Target Hospitality Corp.

Current report

Our business depends on activity levels in critical infrastructure development, including data center and power generation projects, as well as critical mineral development, with demand for our services being tied to the timing, funding, permitting, and overall activity of these projects, and reductions or delays in these projects could adversely affect our results of operations.

Current report

Demand for our services depends in part on the capital spending supporting critical infrastructure development, including data center and associated power generation projects supporting artificial intelligence (“AI”) applications, which has seen rapid expansion in recent years. There is no assurance that such expansion will continue, and the rate of investment in new data centers could slow as a result of a number of factors, including public opposition to data center development and government regulation of data centers and the AI industry. 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.” If capital spending on data center infrastructure slows down, demand for our services may decline, which could have a material adverse effect on our financial condition or results of operations.

Current report

Further, we could be impacted by disruptions to our customers’ data center and associated power generation development activities caused by, among other things, any one of or all of the following singularly or in combination:

Current report

We also provide workforce housing to support critical mineral development projects, such as the Thacker Pass Project. Therefore, we could be impacted by disruptions to our critical mineral development customers’ operations caused by, among other things, any one of or all of the following singularly or in combination:

Current report

These critical infrastructure development projects, including data center and associated power generation projects, as well as critical mineral development projects, may be subject to unique permitting, environmental, regulatory, technological, and execution risks distinct from our historical lodging and hospitality operations. Any slowdown, delay, or cancellation of these projects, whether due to changes in customer capital spending, regulatory or environmental constraints, or project-specific challenges, could reduce occupancy and utilization of our assets.

Current report

We are subject to various laws and regulations, including those related to the data center infrastructure industry, which has become the subject of growing public opposition and increasing government regulation, 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.

Current report

Growing public opposition to data centers has become a major political issue in the U.S. and is driving more stringent government regulation of the industry. The construction and operation of data center facilities are subject to a broad range of federal, state and local laws and regulations, including environmental regulations, energy efficiency standards, water usage restrictions and zoning and land use requirements. The increasing public and regulatory scrutiny of the energy consumption and environmental impact of data center facilities may lead government authorities to impose regulatory requirements on data center operations that could reduce the economic viability of data center infrastructure projects, including those that we serve or may serve in the future. Further, the growing public opposition to data centers in the U.S., including by local communities and advocacy groups, has already resulted in certain data center projects being delayed or cancelled. Data centers are also subject to moratoria in certain U.S. jurisdictions, and this is a trend that may continue. For example, on September 21, 2026, the Governor of Texas directed (the “Texas Directive”) the Texas Commission on Environmental Quality (“TCEQ”) to pause the issuance of all permits related to data center projects until the Electric Reliability Council of Texas (“ERCOT”) completes the comprehensive verification and audit of data centers advancing through ERCOT’s interconnection process ordered by the Governor of Texas in August 2026. As a result of this directive, we may in the future experience delays relating to TCEQ’s inspections of our Texas facilities that serve data centers, which could, depending on the timing of the delay, delay or limit occupancy at those facilities until the TCEQ inspection is conducted and the related permit obtained. Depending on their length, any such delays could result in our inability to begin or continue occupancy at our Texas facilities that serve data centers, which in turn could cause a decrease in the average utilization of existing beds in our WHS segment and have an adverse effect on our financial condition or results of operations. If intensifying public hostility to data centers continues to drive the U.S. federal, state and/or local governments to enact increasingly stringent laws and regulations that significantly increase the costs associated with data center development, there could be a decrease in the number of data center projects that are available to us to serve, which could adversely impact our financial condition and results of operations.

Current report

Our customers include a U.S. government contractor, which means that we may, indirectly, be subject to various statutes and regulations applicable to doing business with the U.S. government. These types of contracts customarily contain provisions that give the U.S. government substantial rights and remedies, many of which are not typically found in commercial contracts and which are unfavorable to contractors, including provisions that allow the government to unilaterally terminate or modify our customers’ federal government contracts, in whole or in part, at the government’s convenience. Under general principles of U.S. government contracting law, if the government terminates a contract for convenience, the terminated party may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered items from another source. In addition, our or our customers’ failure to comply with these laws and regulations might result in administrative penalties or the suspension of our customers’ government contract or debarment and, as a result, the loss of the related revenue which would harm our business, results of operations and financial condition. We are not aware of any action contemplated by any regulatory authority related to any possible non-compliance by or in connection with our operations.

Current report

In addition, U.S. government contracts and grants normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

Current report

If we fail to maintain compliance with these requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under its contract or under the False Claims Act. The False Claims Act’s “whistleblower” provisions allow private individuals, including present and former employees, to sue on behalf of the U.S. government. The False Claims Act statute provides for treble damages and other penalties and, if our operations are found to be in violation of the False Claims Act, we could face other adverse action, including suspension or prohibition from doing business with the U.S. government. Any penalties, fines, suspension or damages could adversely affect our financial results as well as our ability to operate our business.

Current report

Further, our operations are subject to an array of other governmental regulations in each of the jurisdictions in which we operate. Our activities are subject to regulation by several federal and state government agencies, including OSHA and by federal and state laws. Our operations and activities in other jurisdictions are subject to similar governmental regulations. Similar to conventionally constructed buildings, the workforce housing industry is also subject to regulations by multiple governmental agencies in each jurisdiction relating to, among others, environmental, zoning and building standards, and health, safety and transportation matters. Noncompliance with applicable regulations, implementation of new regulations or modifications to existing regulations may increase costs of compliance, require a termination of certain activities or otherwise have a material adverse effect on our business, results of operations, and financial condition.

Current report

We may not be successful in securing, expanding, renewing, or commencing new community and service contracts, which could adversely affect our future growth, profitability, cash flows, and financial condition.

Current report

Our growth strategy is primarily focused on expanding existing customer relationships and securing new community and service contracts to support workforce housing, hospitality, and related services. From time to time, we engage in discussions and negotiations with existing and prospective customers regarding potential new contracts, community expansions, extensions of existing arrangements, and other growth opportunities. However, there can be no assurance that these discussions or negotiations will result in definitive agreements, that anticipated opportunities will be awarded to us, or that existing contracts will be expanded or renewed on favorable terms.

Current report

Customers may select competing providers, reduce the scope of potential opportunities, alter their procurement or capital-allocation priorities, or discontinue negotiations. In addition, we may devote significant management attention and incur business-development, planning, and other costs in pursuing opportunities that do not result in executed agreements.

Current report

Failure to secure anticipated contracts, expand existing customer relationships, or renew significant contracts on favorable terms could adversely affect our future revenue growth, profitability, cash flows, and financial condition.