Target Hospitality Corp.
For the period ended Dec 31, 2025. Filed Mar 11, 2026.
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FY2025 · Filed Mar 11, 2026
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Target Hospitality Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Target Hospitality Corp. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 11, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
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| | Recognition of Revenue for Data Center Community Contract |
| Description of the Matter | As described in Note 2 to the consolidated financial statements, during the three months ended September 30, 2025, the Company entered into a multi-year Data Center Community Contract to construct and provide facility services and hospitality solutions to the Data Center Community. During the three months ended December 31, 2025, the scope and term of the services were expanded. The Data Center Community Contract included advanced payments that were initially recognized as deferred revenue to be amortized as |
| revenue over the estimated term of the contract. The Company began to recognize revenue on the Data Center Community Contract during the year ended December 31, 2025.Auditing revenue recognition for the Data Center Community was complex due to the judgment involved in determining whether the expansions of scope and term represented modifications or separate contracts under ASC 842 and the impact the conclusion has on the allocation of consideration to the components of the contract. | |
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls over its recognition of revenue for the Data Center Community Contract, including management’s evaluation of the judgments involved.Our audit procedures included, among others, evaluating the reasonableness of significant judgments utilized by management in determining whether the expansions of scope and term represented modifications or separate contracts under ASC 842. For example, we evaluated whether the expanded services contemplated in the amendments to the Data Center Community Contract granted the lessee additional rights of use and were priced commensurate with the standalone price for such additional rights of use. Additionally, we independently recalculated the allocation of consideration to the components of the contract and the revenue recognized during the year. |
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/s/Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Houston, Texas
March 11, 2026
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