We're, we're a little behind here, but we'll make up the time. It's always my pleasure to introduce a former competitor of mine. Actually, I was up at KCG when that happened, so I, it's, sort of learned a lot from him as he was. For those of you who don't know Eric T. Kalamaras, he is the CFO of Target Hospitality. He was a former sell side like myself, so I like to give him a little jabs here and there. Obviously, he's done this, but this is a fireside chat. I'm gonna give, I'm gonna give Eric a chance to sort of give you a State of the Union of Target. A lot has happened. Yeah. -in, in the last year. The company's transformed in a big way. It's pretty exciting. We'll start with that, and then I will, I'll jump into the Q&A. Well, great. Thanks for being here and being here for this fireside chat. A couple of few minutes just on Target Hospitality, give you a brief overview for those of you not as familiar with the story. Really unique story. Story which has very few competitors in the space. Really interesting economic profile as well. We're effectively a hospitality and facilities management business that does turnkey communities in largely pretty remote areas of the United States, primarily in the Southwest. We do that for the natural resources industry, we also do it for the U.S. government. Over the past few years, we've taken a pretty meaningful turn, where about 70% of our business is directly tied to the U.S. government segment, which is specifically related to housing and caring for women and children, asylum-seeking women and children, as well as unaccompanied children who are coming across the border. We're housing in our portfolio, a capacity of up to 15,000 individuals potentially on any given day. It's really been a great, you know, it's been a great transition for us over the past few years. You know, that's generally kind of what we've been up to in the past few years. We have a couple of large contracts and, are continuing to grow the business, and hopefully we can grow it substantially even more. You're at 70% today. Where do you see that going? Yeah. In terms of the U.S. government. Yeah, it's a great question. 70% U.S. government, we are looking to take our turnkey hospitality and facilities management solutions and position that within a lot of ways within the U.S. government. You know, we've been doing most of our work in the immigration side, but our full turnkey solution is pretty simple, right? We are putting in infrastructure for as many as 6,000 individuals, and we're doing it in literally start to scratch with no land, putting in the full town, whatever it takes to run a town. We are doing all the infrastructure, sewage chutes, electricity, all the hospitality, sewer systems, all the food, logistics, the housing. Everything goes into running a modular community. You know, we're doing that for these folks. We put out a plan a couple of months ago that said, "Look, we'd like to deploy additional $500 million of capital over the next three or four years." We suspect a lot of that's going to be allocated towards the U.S. government side. They have a number of very large-scale projects, some of which have nothing to do with the immigration in it at all. There's some really large-scale projects that fit really nice within our turnkey portfolio. In addition to that, we also have our natural resources business, which we call HFS business, is hospitality and facility solutions business. That business has a lot of other commercial applications as well, specifically tied to energy transition, et cetera. When we look at the pipeline, which is in the billions of dollars, and we look at that $500 million of capital, I would be safe to say that, you know, well over half of that is on the government side, and the other half is probably on the commercial side. Which probably keeps our mix, you know, in that kinda 75%, 25% area, you know, while, you know, potentially doubling the EBITDA again, just like we doubled it two years ago. I didn't congratulate you on your double B upgraded S&P. Thank you. BB-. Yes, B minus. Just can you talk about the, what you've done with your debt reduction thus far, and how you're thinking about it going forward? What leverage targets in there, you know, identified a large capital need there. Help us think through that, and maybe, let's start with that. Sure. So we have pretty enviable business economics, right? Our EBITDA margins are in the 40%-50% area. Some of our projects are 60% EBITDA margin north of, right? We do that in a, we've been doing that for well over a decade at this point. What happens is, our projects, we deploy capital. We typically, because we're dealing with a modular solution, these are not stick-built solutions. Stick-built solutions will sometimes. You take six, you know, 12, 18 months to develop. Ours are typically done within 3-4 or 5 months. What that, what it means is we deploy capital out, and we start getting cash back very, very fast. What that's allowed us to do is take our balance sheet from 4.5 times to, you know, potentially, have no leverage by the end of the year, sitting on cash as we speak. Allows us to redeploy that capital, but we talked about the $500 million, but that is not necessarily a net debt increase at all. Now, the pace of that could be, but the way we see it is, you know, we're generating close to $200 million of Discretionary Cash Flow a year. If you assume, you know, like we did last year, a couple hundred million dollar capital spend, you know, we'll have that paid back down in, you know, inside of 12 months. We can deploy that capital of $500 million and still end up with $300 million or $400 million in cash in the next couple of years. It's a really unique spot to be in. We don't see a need for capital raise, either equity and the debt. You know, look, we took out $125 million of our notes. You know, we'll continue to work on those and work on some refi possibilities there. You know, I'll tell you, Greg, I mean, it's a really unique situation to be able to deploy that much cash and that much capital and still have that much cash two or three years down the road. you did reduce the notes by $125. We did. Do you think that's permanent, or as you think about the capital structure with growing EBITDA, is it? No. Is there a larger... I think it's permanent. I mean, you know, we could, you know, potentially, if you do a refi. The refi, ironically, any increase in debt on the refi is frankly just a function of market efficiency, right? You try to do a $150 million bond deal, it's not very efficient. You know, it's really we'll have to work around the capital efficiency and really what we can get there. As it relates to specifically needing incremental debt to manage the business, we actually do not, at this point. What will change that is the pace of the projects, right? If we have a few of these come through at a very, very short period of time, you could see us come back to the capital market just to turn some things out. If it's the pacing is what I think it's going to be, we can do this largely organically on our own balance sheet. Do you think that makes sense to have bond as well as pre-payable term loan or? Yeah, I think- I know- I don't. I actually, based on what I'm seeing now, I don't see a large need for a termed debt structure, frankly, in the portfolio. I just don't see that this application. That may change over time, but I think it made sense when we came out of a de-SPAC. I don't think it makes sense today. Got it. What are the when you think about it, what's the right leverage for this business if you? Well, look, conventionally, you would say, you know, to maximize the NPV of the equity of the business, you'd say roughly two to three times. The reality is, because we generate so much cash, it's really closer to one times for us, because that's just the basically the way we can modulate the best. Yeah, I will tell you, we're largely over-equitized, but I think the business stays in an over-equitized position. Frankly, our growth profile really can't, at this point, which is unusual, it can't really outrun our cash build, and because our margins are so high, right? When you have a 10% or 15% margin business, you can easily, or your capital needs easily outgrow your cash build. In our situation, when you're running 40%, 50% business or in some projects, 60% EBITDA margin, your cash builds supersedes your spending need. For us, we're in a very unique position that way. As you think about all success cashes, is there a shareholder return strategy that involves cash, being distributed, or? You know, we haven't done that, and it's not something that we put a lot of, you know, thought into. We, I will tell you, we do have a share buyback program in place, but you know, it's really about optionality at that point, right? You know, I think it's a prudent thing to have out there. It's a prudent thing to do, but, you know, as it relates to dividends or something of that nature, we haven't pursued that at this point. I think maybe that's a topic down the road, but I think right now, I'd like to continue to see how these projects manifest themselves, and then we'll make a decision, you know, maybe sometime in the next year. You talk about the margins in this business. 40%, 50%, 60% seems extraordinarily high. You talk a little bit why, how, what are the competitive dynamics that allow you to maintain margins like that? This gives a sense of why that's- Sure. You know why that exists. Our business is generally modeled off of a specialty rental business, right? Specialty rental businesses generally have a higher margin profile. In our case, you know, what we have is we have our two areas, right? We have our HFS business, and we have our, you know, obviously, our government business. The HFS business, I'll just use that as an example, which is our legacy business, that we have for our natural resources customers. You know, we have an effective market share of 40%-50%. When we broaden that out to include all competitors, our market share is 25%-30%+. That obviously allows us to drive, you know, some pretty meaningful economics there. Typically, in a new build project we'll have in our HFS business, we're looking at paybacks between 2-3 years. We've been able to do that for well over a decade. In the case of the government side, you know, those margins are frankly, even more attractive for a variety of reasons. You know, I think everything that we're seeing, we can continue to keep this economic profile. There have been questions about, look, how this almost seems too good, how long can you all do that? It comes back to the nature of the business that we're in and the competition. The way that I would articulate it is this: if someone comes to you and says, "I need a purpose-built community for 6,000 people, 6,400 people, and I need it in the middle of nowhere. I have no land, I have no infrastructure. It needs to be full turnkey, and I need it inside of 6 months." How many companies in North America can do that? The answer is, there aren't many. Frankly, there is a, you know, there is a return of capital for that. That's something that, you know, we've been able to focus on and enjoy. Just for those of us that don't know, when's the last time you built more than six months, and what were the challenges that you faced? As you think about scaling for a lot more opportunities, how, where could there be setbacks, and what do you need to do? We've done it twice in the past two years. We did it, you know, we were asked by the U.S. government to put a, the first facility together for 4,000 individuals. Again, we did that inside of four months. That was in the first part of 2020, again, we did it last year. When they came back, it's 2021. We did it last year when they came back and asked for an expansion on it, that was another 2,000. Again, we did that in about five months. We've done it twice. This is our business model, right? You know, we're frankly doing this all the time. Now, they're always not that large, right? Typically, the typical community is about 500 people or so, and but they're all within the same timeline. You know, we typically will do these within 3- 4 months. For us, what all that's really required is we need enough lead time. We need about 3 months lead time, and if we can get three months lead time, and we can get the capacity, then we can go ahead, and we can do it. It's we've got an amazing construction team, and they kind of pull off the miracles when it comes to this. Have you been able to handle inflationary forces and passing that through? Is there any challenges to that? No, we haven't had, you know, we have not had much in inflation impact. Our, our business is inflation driven in a couple areas, which we, which we try to, you know, we try to moderate. One is obviously labor. We haven't seen much impact on the labor side. Second is utilities. Obviously, that's movement on commodity and natural gas prices, specifically with power generation. That does ebb and flow. In our HFS business, right, it's a natural resources business, we feel like we have a natural inflation hedge there over time. Now, it's not necessarily, you know, one to one, but over time, we do get a bit of a natural hedge there. The second area where we have inflation pressures occasionally, which we've been able to manage pretty extensively, particularly last year, we're kind of, it's kind of, you know, catching on margins a little bit by surprise this year. That's the food. We are one of the top 20 largest food U.S. food purchasers in the United States. We do have a huge food component, and that, you know, there can be some inflationary impacts there. Inflation has been a little stickier than what we would have otherwise expected. Are you serving more chicken wings then? We are. You know, it's funny, there was a 300% increase in chicken wings last year, in terms of cost. You've heard us talk about the chicken wings. I've- You know, it turns out that chicken thighs taste very similar to chicken wings if you put a barbecue sauce on it. We, you know, we ship, but we are, we're able to shift our menus, right? Each location, we have 26 locations, 27 locations, depending on how you wanna count it. Each one of those executive chefs has budgetary control. As long as they stay in their budget, they are free to adjust their menu however they see fit. That has really allowed us to work through inflation pressures. Okay. How does Prairie Chicken taste? It tastes fantastic. who are you competing against, and why aren't there more people entering this space? It's a great question. The HFS side of the business, our competitors are much smaller, undercapitalized, I'll call them mom-and-pops, if you will. Not to be pejorative to mothers and fathers, but it is, they are typically undercapitalized businesses. Take a step back, and who's our customer base? Our customer are large, integrated energy service companies and producers. Our clients are not an E&P producer or a midstream producer. They do not have a big enough labor footprint. What we are seeking are the top four or five global energy companies, and in particular in our natural resources business, whereby they could allocate labor all through the entire Permian Basin, right? Those 87,000 sq mi is where they allocate their labor, and we're doing it under a long-term contract. There are very few companies that can support ExxonMobil, Chevron, Occidental through 26 locations and can have the capital on the balance sheet for if ExxonMobil comes to us and says, "I need another location for 500 people. I need it in four months." We're gonna add that to our network, and oh, by the way, you can utilize any of our other assets within that network. That is literally $500 million-$600 million capital investment to build that network out of those, in those 87,000 sq mi. For that reason, we are, you know, offering something that other parties just simply cannot offer. We have it built out, and the network is frankly a pretty significant competitive moat. You talk about that sort of the energy side, but what about the government side? On the government side, what they're looking for is full turnkey solutions. When you think about the ability to do full turnkey, this is a specialized space, and certainly, people in other companies can offer modular accommodations. Certainly, other companies offer foods management and logistics, but there are very few that can actually bring it together. What we do is bring the full turnkey solution, and that's what very unique part of the business model. You know, U.S. government is not trying to go to as many parties as they possibly can to facilitate their contracts. They're generally trying to find solutions for this. That is the reason why when they came, frankly, they came to us, two years ago, because of our existing assets that we had supporting women and children, that we've had for well over a decade. The government came to a nonprofit partner and said, "We need support for working with these 3,000 children." They said, "Great, we're happy to do it, but we don't have any infrastructure." They said, "You need to talk to Target," because they knew of our footprint before. They knew of our execution capabilities, and that business development was effectively pushed to us. Let's let me turn to something a little bit more specific that's right in front of you. There's a lot of discussions around sort of Title 42, right? You have a contract that's, you just extended for six months. Associated with that, the U.S. government wants more help on the border. You're also talking about something longer term there. Sure. What does that look like? It sounds like that's in the works. Sure. It's a great question, and there is a bit of a confusion because the, like most things, the government doesn't go out of its way to make things really, really transparent. It's a couple of things to bear in mind. When they came to us a few years ago, they came to us on an emergency order, and the emergency order allows for a one-year contract, right? It doesn't go through a typical appropriations process. By definition, you can only have a contract for one year under emergency order. Well, they did that two years in a row, we are now into the second year, actually, the third year of this emergency order, but it's shifting over into what's called an IDIQ, right? Which is an indefinite delivery, indefinite quantity, which basically means that it opens up a platform for you now to do multi-year contracts. What we're doing is we're shifting our emergency contract over into a longer-term, multi-year contract, which could be as long as 10 years. Similar to what we have in our Dilley asset, which is now, which was a 5-year contract that we did during COVID. Right now, we're in that negotiation for the contract. It's not a negotiation in terms of whether the contract exists or doesn't exist. It's a negotiation in terms of the government came and said, "We want not only your facility, we also need 2 others like it." What they're doing is relooking at how they handle the entire influx need. The discussion with them is how they put these other 9,000, so 9,000 total children, how they put these Influx Care Facilities together. We're part of that process for their multi-year awards, and that's what they'll be doing. At the end of the day, they'll be awarding three multi-year contracts for a total of 9,000 unaccompanied minor children. That's the process. The discussions aren't just about our contract going to, you know, for five, 10 years. It's really about our assets and then two others. Is there real competition there, or is this more of a process that they have to go through? Well, I think it's a function of what the government ultimately wants to do. There's always some competition, right? The people are always trying to be helpful. Look, we have a great asset. We have a great portfolio that we can show them. We recently acquired a strategic asset that, you know, we announced a couple of months ago that, you know, I think is very helpful in our conversations with any new Influx Care communities. You shifted me perfectly towards your M&A strategy. You did buy something. Yeah. What was that? What that do for you, and do you need more? The government has consistently said, we want more Influx Care sites. An Influx Care site, think about it this way. In our case, it's a 6,400-person facility on 250 acres of an open campus, and it's a beautiful facility. What they're looking to do is, you know, put two more of these in place. What we said was, "Look, let's offer a solution to them." We acquired an existing asset. We've said, we have not disclosed where or what that asset is, but we feel that it fits very, very nicely with the scope of what they're seeking. It allows us to bring a solution to them, because they've already said, "Hey, look, we need two more." We're certainly happy to provide them that. We've acquired that, we can, and we can have that up and ready within a few months to the extent that they're desirous of that. Does that mean you have to buy another? We'll wait. Look, we, if we could get another one, that would be amazing. A trifecta. Yeah ... would probably be unlikely. We would look to certainly build some more assets in and around the acquisition that we just made. Presumably, you're repurposing something that people didn't realize was available. One of the nice things about our modular assets is we have the ability to relocate. Good. They are built to stay for 30 years, but we have the ability to relocate, and so it's allowed us to really take advantage of, optimizing capacity in our portfolio. We've done that extensively, and it's been very, very helpful. As it relates to the acquisition strategy of itself, not only do we acquire a new asset, which we would love to deploy, we, you know, we're also looking at a host of other things as well. We're doing that as a way to kind of augment our existing service offerings, right? There are a lot of things that we can do with the government. There are a lot of things we can do with other businesses in industry. There is a number of companies out there that we think are nice adjacencies to us, primarily in the facilities management space, modular services space, food logistics space. There's a lot we can do there. Just remind us, did you disclose how much you paid for that or? We did. It's a subsequent events disclosure. Yes, we did. It's a small transaction initially, but there's a fair capital spend that goes with that to the extent that this asset is actually selected. It's a small $5 million transaction. It appears not meaningful, on the balance sheet. However, I will tell you, it is, we view it as being highly strategic. Got it. just in general, how much do you think you could spend on M&A for strategic assets over the next couple of years? We've looked at a number of deals, but yet we haven't done anything. The reason is because we've tried to be very patient. When you have an economic profile with the margins that we have and the cash generation we have, we've been very thoughtful around not diluting any of that. Our growth profile, we've been able to double the business without doing any transactions. Look, the things we're looking at are not earth-shattering in terms of size. Think about anywhere between $200 million-$400 million. You know, we'll just have to wait and see if those, you know, if those manifest themselves. It's not something where we think it would really stress our financial profile. You know, we're $350 million million-dollar EBITDA business, and doing a transaction of $200 million is not overly stressing the business. I'm gonna turn and just to see the audience, if you have any questions. I have one more here that. Eric? How should investors think about the longevity of the cash flows here? You know, what's the weighted average contract length, and just how should people conceptualize that? Sure. Eric, good to see you again. you know, our weight average contract is about, call it 40 months or so, because we typically do. We think about our portfolio, about 70% of our all revenue is done under a minimum revenue contract. Let's say that's about 40 months or so on average today. I think when anything we do generally is going to require a minimum revenue commitment tied to in some capacity. We're not into the spec new build type approach. That's not something we do. When we put a new asset in place, it's because someone has come to us and said, "We need X, and we're willing to do that community." There's got to be a contract tied to that. I see no change there. To the extent that we move through the IDIQ process, and that turns into a, you know, 5-10-year type deal, obviously, the weight leverage contract length goes up. Typically, we're looking for somewhere 3-4 years on a new contract, and we have a, our retention rate on contract renewals is well over 90%. In fact, I, you know, in the past four or five years, I can't even think of a customer that's left and has not renewed with us. So hopefully, that's helpful. We see no change in terms of how we think about contract structure, and we see no change, anything we do going forward about how we think about economic return. That's one of the questions we get is: Can you continue this economic profile? And the answer is yes. Maybe the business is too young to have an answer yet, but, like, how long does the average project stay before you have to relocate it? We generally are not project-based. Okay? There are companies that do that, and we generally do not do that. The reason because is because too much asset turn, right? It ends up being a lower margin profile. Our assets, many of them have been in place for 5- 10 years, so most of them have been in place for that long. We did relocate some assets out of North Dakota to help facilitate the government project. Those had been in place for about seven or eight years. We did choose to relocate those, but because they're modular, you know, we have the ability to relocate pretty easily. You know, generally speaking, we're not moving much. I mean, our asset turn is certainly less than 10, well, less than 10%. I'll ask one more just to close it up. The energy transition business, you've mentioned that- Yes. As a growth opportunity. How much of that is near term or, you know, and how much is more three, four, let's say, next 1-2 years? Yeah. That's really interesting. We would love to develop another. You know, when we look at our 25 locations for the HFS side of the business that are in the Southwest, it's a beautiful regional footprint. You know, it's really a great economic moat. We would love to develop another one of those. We think that energy transition provides potentially an opportunity to do so. I'm not going to say there's room for 25 locations, and that's where $500 million of capital goes. I will tell you that there is real growth there, and it is meaningful. You know, the U.S. has not had a sustained, you know, EV transition profile. There's a lot of development that needs to happen, whether it's copper, whether it's lithium, whatever it happens to be, whether it's carbon sequestration or, you know, carbon neutral natural gas, and to actually be refined to go into net zero carbon gasoline. You know, these are things that are, they're extensive capital programs and last a long time. I will tell you, there are billions of dollars of pipeline that have been supported through not only commercial and industry, but also through the Inflation Reduction Act that have been supported through, you know, various grants to the U.S. government. Look, we are, I will tell you, we are knee-deep in it, and there are things that is not a two or three-year event. It could be. I hope it is, but it's also something that we could see, you know, potentially before the year's out. Okay. Look, this was fascinating. Really enjoyed the time. Great to see you up here, Eric. Yeah, Eric. Let's have a round of applause for our speaker. Thank you. Thank you.