		—		886		—		—		886
Shares used to settle payroll tax withholding	—		—	—		—		(47)		—		—		(47)
Cumulative translation adjustment	—		—	—		—		—		89		—		89
Balances at September 30, 2020, as restated	101,205,632	$	10	4,414,767	$	(23,559)	$	105,782	$	(2,535)	$	27,635	$	107,333
Balances at December 31, 2020, as restated	101,170,915	$	10	4,414,767	$	(23,559)	$	106,551	$	(2,434)	$	18,320	$	98,888
Net loss	—		—	—		—		—		—		(13,138)		(13,138)
Shares used to settle payroll tax withholding	—		—	—		—		(51)		—		—		(51)
Cumulative translation adjustment	—		—	—		—		—		(19)		—		(19)
Stock-based compensation	65,338		—	—		—		761		—		—		761
Balances at March 31, 2021	101,236,253	$	10	4,414,767	$	(23,559)	$	107,261	$	(2,453)	$	5,182	$	86,441
Net loss	—		—	—		—		—		—		(912)		(912)
Shares used to settle payroll tax withholding	—		—	—		—		(34)		—		—		(34)
Cumulative translation adjustment	—		—	—		—		—		7		—		7
Stock-based compensation	591,284		—	—		—		697		—		—		697
Balances at June 30, 2021	101,827,537	$	10	4,414,767	$	(23,559)	$	107,924	$	(2,446)	$	4,270	$	86,199
Net income	—		—	—		—		—		—		6,675		6,675
Shares used to settle payroll tax withholding	—		—	—		—		(13)		—		—		(13)
Cumulative translation adjustment	—		—	—		—		—		(15)		—		(15)
Stock-based compensation	9,760		—	—		—		600		—		—		600
Balances at September 30, 2021	101,837,297	$	10	4,414,767	$	(23,559)	$	108,511	$	(2,461)	$	10,945	$	93,446

See accompanying notes to the unaudited consolidated financial statements.

7

Target Hospitality Corp.

Unaudited Consolidated Statements of Cash Flows

($ in thousands)

	For the Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities:				(Restated)
Net loss	$	(7,375)	$	(15,814)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		41,774		38,636
Amortization of intangible assets		10,968		11,077
Accretion of asset retirement obligation		(248)		(285)
Amortization of deferred financing costs		3,220		2,914
Amortization of original issue discount		472		408
Change in fair value of warrant liabilities		1,600		(2,453)
Stock-based compensation expense		3,600		2,822
(Gain) loss on disposal of specialty rental assets and other property, plant and equipment		382		(91)
Gain on involuntary conversion		—		(619)
Deferred income taxes		(805)		(5,776)
Provision for loss on receivables, net of recoveries		1,394		3,099
Changes in operating assets and liabilities
Accounts receivable		(6,595)		11,906
Related party receivable		1,224		12
Prepaid expenses and other assets		1,430		(323)
Accounts payable and other accrued liabilities		(2,455)		(8,643)
Deferred revenue and customer deposits		49,472		(7,089)
Other non-current assets and liabilities		1,389		(1,189)
Net cash provided by operating activities		99,447		28,592
Cash flows from investing activities:
Purchase of specialty rental assets		(23,707)		(11,601)
Purchase of property, plant, and equipment		(301)		(182)
Receipt of insurance proceeds		—		619
Proceeds from sale of specialty rental assets and other property, plant and equipment		—		876
Net cash used in investing activities		(24,008)		(10,288)
Cash flows from financing activities:
Principal payments on finance and capital lease obligations		(3,693)		(10,654)
Proceeds from borrowings on finance and capital lease obligations		—		10,151
Principal payments on borrowings from ABL		(76,000)		(52,500)
Proceeds from borrowings on ABL		28,000		42,500
Restricted shares surrendered to pay tax liabilities		(99)		(206)
Purchase of treasury stock		—		(5,318)
Net cash used in financing activities		(51,792)		(16,027)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		15		(14)
Net increase in cash, cash equivalents and restricted cash		23,662		2,263
Cash, cash equivalents and restricted cash - beginning of period		6,979		6,839
Cash, cash equivalents and restricted cash - end of period	$	30,641	$	9,102
Non-cash investing and financing activity:
Non-cash change in accrued capital expenditures	$	(209)	$	—
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets:
Cash and cash equivalents	$	30,641	$	9,102
Restricted cash		—		—
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	30,641	$	9,102

See accompanying notes to the unaudited consolidated financial statements.

8

Target Hospitality Corp.

Notes to Unaudited Consolidated Financial Statements

(Amounts in Thousands, Unless Stated Otherwise)

1. Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

Organization and Nature of Operations

Target Hospitality Corp. (“Target Hospitality” or the “Company”) was formed on March 15, 2019 and is North America’s largest provider of vertically integrated modular accommodations and value-added hospitality services. The Company provides vertically integrated specialty rental and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation services, overall workforce community management, and laundry service. Target Hospitality serves clients in oil, gas, mining, alternative energy, government and immigrations sectors principally located in the West Texas, South Texas, Oklahoma and Midwest regions, as well as various large linear-construction (pipeline and infrastructure) projects in the United States.

The Company, whose securities are listed on the Nasdaq Global Market, serves as the holding company for the businesses of Target Logistics Management, LLC and its subsidiaries (“Target”) and RL Signor Holdings, LLC and its subsidiaries (“Signor”). TDR Capital LLP (“TDR Capital” or “TDR”) owns approximately 64% of Target Hospitality and the remaining ownership is broken out among the founders of the Company’s legal predecessor, Platinum Eagle Acquisition Corp. (“Platinum Eagle” or “PEAC”), investors in Platinum Eagle’s private placement transaction completed substantially and concurrently with the Business Combination (as defined below) (the “PIPE”), and other public shareholders. Platinum Eagle was originally incorporated on July 12, 2017 as a Cayman Islands exempted company, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses. References in this Quarterly Report on Form 10-Q to the Company refer to Target Hospitality for all periods at or after March 15, 2019 and Platinum Eagle for all periods prior to March 15, 2019, unless the context requires otherwise.

On November 13, 2018, PEAC entered into: (i) the agreement and plan of merger, as amended on January 4, 2019 (the “Signor Merger Agreement”), by and among PEAC, Signor Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of Platinum Eagle and sister company to the Holdco Acquiror (defined below as Topaz Holdings LLC) (“Signor Merger Sub”), Arrow Holdings S.a.r.l., a Luxembourg société à responsabilité limitée (the “Arrow Seller”) and Signor Parent (as defined below), and (ii) the agreement and plan of merger, as amended on January 4, 2019 (the “Target Merger Agreement” and, together with the Signor Merger Agreement, the “Merger Agreements”), by and among Platinum Eagle, Topaz Holdings LLC, a Delaware limited liability company (“Topaz”), Arrow Bidco, LLC, a Delaware limited liability company (“Bidco”), Algeco Investments B.V., a Netherlands besloten vennootschap (the “Algeco Seller”) and Target Parent (as defined below), to effect a business combination (the “Business Combination”). Pursuant to the Merger Agreements, on March 15, 2019, Platinum Eagle, through its wholly-owned subsidiary, Topaz, acquired all of the issued and outstanding equity interests of Arrow Parent Corp., a Delaware corporation (“Signor Parent”), the owner of Bidco and the owner of Signor from the Arrow Seller, and all of the issued and outstanding equity interests of Algeco US Holdings LLC, a Delaware limited liability company (“Target Parent”), the owner of Target, from the Algeco Seller, for approximately $1.311 billion. The purchase price was paid in a combination of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and cash. The Arrow Seller and the Algeco Seller are hereinafter referred to as the “Sellers.”

Target Parent was formed by TDR in September 2017. Prior to the Business Combination, Target Parent was directly owned by Algeco Scotsman Global S.a.r.l. (“ASG”) which is ultimately owned by a group of investment funds managed and controlled by TDR. During 2018, ASG assigned all of its ownership interest in Target Parent to the Algeco Seller, an affiliate of ASG that is also ultimately owned by a group of investment funds managed and controlled by TDR. Target Parent acted as a holding company that included the U.S. corporate employees of ASG and certain of its affiliates and certain related administrative costs and was the owner of Target, its operating company. Target Parent received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. As discussed above, in connection with the closing of the Business Combination, Target Parent merged with and into Bidco, with Bidco as the surviving entity.

9

Signor Parent owned 100% of Bidco until the closing of the Business Combination in connection with which Signor Parent merged with and into Topaz with Topaz being the surviving entity. Prior to the Business Combination, Signor Parent was owned by the Arrow Seller, which is ultimately owned by a group of investment funds managed and controlled by TDR. Signor Parent was formed in August 2018 and acted as a holding company for Bidco, which was formed in September 2018, also as a holding company. Bidco acquired Signor on September 7, 2018. Neither Signor Parent nor Bidco had operating activity, but each received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. Signor Parent was dissolved upon consummation of the Business Combination and merger with Topaz described above on March 15, 2019.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) has been condensed or omitted pursuant to those rules and regulations. The financial statements included in this report should be read in conjunction with the Target Hospitality Annual Report on Form 10-K/A for the year ended December 31, 2020, filed with the SEC on May 24, 2021 (the “2020 Form 10-K/A”).

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending December 31, 2021 or any future period.

The accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, except for the restatement discussed below, necessary for a fair statement of financial position as of September 30, 2021, and results of operations for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The consolidated balance sheet as of December 31, 2020, was derived from the audited consolidated balance sheets of Target Hospitality Corp. but does not contain all of the footnote disclosures from those annual financial statements.

Restatement of Previously Issued Consolidated Financial Statements

The notes included herein should be read in conjunction with the Company's restated audited consolidated financial statements included in the 2020 Form 10-K/A.

As previously disclosed in the 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting. We have restated herein our consolidated financial statements as of and for the quarter and period ended September 30, 2020. We have also restated related amounts within the accompanying footnotes to the consolidated financial statements. The impact of this restatement on the financial statements for the three and nine months ended September 30, 2020 was a decrease to net loss of approximately $0.3 million and $2.5 million, respectively.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying unaudited consolidated financial statements.

10

Principles of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries that it controls due to ownership of a majority voting interest. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated.

Revenue Recognition

The Company derives revenue from specialty rental and hospitality services, specifically lodging and related ancillary services. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with the customers. Certain arrangements contain a lease of lodging facilities to customers. The leases are accounted for as an operating lease under the authoritative guidance for leases and are recognized as income using the straight-line method over the term of the lease agreement.

Because performance obligations related to specialty rental and hospitality services are satisfied over time, the majority of our revenue is recognized on a daily basis, for each night a customer stays, at a contractual day rate.  Our customers typically contract for accommodation services under committed contracts with terms that most often range from several months to three years. Our payment terms vary by type and location of our customer and the service offered.  The time between invoicing and when payment is due is not significant.   

When lodging and services are billed and collected in advance, recognition of revenue is deferred until services are rendered. Certain of the Company’s contractual arrangements allow customers the ability to use paid but unused lodging and services for a specified period. The Company recognizes revenue for these paid but unused lodging and services as they are consumed, as it becomes probable the lodging and services will not be used, or upon expiration of the specified term.

Cost of services includes labor, food, utilities, supplies, rent and other direct costs associated with operating the lodging units as well as costs associated with construction services. Cost of rental includes leasing costs and other direct costs of maintaining the lodging units. Costs associated with contracts include sales commissions which are expensed as incurred and reflected in selling, general and administrative expenses in the consolidated statements of comprehensive income (loss).

The Company recognizes revenue associated with community construction using the percentage of completion method with progress towards completion measured using the cost-to-cost method as the basis to recognize revenue. Management believes this cost-to-cost method is the most appropriate measure of progress to the satisfaction of a performance obligation on the community construction. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to projected costs and revenue and are recognized in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. Factors that may affect future project costs and margins include weather, production efficiencies, availability and costs of labor, materials and subcomponents.  

Additionally, the Company collects sales, use, occupancy and similar taxes, which the Company presents on a net basis (excluded from revenues) in the consolidated statements of comprehensive income (loss). 

Recently Issued Accounting Standards

The Company meets the definition of an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In reliance on exemptions provided under the JOBS Act for EGCs, the Company has elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such standards. As such, compliance dates included below pertain to non-issuers, and as permitted, early adoption dates are indicated.

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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises existing practice related to accounting for leases under ASC Topic 840 Leases (ASC 840) for both lessees and lessors. The new guidance requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While the new standard maintains similar accounting for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. In June 2020, the FASB issued ASU No. 2020-05 to delay the effective date for the new standard for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for non-issuers (including EGCs).  Early application continues to be allowed.  Topic 842 allows an entity to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or to adopt under the new optional transition method that allows an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the adoption date. The Company is currently evaluating the impact of the pronouncement on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASU 2016-13 or Topic 326). This new standard changes how companies account for credit impairment for trade and other receivables as well as changing the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur.  ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, was issued in November 2018 and excludes operating leases from the new guidance. In 2019, the FASB voted to delay the effective date for the new standard for financial statements issued to reporting periods beginning after December 15, 2022 and interim periods within those reporting periods. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

Recent Developments – COVID-19 and Disruption to Global Demand

The global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020 presented new risks to the Company’s business in 2020.  Prior to March 2020, the Company’s results of operations were largely in line with expectations and subsequent to March 2020, we began to experience a decline in revenues.  The COVID-19 pandemic has not impacted the Company’s ability to operate nor has it materially disrupted the Company’s supply chain, disrupted service, or caused a shortage of critical products at our communities. However, the situation surrounding COVID-19 and the decrease in global economic demand had a material adverse impact on the Company’s operating results, as a result of which the Company implemented several cost containment measures primarily initiated in April of 2020, including salary reductions, reductions in workforce, furloughs, reduced discretionary spending and elimination of all non-essential travel.  In addition to these measures, the Company temporarily closed and consolidated several communities in the Hospitality & Facilities Services - South segment and in May of 2020, the Company temporarily closed all communities in the Hospitality & Facilities Services - Midwest segment. The Company began re-opening communities in both the Hospitality & Facilities Services - South and Midwest segments in July of 2020 as customer activity levels began to increase.  Additionally, the Company executed contract modifications with several customers resulting in extended terms and reduced minimum contract commitments in 2020.  These modifications utilize multi-year contract extensions to maintain contract value and provide the Company with greater visibility on long-term revenue and cash flow.  This mutually beneficial approach balanced average daily rates with contract term and positions the Company to take advantage of a more balanced market. Overall, the Company has experienced a positive recovery from the lows of 2020 with consistent improvement in customer demand within the Hospitality and Facilities Services – South segment and significant growth in the Government segment.

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There have been significant changes to the global economic situation and to public securities markets as a result of  COVID-19. Although vaccines have become available for COVID-19, surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19, which could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. It is possible that these changes could cause changes to estimates as a result of the markets in which the Company operates, the price of the Company’s publicly traded equity and debt in comparison to the Company’s carrying value. Such changes to estimates could potentially result in impacts that would be material to the Company’s consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units in relation to potential goodwill impairment, the fair value of long-lived and other intangible assets in relation to potential impairment and the allowance for doubtful accounts.

As a result of the impact of COVID-19 and the disruption to the global economy, in the first quarter of 2020 we also concluded a trigger event had occurred and we tested our long-lived and intangible assets, including goodwill, for impairment.  Based upon our impairment assessments, which utilized the Company’s current long-term projections, we determined the carrying amount of these assets were not impaired.  During the third quarter of 2021, we did not identify further triggers or indicators of impairment and therefore did not perform a quantitative impairment test.  

Additionally, in connection with COVID-19, on March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The CARES Act, among other things, included provisions relating to the 80 percent limitation of net operating loss and modifications to the business interest deduction limitations. We evaluated how the provisions in the CARES Act would impact our consolidated financial statements and concluded that the CARES Act did not have a material impact on our provision for income taxes for the three and nine months ended September 30, 2021 and 2020.

2. Revenue

Total revenue recognized under Topic 606 was $155.1 million and $131.2 million for the nine months ended September 30, 2021 and 2020, respectively, while specialty rental income was $54.5 million and $42.4 million subject to the guidance of ASC 840 for the nine months ended September 30, 2021 and 2020, respectively. Total revenue recognized under Topic 606 was $67.1 million and $35.4 million for the three months ended September 30, 2021 and 2020, respectively, while specialty rental income was $22.1 million and $12.8 million subject to the guidance of ASC 840 for the three months ended September 30, 2021 and 2020, respectively.

The following table disaggregates our revenue by our four reportable segments as well as the All Other category: Hospitality & Facilities Services - South, Hospitality & Facilities Services - Midwest, Government, TCPL Keystone, and All Other for the dates indicated below:

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	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Hospitality & Facilities Services - South
Services income	$	28,732	$	16,236	$	77,729	$	77,863
Total Hospitality & Facilities Services - South revenues		28,732		16,236		77,729		77,863
Hospitality & Facilities Services - Midwest
Services income	$	1,266	$	1,154	$	2,593	$	5,705
Total Hospitality & Facilities Services - Midwest revenues		1,266		1,154		2,593		5,705
Government
Services income	$	26,663	$	6,169	$	61,329	$	18,448
Total Government revenues		26,663		6,169		61,329		18,448
TCPL Keystone
Services income	$	31	$	493	$	989	$	493
Construction fee income		9,849		11,105		11,294		27,634
Total TCPL Keystone revenues		9,880		11,598		12,283		28,127
All Other
Services income	$	529	$	279	$	1,166	$	1,017
Total All Other revenues		529		279		1,166		1,017
Total revenues	$	67,070	$	35,436	$	155,100	$	131,160

On July 23, 2021, the Company executed a Termination and Settlement Agreement with TC Energy (the “Termination and Settlement Agreement”), which effectively terminated the Company’s contract with TC Energy that was originated in 2013. The Termination and Settlement Agreement also released the Company from any outstanding work performance obligations under the 2013 contract (including all change orders, limited notices to proceed, and amendments). Additionally, the Termination and Settlement Agreement resulted in an agreed upon termination fee of approximately $5 million that was collected in cash on July 27, 2021. This Termination and Settlement Agreement also resulted in the recognition of approximately $4.9 million of deferred revenue as of the effective date of the Termination and Settlement Agreement.  All such revenue is recognized in construction fee income within the TCPL Keystone segment included in the above table as well as in the accompanying consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2021. No further revenue will be generated from the 2013 contract and as of September 30, 2021, there are no unrecognized deferred revenue amounts or costs for incomplete projects related to this contract following such termination.

As a result of the current market environment discussed in Note 1 “Recent Developments – COVID-19 and Disruption to Global Demand”, the Company considered the increased risk of delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. The Company routinely monitors the financial stability of our customers, which involves a high degree of judgment in assessing customers’ historical time to pay, financial condition and various customer-specific factors.

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 payment for a community build that is 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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	For Nine Months Ended
	September 30,
	2021		2020
Balances at Beginning of the Period	$	18,371	$	26,199
Additions to deferred revenue		125,592		7,866
Revenue recognized		(76,120)		(14,956)
Balances at End of the Period	$	67,843	$	19,109

As of September 30, 2021, for contracts greater than one year, the following table discloses the estimated revenues 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:

		For the Years Ended December 31,
	2021		2022		2023		2024		2025		2026		Total
Revenue expected to be recognized as of September 30, 2021	$	33,059	$	48,519	$	18,699	$	18,748	$	18,699	$	13,987	$	151,711

The Company applied some of the practical expedients in Topic 606, including the “right to invoice” practical expedient, and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations.  Due to the application of these practical expedients, 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.    

3. Specialty Rental Assets, Net

Specialty rental assets, net at the dates indicated below consisted of the following:

	September 30,		December 31,
	2021		2020
Specialty rental assets	$	571,965	$	547,375
Construction-in-process		4,844		5,828
Less: accumulated depreciation		(282,437)		(241,716)
Specialty rental assets, net	$	294,372	$	311,487

Depreciation expense related to specialty rental assets was $40.6 million and $37.2 million for the nine months ended September 30, 2021 and 2020, respectively, and is included in depreciation of specialty rental assets in the consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021 and 2020, depreciation expense of specialty rental assets was $14.3 and $12.0 million, respectively.

4. Other Property, Plant and Equipment, Net

Other property, plant and equipment, net at the dates indicated below, consisted of the following:

	September 30,		December 31,
	2021		2020
Land	$	9,163	$	9,163
Buildings and leasehold improvements		185		115
Machinery and office equipment		1,217		1,072
Software and other		3,838		3,752
		14,403		14,102
Less: accumulated depreciation		(4,211)		(3,083)
Total other property, plant and equipment, net	$	10,192	$	11,019

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Depreciation expense related to other property, plant and equipment was $1.1 million and $1.5 million for the nine months ended September 30, 2021 and 2020, respectively, and is included in other depreciation and amortization in the consolidated statements of comprehensive income (loss).  For the three months ended September 30, 2021 and 2020, depreciation expense related to other property, plant and equipment was $0.4 million and $0.7 million, respectively.

5. Goodwill and Other Intangible Assets, net

The financial statements reflect goodwill from previous acquisitions that is all attributable to the Hospitality and Facilities Services – South business segment and reporting unit.

Changes in the carrying amount of goodwill were as follows:

	Hospitality and Facilities Services - South
Balance at January 1, 2020	$	41,038
Changes in Goodwill		-
Balance at December 31, 2020		41,038
Changes in Goodwill		-
Balance at September 30, 2021	$	41,038

Intangible assets other than goodwill at the dates indicated below consisted of the following:

	September 30, 2021
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	5.8	$	128,907	$	(53,154)	$	75,753
Total			128,907		(53,154)		75,753
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(53,154)	$	92,153

	December 31, 2020
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	6.4	$	128,907	$	(42,186)	$	86,721
Total			128,907		(42,186)		86,721
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(42,186)	$	103,121

For the nine months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $11.0 million and $11.1 million, respectively, and is included in other depreciation and amortization in the consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $3.6 million and $3.7 million, respectively.

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The estimated aggregate amortization expense as of September 30, 2021 for each of the next five years and thereafter is as follows:

Rest of 2021	$	3,687
2022		13,302
2023		12,881
2024		12,881
2025		12,881
Thereafter		20,121
Total	$	75,753

6. Other Non-Current Assets

Other non-current assets include capitalized software implementation costs for the implementation of cloud computing systems. As of the dates indicated below, capitalized implementation costs and related accumulated amortization in other non-current assets on the consolidated balance sheets amounted to the following: 

	September 30,		December 31,
	2021		2020
Cloud computing implementation costs	$	7,198	$	7,094
Less: accumulated amortization		(3,303)		(1,685)
Other non-current assets	$	3,895	$	5,409

The majority of such systems were placed into service beginning January of 2020 at which time the Company began to amortize these capitalized costs on a straight-line basis over the period of the remaining service arrangements of between 2 and 4 years. Such amortization expense amounted to approximately $1.6 million and $1.2 million for the nine months ended September 30, 2021 and 2020, respectively and is included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive loss. For the three months ended September 30, 2021 and 2020, amortization expense related to other non-current assets was approximately $0.6 million and $0.5 million, respectively.

7. Accrued Liabilities

Accrued liabilities as of the dates indicated below consists of the following:

	September 30,		December 31,
	2021		2020
Employee accrued compensation expense	$	9,767	$	6,177
Other accrued liabilities		9,976		8,873
Accrued interest on debt		1,472		9,649
Total accrued liabilities	$	21,215	$	24,699

Other accrued liabilities in the above table relates primarily to accrued utilities, rent, real estate and sales taxes, state income taxes, liability-based stock compensation awards (see Note 16), and other accrued operating expenses.

8. Debt

Senior Secured Notes 2024

In connection with the closing of the Business Combination, Bidco issued $340 million in aggregate principal amount of 9.50% senior secured notes due March 15, 2024 (the “2024 Senior Secured Notes” or “Notes”) under an indenture dated March 15, 2019 (the “Indenture”). The Indenture was entered into by and among Bidco, the guarantors named therein (the “Note Guarantors”), and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest

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is payable semi-annually on September 15 and March 15 beginning September 15, 2019. Refer to table below for a description of the amounts related to the Notes.

		Principal		Unamortized Original Issue Discount		Unamortized Deferred Financing Costs
9.50% Senior Secured Notes, due 2024	$	340,000	$	1,847	$	8,908

If Bidco undergoes a change of control or sells certain of its assets, Bidco may be required to offer to repurchase the Notes. On or after March 15, 2021, Bidco at its option, may redeem the Notes, in whole or part, upon not less than fifteen (15) and not more than sixty (60) days’ prior written notice to holders and not less than twenty (20) days’ prior written notice to the trustee (or such shorter timeline as the trustee may agree), at the redemption price expressed as a percentage of principal amount set forth below, plus accrued and unpaid interest thereon but not including the applicable redemption date (subject to the right of Note holders on the relevant record date to receive interest due on an interest payment date falling on or prior to the redemption date), if redeemed during the 12-month period beginning August 15 of each of the years set below.

	Redemption
Year	Price
2021	104.750%
2022	102.375%
2023 and thereafter	100.000%

The Notes are unconditionally guaranteed by Topaz and each of Bidco’s direct and indirect wholly-owned domestic subsidiaries (collectively, the “Note Guarantors”). Target Hospitality is not an issuer or a guarantor of the Notes. The Note Guarantors are either borrowers or guarantors under the New ABL Facility (as defined below). To the extent lenders under the New ABL Facility release the guarantee of any Note Guarantor, such Note Guarantor is also released from obligations under the Notes. These guarantees are secured by a second priority security interest in substantially all of the assets of Bidco and the Note Guarantors (subject to customary exclusions). The guarantees of the Notes by TLM Equipment, LLC, a Delaware limited liability company (“TLM Equipment LLC”) which holds certain of Target Hospitality’s assets, are subordinated to its obligations under the New ABL Facility.

The Notes contain certain negative covenants, including limitations that restrict Bidco’s ability and the ability of certain of its subsidiaries, to directly or indirectly, create additional financial obligations. With certain specified exceptions, these negative covenants prohibit Bidco and certain of its subsidiaries from: creating or incurring additional debt; paying dividends or making any other distributions with respect to its capital stock; making loans or advances to Bidco or any restricted subsidiary of Bidco; selling, leasing or transferring any of its property or assets to Bidco or any restricted subsidiary of Bidco; directly or indirectly creating, incurring or assuming any lien of any kind securing debt on the collateral; or entering into any sale and leaseback transaction.

In connection with the issuance of the Notes, there was an original issue discount of approximately $3.3 million and the unamortized balance of approximately $1.8 million is presented on the face of the consolidated balance sheet as of September 30, 2021 as a reduction of the principal. The discount is amortized over the life of the Notes using the effective interest method.

Bidco’s ultimate parent, Target Hospitality, has no significant independent assets or operations except as included in the guarantors of the Senior Secured Notes, the guarantees under the Notes are full and unconditional and joint and several, and any subsidiaries of Target Hospitality that are not subsidiary guarantors of the Notes are minor.  There are also no significant restrictions on the ability of Target Hospitality or any guarantor to obtain funds from its subsidiaries by dividend or loan. See discussion of certain negative covenants above. Therefore, pursuant to the SEC Rules, no individual guarantor financial statement disclosures are deemed necessary.

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Capital Lease and Other Financing Obligations

The Company’s capital lease and other financing obligations as of September 30, 2021 consisted of approximately $0.1 million of capital leases related primarily to vehicles. In December 2019, the Company entered into a lease for certain equipment with a lease term expiring November 2022 and an effective interest rate of 4.3%. The Company’s lease relates to commercial-use vehicles. In November 2020, the Company entered into an insurance financing arrangement in an amount of approximately $3.3 million at an interest rate of 3.84%.  The insurance financing arrangement required 9 monthly payments of approximately $0.4 million that began on December 1, 2020 and ended on August 1, 2021 when the obligation was repaid. 

The Company’s capital lease and other financing obligations as of December 31, 2020 consisted of approximately $0.9 million of capital leases and $2.9 million related to insurance financing obligations.

New ABL Facility

On the Closing Date, in connection with the closing of the Business Combination, Topaz, Bidco, Target, Signor and each of their domestic subsidiaries entered into an ABL credit agreement that provides for a senior secured asset based revolving credit facility in the aggregate principal amount of up to $125 million (the “New ABL Facility”). The historical debt of Bidco, Target and their respective subsidiaries under the ABL facility of Algeco Seller was settled at the time of the consummation of the Business Combination on the Closing Date. Approximately $40 million of proceeds from the New ABL Facility were used to finance a portion of the consideration payable and fees and expenses incurred in connection with the Business Combination.

Borrowings under the New ABL Facility, at the relevant borrower’s (the borrowers under the New ABL Facility, the “ABL Borrowers”) option, bear interest at either (1) an adjusted LIBOR or (2) a base rate, in each case plus an applicable margin. The applicable margin is 2.50% with respect to LIBOR borrowings and 1.50% with respect to base rate borrowings. Commencing at the completion of the first full fiscal quarter after the Closing Date, the applicable margin for borrowings under the New ABL Facility is subject to one step-down of 0.25% and one step-up of 0.25%, based on achieving certain excess availability levels with respect to the New ABL Facility.

The New ABL Facility provides borrowing availability of an amount equal to the lesser of (i) (a) $125 million and (b) the Borrowing Base (defined below) (the “Line Cap”).

The Borrowing Base is, at any time of determination, an amount (net of reserves) equal to the sum of:

● 85% of the net book value of the Borrowers’ eligible accounts receivables, plus

● the lesser of (i) 95% of the net book value of the Borrowers’ eligible rental equipment and (ii) 85% of the net orderly liquidation value of the Borrowers’ eligible rental equipment, minus

● customary reserves

The New ABL Facility includes borrowing capacity available for standby letters of credit of up to $15 million and for ‘‘swingline’’ loan borrowings of up to $15 million. Any issuance of letters of credit or making of a swingline loan will reduce the amount available under the New ABL Facility.

In addition, the New ABL Facility will provide the Borrowers with the option to increase commitments under the New ABL Facility in an aggregate amount not to exceed $75 million plus any voluntary prepayments that are accompanied by permanent commitment reductions under the New ABL Facility. The termination date of the New ABL Facility is September 15, 2023.

The obligations under the New ABL Facility are unconditionally guaranteed by Topaz and each existing and subsequently acquired or organized direct or indirect wholly-owned U.S. organized restricted subsidiary of Bidco (together with Topaz, the “ABL Guarantors”), other than certain excluded subsidiaries. The New ABL Facility is secured by (i) a first priority pledge of the equity interests of Topaz, Bidco, Target, and Signor (the “Borrowers) and of each direct, wholly-owned US organized restricted subsidiary of any Borrower or any ABL Guarantor, (ii) a first priority pledge of up to 65% of the

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voting equity interests in each non-US restricted subsidiary of any Borrower or ABL Guarantor and (iii) a first priority security interest in substantially all of the assets of the Borrower and the ABL Guarantors (in each case, subject to customary exceptions).

The New ABL Facility requires the Borrowers to maintain a (i) minimum fixed charge coverage ratio of 1.00:1.00 and (ii) maximum total net leverage ratio of 4.00:1.00, at any time when the excess availability under the New ABL Facility is less than the greater of (a) $15.625 million and (b) 12.5% of the Line Cap.

The New ABL Facility also contains a number of customary negative covenants. Such covenants, among other things, limit or restrict the ability of each of the Borrowers, their restricted subsidiaries, and where applicable, Topaz, to:

● incur additional indebtedness, issue disqualified stock and make guarantees;

● incur liens on assets;

● engage in mergers or consolidations or fundamental changes;

● sell assets;

● pay dividends and distributions or repurchase capital stock;

● make investments, loans and advances, including acquisitions;

● amend organizational documents and master lease documents;

● enter into certain agreements that would restrict the ability to pay dividends;

● repay certain junior indebtedness; and

● change the conduct of its business.

The aforementioned restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments, dividends and distributions, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial metrics and certain other conditions and (ii) a number of other traditional exceptions that grant the ABL Borrowers continued flexibility to operate and develop their businesses. The New ABL Facility also contains certain customary representations and warranties, affirmative covenants and events of default. The carrying value of debt outstanding as of the dates indicated below consist of the following:

	September 30,		December 31,
	2021		2020
Capital lease and other financing obligations	$	148	$	3,840
ABL facility		—		48,000
9.50% Senior Secured Notes due 2024, face amount		340,000		340,000
Less: unamortized original issue discount		(1,847)		(2,319)
Less: unamortized term loan deferred financing costs		(8,908)		(11,182)
Total debt, net		329,393		378,339
Less: current maturities		(148)		(3,571)
Total long-term debt	$	329,245	$	374,768

Interest expense, net

The components of interest expense, net (which includes interest expense incurred) recognized in the unaudited consolidated statements of comprehensive income (loss) for the periods indicated below consist of the following:

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	For the three months ended				For the nine months ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Interest incurred on capital lease and other financing obligations	$	5	$	30	$	51	$	98
Interest expense incurred on ABL facilities and Notes		8,201		8,722		25,315		26,693
Amortization of deferred financing costs on ABL facilities and Notes		1,097		1,016		3,220		2,914
Amortization of original issue discount on Notes		162		145		472		408
Interest expense, net	$	9,465	$	9,913	$	29,058	$	30,113

Deferred Financing Costs and Original Issue Discount

The Company presents unamortized deferred financing costs and unamortized original issue discount as a direct deduction from the principal amount of the Notes on the unaudited consolidated balance sheet as of September 30, 2021. Accumulated amortization expense related to the deferred financing costs was approximately $7.0 million and $4.7 million as of September 30, 2021 and December 31, 2020, respectively. Accumulated amortization of the original issue discount was approximately $1.5 million and $1.0 million as of September 30, 2021 and December 31, 2020, respectively.

Accumulated amortization related to revolver deferred financing costs for the ABL facilities was approximately $3.2 million and $2.4 million as of September 30, 2021 and December 31, 2020, respectively.

Refer to the components of interest expense in the table above for the amounts of the amortization expense related to the deferred financing costs and original issue discount recognized for each of these debt instruments for the three and nine months ended September 30, 2021 and 2020, respectively.

Future maturities

The aggregate annual principal maturities of debt and capital lease obligations for each of the next five years and thereafter, based on contractual terms are listed in the table below. The schedule of future maturities as of September 30, 2021, consists of the following:

Rest of 2021	$	69
2022		79
2023		—
2024		340,000
Total	$	340,148

9. Warrant Liabilities

On January 17, 2018, Harry E. Sloan, Joshua Kazam, Fredric D. Rosen, the Sara L. Rosen Trust and the Samuel N. Rosen 2015 Trust, purchased from PEAC an aggregate of 5,333,334 warrants at a price of $1.50 per warrant (for an aggregate purchase price of $8.0 million) in a private placement (the “Private Warrants”) that occurred simultaneously with the completion of the Public Offering as defined in Note 15. Each Private Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The purchase price of the Private Warrants was added to the proceeds from the Public Offering and was held in the Trust Account until the closing of the Business Combination. The Private Warrants (including the shares of Common Stock issuable upon exercise of the Private Warrants) were not transferable, assignable or salable until 30 days after the closing date of the Business Combination, and they may be exercised on a cashless basis and are non-redeemable so long as they are held by the initial purchasers of the Private Warrants or their permitted transferees.

The Company evaluated the Private Warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity and should be classified as

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liabilities. Since the Private Warrants meet the definition of a derivative under ASC 815, the Company recorded the Private Warrants as liabilities on the balance sheet at their estimated fair value.

Subsequent changes in the estimated fair value of the Private Warrants are reflected in the change in fair value of warrant liabilities in the accompanying consolidated statement of comprehensive income (loss). The change in the estimated fair value of the Private Warrants resulted in a loss (gain) of approximately $1.6 million and ($2.5) million for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, the change in the estimated fair value of the Private Warrants resulted in a gain of approximately ($1.1) million and ($0.3) million, respectively. As of September 30, 2021, and 2020, 5,333,334 Private Warrants were outstanding, which expire no later than five years after the completion of the Business Combination (March 15, 2024) if they remain unredeemed.

The Company determined the following estimated fair values for the outstanding Private Warrants as of the dates indicated below:

	September 30,		December 31,
	2021		2020 (Restated)
Warrant liabilities	$	2,133	$	533
Total	$	2,133	$	533

10. Income Taxes

Income tax expense (benefit) was approximately $0.1 million and ($5.2) million for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, income tax expense (benefit) was $1.7 million and ($3.0) million, respectively. The effective tax rate for the three months ended September 30, 2021 and 2020, was 19.9% and 28.2%, respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020, was (1.9)% and 24.7%, respectively. The fluctuation in the rate for the nine months ended September 30, 2021 and 2020 results primarily from the relationship of year-to-date loss before income tax for the nine months ended September 30, 2021 and 2020

The effective tax rate for the nine months ended September 30, 2021 significantly differs from the US federal statutory rate of 21% primarily due to the permanent add-back related to the change in fair value of warrant liabilities on the Company’s warrants as well as the impact of state tax expense based off of gross receipts.

The Company accounts for income taxes in interim periods under ASC 740-270, Income Taxes – Interim Reporting, which generally requires us to apply an estimated annual consolidated effective tax rate to consolidated pre-tax income. In addition, the guidance under ASC 740 further provides that, in establishing the estimated annual effective tax rate, the Company excludes losses from jurisdictions in which no tax benefit is expected to be recognized for such losses.

11. Fair Value of Financial Instruments

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company has assessed that the fair value of cash and cash equivalents, trade receivables, related party receivables, trade payables, other current liabilities, and other debt approximates their carrying amounts largely due to the short-term maturities or recent commencement of these instruments. The fair value of the ABL facility is primarily based upon observable market data, such as market interest rates, for similar debt. The fair value of the Notes is based upon observable market data.

The Company measured the Private Warrant liabilities at fair value on a recurring basis at each reporting period end as more fully discussed below. Changes in the fair value of the Private Warrants at each reporting period end date were recognized within the accompanying consolidated statement of comprehensive income (loss) in the change in fair value of warrant liabilities.

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Level 1 & 2 Disclosures:

The carrying amounts and fair values of financial assets and liabilities, which are either Level 1 or Level 2, are as follows:

	September 30, 2021				December 31, 2020
Financial Assets (Liabilities) Not Measured at Fair Value	Carrying Amount			Fair Value	Carrying Amount		Fair Value
ABL facility (See Note 8) - Level 2	$	—	$	—	$	(48,000)	$	(48,000)
Senior Secured Notes (See Note 8) - Level 1	$	(329,245)	$	(347,480)	$	(326,499)	$	(300,900)

Recurring fair value measurements

Level 3 Disclosures:

There were 5,333,334 Private Warrants outstanding as of September 30, 2021 and December 31, 2020. Based on the fair value assessment that was performed, the Company determined a fair value price per Private Warrant of $0.40 and $0.10 as of September 30, 2021 and December 31, 2020, respectively. The fair value is classified as Level 3 in the fair value hierarchy due to the use of pricing inputs that are less observable in the marketplace combined with management judgment required for the assumptions underlying the calculation of value. The Company determined the estimated fair value of the Private Warrants using the Black-Scholes option-pricing model. The table below summarizes the inputs used to calculate the fair value of the warrant liabilities at each of the dates indicated below:

		September 30,		December 31,
		2021		2020
Exercise Price	$	11.50	$	11.50
Stock Price	$	3.73	$	1.58
Dividend Yield	%	0.00	%	0.00
Expected Term (in Years)		2.46		3.20
Risk-Free Interest Rate	%	0.39	%	0.19
Expected Volatility	%	64.00	%	68.00
Per Share Value of Warrants	$	0.40	$	0.10

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021:

	Private Placement Warrants
Balance at December 31, 2020 (as Restated)	$	533
Change in fair value of warrant liabilities		640
Balance at March 31, 2021		1,173
Change in fair value of warrant liabilities		2,080
Balance at June 30, 2021		3,253
Change in fair value of warrant liabilities		(1,120)
Balance at September 30, 2021	$	2,133

There were no transfers of financial instruments between the three levels of the fair value hierarchy during the nine months ended September 30, 2021 and 2020 and the year ended December 31, 2020.

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12. Commitments and Contingencies

The Company is involved in various lawsuits or claims in the ordinary course of business. Management is of the opinion that there is no pending claim or lawsuit which, if adversely determined, would have a material impact on the financial condition of the Company.

13. Related Parties

During the nine months ended September 30, 2021 and 2020 the Company incurred $0.6 million and $0.8 million, respectively, in commissions owed to related parties, included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive loss. For the three months ended September 30, 2021 and 2020, the Company incurred $0.2 million and $0.2 million in commissions, respectively. At September 30, 2021 and December 31, 2020, the Company accrued $0.3 million and $0.3 million, respectively, for these commissions.  

14. Earnings (Loss) per Share

Basic earnings (loss) per share (“EPS” or “LPS”) is calculated by dividing net income or loss attributable to Target Hospitality by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. During periods when net losses are incurred, potential dilutive securities would be anti-dilutive and are excluded from the calculation of diluted loss per share for that period. A net income was recorded for the three months ended September 30, 2021 and a net loss was recorded for the three months ended September 30, 2020. A net loss was recorded for the nine months ended September 30, 2021 and 2020. The following table presents basic and diluted EPS (LPS) for the periods indicated below ($ in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Numerator				(Restated)				(Restated)
Net income (loss) attributable to Common Stockholders	$	6,675	$	(7,603)	$	(7,375)	$	(15,814)
Denominator
Weighted average shares outstanding - basic and diluted		96,814,970		96,138,459		96,539,703		95,997,647
Net income (loss) per share - basic and diluted	$	0.07	$	(0.08)	$	(0.08)	$	(0.16)

5,015,898 shares of the 8,050,000 shares of common stock held by the Founders, were placed into escrow concurrent with the Business Combination. Upon being placed into escrow, the voting and economic rights of the shares were suspended for the period they are in escrow. Given that the Founders are not entitled to vote or participate in the economic rewards available to the other shareholders with respect to these shares, these shares are not included in the EPS (LPS) calculations.

The Public and Private Warrants representing a total of 16,166,650 shares of the Company’s common stock for the three and nine months ended September 30, 2020 were excluded from the computation of EPS (LPS) because they are considered anti-dilutive as the exercise price exceeds the average market price of the common stock during the applicable periods.

As discussed in Note 16, RSUs and stock options were outstanding for the three and nine months ended September 30, 2021. These RSUs and stock options were excluded from the computation of EPS (LPS) because their effect would have been anti-dilutive.

Shares of treasury stock have been excluded from the computation of EPS (LPS).

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15. Stockholders’ Equity

Common Stock

As of September 30, 2021, and December 31, 2020, Target Hospitality had 106,252,064 and 105,585,682 shares of Common Stock, par value $0.0001 per share issued with 101,837,297 and 101,170,915 outstanding, respectively. Each share of Common Stock has one vote, except the voting rights related to the 5,015,898 of Founder Shares placed in escrow have been suspended subject to release pursuant to the terms of the earnout agreement entered into at the closing of the Business Combination by and between Harry E. Sloan, Jeff Sagansky, Eli Baker and the Company.

Preferred Shares

Target Hospitality is authorized to issue 1,000,000 preferred shares at $0.0001 par value. As of September 30, 2021, no preferred shares were issued and outstanding.

Public Warrants

On January 17, 2018, PEAC sold 32,500,000 units at a price of $10.00 per unit (the “Units”) in its initial public offering (the “Public Offering”), including the issuance of 2,500,000 Units as a result of the underwriters’ partial exercise of their overallotment option. Each Unit consisted of one Class A ordinary share of PEAC, par value $0.0001 per share (the “Public Shares”), and one-third of one warrant to purchase one ordinary share (the “Public Warrants”).

Each Public Warrant entitles the holder to purchase one share of the Company’s Common Stock at a price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. If upon exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, the Company will upon exercise, round down to the nearest whole number, the number of shares to be issued to the Public Warrant holder. Each Public Warrant became exercisable 30 days after the completion of the Business Combination.

As of September 30, 2021, the Company had 10,833,316 Public Warrants issued and outstanding.

16. Stock-Based Compensation

On March 15, 2019, in connection with the Business Combination, the Company’s Board of Directors approved the adoption of the Target Hospitality Corp. 2019 Incentive Award Plan (the “Plan”), under which 4,000,000 of the Company’s shares of Common Stock were reserved for issuance pursuant to future grants of share awards. The expiration date of the Plan, on and after which date no awards may be granted, is March 15, 2029.  

On February 25, 2021, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors adopted a new form Executive Restricted Stock Unit Agreement (the “RSU Agreement”) and a form Executive Stock Appreciation Rights Award Agreement (the “SAR Agreement” and together with the RSU Agreement, the “Award Agreements”) with respect to the granting of restricted stock units and stock appreciation rights, respectively, under the Plan. The new Award Agreements will be used for all awards to executive officers made on or after February 25, 2021.

The RSU Agreement has material terms that are substantially similar to those in the form Executive Restricted Stock Unit Agreement last approved by the Compensation Committee and previously disclosed by the Company, except for the following: (x) 50% of the restricted stock units (each an “RSU”) will vest on the second grant date anniversary and 50% of the RSUs will vest on the third grant date anniversary and (y) if the participant’s employment or service terminates due to Retirement (as defined in the Plan), and the participant has been continuously employed by the Company for at least twelve months following the grant date, then a pro-rata portion of the participant’s RSUs scheduled to vest on the next following vesting date shall vest on his or her termination date based on completed calendar months since either (a) the grant date or (b) the initial vesting date, as applicable.

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The SAR Agreement has material terms that are substantially similar to those in the form Executive Nonqualified Stock Option Award Agreement last approved by the Compensation Committee and previously disclosed by the Company, except for the following: (x) the change in the equity instrument to a stock appreciation right (“SAR”), which may be settled in shares or cash, (y) 50% of the SARs will vest on the second grant date anniversary and 50% of the SARs will vest on the third grant date anniversary, and (z) if the participant’s employment or service terminates due to Retirement (as defined in the Plan), then (a) if the participant has been continuously employed by the Company for at least twelve months following the grant date, then a pro-rata portion of the SARs scheduled to become vested on the next vesting date shall be vested on the participant’s termination date based on completed calendar months since either (i) the grant date or (ii) the initial vesting date, as applicable; (b) following the application of clause (a), the unvested portion of the SARs shall expire upon such termination of employment or service and (c) the participant may exercise the vested portion of the SARs, but only within such period of time ending on the earlier of (i) two years following such termination of employment or service, or (ii) the Expiration Date (as defined in the SAR Agreement).

Restricted Stock Units

On February 25, 2021, the Compensation Committee granted time-based RSUs to certain of the Company’s executive officers and other employees.  Each RSU represents a contingent right to receive, upon vesting, one share of the Company’s Common Stock or its cash equivalent, as determined by the Company. The number of RSUs granted to certain named executive officers and certain other employees totaled 1,134,524.

Additionally, on May 18, 2021, the Company awarded an aggregate of 326,926-time-based RSUs to each of the Company’s non-employee directors, which vest on the first grant date anniversary or, if earlier, the date of the 2022 Annual Meeting of the Stockholders.

For the nine months ended September 30, 2021, certain of the Company's employees surrendered RSUs owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of RSUs issued under the Plan.

The table below represents the changes in RSUs:

	Number of Shares		Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2020	1,124,762	$	4.21
Granted	1,461,450		2.01
Vested	(654,068)		3.00
Forfeited	(1,606)		4.67
Balance at September 30, 2021	1,930,538	$	2.95

Stock-based compensation expense for these RSUs recognized in selling, general and administrative expense in the consolidated statement of comprehensive income (loss) for the nine months ended September 30, 2021 and 2020, was approximately $2.1 million and $2.3 million, respectively, with an associated tax benefit of $0.5 million and $0.6 million, respectively. For the three months ended September 30, 2021 and 2020, stock-based compensation expense for RSUs was approximately $0.8 million and $0.7 million, respectively. At September 30, 2021, unrecognized compensation expense related to RSUs totaled approximately $5.0 million and is expected to be recognized over a remaining term of approximately 2.00 years.

Under the authoritative guidance for stock-based compensation, 582,096 of the RSUs granted during 2021 are considered liability-based awards due to an insufficient number of shares available under the plan to service these awards upon vesting. As such, the Company recognized a liability associated with these RSUs of approximately $0.6 million as of September 30, 2021, of which approximately $0.4 million is included in accrued liabilities and approximately $0.2 million is included in other non-current liabilities in the accompanying balance sheets.  The estimated fair value of these liability-based awards was $3.73/RSU as of September 30, 2021.  The fair value of these liability awards will be remeasured at each reporting period until the date of settlement.

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Stock Option Awards

During nine months ended September 30, 2021 there were no new grants or other changes in the stock options outstanding. 

546,272 stock options were exercisable at September 30, 2021.

Stock-based compensation expense for these stock option awards recognized in selling, general and administrative expense in the unaudited consolidated statement of comprehensive income (loss) for the nine months ended September 30, 2021 and 2020, was approximately $0.6 million and $0.5 million, respectively, with an associated tax benefit of $0.1 million and $0.1 million, respectively. For the three months ended September 30, 2021 and 2020, stock-based compensation expense was approximately $0.2 million and $0.2 million, respectively, with an associated tax benefit of less than $0.1 million and less than $0.1 million, respectively. At September 30, 2021, unrecognized compensation expense related to stock options totaled $1.6 million and is expected to be recognized over a remaining term of approximately 2.11 years.

The fair value of each option award at the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions: 

		Assumptions
Weighted average expected stock volatility (range)	%	25.94 - 30.90
Expected dividend yield	%	0.00
Expected term (years)		6.25
Risk-free interest rate (range)	%	0.82 - 2.26
Exercise price (range)	$	4.51 - 10.83
Weighted-average grant date fair value	$	1.42

The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility as the Company does not have a sufficient trading history as a stand-alone public company to calculate volatility.   Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award.  The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption.  The Company has never declared or paid a dividend on its shares of common stock.

Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur. No stock options were forfeited for the nine months ended September 30, 2021.

Stock Appreciation Right Awards

On February 25, 2021, the Compensation Committee granted SARs to certain of the Company’s executive officers and other employees.  Each SAR represents a contingent right to receive, upon vesting, payment in cash or the Company’s Common Stock, as determined by the Compensation Committee, in an amount equal to the difference between (a) the fair market value of a Common Share on the date of exercise, over (b) the grant date price. The number of SARs granted to certain named executive officers and certain other employees totaled 1,551,631.

The following table summarizes SARs outstanding at September 30, 2021:

	Number of Units		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)
Outstanding SARs at December 31, 2020	-	$	-	-
Granted	1,551,631		1.79	9.41
Outstanding SARs at September 30, 2021	1,551,631	$	1.79	9.41

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Under the authoritative guidance for stock-based compensation, these SARs are considered liability-based awards.  The Company recognized a liability, which is included in other non-current liabilities in the consolidated balance sheets, associated with its SARs of approximately $0.9 million as of September 30, 2021. These SARs were valued using the Black-Scholes option pricing model, the expected volatility was approximately 43.5%, the term was 6.25 years, the dividend rate was 0.0% and the risk-free interest rate was approximately 1.07%, which resulted in a calculated fair value of approximately $0.78 per SAR as of the grant date. The estimated fair value of each SAR as of September 30, 2021 was $2.92. The fair value of these liability awards will be remeasured at each reporting period until the date of settlement. Increases and decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. For the nine months ended September 30, 2021, the Company recognized compensation expense related to these awards of approximately $0.9 million in selling, general and administrative expense in the unaudited consolidated statement of comprehensive income (loss). For the three months ended September 30, 2021, the Company recognized compensation expense related to these awards of approximately $0.4 million in selling, general, and administrative expense in the unaudited consolidated statement of comprehensive income (loss). At September 30, 2021, unrecognized compensation expense related to SARs totaled approximately $3.6 million and is expected to be recognized over a remaining term of approximately 2.41 years.

The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility as the Company does not have a sufficient trading history as a stand-alone public company to calculate volatility.   Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award.  The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption.  The Company has never declared or paid a dividend on its shares of common stock.

Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period.  Forfeitures are accounted for as they occur. No SARs were forfeited for the nine months ended September 30, 2021.

17. Retirement plans

We offer a defined contribution 401(k) retirement plan to substantially all of our U.S. employees. Participants may contribute from 1% to 90% of eligible compensation, inclusive of pretax and/or Roth deferrals (subject to Internal Revenue Service limitations), and we make matching contributions under this plan on the first 6% of the participant’s compensation (100% match of the first 3% employee contribution and 50% match on the next 3% contribution). Our matching contributions vest at a rate of 20% per year for each of the employee’s first five years of service and then are fully vested thereafter. For the nine months ended September 30, 2021 and 2020, we recognized expense of $0.7 million and $0.6 million, respectively, related to these matching contributions. For the three months ended September 30, 2021 and 2020, we recognized expense of $0.2 million and $0.2 million, respectively.

18. Business Segments

During 2021, the Company changed the names of select reportable segments to appropriately align with its diversified hospitality and facilities service offerings.  The segments formerly known as Permian Basin and Bakken Basin will now be referred to as Hospitality & Facilities Services – South and Hospitality & Facilities Services – Midwest, respectively.  All other reportable segment names will remain unchanged.

The Company is organized primarily on the basis of geographic region and customer industry group and operates in four reportable segments.

Our remaining operating segments have been consolidated and included in an “All Other” category.

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The following is a brief description of our reportable segments and a description of business activities conducted by All Other.

Hospitality & Facilities Services – South  — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers located primarily in Texas and New Mexico.

Hospitality & Facilities Services – Midwest  — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers located primarily in North Dakota.

Government — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers with Government contracts located in Texas.

TCPL Keystone – Segment operations consist primarily of revenue from the construction phase of the contract with TCPL. As a result of the Termination and Settlement Agreement discussed in Note 2, no further activity is expected in this segment.

All Other — Segment operations consist primarily of revenue from specialty rental and vertically integrated hospitality services revenue from customers located outside of the Hospitality & Facilities Services - South and Hospitality & Facilities Services - Midwest segments.

The table below presents information about reported segments for the three and nine months ended September 30 (except for asset information for 2020 that is presented as of December 31):

2021

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2021
Revenue	$	84,350	$	2,593	$	109,255	$	12,283	$	1,166	(a)	$	209,647
Adjusted gross profit	$	38,219	$	(854)	$	66,649	$	9,140	$	(374)		$	112,780
Total Assets	$	213,870	$	44,580	$	81,796	$	3,072	$	2,284		$	345,602
For the Three Months Ended September 30, 2021
Revenue	$	31,066	$	1,266	$	46,428	$	9,880	$	529		$	89,169
Adjusted gross profit	$	13,945	$	(56)	$	25,823	$	8,329	$	(139)		$	47,902

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2020

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2020
Revenue	$	89,163	$	5,705	$	49,527	$	28,126	$	1,018	(a)	$	173,539
Adjusted gross profit	$	42,257	$	323	$	37,701	$	4,419	$	(481)		$	84,219
Total Assets (as of December 31, 2020)	$	277,839	$	51,782	$	27,149	$	3,543	$	3,231		$	363,544
For the Three Months Ended September 30, 2020
Revenue	$	18,968	$	1,154	$	16,264	$	11,598	$	279		$	48,263
Adjusted gross profit	$	8,606	$	87	$	13,213	$	2,027	$	(220)		$	23,713

(a) Revenues are attributable to three operating segments of the Company and are reported in the “All Other” category previously described.

A reconciliation of total segment adjusted gross profit to total consolidated income (loss) before income taxes for the dates indicated below, is as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
				(Restated)				(Restated)
Total reportable segment adjusted gross profit	$	48,041	$	23,933	$	113,154	$	84,700
Other adjusted gross profit		(139)		(220)		(374)		(481)
Depreciation and amortization		(18,302)		(16,336)		(52,742)		(49,713)
Selling, general, and administrative expenses		(12,827)		(8,508)		(35,835)		(28,599)
Other expense (income), net		(91)		183		(781)		752
Interest expense, net		(9,465)		(9,913)		(29,058)		(30,113)
Change in fair value of warrant liabilities		1,120		267		(1,600)		2,453
Consolidated income (loss) before income taxes	$	8,337	$	(10,594)	$	(7,236)	$	(21,001)

A reconciliation of total segment assets to total consolidated assets as of the dates indicated below, is as follows:

	September 30, 2021		December 31, 2020
Total reportable segment assets	$	343,318	$	360,313
Other assets		2,284		3,231
Other unallocated amounts		184,354		170,693
Total Assets	$	529,956	$	534,237

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Other unallocated assets consist of the following as reported in the consolidated balance sheets of the Company as of the dates indicated below:

	September 30, 2021		December 31, 2020
Total current assets	$	69,779	$	43,562
Other intangible assets, net		92,153		103,121
Deferred tax asset		15,984		15,179
Deferred financing costs revolver, net		2,477		3,422
Other non-current assets		3,961		5,409
Total other unallocated amounts of assets	$	184,354	$	170,693

19. Subsequent Events

On October 1, 2021, the Company purchased a group of assets consisting primarily of modular units from Civeo USA, LLC (“seller”) for $6.2 million, which was funded by cash on hand as of the acquisition date. These assets were previously leased from the seller to service the Company’s Government reportable segment, and effective with the purchase, the lease was terminated. These assets will continue to be used in the Company’s Government reportable segment. No personnel were assumed as a part of this transaction.

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the post-combination business. Specifically, forward-looking statements may include statements relating to:

● the duration of the COVID-19 pandemic, related economic repercussions and the resulting negative impact to global economic demand;

● operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees and customers, government imposed vaccine mandates, and contract and supply chain disruptions;

● operational, economic, political and regulatory risks;

● our ability to effectively compete in the specialty rental accommodations and hospitality services industry;

● effective management of our communities;

● natural disasters and other business disruptions including outbreaks of epidemic or pandemic disease;

● the effect of changes in state building codes on marketing our buildings;

● changes in demand within a number of key industry end-markets and geographic regions;

● our reliance on third party manufacturers and suppliers;

● failure to retain key personnel;

● increases in raw material and labor costs;

● the effect of impairment charges on our operating results;

● our inability to recognize deferred tax assets and tax loss carry forwards;

● our future operating results fluctuating, failing to match performance or to meet expectations;

● our exposure to various possible claims and the potential inadequacy of our insurance;

● unanticipated changes in our tax obligations;

● our obligations under various laws and regulations;

● the effect of litigation, judgments, orders, regulatory or customer bankruptcy proceedings on our business;

● our ability to successfully acquire and integrate new operations;

● global or local economic and political movements, including any changes in policy under the Biden administration;

● federal government budgeting and appropriations;

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● our ability to effectively manage our credit risk and collect on our accounts receivable;

● our ability to fulfill our public company obligations;

● any failure of our management information systems and our ability to remediate material weaknesses;

● fluctuations in the fair value of warrant liabilities;

● our ability to meet our debt service requirements and obligations; and

● risks related to Bidco’s obligations under the Notes (as defined below).

These forward-looking statements are based on information available as of the date of this Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

TARGET HOSPITALITY CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of Target Hospitality Corp. and is intended to help the reader understand Target Hospitality Corp., our operations and our present business environment.  This discussion should be read in conjunction with the Company’s unaudited consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.

Executive Summary and Outlook

Target Hospitality Corp. is North America’s largest provider of vertically integrated modular accommodations and value-added hospitality services. The Company provides vertically integrated specialty rental and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation facilities, overall workforce community management, concierge services and laundry service. As of September 30, 2021, our network includes 26 communities to better serve our customers across the US.

COVID – 19 and Economic Update

The global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020 presented new risks to the Company’s business in 2020. Prior to March 2020, the Company’s results of operations were largely in line with expectations and subsequent to March 2020, we began to experience a decline in revenues.  The COVID-19 pandemic has not materially impacted the Company’s ability to operate nor has it materially disrupted the Company’s supply chain, disrupted service or caused a shortage of critical products at our communities.  However, the situation surrounding COVID-19 and the decrease in global economic demand had a material adverse impact on the Company’s operating results. There have been significant changes to the global economic situation and to public securities markets as a result of COVID-19.  A lack of widespread public acceptance of vaccines, could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. Further, even if vaccines are widely accepted, surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19.

The financial results for the third quarter of 2021 reflect reduced customer activity in the Hospitality & Facilities Services – South and Midwest segments as compared to pre-COVID-19 levels experienced in the first quarter of 2020. However, the Company did experience increases in demand for its hospitality and accommodation services compared to the lows experienced in the second and third quarter of 2020, including demand for the Company’s Hospitality & Facilities Services - South segment accommodations as customer activity levels continued to increase during the third quarter of 2021.

For the three months ended September 30, 2021, other key drivers of financial performance included:

● Increased revenue of $40.9 million, or 85% compared to the same period in 2020, driven by an increase in services income revenue of approximately $32.9 million primarily due to additional revenue generated from growth in the Government segment as well as increase in customer demand in the Hospitality & Facilities Services – South segment.  

● Generated net income of approximately $6.7 million for the three months ended September 30, 2021, as compared to a net loss of approximately $7.6 million for the three months ended September 30, 2020, which is primarily attributable to the increase in revenue.

● Generated consolidated Adjusted EBITDA of $37.5 million representing an increase of $20.5 million, or 120.7% as compared to the same period in 2020, driven primarily by the increase in revenue.

Adjusted EBITDA is a non-GAAP measure.  The GAAP measure most comparable to Adjusted EBITDA is Net Income (loss).  Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure.

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As disclosed in our 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting.

Our proximity to customer activities influences occupancy and demand. We have built, own and operate the two largest specialty rental and hospitality services networks available to customers operating in the Hospitality & Facilities Services - South and Hospitality & Facilities Services - Midwest regions. Our broad network often results in us having communities that are the closest to our customers’ job sites, which reduces commute times and costs, and improves the overall safety of our customers’ workforce. Our communities provide customers with cost efficiencies, as they are able to jointly use our communities and related infrastructure (i.e., power, water, sewer and IT) services alongside other customers operating in the same vicinity. Demand for our services is dependent upon activity levels, particularly our customers’ capital spending on exploration, development, production and transportation of oil and natural gas and government housing programs.

Factors Affecting Results of Operations

We expect our business to continue to be affected by the key factors discussed below, as well as factors discussed in the section titled “Risk Factors” included in our 2020 Form 10-K/A. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove to be incorrect, our actual results may vary materially from our expected results.

Public health threats or outbreaks of communicable diseases, including COVID-19, could have a material adverse effect on the Company’s operations and financial results.

The Company may face risks related to public health threats or outbreaks of communicable diseases, including COVID-19, which could adversely affect the economy and the Company’s ability to conduct business for an indefinite period of time. This situation combined with the oil and gas price volatility discussed below has had, and could continue to have, a material adverse effect on the Company’s results of operations.

Supply and Demand for Oil and Gas

As a provider of vertically integrated specialty rental and hospitality services, we are not directly impacted by oil and gas price fluctuations. However, these price fluctuations indirectly influence our activities and results of operations because the exploration and production (“E&P”) workforce is directly affected by price fluctuations and the industry’s expansion or contraction as a result of these fluctuations. Our occupancy volume depends on the size of the workforce within the oil and gas industry and the demand for labor. Oil and gas prices are volatile and influenced by numerous factors beyond our control, including the domestic and global supply of and demand for oil and gas. The commodities trading markets, as well as other supply and demand factors, may also influence the selling prices of oil and gas.  Further, as a result of oil and gas price volatility, the Company temporarily closed and consolidated communities in the Hospitality & Facilities Services - South and Hospitality & Facilities Services - Midwest segments.  However, these communities began re-opening in July of 2020 as conditions started to improve.

Availability and Cost of Capital

Capital markets conditions could affect our ability to access the debt and equity capital markets to the extent necessary to fund our future growth. Interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly, and could limit our ability to raise funds, or increase the price of raising funds, in the capital markets and may limit our ability to expand.

Regulatory Compliance

We are subject to extensive federal, state, local, and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid, and hazardous waste handling and disposal and the investigation and remediation of contamination. The risks of substantial costs, liabilities, and limitations on our

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operations related to compliance with these laws and regulations are an inherent part of our business, and future conditions may develop, arise, or be discovered that create substantial environmental compliance or remediation liabilities and costs.

Natural Disasters or Other Significant Disruption

An operational disruption in any of our facilities could negatively impact our financial results. The occurrence of a natural disaster, such as earthquake, tornado, severe weather, including hail storms, flood, fire, or other unanticipated problems such as labor difficulties, equipment failure, capacity expansion difficulties or unscheduled maintenance could cause operational disruptions of varied duration. These types of disruptions could materially adversely affect our financial condition and results of operations to varying degrees dependent upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative solutions.

Overview of Our Revenue and Operations

We derive the majority of our revenue from specialty rental accommodations and vertically integrated hospitality services. Approximately 68.6% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 31.4% of revenues were earned through leasing of lodging facilities (26.0%) and construction fee income (5.4%) for the nine months ended September 30, 2021. Our services include temporary living accommodations, catering food services, maintenance, housekeeping, grounds-keeping, on-site security, workforce community management, and laundry services. Revenue is recognized in the period in which lodging, and services are provided pursuant to the terms of contractual relationships with our customers. In certain of our contracts, rates may vary over the contract term, in these cases, revenue is generally recognized on a straight-line basis over the contract term. We enter into arrangements with multiple deliverables for which arrangement consideration is allocated between lodging and services based on the relative estimated standalone selling price of each deliverable. The estimated price of lodging and services deliverables is based on the prices of lodging and services when sold separately or based upon the best estimate of selling price.

The Company originated a contract in 2013 with TC Energy Pipelines (“TCPL”) to construct, deliver, cater and manage all accommodations and hospitality services in conjunction with the planned construction of the Keystone XL pipeline project.  During the construction phase of the contract, the Company recognized revenue as costs were incurred in connection with the project under the percentage of completion method of accounting. One of these communities was completed and opened in September 2020 and subsequently closed in mid-December 2020.  The revenue recognized on the community post construction for the three and nine months ended September 30, 2021, was recognized in services income along with our other revenue from specialty rental with vertically integrated hospitality services. In January 2021, the TCPL project was suspended and subsequently cancelled in June 2021 due to the Keystone XL Presidential Permit being revoked.  Then on July 23, 2021, the Company executed the Termination and Settlement Agreement, which effectively terminated the Company’s contract with TC Energy that was originated in 2013.  No further revenue will be generated from the 2013 contract as a result of this termination.

Key Indicators of Financial Performance

Our management uses a variety of financial and operating metrics to analyze our performance. We view these metrics as significant factors in assessing our operating results and profitability and intend to review these measurements frequently for consistency and trend analysis. We primarily review the following profit and loss information when assessing our performance:

Revenue

We analyze our revenues by comparing actual revenues to our internal budgets and projections for a given period and to prior periods to assess our performance. We believe that revenues are a meaningful indicator of the demand and pricing for our services. Key drivers to change in revenues may include average utilization of existing beds, levels of natural resource development activity in the Hospitality & Facilities Services - South and Hospitality & Facilities Services - Midwest segments, and the consumer price index impacting government contracts.

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Adjusted Gross Profit

We analyze our adjusted gross profit, which is a Non-GAAP measure that we define as revenues less cost of sales, excluding impairment and depreciation of specialty rental assets to measure our financial performance. Please see “Non-GAAP Financial Measures” for a definition and reconciliation to the most comparable GAAP measure. We believe adjusted gross profit is a meaningful metric because it provides insight on financial performance of our revenue streams without consideration of our overhead. Additionally, using adjusted gross profit gives us insight on factors impacting cost of sales, such as efficiencies of our direct labor and material costs. When analyzing adjusted gross profit, we compare actual adjusted gross profit to our internal projections and to prior period results for a given period in order to assess our performance.

We also use Non-GAAP measures such as EBITDA, Adjusted EBITDA, and Discretionary cash flows to evaluate the operating performance of our business. For a more in-depth discussion of the Non-GAAP measures, please refer to the "Non-GAAP Financial Measures" section.

Segments

During 2021, the Company changed the names of select reportable segments to appropriately align with its diversified hospitality and facilities service offerings.  The segments formerly known as Permian Basin and Bakken Basin are now referred to as Hospitality & Facilities Services – South and Hospitality & Facilities Services – Midwest, respectively.  All other reportable segment names remain unchanged. We have identified four reportable business segments: Hospitality & Facilities Services - South, Hospitality & Facilities Services - Midwest, Government, and TCPL Keystone:

Hospitality & Facilities Services – South

The Hospitality & Facilities Services - South segment reflects our facilities and operations in the Hospitality & Facilities Services - South region and includes our 18 communities located across Texas and New Mexico.

Hospitality & Facilities Services – Midwest

The Hospitality & Facilities Services - Midwest segment reflects our facilities and operations in the Hospitality & Facilities Services - Midwest region and includes our 4 communities in North Dakota.

Government

The government segment (“Government”) includes the facilities and operations of the family residential center and the related support communities in Dilley, Texas (the “South Texas Family Residential Center”) provided under a lease and services agreement with CoreCivic (“CoreCivic”). Additionally, this segment also includes facilities and operations provided under a lease and services agreement with a leading nonprofit organization, backed by a committed United States Government contract, to provide a suite of comprehensive service offerings in support of their humanitarian aid efforts.

TCPL Keystone

The TCPL Keystone segment reflects initial preparatory work and plans for facilities and services provided in connection with the TCPL project. In January 2021, the TCPL project was suspended and subsequently cancelled in June 2021 due to the Keystone XL Presidential Permit being revoked. Then on July 23, 2021, the Company executed the Termination and Settlement Agreement, which effectively terminated the Company’s contract with TC Energy that was originated in 2013.  As a result of the Termination and Settlement Agreement, no further activity is expected in this segment.

All Other

Our other facilities and operations which do not meet the criteria to be a separate reportable segment are consolidated and reported as “All Other” which represents the facilities and operations of one community in the Anadarko basin of

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Oklahoma, and the catering and other services provided to communities and other workforce accommodation facilities for the oil, gas and mining industries not owned by us.

Key Factors Impacting the Comparability of Results

The historical results of operations for the periods presented may not be comparable, either to each other or to our future results of operations, for the reasons described below:

COVID-19 and Oil and Gas Price Volatility

The COVID-19 pandemic and the disruption in the oil and gas industry has had a material adverse effect on our business and results of operations. The financial results for the third quarter of 2021 reflect the reduced activity in the Hospitality & Facilities Services – South and Hospitality & Facilities Services - Midwest segments resulting from the negative effects of the oil and gas price volatility compounded by the effects of COVID-19 as these disruptions created significant challenges for our energy end-market customers.  This drove a significant reduction in our utilization in these segments during 2020, and, although we have experienced steady increases in utilization into the third quarter of 2021, such utilization levels have not yet reached pre-pandemic levels experienced during the first quarter of 2020.  During 2020, these events also impacted the liquidity of our energy end market customers resulting a greater level of bad debt expense during 2020. 

Restatement of Previously Issued Consolidated Financial Statements for Private Warrants

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the warrant from being classified in equity and thus the warrant should be classified as a liability. As a result of the SEC Statement, the Company re-evaluated the accounting treatment of the warrants issued by PEAC to purchase its common stock in a private placement concurrently with the Public Offering (the “Private Warrants”). Because the Private Warrants contain provisions whereby the settlement amount varies depending upon the characteristics of the warrant holder, the Private Warrants should have been recorded at fair value as a liability in the Company’s consolidated balance sheet instead of accounting for them as equity.

In response to the SEC statement and as previously disclosed in the 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting for the Private Warrants. We have restated herein our consolidated financial results as of and for the three and nine months ended September 30, 2020. The impact to the three and nine months ended September 30, 2020 was a decrease to net loss of approximately $0.3 million and $2.5 million, respectively, reported as a change in fair value of warrant liabilities.

Results of Operations

The period-to-period comparisons of our results of operations have been prepared using the historical periods included in our unaudited consolidated financial statements. The following discussion should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this document.

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Consolidated Results of Operations for the three months ended September 30, 2021 and 2020 (as restated)

	For the Three Months Ended				Amount of		Percentage Change
	September 30,				Increase		Increase
	2021		2020		(Decrease)		(Decrease)
Revenue:				(Restated)
Services income	$	57,221	$	24,331	$	32,890	135%
Specialty rental income		22,099		12,827		9,272	72%
Construction fee income		9,849		11,105		(1,256)	(11)%
Total revenue		89,169		48,263		40,906	85%
Costs:
Services		37,064		21,990		15,074	69%
Specialty rental		4,203		2,560		1,643	64%
Depreciation of specialty rental assets		14,294		11,995		2,299	19%
Gross Profit		33,608		11,718		21,890	187%
Selling, general and administrative		12,827		8,508		4,319	51%
Other depreciation and amortization		4,008		4,341		(333)	(8)%
Other expense (income), net		91		(183)		274	(150)%
Operating income (loss)		16,682		(948)		17,630	(1,860)%
Interest expense, net		9,465		9,913		(448)	(5)%
Change in fair value of warrant liabilities		(1,120)		(267)		(853)	319%
Income (loss) before income tax		8,337		(10,594)		18,931	(179)%
Income tax expense (benefit)		1,662		(2,991)		4,653	(156)%
Net Income (loss)	$	6,675	$	(7,603)	$	14,278	(188)%

For the three months ended September 30, 2021 compared to the three months ended September 30, 2020

Total Revenue. Total revenue was $89.2 million for the three months ended September 30, 2021 and consisted of $57.2 million of services income, $22.1 million of specialty rental income, and $9.9 million of construction fee income. Total revenues for the three months ended September 30, 2020 was $48.3 million which consisted of $24.3 million of services income, $12.8 million of specialty rental income and $11.1 million of construction fee income.

Services income consists primarily of specialty rental accommodations with vertically integrated hospitality services, and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, on-site security, overall workforce community management, health and recreation facilities, concierge services, and laundry service. The main drivers of the increase in services income revenue year over year was the growth in the Government segment combined with a significant increase in customer activity in the Hospitality & Facilities Services – South as well as a slight increase in the Hospitality & Facilities Services - Midwest segment as the business recovers from the significant decreases in demand experienced for the three months ended September 30, 2020.  

Construction fee income consists primarily of revenue from the construction phase of the TCPL contract with the current year consisting almost exclusively of revenue related to the Termination and Settlement Agreement executed on July 23, 2021 with TC Energy. Specialty rental income consists primarily of revenues from renting rooms at facilities leased or owned.

Specialty rental income increased primarily as a result of growth in the Government segment.

Cost of services. Cost of services was $37.1 million for the three months ended September 30, 2021 as compared to $22.0 million for the three months ended September 30, 2020.  

The increase in services costs is primarily due to an increase related to growth in the Government segment as mentioned above combined with a meaningful increase in occupancy in the Hospitality & Facilities Services – South segment.

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Specialty rental costs. Specialty rental costs were $4.2 million for the three months ended September 30, 2021 as compared to $2.6 million for the three months ended September 30, 2020. The increase in specialty rental costs is primarily due to costs related to growth in the Government segment.

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $14.3 million for the three months ended September 30, 2021 as compared to $12.0 million for the three months ended September 30, 2020. This increase is primarily attributable to growth in the Government segment as noted above offset by a decrease in the Hospitality & Facilities Services - South segment due to transfer of assets from the Hospitality and Facilities Services - South segment to the Government segment to service the new Government segment contract.  

Selling, general and administrative. Selling, general and administrative was $12.8 million for the three months ended September 30, 2021 as compared to $8.5 million for the three months ended September 30, 2020. The increase in selling, general and administrative expense of $4.3 million was primarily driven by increases in labor costs, advisory and other professional fees, travel, and insurance costs. The increase in labor costs are driven primarily by an increase in bonus expense, stock based compensation, and to a lesser extent commissions as there have been no material increases to headcount.  These increases were partially offset by a decrease in bad debt expense as economic conditions improved.

Other depreciation and amortization. Other depreciation and amortization expense was $4.0 million for the three months ended September 30, 2021 as compared to $4.3 million for the three months ended September 30, 2020.

Other expense (income), net. Other expense (income), net was $0.1 million for the three months ended September 30, 2021 as compared to ($0.2) million for the three months ended September 30, 2020. The increase in other expenses is primarily driven by the related party reimbursement agreement ending on December 31, 2020, which was not renewed.

Interest expense, net. Interest expense, net was $9.5 million for the three months ended September 30, 2021 as compared to $9.9 million for the three months ended September 30, 2020. The change in interest expense is driven by a reduction of the interest on the New ABL facility as a result of a lower outstanding balance during 2021 as the amount was completely paid off in July of 2021.

Change in fair value of warrant liabilities. Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end.  The change in fair value of the warrant liabilities was ($1.1) million for the three months ended September 30, 2021 as compared to ($0.3) million for the three months ended September 30, 2020.

Income tax expense (benefit).  Income tax expense was $1.7 million for the three months ended September 30, 2021 as compared to a benefit of ($3.0) million for the three months ended September 30, 2020. The increase in income tax expense is primarily attributable to the increase in income before taxes for the three months ended September 30, 2021 as well as an increase in state tax expense based off of gross receipts as a result of the increase in revenues.

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Consolidated Results of Operations for the nine months ended September 30, 2021 and 2020 (as restated)

	For the Nine Months Ended				Amount of		Percentage Change
	September 30,				Increase		Increase
	2021		2020		(Decrease)		(Decrease)
Revenue:				(Restated)
Services income	$	143,806	$	103,526	$	40,280	39%
Specialty rental income		54,547		42,379		12,168	29%
Construction fee income		11,294		27,634		(16,340)	(59)%
Total revenue		209,647		173,539		36,108	21%
Costs:
Services		85,835		82,456		3,379	4%
Specialty rental		11,032		6,864		4,168	61%
Depreciation of specialty rental assets		40,642		37,158		3,484	9%
Gross Profit		72,138		47,061		25,077	53%
Selling, general and administrative		35,835		28,599		7,236	25%
Other depreciation and amortization		12,100		12,555		(455)	(4)%
Other expense (income), net		781		(752)		1,533	(204)%
Operating income		23,422		6,659		16,763	252%
Interest expense, net		29,058		30,113		(1,055)	(4)%
Change in fair value of warrant liabilities		1,600		(2,453)		4,053	(165)%
Loss before income tax		(7,236)		(21,001)		13,765	(66)%
Income tax expense (benefit)		139		(5,187)		5,326	(103)%
Net loss	$	(7,375)	$	(15,814)	$	8,439	(53)%

For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Total Revenue. Total revenue was $209.6 million for the nine months ended September 30, 2021 and consisted of $143.8 million of services income, $54.5 million of specialty rental income, and $11.3 million of construction fee income. Total revenues for the nine months ended September 30, 2020 was $173.5 million which consisted of $103.5 million of services income, $42.4 million of specialty rental income, and $27.6 million of construction fee income.

Services income consists primarily of specialty rental accommodations with vertically integrated hospitality services, and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, on-site security, overall workforce community management, health and recreation facilities, concierge services, and laundry service. The main driver of the increase in services income revenue year over year was the growth in the Government segment partially offset by a reduction of customer activity in the Hospitality & Facilities Services - South and the Hospitality & Facilities Services - Midwest segments, due to the effects of the COVID-19 pandemic, which created a meaningful reduction in customer headcount demand when compared to the first quarter of 2020.  However, as noted previously, we experienced a meaningful increase in customer demand during the three months ended September 30, 2021, when compared to the three months ended September 30, 2020.  

Construction fee income consists primarily of revenue from the construction phase of the TCPL contract with the current year consisting almost exclusively of revenue related to the Termination and Settlement Agreement executed on July 23, 2021 with TC Energy.  The decrease in construction fee income in 2021 compared to 2020 was due to the project being suspended at the end of January 2021, subsequently cancelled in June 2021, and finally resulted in the TCPL contract being terminated in July 2021.  Specialty rental income consists primarily of revenues from renting rooms at facilities leased or owned.  

Specialty rental income increased as a result of the leasing revenue generated by the new Government contract entered into in March of 2021.

Cost of services. Cost of services was $85.8 million for the nine months ended September 30, 2021 as compared to $82.5 million for the nine months ended September 30, 2020.  

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The increase in services costs is primarily due to an increase related to growth in the Government segment as mentioned above. This increase was partially offset by lower activity on the TCPL project resulting from the suspension of the project at the end of January 2021 and subsequent cancellation in June 2021 driven by the Presidential Permit being revoked. Additionally, there was also a decrease in costs in the Hospitality & Services – South and Hospitality & Services – Midwest segments driven by cost containment measures implemented in response to the decrease in utilization for the nine months ended September 30, 2021 as compared to the same period in 2020.

Specialty rental costs. Specialty rental costs were $11.0 million for the nine months ended September 30, 2021 as compared to $6.9 million for the nine months ended September 30, 2020. The increase in specialty rental costs is primarily due to costs related to growth in the Government segment.  This increase was partially offset with a decrease in specialty rental costs due to a modification of a contract for one of our energy end-market customers, which resulted in all such costs and related revenue now being recognized in services income and costs, as it no longer meets the definition of a lease.

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $40.6 million for the nine months ended September 30, 2021 as compared to $37.2 million for the nine months ended September 30, 2020.  This increase is primarily attributable to growth in the Government segment as noted above offset by a decrease in the Hospitality & Facilities Services - South segment due to transfer of assets from the Hospitality and Facilities Services - South segment to the Government segment to service the new Government segment contract.  

Selling, general and administrative. Selling, general and administrative was $35.8 million for the nine months ended September 30, 2021 as compared to $28.6 million for the nine months ended September 30, 2020. The increase in selling, general and administrative expense of $7.2 million was primarily driven by increases in labor costs, advisory and other professional fees, transaction fees, and to a lesser extent, outside services, travel, amortization of system implementation costs, and insurance expense.  The transaction fees, consisting of legal and other advisory fees, primarily related to the previously announced non-binding proposal made by Arrow Holdings S.à r.l. (“Arrow”), an affiliate of TDR Capital LLP (“TDR”), to acquire all of the outstanding shares of common stock of Target Hospitality not owned by Arrow or its affiliates for cash consideration of $1.50 per share (the “Proposal”).  On March 29, 2021, this Proposal was withdrawn and the Company does not expect to incur any further costs related to this Proposal.  The increase in labor costs are driven primarily by an increase in bonus expense, stock-based compensation, and commissions as there have been no material increases to headcount.  These increases were partially offset by a decrease in bad debt expense as economic conditions improved.

Other depreciation and amortization. Other depreciation and amortization expense was $12.1 million for the nine months ended September 30, 2021 as compared to $12.6 million for the nine months ended September 30, 2020.

Other expense (income), net. Other expense (income), net was $0.8 million for the nine months ended September 30, 2021 as compared to ($0.8) million for the nine months ended September 30, 2020. This increase in expense was primarily driven by the prior year including insurance proceeds received for an involuntary asset conversion attributable to storm damage as well as related party reimbursement income, none of which recurred in the current year.

Interest expense, net. Interest expense, net was $29.1 million for the nine months ended September 30, 2021 as compared to $30.1 million for the nine months ended September 30, 2020. The change in interest expense is driven by a reduction of the interest on the New ABL facility as a result of a lower outstanding balance during 2021 as the amount was completely paid off in July of 2021.

Change in fair value of warrant liabilities. Change in fair value of warrant liabilities represents the fair value adjustments to the outstanding Private Warrant liabilities based on the change in their estimated fair value at each reporting period end.  The change in fair value of the warrant liabilities was $1.6 million for the nine months ended September 30, 2021 as compared to ($2.5) million for the nine months ended September 30, 2020. The estimated value of the Private Warrants have increased in the current year generating a reduction to income in the current year.

Income tax expense (benefit).  Income tax expense (benefit) was $0.1 million for the nine months ended September 30, 2021 as compared to ($5.2) million for the nine months ended September 30, 2020. The increase in income tax expense

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is primarily attributable to the decrease in loss before taxes for the nine months ended September 30, 2021 as well as an increase in state tax expense based off of gross receipts as a result of the increase in revenues.

Segment Results

The following table sets forth our selected results of operations for each of our reportable segments for the three months ended September 30, 2021 and 2020.

							Percentage
	For the Three Months Ended September 30,				Amount of Increase		Change Increase
	2021		2020		(Decrease)		(Decrease)
Revenue:
Government	$	46,428	$	16,264	$	30,164	185%
Hospitality & Facilities Services - South		31,066		18,968		12,098	64%
Hospitality & Facilities Services - Midwest		1,266		1,154		112	10%
TCPL Keystone		9,880		11,598		(1,718)	(15)%
All Other		529		279		250	90%
Total Revenues	$	89,169	$	48,263	$	40,906	85%
Adjusted Gross Profit
Government	$	25,823	$	13,213	$	12,610	95%
Hospitality & Facilities Services - South		13,945		8,606		5,339	62%
Hospitality & Facilities Services - Midwest		(56)		87		(143)	(164)%
TCPL Keystone		8,329		2,027		6,302	311%
All Other		(139)		(220)		81	(37)%
Total Adjusted Gross Profit	$	47,902	$	23,713	$	24,189	102%
Average Daily Rate
Government	$	78.10	$	72.27	$	5.83
Hospitality & Facilities Services - South	$	75.39	$	89.56	$	(14.17)
Hospitality & Facilities Services - Midwest	$	68.43	$	98.11	$	(29.68)
Total Average Daily Rate	$	76.78	$	81.28	$	(4.50)

Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets and loss on impairment. Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights.

Government

Revenue for the Government segment was $46.4 million the three months ended September 30, 2021, as compared to $16.3 million for the three months ended September 30, 2020.

Adjusted gross profit for the Government segment was $25.8 million for the three months ended September 30, 2021, as compared to $13.2 million for the three months ended September 30, 2020.

Revenue increased as a result of the new contract originated in the Government segment in March 2021 as previously mentioned. This increase was partially offset by lower non-cash deferred revenue amortization on a legacy contract, driven by a contract extension modification, which extended the term through September 2026 compared to the previous term through September 2021. The increase in adjusted gross profit of $12.6 million was driven by the new contract executed in March of 2021, partially offset by the decrease in non-cash deferred revenue discussed above.

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Hospitality & Facilities Services - South

Revenue for the Hospitality & Facilities Services - South segment was $31.1 million for the three months ended September 30, 2021, as compared to $19.0 million for the three months ended September 30, 2020.

Adjusted gross profit for the Hospitality & Facilities Services - South segment was $13.9 million for the three months ended September 30, 2021, as compared to $8.6 million for the three months ended September 30, 2020.

The increase in revenue of $12.1 million and increase in adjusted gross profit of $5.3 million is primarily attributable to an increase in utilization driven by a significant increase in customer demand.

Hospitality & Facilities Services - Midwest

Revenue for the Hospitality & Facilities Services - Midwest segment was $1.3 million for the three months ended September 30, 2021, as compared to $1.2 million for the three months ended September 30, 2020.

Adjusted gross profit for the Hospitality & Facilities Services - Midwest segment was ($0.1) million for the three months ended September 30, 2021, as compared to $0.1 million for the three months ended September 30, 2020.

The increase in revenue of $0.1 million and decrease in adjusted gross profit of $0.1 million was primarily attributable to an increase in utilization offset by a decrease in ADR.

TCPL Keystone

Revenue for the TCPL Keystone segment was $9.9 million for the three months ended September 30, 2021, as compared to $11.6 million for the three months ended September 30, 2020.

Adjusted gross profit for the TCPL Keystone segment was $8.3 million for the three months ended September 30, 2021, as compared to $2.0 million for the three months ended September 30, 2020.

The decrease in revenue in 2021 compared to 2020 was due to the project being suspended at the end of January 2021, subsequently cancelled in June 2021, and finally resulted in the TCPL contract being terminated in July 2021 with the current year consisting almost exclusively of revenue related to the Termination and Settlement Agreement. We anticipate activity in this segment to be eliminated as a result of the Termination and Settlement Agreement.

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Segment Results

The following table sets forth our selected results of operations for each of our reportable segments for the nine months ended September 30, 2021 and 2020.

		For the Nine Months Ended September 30,			Amount of Increase		Percentage Change Increase
	2021		2020		(Decrease)		(Decrease)
Revenue:
Government	$	109,255	$	49,527	$	59,728	121%
Hospitality & Facilities Services - South		84,350		89,163		(4,813)	(5)%
Hospitality & Facilities Services - Midwest		2,593		5,705		(3,112)	(55)%
TCPL Keystone		12,283		28,126		(15,843)	(56)%
All Other		1,166		1,018		148	15%
Total Revenues	$	209,647	$	173,539	$	36,108	21%
Adjusted Gross Profit
Government	$	66,649	$	37,701	$	28,948	77%
Hospitality & Facilities Services - South		38,219		42,257		(4,038)	(10)%
Hospitality & Facilities Services - Midwest		(854)		323		(1,177)	(364)%
TCPL Keystone		9,140		4,419		4,721	107%
All Other		(374)		(481)		107	(22)%
Total Adjusted Gross Profit	$	112,780	$	84,219	$	28,561	34%
Average Daily Rate
Government	$	74.84	$	73.87	$	0.97
Hospitality & Facilities Services - South	$	74.50	$	83.36	$	(8.86)
Hospitality & Facilities Services - Midwest	$	67.14	$	80.60	$	(13.46)
Total Average Daily Rate	$	74.57	$	79.62	$	(5.05)

Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets and loss on impairment. Average daily rate is calculated based on specialty rental income and services income received over the period indicated, divided by utilized bed nights.

Government

Revenue for the Government segment was $109.3 million for the nine months ended September 30, 2021, as compared to $49.5 million for the nine months ended September 30, 2020.

Adjusted gross profit for the Government segment was $66.6 million for the nine months ended September 30, 2021, as compared to $37.7 million for the nine months ended September 30, 2020.

Revenue increased as a result of the new contract originated in the Government segment in March 2021 as previously mentioned. This increase was partially offset by lower non-cash deferred revenue amortization on a legacy contract, driven by a contract extension modification, which extended the term through September 2026 compared to the previous term through September 2021. The increase in adjusted gross profit of $28.9 million was driven by the new contract partially offset by the decrease in non-cash deferred revenue discussed above.

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Hospitality & Facilities Services - South

Revenue for the Hospitality & Facilities Services - South segment was $84.4 million for the nine months ended September 30, 2021, as compared to $89.2 million for the nine months ended September 30, 2020.

Adjusted gross profit for the Hospitality & Facilities Services - South segment was $38.2 million for the nine months ended September 30, 2021, as compared to $42.3 million for the nine months ended September 30, 2020.

The decrease in revenue of $4.8 million and decrease in adjusted gross profit of $4.1 million is primarily attributable to a decrease in ADR due to the impacts of contracts being renegotiated in 2020 in response to the downturn in the economy. This decrease in ADR was partially offset by an increase in utilization. Additionally, as noted previously, this segment experienced a meaningful increase in customer demand during the three months ended September 30, 2021, when compared to the three months ended September 30, 2020.

Hospitality & Facilities Services - Midwest

Revenue for the Hospitality & Facilities Services - Midwest segment was $2.6 million for the nine months ended September 30, 2021, as compared to $5.7 million for the nine months ended September 30, 2020.

Adjusted gross profit for the Hospitality & Facilities Services - Midwest segment was ($0.9) million for the nine months ended September 30, 2021, as compared to $0.3 million for the nine months ended September 30, 2020.

The decrease in revenue of $3.1 million and decrease in adjusted gross profit of $1.2 million was primarily driven by a decrease in utilization and ADR due to the impacts of the COVID-19 pandemic, which created a meaningful reduction in customer headcount demand when compared to the first quarter of 2020. The Hospitality and Facilities Services – Midwest segment was shut down in early May of 2020 but began to reopen in July of 2020.  However, as noted previously, this segment experienced a slight increase in customer demand during the three months ended September 30, 2021, when compared to the three months ended September 30, 2020.

TCPL Keystone

Revenue for the TCPL Keystone segment was $12.3 million for the nine months ended September 30, 2021, as compared to $28.1 million for the nine months ended September 30, 2020.

Adjusted gross profit for the TCPL Keystone segment was $9.1 million for the nine months ended September 30, 2021, as compared to $4.4 million for the nine months ended September 30, 2020.

The decrease in revenue in 2021 compared to 2020 was due to the project being suspended at the end of January 2021, subsequently cancelled in June 2021, and finally resulted in the TCPL contract being terminated in July 2021 with the current year consisting almost exclusively of revenue related to the Termination and Settlement Agreement executed on July 23, 2021 with TC Energy. We anticipate activity in this segment to be eliminated as a result of the Termination and Settlement Agreement.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been capital contributions from our owners and cash flow from operations. We depend on cash flow from operations, cash on hand and borrowings under our revolving credit facility to finance our acquisition strategy, working capital needs, and capital expenditures. We currently believe that our cash on hand, along with these sources of funds will provide sufficient liquidity to fund debt service requirements, support our growth strategy, lease obligations, contingent liabilities and working capital investments for at least the next 12 months. However, we cannot assure you that we will be able to obtain future debt or equity financings adequate for our future cash requirements on commercially reasonable terms or at all.

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If our cash flows and capital resources are insufficient, we may be forced to reduce or delay additional acquisitions, future investments, and capital expenditures, and seek additional capital. Significant delays in our ability to finance planned acquisitions or capital expenditures may materially and adversely affect our future revenue prospects.

Capital Requirements

During for the nine months ended September 30, 2021 we incurred approximately $24.2 million in capital expenditures, largely driven by growth in our Government segment. As we pursue growth in the future, we monitor which capital resources, including equity and debt financings, are available to us to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. However, future cash flows are subject to a number of variables, including the ability to maintain existing contracts, obtain new contracts and manage our operating expenses. The failure to achieve anticipated revenue and cash flows from operations could result in additional reductions in future capital spending. We cannot assure you that operations and other needed capital will be available on acceptable terms or at all. In the event we make additional acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to further reduce the expected level of capital expenditures or seek additional capital. We cannot assure you that needed capital will be available on acceptable terms or at all.

The following table sets forth general information derived from our unaudited consolidated statements of cash flows:

	For the Nine Months Ended
	September 30,
	2021		2020
Net cash provided by operating activities	$	99,447	$	28,592
Net cash used in investing activities		(24,008)		(10,288)
Net cash used in financing activities		(51,792)		(16,027)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		15		(14)
Net increase in cash, cash equivalents and restricted cash	$	23,662	$	2,263

For the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020

Cash flows provided by operating activities. Net cash provided by operating activities was $99.4 million for the nine months ended September 30, 2021 compared to net cash provided by operating activities of $28.6 million for the nine months ended September 30, 2020.

The current period is up by approximately $70.8 million when compared to 2020 driven primarily by an increase in cash collections resulting from growth in the Government segment. This was partially offset by a decrease in cash flows from operations in the first quarter of 2021 when compared to the first quarter of 2020 as a result of the impact of COVID-19.

Cash flows used in investing activities. Net cash used in investing activities was $24.0 million for the nine months ended September 30, 2021 compared to $10.3 million for the nine months ended September 30, 2020. This increase was primarily related to an increase in capital expenditures driven by growth in the Government segment.

Cash flows used in financing activities. Net cash flows used in financing activities was $51.8 million for the nine months ended September 30, 2021 compared to $16.0 million for the nine months ended September 30, 2020. The increase in cash used in financing activities primarily reflects the increase in principal payments on borrowings from the New ABL Facility in the current period as the New ABL Facility was completely paid off by July of 2021.

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Indebtedness

Capital lease and other financing obligations

The Company’s capital lease and other financing obligations as of September 30, 2021 consisted of approximately $0.1 million of capital leases related primarily to vehicles. In December 2019, the Company entered into a lease for certain equipment with a lease term expiring November 2022 and an effective interest rate of 4.3%. The Company’s lease relates to commercial-use vehicles. In November 2020, the Company entered into an insurance financing arrangement in an amount of approximately $3.3 million at an interest rate of 3.84%.  The insurance financing arrangement requires 9 monthly payments of approximately $0.4 million that began on December 1, 2020 and ended on August 1, 2021 when the obligation was completely paid off.

The Company’s capital lease and other financing obligations as of December 31, 2020 consisted of approximately $0.9 million of capital leases and $2.9 million related to insurance financing obligations.

New ABL Facility

On the Closing Date, in connection with the closing of the Business Combination, Topaz, Bidco, Target, Signor and each of their domestic subsidiaries entered into an ABL credit agreement that provides for a senior secured asset-based revolving credit facility in the aggregate principal amount of up to $125 million. Approximately $40 million of proceeds from the New ABL Facility were used to finance a portion of the consideration payable and fees and expenses incurred in connection with the Business Combination.  During the nine months ended September 30, 2021, the Company repaid a net amount of $48 million of borrowings under the New ABL Facility from excess cash available which reduced the outstanding balance to $0 as of September 30, 2021. The maturity date of the New ABL Facility is September 15, 2023.  Refer to Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q for additional discussion of the New ABL Facility.

Senior Secured Notes

In connection with the closing of the Business Combination, Bidco issued $340 million in aggregate principal amount of 9.50% senior secured notes due March 15, 2024 (the “2024 Senior Secured Notes” or “Notes”) under an indenture dated March 15, 2019 (the “Indenture”). The Indenture was entered into by and among Bidco, the guarantors named therein (the “Note Guarantors”), and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest is payable semi-annually on September 15 and March 15. Refer to Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q for additional discussion of the 2024 Senior Secured Notes.  

Concentration of Risks

In the normal course of business, we grant credit to customers based on credit evaluations of their financial condition and generally require no collateral or other security. Major customers are defined as those individually comprising more than 10% of our revenues or accounts receivable. For the nine months ended September 30, 2021, we had two customers, who accounted for 32% and 20% of revenues, respectively, while no other customer accounted for more than 10% of revenues. The largest customers accounted for 18% and 13% of accounts receivable, respectively, while no other customers accounted for more than 10% of the accounts receivable balance as of September 30, 2021.

Our two largest customers for the nine months ended September 30, 2020 accounted for 29% and 16% of revenues, while no other customer accounted for more than 10% of revenues. The largest customers accounted for 27% and 23% of accounts receivable, respectively, while no other customer accounted for more than 10% of the accounts receivable balance as of September 30, 2020.

Major suppliers are defined as those individually comprising more than 10% of the annual goods purchased by the Company. For the nine months ended September 30, 2021, we had four major suppliers representing 21.6%, 19.3%,

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15.8%, and 12.7% of goods purchased, respectively. For the nine months ended September 30, 2020, there were two major suppliers that represented 15% and 13% of goods purchased, respectively.

We provide services almost entirely to customers in the governmental and geographically remote workforces and as such, we are almost entirely dependent upon the continued activity of such customers.

Contractual Obligations

In the ordinary course of business, we enter into various contractual obligations for varying terms and amounts. The table below presents our significant contractual obligations as of September 30, 2021:

Contractual Obligations	Total		2021		2022 and 2023		2024 and 2025		2026 and beyond
Capital lease and other financing obligations	$	148	$	69	$	79	$	—	$	—
Asset retirement obligations		3,304		—		—		746		2,558
Interest payments(1)		80,750		—		64,600		16,150		—
New ABL Facility		—		—		—		—		—
2024 Senior Secured Notes		340,000		—		—		340,000		—
Total	$	424,202	$	69	$	64,679	$	356,896	$	2,558

(1) Pursuant to our 2024 Senior Secured Notes, we will incur and pay interest expense at 9.50% of the face value of $340.0 million annually, or $32.3 million. Over the remaining term of the Notes, interest payments total $80.8 million.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Commitments and Contingencies

We lease certain land, community units, and real estate under non-cancelable operating leases, the terms of which vary and generally contain renewal options. Total rent expense under these leases is recognized ratably over the initial term of the lease. Any difference between the rent payment and the straight-line expense is recorded as a liability.

Rent expense included in services costs in the unaudited consolidated statements of comprehensive income (loss) for cancelable and non-cancelable leases was $9.8 million and $4.2 million for the nine months ended September 30, 2021 and 2020, respectively. Rent expense included in services costs in the unaudited consolidated statements of comprehensive income (loss) for cancelable and non-cancelable leases was $4.0 million and $1.3 million for the three months ended September 30, 2021 and 2020, respectively. Rent expense included in the selling, general, and administrative expenses in the unaudited consolidated statements of comprehensive income (loss) for cancelable and non-cancelable leases was $0.3 million and $0.4 million for the nine months ended September 30, 2021 and 2020, respectively. Rent expense included in the selling, general, and administrative expenses in the unaudited consolidated statements of comprehensive income (loss) for cancelable and non-cancelable leases was $0.1 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively.

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Future minimum lease payments at September 30, 2021 by year and in the aggregate for each of the next five years and thereafter, under non-cancelable operating leases are as follows:

Rest of 2021	$	1,847
2022		4,598
2023		3,190
2024		2,938
2025		2,838
Thereafter		2,141
Total	$	17,552

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”).

For a discussion of the critical accounting policies and estimates that we use in the preparation of our audited consolidated financial statements, refer to Note 1 of the notes to our audited consolidated financial statements included in Part II, Item 8 of our 2020 Form 10-K/A. Additionally, refer to Note 1 of our notes to our unaudited consolidated financial statements included in this Form 10-Q for additional discussion of our summary of significant accounting policies and use of estimates. These estimates require significant judgments and assumptions. There have been no material changes during the three and nine months ended September 30, 2021, to the judgments, assumptions and estimates upon which our critical accounting estimates are based.

Principles of Consolidation

Refer to Note 1 of the notes to our unaudited consolidated financial statements included in this Form 10-Q for a discussion of principles of consolidation.

Recently Issued Accounting Standards

Refer to Note 1 of the notes to our unaudited consolidated financial statements included in this Form 10-Q for our assessment of recently issued and adopted accounting standards.

Non-GAAP Financial Measures

We have included Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows which are measurements not calculated in accordance with US GAAP, in the discussion of our financial results because they are key metrics used by management to assess financial performance. Our business is capital-intensive and these additional metrics allow management to further evaluate our operating performance.

Target Hospitality defines Adjusted gross profit, as gross profit plus depreciation of specialty rental assets and loss on impairment.

Target Hospitality defines EBITDA as net income (loss) before interest expense and loss on extinguishment of debt, income tax expense (benefit), depreciation of specialty rental assets, and other depreciation and amortization.

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Adjusted EBITDA reflects the following further adjustments to EBITDA to exclude certain non-cash items and the effect of what management considers transactions or events not related to its core business operations:

● Other expense, net: Other expense, net includes consulting expenses related to certain projects, financing costs not classified as interest expense, gains and losses on disposals of property, plant, and equipment, involuntary asset conversions, COVID-19 related expenses, and other immaterial non-cash charges.

● Transaction expenses: Target Hospitality incurred certain transaction costs, including legal and professional fees, associated with the Proposal in the current period as well as the warrant restatement. The prior period primarily included residual tax advisory filing related expenses associated with the Business Combination.

● Stock-based compensation: Non-cash charges associated with stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.

● Change in fair value of warrant liabilities: Non-cash change in estimated fair value of warrant liabilities.

● Other adjustments: System implementation costs, including primarily non-cash amortization of capitalized system implementation costs, claim settlement, business development, accounting standard implementation costs and certain severance costs.

We define Discretionary cash flows as cash flows from operations less maintenance capital expenditures for specialty rental assets.

EBITDA reflects net income (loss) excluding the impact of interest expense and loss on extinguishment of debt, provision for income taxes, depreciation, and amortization. We believe that EBITDA is a meaningful indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors, and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization expense, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Target Hospitality also believes that Adjusted EBITDA is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects adjustments to exclude the effects of additional items, including certain items, that are not reflective of the ongoing operating results of Target Hospitality.  In addition, to derive Adjusted EBITDA, we exclude gains or losses on the sale of depreciable assets and impairment losses because including them in EBITDA is inconsistent with reporting the ongoing performance of our remaining assets. Additionally, the gain or loss on sale of depreciable assets and impairment losses represents either accelerated depreciation or excess depreciation in previous periods, and depreciation is excluded from EBITDA.

Target Hospitality also presents Discretionary cash flows because we believe it provides useful information regarding our business as more fully described below. Discretionary cash flows indicate the amount of cash available after maintenance capital expenditures for specialty rental assets for, among other things, investments in our existing business.

Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows are not measurements of Target Hospitality’s financial performance under GAAP and should not be considered as alternatives to gross profit, net income or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of Target Hospitality’s liquidity. Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash

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flows should not be considered as discretionary cash available to Target Hospitality to reinvest in the growth of our business or as measures of cash that is available to it to meet our obligations. In addition, the measurement of Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flows may not be comparable to similarly titled measures of other companies. Target Hospitality’s management believes that Adjusted gross profit, EBITDA, Adjusted EBITDA, and Discretionary cash flow provide useful information to investors about Target Hospitality and its financial condition and results of operations for the following reasons: (i) they are among the measures used by Target Hospitality’s management team to evaluate its operating performance; (ii) they are among the measures used by Target Hospitality’s management team to make day-to-day operating decisions, (iii) they are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results across companies in Target Hospitality’s industry.

The following table presents a reconciliation of Target Hospitality’s consolidated gross profit to Adjusted gross profit:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Gross Profit	$	33,608	$	11,718	$	72,138	$	47,061
Depreciation of specialty rental assets		14,294		11,995		40,642		37,158
Adjusted gross profit	$	47,902	$	23,713	$	112,780	$	84,219

The following table presents a reconciliation of Target Hospitality’s consolidated net income (loss) to EBITDA and Adjusted EBITDA:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income (loss)	$	6,675	$	(7,603)	$	(7,375)	$	(15,814)
Income tax expense (benefit)		1,662		(2,991)		139		(5,187)
Interest expense, net		9,465		9,913		29,058		30,113
Other depreciation and amortization		4,008		4,341		12,100		12,555
Depreciation of specialty rental assets		14,294		11,995		40,642		37,158
EBITDA		36,104		15,655		74,564		58,825
Adjustments
Other expense, net		91		99		781		94
Transaction expenses		49		26		1,198		382
Stock-based compensation		1,362		886		3,598		2,808
Change in fair value of warrant liabilities		(1,120)		(267)		1,600		(2,453)
Other adjustments		1,048		611		3,697		3,071
Adjusted EBITDA	$	37,534	$	17,010	$	85,438	$	62,727

The following table presents a reconciliation of Target Hospitality’s Net cash provided by operating activities to Discretionary cash flows:

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	For the Nine Months Ended
	September 30,
	2021		2020
Net cash provided by operating activities	$	99,447	$	28,592
Less: Maintenance capital expenditures for specialty rental assets		(8,407)		(766)
Discretionary cash flows	$	91,040	$	27,826
Purchase of specialty rental assets		(23,707)		(11,601)
Purchase of property, plant and equipment		(301)		(182)
Receipt of insurance proceeds		—		619
Proceeds from sale of specialty rental assets and other property, plant and equipment		—		876
Net cash used in investing activities	$	(24,008)	$	(10,288)
Proceeds from borrowings on finance and capital lease obligations		—		10,151
Principal payments on finance and capital lease obligations		(3,693)		(10,654)
Principal payments on borrowings from ABL		(76,000)		(52,500)
Proceeds from borrowings on ABL		28,000		42,500
Purchase of treasury stock		—		(5,318)
Restricted shares surrendered to pay tax liabilities		(99)		(206)
Net cash used in financing activities	$	(51,792)	$	(16,027)

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Our principal market risks are our exposure to interest rates and commodity risks.

Interest Rates

We are exposed to interest rate risk through our New ABL Facility which is subject to the risk of higher interest charges associated with increases in interest rates. As of September 30, 2021, we had $0 of outstanding floating-rate obligations under our credit facilities. These floating-rate obligations expose us to the risk of increased interest expense in the event of increases in short-term interest rates. If floating interest rates increased by 100 basis points, our consolidated interest expense would not be impacted, however, based on our floating-rate debt obligations, which had no outstanding balances as September 30, 2021.

Commodity Risk

Commodity price fluctuations also indirectly influence our activities and results of operations over the long-term because they may affect production rates and investments by E&P companies in the development of oil and gas reserves.

We have limited direct exposure to risks associated with fluctuating commodity prices of crude oil. However, both our profitability and our cash flows are affected by volatility in the price of crude oil. We do not currently hedge our exposure to crude oil prices.

Additionally, we believe that inflation has not had a material effect on our results of operations.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated

53

to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021, at the reasonable assurance level.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

We are involved in various lawsuits, claims and legal proceedings, the majority of which arise out of the ordinary course of business. The nature of the Company’s business is such that disputes occasionally arise with vendors including suppliers and subcontractors, and customers over contract specifications and contract interpretations among other things. The company assesses these matters on a case-by-case basis as they arise. Reserves are established, as required, based on its assessment of exposure. We have insurance policies to cover general liability and workers’ compensation related claims. In the opinion of management, the ultimate amount of liability not covered by insurance, if any, under such pending lawsuits, claims and legal proceedings will not have a material adverse effect on its financial condition or results of operations. Because litigation is subject to inherent uncertainties including unfavorable rulings or developments, it is possible that the ultimate resolution of our legal proceedings could involve amounts that are different from our currently recorded accruals, and that such differences could be material.

54

Item 1A. Risk Factors

The Company’s financial position, results of operations and cash flows are subject to various risks, many of which are not exclusively within the Company’s control and which may cause actual performance to differ materially from historical or projected future performance. For additional information about our risk factors, you should carefully consider the risk factors included in the 2020 Form 10-K/A, which have not materially changed, except as noted below.

Government requirements to mandate COVID-19 vaccination of our workforce could adversely affect our business, financial condition or results of operations

On September 9, 2021, President Biden released his COVID-19 Action Plan, Path Out of the Pandemic (the “Plan”), with the stated goal of getting more people vaccinated.  As part of the Plan, President Biden signed Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors (the “Order”). Pursuant to the Order, on September 24, 2021, the Safer Federal Workforce Task Force (the “Task Force”) released guidance for U.S. Government contractors and their subcontractors, which includes us, including mandatory vaccination of all employees working on or for a government contract, either directly or indirectly, by January 4, 2022 (subject to medical and religious exemptions). We have been put on notice by our Government Segment partners of the COVID-19 vaccination requirement for their subcontractors. President Biden also directed, on September 9, 2021, the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) to issue an Emergency Temporary Standard (“ETS”) requiring that all employers with at least 100 employees ensure that their U.S.-based employees are fully vaccinated for COVID-19 or obtain a negative COVID-19 test at least once a week.  On November 4, 2021, OSHA issued an ETS requiring that all employers with 100 or more employees ensure that their employees are fully vaccinated against COVID-19 by January 4, 2022, or tested weekly.  Further, by December 5, 2021, employers must comply with all other OSHA ETS vaccine requirements, including providing paid time off for employees to get vaccinated and ensuring that unvaccinated workers wear face coverings in the workplace.  For our sites and employees that are not already affected by the Order, as a company with more than 100 employees, we would be required to mandate COVID-19 vaccination of our workforce or require our unvaccinated employees to be tested on a weekly basis. On November 4, 2021, the 5^th U.S. Circuit Court of Appeals granted an emergency stay of the OSHA ETS vaccine requirement. It is not currently possible to predict with any certainty the outcome of the legal challenges of the OSHA ETS or Order, the exact impact on the Company of the OSHA ETS or Order, or the requirements for U.S. Government contractors and their subcontractors. Any requirement to mandate COVID-19 vaccination of our workforce or require our unvaccinated employees to be tested weekly could result in employee attrition and difficulty securing future labor needs, which could adversely affect our business, financial condition or results of operations. In addition, any requirement to impose obligations on our suppliers under the Order could impact the price and continuity of supply of materials and our business, financial condition or results of operations could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

The Company did not sell any securities during the quarter ended September 30, 2021 that were not registered under the Securities Act of 1933, as amended (the "Securities Act").

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

55

Item 5. Other Information

None.

Item 6.  Exhibits

Exhibit No.	Exhibit Description
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

-----------------

* Filed herewith

** The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

56

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Target Hospitality Corp.
Dated:  November 12, 2021	By:	/s/ ERIC T. KALAMARAS
		Eric T. Kalamaras
		Executive Vice President and Chief Financial Officer

57

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

1. I have reviewed this report on Form 10-Q of Target Hospitality Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

I, James B. Archer, certify that:

Date:	November 12, 2021	By:	/s/ JAMES B. ARCHER
			James B. Archer President and Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

1. I have reviewed this report on Form 10-Q of Target Hospitality Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

I, Eric T. Kalamaras, certify that:

Date:	November 12, 2021	By:	/s/ ERIC T. KALAMARAS
			Eric T. Kalamaras Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Target Hospitality Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. Archer, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 12, 2021	By:	/s/ JAMES B. ARCHER
		James B. Archer President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

(ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

In connection with the periodic report of Target Hospitality Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric T. Kalamaras, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 12, 2021	By:	/s/ ERIC T. KALAMARAS
		Eric T. Kalamaras Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2021	Nov. 08, 2021
Entity Listings [Line Items]
Document Type	10-Q
Document Period End Date	Sep. 30, 2021
Entity Registrant Name	TARGET HOSPITALITY CORP.
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		101,837,297
Entity Central Index Key	0001712189
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-38343
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	98-1378631
Entity Address, Address Line One	2170 Buckthorne Place, Suite 440
Entity Address, City or Town	The Woodlands
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77380-1775
City Area Code	800
Local Phone Number	832-4242
Common Stock [Member]
Entity Listings [Line Items]
Title of 12(b) Security	Common stock, par value $0.0001 per share
Trading Symbol	TH
Security Exchange Name	NASDAQ
Warrants to purchase common stock [Member]
Entity Listings [Line Items]
Title of 12(b) Security	Warrants to purchase common stock
Trading Symbol	THWWW
Security Exchange Name	NASDAQ

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 30,641	$ 6,979
Accounts receivable, less allowance for doubtful accounts of $1,089 and $2,977, respectively	33,373	28,183
Prepaid expenses and other assets	5,765	7,195
Related party receivable		1,205
Total current assets	69,779	43,562
Specialty rental assets, net	294,372	311,487
Other property, plant and equipment, net	10,192	11,019
Goodwill	41,038	41,038
Other intangible assets, net	92,153	103,121
Deferred tax asset	15,984	15,179
Deferred financing costs revolver, net	2,477	3,422
Other non-current assets	3,961	5,409
Total assets	529,956	534,237
Current liabilities:
Accounts payable	12,321	10,644
Accrued liabilities	21,215	24,699
Deferred revenue and customer deposits	60,986	6,619
Current portion of capital lease and other financing obligations (Note 8)	148	3,571
Total current liabilities	94,670	45,533
Long-term debt (Note 8):
Principal amount	340,000	340,000
Less: unamortized original issue discount	(1,847)	(2,319)
Less: unamortized term loan deferred financing costs	(8,908)	(11,182)
Long-term debt, net	329,245	326,499
Revolving credit facility (Note 8)		48,000
Long-term capital lease and other financing obligations		269
Other non-current liabilities	1,569	479
Deferred revenue and customer deposits	6,857	11,752
Asset retirement obligations	2,036	2,284
Warrant liabilities	2,133	533
Total liabilities	436,510	435,349
Commitments and contingencies (Note 12)
Stockholders' equity:
Common Stock, $0.0001 par, 400,000,000 authorized, 105,692,049 issued and 101,837,297 outstanding as of September 30, 2021 and 105,585,682 issued and 101,170,915 outstanding as of December 31, 2020.	10	10
Common Stock in treasury at cost, 4,414,767 shares as of September 30, 2021 and December 31, 2020, respectively.	(23,559)	(23,559)
Additional paid-in-capital	108,511	106,551
Accumulated other comprehensive loss	(2,461)	(2,434)
Accumulated earnings	10,945	18,320
Total stockholders' equity	93,446	98,888
Total liabilities and stockholders' equity	$ 529,956	$ 534,237

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Consolidated Balance Sheets
Allowance for doubtful accounts	$ 1,089	$ 2,977
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock shares authorized	400,000,000	400,000,000
Common stock shares issued	106,252,064	105,585,682
Common stock, Number of share outstanding	101,837,297	101,170,915
Treasury stock, shares	4,414,767	4,414,767

XML

Consolidated Statements of Comprehensive Income (loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue:
Revenue, Topic 606	$ 67,070	$ 35,436	$ 155,100	$ 131,160
Revenue	89,169	48,263	209,647	173,539
Costs:
Depreciation of specialty rental assets	14,294	11,995	40,642	37,158
Gross profit	33,608	11,718	72,138	47,061
Selling, general and administrative	12,827	8,508	35,835	28,599
Other depreciation and amortization	4,008	4,341	12,100	12,555
Other expense (income), net	91	(183)	781	(752)
Operating income (loss)	16,682	(948)	23,422	6,659
Interest expense, net	9,465	9,913	29,058	30,113
Change in fair value of warrant liabilities	(1,120)	(267)	1,600	(2,453)
Income (loss) before income tax	8,337	(10,594)	(7,236)	(21,001)
Income tax expense (benefit)	1,662	(2,991)	139	(5,187)
Net income (loss)	6,675	(7,603)	(7,375)	(15,814)
Other comprehensive income (loss)
Foreign currency translation	(15)	89	(27)	23
Comprehensive income (loss)	$ 6,660	$ (7,514)	$ (7,402)	$ (15,791)
Two Class Method:
Weighted average number shares outstanding - basic and diluted	96,814,970	96,138,459	96,539,703	95,997,647
Net income (loss) per share - basic and diluted	$ 0.07	$ (0.08)	$ (0.08)	$ (0.16)
Services
Revenue:
Revenue, Topic 606	$ 57,221	$ 24,331	$ 143,806	$ 103,526
Costs:
Costs	37,064	21,990	85,835	82,456
Specialty rental
Revenue:
Revenue, subject to ASC 840	22,099	12,827	54,547	42,379
Costs:
Costs	4,203	2,560	11,032	6,864
Construction fee
Revenue:
Revenue, Topic 606	$ 9,849	$ 11,105	$ 11,294	$ 27,634

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Retroactive application of recapitalization	Common Stock	Treasury Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Earnings	Total
Beginning Balances at Dec. 31, 2019		$ 10	$ (23,559)	$ 103,178	$ (2,558)	$ 43,451	$ 120,522
Beginning Balances (In Shares) at Dec. 31, 2019		100,840,162	4,414,767
Net income (loss)						5,454	5,454
Stock-based compensation				884			884
Stock-based compensation (in shares)		83,831
Shares used to settle payroll tax withholding				(83)			(83)
Cumulative translation adjustment					(111)		(111)
Ending Balances at Mar. 31, 2020		$ 10	$ (23,559)	103,979	(2,669)	48,905	126,666
Ending Balances (In shares) at Mar. 31, 2020		100,923,993	4,414,767
Beginning Balances at Dec. 31, 2019		$ 10	$ (23,559)	103,178	(2,558)	43,451	120,522
Beginning Balances (In Shares) at Dec. 31, 2019		100,840,162	4,414,767
Net income (loss)	$ 2,500						(15,814)
Cumulative translation adjustment							23
Ending Balances at Sep. 30, 2020		$ 10	$ (23,559)	105,782	(2,535)	27,635	107,333
Ending Balances (In shares) at Sep. 30, 2020		101,205,632	4,414,767
Beginning Balances at Mar. 31, 2020		$ 10	$ (23,559)	103,979	(2,669)	48,905	126,666
Beginning Balances (In Shares) at Mar. 31, 2020		100,923,993	4,414,767
Net income (loss)						(13,667)	(13,667)
Stock-based compensation				1,038			1,038
Stock-based compensation (in shares)		184,224
Shares used to settle payroll tax withholding				(74)			(74)
Cumulative translation adjustment					45		45
Ending Balances at Jun. 30, 2020		$ 10	$ (23,559)	104,943	(2,624)	35,238	114,008
Ending Balances (In shares) at Jun. 30, 2020		101,108,217	4,414,767
Net income (loss)	$ 300					(7,603)	(7,603)
Stock-based compensation				886			886
Stock-based compensation (in shares)		97,415
Shares used to settle payroll tax withholding				(47)			(47)
Cumulative translation adjustment					89		89
Ending Balances at Sep. 30, 2020		$ 10	$ (23,559)	105,782	(2,535)	27,635	107,333
Ending Balances (In shares) at Sep. 30, 2020		101,205,632	4,414,767
Beginning Balances at Dec. 31, 2020		$ 10	$ (23,559)	106,551	(2,434)	18,320	98,888
Beginning Balances (In Shares) at Dec. 31, 2020		101,170,915	4,414,767
Net income (loss)						(13,138)	(13,138)
Stock-based compensation				761			761
Stock-based compensation (in shares)		65,338
Shares used to settle payroll tax withholding				(51)			(51)
Cumulative translation adjustment					(19)		(19)
Ending Balances at Mar. 31, 2021		$ 10	$ (23,559)	107,261	(2,453)	5,182	86,441
Ending Balances (In shares) at Mar. 31, 2021		101,236,253	4,414,767
Beginning Balances at Dec. 31, 2020		$ 10	$ (23,559)	106,551	(2,434)	18,320	98,888
Beginning Balances (In Shares) at Dec. 31, 2020		101,170,915	4,414,767
Net income (loss)							(7,375)
Cumulative translation adjustment							(27)
Ending Balances at Sep. 30, 2021		$ 10	$ (23,559)	108,511	(2,461)	10,945	93,446
Ending Balances (In shares) at Sep. 30, 2021		101,837,297	4,414,767
Beginning Balances at Mar. 31, 2021		$ 10	$ (23,559)	107,261	(2,453)	5,182	86,441
Beginning Balances (In Shares) at Mar. 31, 2021		101,236,253	4,414,767
Net income (loss)						(912)	(912)
Stock-based compensation				697			697
Stock-based compensation (in shares)		591,284
Shares used to settle payroll tax withholding				(34)			(34)
Cumulative translation adjustment					7		7
Ending Balances at Jun. 30, 2021		$ 10	$ (23,559)	107,924	(2,446)	4,270	86,199
Ending Balances (In shares) at Jun. 30, 2021		101,827,537	4,414,767
Net income (loss)						6,675	6,675
Stock-based compensation				600			600
Stock-based compensation (in shares)		9,760
Shares used to settle payroll tax withholding				(13)			(13)
Cumulative translation adjustment					(15)		(15)
Ending Balances at Sep. 30, 2021		$ 10	$ (23,559)	$ 108,511	$ (2,461)	$ 10,945	$ 93,446
Ending Balances (In shares) at Sep. 30, 2021		101,837,297	4,414,767

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net loss	$ (7,375)	$ (15,814)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	41,774	38,636
Amortization of intangible assets	10,968	11,077
Accretion of asset retirement obligation	(248)	(285)
Amortization of deferred financing costs	3,220	2,914
Amortization of original issue discount	472	408
Change in fair value of warrant liabilities	1,600	(2,453)
Stock-based compensation expense	3,600	2,822
(Gain) loss on disposal of specialty rental assets and other property, plant and equipment	382	(91)
Gain on involuntary conversion		(619)
Deferred income taxes	(805)	(5,776)
Provision for loss on receivables, net of recoveries	1,394	3,099
Changes in operating assets and liabilities
Accounts receivable	(6,595)	11,906
Related party receivable	1,224	12
Prepaid expenses and other assets	1,430	(323)
Accounts payable and other accrued liabilities	(2,455)	(8,643)
Deferred revenue and customer deposits	49,472	(7,089)
Other non-current assets and liabilities	1,389	(1,189)
Net cash provided by operating activities	99,447	28,592
Cash flows from investing activities:
Purchase of specialty rental assets	(23,707)	(11,601)
Purchase of property, plant, and equipment	(301)	(182)
Receipt of insurance proceeds		619
Proceeds from sale of specialty rental assets and other property, plant and equipment		876
Net cash used in investing activities	(24,008)	(10,288)
Cash flows from financing activities:
Principal payments on finance and capital lease obligations	(3,693)	(10,654)
Proceeds from borrowings on finance and capital lease obligations		10,151
Principal payments on borrowings from ABL	(76,000)	(52,500)
Proceeds from borrowings on ABL	28,000	42,500
Restricted shares surrendered to pay tax liabilities	(99)	(206)
Purchase of treasury stock		(5,318)
Net cash used in financing activities	(51,792)	(16,027)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	15	(14)
Net increase in cash, cash equivalents and restricted cash	23,662	2,263
Cash, cash equivalents and restricted cash - beginning of period	6,979	6,839
Cash, cash equivalents and restricted cash - end of period	30,641	$ 9,102
Non-cash investing and financing activity:
Non-cash change in accrued capital expenditures	$ (209)

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Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019
Reconciliation of cash, cash equivalents, and restricted cash to consolidated balance sheets:
Cash and cash equivalents	$ 30,641	$ 6,979	$ 9,102
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$ 30,641	$ 6,979	$ 9,102	$ 6,839

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Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

1. Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

Organization and Nature of Operations

Target Hospitality Corp. (“Target Hospitality” or the “Company”) was formed on March 15, 2019 and is North America’s largest provider of vertically integrated modular accommodations and value-added hospitality services. The Company provides vertically integrated specialty rental and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation services, overall workforce community management, and laundry service. Target Hospitality serves clients in oil, gas, mining, alternative energy, government and immigrations sectors principally located in the West Texas, South Texas, Oklahoma and Midwest regions, as well as various large linear-construction (pipeline and infrastructure) projects in the United States.

The Company, whose securities are listed on the Nasdaq Global Market, serves as the holding company for the businesses of Target Logistics Management, LLC and its subsidiaries (“Target”) and RL Signor Holdings, LLC and its subsidiaries (“Signor”). TDR Capital LLP (“TDR Capital” or “TDR”) owns approximately 64% of Target Hospitality and the remaining ownership is broken out among the founders of the Company’s legal predecessor, Platinum Eagle Acquisition Corp. (“Platinum Eagle” or “PEAC”), investors in Platinum Eagle’s private placement transaction completed substantially and concurrently with the Business Combination (as defined below) (the “PIPE”), and other public shareholders. Platinum Eagle was originally incorporated on July 12, 2017 as a Cayman Islands exempted company, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses. References in this Quarterly Report on Form 10-Q to the Company refer to Target Hospitality for all periods at or after March 15, 2019 and Platinum Eagle for all periods prior to March 15, 2019, unless the context requires otherwise.

On November 13, 2018, PEAC entered into: (i) the agreement and plan of merger, as amended on January 4, 2019 (the “Signor Merger Agreement”), by and among PEAC, Signor Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of Platinum Eagle and sister company to the Holdco Acquiror (defined below as Topaz Holdings LLC) (“Signor Merger Sub”), Arrow Holdings S.a.r.l., a Luxembourg société à responsabilité limitée (the “Arrow Seller”) and Signor Parent (as defined below), and (ii) the agreement and plan of merger, as amended on January 4, 2019 (the “Target Merger Agreement” and, together with the Signor Merger Agreement, the “Merger Agreements”), by and among Platinum Eagle, Topaz Holdings LLC, a Delaware limited liability company (“Topaz”), Arrow Bidco, LLC, a Delaware limited liability company (“Bidco”), Algeco Investments B.V., a Netherlands besloten vennootschap (the “Algeco Seller”) and Target Parent (as defined below), to effect a business combination (the “Business Combination”). Pursuant to the Merger Agreements, on March 15, 2019, Platinum Eagle, through its wholly-owned subsidiary, Topaz, acquired all of the issued and outstanding equity interests of Arrow Parent Corp., a Delaware corporation (“Signor Parent”), the owner of Bidco and the owner of Signor from the Arrow Seller, and all of the issued and outstanding equity interests of Algeco US Holdings LLC, a Delaware limited liability company (“Target Parent”), the owner of Target, from the Algeco Seller, for approximately $1.311 billion. The purchase price was paid in a combination of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and cash. The Arrow Seller and the Algeco Seller are hereinafter referred to as the “Sellers.”

Target Parent was formed by TDR in September 2017. Prior to the Business Combination, Target Parent was directly owned by Algeco Scotsman Global S.a.r.l. (“ASG”) which is ultimately owned by a group of investment funds managed and controlled by TDR. During 2018, ASG assigned all of its ownership interest in Target Parent to the Algeco Seller, an affiliate of ASG that is also ultimately owned by a group of investment funds managed and controlled by TDR. Target Parent acted as a holding company that included the U.S. corporate employees of ASG and certain of its affiliates and certain related administrative costs and was the owner of Target, its operating company. Target Parent received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. As discussed above, in connection with the closing of the Business Combination, Target Parent merged with and into Bidco, with Bidco as the surviving entity.

Signor Parent owned 100% of Bidco until the closing of the Business Combination in connection with which Signor Parent merged with and into Topaz with Topaz being the surviving entity. Prior to the Business Combination, Signor Parent was owned by the Arrow Seller, which is ultimately owned by a group of investment funds managed and controlled by TDR. Signor Parent was formed in August 2018 and acted as a holding company for Bidco, which was formed in September 2018, also as a holding company. Bidco acquired Signor on September 7, 2018. Neither Signor Parent nor Bidco had operating activity, but each received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. Signor Parent was dissolved upon consummation of the Business Combination and merger with Topaz described above on March 15, 2019.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) has been condensed or omitted pursuant to those rules and regulations. The financial statements included in this report should be read in conjunction with the Target Hospitality Annual Report on Form 10-K/A for the year ended December 31, 2020, filed with the SEC on May 24, 2021 (the “2020 Form 10-K/A”).

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending December 31, 2021 or any future period.

The accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, except for the restatement discussed below, necessary for a fair statement of financial position as of September 30, 2021, and results of operations for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The consolidated balance sheet as of December 31, 2020, was derived from the audited consolidated balance sheets of Target Hospitality Corp. but does not contain all of the footnote disclosures from those annual financial statements.

Restatement of Previously Issued Consolidated Financial Statements

The notes included herein should be read in conjunction with the Company's restated audited consolidated financial statements included in the 2020 Form 10-K/A.

As previously disclosed in the 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting. We have restated herein our consolidated financial statements as of and for the quarter and period ended September 30, 2020. We have also restated related amounts within the accompanying footnotes to the consolidated financial statements. The impact of this restatement on the financial statements for the three and nine months ended September 30, 2020 was a decrease to net loss of approximately $0.3 million and $2.5 million, respectively.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying unaudited consolidated financial statements.

Principles of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries that it controls due to ownership of a majority voting interest. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated.

Revenue Recognition

The Company derives revenue from specialty rental and hospitality services, specifically lodging and related ancillary services. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with the customers. Certain arrangements contain a lease of lodging facilities to customers. The leases are accounted for as an operating lease under the authoritative guidance for leases and are recognized as income using the straight-line method over the term of the lease agreement.

Because performance obligations related to specialty rental and hospitality services are satisfied over time, the majority of our revenue is recognized on a daily basis, for each night a customer stays, at a contractual day rate.  Our customers typically contract for accommodation services under committed contracts with terms that most often range from several months to three years. Our payment terms vary by type and location of our customer and the service offered.  The time between invoicing and when payment is due is not significant.   

When lodging and services are billed and collected in advance, recognition of revenue is deferred until services are rendered. Certain of the Company’s contractual arrangements allow customers the ability to use paid but unused lodging and services for a specified period. The Company recognizes revenue for these paid but unused lodging and services as they are consumed, as it becomes probable the lodging and services will not be used, or upon expiration of the specified term.

Cost of services includes labor, food, utilities, supplies, rent and other direct costs associated with operating the lodging units as well as costs associated with construction services. Cost of rental includes leasing costs and other direct costs of maintaining the lodging units. Costs associated with contracts include sales commissions which are expensed as incurred and reflected in selling, general and administrative expenses in the consolidated statements of comprehensive income (loss).

The Company recognizes revenue associated with community construction using the percentage of completion method with progress towards completion measured using the cost-to-cost method as the basis to recognize revenue. Management believes this cost-to-cost method is the most appropriate measure of progress to the satisfaction of a performance obligation on the community construction. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to projected costs and revenue and are recognized in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. Factors that may affect future project costs and margins include weather, production efficiencies, availability and costs of labor, materials and subcomponents.  

Additionally, the Company collects sales, use, occupancy and similar taxes, which the Company presents on a net basis (excluded from revenues) in the consolidated statements of comprehensive income (loss). 

Recently Issued Accounting Standards

The Company meets the definition of an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In reliance on exemptions provided under the JOBS Act for EGCs, the Company has elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such standards. As such, compliance dates included below pertain to non-issuers, and as permitted, early adoption dates are indicated.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises existing practice related to accounting for leases under ASC Topic 840 Leases (ASC 840) for both lessees and lessors. The new guidance requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While the new standard maintains similar accounting for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. In June 2020, the FASB issued ASU No. 2020-05 to delay the effective date for the new standard for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for non-issuers (including EGCs).  Early application continues to be allowed.  Topic 842 allows an entity to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or to adopt under the new optional transition method that allows an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the adoption date. The Company is currently evaluating the impact of the pronouncement on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASU 2016-13 or Topic 326). This new standard changes how companies account for credit impairment for trade and other receivables as well as changing the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur.  ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, was issued in November 2018 and excludes operating leases from the new guidance. In 2019, the FASB voted to delay the effective date for the new standard for financial statements issued to reporting periods beginning after December 15, 2022 and interim periods within those reporting periods. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

Recent Developments – COVID-19 and Disruption to Global Demand

The global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020 presented new risks to the Company’s business in 2020.  Prior to March 2020, the Company’s results of operations were largely in line with expectations and subsequent to March 2020, we began to experience a decline in revenues.  The COVID-19 pandemic has not impacted the Company’s ability to operate nor has it materially disrupted the Company’s supply chain, disrupted service, or caused a shortage of critical products at our communities. However, the situation surrounding COVID-19 and the decrease in global economic demand had a material adverse impact on the Company’s operating results, as a result of which the Company implemented several cost containment measures primarily initiated in April of 2020, including salary reductions, reductions in workforce, furloughs, reduced discretionary spending and elimination of all non-essential travel.  In addition to these measures, the Company temporarily closed and consolidated several communities in the Hospitality & Facilities Services - South segment and in May of 2020, the Company temporarily closed all communities in the Hospitality & Facilities Services - Midwest segment. The Company began re-opening communities in both the Hospitality & Facilities Services - South and Midwest segments in July of 2020 as customer activity levels began to increase.  Additionally, the Company executed contract modifications with several customers resulting in extended terms and reduced minimum contract commitments in 2020.  These modifications utilize multi-year contract extensions to maintain contract value and provide the Company with greater visibility on long-term revenue and cash flow.  This mutually beneficial approach balanced average daily rates with contract term and positions the Company to take advantage of a more balanced market. Overall, the Company has experienced a positive recovery from the lows of 2020 with consistent improvement in customer demand within the Hospitality and Facilities Services – South segment and significant growth in the Government segment.

There have been significant changes to the global economic situation and to public securities markets as a result of  COVID-19. Although vaccines have become available for COVID-19, surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19, which could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. It is possible that these changes could cause changes to estimates as a result of the markets in which the Company operates, the price of the Company’s publicly traded equity and debt in comparison to the Company’s carrying value. Such changes to estimates could potentially result in impacts that would be material to the Company’s consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units in relation to potential goodwill impairment, the fair value of long-lived and other intangible assets in relation to potential impairment and the allowance for doubtful accounts.

As a result of the impact of COVID-19 and the disruption to the global economy, in the first quarter of 2020 we also concluded a trigger event had occurred and we tested our long-lived and intangible assets, including goodwill, for impairment.  Based upon our impairment assessments, which utilized the Company’s current long-term projections, we determined the carrying amount of these assets were not impaired.  During the third quarter of 2021, we did not identify further triggers or indicators of impairment and therefore did not perform a quantitative impairment test.  

Additionally, in connection with COVID-19, on March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The CARES Act, among other things, included provisions relating to the 80 percent limitation of net operating loss and modifications to the business interest deduction limitations. We evaluated how the provisions in the CARES Act would impact our consolidated financial statements and concluded that the CARES Act did not have a material impact on our provision for income taxes for the three and nine months ended September 30, 2021 and 2020.

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Revenue

9 Months Ended

Sep. 30, 2021

Revenue

Revenue

2. Revenue

Total revenue recognized under Topic 606 was $155.1 million and $131.2 million for the nine months ended September 30, 2021 and 2020, respectively, while specialty rental income was $54.5 million and $42.4 million subject to the guidance of ASC 840 for the nine months ended September 30, 2021 and 2020, respectively. Total revenue recognized under Topic 606 was $67.1 million and $35.4 million for the three months ended September 30, 2021 and 2020, respectively, while specialty rental income was $22.1 million and $12.8 million subject to the guidance of ASC 840 for the three months ended September 30, 2021 and 2020, respectively.

The following table disaggregates our revenue by our four reportable segments as well as the All Other category: Hospitality & Facilities Services - South, Hospitality & Facilities Services - Midwest, Government, TCPL Keystone, and All Other for the dates indicated below:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Hospitality & Facilities Services - South
Services income	$	28,732	$	16,236	$	77,729	$	77,863
Total Hospitality & Facilities Services - South revenues		28,732		16,236		77,729		77,863
Hospitality & Facilities Services - Midwest
Services income	$	1,266	$	1,154	$	2,593	$	5,705
Total Hospitality & Facilities Services - Midwest revenues		1,266		1,154		2,593		5,705
Government
Services income	$	26,663	$	6,169	$	61,329	$	18,448
Total Government revenues		26,663		6,169		61,329		18,448
TCPL Keystone
Services income	$	31	$	493	$	989	$	493
Construction fee income		9,849		11,105		11,294		27,634
Total TCPL Keystone revenues		9,880		11,598		12,283		28,127
All Other
Services income	$	529	$	279	$	1,166	$	1,017
Total All Other revenues		529		279		1,166		1,017
Total revenues	$	67,070	$	35,436	$	155,100	$	131,160

On July 23, 2021, the Company executed a Termination and Settlement Agreement with TC Energy (the “Termination and Settlement Agreement”), which effectively terminated the Company’s contract with TC Energy that was originated in 2013. The Termination and Settlement Agreement also released the Company from any outstanding work performance obligations under the 2013 contract (including all change orders, limited notices to proceed, and amendments). Additionally, the Termination and Settlement Agreement resulted in an agreed upon termination fee of approximately $5 million that was collected in cash on July 27, 2021. This Termination and Settlement Agreement also resulted in the recognition of approximately $4.9 million of deferred revenue as of the effective date of the Termination and Settlement Agreement.  All such revenue is recognized in construction fee income within the TCPL Keystone segment included in the above table as well as in the accompanying consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2021. No further revenue will be generated from the 2013 contract and as of September 30, 2021, there are no unrecognized deferred revenue amounts or costs for incomplete projects related to this contract following such termination.

As a result of the current market environment discussed in Note 1 “Recent Developments – COVID-19 and Disruption to Global Demand”, the Company considered the increased risk of delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. The Company routinely monitors the financial stability of our customers, which involves a high degree of judgment in assessing customers’ historical time to pay, financial condition and various customer-specific factors.

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 payment for a community build that is being recognized over the related contract period. Activity in the deferred revenue accounts as of the dates indicated below was as follows:

	For Nine Months Ended
	September 30,
	2021		2020
Balances at Beginning of the Period	$	18,371	$	26,199
Additions to deferred revenue		125,592		7,866
Revenue recognized		(76,120)		(14,956)
Balances at End of the Period	$	67,843	$	19,109

As of September 30, 2021, for contracts greater than one year, the following table discloses the estimated revenues 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:

		For the Years Ended December 31,
	2021		2022		2023		2024		2025		2026		Total
Revenue expected to be recognized as of September 30, 2021	$	33,059	$	48,519	$	18,699	$	18,748	$	18,699	$	13,987	$	151,711

The Company applied some of the practical expedients in Topic 606, including the “right to invoice” practical expedient, and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations.  Due to the application of these practical expedients, 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.    

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Specialty Rental Assets, Net

9 Months Ended

Sep. 30, 2021

Specialty Rental Assets, Net

Specialty Rental Assets, Net

3. Specialty Rental Assets, Net

Specialty rental assets, net at the dates indicated below consisted of the following:

	September 30,		December 31,
	2021		2020
Specialty rental assets	$	571,965	$	547,375
Construction-in-process		4,844		5,828
Less: accumulated depreciation		(282,437)		(241,716)
Specialty rental assets, net	$	294,372	$	311,487

Depreciation expense related to specialty rental assets was $40.6 million and $37.2 million for the nine months ended September 30, 2021 and 2020, respectively, and is included in depreciation of specialty rental assets in the consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021 and 2020, depreciation expense of specialty rental assets was $14.3 and $12.0 million, respectively.

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Other Property, Plant and Equipment, Net

9 Months Ended

Sep. 30, 2021

Other Property, Plant and Equipment, Net

Other Property, Plant and Equipment, Net

4. Other Property, Plant and Equipment, Net

Other property, plant and equipment, net at the dates indicated below, consisted of the following:

	September 30,		December 31,
	2021		2020
Land	$	9,163	$	9,163
Buildings and leasehold improvements		185		115
Machinery and office equipment		1,217		1,072
Software and other		3,838		3,752
		14,403		14,102
Less: accumulated depreciation		(4,211)		(3,083)
Total other property, plant and equipment, net	$	10,192	$	11,019

Depreciation expense related to other property, plant and equipment was $1.1 million and $1.5 million for the nine months ended September 30, 2021 and 2020, respectively, and is included in other depreciation and amortization in the consolidated statements of comprehensive income (loss).  For the three months ended September 30, 2021 and 2020, depreciation expense related to other property, plant and equipment was $0.4 million and $0.7 million, respectively.

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Goodwill and Other Intangible Assets, net

9 Months Ended

Sep. 30, 2021

Goodwill and Other Intangible Assets, net

Goodwill and Other Intangible Assets, net

5. Goodwill and Other Intangible Assets, net

The financial statements reflect goodwill from previous acquisitions that is all attributable to the Hospitality and Facilities Services – South business segment and reporting unit.

Changes in the carrying amount of goodwill were as follows:

	Hospitality and Facilities Services - South
Balance at January 1, 2020	$	41,038
Changes in Goodwill		-
Balance at December 31, 2020		41,038
Changes in Goodwill		-
Balance at September 30, 2021	$	41,038

Intangible assets other than goodwill at the dates indicated below consisted of the following:

	September 30, 2021
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	5.8	$	128,907	$	(53,154)	$	75,753
Total			128,907		(53,154)		75,753
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(53,154)	$	92,153

	December 31, 2020
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	6.4	$	128,907	$	(42,186)	$	86,721
Total			128,907		(42,186)		86,721
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(42,186)	$	103,121

For the nine months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $11.0 million and $11.1 million, respectively, and is included in other depreciation and amortization in the consolidated statements of comprehensive income (loss). For the three months ended September 30, 2021 and 2020, amortization expense related to intangible assets was $3.6 million and $3.7 million, respectively.

The estimated aggregate amortization expense as of September 30, 2021 for each of the next five years and thereafter is as follows:

Rest of 2021	$	3,687
2022		13,302
2023		12,881
2024		12,881
2025		12,881
Thereafter		20,121
Total	$	75,753

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Other Non-Current Assets

9 Months Ended

Sep. 30, 2021

Other Non-Current Assets

Other Non-Current Assets

6. Other Non-Current Assets

Other non-current assets include capitalized software implementation costs for the implementation of cloud computing systems. As of the dates indicated below, capitalized implementation costs and related accumulated amortization in other non-current assets on the consolidated balance sheets amounted to the following: 

	September 30,		December 31,
	2021		2020
Cloud computing implementation costs	$	7,198	$	7,094
Less: accumulated amortization		(3,303)		(1,685)
Other non-current assets	$	3,895	$	5,409

The majority of such systems were placed into service beginning January of 2020 at which time the Company began to amortize these capitalized costs on a straight-line basis over the period of the remaining service arrangements of between 2 and 4 years. Such amortization expense amounted to approximately $1.6 million and $1.2 million for the nine months ended September 30, 2021 and 2020, respectively and is included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive loss. For the three months ended September 30, 2021 and 2020, amortization expense related to other non-current assets was approximately $0.6 million and $0.5 million, respectively.

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Accrued Liabilities

9 Months Ended

Sep. 30, 2021

Accrued Liabilities

Accrued Liabilities

7. Accrued Liabilities

Accrued liabilities as of the dates indicated below consists of the following:

	September 30,		December 31,
	2021		2020
Employee accrued compensation expense	$	9,767	$	6,177
Other accrued liabilities		9,976		8,873
Accrued interest on debt		1,472		9,649
Total accrued liabilities	$	21,215	$	24,699

Other accrued liabilities in the above table relates primarily to accrued utilities, rent, real estate and sales taxes, state income taxes, liability-based stock compensation awards (see Note 16), and other accrued operating expenses.

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Debt

9 Months Ended

Sep. 30, 2021

Debt

Debt

8. Debt

Senior Secured Notes 2024

In connection with the closing of the Business Combination, Bidco issued $340 million in aggregate principal amount of 9.50% senior secured notes due March 15, 2024 (the “2024 Senior Secured Notes” or “Notes”) under an indenture dated March 15, 2019 (the “Indenture”). The Indenture was entered into by and among Bidco, the guarantors named therein (the “Note Guarantors”), and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. Interest

is payable semi-annually on September 15 and March 15 beginning September 15, 2019. Refer to table below for a description of the amounts related to the Notes.

		Principal		Unamortized Original Issue Discount		Unamortized Deferred Financing Costs
9.50% Senior Secured Notes, due 2024	$	340,000	$	1,847	$	8,908

If Bidco undergoes a change of control or sells certain of its assets, Bidco may be required to offer to repurchase the Notes. On or after March 15, 2021, Bidco at its option, may redeem the Notes, in whole or part, upon not less than fifteen (15) and not more than sixty (60) days’ prior written notice to holders and not less than twenty (20) days’ prior written notice to the trustee (or such shorter timeline as the trustee may agree), at the redemption price expressed as a percentage of principal amount set forth below, plus accrued and unpaid interest thereon but not including the applicable redemption date (subject to the right of Note holders on the relevant record date to receive interest due on an interest payment date falling on or prior to the redemption date), if redeemed during the 12-month period beginning August 15 of each of the years set below.

	Redemption
Year	Price
2021	104.750%
2022	102.375%
2023 and thereafter	100.000%

The Notes are unconditionally guaranteed by Topaz and each of Bidco’s direct and indirect wholly-owned domestic subsidiaries (collectively, the “Note Guarantors”). Target Hospitality is not an issuer or a guarantor of the Notes. The Note Guarantors are either borrowers or guarantors under the New ABL Facility (as defined below). To the extent lenders under the New ABL Facility release the guarantee of any Note Guarantor, such Note Guarantor is also released from obligations under the Notes. These guarantees are secured by a second priority security interest in substantially all of the assets of Bidco and the Note Guarantors (subject to customary exclusions). The guarantees of the Notes by TLM Equipment, LLC, a Delaware limited liability company (“TLM Equipment LLC”) which holds certain of Target Hospitality’s assets, are subordinated to its obligations under the New ABL Facility.

The Notes contain certain negative covenants, including limitations that restrict Bidco’s ability and the ability of certain of its subsidiaries, to directly or indirectly, create additional financial obligations. With certain specified exceptions, these negative covenants prohibit Bidco and certain of its subsidiaries from: creating or incurring additional debt; paying dividends or making any other distributions with respect to its capital stock; making loans or advances to Bidco or any restricted subsidiary of Bidco; selling, leasing or transferring any of its property or assets to Bidco or any restricted subsidiary of Bidco; directly or indirectly creating, incurring or assuming any lien of any kind securing debt on the collateral; or entering into any sale and leaseback transaction.

In connection with the issuance of the Notes, there was an original issue discount of approximately $3.3 million and the unamortized balance of approximately $1.8 million is presented on the face of the consolidated balance sheet as of September 30, 2021 as a reduction of the principal. The discount is amortized over the life of the Notes using the effective interest method.

Bidco’s ultimate parent, Target Hospitality, has no significant independent assets or operations except as included in the guarantors of the Senior Secured Notes, the guarantees under the Notes are full and unconditional and joint and several, and any subsidiaries of Target Hospitality that are not subsidiary guarantors of the Notes are minor.  There are also no significant restrictions on the ability of Target Hospitality or any guarantor to obtain funds from its subsidiaries by dividend or loan. See discussion of certain negative covenants above. Therefore, pursuant to the SEC Rules, no individual guarantor financial statement disclosures are deemed necessary.

Capital Lease and Other Financing Obligations

The Company’s capital lease and other financing obligations as of September 30, 2021 consisted of approximately $0.1 million of capital leases related primarily to vehicles. In December 2019, the Company entered into a lease for certain equipment with a lease term expiring November 2022 and an effective interest rate of 4.3%. The Company’s lease relates to commercial-use vehicles. In November 2020, the Company entered into an insurance financing arrangement in an amount of approximately $3.3 million at an interest rate of 3.84%.  The insurance financing arrangement required 9 monthly payments of approximately $0.4 million that began on December 1, 2020 and ended on August 1, 2021 when the obligation was repaid. 

The Company’s capital lease and other financing obligations as of December 31, 2020 consisted of approximately $0.9 million of capital leases and $2.9 million related to insurance financing obligations.

New ABL Facility

On the Closing Date, in connection with the closing of the Business Combination, Topaz, Bidco, Target, Signor and each of their domestic subsidiaries entered into an ABL credit agreement that provides for a senior secured asset based revolving credit facility in the aggregate principal amount of up to $125 million (the “New ABL Facility”). The historical debt of Bidco, Target and their respective subsidiaries under the ABL facility of Algeco Seller was settled at the time of the consummation of the Business Combination on the Closing Date. Approximately $40 million of proceeds from the New ABL Facility were used to finance a portion of the consideration payable and fees and expenses incurred in connection with the Business Combination.

Borrowings under the New ABL Facility, at the relevant borrower’s (the borrowers under the New ABL Facility, the “ABL Borrowers”) option, bear interest at either (1) an adjusted LIBOR or (2) a base rate, in each case plus an applicable margin. The applicable margin is 2.50% with respect to LIBOR borrowings and 1.50% with respect to base rate borrowings. Commencing at the completion of the first full fiscal quarter after the Closing Date, the applicable margin for borrowings under the New ABL Facility is subject to one step-down of 0.25% and one step-up of 0.25%, based on achieving certain excess availability levels with respect to the New ABL Facility.

The New ABL Facility provides borrowing availability of an amount equal to the lesser of (i) (a) $125 million and (b) the Borrowing Base (defined below) (the “Line Cap”).

The Borrowing Base is, at any time of determination, an amount (net of reserves) equal to the sum of:

● 85% of the net book value of the Borrowers’ eligible accounts receivables, plus

● the lesser of (i) 95% of the net book value of the Borrowers’ eligible rental equipment and (ii) 85% of the net orderly liquidation value of the Borrowers’ eligible rental equipment, minus

● customary reserves

The New ABL Facility includes borrowing capacity available for standby letters of credit of up to $15 million and for ‘‘swingline’’ loan borrowings of up to $15 million. Any issuance of letters of credit or making of a swingline loan will reduce the amount available under the New ABL Facility.

In addition, the New ABL Facility will provide the Borrowers with the option to increase commitments under the New ABL Facility in an aggregate amount not to exceed $75 million plus any voluntary prepayments that are accompanied by permanent commitment reductions under the New ABL Facility. The termination date of the New ABL Facility is September 15, 2023.

The obligations under the New ABL Facility are unconditionally guaranteed by Topaz and each existing and subsequently acquired or organized direct or indirect wholly-owned U.S. organized restricted subsidiary of Bidco (together with Topaz, the “ABL Guarantors”), other than certain excluded subsidiaries. The New ABL Facility is secured by (i) a first priority pledge of the equity interests of Topaz, Bidco, Target, and Signor (the “Borrowers) and of each direct, wholly-owned US organized restricted subsidiary of any Borrower or any ABL Guarantor, (ii) a first priority pledge of up to 65% of the

voting equity interests in each non-US restricted subsidiary of any Borrower or ABL Guarantor and (iii) a first priority security interest in substantially all of the assets of the Borrower and the ABL Guarantors (in each case, subject to customary exceptions).

The New ABL Facility requires the Borrowers to maintain a (i) minimum fixed charge coverage ratio of 1.00:1.00 and (ii) maximum total net leverage ratio of 4.00:1.00, at any time when the excess availability under the New ABL Facility is less than the greater of (a) $15.625 million and (b) 12.5% of the Line Cap.

The New ABL Facility also contains a number of customary negative covenants. Such covenants, among other things, limit or restrict the ability of each of the Borrowers, their restricted subsidiaries, and where applicable, Topaz, to:

● incur additional indebtedness, issue disqualified stock and make guarantees;

● incur liens on assets;

● engage in mergers or consolidations or fundamental changes;

● sell assets;

● pay dividends and distributions or repurchase capital stock;

● make investments, loans and advances, including acquisitions;

● amend organizational documents and master lease documents;

● enter into certain agreements that would restrict the ability to pay dividends;

● repay certain junior indebtedness; and

● change the conduct of its business.

The aforementioned restrictions are subject to certain exceptions including (i) the ability to incur additional indebtedness, liens, investments, dividends and distributions, and prepayments of junior indebtedness subject, in each case, to compliance with certain financial metrics and certain other conditions and (ii) a number of other traditional exceptions that grant the ABL Borrowers continued flexibility to operate and develop their businesses. The New ABL Facility also contains certain customary representations and warranties, affirmative covenants and events of default. The carrying value of debt outstanding as of the dates indicated below consist of the following:

	September 30,		December 31,
	2021		2020
Capital lease and other financing obligations	$	148	$	3,840
ABL facility		—		48,000
9.50% Senior Secured Notes due 2024, face amount		340,000		340,000
Less: unamortized original issue discount		(1,847)		(2,319)
Less: unamortized term loan deferred financing costs		(8,908)		(11,182)
Total debt, net		329,393		378,339
Less: current maturities		(148)		(3,571)
Total long-term debt	$	329,245	$	374,768

Interest expense, net

The components of interest expense, net (which includes interest expense incurred) recognized in the unaudited consolidated statements of comprehensive income (loss) for the periods indicated below consist of the following:

	For the three months ended				For the nine months ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Interest incurred on capital lease and other financing obligations	$	5	$	30	$	51	$	98
Interest expense incurred on ABL facilities and Notes		8,201		8,722		25,315		26,693
Amortization of deferred financing costs on ABL facilities and Notes		1,097		1,016		3,220		2,914
Amortization of original issue discount on Notes		162		145		472		408
Interest expense, net	$	9,465	$	9,913	$	29,058	$	30,113

Deferred Financing Costs and Original Issue Discount

The Company presents unamortized deferred financing costs and unamortized original issue discount as a direct deduction from the principal amount of the Notes on the unaudited consolidated balance sheet as of September 30, 2021. Accumulated amortization expense related to the deferred financing costs was approximately $7.0 million and $4.7 million as of September 30, 2021 and December 31, 2020, respectively. Accumulated amortization of the original issue discount was approximately $1.5 million and $1.0 million as of September 30, 2021 and December 31, 2020, respectively.

Accumulated amortization related to revolver deferred financing costs for the ABL facilities was approximately $3.2 million and $2.4 million as of September 30, 2021 and December 31, 2020, respectively.

Refer to the components of interest expense in the table above for the amounts of the amortization expense related to the deferred financing costs and original issue discount recognized for each of these debt instruments for the three and nine months ended September 30, 2021 and 2020, respectively.

Future maturities

The aggregate annual principal maturities of debt and capital lease obligations for each of the next five years and thereafter, based on contractual terms are listed in the table below. The schedule of future maturities as of September 30, 2021, consists of the following:

Rest of 2021	$	69
2022		79
2023		—
2024		340,000
Total	$	340,148

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Warrant Liabilities

9 Months Ended

Sep. 30, 2021

Warrant Liabilities

Warrant Liabilities

9. Warrant Liabilities

On January 17, 2018, Harry E. Sloan, Joshua Kazam, Fredric D. Rosen, the Sara L. Rosen Trust and the Samuel N. Rosen 2015 Trust, purchased from PEAC an aggregate of 5,333,334 warrants at a price of $1.50 per warrant (for an aggregate purchase price of $8.0 million) in a private placement (the “Private Warrants”) that occurred simultaneously with the completion of the Public Offering as defined in Note 15. Each Private Warrant entitles the holder to purchase one share of common stock at $11.50 per share. The purchase price of the Private Warrants was added to the proceeds from the Public Offering and was held in the Trust Account until the closing of the Business Combination. The Private Warrants (including the shares of Common Stock issuable upon exercise of the Private Warrants) were not transferable, assignable or salable until 30 days after the closing date of the Business Combination, and they may be exercised on a cashless basis and are non-redeemable so long as they are held by the initial purchasers of the Private Warrants or their permitted transferees.

The Company evaluated the Private Warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity and should be classified as

liabilities. Since the Private Warrants meet the definition of a derivative under ASC 815, the Company recorded the Private Warrants as liabilities on the balance sheet at their estimated fair value.

Subsequent changes in the estimated fair value of the Private Warrants are reflected in the change in fair value of warrant liabilities in the accompanying consolidated statement of comprehensive income (loss). The change in the estimated fair value of the Private Warrants resulted in a loss (gain) of approximately $1.6 million and ($2.5) million for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, the change in the estimated fair value of the Private Warrants resulted in a gain of approximately ($1.1) million and ($0.3) million, respectively. As of September 30, 2021, and 2020, 5,333,334 Private Warrants were outstanding, which expire no later than five years after the completion of the Business Combination (March 15, 2024) if they remain unredeemed.

The Company determined the following estimated fair values for the outstanding Private Warrants as of the dates indicated below:

	September 30,		December 31,
	2021		2020 (Restated)
Warrant liabilities	$	2,133	$	533
Total	$	2,133	$	533

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Income Taxes

9 Months Ended

Sep. 30, 2021

Income Taxes

Income Taxes

10. Income Taxes

Income tax expense (benefit) was approximately $0.1 million and ($5.2) million for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, income tax expense (benefit) was $1.7 million and ($3.0) million, respectively. The effective tax rate for the three months ended September 30, 2021 and 2020, was 19.9% and 28.2%, respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020, was (1.9)% and 24.7%, respectively. The fluctuation in the rate for the nine months ended September 30, 2021 and 2020 results primarily from the relationship of year-to-date loss before income tax for the nine months ended September 30, 2021 and 2020

The effective tax rate for the nine months ended September 30, 2021 significantly differs from the US federal statutory rate of 21% primarily due to the permanent add-back related to the change in fair value of warrant liabilities on the Company’s warrants as well as the impact of state tax expense based off of gross receipts.

The Company accounts for income taxes in interim periods under ASC 740-270, Income Taxes – Interim Reporting, which generally requires us to apply an estimated annual consolidated effective tax rate to consolidated pre-tax income. In addition, the guidance under ASC 740 further provides that, in establishing the estimated annual effective tax rate, the Company excludes losses from jurisdictions in which no tax benefit is expected to be recognized for such losses.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2021

Fair Value of Financial Instruments

Fair Value of Financial Instruments

11. Fair Value of Financial Instruments

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company has assessed that the fair value of cash and cash equivalents, trade receivables, related party receivables, trade payables, other current liabilities, and other debt approximates their carrying amounts largely due to the short-term maturities or recent commencement of these instruments. The fair value of the ABL facility is primarily based upon observable market data, such as market interest rates, for similar debt. The fair value of the Notes is based upon observable market data.

The Company measured the Private Warrant liabilities at fair value on a recurring basis at each reporting period end as more fully discussed below. Changes in the fair value of the Private Warrants at each reporting period end date were recognized within the accompanying consolidated statement of comprehensive income (loss) in the change in fair value of warrant liabilities.

Level 1 & 2 Disclosures:

The carrying amounts and fair values of financial assets and liabilities, which are either Level 1 or Level 2, are as follows:

	September 30, 2021				December 31, 2020
Financial Assets (Liabilities) Not Measured at Fair Value	Carrying Amount			Fair Value	Carrying Amount		Fair Value
ABL facility (See Note 8) - Level 2	$	—	$	—	$	(48,000)	$	(48,000)
Senior Secured Notes (See Note 8) - Level 1	$	(329,245)	$	(347,480)	$	(326,499)	$	(300,900)

Recurring fair value measurements

Level 3 Disclosures:

There were 5,333,334 Private Warrants outstanding as of September 30, 2021 and December 31, 2020. Based on the fair value assessment that was performed, the Company determined a fair value price per Private Warrant of $0.40 and $0.10 as of September 30, 2021 and December 31, 2020, respectively. The fair value is classified as Level 3 in the fair value hierarchy due to the use of pricing inputs that are less observable in the marketplace combined with management judgment required for the assumptions underlying the calculation of value. The Company determined the estimated fair value of the Private Warrants using the Black-Scholes option-pricing model. The table below summarizes the inputs used to calculate the fair value of the warrant liabilities at each of the dates indicated below:

		September 30,		December 31,
		2021		2020
Exercise Price	$	11.50	$	11.50
Stock Price	$	3.73	$	1.58
Dividend Yield	%	0.00	%	0.00
Expected Term (in Years)		2.46		3.20
Risk-Free Interest Rate	%	0.39	%	0.19
Expected Volatility	%	64.00	%	68.00
Per Share Value of Warrants	$	0.40	$	0.10

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021:

	Private Placement Warrants
Balance at December 31, 2020 (as Restated)	$	533
Change in fair value of warrant liabilities		640
Balance at March 31, 2021		1,173
Change in fair value of warrant liabilities		2,080
Balance at June 30, 2021		3,253
Change in fair value of warrant liabilities		(1,120)
Balance at September 30, 2021	$	2,133

There were no transfers of financial instruments between the three levels of the fair value hierarchy during the nine months ended September 30, 2021 and 2020 and the year ended December 31, 2020.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies.

Commitments and Contingencies

12. Commitments and Contingencies

The Company is involved in various lawsuits or claims in the ordinary course of business. Management is of the opinion that there is no pending claim or lawsuit which, if adversely determined, would have a material impact on the financial condition of the Company.

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Related Parties

9 Months Ended

Sep. 30, 2021

Related Parties

Related Parties

13. Related Parties

During the nine months ended September 30, 2021 and 2020 the Company incurred $0.6 million and $0.8 million, respectively, in commissions owed to related parties, included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive loss. For the three months ended September 30, 2021 and 2020, the Company incurred $0.2 million and $0.2 million in commissions, respectively. At September 30, 2021 and December 31, 2020, the Company accrued $0.3 million and $0.3 million, respectively, for these commissions.  

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Earnings (Loss) per Share

9 Months Ended

Sep. 30, 2021

Earnings (Loss) per Share

Earnings (Loss) per Share

14. Earnings (Loss) per Share

Basic earnings (loss) per share (“EPS” or “LPS”) is calculated by dividing net income or loss attributable to Target Hospitality by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed similarly to basic net income per share, except that it includes the potential dilution that could occur if dilutive securities were exercised. During periods when net losses are incurred, potential dilutive securities would be anti-dilutive and are excluded from the calculation of diluted loss per share for that period. A net income was recorded for the three months ended September 30, 2021 and a net loss was recorded for the three months ended September 30, 2020. A net loss was recorded for the nine months ended September 30, 2021 and 2020. The following table presents basic and diluted EPS (LPS) for the periods indicated below ($ in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Numerator				(Restated)				(Restated)
Net income (loss) attributable to Common Stockholders	$	6,675	$	(7,603)	$	(7,375)	$	(15,814)
Denominator
Weighted average shares outstanding - basic and diluted		96,814,970		96,138,459		96,539,703		95,997,647
Net income (loss) per share - basic and diluted	$	0.07	$	(0.08)	$	(0.08)	$	(0.16)

5,015,898 shares of the 8,050,000 shares of common stock held by the Founders, were placed into escrow concurrent with the Business Combination. Upon being placed into escrow, the voting and economic rights of the shares were suspended for the period they are in escrow. Given that the Founders are not entitled to vote or participate in the economic rewards available to the other shareholders with respect to these shares, these shares are not included in the EPS (LPS) calculations.

The Public and Private Warrants representing a total of 16,166,650 shares of the Company’s common stock for the three and nine months ended September 30, 2020 were excluded from the computation of EPS (LPS) because they are considered anti-dilutive as the exercise price exceeds the average market price of the common stock during the applicable periods.

As discussed in Note 16, RSUs and stock options were outstanding for the three and nine months ended September 30, 2021. These RSUs and stock options were excluded from the computation of EPS (LPS) because their effect would have been anti-dilutive.

Shares of treasury stock have been excluded from the computation of EPS (LPS).

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Stockholders Equity

9 Months Ended

Sep. 30, 2021

Stockholders Equity

Stockholders' Equity

15. Stockholders’ Equity

Common Stock

As of September 30, 2021, and December 31, 2020, Target Hospitality had 106,252,064 and 105,585,682 shares of Common Stock, par value $0.0001 per share issued with 101,837,297 and 101,170,915 outstanding, respectively. Each share of Common Stock has one vote, except the voting rights related to the 5,015,898 of Founder Shares placed in escrow have been suspended subject to release pursuant to the terms of the earnout agreement entered into at the closing of the Business Combination by and between Harry E. Sloan, Jeff Sagansky, Eli Baker and the Company.

Preferred Shares

Target Hospitality is authorized to issue 1,000,000 preferred shares at $0.0001 par value. As of September 30, 2021, no preferred shares were issued and outstanding.

Public Warrants

On January 17, 2018, PEAC sold 32,500,000 units at a price of $10.00 per unit (the “Units”) in its initial public offering (the “Public Offering”), including the issuance of 2,500,000 Units as a result of the underwriters’ partial exercise of their overallotment option. Each Unit consisted of one Class A ordinary share of PEAC, par value $0.0001 per share (the “Public Shares”), and one-third of one warrant to purchase one ordinary share (the “Public Warrants”).

Each Public Warrant entitles the holder to purchase one share of the Company’s Common Stock at a price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. If upon exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, the Company will upon exercise, round down to the nearest whole number, the number of shares to be issued to the Public Warrant holder. Each Public Warrant became exercisable 30 days after the completion of the Business Combination.

As of September 30, 2021, the Company had 10,833,316 Public Warrants issued and outstanding.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Stock-Based Compensation

Stock-Based Compensation

16. Stock-Based Compensation

On March 15, 2019, in connection with the Business Combination, the Company’s Board of Directors approved the adoption of the Target Hospitality Corp. 2019 Incentive Award Plan (the “Plan”), under which 4,000,000 of the Company’s shares of Common Stock were reserved for issuance pursuant to future grants of share awards. The expiration date of the Plan, on and after which date no awards may be granted, is March 15, 2029.  

On February 25, 2021, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors adopted a new form Executive Restricted Stock Unit Agreement (the “RSU Agreement”) and a form Executive Stock Appreciation Rights Award Agreement (the “SAR Agreement” and together with the RSU Agreement, the “Award Agreements”) with respect to the granting of restricted stock units and stock appreciation rights, respectively, under the Plan. The new Award Agreements will be used for all awards to executive officers made on or after February 25, 2021.

The RSU Agreement has material terms that are substantially similar to those in the form Executive Restricted Stock Unit Agreement last approved by the Compensation Committee and previously disclosed by the Company, except for the following: (x) 50% of the restricted stock units (each an “RSU”) will vest on the second grant date anniversary and 50% of the RSUs will vest on the third grant date anniversary and (y) if the participant’s employment or service terminates due to Retirement (as defined in the Plan), and the participant has been continuously employed by the Company for at least twelve months following the grant date, then a pro-rata portion of the participant’s RSUs scheduled to vest on the next following vesting date shall vest on his or her termination date based on completed calendar months since either (a) the grant date or (b) the initial vesting date, as applicable.

The SAR Agreement has material terms that are substantially similar to those in the form Executive Nonqualified Stock Option Award Agreement last approved by the Compensation Committee and previously disclosed by the Company, except for the following: (x) the change in the equity instrument to a stock appreciation right (“SAR”), which may be settled in shares or cash, (y) 50% of the SARs will vest on the second grant date anniversary and 50% of the SARs will vest on the third grant date anniversary, and (z) if the participant’s employment or service terminates due to Retirement (as defined in the Plan), then (a) if the participant has been continuously employed by the Company for at least twelve months following the grant date, then a pro-rata portion of the SARs scheduled to become vested on the next vesting date shall be vested on the participant’s termination date based on completed calendar months since either (i) the grant date or (ii) the initial vesting date, as applicable; (b) following the application of clause (a), the unvested portion of the SARs shall expire upon such termination of employment or service and (c) the participant may exercise the vested portion of the SARs, but only within such period of time ending on the earlier of (i) two years following such termination of employment or service, or (ii) the Expiration Date (as defined in the SAR Agreement).

Restricted Stock Units

On February 25, 2021, the Compensation Committee granted time-based RSUs to certain of the Company’s executive officers and other employees.  Each RSU represents a contingent right to receive, upon vesting, one share of the Company’s Common Stock or its cash equivalent, as determined by the Company. The number of RSUs granted to certain named executive officers and certain other employees totaled 1,134,524.

Additionally, on May 18, 2021, the Company awarded an aggregate of 326,926-time-based RSUs to each of the Company’s non-employee directors, which vest on the first grant date anniversary or, if earlier, the date of the 2022 Annual Meeting of the Stockholders.

For the nine months ended September 30, 2021, certain of the Company's employees surrendered RSUs owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of RSUs issued under the Plan.

The table below represents the changes in RSUs:

	Number of Shares		Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2020	1,124,762	$	4.21
Granted	1,461,450		2.01
Vested	(654,068)		3.00
Forfeited	(1,606)		4.67
Balance at September 30, 2021	1,930,538	$	2.95

Stock-based compensation expense for these RSUs recognized in selling, general and administrative expense in the consolidated statement of comprehensive income (loss) for the nine months ended September 30, 2021 and 2020, was approximately $2.1 million and $2.3 million, respectively, with an associated tax benefit of $0.5 million and $0.6 million, respectively. For the three months ended September 30, 2021 and 2020, stock-based compensation expense for RSUs was approximately $0.8 million and $0.7 million, respectively. At September 30, 2021, unrecognized compensation expense related to RSUs totaled approximately $5.0 million and is expected to be recognized over a remaining term of approximately 2.00 years.

Under the authoritative guidance for stock-based compensation, 582,096 of the RSUs granted during 2021 are considered liability-based awards due to an insufficient number of shares available under the plan to service these awards upon vesting. As such, the Company recognized a liability associated with these RSUs of approximately $0.6 million as of September 30, 2021, of which approximately $0.4 million is included in accrued liabilities and approximately $0.2 million is included in other non-current liabilities in the accompanying balance sheets.  The estimated fair value of these liability-based awards was $3.73/RSU as of September 30, 2021.  The fair value of these liability awards will be remeasured at each reporting period until the date of settlement.

Stock Option Awards

During nine months ended September 30, 2021 there were no new grants or other changes in the stock options outstanding. 

546,272 stock options were exercisable at September 30, 2021.

Stock-based compensation expense for these stock option awards recognized in selling, general and administrative expense in the unaudited consolidated statement of comprehensive income (loss) for the nine months ended September 30, 2021 and 2020, was approximately $0.6 million and $0.5 million, respectively, with an associated tax benefit of $0.1 million and $0.1 million, respectively. For the three months ended September 30, 2021 and 2020, stock-based compensation expense was approximately $0.2 million and $0.2 million, respectively, with an associated tax benefit of less than $0.1 million and less than $0.1 million, respectively. At September 30, 2021, unrecognized compensation expense related to stock options totaled $1.6 million and is expected to be recognized over a remaining term of approximately 2.11 years.

The fair value of each option award at the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions: 

		Assumptions
Weighted average expected stock volatility (range)	%	25.94 - 30.90
Expected dividend yield	%	0.00
Expected term (years)		6.25
Risk-free interest rate (range)	%	0.82 - 2.26
Exercise price (range)	$	4.51 - 10.83
Weighted-average grant date fair value	$	1.42

The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility as the Company does not have a sufficient trading history as a stand-alone public company to calculate volatility.   Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award.  The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption.  The Company has never declared or paid a dividend on its shares of common stock.

Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur. No stock options were forfeited for the nine months ended September 30, 2021.

Stock Appreciation Right Awards

On February 25, 2021, the Compensation Committee granted SARs to certain of the Company’s executive officers and other employees.  Each SAR represents a contingent right to receive, upon vesting, payment in cash or the Company’s Common Stock, as determined by the Compensation Committee, in an amount equal to the difference between (a) the fair market value of a Common Share on the date of exercise, over (b) the grant date price. The number of SARs granted to certain named executive officers and certain other employees totaled 1,551,631.

The following table summarizes SARs outstanding at September 30, 2021:

	Number of Units		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)
Outstanding SARs at December 31, 2020	-	$	-	-
Granted	1,551,631		1.79	9.41
Outstanding SARs at September 30, 2021	1,551,631	$	1.79	9.41

Under the authoritative guidance for stock-based compensation, these SARs are considered liability-based awards.  The Company recognized a liability, which is included in other non-current liabilities in the consolidated balance sheets, associated with its SARs of approximately $0.9 million as of September 30, 2021. These SARs were valued using the Black-Scholes option pricing model, the expected volatility was approximately 43.5%, the term was 6.25 years, the dividend rate was 0.0% and the risk-free interest rate was approximately 1.07%, which resulted in a calculated fair value of approximately $0.78 per SAR as of the grant date. The estimated fair value of each SAR as of September 30, 2021 was $2.92. The fair value of these liability awards will be remeasured at each reporting period until the date of settlement. Increases and decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. For the nine months ended September 30, 2021, the Company recognized compensation expense related to these awards of approximately $0.9 million in selling, general and administrative expense in the unaudited consolidated statement of comprehensive income (loss). For the three months ended September 30, 2021, the Company recognized compensation expense related to these awards of approximately $0.4 million in selling, general, and administrative expense in the unaudited consolidated statement of comprehensive income (loss). At September 30, 2021, unrecognized compensation expense related to SARs totaled approximately $3.6 million and is expected to be recognized over a remaining term of approximately 2.41 years.

The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility as the Company does not have a sufficient trading history as a stand-alone public company to calculate volatility.   Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award.  The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption.  The Company has never declared or paid a dividend on its shares of common stock.

Stock-based payments are subject to service based vesting requirements and expense is recognized on a straight-line basis over the vesting period.  Forfeitures are accounted for as they occur. No SARs were forfeited for the nine months ended September 30, 2021.

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Retirement Plans

9 Months Ended

Sep. 30, 2021

Retirement Plans

Retirement Plans

17. Retirement plans

We offer a defined contribution 401(k) retirement plan to substantially all of our U.S. employees. Participants may contribute from 1% to 90% of eligible compensation, inclusive of pretax and/or Roth deferrals (subject to Internal Revenue Service limitations), and we make matching contributions under this plan on the first 6% of the participant’s compensation (100% match of the first 3% employee contribution and 50% match on the next 3% contribution). Our matching contributions vest at a rate of 20% per year for each of the employee’s first five years of service and then are fully vested thereafter. For the nine months ended September 30, 2021 and 2020, we recognized expense of $0.7 million and $0.6 million, respectively, related to these matching contributions. For the three months ended September 30, 2021 and 2020, we recognized expense of $0.2 million and $0.2 million, respectively.

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Business Segments

9 Months Ended

Sep. 30, 2021

Business Segments

Business Segments

18. Business Segments

During 2021, the Company changed the names of select reportable segments to appropriately align with its diversified hospitality and facilities service offerings.  The segments formerly known as Permian Basin and Bakken Basin will now be referred to as Hospitality & Facilities Services – South and Hospitality & Facilities Services – Midwest, respectively.  All other reportable segment names will remain unchanged.

The Company is organized primarily on the basis of geographic region and customer industry group and operates in four reportable segments.

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.

Hospitality & Facilities Services – South  — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers located primarily in Texas and New Mexico.

Hospitality & Facilities Services – Midwest  — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers located primarily in North Dakota.

Government — Segment operations consist primarily of specialty rental and vertically integrated hospitality services revenue from customers with Government contracts located in Texas.

TCPL Keystone – Segment operations consist primarily of revenue from the construction phase of the contract with TCPL. As a result of the Termination and Settlement Agreement discussed in Note 2, no further activity is expected in this segment.

All Other — Segment operations consist primarily of revenue from specialty rental and vertically integrated hospitality services revenue from customers located outside of the Hospitality & Facilities Services - South and Hospitality & Facilities Services - Midwest segments.

The table below presents information about reported segments for the three and nine months ended September 30 (except for asset information for 2020 that is presented as of December 31):

2021

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2021
Revenue	$	84,350	$	2,593	$	109,255	$	12,283	$	1,166	(a)	$	209,647
Adjusted gross profit	$	38,219	$	(854)	$	66,649	$	9,140	$	(374)		$	112,780
Total Assets	$	213,870	$	44,580	$	81,796	$	3,072	$	2,284		$	345,602
For the Three Months Ended September 30, 2021
Revenue	$	31,066	$	1,266	$	46,428	$	9,880	$	529		$	89,169
Adjusted gross profit	$	13,945	$	(56)	$	25,823	$	8,329	$	(139)		$	47,902

2020

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2020
Revenue	$	89,163	$	5,705	$	49,527	$	28,126	$	1,018	(a)	$	173,539
Adjusted gross profit	$	42,257	$	323	$	37,701	$	4,419	$	(481)		$	84,219
Total Assets (as of December 31, 2020)	$	277,839	$	51,782	$	27,149	$	3,543	$	3,231		$	363,544
For the Three Months Ended September 30, 2020
Revenue	$	18,968	$	1,154	$	16,264	$	11,598	$	279		$	48,263
Adjusted gross profit	$	8,606	$	87	$	13,213	$	2,027	$	(220)		$	23,713

(a) Revenues are attributable to three operating segments of the Company and are reported in the “All Other” category previously described.

A reconciliation of total segment adjusted gross profit to total consolidated income (loss) before income taxes for the dates indicated below, is as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
				(Restated)				(Restated)
Total reportable segment adjusted gross profit	$	48,041	$	23,933	$	113,154	$	84,700
Other adjusted gross profit		(139)		(220)		(374)		(481)
Depreciation and amortization		(18,302)		(16,336)		(52,742)		(49,713)
Selling, general, and administrative expenses		(12,827)		(8,508)		(35,835)		(28,599)
Other expense (income), net		(91)		183		(781)		752
Interest expense, net		(9,465)		(9,913)		(29,058)		(30,113)
Change in fair value of warrant liabilities		1,120		267		(1,600)		2,453
Consolidated income (loss) before income taxes	$	8,337	$	(10,594)	$	(7,236)	$	(21,001)

A reconciliation of total segment assets to total consolidated assets as of the dates indicated below, is as follows:

	September 30, 2021		December 31, 2020
Total reportable segment assets	$	343,318	$	360,313
Other assets		2,284		3,231
Other unallocated amounts		184,354		170,693
Total Assets	$	529,956	$	534,237

Other unallocated assets consist of the following as reported in the consolidated balance sheets of the Company as of the dates indicated below:

	September 30, 2021		December 31, 2020
Total current assets	$	69,779	$	43,562
Other intangible assets, net		92,153		103,121
Deferred tax asset		15,984		15,179
Deferred financing costs revolver, net		2,477		3,422
Other non-current assets		3,961		5,409
Total other unallocated amounts of assets	$	184,354	$	170,693

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Subsequent Events

9 Months Ended

Sep. 30, 2021

Subsequent Events

Subsequent Events

19. Subsequent Events

On October 1, 2021, the Company purchased a group of assets consisting primarily of modular units from Civeo USA, LLC (“seller”) for $6.2 million, which was funded by cash on hand as of the acquisition date. These assets were previously leased from the seller to service the Company’s Government reportable segment, and effective with the purchase, the lease was terminated. These assets will continue to be used in the Company’s Government reportable segment. No personnel were assumed as a part of this transaction.

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Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies

Organization and Nature of Operations

Organization and Nature of Operations

Target Hospitality Corp. (“Target Hospitality” or the “Company”) was formed on March 15, 2019 and is North America’s largest provider of vertically integrated modular accommodations and value-added hospitality services. The Company provides vertically integrated specialty rental and comprehensive hospitality services including catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation services, overall workforce community management, and laundry service. Target Hospitality serves clients in oil, gas, mining, alternative energy, government and immigrations sectors principally located in the West Texas, South Texas, Oklahoma and Midwest regions, as well as various large linear-construction (pipeline and infrastructure) projects in the United States.

The Company, whose securities are listed on the Nasdaq Global Market, serves as the holding company for the businesses of Target Logistics Management, LLC and its subsidiaries (“Target”) and RL Signor Holdings, LLC and its subsidiaries (“Signor”). TDR Capital LLP (“TDR Capital” or “TDR”) owns approximately 64% of Target Hospitality and the remaining ownership is broken out among the founders of the Company’s legal predecessor, Platinum Eagle Acquisition Corp. (“Platinum Eagle” or “PEAC”), investors in Platinum Eagle’s private placement transaction completed substantially and concurrently with the Business Combination (as defined below) (the “PIPE”), and other public shareholders. Platinum Eagle was originally incorporated on July 12, 2017 as a Cayman Islands exempted company, for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses. References in this Quarterly Report on Form 10-Q to the Company refer to Target Hospitality for all periods at or after March 15, 2019 and Platinum Eagle for all periods prior to March 15, 2019, unless the context requires otherwise.

On November 13, 2018, PEAC entered into: (i) the agreement and plan of merger, as amended on January 4, 2019 (the “Signor Merger Agreement”), by and among PEAC, Signor Merger Sub LLC, a Delaware limited liability company and wholly-owned subsidiary of Platinum Eagle and sister company to the Holdco Acquiror (defined below as Topaz Holdings LLC) (“Signor Merger Sub”), Arrow Holdings S.a.r.l., a Luxembourg société à responsabilité limitée (the “Arrow Seller”) and Signor Parent (as defined below), and (ii) the agreement and plan of merger, as amended on January 4, 2019 (the “Target Merger Agreement” and, together with the Signor Merger Agreement, the “Merger Agreements”), by and among Platinum Eagle, Topaz Holdings LLC, a Delaware limited liability company (“Topaz”), Arrow Bidco, LLC, a Delaware limited liability company (“Bidco”), Algeco Investments B.V., a Netherlands besloten vennootschap (the “Algeco Seller”) and Target Parent (as defined below), to effect a business combination (the “Business Combination”). Pursuant to the Merger Agreements, on March 15, 2019, Platinum Eagle, through its wholly-owned subsidiary, Topaz, acquired all of the issued and outstanding equity interests of Arrow Parent Corp., a Delaware corporation (“Signor Parent”), the owner of Bidco and the owner of Signor from the Arrow Seller, and all of the issued and outstanding equity interests of Algeco US Holdings LLC, a Delaware limited liability company (“Target Parent”), the owner of Target, from the Algeco Seller, for approximately $1.311 billion. The purchase price was paid in a combination of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and cash. The Arrow Seller and the Algeco Seller are hereinafter referred to as the “Sellers.”

Target Parent was formed by TDR in September 2017. Prior to the Business Combination, Target Parent was directly owned by Algeco Scotsman Global S.a.r.l. (“ASG”) which is ultimately owned by a group of investment funds managed and controlled by TDR. During 2018, ASG assigned all of its ownership interest in Target Parent to the Algeco Seller, an affiliate of ASG that is also ultimately owned by a group of investment funds managed and controlled by TDR. Target Parent acted as a holding company that included the U.S. corporate employees of ASG and certain of its affiliates and certain related administrative costs and was the owner of Target, its operating company. Target Parent received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. As discussed above, in connection with the closing of the Business Combination, Target Parent merged with and into Bidco, with Bidco as the surviving entity.

Signor Parent owned 100% of Bidco until the closing of the Business Combination in connection with which Signor Parent merged with and into Topaz with Topaz being the surviving entity. Prior to the Business Combination, Signor Parent was owned by the Arrow Seller, which is ultimately owned by a group of investment funds managed and controlled by TDR. Signor Parent was formed in August 2018 and acted as a holding company for Bidco, which was formed in September 2018, also as a holding company. Bidco acquired Signor on September 7, 2018. Neither Signor Parent nor Bidco had operating activity, but each received capital contributions, made distributions, and maintained cash as well as other amounts owed to and from affiliated entities. Signor Parent was dissolved upon consummation of the Business Combination and merger with Topaz described above on March 15, 2019.

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Certain information in footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) has been condensed or omitted pursuant to those rules and regulations. The financial statements included in this report should be read in conjunction with the Target Hospitality Annual Report on Form 10-K/A for the year ended December 31, 2020, filed with the SEC on May 24, 2021 (the “2020 Form 10-K/A”).

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the operating results that may be expected for the full fiscal year ending December 31, 2021 or any future period.

The accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, except for the restatement discussed below, necessary for a fair statement of financial position as of September 30, 2021, and results of operations for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The consolidated balance sheet as of December 31, 2020, was derived from the audited consolidated balance sheets of Target Hospitality Corp. but does not contain all of the footnote disclosures from those annual financial statements.

Restatement of Previously Issued Consolidated Financial Statements

The notes included herein should be read in conjunction with the Company's restated audited consolidated financial statements included in the 2020 Form 10-K/A.

As previously disclosed in the 2020 Form 10-K/A, we restated the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020, as well as each of the quarters within 2020 to make the necessary accounting corrections related to warrant accounting. We have restated herein our consolidated financial statements as of and for the quarter and period ended September 30, 2020. We have also restated related amounts within the accompanying footnotes to the consolidated financial statements. The impact of this restatement on the financial statements for the three and nine months ended September 30, 2020 was a decrease to net loss of approximately $0.3 million and $2.5 million, respectively.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, actual amounts may differ from those included in the accompanying unaudited consolidated financial statements.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries that it controls due to ownership of a majority voting interest. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All intercompany balances and transactions are eliminated.

Revenue Recognition

Revenue Recognition

The Company derives revenue from specialty rental and hospitality services, specifically lodging and related ancillary services. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with the customers. Certain arrangements contain a lease of lodging facilities to customers. The leases are accounted for as an operating lease under the authoritative guidance for leases and are recognized as income using the straight-line method over the term of the lease agreement.

Because performance obligations related to specialty rental and hospitality services are satisfied over time, the majority of our revenue is recognized on a daily basis, for each night a customer stays, at a contractual day rate.  Our customers typically contract for accommodation services under committed contracts with terms that most often range from several months to three years. Our payment terms vary by type and location of our customer and the service offered.  The time between invoicing and when payment is due is not significant.   

When lodging and services are billed and collected in advance, recognition of revenue is deferred until services are rendered. Certain of the Company’s contractual arrangements allow customers the ability to use paid but unused lodging and services for a specified period. The Company recognizes revenue for these paid but unused lodging and services as they are consumed, as it becomes probable the lodging and services will not be used, or upon expiration of the specified term.

Cost of services includes labor, food, utilities, supplies, rent and other direct costs associated with operating the lodging units as well as costs associated with construction services. Cost of rental includes leasing costs and other direct costs of maintaining the lodging units. Costs associated with contracts include sales commissions which are expensed as incurred and reflected in selling, general and administrative expenses in the consolidated statements of comprehensive income (loss).

The Company recognizes revenue associated with community construction using the percentage of completion method with progress towards completion measured using the cost-to-cost method as the basis to recognize revenue. Management believes this cost-to-cost method is the most appropriate measure of progress to the satisfaction of a performance obligation on the community construction. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to projected costs and revenue and are recognized in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. Factors that may affect future project costs and margins include weather, production efficiencies, availability and costs of labor, materials and subcomponents.  

Additionally, the Company collects sales, use, occupancy and similar taxes, which the Company presents on a net basis (excluded from revenues) in the consolidated statements of comprehensive income (loss). 

Recently Issued Accounting Standards

Recently Issued Accounting Standards

The Company meets the definition of an emerging growth company (“EGC”) as defined under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). In reliance on exemptions provided under the JOBS Act for EGCs, the Company has elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002) is required to comply with such standards. As such, compliance dates included below pertain to non-issuers, and as permitted, early adoption dates are indicated.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises existing practice related to accounting for leases under ASC Topic 840 Leases (ASC 840) for both lessees and lessors. The new guidance requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While the new standard maintains similar accounting for lessors as under ASC 840, the new standard reflects updates to, among other things, align with certain changes to the lessee model. In June 2020, the FASB issued ASU No. 2020-05 to delay the effective date for the new standard for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for non-issuers (including EGCs).  Early application continues to be allowed.  Topic 842 allows an entity to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or to adopt under the new optional transition method that allows an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings as of the adoption date. The Company is currently evaluating the impact of the pronouncement on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASU 2016-13 or Topic 326). This new standard changes how companies account for credit impairment for trade and other receivables as well as changing the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace the current "incurred loss" model with an "expected loss" model. Under the "incurred loss" model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been "incurred"). Under the "expected loss" model, a loss (or allowance) is recognized upon initial recognition of the asset that reflects all future events that leads to a loss being realized, regardless of whether it is probable that the future event will occur. The "incurred loss" model considers past events and current conditions, while the "expected loss" model includes expectations for the future which have yet to occur.  ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, was issued in November 2018 and excludes operating leases from the new guidance. In 2019, the FASB voted to delay the effective date for the new standard for financial statements issued to reporting periods beginning after December 15, 2022 and interim periods within those reporting periods. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

Recent Developments - COVID-19 and Disruption to Global Demand

Recent Developments – COVID-19 and Disruption to Global Demand

The global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020 presented new risks to the Company’s business in 2020.  Prior to March 2020, the Company’s results of operations were largely in line with expectations and subsequent to March 2020, we began to experience a decline in revenues.  The COVID-19 pandemic has not impacted the Company’s ability to operate nor has it materially disrupted the Company’s supply chain, disrupted service, or caused a shortage of critical products at our communities. However, the situation surrounding COVID-19 and the decrease in global economic demand had a material adverse impact on the Company’s operating results, as a result of which the Company implemented several cost containment measures primarily initiated in April of 2020, including salary reductions, reductions in workforce, furloughs, reduced discretionary spending and elimination of all non-essential travel.  In addition to these measures, the Company temporarily closed and consolidated several communities in the Hospitality & Facilities Services - South segment and in May of 2020, the Company temporarily closed all communities in the Hospitality & Facilities Services - Midwest segment. The Company began re-opening communities in both the Hospitality & Facilities Services - South and Midwest segments in July of 2020 as customer activity levels began to increase.  Additionally, the Company executed contract modifications with several customers resulting in extended terms and reduced minimum contract commitments in 2020.  These modifications utilize multi-year contract extensions to maintain contract value and provide the Company with greater visibility on long-term revenue and cash flow.  This mutually beneficial approach balanced average daily rates with contract term and positions the Company to take advantage of a more balanced market. Overall, the Company has experienced a positive recovery from the lows of 2020 with consistent improvement in customer demand within the Hospitality and Facilities Services – South segment and significant growth in the Government segment.

There have been significant changes to the global economic situation and to public securities markets as a result of  COVID-19. Although vaccines have become available for COVID-19, surfacing of virus variants has added a degree of uncertainty to the continuing global impact of COVID-19, which could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. It is possible that these changes could cause changes to estimates as a result of the markets in which the Company operates, the price of the Company’s publicly traded equity and debt in comparison to the Company’s carrying value. Such changes to estimates could potentially result in impacts that would be material to the Company’s consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units in relation to potential goodwill impairment, the fair value of long-lived and other intangible assets in relation to potential impairment and the allowance for doubtful accounts.

As a result of the impact of COVID-19 and the disruption to the global economy, in the first quarter of 2020 we also concluded a trigger event had occurred and we tested our long-lived and intangible assets, including goodwill, for impairment.  Based upon our impairment assessments, which utilized the Company’s current long-term projections, we determined the carrying amount of these assets were not impaired.  During the third quarter of 2021, we did not identify further triggers or indicators of impairment and therefore did not perform a quantitative impairment test.  

Additionally, in connection with COVID-19, on March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The CARES Act, among other things, included provisions relating to the 80 percent limitation of net operating loss and modifications to the business interest deduction limitations. We evaluated how the provisions in the CARES Act would impact our consolidated financial statements and concluded that the CARES Act did not have a material impact on our provision for income taxes for the three and nine months ended September 30, 2021 and 2020.

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Revenue (Tables)

9 Months Ended

Sep. 30, 2021

Revenue

Summary of disaggregation of revenue by reportable segments as well as the all other category

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Hospitality & Facilities Services - South
Services income	$	28,732	$	16,236	$	77,729	$	77,863
Total Hospitality & Facilities Services - South revenues		28,732		16,236		77,729		77,863
Hospitality & Facilities Services - Midwest
Services income	$	1,266	$	1,154	$	2,593	$	5,705
Total Hospitality & Facilities Services - Midwest revenues		1,266		1,154		2,593		5,705
Government
Services income	$	26,663	$	6,169	$	61,329	$	18,448
Total Government revenues		26,663		6,169		61,329		18,448
TCPL Keystone
Services income	$	31	$	493	$	989	$	493
Construction fee income		9,849		11,105		11,294		27,634
Total TCPL Keystone revenues		9,880		11,598		12,283		28,127
All Other
Services income	$	529	$	279	$	1,166	$	1,017
Total All Other revenues		529		279		1,166		1,017
Total revenues	$	67,070	$	35,436	$	155,100	$	131,160

Summary of contract liabilities

	For Nine Months Ended
	September 30,
	2021		2020
Balances at Beginning of the Period	$	18,371	$	26,199
Additions to deferred revenue		125,592		7,866
Revenue recognized		(76,120)		(14,956)
Balances at End of the Period	$	67,843	$	19,109

Summary of revenue expected to be recognized from contracts where the price and quantity of the product or service are fixed

As of September 30, 2021, for contracts greater than one year, the following table discloses the estimated revenues 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:

		For the Years Ended December 31,
	2021		2022		2023		2024		2025		2026		Total
Revenue expected to be recognized as of September 30, 2021	$	33,059	$	48,519	$	18,699	$	18,748	$	18,699	$	13,987	$	151,711

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Specialty Rental Assets, Net (Tables)

9 Months Ended

Sep. 30, 2021

Specialty Rental Assets, Net

Schedule of Specialty rental assets

	September 30,		December 31,
	2021		2020
Specialty rental assets	$	571,965	$	547,375
Construction-in-process		4,844		5,828
Less: accumulated depreciation		(282,437)		(241,716)
Specialty rental assets, net	$	294,372	$	311,487

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Other Property, Plant and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2021

Other Property, Plant and Equipment, Net

Schedule of other property, plant and equipment, net

	September 30,		December 31,
	2021		2020
Land	$	9,163	$	9,163
Buildings and leasehold improvements		185		115
Machinery and office equipment		1,217		1,072
Software and other		3,838		3,752
		14,403		14,102
Less: accumulated depreciation		(4,211)		(3,083)
Total other property, plant and equipment, net	$	10,192	$	11,019

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Goodwill and Other Intangible Assets, net (Tables)

9 Months Ended

Sep. 30, 2021

Goodwill and Other Intangible Assets, net

Schedule of changes in carrying amount of goodwill

	Hospitality and Facilities Services - South
Balance at January 1, 2020	$	41,038
Changes in Goodwill		-
Balance at December 31, 2020		41,038
Changes in Goodwill		-
Balance at September 30, 2021	$	41,038

Schedule of intangible assets other than goodwill

	September 30, 2021
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	5.8	$	128,907	$	(53,154)	$	75,753
Total			128,907		(53,154)		75,753
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(53,154)	$	92,153

	December 31, 2020
	Weighted	Gross
	average	Carrying		Accumulated		Net Book
	remaining lives	Amount		Amortization		Value
Intangible assets subject to amortization
Customer relationships	6.4	$	128,907	$	(42,186)	$	86,721
Total			128,907		(42,186)		86,721
Indefinite lived assets:
Tradenames			16,400		—		16,400
Total intangible assets other than goodwill		$	145,307	$	(42,186)	$	103,121

Schedule of estimated aggregate amortization expense

Rest of 2021	$	3,687
2022		13,302
2023		12,881
2024		12,881
2025		12,881
Thereafter		20,121
Total	$	75,753

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Other Non-Current Assets (Tables)

9 Months Ended

Sep. 30, 2021

Other Non-Current Assets

Schedule of other non-current assets

	September 30,		December 31,
	2021		2020
Cloud computing implementation costs	$	7,198	$	7,094
Less: accumulated amortization		(3,303)		(1,685)
Other non-current assets	$	3,895	$	5,409

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Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Accrued Liabilities

Schedule of accrued liabilities

	September 30,		December 31,
	2021		2020
Employee accrued compensation expense	$	9,767	$	6,177
Other accrued liabilities		9,976		8,873
Accrued interest on debt		1,472		9,649
Total accrued liabilities	$	21,215	$	24,699

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Debt (Tables)

9 Months Ended

Sep. 30, 2021

Debt

Summary of carrying value of debt outstanding

	September 30,		December 31,
	2021		2020
Capital lease and other financing obligations	$	148	$	3,840
ABL facility		—		48,000
9.50% Senior Secured Notes due 2024, face amount		340,000		340,000
Less: unamortized original issue discount		(1,847)		(2,319)
Less: unamortized term loan deferred financing costs		(8,908)		(11,182)
Total debt, net		329,393		378,339
Less: current maturities		(148)		(3,571)
Total long-term debt	$	329,245	$	374,768

Schedule of debt redemption

	Redemption
Year	Price
2021	104.750%
2022	102.375%
2023 and thereafter	100.000%

Components of interest expense

	For the three months ended				For the nine months ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Interest incurred on capital lease and other financing obligations	$	5	$	30	$	51	$	98
Interest expense incurred on ABL facilities and Notes		8,201		8,722		25,315		26,693
Amortization of deferred financing costs on ABL facilities and Notes		1,097		1,016		3,220		2,914
Amortization of original issue discount on Notes		162		145		472		408
Interest expense, net	$	9,465	$	9,913	$	29,058	$	30,113

Schedule of future maturities

Rest of 2021	$	69
2022		79
2023		—
2024		340,000
Total	$	340,148

Senior Secured Notes 2024

Debt

Summary of carrying value of debt outstanding

		Principal		Unamortized Original Issue Discount		Unamortized Deferred Financing Costs
9.50% Senior Secured Notes, due 2024	$	340,000	$	1,847	$	8,908

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Warrant Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Warrant Liabilities

Schedule of warrant liabilities

	September 30,		December 31,
	2021		2020 (Restated)
Warrant liabilities	$	2,133	$	533
Total	$	2,133	$	533

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value of Financial Instruments

Summary of carrying amounts and fair values of financial assets and liabilities

	September 30, 2021				December 31, 2020
Financial Assets (Liabilities) Not Measured at Fair Value	Carrying Amount			Fair Value	Carrying Amount		Fair Value
ABL facility (See Note 8) - Level 2	$	—	$	—	$	(48,000)	$	(48,000)
Senior Secured Notes (See Note 8) - Level 1	$	(329,245)	$	(347,480)	$	(326,499)	$	(300,900)

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

		September 30,		December 31,
		2021		2020
Exercise Price	$	11.50	$	11.50
Stock Price	$	3.73	$	1.58
Dividend Yield	%	0.00	%	0.00
Expected Term (in Years)		2.46		3.20
Risk-Free Interest Rate	%	0.39	%	0.19
Expected Volatility	%	64.00	%	68.00
Per Share Value of Warrants	$	0.40	$	0.10

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Private Placement Warrants
Balance at December 31, 2020 (as Restated)	$	533
Change in fair value of warrant liabilities		640
Balance at March 31, 2021		1,173
Change in fair value of warrant liabilities		2,080
Balance at June 30, 2021		3,253
Change in fair value of warrant liabilities		(1,120)
Balance at September 30, 2021	$	2,133

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Earnings (Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings (Loss) per Share

Schedule of reconciliation of net loss and weighted-average shares of common stock outstanding

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Numerator				(Restated)				(Restated)
Net income (loss) attributable to Common Stockholders	$	6,675	$	(7,603)	$	(7,375)	$	(15,814)
Denominator
Weighted average shares outstanding - basic and diluted		96,814,970		96,138,459		96,539,703		95,997,647
Net income (loss) per share - basic and diluted	$	0.07	$	(0.08)	$	(0.08)	$	(0.16)

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2021

Stock-Based Compensation

Schedule of changes in restricted stock units

	Number of Shares		Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2020	1,124,762	$	4.21
Granted	1,461,450		2.01
Vested	(654,068)		3.00
Forfeited	(1,606)		4.67
Balance at September 30, 2021	1,930,538	$	2.95

Schedule of assumptions using Black-scholes option-pricing model

		Assumptions
Weighted average expected stock volatility (range)	%	25.94 - 30.90
Expected dividend yield	%	0.00
Expected term (years)		6.25
Risk-free interest rate (range)	%	0.82 - 2.26
Exercise price (range)	$	4.51 - 10.83
Weighted-average grant date fair value	$	1.42

Stock appreciation right awards

	Number of Units		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (Years)
Outstanding SARs at December 31, 2020	-	$	-	-
Granted	1,551,631		1.79	9.41
Outstanding SARs at September 30, 2021	1,551,631	$	1.79	9.41

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Business Segments (Tables)

9 Months Ended

Sep. 30, 2021

Business Segments

Schedule of Segment Reporting Information

The table below presents information about reported segments for the three and nine months ended September 30 (except for asset information for 2020 that is presented as of December 31):

2021

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2021
Revenue	$	84,350	$	2,593	$	109,255	$	12,283	$	1,166	(a)	$	209,647
Adjusted gross profit	$	38,219	$	(854)	$	66,649	$	9,140	$	(374)		$	112,780
Total Assets	$	213,870	$	44,580	$	81,796	$	3,072	$	2,284		$	345,602
For the Three Months Ended September 30, 2021
Revenue	$	31,066	$	1,266	$	46,428	$	9,880	$	529		$	89,169
Adjusted gross profit	$	13,945	$	(56)	$	25,823	$	8,329	$	(139)		$	47,902

2020

	Hospitality & Facilities Services - South		Hospitality & Facilities Services - Midwest		Government		TCPL Keystone		All Other			Total
For the Nine Months Ended September 30, 2020
Revenue	$	89,163	$	5,705	$	49,527	$	28,126	$	1,018	(a)	$	173,539
Adjusted gross profit	$	42,257	$	323	$	37,701	$	4,419	$	(481)		$	84,219
Total Assets (as of December 31, 2020)	$	277,839	$	51,782	$	27,149	$	3,543	$	3,231		$	363,544
For the Three Months Ended September 30, 2020
Revenue	$	18,968	$	1,154	$	16,264	$	11,598	$	279		$	48,263
Adjusted gross profit	$	8,606	$	87	$	13,213	$	2,027	$	(220)		$	23,713

(a) Revenues are attributable to three operating segments of the Company and are reported in the “All Other” category previously described.

Schedule of reconciliation of total segment adjusted gross profit

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
				(Restated)				(Restated)
Total reportable segment adjusted gross profit	$	48,041	$	23,933	$	113,154	$	84,700
Other adjusted gross profit		(139)		(220)		(374)		(481)
Depreciation and amortization		(18,302)		(16,336)		(52,742)		(49,713)
Selling, general, and administrative expenses		(12,827)		(8,508)		(35,835)		(28,599)
Other expense (income), net		(91)		183		(781)		752
Interest expense, net		(9,465)		(9,913)		(29,058)		(30,113)
Change in fair value of warrant liabilities		1,120		267		(1,600)		2,453
Consolidated income (loss) before income taxes	$	8,337	$	(10,594)	$	(7,236)	$	(21,001)

Schedule of reconciliation of total segment assets to total combined assets

	September 30, 2021		December 31, 2020
Total reportable segment assets	$	343,318	$	360,313
Other assets		2,284		3,231
Other unallocated amounts		184,354		170,693
Total Assets	$	529,956	$	534,237

Schedule of unallocated assets consist of the following as reported in the combined balance sheets

	September 30, 2021		December 31, 2020
Total current assets	$	69,779	$	43,562
Other intangible assets, net		92,153		103,121
Deferred tax asset		15,984		15,179
Deferred financing costs revolver, net		2,477		3,422
Other non-current assets		3,961		5,409
Total other unallocated amounts of assets	$	184,354	$	170,693

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Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended						9 Months Ended
	Mar. 15, 2019	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Common Stock, Par or Stated Value Per Share		$ 0.0001						$ 0.0001		$ 0.0001
Net loss		$ 6,675	$ (912)	$ (13,138)	$ (7,603)	$ (13,667)	$ 5,454	$ (7,375)	$ (15,814)
Retroactive application of recapitalization
Net loss					$ 300				$ 2,500
Algeco and Arrow
Purchase price	$ 1,311,000
Common Stock, Par or Stated Value Per Share	$ 0.0001
TDR Capital | Target Hospitality
Ownership interest in an affiliate		64.00%						64.00%
Signor | Bidco
Ownership percentage		100.00%						100.00%

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Organization and Nature of Operations, Basis of Presentation, and Summary of Significant Accounting Policies - Revenue Recognition (Details)	9 Months Ended
	Sep. 30, 2021
Maximum
Contract for accommodation services under take-or-pay contracts term	3 years

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Revenue (Details) - USD ($) $ in Thousands			3 Months Ended		9 Months Ended
	Jul. 27, 2021	Jul. 23, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Revenue, Topic 606			$ 67,070	$ 35,436	$ 155,100	$ 131,160
Services
Disaggregation of Revenue [Line Items]
Revenue, Topic 606			57,221	24,331	143,806	103,526
Specialty rental
Disaggregation of Revenue [Line Items]
Revenue Not from Contract with Customer			$ 22,099	$ 12,827	$ 54,547	$ 42,379
Termination And Settlement Agreement [Member]
Disaggregation of Revenue [Line Items]
Gain (Loss) on Contract Termination	$ 5,000	$ 4,900

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Revenue - Disaggregation Revenue (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($)
Disaggregation of Revenue [Line Items]
Number of Reportable Segments | segment			4
Total Revenue	$ 67,070	$ 35,436	$ 155,100	$ 131,160
Hospitality And Facilities Services South [Member]
Disaggregation of Revenue [Line Items]
Total Revenue	28,732	16,236	77,729	77,863
Hospitality And Facilities Services Midwest [Member]
Disaggregation of Revenue [Line Items]
Total Revenue	1,266	1,154	2,593	5,705
Government
Disaggregation of Revenue [Line Items]
Total Revenue	26,663	6,169	61,329	18,448
TCPL Keystone
Disaggregation of Revenue [Line Items]
Total Revenue	9,880	11,598	12,283	28,127
All Other
Disaggregation of Revenue [Line Items]
Total Revenue	529	279	1,166	1,017
Services
Disaggregation of Revenue [Line Items]
Total Revenue	57,221	24,331	143,806	103,526
Services | Hospitality And Facilities Services South [Member]
Disaggregation of Revenue [Line Items]
Total Revenue	28,732	16,236	77,729	77,863
Services | Hospitality And Facilities Services Midwest [Member]
Disaggregation of Revenue [Line Items]
Total Revenue	1,266	1,154	2,593	5,705
Services | Government
Disaggregation of Revenue [Line Items]
Total Revenue	26,663	6,169	61,329	18,448
Services | TCPL Keystone
Disaggregation of Revenue [Line Items]
Total Revenue	31	493	989	493
Services | All Other
Disaggregation of Revenue [Line Items]
Total Revenue	529	279	1,166	1,017
Construction fee
Disaggregation of Revenue [Line Items]
Total Revenue	9,849	11,105	11,294	27,634
Construction fee | TCPL Keystone
Disaggregation of Revenue [Line Items]
Total Revenue	$ 9,849	$ 11,105	$ 11,294	$ 27,634

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Revenue - Contract Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Change in Contract with Customer, Liability [Abstract]
Balances at Beginning of Year	$ 18,371	$ 26,199
Additions to deferred revenue	125,592	7,866
Revenue recognized	(76,120)	(14,956)
Balances at End of Year	$ 67,843	$ 19,109

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Revenue - Revenue Expected to be Recognized (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue expected to be recognized	$ 151,711
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 33,059
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 48,519
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 18,699
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 18,748
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 18,699
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue expected to be recognized	$ 13,987

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Specialty Rental Assets, Net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (282,437)		$ (282,437)		$ (241,716)
Specialty rental assets, net	294,372		294,372		311,487
Depreciation	14,294	$ 11,995	40,642	$ 37,158
Specialty rental assets
Property, Plant and Equipment [Line Items]
Specialty rental assets, gross	571,965		571,965		547,375
Depreciation	14,300	$ 12,000	40,600	$ 37,200
Construction-in-process
Property, Plant and Equipment [Line Items]
Specialty rental assets, gross	$ 4,844		$ 4,844		$ 5,828

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Other Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Other property, plant and equipment
Other property, plant and equipment, gross	$ 14,403		$ 14,403		$ 14,102
Less: accumulated depreciation	(4,211)		(4,211)		(3,083)
Property, Plant and Equipment, Other, Net, Total	10,192		10,192		11,019
Depreciation on Other PPE	4,008	$ 4,341	12,100	$ 12,555
Land
Other property, plant and equipment
Other property, plant and equipment, gross	9,163		9,163		9,163
Buildings and leasehold improvements
Other property, plant and equipment
Other property, plant and equipment, gross	185		185		115
Machinery and office equipment
Other property, plant and equipment
Other property, plant and equipment, gross	1,217		1,217		1,072
Software and other
Other property, plant and equipment
Other property, plant and equipment, gross	3,838		3,838		$ 3,752
Property, Plant and Equipment Other Types
Other property, plant and equipment
Depreciation on Other PPE	$ 400	$ 700	$ 1,100	$ 1,500

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Goodwill and Other Intangible Assets, net - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Goodwill and Other Intangible Assets, net
Goodwill, Beginning Balance	$ 41,038	$ 41,038
Goodwill, Ending Balance	$ 41,038	$ 41,038

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Goodwill and Other Intangible Assets, net - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Intangible assets subject to amortization
Gross Carrying Amount	$ 128,907		$ 128,907		$ 128,907
Accumulated Amortization	(53,154)		(53,154)		(42,186)
Net Book Value	75,753		75,753		86,721
Total intangible assets other than goodwill
Gross Carrying Amount	145,307		145,307		145,307
Net Book Value	92,153		92,153		103,121
Aggregate amortization expense of intangible assets	3,600	$ 3,700	10,968	$ 11,077
Tradenames
Indefinite lived assets:
Net Book Value					16,400
Total intangible assets other than goodwill
Gross Carrying Amount	16,400		16,400		$ 16,400
Net Book Value	16,400		$ 16,400
Customer relationships
Intangible assets subject to amortization
Weighted average remaining lives			5 years 9 months 18 days		6 years 4 months 24 days
Gross Carrying Amount	128,907		$ 128,907		$ 128,907
Accumulated Amortization	(53,154)		(53,154)		(42,186)
Net Book Value	$ 75,753		$ 75,753		$ 86,721

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Goodwill and Other Intangible Assets, net - Future Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Estimated aggregate amortization expense:
Rest of 2021	$ 3,687
2022	13,302
2023	12,881
2024	12,881
2025	12,881
Thereafter	20,121
Total	$ 75,753	$ 86,721

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Other Non-Current Assets (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Amortization of Intangible Assets	$ 3,600	$ 3,700	$ 10,968	$ 11,077
Computer Software, Intangible Asset [Member]
Amortization of Intangible Assets	$ 600	$ 500	$ 1,600	$ 1,200
Computer Software, Intangible Asset [Member] | Maximum
Finite-Lived Intangible Asset, Useful Life			4 years
Computer Software, Intangible Asset [Member] | Minimum
Finite-Lived Intangible Asset, Useful Life			2 years

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Other Non-Current Assets (Other non-current assets) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Other Non-Current Assets
Cloud computing implementation costs	$ 7,198	$ 7,094
Less: accumulated amortization	(3,303)	(1,685)
Other non-current assets	$ 3,895	$ 5,409

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accrued Liabilities
Employee accrued compensation expense	$ 9,767	$ 6,177
Other accrued liabilities	9,976	8,873
Accrued interest on debt	1,472	9,649
Total accrued liabilities	$ 21,215	$ 24,699

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Debt (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Mar. 15, 2019	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Debt
Aggregate principal amount		$ 340,000		$ 340,000
Unamortized Original Issue Discount		1,847		1,847		$ 2,319
Unamortized Deferred Financing Costs		8,908		8,908		$ 11,182
Amortization		162	$ 145	$ 472	$ 408
Minimum
Debt
Period for prior written notice to trustee for redemption				20 days
Senior Secured Notes 2024
Debt
Aggregate principal amount	$ 340,000
Interest rate (as a percent)	9.50%			9.50%
Unamortized Original Issue Discount	$ 3,300	$ 1,800		$ 1,800
Senior Secured Notes 2024 | Minimum
Debt
Period for prior written notice to holders for redemption				15 days
Senior Secured Notes 2024 | Maximum
Debt
Period for prior written notice to holders for redemption				60 days
2021 | Senior Secured Notes 2024
Debt
Redemption price				104.75%
2022 | Senior Secured Notes 2024
Debt
Redemption price				102.375%
2023 and thereafter | Senior Secured Notes 2024
Debt
Redemption price				100.00%

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Debt - Capital Lease and Other Financing Obligations (Details) $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($) installment	Dec. 31, 2020 USD ($)	Nov. 30, 2020 USD ($)	Dec. 31, 2019
Lessee, Lease, Description [Line Items]
Capital leases	$ 0.1	$ 0.9
Other financing arrangement			$ 3.3
Interest rate (as a percent)			3.84%
Number of monthly installments | installment	9
Debt instrument, periodic payment	$ 0.4
Equipment
Lessee, Lease, Description [Line Items]
Interest rate (as a percent)				4.30%
Commercial-use vehicles
Lessee, Lease, Description [Line Items]
Other financing obligations		$ 2.9

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Debt - ABL Facility (Details) - USD ($) $ in Thousands		9 Months Ended
	Mar. 15, 2019	Sep. 30, 2021	Sep. 30, 2020
ABL Facility
Proceeds from line of credit		$ 28,000	$ 42,500
New ABL Facility
ABL Facility
Borrowing capacity	$ 125,000
Proceeds from line of credit	$ 40,000
Borrowing base, line cap (as a percent)	12.50%
Applicable margin - one step-down (as a percent)	0.25%
Applicable margin - one step-up (as a percent)	0.25%
Percentage of net book value of borrowers' eligible accounts receivables	85.00%
Percentage of net book value of borrowers' eligible rental equipment	95.00%
Percentage of net orderly liquidation value of borrowers' eligible rental equipment	85.00%
Options to increase commitments	$ 75,000
Percentage of voting equity interests in non-US restricted subsidiary pledge	65.00%
Minimum fixed charge coverage ratio	100.00%
Maximum total net leverage ratio	400.00%
Borrowing base	$ 15,625
Line cap (as a percent)	12.50%
New ABL Facility | Libor
ABL Facility
Variable rate (as a percent)	2.50%
New ABL Facility | Base rate
ABL Facility
Variable rate (as a percent)	1.50%
Standby letters of credit
ABL Facility
Borrowing capacity	$ 15,000
Swingline
ABL Facility
Borrowing capacity	$ 15,000

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Debt - Carrying Value of Debt Outstanding (Details) - USD ($) $ in Thousands		9 Months Ended
	Mar. 15, 2019	Sep. 30, 2021	Dec. 31, 2020
Carrying value of debt outstanding
Capital lease and other financing obligations		$ 100	$ 900
Long-term debt, net		340,148
Principal amount		340,000	340,000
Less: unamortized original issue discount		(1,847)	(2,319)
Less: unamortized term loan deferred financing costs		(8,908)	(11,182)
Total debt, net		329,393	378,339
Less: current maturities		(148)	(3,571)
Total long-term debt		329,245	374,768
New ABL Facility
Carrying value of debt outstanding
Long-term debt, net			48,000
Capital lease and other financing obligations
Carrying value of debt outstanding
Capital lease and other financing obligations		148	3,840
Senior Secured Notes 2024
Carrying value of debt outstanding
Principal amount		340,000	$ 340,000
Less: unamortized original issue discount	$ (3,300)	$ (1,800)
Interest rate (as a percent)	9.50%	9.50%

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Debt - Components of interest expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Interest incurred on capital lease and other financing obligations	$ 5	$ 30	$ 51	$ 98
Interest expense incurred on ABL facilities and Notes	8,201	8,722	25,315	26,693
Amortization of deferred financing costs			3,220	2,914
Amortization of original issue discount	162	145	472	408
Interest expense, net	9,465	9,913	29,058	30,113
New ABL Facility
Debt Instrument [Line Items]
Amortization of deferred financing costs	$ 1,097	$ 1,016	$ 3,220	$ 2,914

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Debt - Interest Expense and Deferred Financing Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Debt
Interest incurred and expensed on debt	$ 8,201	$ 8,722	$ 25,315	$ 26,693
Debt issuance costs	8,908		8,908		$ 11,182
Amortization of deferred financing costs			3,220	$ 2,914
Senior Secured Notes 2024
Debt
Accumulated amortization of deferred financing costs	7,000		7,000		4,700
Accumulated amortization of debt issuance costs	1,500		1,500		1,000
New ABL Facility | Algeco ABL facility
Debt
Accumulated amortization related to revolver deferred financing costs	$ 3,200		$ 3,200		$ 2,400

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Debt - Future Maturities (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Future maturities of long term debt
Rest of 2021	$ 69
2022	79
2024	340,000
Long-term debt, net	$ 340,148

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Warrant Liabilities - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		9 Months Ended
	Jan. 17, 2018	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Warrants to issue shares of common stock	5,333,334	10,833,316		10,833,316
Aggregate purchase price per warrant	$ 1.50
Aggregate purchase price	$ 8,000
Number of stock issued for each warrant	1
Share price	$ 11.50
Warrant exercisable term	30 days
Fair Value Adjustment of Warrants		$ (1,120)	$ (267)	$ 1,600	$ (2,453)
Expiration year		5 years		5 years
Private Warrants [Member]
Warrants to issue shares of common stock		5,333,334	5,333,334	5,333,334	5,333,334
Fair Value Adjustment of Warrants		$ (1,100)	$ (300)	$ 1,600	$ (2,500)
Private Placement Warrants [Member]
Warrants to issue shares of common stock		5,333,334		5,333,334		5,333,334

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Warrant Liabilities - Estimated fair value Private Warrants (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Warranty Liability Non Current	$ 2,133	$ 533
Private Warrants [Member]
Warranty Liability Non Current	$ 2,133	$ 533

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Income tax expense (benefit)	$ 1,662	$ (2,991)	$ 139	$ (5,187)
Effective tax rate	19.90%	28.20%	(1.90%)	24.70%
Effective Income Tax Rate			21.00%

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Fair Value of Financial Instruments (Details) $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2021 USD ($) $ / shares	Jun. 30, 2021 USD ($)	Mar. 31, 2021 USD ($)	Sep. 30, 2021 USD ($) $ / shares	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($) $ / shares
Carrying amounts and fair values of financial assets and liabilities
Transfers of financials assets form level 1 to level 2	$ 0			$ 0	$ 0	$ 0
Transfers of financials assets form level 2 to level 1	0			0	0	0
Transfers of financials assets in and out of level 3				0	0	0
Transfers of financials liabilities form level 1 to level 2	0			0	0	0
Transfers of financials liabilities form level 2 to level 1	0			0	0	0
Transfers of financials liabilities in and out of level 3				0	$ 0	0
Private Placement Warrants [Member]
Carrying amounts and fair values of financial assets and liabilities
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value, Beginning Balance	3,253	$ 1,173	$ 533	533
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings	(1,120)	2,080	640
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value, Ending Balance	$ 2,133	$ 3,253	$ 1,173	$ 2,133		$ 533
Level 3
Carrying amounts and fair values of financial assets and liabilities
Warrant Liabilities Fair Value Per Share | $ / shares	$ 0.40			$ 0.40		$ 0.10
Level 3 | Measurement Input, Exercise Price [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input | $ / shares	11.50			11.50		11.50
Level 3 | Measurement Input, Share Price [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input | $ / shares	3.73			3.73		1.58
Level 3 | Measurement Input, Expected Dividend Rate [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input	0.00			0.00		0.00
Level 3 | Measurement Input, Expected Term [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input	2.46			2.46		3.20
Level 3 | Measurement Input, Risk Free Interest Rate [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input	0.39			0.39		0.19
Level 3 | Measurement Input, Price Volatility [Member]
Carrying amounts and fair values of financial assets and liabilities
Warrants and Rights Outstanding, Measurement Input	64.00			64.00		68.00
Carrying amount | New ABL Facility | Level 2
Carrying amounts and fair values of financial assets and liabilities
Debt Instrument, Fair Value Disclosure,						$ (48,000)
Fair value | New ABL Facility | Level 2
Carrying amounts and fair values of financial assets and liabilities
Debt Instrument, Fair Value Disclosure,						(48,000)
Senior Secured Notes 2024 | Carrying amount | Level 1
Carrying amounts and fair values of financial assets and liabilities
Debt Instrument, Fair Value Disclosure,	$ (329,245)			$ (329,245)		(326,499)
Senior Secured Notes 2024 | Fair value | Level 1
Carrying amounts and fair values of financial assets and liabilities
Debt Instrument, Fair Value Disclosure,	$ (347,480)			$ (347,480)		$ (300,900)

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Related Parties (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Related parties
Secured Debt	$ 329,245		$ 329,245		$ 326,499
Debt issuance costs	8,908		8,908		11,182
Accrued	300		300		$ 300
Selling, general, and administrative expenses
Related parties
Commission	$ 200	$ 200	$ 600	$ 800

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Earnings (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
Numerator
Net loss	$ 6,675	$ (912)	$ (13,138)	$ (7,603)	$ (13,667)	$ 5,454	$ (7,375)	$ (15,814)
Weighted average number shares outstanding - basic and diluted	96,814,970			96,138,459			96,539,703	95,997,647
Net income (loss) per share - basic and diluted	$ 0.07			$ (0.08)			$ (0.08)	$ (0.16)
Founder Shares
Numerator
Shares issued to the Sellers							8,050,000
Founder Shares
Numerator
Excluded from computation of loss per share							5,015,898
Warrant
Numerator
Excluded from computation of loss per share	16,166,650						16,166,650

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Stockholders' Equity (Details) - $ / shares	Jan. 17, 2018	Sep. 30, 2021	Dec. 31, 2020
Common Stock
Common stock shares issued		106,252,064	105,585,682
Common stock, Number of share outstanding		101,837,297	101,170,915
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Common shares placed into escrow		5,015,898
Preferred Shares
Preferred stock, shares authorized		1,000,000
Preferred stock, par value		$ 0.0001
Preferred stock, shares issued		0
Preferred stock, shares outstanding		0
Warrants
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Number of stock issued for each warrant	1
Share price	$ 11.50
Warrant exercisable term	30 days
Warrants to issue shares of common stock	5,333,334	10,833,316
Public Offering
Warrants
Number of units sold	32,500,000
Price per unit	$ 10.00
Number of warrants per unit	0.33
Number of fractional shares issued upon exercise of warrants	0
Number of stock issued for each warrant	1
Share price	$ 11.50
Warrant exercisable term	30 days
Over allotment
Warrants
Number of units sold	2,500,000
Common Stock [Member] | Public Offering
Common Stock
Common stock, par value (in dollars per share)	$ 0.0001
Warrants
Number of shares per unit	1
Common stock, par value (in dollars per share)	$ 0.0001

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Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands			9 Months Ended
	May 18, 2021	Feb. 25, 2021	Sep. 30, 2021	Dec. 31, 2020	Mar. 15, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance					4,000,000
Common stock, par value (in dollars per share)			$ 0.0001	$ 0.0001
Executive Stock Appreciation Rights Award Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Period After Termination Of Employment Or Service To Exercise Pro Rata Vesting		2 years
Share Based Compensation Arrangement By Share Based Payment Award Threshold Service Period For Pro Rata Vesting		12 months
Executive Restricted Stock Unit Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Threshold Service Period For Pro Rata Vesting		12 months
Share-based Payment Arrangement, Tranche One [Member] | Executive Stock Appreciation Rights Award Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		50.00%
Share-based Payment Arrangement, Tranche One [Member] | Executive Restricted Stock Unit Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		50.00%
Share-based Payment Arrangement, Tranche Two [Member] | Executive Stock Appreciation Rights Award Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		50.00%
Share-based Payment Arrangement, Tranche Two [Member] | Executive Restricted Stock Unit Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		50.00%
Time-based restricted stock unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Right to buy number of shares upon vesting		1
Options
Outstanding Options at beginning of period (in shares)			1,124,762
Granted (in shares)			1,461,450
Vested and released (in shares)			(654,068)
Forfeited (in shares)			(1,606)
Outstanding Options at end of period (in shares)			1,930,538
Weighted Average Grant Date Fair Value per Share
Outstanding Options at beginning of period (in shares)			$ 4.21
Granted (in dollars per share)			2.01
Vested and released (in dollars per share)			3.00
Forfeited (in dollars per share)			4.67
Outstanding Options at end of period (in dollars per share)			$ 2.95
Time-based restricted stock unit | Non-executive Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	326,926
Time-based restricted stock unit | Executive Officers and Other Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)		1,134,524
Time-based stock option awards
Options
Forfeited (in shares)			0
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			1,551,631
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount			$ 3,600
Deferred Compensation Share-based Arrangements, Liability, Current			$ 900
Estimated Fair Value Per Share			$ 2.92
Options
Forfeited (in shares)			0
Outstanding Options at end of period (in shares)		1,551,631
Weighted Average Grant Date Fair Value per Share
Outstanding Options at end of period (in dollars per share)			$ 0.78
Liability Based Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Liability recognized			$ 600
Options
Granted (in shares)			582,096
Weighted Average Grant Date Fair Value per Share
Granted (in dollars per share)			$ 3.73
Liability Based Restricted Stock Units [Member] | Accrued Liabilities [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Liability recognized			$ 400
Liability Based Restricted Stock Units [Member] | Other Noncurrent Liabilities [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Liability recognized			$ 200

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Stock-Based Compensation - Changes in stock options (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Time-based stock option awards
Intrinsic Value
Exercisable Options at end of period	$ 546,272
Stock Appreciation Rights (SARs) [Member]
Number of shares
Granted (in shares)	1,551,631
Outstanding Options at end of period (in shares)	1,551,631
Weighted Average Exercise Price per Share
Granted (in dollars per share)	$ 1.79
Outstanding Options at end of period (in dollars per share)	$ 1.79
Weighted Average Contractual Life (Years)
Outstanding Options (in years)	9 years 4 months 28 days	0 years
Granted (in years)	9 years 4 months 28 days
Outstanding Options at end of period (in years)	9 years 4 months 28 days	0 years

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Stock-Based Compensation - Assumptions (Details)	9 Months Ended
	Sep. 30, 2021 $ / shares
Time-based stock option awards
Assumptions:
Expected dividend yield	0.00%
Expected term (years)	6 years 3 months
Risk-free interest rate - maximum	2.26%
Weighted-average grant date fair value	$ 1.42
Stock Appreciation Rights (SARs) [Member]
Assumptions:
Weighted average expected stock volatility	43.50%
Expected dividend yield	0.00%
Expected term (years)	6 years 3 months
Risk-free interest rate (range)	1.07%
Minimum | Time-based stock option awards
Assumptions:
Risk-free interest rate - minimum	0.82%
Exercise price (range)	$ 4.51
Maximum | Time-based stock option awards
Assumptions:
Exercise price (range)	$ 10.83

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Stock-Based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Time-based restricted stock unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based Compensation Expense	$ 800	$ 700	$ 2,100	$ 2,300
Associated tax benefit from stock-based compensation expense			500	600
Unrecognized compensation expense	5,000		$ 5,000
Period for unrecognized compensation expense expected to be recognized			2 years
Time-based stock option awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based Compensation Expense	200	200	$ 600	500
Associated tax benefit from stock-based compensation expense	100	$ 100	100	$ 100
Unrecognized compensation expense	1,600		$ 1,600
Period for unrecognized compensation expense expected to be recognized			2 years 1 month 9 days
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based Compensation Expense	$ 400		$ 900
Period for unrecognized compensation expense expected to be recognized			2 years 4 months 28 days

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Retirement Plans (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Retirement Plans
Minimum percentage of annual eligible compensation by the participants			1.00%
Maximum percentage of annual eligible compensation by the participants			90.00%
Percentage of contribution matched			6.00%
Percentage of contribution, matched 100% by employer			3.00%
Employer match of employee contributions of first 3% of contributions			100.00%
Percentage of contribution, matched 50% by employer			3.00%
Employer match of employee contributions of next 3% of contributions			50.00%
Vesting percentage			20.00%
Vesting period			5 years
Contribution expenses	$ 0.2	$ 0.2	$ 0.7	$ 0.6

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Business Segments (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($) segment	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($) segment	Dec. 31, 2020 USD ($)
Business segments
Number of reportable segments | segment			4
Number of Operating Segments | segment	3	3	3	3
Revenue	$ 89,169	$ 48,263	$ 209,647	$ 173,539
Adjusted gross profit	48,041	23,933	113,154	84,700
Total Assets	529,956		529,956		$ 534,237
Operating Segments
Business segments
Revenue	89,169	48,263	209,647	173,539
Adjusted gross profit	47,902	23,713	112,780	84,219
Total Assets	345,602		345,602		363,544
Permian Basin | Operating Segments
Business segments
Revenue	31,066	18,968	84,350	89,163
Adjusted gross profit	13,945	8,606	38,219	42,257
Total Assets	213,870		213,870		277,839
Bakken Basin | Operating Segments
Business segments
Revenue	1,266	1,154	2,593	5,705
Adjusted gross profit	(56)	87	(854)	323
Total Assets	44,580		44,580		51,782
Government | Operating Segments
Business segments
Revenue	46,428	16,264	109,255	49,527
Adjusted gross profit	25,823	13,213	66,649	37,701
Total Assets	81,796		81,796		27,149
TCPL Keystone | Operating Segments
Business segments
Revenue	9,880	11,598	12,283	28,126
Adjusted gross profit	8,329	2,027	9,140	4,419
Total Assets	3,072		3,072		3,543
All Other
Business segments
Total Assets	2,284		2,284		3,231
All Other | Operating Segments
Business segments
Revenue	529	279	1,166	1,018
Adjusted gross profit	(139)	$ (220)	(374)	$ (481)
Total Assets	$ 2,284		$ 2,284		$ 3,231

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Business Segments - Reconciliation of total segment adjusted gross profit to total combined income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Business Segments
Total reportable segment adjusted gross profit	$ 48,041	$ 23,933	$ 113,154	$ 84,700
Other adjusted gross profit	(139)	(220)	(374)	(481)
Depreciation and amortization	(18,302)	(16,336)	(52,742)	(49,713)
Selling, general and administrative expenses	(12,827)	(8,508)	(35,835)	(28,599)
Other (income) expense, net	(91)	183	(781)	752
Interest expense, net	(9,465)	(9,913)	(29,058)	(30,113)
Change in fair value of warrant liabilities	(1,120)	(267)	1,600	(2,453)
Income (loss) before income tax	$ 8,337	$ (10,594)	$ (7,236)	$ (21,001)

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Business Segments - Reconciliation of total segment assets to total combined assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 529,956	$ 534,237
Total reportable segment assets
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	343,318	360,313
All Other
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	2,284	3,231
Other unallocated amounts
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 184,354	$ 170,693

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Business Segments - Unallocated assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Total current assets	$ 69,779	$ 43,562
Other intangible assets, net	92,153	103,121
Deferred tax asset	15,984	15,179
Deferred financing costs revolver, net	2,477	3,422
Other non-current assets	3,961	5,409
Total assets	529,956	534,237
Other unallocated amounts
Total current assets	69,779	43,562
Other intangible assets, net	92,153	103,121
Deferred tax asset	15,984	15,179
Deferred financing costs revolver, net	2,477	3,422
Other non-current assets	3,961	5,409
Total assets	$ 184,354	$ 170,693

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Subsequent Events (Details) $ in Millions	Oct. 01, 2021 USD ($)
Subsequent Events [Member] | Civeo USA, LLC [Member]
Subsequent Events
Asset acquisition, consideration transferred	$ 6.2