Target Hospitality Corp.

Previous 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.

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 September 30, 2026, our network included 30 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

During the first half of 2026, the Company entered into four significant workforce accommodations and hospitality services contracts supporting AI infrastructure development and power generation projects. Collectively, these agreements are expected to generate more than $1.4 billion of contracted revenue and support approximately 9,000 individuals over contractual terms ranging from 26 to approximately 60 months. The contracts include the West Texas Power Community, Pecos Power Community, Data Center Hub, and AI Infrastructure Community projects (each as defined in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026), each of which began generating revenue during the six months ended June 30, 2026, and is reported within the Company's WHS segment. The projects utilize a combination of existing infrastructure and newly deployed assets and are expected to require significant capital investment (as outlined in the Capital Expenditures Requirements section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations), while providing long-term revenue visibility and positioning the Company to benefit from continued growth in AI infrastructure and power generation development.

Current wording

During 2026, the Company entered into five significant workforce accommodations and hospitality services contracts supporting AI infrastructure development and power generation projects. Collectively, these agreements are expected to generate more than $1.7 billion of contracted revenue and support more than 10,300 individuals over contractual terms ranging from 23 to approximately 60 months. These new contracts began generating revenue during the nine months ended September 30, 2026, and are reported within the Company's WHS segment. The projects utilize a combination of existing infrastructure and newly deployed assets and are expected to require significant capital investment (as outlined in the Capital Expenditures Requirements section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations), while providing long-term revenue visibility and positioning the Company to benefit from continued growth in North American critical infrastructure, including AI data center and power generation development.

Previous 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.

Current wording

The Company generated cash flows from operations for the nine months ended September 30, 2026 of approximately $154.2 million compared to approximately $68.4 million for the nine months ended September 30, 2025, representing an increase in cash flows from operations of approximately $85.8 million or 126% 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, a $9.9 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 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.

Current wording

We expect margins to continue 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 executed WHS contracts. 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 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.

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. Further, increasing regulation of data centers, such as in the case of the Texas Directive (defined below), may adversely impact our results of operations and financial condition. See*“We are subject to various laws and regulations, including those related to the data center infrastructure industry, those governing our contractual relationships with the U.S. government and a U.S. government contractor, and those related to the health and safety of our workforce and our customers. Obligations and liabilities under these laws and regulations may materially harm our business”*under Item 1A. Risk Factors of this Form 10-Q.

Previous wording

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 2025 Form 10-K. 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*.*

Current wording

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 this Form 10-Q and in our 2025 Form 10-K. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or

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 data center and energy-related projects.

Current wording

The timing and visibility of future demand may be affected by commodity price volatility, permitting timelines, regulatory changes, 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

As discussed in Note 17 of the notes to our unaudited consolidated financial statements, included elsewhere in this Form 10-Q, subsequent to June 30, 2026, the Company entered into the New ABL Facility, which replaced the ABL Facility and provides aggregate revolving commitments of up to $660 million, together with an accordion feature of up to $190 million, subject to customary conditions and lender commitments. Additional information regarding the New ABL Facility is included in Note 17 of the notes to our unaudited consolidated financial statements, included elsewhere in this Form 10-Q.

Current wording

As discussed in Note 8 of the notes to our unaudited consolidated financial statements, included elsewhere in this Form 10-Q, the Company has an ABL Facility, which provides aggregate revolving commitments of up to $660 million, together with an accordion feature of up to $190 million, subject to customary conditions and lender commitments. Additional information regarding the ABL Facility is included in Note 8 of the notes to our unaudited consolidated financial statements, included elsewhere in this Form 10-Q.

Previous wording

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. In addition, we may be subject, indirectly, to various statutes and regulations applicable to doing business with the U.S. government as a result of our contract with a U.S. government contractor client. The risks of substantial costs, liabilities, and limitations on our 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 compliance or environmental remediation liabilities and costs.

Current wording

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. In addition, we may be subject, indirectly, to various statutes and regulations applicable to doing business with our WHS customers, and the U.S. government as a result of our contract with a U.S. government contractor client. The risks of substantial costs, liabilities, and limitations on our 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 compliance or environmental remediation liabilities and costs. See “*We are subject to various laws and regulations, including those related to the data center infrastructure industry, those governing our contractual relationships with the U.S. government and a U.S. government contractor, and those related to the health and safety of our workforce and our customers. Obligations and liabilities under these laws and regulations may materially harm our business.”*under Item 1A. Risk Factors of this Form 10-Q.

Previous 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.

Current wording

We derive the majority of our revenue from specialty rental accommodations and vertically integrated hospitality services. Approximately 56% of our revenue was earned from specialty rental with vertically integrated hospitality services, specifically lodging and related ancillary services, whereas the remaining 44% of revenues were earned through leasing of lodging facilities (39)% and construction fee income (5)% for the nine months ended September 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 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.

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 September 30, 2026, construction of the Workforce Hub was substantially complete, and during the nine months ended September 30, 2026, revenue under this contract was split between construction services and services income, with construction services representing approximately 39% 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 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.

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 nine months ended September 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

The HFS – South segment reflects our facilities and operations in the HFS – South region from customers in the natural resources development industry and includes our 16 communities located across Texas and New Mexico.

Current wording

The HFS – South segment reflects our facilities and operations in the HFS – South region from customers in the natural resources development industry and includes our 17 communities located across Texas and New Mexico.

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 $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.

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 $0.9 million and $35.6 million of construction fee income for the three months ended September 30, 2026 and 2025, respectively, and approximately $13.5 million and $54.8 million of construction fee income for the nine months ended September 30, 2026 and 2025, respectively. As the construction phase of the Workforce Housing Contract was substantially complete as of September 30, 2026, construction fee income represented a significantly smaller portion of segment revenue in 2026 compared to 2025, while 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 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 September 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 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.

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 $36.3 million for the nine months ended September 30, 2026 and 2025, respectively, with $0 and $12.2 million during the three months ended September 30, 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.

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 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.

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 September 30, 2026. The DIPC Contract generated total revenue of approximately $13.7 million and $11.7 million for the three months ended September 30, 2026 and 2025, respectively, and approximately $40.6 million and $20.8 million for the nine months ended September 30, 2026 and 2025, respectively.

Previous 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.

Current wording

Total Revenue. Total revenue was $129.1 million for the three months ended September 30, 2026 and consisted of $63.3 million of services income, $64.9 million of specialty rental income and $0.9 million of construction fee income. Total revenue for the three months ended September 30, 2025 was $99.4 million, which consisted of $56.0 million of services income, $7.8 million of specialty rental income, and $35.6 million of construction fee income.

Previous wording

The main driver of the increase in services income revenue was higher revenue in the WHS segment led by the new contracts entered into since June 30, 2025 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.

Current wording

The main driver of the increase in services income revenue was higher revenue in the WHS segment led by the new contracts entered into since September 30, 2025 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. This was partially offset by the prior period including the PCC Contract Close-Out Payment of $11.8 million in the Government segment, which did not recur in the current period.

Previous wording

Cost of services and construction. Cost of services and construction were $47.6 million for the three months ended June 30, 2026 as compared to $45.6 million for the three months ended June 30, 2025. The increase in services costs is primarily due to an increase in costs of approximately $3.7 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. This net increase was partially offset by costs associated with the Government segment decreasing by ($1.4) million between periods largely due to the termination of the PCC Contract.

Current wording

Cost of services and construction. Cost of services and construction were $51.1 million for the three months ended September 30, 2026 as compared to $64.1 million for the three months ended September 30, 2025. The decrease in costs is primarily due to a decrease in construction costs of approximately $28 million associated with the wind down of the construction phase associated with the Workforce Housing Contract. This decrease was partially offset by an increase of approximately $13 million in services costs associated with growth in the WHS segment, as well as an increase of approximately $1.4 million in services costs led by the demobilization of uncontracted leased assets that were previously used to service the PCC Contract in the Government segment.

Previous wording

Specialty rental costs. Specialty rental costs were $4.7 million for the three months ended June 30, 2026 as compared to $2.8 million for the three months ended June 30, 2025. The increase in specialty rental costs was primarily due to the growth of the WHS segment.

Current wording

Specialty rental costs. Specialty rental costs were $27.1 million for the three months ended September 30, 2026 as compared to $3.0 million for the three months ended September 30, 2025. The increase in specialty rental costs was primarily due to the growth of the WHS segment.

Previous 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.

Current wording

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $21.3 million for the three months ended September 30, 2026 as compared to $14.4 million for the three months ended September 30, 2025. The increase 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 $12 million, as well as an increase of approximately $0.6 million in the HFS-South segment, partially offset by a decrease in depreciation expense of approximately $(5.7) million associated with Government segment specialty rental assets driven by the termination of the PCC Contract on February 21, 2025.

Previous wording

Selling, general and administrative. Selling, general and administrative was $18.8 million for the three months ended June 30, 2026 as compared to $12.7 million for the three months ended June 30, 2025. The increase in selling, general and administrative expense from the prior period was primarily driven by an increase of $3.3 million in compensation and benefits costs between periods led by an increase in the short-term incentive bonus plan 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 $0.6 million, an increase in transaction fee expense of approximately $0.4 million associated with the secondary public offerings completed by the Selling Stockholders during the second quarter of 2026, as discussed in Note 13 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q, an increase in stock compensation expense of approximately $0.2 million led by new awards being granted, an increase in recruiting fees of approximately $0.3 million, an increase in system implementation costs of approximately $0.2 million, an increase in travel expenses of approximately $0.2 million, an increase in bad debt expense of approximately $0.1 million, and an increase in other corporate expenses.

Current wording

$0.3 million, an increase in transaction fee expense of approximately $0.3 million, an increase in recruiting fees of approximately $0.3 million, an increase in travel expenses of approximately $0.3 million, an increase in stock compensation expense of approximately $0.1 million led by new awards being granted, and an increase in other corporate expenses. These increases were partially offset by lower bad debt and insurance expense of approximately $(0.6) million.

Previous 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.

Current wording

Other depreciation and amortization. Other depreciation and amortization expense was $4.0 million for the three months ended September 30, 2026 and approximated the prior period amount of $4.1 million for the three months ended September 30, 2025.

Previous wording

Other expense (income), net. Other expense (income), net was $0.4 million for the three months ended June 30, 2026 compared to less than $(0.2) million for the three months ended June 30, 2025. The change in other expense (income), net was primarily driven by an increase in community pre-opening costs of $0.6 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.

Current wording

Other expense, net. Other expense, net was $3.3 million for the three months ended September 30, 2026 compared to less than $0.9 million for the three months ended September 30, 2025. The change in other expense, net was primarily driven by an increase of approximately $1.9 million in losses on disposal of certain specialty rental assets as well as an increase in community pre-opening costs of approximately $0.6 million associated with ramp-up activities for community expansions and new customer contracts in the WHS segment. Community pre-opening costs primarily relate to certain operating costs incurred prior to a community becoming fully operational. This was partially offset by an increase in the gain on the disposal of leased assets by approximately $0.1 million.

Previous wording

Interest expense, net. Interest expense, net was $1.0 million for the three months ended June 30, 2026 as compared to $0.9 million for the three months ended June 30, 2025.

Current wording

Interest expense, net. Interest expense, net was $3.2 million for the three months ended September 30, 2026 as compared to $0.5 million for the three months ended September 30, 2025. This increase was primarily driven by higher average borrowings and outstanding balances under the ABL Facility to fund growth in the WHS segment.

Previous wording

Total Revenue. Total revenue was $158.2 million for the six months ended June 30, 2026 and consisted of $98.3 million of services income, $47.3 million of specialty rental income and $12.6 million of construction fee income. Total revenue for the six months ended June 30, 2025 was $131.5 million, which consisted of $90.6 million of services income, $21.7 million of specialty rental income, and $19.2 million of construction fee income.

Current wording

Total Revenue. Total revenue was $287.3 million for the nine months ended September 30, 2026 and consisted of $161.6 million of services income, $112.2 million of specialty rental income and $13.5 million of construction fee income. Total revenue for the nine months ended September 30, 2025 was $230.9 million, which consisted of $146.6 million of services income, $29.5 million of specialty rental income, and $54.8 million of construction fee income.

Previous 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.

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. This increase was partially offset by revenue recognized in the prior-year period from the PCC Contract, including the PCC Contract Close-Out Payment of $11.8 million, in the Government segment, which did not recur in the current period following the termination of the PCC Contract on February 21, 2025.

Previous 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

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. This increase was partially offset by a decrease in the Government segment led by the termination of the PCC Contract.

Previous wording

The decrease in construction fee income for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, was driven solely by the construction related activities for the Workforce Housing Contract within the WHS segment substantially concluded as of December 31, 2025.

Current wording

The decrease in construction fee income for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, was driven solely by the construction related activities during the construction phase of the Workforce Housing Contract within the WHS segment, which was substantially concluded as of December 31, 2025.

Previous wording

The termination of the PCC Contract in the Government segment resulted in the loss of a significant source of historically high-margin revenue; however, consolidated margins improved during the six months ended June 30, 2026, compared to the prior-year period, primarily due to changes in revenue mix within the WHS segment. As the construction phase of the Workforce Housing Contract became substantially complete, lower-margin construction fee income represented a smaller portion of WHS revenue, while higher-margin hospitality services revenue generated under the Workforce Housing Contract represented a larger share of segment revenue. In addition, several newer WHS contracts were more fully ramped up during the current period, increasing the contribution of higher-margin hospitality services and specialty rental income within the WHS segment. Accordingly, the favorable shift in revenue mix more than offset the loss of the PCC Contract's historically high-margin revenue and contributed to improved consolidated margins compared to the prior-year period.

Current wording

The termination of the PCC Contract in the Government segment resulted in the loss of a significant source of historically high-margin revenue; however, consolidated margins improved during the nine months ended September 30, 2026, compared to the prior-year period, primarily due to changes in revenue mix within the WHS segment. As the construction phase of the Workforce Housing Contract became substantially complete, lower-margin construction fee income represented a smaller portion of WHS revenue, while higher-margin hospitality services revenue generated under the Workforce Housing Contract represented a larger share of segment revenue. In addition, several newer WHS contracts were more fully ramped up during the current period, increasing the contribution of higher-margin hospitality services and specialty rental income within the WHS segment. Accordingly, the favorable shift in revenue mix more than offset the loss of the PCC Contract's historically high-margin revenue and contributed to improved consolidated margins compared to the prior-year period.

Previous 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.

Current wording

Specialty rental costs. Specialty rental costs were $35.4 million for the nine months ended September 30, 2026 as compared to $8.3 million for the nine months ended September 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 $17.4 million for the three months ended June 30, 2026 as compared to $13.6 million for the three 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

Current wording

Depreciation of specialty rental assets. Depreciation of specialty rental assets was $54.3 million for the nine months ended September 30, 2026 as compared to $41.6 million for the nine months ended September 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 $24 million, partially offset by a decrease in depreciation expense of approximately $(11.3) million associated with Government segment specialty rental assets driven by the termination of the PCC Contract on February 21, 2025.

Previous 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

Current wording

Selling, general and administrative. Selling, general and administrative expenses were $52.6 million for the nine months ended September 30, 2026 as compared to $40.4 million for the nine months ended September 30, 2025. The increase was primarily driven by an increase of approximately $9.1 million in compensation and benefits expense, led by an increase in the short-term incentive plan bonus expense accruals, reflecting new contract awards during 2026, which increased the estimated bonus payout, as well as increased corporate headcount to support the Company’s growth. The remaining increase was primarily attributable to an increase in professional fees of approximately $1.2 million, an increase in recruiting fees of approximately $0.8 million, an increase in travel expenses of approximately $0.6 million, an increase in legal fees of approximately $0.3 million, an increase in stock compensation expense of approximately $0.3 million led by new awards being granted, an increase in system implementation costs of approximately $0.1 million, and an increase in other corporate expenses. This increase was partially offset by a decrease in transaction fees expense by approximately $(1.8) 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).

Previous wording

Other depreciation and amortization. Other depreciation and amortization expense was $8.1 million for the six months ended June 30, 2026 and approximated the prior period amount of $8.1 million for the six months ended June 30, 2025.

Current wording

Other depreciation and amortization. Other depreciation and amortization expense was $12.1 million for the nine months ended September 30, 2026 and approximated the prior period amount of $12.1 million for the nine months ended September 30, 2025.

Previous 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.

Current wording

Other expense, net. Other expense, net was $6.3 million for the nine months ended September 30, 2026 compared to less than $1.0 million for the nine months ended September 30, 2025. The change in other expense, net was primarily driven by an increase in community pre-opening costs of approximately $2.9 million associated with ramp-up activities for community expansions and new customer contracts in the WHS segment. 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 attributable to an increase in the loss on the disposal of assets by approximately $2.8 million during the current period. This was partially offset by an increase in the gain on the disposal of leased assets by approximately $0.3 million.

Previous 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.

Current wording

Loss on extinguishment of debt. Loss on extinguishment of debt was $1 million for the nine months ended September 30, 2026 as compared to $2.4 million for the nine months ended September 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. This was partially offset by the current period write-off of the portion of the unamortized deferred financing costs associated with the prior asset-based revolving credit facility for lenders that did not participate in the ABL Facility that closed on July 24, 2026. Refer to Note 8 of the notes to our unaudited consolidated financial statements included elsewhere within this Form 10-Q for further discussion of the ABL Facility.

Previous 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.

Current wording

Interest expense, net. Interest expense, net was $5.1 million for the nine months ended September 30, 2026 as compared to $5.7 million for the nine months ended September 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, as well as higher average borrowings and outstanding balances under the ABL Facility in the current period to fund growth in the WHS segment.

Previous wording

*Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and construction costs, and rental costs recognized in the financial statements and excludes depreciation on specialty rental assets, certain severance costs, 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.

Current wording

*Note: Adjusted gross profit for the chief operating decision maker’s (“CODM”) analysis includes the services and construction costs, and rental costs recognized in the financial statements and excludes depreciation of specialty rental assets, certain severance costs, 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.

Previous wording

Revenue for the HFS – South segment was $32.6 million for the three months ended June 30, 2026, as compared to $36.2 million for the three months ended June 30, 2025.

Current wording

Revenue for the HFS – South segment was $32.6 million for the three months ended September 30, 2026, as compared to $35.6 million for the three months ended September 30, 2025.

Previous wording

The decrease in adjusted gross profit of approximately $(5.8) 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.

Current wording

The decrease in adjusted gross profit of approximately ($2.7) million was primarily attributable to the decrease in revenue noted above.