Target Hospitality Corp.

Previous wording

Target Hospitality Corp. is one of North America’s largest providers of vertically integrated specialty rental and value-added hospitality services including: catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation facilities, community design and construction, overall workforce community management, concierge services and laundry service. As of March 31, 2026, our network included 29 communities, to better serve our customers across the US and Canada. We also operate 2 communities not owned or leased by the Company.

Current wording

Target Hospitality Corp. is one of North America’s largest providers of vertically integrated specialty rental modular accommodations and full-service value-added hospitality services including: catering and food services, maintenance, housekeeping, grounds-keeping, security, health and recreation facilities, community design and construction, overall workforce community management, concierge services and laundry service. As of June 30, 2026, our network included 29 communities, to better serve our customers across the US and Canada. We also operate 2 communities not owned or leased by the Company.

Previous wording

The Company generated cash flows from operations for the three months ended March 31, 2026 of approximately $7.0 million compared to approximately $3.9 million for the three months ended March 31, 2025, representing an increase in cash flows from operations of approximately $3.1 million or 79% led by an increase in cash collections, a $10.3 million

Current wording

The Company generated cash flows from operations for the six months ended June 30, 2026 of approximately $111.0 million compared to approximately $15.0 million for the six months ended June 30, 2025, representing an increase in cash flows from operations of approximately $96 million or 640% attributable to an increase in cash collections, which in turn was driven by a significant increase in advanced payments from customers associated with several new WHS segment contracts for community builds that are being recognized as revenue over the related contract periods, an $11.2 million decrease in cash paid for interest driven by the early payoff of the 2025 Senior Secured Notes on March 25, 2025, and a decrease in cash paid for income taxes, partially offset by an increase in cash paid for operating expenses and payroll (led by growth in the WHS segment), and a decrease in interest income.

Previous wording

We expect margins to improve as the Company progresses through 2026, driven primarily by growth in the WHS segment. This improvement is expected to result from the ramp-up of communities under recently executed WHS contracts, namely those associated with the West Texas Power Community and the Pecos Power Community, as well as the Data Center Hub Contract, including those discussed in our 2025 Form 10-K. These expectations are supported by the contract terms, ramp timing, and the Company’s internal analysis of the anticipated 2026 revenue mix, as summarized above and in the 2025 Form 10-K. However, we cannot assure you that margin improvement will be achieved, as it depends on the effective execution, ramp-up timing, and servicing of these contracts.

Current wording

We expect margins to continue to improve as the Company progresses towards the end of 2026, driven primarily by growth in the WHS segment. This improvement is expected to result from the ramp-up of communities under recently executed WHS contracts, namely those associated with the West Texas Power Community, the Pecos Power Community, the Data Center Hub contract, and the AI Infrastructure Community project contract, including those discussed in our 2025 Form 10-K. These expectations are supported by the contract terms, planned community development and ramp-up timelines, and the Company’s internal analysis of the anticipated 2026 revenue mix, as summarized above and in the 2025 Form 10-K. However, we cannot assure you that margin improvement will be achieved, as it depends on the effective execution, ramp-up timing, and servicing of these contracts.

Previous wording

Our proximity to customer activities influences occupancy and demand. We have built, own and operate the largest specialty rental and hospitality services network available to customers operating in the HFS – South region. 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 natural resource development activities.

Current wording

Our proximity to customer activities influences occupancy and demand. We have built, own and operate the largest specialty rental and hospitality services network available to customers operating in the HFS – South region. Our broad network often results in us having communities that are 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 natural resource development activities.

Previous wording

Our WHS segment includes construction and hospitality services provided to a community in Winnemucca, Nevada where there is insufficient housing and infrastructure solutions supporting the critical mineral supply chain. The WHS segment also includes specialty rental and hospitality services provided to communities in the Southwestern United States, including Texas, where there is also insufficient housing and infrastructure solutions supporting the development of power generation and data center infrastructure projects. Our communities provide our customers with a strategic competitive advantage in attracting and retaining a highly skilled workforce to support their objectives in areas of critical mineral development, power generation, and the building of data centers in remote locations. Demand for our services in this

Current wording

Our WHS segment includes construction and hospitality services provided to a community in Winnemucca, Nevada where there are insufficient housing and infrastructure solutions supporting the critical mineral supply chain. The WHS segment also includes specialty rental and hospitality services provided to communities in the Southwestern United States, including Texas, where there is also insufficient housing and infrastructure solutions supporting the development of power generation and data center infrastructure projects. Our communities provide our customers with a strategic competitive advantage in attracting and retaining a highly skilled workforce to support their objectives in areas of critical mineral development, power generation, and the building of data centers in remote locations. Demand for our services in this segment is dependent on capital spending supporting the critical mineral supply chain, such as lithium mining, as well as capital spending on the development of power generation and data centers in remote locations.

Previous wording

Our Government segment includes the DIPC community in Dilley, Texas supporting critical U.S. government efforts, delivering essential services and accommodations near the southern U.S. border where there is insufficient housing and infrastructure solutions to appropriately address immigration and deportation.

Current wording

Our Government segment includes the DIPC community in Dilley, Texas supporting critical U.S. government efforts, delivering essential services and accommodations near the southern U.S. border where there is insufficient housing and infrastructure solutions to appropriately address immigration-related program needs.

Previous wording

Demand for our services is influenced by broader trends in natural resource development, mining activity, energy demand, and the availability of supporting infrastructure in the regions where our customers operate. Although we are not directly exposed to commodity price movements, customer capital spending and workforce deployment are closely tied to commodity supply-demand dynamics across natural resources, including lithium, and other critical minerals. As these industries expand or contract, the size and duration of customer workforces—particularly in remote areas—impact our occupancy levels and utilization rates.

Current wording

Demand for our services is influenced by broader trends in natural resource development, mining activity, energy demand, and the availability of supporting infrastructure in the regions where our customers operate. Although we are not directly exposed to commodity price movements, customer capital spending and workforce deployment are closely tied to commodity supply-demand dynamics across natural resources, including lithium, and data center and energy infrastructure. As these industries expand or contract, the size and duration of customer workforces—particularly in remote areas—impact our occupancy levels and utilization rates.

Previous wording

The timing and visibility of future demand may be affected by commodity price volatility, permitting timelines, energy availability, and regional infrastructure constraints, all of which influence the pace of customer investment and workforce mobilization in natural resources, mining, and emerging energy-related projects.

Current wording

The timing and visibility of future demand may be affected by commodity price volatility, permitting timelines, energy availability, and regional infrastructure constraints, all of which influence the pace of customer investment and workforce mobilization in natural resources, mining, and emerging data center and energy-related projects.

Previous wording

We have derived a portion of our revenues from our subcontract with a U.S. government contractor. The U.S. government and, by extension, our U.S. government contractor customer, may from time to time adopt, implement or modify certain policies or directives that may adversely affect our business. Changes in government policy, presidential administration or other changes in the political landscape relating to immigration policies may similarly result in a decline in our revenues in the Government segment.

Current wording

We have derived a portion of our revenues from our subcontract with a U.S. government contractor. The U.S. government and, by extension, our U.S. government contractor customer, may from time to time adopt, implement or modify certain policies or directives that may adversely affect our business. Changes in government policy, presidential administration or

Previous wording

We derive the majority of our revenue from specialty rental accommodations and vertically integrated hospitality services. Approximately 64% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 36% of revenues were earned through leasing of lodging facilities (23)% and construction fee income (13)% for the three months ended March 31, 2026. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with our customers. 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.

Current wording

We derive the majority of our revenue from specialty rental accommodations and vertically integrated hospitality services. Approximately 62% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 38% of revenues were earned through leasing of lodging facilities (30)% and construction fee income (8)% for the six months ended June 30, 2026. Revenue is recognized in the period in which lodging and services are provided pursuant to the terms of contractual relationships with our customers. 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.

Previous wording

In February 2025, the Company entered into a multi-year construction and services agreement (the “Workforce Housing Contract”) to provide construction of workforce housing (the “Workforce Hub”), comprehensive facility services, and premium hospitality solutions to Lithium Nevada in support of Lithium Nevada’s development of Thacker Pass (“Thacker Pass Project”) and a North American critical minerals supply chain. The all-inclusive Workforce Hub is near Thacker Pass, the world’s largest known measured lithium resource. The Thacker Pass Project is expected to play a major role in the domestic production of lithium batteries. As of March 31, 2026, construction of the Workforce Hub was substantially complete and most of the revenue recognized under this contract during the three months ended March 31, 2026 reflected construction services performed during this phase.

Current wording

In February 2025, the Company entered into a multi-year construction and services agreement (the “Workforce Housing Contract”) to provide construction of workforce housing (the “Workforce Hub”), comprehensive facility services, and premium hospitality solutions to Lithium Nevada in support of Lithium Nevada’s development of Thacker Pass (“Thacker Pass Project”) and a North American critical minerals supply chain. The all-inclusive Workforce Hub is near Thacker Pass, the world’s largest known measured lithium resource. The Thacker Pass Project is expected to play a major role in the domestic production of lithium batteries. As of June 30, 2026, construction of the Workforce Hub was substantially complete, and during the six months ended June 30, 2026, revenue under this contract was split nearly evenly between construction services and services income, with construction services representing approximately 51% of revenue on this Workforce Housing Contract.

Previous wording

Upon completion of the construction phase, the Workforce Hub will be capable of supporting a population of approximately 2,000 individuals. In addition to constructing the Workforce Hub, the Company is also providing turnkey operational support, including culinary services, facilities management, and other support services, which generated services revenue during the three months ended March 31, 2026 for the completed portions of the Workforce Hub. The Workforce Housing Contract has an initial term through 2027 with first occupancy that began in September 2025. During the construction phase, the Company is recognizing revenue under the percentage of completion method as costs are

Current wording

Upon completion of the construction phase, the Workforce Hub will be capable of supporting a population of approximately 2,000 individuals. In addition to constructing the Workforce Hub, the Company is also providing turnkey operational support, including culinary services, facilities management, and other support services, which generated services revenue during the six months ended June 30, 2026 for the completed portions of the Workforce Hub. The Workforce Housing Contract has an initial term through 2027 with first occupancy that began in September 2025. During the construction phase, the Company is recognizing construction fee income revenue under the percentage of completion method as costs are incurred, as more fully discussed in Note 1 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q.

Previous wording

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 development activity in the HFS – South segment, development activity in remote locations in support of critical mineral supply chains, including lithium supply chains, data center development and infrastructure activity in remote locations in the WHS segment, and the consumer price index impacting government contracts, and government spending on housing programs in the Government segment.

Current wording

for our services. Key drivers to change in revenues may include average utilization of existing beds, levels of development activity in the HFS – South segment, development activity in remote locations in support of critical mineral supply chains, including lithium supply chains, data center development and infrastructure activity in remote locations in the WHS segment, and the consumer price index impacting government contracts, and government spending on housing programs in the Government segment.

Previous wording

The WHS segment includes one community in Winnemucca, Nevada to establish a new regional workforce hub network capacity for lithium and related critical mineral development as well as the Workforce Housing Contract for construction of workforce housing and delivery of comprehensive hospitality and facility services. The WHS segment also includes the Data Center Community Contract to construct and provide comprehensive facility services and hospitality solutions supporting the Data Center Community. The WHS segment also includes the West Texas Power Community, the Pecos Power Community, and will include the communities associated with the Data Center Hub Contract previously described and the Power Community Contract that is currently under development.

Current wording

The WHS segment includes one community in Winnemucca, Nevada to establish a new regional workforce hub network capacity for lithium and related critical mineral development as well as the Workforce Housing Contract for construction of workforce housing and delivery of comprehensive hospitality and facility services. The WHS segment also includes the Data Center Community Contract to construct and provide comprehensive facility services and hospitality solutions supporting the Data Center Community. The WHS segment also includes the West Texas Power Community, the Pecos Power Community, and the Power Community, and will include the communities associated with the Data Center Hub Contract, and the AI Infrastructure Contract.

Previous wording

Additionally, this segment included the facilities and operations provided under a lease and services agreement known as the PCC Contract with our NP Partner. This arrangement was supported by a U.S. government contract to provide a suite of comprehensive service offerings in support of their aid efforts. The PCC Contract was terminated effective February 21, 2025. The related assets associated with the PCC Contract were largely re-deployed to support growth in the WHS segment.

Current wording

Additionally, this segment included the facilities and operations provided under a lease and services agreement known as the PCC contract with our non-profit partner (the “PCC Contract”). This arrangement was supported by a U.S. government contract to provide a suite of comprehensive service offerings in support of their aid efforts. The PCC Contract was terminated effective February 21, 2025. The related assets associated with the PCC Contract were re-deployed or are in process of being re-deployed to support growth in the WHS segment.

Previous wording

The Company originated the Workforce Housing Contract in February 2025. The Workforce Housing Contract, which consists of construction and services revenue, is expected to generate approximately $176.7 million of revenue over its initial term, with approximately $112.6 million of committed minimum revenue. Revenue realized during 2025 and early 2026 on the Workforce Housing Contract was largely comprised of construction fee income recognized using the percentage of completion method with progress towards completion measured using the cost-to-cost method as the basis to recognize revenue. The Workforce Housing Contract generated approximately $9.7 million and $4.8 million of construction fee income for the three months ended March 31, 2026 and 2025, respectively. As the construction phase of the Workforce Housing Contract was substantially complete as of March 31, 2026, construction fee income is expected to be a minor portion of revenue in 2026 compared to 2025. As such, service revenue will continue to replace construction fee income over time as we continue to transition from construction activities to ongoing hospitality service delivery under the Workforce Housing Contract. Additionally, the construction fee income generated carries lower margins when compared to the margins generated under the terminated PCC Contract in the Government segment described below, which contributed to lower gross profit margins overall for the Company for the three months ended March 31, 2026, when compared to the same period in the prior year. The additional contracts included in the WHS segment generate higher margins when compared to the construction fee income on the Workforce Housing Contract, but such contracts are still in the early phases of ramping up. Accordingly, the combination of (i) the decline in higher-margin revenue following the termination of the PCC Contract, (ii) the predominance of lower-margin construction fee income under the Workforce Housing Contract during the period, and (iii) the limited contribution from higher-margin WHS contracts that are still in the early stages of ramping up, resulted in lower adjusted gross profit margins for the three months ended March 31, 2026 compared to the same period in the prior year, and limits comparability between periods.

Current wording

The Company originated the Workforce Housing Contract in February 2025. The Workforce Housing Contract, which consists of construction and services revenue, is expected to generate approximately $177.4 million of revenue over its initial term, with approximately $113.2 million of committed minimum revenue. Revenue realized during 2025 and early 2026 on the Workforce Housing Contract was largely comprised of construction fee income recognized using the percentage of completion method with progress towards completion measured using the cost-to-cost method as the basis to recognize revenue. The Workforce Housing Contract generated approximately $2.9 million and $14.4 million of construction fee income for the three months ended June 30, 2026 and 2025, respectively, and approximately $12.6 million and $19.2 million of construction fee income for the six months ended June 30, 2026 and 2025, respectively. As the construction phase of the Workforce Housing Contract was substantially complete as of June 30, 2026, lower-margin construction fee income represented a significantly smaller portion of segment revenue in 2026 compared to 2025, while higher-margin hospitality service revenue under the Workforce Housing Contract and higher-margin hospitality services revenue and specialty rental income from other WHS contracts represented a larger share of revenue in 2026 compared to 2025. In addition, several newer WHS contracts were more fully ramped up during the current period. Accordingly, the combination of (i) the predominance of lower-margin construction fee income under the Workforce Housing Contract during the prior period, and (ii) the increased contribution from higher-margin services and specialty rental income in the current period, resulted in higher adjusted gross profit margins for the three months ended June 30, 2026 compared to the same period in the prior year, and limits comparability between periods. As previously discussed, as the WHS contracts continue to ramp up, we anticipate continued margin expansion. However, we cannot assure you that margin improvement will be achieved, as it depends on the effective execution, ramp-up timing, and servicing of these contracts.

Previous wording

As discussed in the 2025 Form 10-K, the PCC Contract with the NP Partner was terminated effective February 21, 2025. The PCC Contract generated total revenue of $0 and $24.1 million for the three months ended March 31, 2026 and 2025, respectively. The PCC Contract included a minimum annual revenue contribution of approximately $168 million, all of which was attributable to the Government reportable segment. No further revenue is expected from the PCC Contract. In addition to the decline in revenue, the termination of the PCC Contract removed a significant source of historically high-margin revenue from our results. The incremental revenue generated for the three months ended March 31, 2026 from

Current wording

As discussed in the 2025 Form 10-K, the PCC Contract was terminated effective February 21, 2025. The PCC Contract generated total revenue of $0 and $24.1 million for the six months ended June 30, 2026 and 2025, respectively, with no revenue generated during the three months ended June 30, 2026 and 2025. The PCC Contract included a minimum annual revenue contribution of approximately $168 million, all of which was attributable to the Government reportable segment. No further revenue is expected from the PCC Contract. In addition to the decline in revenue, the termination of the PCC Contract removed a significant source of historically high-margin revenue from our results.

Previous wording

As discussed in the 2025 Form 10-K, the assets associated with the STFRC Contract, which terminated on August 9, 2024, were reactivated under the DIPC Contract effective March 5, 2025. The DIPC Contract is expected to provide over $246 million of revenue over its anticipated five-year term, to March 2030, and was subject to a ramp up period based on utilization during the first six months of the contract term resulting in lower fixed minimum revenue amounts during the ramp up period. The ramp up period was completed as scheduled in September 2025 with the maximum fixed minimum revenue amount now being recognized as of March 31, 2026. The DIPC Contract generated total revenue of approximately $13.4 million and $1.6 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

As discussed in the 2025 Form 10-K, the assets associated with the STFRC Contract, which terminated on August 9, 2024, were reactivated under the DIPC Contract effective March 5, 2025. The DIPC Contract is expected to provide over $246 million of revenue over its anticipated five-year term, to March 2030, and was subject to a ramp-up period based on utilization during the first six months of the contract term resulting in lower fixed minimum revenue amounts during the ramp-up period. The ramp-up period was completed as scheduled in September 2025 with the maximum fixed minimum revenue amount now being recognized as of June 30, 2026. The DIPC Contract generated total revenue of approximately $13.5 million and $7.5 million for the three months ended June 30, 2026 and 2025, respectively, and approximately $26.9 million and $9.1 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Total Revenue. Total revenue was $72.8 million for the three months ended March 31, 2026 and consisted of $46.5 million of services income, $16.6 million of specialty rental income and $9.7 million of construction fee income. Total revenue for the three months ended March 31, 2025 was $69.9 million, which consisted of $50.1 million of services income, $15.0 million of specialty rental income, and $4.8 million of construction fee income.

Current wording

Total Revenue. Total revenue was $85.5 million for the three months ended June 30, 2026 and consisted of $51.8 million of services income, $30.8 million of specialty rental income and $2.9 million of construction fee income. Total revenue for the three months ended June 30, 2025 was $61.6 million, which consisted of $40.5 million of services income, $6.7 million of specialty rental income, and $14.4 million of construction fee income.

Previous wording

Specialty rental income increased primarily due to growth in the WHS segment led by the Data Center Community Contract that was entered into September 2025, and partially driven by the activation of the West Texas Power Community contract in March 2026. This increase was partially offset by a decrease in the Government segment led by the termination of the PCC Contract.

Current wording

Specialty rental income increased primarily due to growth in the WHS segment, and partially due to the reactivation and ramp-up of assets associated with the STFRC Contract under the DIPC Contract within the Government segment in March 2025 as previously discussed.

Previous wording

Other depreciation and amortization. Other depreciation and amortization expense was $4.0 million for the three months ended March 31, 2026 and approximated the prior period amount of $4.0 million for the three months ended March 31, 2025.

Current wording

Other depreciation and amortization. Other depreciation and amortization expense was $4.1 million for the three months ended June 30, 2026 and approximated the prior period amount of $4.1 million for the three months ended June 30, 2025.

Previous wording

Income tax benefit. Income tax benefit was $(2.3) million for the three months ended March 31, 2026 as compared to $(1.3) million for the three months ended March 31, 2025. The change in income tax benefit is primarily attributable to the decrease in income before taxes for the three months ended March 31, 2026 led by cost increases and loss of the higher margin PCC Contract previously mentioned.

Current wording

Income tax expense (benefit). Income tax expense (benefit) was $0.5 million for the three months ended June 30, 2026 as compared to $(2.9) million for the three months ended June 30, 2025. The change in income tax expense (benefit) is primarily attributable to the increase in income before taxes for the three months ended June 30, 2026 led by growth in the WHS segment as previously discussed.

Previous wording

The main driver of the decrease in services income revenue was lower revenue in the Government segment led by the termination of the PCC Contract as previously discussed. This decrease was largely offset by growth in the WHS segment, and partially offset by reactivation of the assets associated with the STFRC Contract under the DIPC Contract within the Government segment in March 2025 as previously discussed.

Current wording

The main driver of the increase in services income revenue was due to the growth in the WHS segment, and partially by reactivation of the assets associated with the STFRC Contract under the DIPC Contract within the Government segment in March 2025 as previously discussed.

Previous wording

Cost of services and construction. Cost of services and construction were $46.7 million for the three months ended March 31, 2026 as compared to $35.8 million for the three months ended March 31, 2025. The increase in services costs is primarily due to an increase in costs of approximately $9.8 million in the WHS segment led by construction costs for the construction services activity under the Workforce Housing Contract as well as ramp-up of communities associated with new WHS contracts. Additionally, costs associated with the Government segment driven by the reactivation of assets associated with the DIPC Contract increased by approximately $1.6 million. These cost increases were partially offset by the HFS-South segment costs, which decreased by approximately $(0.4) million led by lower community operating costs.

Current wording

Cost of services and construction. Cost of services and construction were $94.3 million for the six months ended June 30, 2026 as compared to $81.3 million for the six months ended June 30, 2025. The increase in services costs is primarily due to an increase in costs of approximately $13.4 million in the WHS segment led by an increase in service costs from the ramp-up of communities associated with new WHS contracts, partially offset by a decrease in construction costs associated with the wind down of the construction phase associated with the Workforce Housing Contract. Additionally, costs associated with the Government segment driven by the reactivation of assets associated with the DIPC Contract increased by approximately $0.2 million. These cost increases were partially offset by cost decreases in the HFS-South segment by approximately $(0.8) million led by lower community operating costs driven by lower occupancy.

Previous wording

Specialty rental costs. Specialty rental costs were $3.6 million for the three months ended March 31, 2026 as compared to $2.5 million for the three months ended March 31, 2025. The increase in specialty rental costs was primarily due to higher costs in the Government segment associated with increased activity under the DIPC Contract, as well as growth in the WHS segment, led by the Data Center Community Contract entered into in September 2025 and the activation of the West Texas Power Community contract in March 2026.

Current wording

Specialty rental costs. Specialty rental costs were $8.2 million for the six months ended June 30, 2026 as compared to $5.3 million for the six months ended June 30, 2025. The increase is largely due to the growth in the WHS segment, and partially due to the reactivation and ramp-up of assets associated with the STFRC Contract under the DIPC Contract within the Government segment in March 2025 as previously discussed.

Previous wording

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $15.6 million for the three months ended March 31, 2026 as compared to $13.7 million for the three months ended March 31, 2025. The increase in depreciation expense is primarily attributable to an increase in depreciation expense for specialty rental assets driven by growth in the WHS Segment leading to an increase in $3.6 million between periods, partially offset by a decrease in depreciation expense of approximately $(1.5) million associated with Government segment specialty rental assets driven by the termination of the PCC contract on February 21, 2025.

Current wording

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $33.0 million for the six months ended June 30, 2026 as compared to $27.3 million for the six months ended June 30, 2025. The increase in depreciation expense is primarily attributable to an increase in depreciation expense for specialty rental assets driven by growth in the WHS Segment leading to an increase of approximately $12 million between periods, partially offset by a decrease in depreciation expense of approximately $(5.6) million associated with Government segment specialty rental assets driven by the termination of the PCC Contract on February 21, 2025, and a decrease of approximately $0.7 million in the HFS-South segment associated with certain assets becoming fully depreciated since the prior period.

Previous wording

Selling, general and administrative. Selling, general and administrative was $14.6 million for the three months ended March 31, 2026 as compared to $14.8 million for the three months ended March 31, 2025. The decrease in selling, general and administrative expense from the prior period was primarily driven by a decrease in transaction fees expense by approximately $2.5 million driven primarily by the prior period including legal, advisory, and audit fees associated with debt related transaction activity related to the 2025 Senior Secured Notes that were paid off on March 25, 2025, and, to a lesser extent, other business development project related transaction activity and remaining costs associated with the evaluation of the Arrow Proposal in 2024 (as defined in the 2025 Form 10-K). This decrease was partially offset by an increase of approximately $2.1 million in compensation and benefits costs led by an increase in the short-term incentive plan bonus expense, reflecting new contract wins during 2026, which drove up the estimated payout based on the Company’s continued strong execution on strategic growth initiatives.

Current wording

Selling, general and administrative. Selling, general and administrative was $33.3 million for the six months ended June 30, 2026 as compared to $27.5 million for the six months ended June 30, 2025. The increase in selling, general and administrative expense is primarily driven by an increase of approximately $5.4 million in compensation and benefits costs led by an increase in the short-term incentive plan bonus expense, reflecting new contract wins during 2026, which drove up the estimated payout based on the Company’s continued strong execution on strategic growth initiatives. The remaining increase was driven by an increase in professional fees of approximately $0.4 million, an increase in stock compensation expense of approximately $0.2 million led by new awards being granted, an increase in recruiting fees of approximately $0.5 million, an increase in system implementation costs of approximately $0.2 million, an increase in travel expenses of approximately $0.3 million, an increase in bad debt expense of approximately $0.2 million, and an increase in other corporate expenses. This increase was partially offset by a decrease in transaction fees expense by approximately $2.1 million driven primarily by the prior period including legal, advisory, and audit fees associated with debt related transaction

Previous wording

off on March 25, 2025, and, to a lesser extent, other business development project related transaction activity and remaining costs associated with the Arrow Proposal.

Current wording

activity related to the 2025 Senior Secured Notes that were paid off on March 25, 2025, and, to a lesser extent, other business development project related transaction activity and remaining costs associated with the evaluation of the Arrow Proposal in 2024 (as defined in the 2025 Form 10-K).

Previous wording

Other expense, net. Other expense, net was $2.6 million for the three months ended March 31, 2026 compared to less than $0.3 million for the three months ended March 31, 2025. The change in other expense, net was primarily driven by an increase in community pre-opening costs of approximately $1.6 million associated with ramp-up activities for community expansions and new customer contracts in the WHS segment. The WHS segment is in an early stage of development and has experienced increased community expansion and new contract activity during the period. Community pre-opening costs primarily relate to certain operating costs incurred prior to a community becoming fully operational. The remaining increase in other expense, net was primarily attributable to a loss on the disposal of assets in the All Other category of operating segments during the current period.

Current wording

Other expense, net. Other expense, net was $3.0 million for the for the six months ended June 30, 2026 compared to less than $0.1 million for the six months ended June 30, 2025. The change in other expense, net was primarily driven by an increase in community pre-opening costs of approximately $2.3 million associated with ramp-up activities for community expansions and new customer contracts in the WHS segment. The WHS segment has experienced increased community expansion and new contract activity during the period. Community pre-opening costs primarily relate to certain operating costs incurred prior to a community becoming fully operational. The remaining increase in other expense, net was primarily attributable to a loss on the disposal of assets in the All Other category of operating segments during the current period.

Previous wording

Loss on extinguishment of debt. Loss on extinguishment of debt was $0 for the three months ended March 31, 2026 as compared to $2.4 million for the three months ended March 31, 2025. The decrease in loss on extinguishment of debt is due to the redemption of the 2025 Senior Secured Notes on March 25, 2025 with no such transaction activity during the three months ended March 31, 2026.

Current wording

Loss on extinguishment of debt. Loss on extinguishment of debt was $0 for the six months ended June 30, 2026 as compared to $2.4 million for the six months ended June 30, 2025. The decrease in loss on extinguishment of debt is due to the redemption of the 2025 Senior Secured Notes on March 25, 2025 with no such transaction activity during the six months ended June 30, 2026.

Previous wording

Interest expense, net. Interest expense, net was $0.9 million for the three months ended March 31, 2026 as compared to $4.3 million for the three months ended March 31, 2025. The change in interest expense, net was primarily driven by a decrease in interest expense on the 2025 Senior Secured Notes led by their early redemption on March 25, 2025, partially offset by a decrease in interest income earned on cash equivalents.

Current wording

Interest expense, net. Interest expense, net was $1.9 million for the six months ended June 30, 2026 as compared to $5.3 million for the six months ended June 30, 2025. The change in interest expense, net was primarily driven by a decrease in interest expense on the 2025 Senior Secured Notes led by their early redemption on March 25, 2025, partially offset by a decrease in interest income earned on cash equivalents.

Previous wording

The decrease in revenue of approximately ($3.0) million was attributable to a decrease in utilization.

Current wording

The decrease in revenue of approximately ($3.6) million was attributable to a decrease in utilization.

Previous wording

The decrease in adjusted gross profit of approximately ($2.6) million was primarily attributable to the decrease in revenue noted above, partially offset by a decrease in operational costs led by a decrease in community operating costs.

Current wording

The decrease in adjusted gross profit of approximately ($3.1) million was primarily attributable to the decrease in revenue noted above, partially offset by a decrease in operational costs led by a decrease in community operating costs from lower occupancy.

Previous wording

previously discussed West Texas Power Community contract. The increase was also attributable to continued progression of the Workforce Housing Contract originated in February 2025 from the construction phase into the services phase. As construction activities under this contract conclude and additional beds are placed into service, a greater proportion of revenue is being generated from ongoing services, resulting in increased services revenue during the period.

Current wording

The increase in revenue of approximately $21.3 million was primarily driven by revenue generated from new contract awards since June 30, 2025, as previously discussed within this Form 10-Q and as discussed in the 2025 Form 10-K and Form 10-Q for the quarter ended March 31, 2026. The increase was also attributable to continued progression of the Workforce Housing Contract originated in February 2025 from the construction phase into the services phase. As construction activities under this contract conclude and additional beds are placed into service, a greater proportion of revenue is being generated from ongoing services, resulting in increased services revenue during the current period.

Previous wording

Revenue decreased primarily due to the termination of the PCC Contract as previously discussed, partially offset by the reactivation of the assets associated with the STFRC Contract under the DIPC Contract in March 2025. Approximately $24.1 million of the revenue decrease was attributable to the PCC Contract termination, partially offset by an increase in revenue of approximately $11.8 million attributable to the DIPC Contract mentioned above.

Current wording

Revenue decreased primarily due to the termination of the PCC Contract as previously discussed, partially offset by the reactivation of the assets associated with the STFRC Contract under the DIPC Contract in March 2025. Approximately $24.1 million of the revenue decrease was attributable to the PCC Contract termination, partially offset by an increase in revenue of approximately $18.1 million attributable to the DIPC Contract mentioned above.

Previous wording

Adjusted gross profit decreased as a result of the decrease in revenue mentioned above, and partially driven by higher costs driven by the DIPC Contract reactivation, mentioned above, leading to an increase in costs of $1.9 million between periods.

Current wording

Adjusted gross profit decreased as a result of the decrease in revenue mentioned above, and partially driven by higher costs driven by the DIPC Contract reactivation, mentioned above, leading to an increase in costs of $0.5 million between periods.

Previous wording

Government segment margins for the three months ended March 31, 2026, reflected residual carrying costs of approximately $1.8 million associated with legacy West Texas Community assets that previously serviced the PCC Contract. These costs were primarily driven by lease and utility expenses incurred while the assets were being remarketed.

Current wording

Government segment margins for the six months ended June 30, 2026, reflected residual carrying costs of approximately $3.1 million associated with legacy West Texas Community assets that previously serviced the PCC Contract. These costs were primarily driven by lease and utility expenses incurred while the assets were being remarketed.

Previous wording

During the latter part of the current quarter, many of these assets were re-contracted or redeployed to support growth in the WHS segment, which is expected to reduce such carrying costs in the Government segment, excluding the anticipated leased asset demobilization costs discussed below.

Current wording

During the latter part of the three months ended March 31, 2026, many of these assets were re-contracted or redeployed to support growth in the WHS segment, which is expected to reduce such carrying costs in the Government segment, excluding the anticipated leased asset demobilization costs discussed below.

Previous wording

The remaining undeployed or uncontracted leased assets are expected to be demobilized over the next two quarters. The demobilization process may result in additional costs, which are not expected to recur once these actions are completed.

Current wording

The remaining undeployed or uncontracted leased assets are expected to be demobilized over the next few quarters. The demobilization process may result in additional costs, which are not expected to recur once these actions are completed.

Previous wording

We depend on cash flow from operations, cash on hand and borrowings under our ABL Facility to finance our growth and diversification strategy, working capital needs, and capital expenditures. As of March 31, 2026, the ABL Facility had available borrowing capacity of $145 million. We currently believe that our cash on hand, along with these sources of funds will provide sufficient liquidity to fund our anticipated debt service obligations, lease obligations, contingent liabilities and working capital investments for at least the next 12 months. However, the pursuit of certain growth and diversification initiatives as discussed in Item 1, “Business” of the Company’s 2025 Form 10-K, may require capital resources in excess of these sources, which could necessitate additional debt or equity financing. We cannot assure you that such financing will be available on commercially reasonable terms or at all.

Current wording

We depend on cash flow from operations, cash on hand and borrowings under our ABL Facility to finance our growth and diversification strategy, working capital needs, and capital expenditures. As of June 30, 2026, the ABL Facility had available borrowing capacity of $135 million.