Q4 2019 Earnings Call
[music].
Good morning, My name is Travis it'll be your conference Operator as reminder, this call is being recorded.
Tom I want to welcome you to the core cities fourth quarter 2019 earnings Conference call. All lines have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time certainly present store in the number one on your telephone keypad, if you would like.
Withdraw your question for store too.
Thank you I would now like to turn the call over to Cameron Hopewell core civics, managing director of Investor Relations Mr. Hope you may begin your conference.
Thank you Travis good morning, ladies and gentlemen, thank you for joining us participating on today's call or Damon Hininger, President Chief Executive Officer.
David Garfinkle, Chief Financial Officer.
During today's call our remarks, including aren't answers to your question will include forward looking statements pursuant to the safe Harbor provision of the private Securities Litigation Reform Act or actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2019 earnings release.
Issued aftermarket yesterday and in our Securities Exchange Commission filings, including forms 10-K tend to you and Teekay reports.
You are also caution that any forward looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future.
On this call will also discuss certain non-GAAP measures a reconciliation of the most comparable GAAP measurements is provided in our corresponding earnings release and included in the supplemental financial data on the investors page of our website Corecivic Dot com.
With that it's my pleasure to turn the call Labrador, President and CEO Damon Hininger Dan.
Thank you Karen good morning, everyone and thank you for during our fourth quarter 2019 conference call today.
Core civic is a diversified real estate investment trust specializing in delivering government real estate solutions to serve the public good.
The country's largest private owner of real estate assets in years by U.S. government agencies.
Following our latest portfolio acquisition last month and the recent opening of our newly constructed correct study in Lansing, Kansas.
We own 136 facilities totaling nearly 19 million square feet of real estate.
We have a 35 year history of delivering a broad range of solutions to help solve tough government challenges and flexible cost effective ways.
Our unique diversified portfolio of assets generated study recurring care slow stream underwritten by investment grade government tenants.
Each of our three business segments provide specialize real estate government tenants.
Our safety segment owns and manages corrections and detention facility, including 50 Correctional and detention facilities with the design capacity to safely securely care for over 72000 people.
In the last five years in this segment, we didn't help over 3000 individuals achieved their high school prudently, Oregon industry recognized traits are just beginning with evidence based research has shown to materially reduced recidivism rates.
Our community segment is a network of residential reentry centers and non residential community based corrections alternatives that help address Americans, we sort of business prices and includes 29 residential reentry facilities, where they design capacity to support 5394 individuals.
We also provide non residential community based services to approximately 35000 people on a daily basis.
Finally, our property segment is a portfolio of mission critical government leased properties that has a year in 2019 included a 28 properties, representing approximately 2.4 million feet up real estate.
Subsequent to year end. This portfolio has expanded by nearly 1 million square feet due to the recent opening of our new legacy credit facility.
Hey, new lease with Kentucky far Southeast Correctional complex and our acquisition of a 28 property portfolio. If you say at least the assets in January.
Our properties portfolio produces predictable recurring cash flows through leases backed by the high credit quality government tenants.
For the for year 2019, we generated 1.98 billion revenue and deeper sin inquiry from the prior year.
This top line growth led to strong double digit growth earnings per share [laughter], Oh and EBITDA.
Normalized this will go per share was $2, a 62 cents, an increase of 30% and adjusted EBIT dollars worth 44 billion and talk with an increase from the prior year.
Our growth was the result of multiple calls that's across each of our three business segments.
Our safety segment, which accounted for Boston, 85% or the company be EBITDA generated year over year revenue growth of 6%.
During 2019, we were awarded for new contracts.
The contract awards resulted in activation of previously idle Correctional facilities.
In May of 2019, or 40, 822 bed <unk> data center was awarded the new contract from the United States Markham service and our nine or 10 bed towards county became still gets awarded new contract from immigration and customs enforcement, Ohio.
These facilities are activated over the summer and operations were normalizing throughout the end of year.
In September of 2019, our 2232 bit Adams County credit facility in Mississippi was awarded a new contractor mice treated this means the facility from another settle park.
Our things segment was also awarded an out of state contract. This in Kansas for up to 600 beds and also the world Correctional facility in Arizona.
Our property segment, which accounted for 10% of the company's EBITDA in 2019 generated year over year revenue growth of 34%.
The growth generated within this segment was driven by M&A activity completed throughout 2018.
We deliberately tempered our M&A activity in 2019 due to the market valuation of our equity and debt securities throughout the year, which resulted from politically motivated attacks on the company in our industry.
However, we continue to pursue accretive M&A opportunities to grow our properties and community segments.
We have narrowed our focus on portfolios with above average risk adjusted returns with the opportunity for utilize the alternative financing structures as evidenced by our acquisition in January of a 28 property portfolio allergies, they leased assets using a downright structure.
Its portfolio acquisition, coupled with new leases at our latest the Crystal City, Kansas. He is the southeast Correctional complex in Kentucky decisions. Our property segment for continued revenue and you know why growth again 20 twond.
Our community segment accounted for 5% of the company EBITDA in 2019, but has generated 21% year over year revenue growth.
Revenue growth in this segment was largely driven by acquisitions, we made in the area nonresidential Correctional alternative sources, including electronic monitoring in case management services.
We continue to pursue limited M&A opportunities for the residential utilities and nonresidential service providers and we acquired to our RC This Virginia during the fourth quarter 2019.
In the fourth quarter, we posted total revenue of 498 million, a 3% increase year over year and normalized AFFO per share a 59 cents or a penny below the low end of our fourth quarter 2019 guidance.
The primary driver or bar for his performance in the quarter was lower than expected utilization Buckeyes across our safety portfolio.
Our neutral fourth quarter guidance anticipated the combination of decline in high utilization, even additional expenses from recently activates told it continues to ramp to normalize utilization levels throughout the quarter.
During the spring summer 2019 activity across the southwest border was that heightened levels not reached nearly two decades.
In an effort to help address this humanitarian crisis, there was high utilization at least bar facilities under contract with dies.
It's above average utilization by high over the summer resulted increased earnings.
We correctly anticipated reduction utilization in the fourth quarter, but the declines were slightly larger than what we had forecasted.
It's important to note that this ability to flex up or down utilization levels were based on real time demand is actually one of the key reasons like ice contracts with quarterly for substantial portions of their detention capacity and flexibility is one of the key ways, we provide daiichi taxpayers.
Our utilization historically, the most difficult to predict if any of our government partners. Because there are so many complex factors at play here.
However, southwest order activity return to historical norms in the fall or last year and has remained at similar levels based on the latest available government data.
This recent trends along with other immigration policy changes implemented last year has informed our current expectations for ice utilization than 2020 and is reflected in our initial 2020 financial guidance.
Our full year 2020 financial guidance forecast normalized AFFO per share in a range of $2 a three cents to 2014 cents and yeah for FFO per share in a range of two hours of 29 cents to 2039 cents.
Our guidance also includes six cents per share in additional interest expense, resulting from the refinancing of our unsecured bonds that were set to expire in April 2020.
He ended December 2019 issuance of our 250 billion dollar term loan b.
Every summarize some of the key drivers of our fourth quarter and for your 19 <unk> financial results and our Mitchell for your 2020 guide, which Dave will review in more detail I would now like to shift our focus to recent business development and market opportunities with the potential of influence.
Influencing future financial performance.
Sorry, first with our safety segment.
So far this year, we have already announced one new safety contract.
In January we signed and diversity 335 bed contract with Mississippi to utilize our Tallahassee County Correctional facility to assist the state following a series of operational challenges at their nearby facility in park.
Which is also sustain significant infrastructure damage.
The 90 day contract provides optional extension for up to it to additional 90 day terms and allowing to stay time to develop a long term plan for their correction system.
Situations like this exemplify how critically important is both state and so partner to have access to our modern real estate assets and the services we offer.
Our tellers facility has provided you capacity for the state to move a portion of their close coffee population, which should help to improve the safety and security up here and talk [laughter].
Without the private sector, there would be no alternative solution available to the state.
And we stand ready to provide the state with additional system should it be request.
This data bartos border correction has granted the 42 the department of Corrections to award US a contract pursuant to an RFP issued last year for up to 12 quarter beds.
We have not yet received a final contract that we have been in frequent communication with the Barbara correction since this announcement.
We will hopefully have more to report on that isn't very short term.
We're seeing a real need for modern personal infrastructure across the country and there's a growing number of states acknowledging this reality as a serious challenge.
Recently, the Governor of Arizona Post closing the state owns president warrants to generate 275 million in saving over three years from avoidable repairs enough.
The Arizona State prison complex in Florence dates back to 19 go nine and has the capacity of 3946 beds.
There are stated plans are utilized other public if privately held facilities within the state that have available capacity.
The state has not announced their physical transition plan. So we are we're awaiting potential procurement opportunities.
In our property segment, we have seen very positive momentum with new lease agreements new development in future development opportunities.
As I mentioned earlier, we've recently activated our new legacy credit facility in Kansas and entered into a new lease agreement for our southeast Correctional complex in Kentucky.
These two lease agreements represent 3008, yet newly leased beds or over 525000 square feet or real estate.
Our 83.2 million acquisition of a portfolio of 28, just a lease properties as an additional 445000 square feet of real estate to our property segments portfolio.
As for development opportunities within the property segment. The state, Alabama is been impacted process to procure three large scale stated the our facilities financing constructed by the private sector in order to consolidate approximately 15 outdated overcrowded prisons.
The state estimate the aggregate size of this procurement to be approximately 10000 beds at a cost of a nearly a billion dollars.
As they publish an RFP in the fourth quarter of 2019, and we have been publicly saying that the qualified responded to the procurement.
This opportunity in Alabama will not contribute to our 2020 financial performance, but it is further evidence that the build finance lease model pioneered by course, good properties is resonating with government agencies dealing with critical criminal justice infrastructure needs.
We know there or at least half a dozen other states and mean vis vis vis vis validated considering a similar process to address their age.
Fisher criminal Justice infrastructure.
For decades appropriators at the federal state and local level have would you would decline to provide sufficient funding to address pressure points within their criminal justice infrastructure, maybe you can access to private capital and industry expertise offered through our courts of the property segment.
Most efficient cost effective way to address these previously unmet needs.
It is very gratifying to see this offering is resonating and expect to see more of these opportunities come to market.
In our community segment, we focus much of our attention in 2019 on integrating the operates up our two non residential community based service companies, we acquired in 2019 to creating consistent platform.
We believe this strategic integration position us very well to compete for new market opportunities.
The largest markers opportunity we're actively pursuing is they read that as the antibodies supervision appearance program also known as I said for immigration and customs enforcement.
The ice that program is the largest electronic monitoring contract in oil serving well over 100000 active procure participants on a daily basis.
We have remaining days throughout the procurement process, which began last may and believe we offer a very competitive option.
Yes based reward day produced opportunities expected yeah, it's expected by the end of this month.
Yeah.
We believe we have positioned the company to continue to improve portfolio utilization as evidenced by the activation of three previously idle of course facility since we started 2019.
The activation of our Easyjet Center, Torrance County detention Center and Southeast Correctional complex represents 2988 previously idle beds.
Once these contracts are fully activated.
We'll have five remaining idle correct facilities in the portfolio, a very meaningful improvement in less than 15 months.
We also believe this is to be evidence of the our real estate and service offerings are resonating across a diverse set of government partners with very needs.
Each of our three business segment that multiple potential catalyst bank could easily contribute to additional cash flow in 2020.
In addition, it is important to note that we do not have any material contracts subject to competitive rebids over next 12 months. So we believe we are well positioned to capitalize on a large number of market opportunities outstanding.
I'd like to close by remark by providing you an update on how we're thinking about our long term capital allocation strategy.
Our quarterly dividend is very well covered.
At an AFFO payout ratio of 75% based on the midpoint of our full year 2020 financial guidance.
This pay outlays level is very manageable given our strong cash flows and well below the average re ask AFFO payout ratio.
This is converting to a repeat in 2013, we have maintained a targeted a AFFO payout ratio of 80% and has the current dividend level, our stock carry been attractive yield up over 10%.
We continue to assess M&A opportunities on a case by case basis as we believe further growth of our community and property segments would generate long term shareholder value.
Since the issuance of our term loan b in December but pricing of our unsecured bonus in the secondary markets have meaningfully improved.
However, the pricing of our bonds and the valuation of our equity securities still do not reflect our strong credit profile or stable cash generation, which requires us to target acquisitions with above average risk adjusted returns.
And the structure you need deals that do not require significant cash at closing.
Given the current market conditions, we believe the best use of our excess cash flows in it.
In full year of 2020 days.
Thank you Damon and good morning, everyone for the full year ended December 31st adjusted EPS was $1.72 of 18.6% from the prior year normalized FFO was 2062 cents up 13.4% from the prior year and assets those 2058 cents.
18.8% from the prior year.
Depending on the metric per share amounts were either 22 cents or 23 cents higher than the midpoint of our initial guidance published a year ago at this time.
And fourth quarter, we generated 35, thats, the bps or 36 cents adjusted as compared to our guidance range of 30 to 42 cents.
Normalized AFFO for the 59 cents per share compared to our guidance range of 60 to 64 cents.
FFO totaled 58 cents per share compared to our guidance range of 59 to 53 cents.
Adjusted EPS is 103.5 million for the quarter.
Adjusted amounts exclude expenses associated with debt refinancing and M&A transactions, including contingent consideration.
M&A transaction reflected in the prior year quarter.
Our financial results for the fourth quarter slightly below our guidance levels due to lower than expected population from Wolfe immigration and customs enforcement or ice.
Last quarter I mentioned that we had lowered our Q4 ice populations projections, because we did not believe the elevated levels experienced in the second and third quarters of 2019 or sustainable.
As total southwest border Apprehensions had reached the highest levels and over a decade.
However, ice populations nonetheless declined to levels below our forecast.
Compared to the prior year quarter.
Adjusted EPS, the normalized AFFO decreased by four cents per share at the whole decreased by a penny per share.
Total contracts in 2019 to activate our previously either 1422 bed Eden detention center in Texas, and our 910 basis points County, potassium sold in new Mexico will more than offset by declines in California populations at our 3060 bed in the formal facility in Arizona.
80 vacated deployed by the ended the second quarter 2019 as expected.
Year over year results were also negatively impacted by higher gene expenses and lower ice populations that are Tallahassee facility in Mississippi and at our facility in Arizona.
We continue to manage the strong balance sheet leverage to 3.7 times at December 31st we hit $92 million of cash on hand, and 413 billion of availability under our revolving credit facility. In addition to 350 million dollar accordion feature under our credit facility, which matures in 2023.
During the fourth quarter 2019, we access the capital markets to obtain a 259 our term loan using the proceeds towards repayment in December and $325 million senior unsecured notes that were scheduled to mature April 2020, with a balanced funded from our revolving credit facility.
No debt maturities until October 2022.
In December 2019, we completed construction activated the 512 that comp that's at the Olympics Correctional facility in Kansas ahead of schedule and completed the thousand 920 by complex last month on schedule on blow by the total cost of $155 million, resulting in commencement of the 20 year lease are too.
20 capital expenditure forecast includes 21 to 23 mine in prison construction, primarily to compete construction of Lansing Correctional facility and in connection with a new leases signed in December 2019, with the Commonwealth, Kentucky to reactivate, our 656 bed southeast Correctional complex wishing to a point here at least agreement putting extension options.
Our 2020 capital expenditure forecast also includes approximately $7 million of tenant improvement and leasing commissions and maintenance capex of approximately $60 million split evenly between real estate and non real estate assets.
Moving next to a discussion of our earnings guidance as indicated in the press release adjusted EPS guidance for the first quarter 2020 is a range of 26 to 29 cents normalized AFFO per share guidance for the first quarter is 49.
53 cents and AFFO per share guidance, its 50 cents to 54 cents.
For the full year adjusted EPS guidance range of $1.30 $2 47 full year normalized FFO per share guidance. There's a range of 2030 says 2040 cents and full year AFFO per share guidance as 2029 cents to 2039 cents.
Adjusted EBITDA guidance for the first quarter is 96 to nine $9 million as for the full year is 427.5 million to 437.5 million.
As a reminder, compared to the fourth quarter of 2019, Q1 is seasonally weaker because the one fewer day in the quarter and because we incurred approximately 75% of our unemployment taxes during the first quarter, resulting in a collective four cents per share decline from Q4 to Q1.
Our Q1 and full year guidance reflects higher interest expense and lower utilization from ice at several of our facilities compared to 2019 levels.
Q4 to Q1 these items account for per share reduction of five cents.
2019 to 2020 these items accounted for as per share reduction of 31 cents.
Taking into consideration recent immigration trends and policy changes implemented by the federal government last year is setting our forecasted levels throughout 2020.
Our full year guidance also includes a new contract the Mississippi higher utilization at our newly expanded OPI Mesa detention facility, the commencement of leases in Kansas, and Kentucky, and the full year impact of the activation last year as our and towards facilities.
In addition to the lease agreements of Kansas, but anyway, I think production facility commencing in the first quarter 2020, and Kentucky for our previously added southeast passionate complex commenced in mid year, our guidance for the quarter property segment includes the portfolio acquisition announced January 2nd 2000, 2028 properties all leads to the federal government choose a general sort of.
This is administration.
Keith to be able to finance, the 83 million our acquisition will only $7 million of cash with the balance funded by assumed that given attractive fixed interest rate of 4.9% and the issuance of 1.3 million limited partnership units to the seller that are convertible into cash of common stock following a two year period.
As the market prices for our securities does that affect is primarily by headlines from some of the industry's banking partners as well, Washington politics, you have tempered our M&A pursuits and have more other M&A transactions in our guidance.
Our guidance also does not include any new contract awards beyond the previously announced it's a difficult to predict the timing of New awards as David mentioned the state of I had a home is granted a 42 the department of corrections for awarded the contract pursuant to an RFP for out of state capacity of up to 1200 offenders. This ultimately awarded we may activate another one of our.
Facilities.
We're also pursuing several other state opportunities Damon mentioned, many of which will provide upside to our guidance.
Our guidance range reflects our best estimate of ice populations. However, thats populations are the most difficult to predict that could provide upside to our guidance like they did last year.
Compared with 2019, our full year 2020 guidance reflects a fair share reduction of six cents for higher interest expense associated with the 250 million dollar term loan obtained in December as an interest rate at LIBOR, plus 4.5%, which was used to refinance our corn and 8% senior notes.
Although we have the although we had the capacity to pay the mature nodes with our revolving credit facility, which would have saved considerable interest expense, we believe refinancing settlements with longer term capital within more prudent strategy than one that shorter term bank debt.
The adjusted EBITDA guidance, a press release enables me to calculate our estimated normalized effective income tax rate of 4% to 5% for the first quarter at full year and provide you with our estimate total depreciation and interest expense for the first cooling full year.
Thanks, Julie expenses to be approximately 6% for revenue.
Yes, we are providing flexible capacity for ice during times of emerging need like those experienced in 2019 or for the U.S Marshal service, both of which rely other private sector for their detention capacity or providing lead to a fractional system basin unique challenges are updated infrastructure, we play a very important role.
We understand transient federal populations, particularly eyes can be volatile and influence our short term financial results. So while we signed three large contract wise as well as two large contract will be as Marshal service over the past 18 months, we have not taken our focus away from state business. In fact, we've been very successful in executing new contracts with state.
Revenues in.
In 2018, we signed the aforementioned 20 year lease agreement with Kansas Bolstering our growth in the course of the property segment and side management contract in South Carolina, Themart, Wyoming, while completing the and take a state populations pursuit to management contracts from Kentucky, Ohio, and Nevada, supporting our cost of the safety business.
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In 2019, we signed a new management contract the Kansas to utilize a portion of our floral facility in Arizona and another agreement with Kentucky to activate one of our idle facilities and the common law. This time under lease agreement were Kentucky will operate the facility.
Last month, we signed a new national contracted Mississippi, and we are in pursuit of an ethnic contract, Idaho and lease of an idle facility with another state.
I would think of jurisdiction government agencies continue to turn of course are there for the solutions we provide.
We have been winning new contract awards, including accretive acquisitions that provide a growing base of stable cash flows.
Several visas new agreements also demonstrate that we can provide facilities operated by our government partners to lease in our course at a property portfolio or turnkey solutions, we provide both in real estate and Correctional services and our cost of the safety portfolio.
At the midpoint of our guidance for 2020, we expect to generate roughly $285 billion FFO a proxy for cash flow after maintenance capex that before dividends and expect them to $15 million revenue producing capex funded from cash flows.
At the current quarterly dividend rate of 44 cents per share our dividends annualized $210 million meeting about $60 million of residual cash flow, which we currently expect to used to pay down debt.
Our dividend as well covered with an AFFO payout ratio of 75% based on our guidance close to our guided dividend policy of 80% with attractive yield of over 10%.
Our board reviews dividend levels, and our dividend policy every quarter as part of the quarterly dividend Declaration process. The next board meeting is scheduled for February Twentyth, we expect to issue a press release shortly after that meeting announcing the amount of the next quarterly dividend that would be paid in April.
I'll now turn the call back to the operator Travis to open the line for questions.
It's just a reminder, if you would like to ask a question. Please press star one your telephone keypad store [noise].
We have a question from Jones <unk> capital.
Good morning, and thanks for taking the questions.
Hi, Joe.
First question I'm looking in the fourth quarter and understand the whole ice and everything.
I'm looking at that safety segment.
Revenues increased.
Year over year, we all saw.
That's a big increase and expenses and the safety segment, where they went up to 74.3% of revenues from 72.6% of revenues I just wonder if you could talk a little bit about.
What was going on there.
Oh, I got a high level, yeah, our expenses.
Let me back up so when you see declines in populations were not able to necessarily reduced staff. So you had was fixed costs of staffing that you can only flex if you have significant reductions of populations. So throughout 2019, we had some pretty meaningful increases in federal populations. So.
On the margin those are those are higher.
Then if your activating an idle facility for example.
But but as far as kind of at a global level expenses in 2019 reflect higher wage rates. So you've got a very low unemployment rate. So provided wage increases has it provides several market adjustments.
Several facilities, but but beyond that I can't think of anything I just out of the ordinary that with that would influence or are those incidents margins.
Okay.
Thanks to the detail on that and [noise].
I was wondering if you might be able to talk.
Little bit.
You know about what you know government funding for 2020 years or if there's any new government policies that you guys.
The <unk> bandied about that could positively or negatively impact demand from ice.
Yeah. Good good morning, as Damon and now I'll answer that question and I appreciate the question itself.
A couple of days one is that we look at a trend month to month. In addition to kind of real live feedback from our partnering to safety and heights.
And both on the data and looking at historically, but also the kind of feedback from mice.
He indicated last summer that was extraordinary levels sort of population and in turn needs for capacity within our system. Another facility the used throughout the country. So we knew going in the last year.
They were going to see decreased utilization and really kind of get back to kind of historical levels and we look back 10 years back on to look at historical levels and you may know already historically to how you see kind of level for you usually see it loaded decreased during the winter holidays, which is pretty consistent last not 50 days.
To your question is typically about policy and funding so funding.
As a stable this year based on the demands for ice and then the President I think just released a couple of days ago that the a budget for 2021 and within that document. There is a request for increased funding that 60000, so that would be 60000 beds I should say so that would be an increase over current funding less.
Now you know as well as why that's going to go through Congress in house in the sentence now.
A lot more activity on that trying to determine exactly what that number is but at least gives you a preview of what lease administration is looking for.
For for next year from a policy perspective, you've probably seen all they can articles and things we hear back from our partner relative to the cooperation or get with some of the Latin in Central America countries and also with the with Mexico, There's nothing really to add to that but I'd say generally as we said in my comments and has been recorded in the media interest.
Some of those policies in agreement they've worked out has an impact on the southwest border on you would actually that David no no, but I do want to go back to your first question just thinking if you're looking at expenses year over year.
We did have startup expenses to activate our torrance and even facilities. So year over year Q2, and we had about 2.79 does it start up in Q3 at about $6.8 million just start so those would be reflected in our margins than ever in a per diem tables that we present in the supplemental financial.
Okay, great and.
One last one for me one of the the.
Opportunities that that.
You guys I've mentioned in the past is that the potential transfer.
Some of the I'm, sorry, our U.S. Marshalls.
And mates from.
Local jails too you know Oh, let's say a course civic property well what do you guys. See is is there any progress in that or the actual potential that in the near term.
Yeah, Great Great question, and I would say it's over the last couple of years, you don't see a lot of attention to this but we're kind of here on the ground in different regions, where we operate there has been some incremental.
Movement population from Citi counted facilities to core civic and even into Geo and the kind of common thing that we here is that.
I see their credit they continue to kind of.
Raised the bar relative to quality and the type of standards. They want to put in place. So leads and we have consistently met or chief compliance with those standards, where that maybe challenging for us Didier County. So you don't see a lot of press on this but we will hear anecdotally and we hear from time to time with wouldn't our folks in various regions in the country. There here in about a seat.
We are county facility or jail and have taken a step either to go ahead transition that population back to ice and that's sort of like where civic or they've just made the decision that they can not comply with the standards.
Thanks expects for those provider public or private so again I'd say, it's incremental we've seen some some opportunity with that in different parts of the country.
Okay, great. Thank you very much.
Yeah I appreciate your questions.
[noise] just a reminder, if you like to ask your question. Please press star one.
Our next question comes from Jordan Sherman Granger Global.
Good morning, Thanks, one of the go back to your comments about will follow.
I'm not sure I heard that correctly.
He did you say that that is I mean, it in the supplement it says its 60 plus 15%.
Occupied is that right and is that where was that trending I'm sorry, I missed the comments on that.
Yeah, so yet supplemental.
Coffee indicates end of a year I think we're pretty consistent with that today and maybe it might be a little higher utilization as we go into for part of this year, but yeah, I'd say, it's trending a little bit of an increase since the fourth quarter ending that does that David no and as the polymer recall in 19, we had California vacating that facility we've signed up.
A new contact with ice to kind of replace.
The California populations Abbott, they've not fully replace them.
So you had to transition going on throughout 2019 in California really exiting through June and then ice ramping up as the year over year, I think Q4 versus Q4.
A lot of say they were.
Let me get when I think that we'll check on that so I feel that's okay. I just what's your expectation on.
What will happen with that and is that a capacity you might be able to use with the Arizona.
Provision.
Yeah.
Good question I'd say they just the first part is ice has indicated that location is very important to them. Its in close proximity to our ILORI facility, which historically has always been utilized for ice for gosh, almost 2020 to 25 year. So operationally it is a very good facility for them.
In fact, and all that you'd like but also their Florence facility. So so I just as indicated kind of I'd say short and mid term interest on full utilization of facility, but to your second part of your question Mango absolutely. We'll obviously continue kind of judge that with with ice and determine if there's other partners. It could use that capacity in that might be a good fit for them.
At Q4 ice averaged about 1800 people at that facility for 19.
Theres about 900 in Q4 18.
Right.
I'm just wondering in terms of the outlook for [noise] detainees for ice in U.S marshals.
Considering the new policies in place I'm wondering again I'm not sure we'll know what's going to happen longer term on that but.
I'm just wondering does the 60000 beds in the Trump budget.
Actually makes sense I mean, it doesn't look like we're trending in that direction.
Now if you look at I guess, the last 12 months' look at My chart. You know, we got as high as I think 56 57000 middle of last a year I guess during the summer months and that was again increased utilization based on historical standards.
Today, you can look at the nationwide number let's see this was a January.
Today that.
Number was about 40 or 40 to 43000 nationally that I sat in detention capacity public or private and what I would say is that if you look at just the amount of individual they've actually on the border that appears to be pretty consistent over the winter with historical standards, you're looking back at 10 plus years cycle.
All the way of saying that it did fears that having kind of funding I don't know if its 50000, but probably some funny enough to where they were last year 55000 based on now I kind of unique things that happen from time to time, but also seasonal fluctuations of population, that's probably a pretty good number again 50000 I don't know.
I don't think gets through Congress and through the house and Senate, but I'd say kind of the funding they've got today that might be a pretty good number for them to think about claiming that on next year I would imagine the David It's David that's it is it is typically seasonal so you'll see declines and illegal immigration during the peak winter months and during the peak summer months.
Yeah, we've factored into our guidance.
The new policies of the administration implement that last year and that's about when we saw declines in our populations beginning September October ish. So there can be substantial surgeons last year, we would not have predicted we did not predict the level of ice detainees that we had throughout 2019 as I mentioned Q2 in Q3 was.
Kind of high watermarks for us and it's just very difficult to predict whether that's going to happen again. This year, we're not expecting it to it's not in our guidance.
Based on the new policies of the administration. So if it does that would be upside I can just add one more thing. The question I've asked earlier, one thing I think gives us maybe.
Buffer against a little bit on maybe its population going up and down is I mean, we need all the appropriate standards I mean, we've got the newest most modern facilities on providing capacity the ice again when it all the appropriate standards knowledge that physical plant the operational standards and our high facilities are the most monitored probably in our portfolio matters a lot of.
Government floors that are walking the halls, and our facilities not every day monitoring our operations interaction with the detainees and so and we welcome that we welcome that oversight and on a constant monitoring I guess my point is that is if I had the opportunity to maybe recalibrate a little bit their capacity in her system I think we'll always gets the.
First month versus the city or county that you again can't maybe make the capital investment or the dollars investment to meet these standards that continue to increase and raise the bar on quality.
How does that actually let me ask a question along that line before how much how much of ice is capacity or for U.S marshals added a few as marshals has any.
Is not is in like county or municipal facilities.
Yeah, Great question. So good to go back to that number let me just use around never say 45000, or maybe 50000 of potential capacity that high cheeses eye on annual basis, I would say between us and Geo and MPC is probably about half of the capacity, so say half of that capacity as private sector. So say there.
The way the other half is with the other public sector cities and counties. There is a little bit of ice capacity that they've got where they own and operate themselves, but that's a very small mouth I think only a couple of thousand beds, So say half and half on Marshal service, we have about the eight 9000 prisoners on and begin today for the Marshal service I think is pretty good.
System with GE, though.
I'd say, David probably with a almost 50000 federal prisoners is probably not half is probably maybe by the for a marker prisoners are in prime still there's like ours and the other two thirds or in public or public utility Sydney and county jail.
But I.
So just wondering is there any it I don't know if you looked at the details that budget I know, it's just a preliminary or just a more talking points. Then it is actual budget.
Is there a an increase in funding requested for ice officers for a enforcement I mean, maybe that.
Ultimately would or could drive increases in number of.
Detainees I guess immigrant detainees captures and the Chinese.
Yeah, there was actually pretty pretty well it kind of funding across the board for all of all advice and homeland security or should they also and even customs and border more control so young.
Half and personnel attorneys.
So you had a lot lot as best as I say throughout their kind of entire system.
Okay, I've got a couple others, but let me I'll return to the Qs and see if someone else wants to ask the question now.
Perfect. Thank you.
Thanks.
She would like to ask your question. Please press star one now.
[laughter].
Again for Star one ask a question.
Yeah, we do have a follow up from Mr. Sherman.
[laughter] give someone else it back [laughter]. Thanks.
Just to go back to the three facilities Adams Torrance and eating.
What I just wondering how the contracts are sort of structures there or is there a base minimum and then and then a incremental per diem for a as you would you get above that and just you know just wondering how those.
Work.
Yeah. So it's kind of all the above every contract that we negotiate kind of stands on their own a there is many things that we consider.
Based on kind of the dynamics of needs from the from the partner also the regional location and maybe you flexibility either ice or marshals want or vice versa. We want a base on potential opportunities like in Arizona, and Mississippi. So it's kind of all the all the above we've got different provisions and all three.
Okay, and then I guess with eight with Adams 51 for is what's the what's the outlook for Adams usage, 51% occupied now if ice doesn't take up the rest of that as their opportunities to farm that out somewhere else or we use that for some other.
Yes. Good question, it's almost kind of the same identical situations will comment on Arizona. So it's a great location for ice close proximity in New Orleans, which is a key kind of.
Airport for them on.
Moving of individuals around the country or maybe out of the country. So it's a great location strategic or for them, but it's also kind of the same kind of view, we have enough facility ice has indicated that a need and desire to use entire facility, but we continue to kind of modern into that and talk to them real time based on a needs because we know we have not only need in state with.
Mississippi you know the initially contract we did up and how has your wishes north part of the state but also.
I would say placement could be an opportunity to so we're we're monitoring closely but I guess the short answer is ice has indicated an interest entire facility.
So it was expectation that they would wrap that up this over the over the next.
A few quarters over next year, how does that sort of sort out.
Yeah, I'd say, probably the way to look at that want to get probably it's a verbal comments probably during the course of this year again. It is you know classic conversation and based on kind of you either changes they have warehouse communicating with them that.
As you heard me say in my script too I mean, we've got Oh gosh 1234.
Several states I expressed an interest in capacity in our system and so while we're also keeping them educated about opportunities, maybe where we can use capacity like Atlanta will paloma. So I'd say dirty courses. This year, but again this will be probably a kind of a day by day week, the big lump monitor closely to determine based on their needs opportunities we can all.
So we use that capacity someone else.
And then just last question I apologize if I missed the timing of a the timing of the Idaho.
Either RFP or awarding or how whereas what does that sound again.
It's a we think any day now so we fad or the most notable thing was the public announcement by the border corrections in January indicating authority in approval for them to negotiate dnbi in pharma corrections negotiated contract with of course is like and so we've been in Tasigna case was did I, how Idaho, So we think probably any.
Day now and.
As I mentioned in my remarks, we don't have that contract in our guidance.
Likely require the activation of and idled facility, which is probably a 120 day ramp as well so I probably talking.
Second half the year before you start seeing a financial impact if you. If we are ultimately get that contract awarded.
So some potential addition to this year, but but obviously a big are much bigger impact next year.
Right right and that's exactly right.
Okay.
And then just finally I apologize I, Arizona that they said anything about the timing of their decisions I know that was a sort of a they came out of left field that they would shut down that big facility, but as they put any timing on on any part of that process.
I don't think they.
For the hard timeline on it it was part of you probably already there was part of the Governor state of the state address earlier this year and so it's our anticipation that this would be a fiscal year next year fiscal year. There. So that would be starting July one of this year you haven't said exactly what they plan to do but we anticipate that.
A copy of procurement or a serious procurements for either instate indoor out of state capacity longer term it could be a play where they why owned and managed so a safety solution and door because it is a big quantity and or maybe a property solution, where we lisa to them and developed before them. So your time to be path.
I see utilization for long term could be either new facility or utilizing a lease model like we do in Kansas or proposed in Alabama.
Okay, great. Thank you very much.
Appreciate the question.
If you might ask a question please press star one.
Yeah, no further questions in the queue I, let turn call back over to Mr. Hedinger.
Thank you Travis before we conclude the call I once again I want to take a moment to recognize all of our employees across the country, you're doing a great work on behalf of our government partners.
Thanks to their hard work dedication, we were able to make a real different for those and arc here.
For example in 2019, approximately 6500 or high school with Italy or career trade certificates were awarded to individuals a trusted in our care.
Type of accomplishment for the individuals and arc here can drastically improve their ability to successfully reenter society and it would not be possible without the commitment of our employees.
Whether we are for these individuals on the road to reentry will provide in a safe environment for people, who have just entered our country. Our employees played a need for an important role and for that I am truly truly thankful.
I would like to figure one for joining us on the call today, we look forward to reported to you. Our first quarter 2025 as a result in may thanks again.
Thank you ladies and gentlemen, this concludes todays teleconference. You may now disconnect.