14. Stock-Based Compensation

On February 25, 2026, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company adopted (i) a new form Executive Restricted Stock Unit Agreement (the “RSU Agreement”) and a new form Executive Performance Stock Unit Agreement (the “PSU Agreement”) with respect to the granting of restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), respectively, under the Target Hospitality Corp. 2019 Incentive Plan (as amended by the First and Second Amendments to the Target Hospitality Corp. 2019 Incentive Award Plan, the “Plan”). The new RSU Agreement and PSU Agreements will be used for all awards to executive officers made on or after February 25, 2026.

The RSU Agreement has material terms that are substantially similar to those in the form 2025 Executive Restricted Stock Unit Agreement last approved by the Compensation Committee and previously disclosed by the Company in the 2025 Form 10-K.

Each PSU awarded under the PSU Agreement represents the right to receive one share of Common Stock. PSUs vest and become unrestricted on the third anniversary of the grant date. The number of PSUs that vest pursuant to the PSU Agreement is based in equal parts on the Company’s Total Shareholder Return (the “TSR Based Award”) performance and the Company’s Adjusted EBITDA (as defined in the PSU Agreement) (the “Adjusted EBITDA Based Award”), each measured based on the applicable performance period specified in the PSU Agreement (the “Performance Period”). The number of PSUs that vest pursuant to the TSR Based Award range from 0% to 200% of the Target Level (as defined in the PSU Agreement) depending upon the achievement of a specified percentile rank during the Performance Period. The number of PSUs that vest pursuant to the Adjusted EBITDA Based Award range from 0% to 200% of the Target Level (as defined in the PSU Agreement) depending upon the Company’s Adjusted EBITDA (as defined in the PSU Agreement) during the Performance Period. Vesting of PSUs is contingent upon the executive’s continued employment through the vesting date, unless the executive’s employment is terminated by reason of death, without Cause, for Good Reason, or in the event of a Change in Control (each term as defined in the Plan).

Restricted Stock Units

On February 25, 2026, the Compensation Committee awarded an aggregate of 558,887 time-based RSUs to certain of the Company’s executive officers and other employees, which vest ratably over a four-year period.

The table below represents the changes in RSUs:

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Stock-based compensation expense for these RSUs recognized in selling, general and administrative expense in the consolidated statements of comprehensive loss for the three months ended March 31, 2026 and 2025, stock-based compensation expense for these RSUs was approximately $1.0 million and $1.0 million, respectively, with an associated

tax benefit of $0.3 million and $0.2 million, respectively. At March 31, 2026, unrecognized compensation expense related to RSUs totaled approximately $8.8 million and is expected to be recognized over a remaining term of approximately 3.0 years.

Performance Stock Units

On February 25, 2026 the Company awarded an aggregate of 352,238 PSUs to certain of the Company’s executive officers and employees, which vest upon satisfaction of continued service with the Company until the third anniversary of the Grant Date and attainment of the Company’s TSR criteria. These PSUs were valued using a Monte Carlo simulation with the following assumptions on the grant date: the expected volatility was approximately 38.20%, the term was 2.85 years, the correlation coefficient was 0.5149, the dividend rate was 0.0% and the risk-free interest rate was approximately 3.45%, which resulted in a calculated fair value of approximately $8.97 per PSU as of the grant date.

On March 1, 2023, the Company awarded an aggregate of 91,025 time and performance-based PSUs (the “2023 PSUs”) to certain of the Company’s employees, which would vest upon satisfaction of continued service with the Company until the third anniversary of the grant date and attainment of Company Diversification EBITDA (measured through the end of the Performance Period dated February 28, 2026) and TSR criteria (measured through the end of the Performance Period dated December 31, 2025). In January 2026, and March 2026, the Compensation Committee of the Board approved amendments to the 2023 Executive Performance Stock Unit Agreement (the “Amended PSU Agreement”) between the Company and certain employees, including certain of the Company’s current named executive officers. The Amended PSU Agreement extended the performance period for the TSR and Diversification EBITDA criteria through December 31, 2026 and February 28, 2027, respectively. The purpose of the Amended PSU Agreement was to preserve the original pay-for-performance intent of the 2023 PSUs and to maintain alignment with stockholder interest by taking into account the disruption caused by the Arrow Proposal in 2024 (as defined in the 2025 Form 10-K), which constrained management’s ability to execute against key metrics in the 2023 PSUs.

The Amended PSU Agreement constitutes a reissuance of 2023 PSUs granted under the PSU substantially similar to those in the PSU Agreement for the 2023 PSUs approved by the Compensation Committee.

On February 25, 2026, the Compensation Committee, and the Board, approved agreements granting PSUs aimed at motivating, incentivizing and retaining, certain of the Company’s executive officers under and pursuant to the Plan. Each PSU represents the right to receive one share of Common Stock. PSUs vest and become unrestricted June 30, 2028 (the “Performance Period”). The executives will each earn a corresponding number of PSUs upon the achievement of specified share price thresholds, the first of which is $20.00 per share and the highest of which is $30.00 per share. If all Performance Goals (as defined in the applicable award agreements) are met during the Performance Period, Mr. Schrenk will be entitled to receive a maximum of 400,000 PSUs, Mr. Dowhaniuk will be entitled to receive a maximum of 300,000 PSUs, and Ms. Lewis will be entitled to receive a maximum of 175,000 PSUs. Vesting is contingent upon the applicable executive’s continued employment through the vesting date, unless the applicable executive’s employment is terminated by reason of death or Disability, without Cause, for Good Reason, or in the event of a Qualifying Termination in connection with a Change in Control (each term as defined in the Plan, or each executive’s employment agreement, as amended, with the Company). These PSUs were valued using a Monte Carlo simulation with the following assumptions on the grant date: the expected volatility was approximately 39.57%, the term was 2.34 years, the dividend rate was 0.0% and the risk-free interest rate was approximately 3.43%, which resulted in a calculated fair value of approximately $0.36 per PSU as of the grant date.

The table below represents the changes in PSUs:

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Stock-based compensation expense for these PSUs recognized in selling, general and administrative expense in the consolidated statements of comprehensive loss for the three months ended March 31, 2026 and 2025, stock-based compensation expense for these PSUs was approximately $0.6 million and $0.7 million, respectively, with an associated tax benefit of $0.1 million and $0.2 million, respectively. At March 31, 2026, unrecognized compensation expense related to PSUs totaled approximately $7.2 million and is expected to be recognized over a remaining term of approximately 2.25 years.

Stock Option Awards

During the three months ended March 31, 2026, there were no new grants or other changes in stock options outstanding.

As of March 31, 2026, 345,227 stock options were exercisable with a weighted average exercise price of $7.52 per share, an average contractual life of 3.55 years, and a total intrinsic value of approximately $0.9 million.

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There was no stock-based compensation expense for these stock option awards recognized in selling, general and administrative expense in the consolidated statements of comprehensive loss for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, there was no unrecognized compensation expense related to stock options.

The fair value of each option award at the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions: 

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The volatility assumption used in the Black-Scholes option-pricing model was based on peer group volatility as the Company did not have a sufficient trading history as a stand-alone public company to calculate volatility at the time of estimating the fair value of each option at the grant date. Additionally, due to an insufficient history with respect to stock option activity and post vesting cancellations, the expected term assumption is based on the simplified method permitted under SEC rules, whereby, the simple average of the vesting period for each tranche of award and its contractual term is aggregated to arrive at a weighted average expected term for the award.  The risk-free interest rate used in the Black-Scholes model is based on the implied US Treasury bill yield curve at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a dividend on its shares of Common Stock.

Stock-based payments are subject to service based vesting requirements and expense was recognized on a straight-line basis over the vesting period. Forfeitures are accounted for as they occur. No stock options were forfeited during the three months ended March 31, 2026.