Target Hospitality (TH) Risk Analysis

Below is a summary of the principal factors that make an investment in our common stock, par value $0.0001 per share (the “Common Stock”), speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found immediately following this summary and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding our Common Stock.

Our operations are and will be exposed to operational economic, political and regulatory risks. Our operations could be affected by economic, political and regulatory risks. These risks include: ?multiple regulatory requirements that are subject to change and that could restrict our ability to build and operate our communities and other sites; ?inflation or other increases in costs relating to personnel, utilities, insurance, medical and food, recessions, fluctuations in interest rates; ?compliance with applicable export control laws and economic sanctions laws and regulations; ?trade protection measures, including increased duties and taxes, and import or export licensing requirements; ?ownership regulations; ?compliance with applicable antitrust and other regulatory rules and regulations relating to potential future acquisitions; ?different local product preferences and product requirements; ?challenges in maintaining, staffing and managing national operations; ?bankruptcy or insolvency of our customers, thereby reducing demand for our services; ?different labor regulations; ?potentially adverse consequences from changes in or interpretations of tax laws; ?political and economic instability; ?federal government budgeting and appropriations; ?enforcement of remedies in various jurisdictions; ?the risk that the business partners upon whom we depend for technical assistance or management and acquisition expertise will not perform as expected; and ?differences in business practices that may result in violation of our policies including but not limited to bribery and collusive practices. These and other risks could have a material adverse effect on our business, results of operations and financial condition. We face significant competition as a provider of specialty rental and hospitality services in the specialty rental sector. If we are unable to compete successfully, we could lose customers and our revenue and profitability could decline. Although our competition varies significantly by market, the specialty rental and hospitality services industry, in general, is competitive. We compete on the basis of a number of factors, including equipment availability, quality, price, service, reliability, appearance, functionality and delivery terms. We may experience pricing pressures in our operations in the future as some of our competitors seek to obtain market share by reducing prices. We may also face reduced demand for our products and services if our competitors are able to provide new or innovative products or services that better appeal to our potential customers. In each of our current markets, we face competition from national, regional and local companies who have an established market position in the specific service area. We expect to encounter similar competition in any new markets that we may enter. Some of our competitors may have greater market share, greater pricing flexibility, more attractive product or service offerings, or superior marketing and financial resources. In addition, if some of our government customers have capacity at the facilities which they operate, they may choose to use less capacity at our facilities. Increased competition could result in lower profit margins, substantial pricing pressure, and reduced market share. Price competition, together with other forms of competition, may materially adversely affect our business, results of operations, and financial condition. The loss of any one of our largest customers in any of our business segments could adversely affect our results of operations. The loss of any one of our largest customers in any of our business segments could adversely affect our results of operations. For the year ended December 31, 2025, the Company had three customers who accounted for 28%, 11% and 11% of total revenue, respectively, and our five largest customers accounted for approximately 63% of our total revenue. Despite recent diversification discussed below, our business remains highly dependent on a limited number of large customers, including several in new end-markets such as critical minerals and data center infrastructure. For a more detailed explanation of our customers, see the section of this Annual Report on Form 10-K entitled “Business”. Following the termination of the PCC Contract, we pursued new business opportunities and sought to diversify our customer base. During the year ended December 31, 2025, we secured new contracts from multiple customers across two of our business segments that replaced a substantial majority of the estimated remaining contract value associated with the terminated PCC Contract. Although newly awarded contracts have offset a substantial portion of the lost PCC Contract revenue, the loss of any of our largest remaining customers, delays in ramping the newly awarded contracts, or a sustained decrease in demand by any such customers could still result in a material reduction in revenues and could adversely affect our results of operations. There can be no assurance that the newly awarded contracts will perform as expected, that utilization will materialize at anticipated levels, or that we will not experience future customer losses or reductions. Investors should carefully consider the continuing risks associated with customer concentration, including the potential adverse impact on our business, financial condition, and results of operations if we are unable to maintain or further diversify our customer relationships. In addition, the concentration of customers in the industries in which we operate may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic, political, and industry conditions. Furthermore, our relationship with the U.S. government subjects us and our government contractor customer to unique risks such as unanticipated increased costs and litigation that could materially adversely affect our or their business, financial condition, or results of operations. These operational risks and others associated with privately managing residential facilities could result in higher costs associated with staffing and lead to increased litigation. Lawsuits, to which we are not a party, have challenged the government's policy of detaining migrant families, and government policies with respect to family immigration may impact the demand for our facilities. Any court decision or government action that impacts our customers’ existing contract with the government could impact our subcontract for the facilities and result in a reduction in demand for our services or reputational damage to us and require us to devote a significant amount of time and expense to the defense of our operations and reputation, which could materially affect our business, financial condition, and results of operations. We are subject to extensive procurement laws, regulations and procedures, including those that enable the U.S. government to terminate contracts for convenience. Our business and reputation could be adversely affected if we or those we do business with fail to comply with or adapt to existing or new procurement laws and regulations, which are regularly evolving. As a U.S. government subcontractor, we and others with which we do business must comply with laws and regulations relating to the award, administration and performance of U.S. government contracts. Government contract laws and regulations affect how we do business with our customers and impose certain risks and costs on our business. A violation of these laws and regulations by us, our employees, others working on our behalf or a supplier could harm our reputation and result in the imposition of fines and penalties, the termination of our contracts, suspension or debarment from bidding on or being awarded contracts, loss of our ability to export products or perform services and civil or criminal investigations or proceedings. In addition, costs to comply with new government regulations can increase our costs, reduce our margins and adversely affect our competitiveness. Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. One of the significant differences is that the U.S. government generally may terminate its contracts, not only for default based on our performance, but also at its convenience. Generally, prime contractors have a similar right under subcontracts related to government contracts. If a contract is terminated for convenience, we typically would be entitled to receive payments for our allowable costs incurred and the proportionate share of fees or earnings for the work performed. However, to the extent insufficient funds have been appropriated by the U.S. government to the program to cover our costs upon a termination for convenience, the U.S. government may assert that it is not required to appropriate additional funding. If a contract is terminated for default, the U.S. government could make claims to reduce the contract value or recover its procurement costs and could assess other special penalties, exposing us to liability and adversely affecting our ability to compete for future contracts and orders. In addition, the U.S. government could terminate a prime contract under which we are a subcontractor, notwithstanding the fact that our performance and the quality of the services we delivered were consistent with our contractual obligations as a subcontractor. Similarly, the U.S. government could indirectly terminate a program or contract by not appropriating funding. The decision to terminate programs or contracts for convenience or default could adversely affect our business and future financial performance. Additionally, the U.S. government increasingly has relied on competitive contract award types, including indefinite-delivery, indefinite-quantity and other multi-award contracts, which have the potential to create pricing pressure and to increase costs by requiring prime contractors to submit multiple bids and proposals. Multi-award contracts require our prime contractor to make sustained efforts to obtain task orders under the contract. Additionally, procurements that do not evaluate whether the cost assumptions in the bids are realistic can lead to bidders taking aggressive pricing positions, which could result in the winner realizing a loss upon contract award or an increased risk of lower margins or realizing a loss over the term of the contract. For a broader discussion of the indirect exposure to statutes and regulations applicable to U.S. government contractors please see “We are subject to various laws and regulations including those governing our contractual relationships with the U.S. government and U.S. government contractors and the health and safety of our workforce and our customers. Obligations and liabilities under these laws and regulations may materially harm our business.” below. Our natural resource development customers are exposed to a number of unique operating risks and challenges which could also adversely affect us. Demand for our services is sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, natural resource development companies. The natural resource development industries’ willingness to explore, develop, and produce depends largely upon the availability of attractive resource prospects and the prevailing view of their future cash flows. Prices for energy products can be subject to large fluctuations in response to changes in the supply of and demand for these commodities, market uncertainty, and a variety of other factors that are beyond our control. This volatility causes natural resource development companies to change their strategies and expenditure levels. Accordingly, we could be impacted by disruptions to our customers’ operations caused by, among other things, any one of or all of the following singularly or in combination: ?worldwide economic activity including growth in developing countries, U.S. and international tax policies, pricing and demand for the natural resources being produced at a given project (or proposed project); ?national government political requirements, including the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and government policies which could nationalize or expropriate natural resource development exploration, production, refining or transportation assets; ?the level of activity in U.S. shale development; ?unexpected problems, higher costs and delays during the development, construction, and project start-up which may delay the commencement of production; ?unforeseen and adverse geological, geotechnical, and seismic conditions; ?lack of availability of sufficient water or power to maintain their operations; ?lack of availability or failure of the required infrastructure necessary to maintain or to expand their operations; ?the breakdown or shortage of equipment and labor necessary to maintain their operations; ?risks associated with the natural resource industry being subject to various regulatory approvals. Such risks may include governmental actions; ?interruptions to the operations of our customers caused by industrial accidents or disputes or weather conditions and natural disasters; and ?delays in or failure to commission new infrastructure in timeframes so as not to disrupt customer operations. The carrying value of our communities could be reduced by extended periods of limited or no activity by our customers, which would require us to record impairment charges equal to the excess of the carrying value of the communities over fair value. We may incur asset impairment charges in the future. Such charges may negatively affect our results of operations and financial condition as well as our borrowing base. Our business also depends on activity levels in critical mineral development and data center infrastructure industries, and reductions or delays in these projects could adversely affect our results of operations. We provide workforce housing to support large-scale lithium mining and data center development projects located in remote locations. These projects may be subject to unique permitting, environmental, regulatory, technological, and execution risks distinct from our historical lodging and hospitality operations. Demand for our services is therefore closely tied to the timing, funding, permitting, and overall activity of these projects. Demand for our services is also sensitive to the capital spending on data center infrastructure to support artificial intelligence (“AI”) applications, which has seen rapid expansion in recent years. There is no assurance that such expansion will continue. If capital spending on data center infrastructure slows down, including due to adverse developments related to AI or changes in the way AI applications are supported, demand for our services may decline, which could have a material adverse effect on our financial condition or results of operations. Accordingly, we could be impacted by disruptions to our data center customers’ operations caused by, among other things, any one of or all of the following singularly or in combination: ?a slowdown in worldwide economic activity or a decline in the demand for AI-related products and the data center end market; ?rising energy costs for and lack of energy capacity to support data center development and operations; ?lack of availability or failure of the required infrastructure necessary to maintain or to expand their operations; ?the breakdown or shortage of equipment and labor necessary to maintain their operations; ?risks associated with the AI and data center industry being subject to various regulatory approvals. Such risks may include governmental actions; ?interruptions to the operations of our customers caused by industrial accidents or disputes or weather conditions and natural disasters; and ?delays in or failure to commission new infrastructure in timeframes so as not to disrupt customer operations.?