Q1 2025 CoreCivic Inc Earnings Call
Good day, and thank you for standing by.
Welcome to the course of the next first quarter 'twenty 25 earnings call.
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Speaker Change: I would now like to hand, the conference over to your first speaker today.
Michael Graham: Michael Graham.
Speaker Change: Managing director of Investor Relations.
Speaker Change: Thank you operator, good morning, everyone and welcome to <unk> first quarter 2025 earnings call participating on today's call are Damien heightening, Curt <unk>, Chief Executive Officer, Patrick Swindle, <unk>, President and Chief operating Officer, and David Garfinkle, Chief Financial Officer.
Speaker Change: Sure.
Speaker Change: We are also joined here in the room by our Vice President of Finance, Brian Hammonds.
Speaker Change: On this call we will discuss financial results for the first quarter of 2025 as well as the updated financial guidance for the 2025 year.
Speaker Change: We will also discuss developments with our government partners and provide you with other general business updates.
Speaker Change: During today's call our remarks, including our answers to your questions will include forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act.
Speaker Change: Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our first quarter 2025 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including forms 10-K, 10-Q, and also 8-K reports.
You are cautioned 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.
Speaker Change: Management will discuss certain non-GAAP metrics are.
Speaker Change: A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the Companys quarterly supplemental financial data report posted on the investors page of the company's website at <unk> Dot com.
David: With that it is my pleasure to turn the call over to our CEO David <unk>.
David: Thanks, Mike Good morning, and thanks, everyone for joining us for core Civics first quarter 2025 earnings call.
David: On this mornings call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners.
Speaker Change: Following my opening remarks, including high level comments on our quarter and updates on contracting activity I will hand, the call over to Patrick Swindle, our president and Chief operating officer.
David: Patrick will discuss operational results as well as our ongoing facility Activations.
David: Finally, we will turn the call over to our CFO, Dave Garfinkle, who will provide greater detail on our first quarter financial results as well as our updated 2025 financial guidance.
David: Dave will also provide an update on our capital allocation strategy.
Speaker Change: Before I go to the highlights of our first quarter results and numerous contracting actions I would like to share how excited I am for and deeply proud of our team here at core civic.
Speaker Change: Our team has always been mission and outcomes focused but this is such a significant moment of time in our company's history.
Speaker Change: Never in our 42 year company history have we had so much activity and demand for our services as we are seeing right now.
Speaker Change: As you know and as shared daily in the media maybe of our partners are facing tough challenges and our team is focused and energized to be able to answer the call with solutions our partners need at this critical moment in time.
Speaker Change: Let me now move on to a few highlights from our first quarter results.
Speaker Change: <unk> core civic exceeded its expectations for revenue and profit during the first quarter.
Speaker Change: Patrick and Dave will discuss the quarter in greater detail, but the strong financial performance resulted from realized cost management improvements coupled with meaningful increases in facility utilization, which improved to 77% from 75, 2% in the first quarter of the prior year.
Speaker Change: Specifically first quarter revenue of $488 6 billion exceeded our expectations with notable strength from facilities, serving the United States immigration and customs enforcement or ice facilities as well as from our state partners.
Speaker Change: Similarly, EBITDA exceeded plan coming in at $81 million.
Speaker Change: Both metrics were up meaningfully from the fourth quarter of 2024, but down slightly from the first quarter of last year, when our daily fulfill had a full quarter of operation and when our California City facility was fully leased by the state of California.
Speaker Change: I'll have more on those two facilities.
Speaker Change: As we have begun to reactivate those facilities.
Speaker Change: Turning to contracting activity, we have been busy this quarter, particularly since the change in presidential administration in late January.
Speaker Change: February 27th we announced contract modifications for our 2016 bed northeast, Ohio Correctional Center in Youngstown, Ohio.
Speaker Change: 72 bed, Nevada, Southern detention center in Pahrump, Nevada.
Speaker Change: And our 600 bed Cimarron Correctional facility in Cushing, Oklahoma to add capacity for up to 784 ice detainees.
Speaker Change: Additionally, a contract modification at our 2672 bed Tallahatchie County Correctional facility.
Speaker Change: While our Mississippi details that ice may use up to 258 beds.
Speaker Change: Our March 5th we announced that we had agreed under an amendment to our in our government services agreement or SA to resume operations and care for up to 2400 individuals at the 2400 bed daily Immigration processing Center in Delhi, Texas, a facility operated by <unk>.
Speaker Change: Vic and owned by a third party.
Speaker Change: The term of the amended GSA, which expires in March of 2030, and it may be further extended by mutual agreement.
Speaker Change: We anticipate total annual revenue once the facility is fully activated to be approximately $180 million.
Speaker Change: As those who follow the company will recall, we previously received notification from ice on June 10th 2024. After nearly 10 years of operation of Ics intent to terminate funding of the GSA for services that the daily facility effective August nine 2024.
Speaker Change: We did not operate the <unk> facility for August nine 2024 until the resumption of operations at the facility on March 5th 2025, though we did continue to provide a maintenance team at the facility to keep it ready to reactivate.
Speaker Change: We are honored to have this important facility operating again.
Speaker Change: We are grateful to work once again with target hospitality, our exceptional real estate partner and we are thankful to ice for their trust in our capabilities.
Speaker Change: Patrick will share more about this activation development, but I'm proud to share that we began receiving an initial population at the daily facility. Just 31 days after many of the contract and accomplishment only powerful due to months of pre planning by our hardworking activation team.
Speaker Change: Sticking with ice we also have entered into two six months later contracts with ice.
Speaker Change: Secondly, these later contracts provide initial finally into course of it to begin activation efforts, while we engage collaboratively with ice to negotiate and execute longer term a longer term contract.
Speaker Change: On March 7th we commenced a letter contract at our 1033 Bad Midwest Regional reception center in Kansas.
Speaker Change: On April 1st we signed a letter contract for our 2560 bed, California City Immigration processing Center in California City, California.
Speaker Change: We continue to have active conversations with ice regarding their increase secured bed needs at other facilities.
Speaker Change: We expect additional contracts with ice to follow a budget reconciliation what ice is a clear line of funding, though it is possible some contracts could be announced either prior to reconciliation.
Speaker Change: Core civic has three facilities currently under activation with ice and we are also leaning forward our facility and transportation Capex at other facilities. So that we are ready to mobilize quickly.
Speaker Change: To that end on our last conference call. We mentioned that we had internally approved $40 million to $45 million of capital expenditures related to facility Activations and transportation services and based on our opportunities. We are now, adding another $25 million more for facility activation expenditures.
Speaker Change: And as April 7th document titled justification for other than full and open competition I cite the need for nearly 100000 beds based on the Lincoln Riley Act three executive orders around border security and the administration's goal of removing 1 million aliens annually.
Speaker Change: In contrast, Ice's budget currently find 41500 beds.
Speaker Change: This document is as justification for streamlining the contracting process recognizes that the procurement process is very time consuming and that the private sector. In particular is needed to fill the gap and meet the immediacy of the current need.
Speaker Change: We believe this justification could allow for expedited contract and incorporating fair and reasonable pricing once the federal budget is determined.
Speaker Change: Turning now to the federal budget process. Our current outlook is that we are still moved toward president Trump's singular funding Bill, which in addition to significant funding for border security would include the administration's tax and spending priorities and that this will be achieved via budget reconciliation.
Speaker Change: Process.
Speaker Change: Republicans are currently aiming for reconciliation by Memorial day, but that could fly to July 4th.
Speaker Change: The key to a reconciliation bill is concurrent adoption by the house and Senate are specific reconciliations instructions, which aligns the two houses of Congress to a common budget outcome.
Speaker Change: On April 28, the Republican House Judiciary committees portion of the budget reconciliation reconciliation Bill requested $45 billion over the four years ending in 2029 for immigration detention, which if annualized would be over three times, our current attention budget.
Speaker Change: The thing that has not yet shared its version, but we believe support for ice is strong there too.
Speaker Change: Our belief is that most new contracts with ice will come after finding that established VA congressional budget agreement.
Speaker Change: We continue to believe that detention beds supplied by the private sector represent the best value.
Speaker Change: And are the most humane most efficient logistically have the highest audit compliance scores in their system and are readily available.
Speaker Change: Additionally, with 42 years of operating experience with ice private sector beds are the least likely to be legally challenged particularly relative to some international options.
Before I move on let me take a minute and pan out to the big picture regarding capacity, we still have available for ice versus capacity already under contract.
Speaker Change: I also wanted to provide a crosswalk to some of the members we discussed on last quarter's call.
Speaker Change: Dave will note in his comments that we have nine Idaho facility to have over 13400 beds available.
Speaker Change: As mentioned last quarter. If you include this about the 13400 beds along with surge capacity, we have made available at certain facilities.
Speaker Change: Partial capacity, we have in facilities that are currently in operation and finally capacity, we can make available through third party leases like our great partnership with target hospitality at our daily facility as an example.
Speaker Change: If you add all of these options together, we're close to the 30000 beds that we proposed to ice earlier this year.
Speaker Change: So with the four contract modifications at our Ohio, Mississippi, Nevada, and Oklahoma facilities.
Speaker Change: Our amendment at the daily facility and the letter contracts at our Midwest and Cal City facility that we assume will be replaced with long term agreements. These together represent approximately 7000 beds that either are or that will that we expect will be under contract.
Speaker Change: So we continue to have an excess 20000 beds that could be available for ice if they get it just don't find easier reconciliation.
Speaker Change: We are also looking at additional opportunities for expansion that could be cost effective and allow for greater efficiencies.
Speaker Change: Finally, we are looking at facilities all across the United States that might be attractive for lease or purchase but to be clear. Our primary near term focus on the solutions. We are proposing to ice is our existing idle or underutilized capacity.
Speaker Change: Switching now to the state side during January we announced that we were awarded a new major contract with the state of Montana to care for additional inmates outside the state of Montana with 240 in arriving at our 2000 and 672 bed Tallahatchie County Correctional facility in Tutwiler, Mississippi.
Speaker Change: During the first quarter.
Speaker Change: The base term of the new management contract with the state of Montana.
Speaker Change: As for a specified number of inmates and therefore could grow beyond 40.
Speaker Change: Runs through December of 2026 and contract extensions could run as long as seven years.
Speaker Change: Also during January of 2025, we received 120 additional Montana inmates at our <unk> hundred 96 beds, the world Correctional facility and Eloy, Arizona under an existing contract.
Speaker Change: Our partnership with Montana remains strong and we now serve the stayed at three facilities. Those two out of state facilities I, just mentioned and also our 644 bed Crossroads Correctional Centre in Shelby Montana.
Speaker Change: We are grateful for our strong partnership with Montana, and we appreciate the trust they put in our company and our facility teams.
Speaker Change: On the state budget front, most states initiate the annual budget process with the governor submitting a proposed budget around the start of the year, followed by a review and amendments by the legislature and culminating in a budget before the start of the new fiscal year typically on July one.
Speaker Change: We continue to work with our state partners to help ensure that our per diem rate fully reflect the higher levels of inflation, particularly around labor experienced during and after the COVID-19 pandemic period.
Speaker Change: We are generally encouraged by the direction of the budget proposals.
Speaker Change: We remain in active dialogue with several other existing <unk> partners as well as new state partners that could result in additional populations, including the possible use of one or more of our idle facilities.
Speaker Change: We are also currently evaluating rfps for several different facilities with the Florida Department of corrections.
Patrick Swindle: Now I'll pass it over to Patrick as window for an overview of operations during the first quarter Patrick.
Patrick Swindle: Thanks, David.
Patrick Swindle: I'll start with a high level overview of our first quarter operational performance.
Speaker Change: As David mentioned overall occupancy for the quarter was 77% up one five percentage points from the fourth quarter of last year, and one eight points as the year ago quarter.
Speaker Change: Occupancy has been on an upward trajectory since early 2023, when it stood at approximately 70%.
Speaker Change: This quarter also showed a month to month trends of improving occupancy with increases in ice detention population levels beginning in late January.
Speaker Change: Federal partners, primarily immigration and customs enforcement in the U S. Marshal service comprised 48% of course civics total revenue in the first quarter.
Speaker Change: Revenue from our federal partners declined 8% during the first quarter of 2025 compared to the prior year quarter.
Speaker Change: However, excluding the ability immigration processing center for both years.
Speaker Change: Our revenue from <unk> increased 11% versus the first quarter of 2020 for our.
Speaker Change: Our first quarter revenue from the U S. Marshal service, our second largest customer was essentially flat year over year that we believe U S. Marshals service populations may start to increase later this year.
Speaker Change: Now I'd like to discuss <unk> usage of detention capacity nationally across all facilities.
Speaker Change: I started the quarter with this national detention population of approximately 39000 and ended the quarter at nearly 48000 individuals in detention.
Speaker Change: Most recently published ice detention total was 47 978 on April six 2025.
Speaker Change: <unk> share of the total detention population is remain roughly steady during this period of expansion and we've increased from roughly 10000 ice detainees in our facilities at the end of 2024 to about 12000 now.
Speaker Change: As we anticipated last quarter the accelerated rate of interior enforcement arrest is more than offset the decline in border apprehensions, resulting in ice exceeding the 41500 funded bad level.
Speaker Change: On March 5th we announced the resumption of operations at 2400 bed Daily Immigration processing Center in Dilley, Texas, which was idle during August 2024.
Speaker Change: The contract modification costs for core civic to reopen their facilities five neighborhoods over 180 days, which commenced on March 5th.
Speaker Change: The fixed revenue scale accordingly.
Speaker Change: While the activation plan called for core civic to have the first two neighborhoods ready to receive detainees. After 60 days of course civic was able to mobilize even more swiftly and we received our first detainees just 31 days after commencement.
Speaker Change: Many of our facility leaders and former employees were able to transfer back to the facility or to be rehired and we already have reestablished a team of approximately 360 employees and growing daily.
Speaker Change: Target Hospitality Corporation, a real estate partner Daily has moved in lockstep with core civic and we appreciate our strong relationship.
Speaker Change: Importantly, we are on track to open the additional neighborhoods on schedule and we should be fully ramped and receiving full contract economics beginning in September.
Speaker Change: We're also actively working to prepare two additional facilities for detention intake for ice under letter contracts.
Speaker Change: Keyword includes preparing the physical facilities to ensure compliance with national detention standards and hiring and training the professionals the operation will require.
Speaker Change: Our 1033 bed Midwest Regional reception center located in Leavenworth, Kansas has begun preliminary activation steps under our March 7th letter contract with ice.
Speaker Change: While we work collaboratively with ice towards negotiation and execution of a longer term contract. We have begun the on ground steps necessary to get the physical facility and the team ready to receive a population there.
Speaker Change: Notably we have assembled our facility leadership team there and they are now onsite we posted job listings for employment at this facility on March 17th we have already received over 500 applications for an estimated 300 positions. Our first training class for detention officer started this past Monday.
Speaker Change: Similarly, we have begun preparation activities at our 20 560 bed, California City immigration processing Center in California City, California under a letter contract signed April one 2025.
Speaker Change: Again, our facility leadership team is now in place and they are actively preparing the facility to receive an ice population with a long term contract has been negotiated and executed.
Speaker Change: We posted job listings for Cal City on April seven and we received over 2500 applications already.
Speaker Change: One other significant component of core civics broader ice activation plan involves adding capacity for detainee transportation.
Speaker Change: Over the last four months core civic is purchased or Hasnt production. A total of 120 vehicles comprised of a mix of buses and vans. This is a significant increase in our fleet and we believe this capacity will be necessary to accommodate Ics transportation requirements.
Speaker Change: Of course, the VIX first quarter revenue from state partners, and our safety and community segments increased five 2% compared with the prior year quarter.
Speaker Change: This increase is a result of higher premium rates at higher occupancy from our state government partners as well as contributions from additional contracts with Montana that commenced in the third quarter of 2024, and the first quarter of 2025.
Speaker Change: During January 2025, we expanded our relationship with the state of Montana with a new contract that expanded the geographic area of our facilities that can serve the state.
Speaker Change: During the first quarter, we accepted 240 inmates at our Tallahatchie County Correctional facility in Mississippi.
Speaker Change: Within our facilities, we continue to realize operational improvements in <unk>.
Speaker Change: Staffing levels continue to drive much of our operating improvement as we've been able to reduce or eliminate expensive short term labor measures necessary in response to the COVID-19 pandemic.
Speaker Change: In addition to being more cost effective over the long term permanent and locally hired staff also improved facility performance in such areas of safety program outcomes and audit performance.
Speaker Change: Labor is the largest expense in our industry and in recent years, we've experienced unusual levels of labor inflation and cost uncertainty.
Speaker Change: At this point labor inflation and availability have returned a relatively normal and predictable levels and labor markets are displaying stability.
Speaker Change: In recent years, we've invested significantly in our frontline employees often ahead of receiving funding support from our partners.
Speaker Change: Through premium increases and operational improvements we are restoring the performance of many of these facilities.
Speaker Change: Of course, <unk> ability to maintain strong staffing levels in our current base of facilities is particularly important as we address the increased demand under existing contracts and approached facility Activations.
Speaker Change: In short our improved staffing positions us well operationally to maintain the trust of our partners to manage their higher population needs and respond swiftly to new opportunities.
Speaker Change: Of course, the VIX community segment is comprised of 21 residential reentry facilities, serving the federal Bureau of prisons, as well as various state and county governments.
Speaker Change: Facilities in our community segment are engaged primarily in preparing individuals for successful reentry to their communities after a period of incarceration or as an alternative to incarceration.
Speaker Change: Revenue in our community segment was essentially flat compared with the first quarter of 2020 for the facility net operating income per community increased 6%.
Speaker Change: We remain positive about the outlook for the community segment as more of our government partners, including the.
Speaker Change: Return their focus to successful reentry in order to curb the recidivism challenge.
Speaker Change: In conclusion, <unk> is well positioned operationally to serve our government partners growing needs.
Speaker Change: The longer term macro environment for our federal state and local businesses remains positive as we are well positioned to support increasing public safety and immigration priorities.
Speaker Change: Our government partners at all levels based complex challenges, including capacity limitations aging expensive to maintain and expensive to build facilities persistent staffing challenges in populations that are increasing in numbers and evolving their complexity.
Speaker Change: Our ongoing conversations with our partners highlight their growing needs as do other metrics, including jail backlogs of population forecasts.
Speaker Change: Now I will turn the call over to David Garfinkel, who will provide a detailed look at our first quarter financial results, our capital markets activities and assumptions included in our 2025 financial guidance Dave.
David Garfinkel: Thank you Patrick and good morning, everyone in the first quarter of 2025, we generated net income of 23 per share and <unk> per share of <unk> 45.
David Garfinkel: Both exceeding average analyst estimates by <unk> 10 per share adjusted.
David Garfinkel: Adjusted EBITDA was $81 million exceeding average analyst estimates by $10 million.
David Garfinkel: Excluding the contribution of our South Texas family residential center at our California City Correctional Center contracts in the prior year period revenue increased six 7% and adjusted EBITDA increased 21, 2% in the remainder of our portfolio, helping offset some of the impact of these contract losses.
David Garfinkel: On an as reported basis compared to the prior year quarter, adjusted EBITDA decreased $8 $5 million adjusted EPS declined to <unk> and normalized <unk> per share decreased a penny.
David Garfinkel: These year over year declines resulted from the termination of our contract with ice at our South Texas family Residential Center effective August nine 2024, and our lease exploration with the state of California effective March 31, 2024 at our California City Correctional Center.
David Garfinkel: These terminations combined for a decrease in facility net operating income of $22 6 million or <unk> 16 per share from the prior year quarter.
David Garfinkel: During the first quarter, we began reactivating the south Texas facility now known as the daily Immigration processing Center under a new five year agreement that became effective March 5th had accepted our first residents at this facility April 9th.
David Garfinkel: Further on April one 2025, we entered into a letter contract with ice at the California City facility now known as the California City Immigration processing Center, which authorizes funding for a six month period to reactivate the facility, while we work with ice to negotiate and execute a long term contract.
David Garfinkel: The reductions in adjusted EBITDA and per share results. During the first quarter of 2025 compared with the prior year quarter were partially offset by higher occupancy from state and local partners as well as from ice across the remainder of the portfolio.
David Garfinkel: First quarter 2025 results also include an income tax benefit associated with stock based compensation vesting and certain payroll tax credits aggregating <unk> per share, which compares to a <unk> <unk> income tax benefit associated with stock based compensation vesting in the prior year quarter.
David Garfinkel: Our capital allocation strategy contributed to increases in per share earnings aggregating approximately <unk> <unk> per share through reductions in interest expense and common shares outstanding.
David Garfinkel: Federal revenue in our safety and community segments decreased $21 $1 million from the first quarter of 2024 to the first quarter of 2025, including a reduction in management revenue at the deli facility of $33 $6 million.
David Garfinkel: So excluding this facility federal revenue in our safety and community segments increased $12 5 million or five 6%.
David Garfinkel: State revenue in the safety and community segments increased $9 8 million or five 2% from the first quarter of 2024 to the first quarter of 2025, which included revenue from two new contracts with the state of Montana awarded in the third quarter of 2024 in the first quarter of 2025 rare.
David Garfinkel: Revenue in our property segment declined $8 $4 million, primarily due to the aforementioned expiration of the lease at our California City facility.
David Garfinkel: Based on our activation activities, resulting from the letter contract signed effective April one.
David Garfinkel: The California City facility will move to our safety segment in the second quarter to be reported with other correctional and detention facilities, we operate.
David Garfinkel: Operating margin in our safety and community facilities combined was 23, 6% in the first quarter of 2025 compared to 23, 7% in the prior year quarter.
David Garfinkel: The slight decrease in our operating margin was due to the termination of the ice contract at the Deli facility.
David Garfinkel: As we have previously mentioned the margin at the Deli facility was higher than the portfolio average due to the size and scalability of expenses and due to the unique design and specialized services provided at the facility.
David Garfinkel: All else equal, we expect our margin to improve as we fully reactivate the delta facility.
David Garfinkel: Excluding the Dolby facility operating margin was 22, 2% in the prior year quarter.
David Garfinkel: The increase in our operating margin excluding the delay facility was due to an increase in occupancy from 75, 2% to 77% for our safety and community segments combined and a reduction in certain operating expenses.
David Garfinkel: Turning next to the balance sheet during the first quarter, we repurchased one 9 million shares of our common stock at an aggregate cost of $37 $9 million under our $350 million share repurchase program accelerating the pace of our repurchases compared with recent quarters.
David Garfinkel: Since our share repurchase program was announced in May 2022 through March 31, we have repurchased $16 5 million shares of our stock at a total cost of $219 million or an average price of $13 30 per share.
David Garfinkel: As of March 31, we had $131 million available under the board authorization.
David Garfinkel: Our leverage measured by net debt to adjusted EBITDA was two five times using the trailing 12 months ended March 31, 2025, right in the middle of our target range of two and a quarter times to two and three quarters times.
David Garfinkel: As of March 31, we had $75 million of cash on hand, and an additional $256 million of borrowing capacity on our revolving credit facility, providing us with total liquidity of $331 million.
David Garfinkel: Our next debt maturity is October 2027, when $238 5 million of.
David Garfinkel: Senior unsecured notes mature.
David Garfinkel: Based on our first quarter performance, which beat our internal forecast our business momentum and new contract awards and contract expansions announced since we last provided guidance. We are increasing our full year 2025 financial guidance for 2025, we now expect to generate diluted EPS of <unk> 83 to <unk> 92.
David Garfinkel: Up from 48 to 61, and our previous guidance up 61% at the midpoint.
David Garfinkel: We now expect <unk> per share of $1 72 to $1 82 up from $1 37 to $1 50 up 23% at the midpoint.
David Garfinkel: And we expect EBITDA of 331 million to $339 million up from 281% to $293 million or 17% at the midpoint.
David Garfinkel: The single largest factor in our increased guidance is the reactivation of the daily immigration processing Center effective March 5th.
David Garfinkel: The new agreement for the <unk> facility provides for a fixed monthly revenue payment in accordance with a graduated schedule to correlate with the activation of each neighborhood within within the facility.
David Garfinkel: We expect to have the entire facility activated by early September 2025, and expect to begin recognizing revenue for the entire 2400 bed facility at that point.
Consistent with our past practice our guidance does not include the impact of New management contract awards, not previously announced because the timing of government actions on new contracts is always difficult to predict.
David Garfinkel: Although we have entered into short term letter agreements for our <unk> thousand 33 bed Midwest Regional reception Center, and our 2000 and 560 bed, California City immigration processing Center. Our guidance does not include the impact of potential longer term contracts at these facilities as we have not yet negotiated a per diem rate or a definitive quantity of bed.
David Garfinkel: To be utilized at either facility.
David Garfinkel: The timing of any new longer term contract awards at these facilities is also difficult to predict.
David Garfinkel: In the meantime, the net financial impact of the forecast of the short term agreement is not material, but assuming we are able to negotiate longer term contracts at these facilities. The EBIT contribution will occur will occur sooner than if we did not have the letter contracts because the letter contracts enable us to offset activation expenses we have.
David Garfinkel: Already begun to incur.
David Garfinkel: We are expecting to execute new contracts during 2025, including but not limited to the potential long term contracts at the Midwest Regional reception Center, and our California City Immigration processing Center, and we will revise our financial guidance throughout the year, if and when new contracts are signed.
David Garfinkel: Based on immigration policies of the new administration as well as newly enacted legislation requiring the utilization of more detention for certain criminal violations, we expect new contracts to require the activation of one or more of our idle facilities.
David Garfinkel: We currently own nine idle correctional and detention facilities that have over 13400 available beds, including the two I just mentioned.
David Garfinkel: The activation of an idle facility generally requires four to six months to hire train and prepare the facility to accept residential populations, which depending on contract structure could result in substantial startup expenses before we realize additional revenue.
David Garfinkel: To the extent any new contract requires the activation of an idle facility before we begin to recognize revenue our guidance could be negatively impacted by the startup expenses until the revenue we generate offsets these expenses.
David Garfinkel: We plan to spend $60 to $65 million on maintenance capital expenditures during 2025 unchanged from our prior guidance and $9 million to $10 million for other capital expenditures up slightly from our prior guidance.
David Garfinkel: Our $2025 forecast also includes $65 million to $70 million of capital expenditures associated with potential idle facility Activations and for additional transportation vehicles, including $12 million spent in the first quarter.
David Garfinkel: We have increased this forecast by $25 million from our prior guidance in order to expand the number of facilities ready to accept residential populations beyond the initial list of priority locations. We had previously identified.
Our 2025 guidance contemplates staying within our targeted leverage of two five times to 275 times.
David Garfinkel: Though we continue to evaluate M&A opportunities, which if completed would most likely include transactions in our core business. Our guidance does not include any M&A activity.
David Garfinkel: However, we could deploy additional capital into M&A opportunities, where we believe cash flows are sustainable over the long term and where returns meet or exceed returns on share repurchases.
David Garfinkel: Considering the size of M&A opportunities under evaluation, we would expect to finance such M&A opportunities with existing liquidity.
David Garfinkel: Our guidance also does not include any share repurchases beyond those completed to date or additional capital expenditures beyond those mentioned that could be needed in connection with the reactivation of our idle facilities, which may depend on customer needs and preferences.
David Garfinkel: However, we expect to continue executing on our share repurchase program, taking into consideration our earnings trajectory stock price liquidity and alternative opportunities to deploy capital as a result, we could temporarily exceed our leverage target in the short term, but considering the strength of our existing cash flows and the potential growth in our <unk>.
David Garfinkel: Earnings, we would expect a naturally achieve and sustain our targeted leverage over the medium and long term.
David Garfinkel: Our balance sheet remains strong with low leverage and no near term debt maturities and readily available bed capacity positioning us well to take advantage of opportunities in the marketplace.
David Garfinkel: We expect adjusted funds from operations or <unk>, which we consider a proxy for our cash flow available for capital allocation decisions such as share repurchases M&A activity and growth capex, such as facility Activations to range from $187 5 million to $205 million for 2025.
David Garfinkel: We expect our normalized annual effective tax rate to be 25% to 30% unchanged from our prior guidance, which reflected a lower tax rate in Q1 compared with the other quarters as previously mentioned.
David Garfinkel: The full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense.
David Garfinkel: We are forecasting G&A expenses in 2025 to be between $145 million and $150 million unchanged from our prior guidance.
David Garfinkel: I will now turn the call back to the operator to open up the lines for questions.
David Garfinkel: Thank you.
David Garfinkel: At this time, we will conduct a question and answer session.
David Garfinkel: A reminder to ask a question you will need Starwood one on your telephone and wait for your name to be announced.
David Garfinkel: To withdraw your question. Please press star one again.
David Garfinkel: Please standby.
David Garfinkel: Kyle the Q&A roster.
Speaker Change: Our first question comes from Joe Gomes with noble capital.
Your line is open.
Joe Gomes: Good afternoon, gentlemen, and congrats on the quarter.
Speaker Change: Joe Thank you so much.
So I wanted to start with the letter of agreements.
Speaker Change: Good news on both Midwest and Cal City.
Speaker Change: Are you hiding any more of them on us than it.
Speaker Change: I've come to you signed a couple of more recently.
Speaker Change: Definitely not heightened anymore I knew Joe.
Speaker Change: But I guess a couple of observations one is that.
Speaker Change: It's clear to us that there is a lot a lot of intensity for obvious reasons for ice to get a lot of beds under contract and so they kind of pull this tool. The toolbox here earlier this year to basically get these facilities.
Speaker Change: At least that.
Speaker Change: Protection for ice so they can get the secured more under long term contracts. So it was a great feature on their part at least get get these facilities secure they know theyre going to need them. They know theyre going to get additional funding through reconciliation to support the contracts and also is a great feature for us because as Dave noted it allows us to go ahead and start the activation processed are higher and staff.
Speaker Change: Put leadership in place get the academies Academy is going so it would not surprise us Joe that we see a lot more of these in the coming days and weeks, especially as we get closer to reconciliation, but anything you'd add to that Dave.
Speaker Change: The two letter contracts that we have we have heard from ice for the longest time that the Midwest Regional reception center was a priority for them to consolidate populations in that area.
Speaker Change: And then the Cal city facility, becoming available the end of March of last year and that's in a strategic location.
Speaker Change: A great facility for ice could potentially be used for the U S Marshal service.
Speaker Change: But those are two key facilities, we are really pleased to get under a letter of agreements and then of course, the deli facility, which is not a letter agreement extended to the longer term contract stage.
Speaker Change: Between Cal City in Delhi, those were really two key facilities, we were prioritizing at the beginning of the year. So good to get those across the.
Joe Gomes: Daily across the finish line in a letter agreement with <unk>. One thing I'll also add Joe is that.
Joe Gomes: Again, I've been with the company almost 33 years, almost 16 years as CEO I have never seen the intensity and activity <unk> part to secure capacity again. These letter agreement or a new tool that are utilizing again too I think secure these beds again with Cal city in.
Joe Gomes: Midwest, but we've also seen I mean, they've toured a lot of our facilities that are not under contract capacity. We've got in Colorado capacity, We've got in Oklahoma capacity, We've got Tennessee, I mean really all over the country. They have expressed interest in some way or another.
Joe Gomes: Not just in the details of each facility and the capabilities, but actually making.
Joe Gomes: Making efforts to tour the facility ZR capability to see maybe some capex, we can deploy to be able to put.
Joe Gomes: Additional transportation assets in place, but also maybe courts and other services to help support the mission so lot of activity at the bottom line.
Joe Gomes: Okay, and then the additional $25 million Capex.
Joe Gomes: You announced.
Joe Gomes: How many more facilities could that stand up.
Joe Gomes: Yes.
Joe Gomes: Yeah. Good question, Joe I mean, we're kind of.
Joe Gomes: Leaning forward on almost all of our idle facilities at this point at the beginning of the year, we kind of targeted the priority locations that we thought would make the most sense. So we've obviously expanded the number of facilities that we are investing in to have ready. They obviously, depending on how long they have been idle have different levels of capex.
Joe Gomes: Yes.
Joe Gomes: Necessarily say that's the.
Joe Gomes: Total capex that we would end up spending on them.
Joe Gomes: Because there were leaning forward a different levels as well so I don't know if that number's, an additional $25 million or maybe even as high as $50 million. If we were to activate all facilities and incur all of the capital expenditures necessary.
Joe Gomes: To reactivate them, all but we are certainly leaning forward on more facilities than we were last quarter just due to the confidence that we have in our ability to reactivate these facilities and thats not just for federal I think that could include a potential state contracts as well. So we want to position these facilities to be available for the next customer.
Joe Gomes: <unk> that would use them.
Joe Gomes: Okay and then.
Joe Gomes: One of the items has been in the news.
Joe Gomes: Yes, the use of some soft sided facilities there was the Fort Bliss.
Joe Gomes: Type of contract.
Speaker Change: What would your guys' appetite be for.
Joe Gomes: Sure.
Joe Gomes: Either putting together are managing.
Joe Gomes: One of these types of soft sided facilities.
Joe Gomes: Yes, Great question, Joe and the bottom line is we're very interested we're very interested we've been monitoring this very closely as you've probably seen the press I think they're talking about.
Joe Gomes: Potentially it can military reservations around the country that potentially could be good sites for that type of solution. We think this type of solution. They are looking for something that we're very capable to provide.
Joe Gomes: As you can as you know with with DLA, We just again reactivated in 31 days, but going back 10 years. When we first opened that facility. We basically had to do that we had to work quickly with target to provide the capex.
Joe Gomes: Campus configured and operate very quickly and I think we did it within I think probably 80 to 90 days. So we've got the capability to provide something very quickly that they are anticipating some of these military reservations.
Joe Gomes: Also say that in addition to our <unk>.
Joe Gomes: Experiences at Delhi, we've got off to a great.
Joe Gomes: Capacity and ability to do transportation that may be needed on the sites, obviously very consistent what we do under detention side with our other facilities, but also again, we've got the capability to do it very very quickly I talked about Delhi, but also we've been asked by ice from time to time to help with natural disasters.
Joe Gomes: Depopulated facility very quickly when the hurricanes coming so thats, a long way of saying we've got the capabilities.
Joe Gomes: That you are anticipating the need for these solutions on these military.
Joe Gomes: Properties. The only other thing I would just say is that every every procurement area RFID every.
Joe Gomes: Survey our sources side that we've seen from ice here in the last 90 days, we've expressed interest in one way or another so again, you asked specifically about bliss, but obviously a lot of activity going on around the country for unique detention solutions, either existing facilities, which obviously again, we've had a lot of success.
David Garfinkel: Already with all facilities, we just announced but maybe some other unique solutions. They want in other parts of the country, but anything you'd add to that Dave just obviously, our priority would be on our on our idle facilities and maximizing the utilization of our facilities, but we'll respond to whatever needs our customer has.
Joe Gomes: Our own facilities provide the most cost effective readily available capacity, but.
David Garfinkel: There are some other solutions.
David Garfinkel: As David just mentioned we'd be interested in.
David Garfinkel: Provide and can put up fairly quickly as well you know one other quick thing I alluded to this in my comments, Joe, but we've got a lot of real estate around existing facilities that may be good.
David Garfinkel: Would be suitable for expansion to so if there is a certain location in a country, where I, saying youre facility and dislocations 2000 beds can you add another 250 very quickly that's part of the analysis that we're doing and again that could be a kind of a short term expansion because it isn't with these type.
David Garfinkel: Type of facilities that are anticipated for these military reservation. So again all of that all of the different solutions that we're bringing to bear based on what their needs are and where they need us.
David Garfinkel: Bad debt.
David Garfinkel: Okay, great. Thanks, I'll, let someone else ask a couple of questions. Thank you Joe Thanks, Joe.
David Garfinkel: Thank you.
Speaker Change: Our next question is from Jay Mccanless with Wedbush. Your line is open.
David Garfinkel: Hey, good morning, guys. Thanks for taking my questions.
David Garfinkel: The first one I had was there anything you guys were talking about increasing the size of your rolling fleet I guess could.
David Garfinkel: Could you give us maybe some preliminary our idea of what revenues you might be able to generate through doing more transportation work for ice.
Speaker Change: Yes, probably.
Speaker Change: Bill a little hard to put a number to it we could maybe talk to you offline and give you a give you a ballpark but.
Speaker Change: The way, we thought about it as places like Cal City and love more if we know kind of historically what the needs are based on the number of beds for a capacity need for transportation. So we just basically have done that analysis.
Speaker Change: So anyway, that's a long way of saying, we probably won't get clarity on that until we kind of finalize some of these contracts like Cal city, and let them work, but again, we can work with you a little bit offline and give you at least a ballpark.
Speaker Change: Okay. It sounds great.
Speaker Change: And then also wanted to you guys talked about looking at some different facilities.
Speaker Change: And your partner that you guys are partnered with target hospitality I guess as Pico is one of the ones that you guys might consider purchasing an <unk> what other facilities.
Speaker Change: Looking at at this point.
Speaker Change: <unk>, probably be a little inappropriate for me to give a lot of clarity on that we begin.
Speaker Change: We obviously know the market really really well and so we basically have surveyed.
Speaker Change: Facilities that are available that may be are newer.
Speaker Change: In construction that would be consistent with the type of emissions. So I wouldn't want to necessarily say, we're looking at these various facilities around the country for for obvious competitive reasons, but again, where we've got a great real estate team thats not only looking at potentially with available maybe on a local or city or county governments, Bob but also again to obviously talking to target.
Dave Garfinkle: About their capabilities are what they have at their various locations anything you'd add to that Dave.
Dave Garfinkle: Going back to the transportation question, so thinking about that further a lot of our negotiations are including the transportation services in the existing detention contracts that are not necessarily separate and often built into the per diem, but we are seeing certainly an increased need for transportation services in connection with those contracts.
Dave Garfinkle: Okay. That's great and then the last question I had.
Speaker Change: You guys said in the prepared comments.
Speaker Change: Are you starting to get more active on the community side I guess anything you can tell us there have you seen any more pushout of team bonding or justice in terms of the first step back yes.
Speaker Change: Yes, great Great question.
Speaker Change: It's been in I think two weeks.
Speaker Change: <unk> has announced a new director a gentleman from west from West, Virginia, and I think he has been in the early days just getting his leadership team in place. So I think you've still got some positions filled at the senior leadership level at the top.
Speaker Change: So it is our.
Speaker Change: It's our belief that probably in the coming days and weeks once he gets again his leadership team in place they have got a got a plan.
Speaker Change: And what they want to do now in a community side, but also maybe on the secure side that they will start making those.
Speaker Change: Kind of priorities and goals note out to the to the private sector.
Speaker Change: We understand that there has been some work on that already but again it's.
Speaker Change: Just been announced that the new director and like I said he is getting his team in place and like I said, we'll probably have no a lot more over the summer leading up to our call in August on kind of where the direction is but we do feel like back to your kind of initial part of your question. We do feel like there's going to be a big push by this administration and Doj leadership to really supercharge the.
Speaker Change: It's available in the private sector for community beds.
Speaker Change: Again really fulfill the goals and the attended the first step back, but I don't know if anything you'd add to that.
Speaker Change: I think potentially in the secure side too.
Speaker Change: It's well documented they've had challenges with our infrastructure. It's all then our data and they've had some staffing challenges. So we think we provide a great solution.
Speaker Change: To to be able to provide additional services to them in our correctional facilities like we did years ago, that's cost effective as well so.
Speaker Change: We're optimistic that that can be an opportunity at least in the medium term, maybe not tomorrow, but in the medium to long term certainly.
Speaker Change: Okay. That's great. Thanks, guys appreciate it.
Speaker Change: Yes, Sir.
Yes.
Speaker Change: Our next question comes from Ed Marin with Zach Your line is open.
Speaker Change: Thank you so in your prepared remarks and now in the Q&A you mentioned.
Speaker Change: Some of the competitive advantages.
Speaker Change: With your facilities versus other options from Goldman partners.
Speaker Change: Christa.
Speaker Change: Modern.
Speaker Change: Many of these I guess.
Speaker Change: Cost effectiveness.
Speaker Change: Tom.
Speaker Change: Your ability to negotiate higher per Dan.
Speaker Change: Thank you.
Speaker Change: For that cost advantage.
Speaker Change: Ill go away.
Speaker Change: Well, it's a great question, we watch I mean, we've been doing this for years, where we watch really closely on what the rates city and counties negotiate with them our service and ISO obviously when you look at that is that as it.
Speaker Change: End of <unk>.
Speaker Change: And that as a benchmark, but just obviously want to appreciate what.
Speaker Change: Certain jurisdictions are charging Isamar service.
Speaker Change: And geographical locations in the country. So that's one.
Speaker Change: Data point and then the second thing is they are really what the scope is and so.
Speaker Change: They may want to tissue capacity, but they also may want transportation or where they want a specialized medical component Thats got an infirmary beds and so again, we kind of put all those pieces in place and look at the total cost and if you look at even those where we have a more comprehensive level of services. I mean, we are still very competitive to the alternatives both.
Speaker Change: The city and counties can offer.
Speaker Change: But also what the federal government could do the sale, especially if they are buying beds from the boat or other other agencies within the.
Speaker Change: Within the federal government and then there has been some discussion as you know about maybe capacity outside the U S and if you look at those numbers I mean, we are really really really cost competitive.
Speaker Change: And again higher quality, great audit scores more effective logistically for for <unk>.
Speaker Change: Transportation, and obviously a lot less likely to get challenged from a legal perspective relative to our capabilities and the service that we provide on a leading edge of that Dave, Yes, where we already have the capacity the challenge with some of the other solutions being proposed as they intend on them being temporary and so you have to recover that cost of.
Speaker Change: Cost of activation in cost of infrastructure over a short period of time, which adds to the challenges in.
Speaker Change: Providing a competitive per diem.
Speaker Change: Compared with.
Speaker Change: Our traditional or detention capacity, where the beds are in the ground already built paid for.
Speaker Change: Can ramp staffing fairly quickly. So I think that will continue to be a competitive price advantage.
Speaker Change: Okay. Thank you that makes sense.
Speaker Change: One more question, which is.
Speaker Change: These facilities that Youre currently in the process of.
Speaker Change: We are debating or you've already started.
Speaker Change: Onboarding.
Speaker Change: People.
Speaker Change: Are in three different states right.
Speaker Change: Texas, California, Kansas, and you talked about how the all.
Speaker Change: All three facilities are strategically located I think specifically for ice.
Speaker Change: Woods.
Speaker Change: If you look at your overall portfolio.
Speaker Change: Yes.
Speaker Change: Mr. Rfps that are currently idle and youre thinking in terms of strategic location.
Speaker Change: Talking about the Kansas.
Speaker Change: Midwest, One general reception center for quite a while.
Speaker Change: While that was a strategically located.
Speaker Change: <unk>, if you will get your portfolio.
Speaker Change: Specifically, we look at idled facility are there any others that jump out at you in terms of the location.
Speaker Change: Being particularly attractive.
Speaker Change: And then potentially other government partners.
Speaker Change: Yes, that's a great.
Speaker Change: Question I will tag team here, our logo, Dave on that but I would say the three locations that I think for me are top of mind that I think would be most attractive to ice is one our facility northeast of Memphis, Tennessee, So right there on the border of Memphis in Arkansas, It's about 600 bed facility and I think I saw it.
Speaker Change: That very attractive just because of proximity to Memphis, and obviously the transportation hub, there with I 40 going through through Memphis, So that'd be one.
Speaker Change: Second and this is an obvious one but oklahoma centrally located period, so our capacity at both our Diamondback facility at our Norfork facility, which again right. There on I 40, West of Oklahoma City, Oklahoma City, usually is a very big hub for air transportation for ice and Marshal service. So.
Speaker Change: Checks a lot of boxes with those two facilities and again I think both of those will be very attractive to ice and.
Speaker Change: And then.
Speaker Change: Finally, I would just say the capacity we've got in Colorado, I think having beds out west that are not all the way over to the coast and California, where they can service the needs of Salt Lake and Denver, and even some of the needs out of our Wyoming, Montana makes our kit Carson at our <unk> facility is very attractive to ice so I'd say those.
Speaker Change: We're probably the next one is kind of top of the list. We also have got capacity up in Minnesota with FERC facility that could be a good solution if there <unk>.
Speaker Change: Activity more.
Speaker Change: Kind of mid to long term for ice on the northern border. So that would be a great locate great location and then we do have some incremental beds in Kentucky that are maybe a little lower on the list, but I would say, Tennessee, Oklahoma, Colorado I think they are probably the top three locations, where we've got capacity I think it will be a very attractive, but any added that Dave just the beds in Oklahoma Theres sizable there.
Speaker Change: <unk> Diamondback 's 2160, <unk> 2400, so those are very large facilities and when you get large facilities like that if they if they need that type of demand if the demand is there.
Speaker Change: Certainly offer a more competitive per diem compared with a smaller facility.
Speaker Change: Sure.
Speaker Change: Could be.
Speaker Change: Wouldn't be able to compete as well as a large facility like those two.
Speaker Change: Okay. Thank you very much.
Speaker Change: A question to make them.
Speaker Change: Thank you.
Greg Gordon: Our next question is from Greg Gordon with Northland Securities. Your line is open.
Greg Gordon: Hey, good morning, Damon David Patrick Thanks for taking the question congrats on the quarter.
Greg Gordon: I wanted to ask.
Greg Gordon: On the puts and takes I guess of the $48 million EBITDA range increase at the midpoint.
Greg Gordon: <unk>, obviously being the primary one but could you maybe discuss the drivers are pieces of the increase in your guidance assumptions.
Greg Gordon: Sure I'll take that one Greg certainly the Q1 beat was like I think we are $13 million higher than our internal forecast $10 million higher than average analyst estimates. So that's obviously being carried through.
Greg Gordon: You mentioned the deli facility that will be ramping up so we don't get a full run rate until <unk>.
Greg Gordon: September are really a full quarter until Q4, but also I'd add.
Greg Gordon: Population increases we've seen if you looked at January February and March, particularly ice populations. They increased sequentially. Each month. So we're kind of carrying through those populations that we saw in march expecting them to sustain throughout the remainder of the year. So so those are really impactful as well.
Greg Gordon: On the expense side.
Greg Gordon: I'd say probably status quo on the expense side, we didn't build any additional cost savings and for the rest of the year.
Greg Gordon: That's where.
Greg Gordon: We've we've normalized expenses for the most part particular, we continue to refer to the pandemic years. So I think those are really at a good level. These days.
Greg Gordon: Didn't necessarily see a lot of opportunity for cost savings going forward.
Greg Gordon: There could be potential opportunities in the guidance as we mentioned the Midwest Regional reception center in the Cal City facility the longer term contracts are not baked in I think we took a fairly reasonable approach on per diem increases, particularly from state customers. They don't kick in until July.
Greg Gordon: That's not coincidentally the same month, where we provide wage increases to our staff. So we're in discussions with most state legislature right now our legislators are in session and we will see where we come out on that there potentially could be upside with per diem increases there, but but we.
Greg Gordon: We won't know that for another couple of months.
Greg Gordon: Got it Thats helpful.
Greg Gordon: And.
Greg Gordon: I'm guessing there is nothing specific that you can share here, but did you have a general sense of the timing of when the letter contracts are expected to be finalized via a formalized contract like how long would you expect maybe that negotiation process to take and do you think it would have to be post budget reconciliation.
Greg Gordon: Yes, great. Another great question, and I will tag team with Patrick on this a little bit but.
and David Garfinkle. Thank you. Thank you.
Speaker Change: Both of them are progressing pretty darn well. We got, I guess, the template of the actual contracts on both locations, I think, within the last 10 days, and so we're thumbing through it and making notes, and so they'll probably be some back and forth.
Speaker Change: Miss this moment of time to get these two facilities and again it would surprise us when we get maybe another letter contract or two prior to reconciliation to where they again they can kind of put there.
Speaker Change: Get their hands on the on the capacity in our facilities as we work on a parallel path on the contracts, but Patrick Let me, let me, let you kind of add or amplified of this.
Patrick Swindle: Sure. Thank you Damian Thank you for the question.
I'd offer two additional thoughts one of them is.
Patrick Swindle: Normal activation for.
Patrick Swindle: Amongst both facility would be 120 to 180 days and so the value of a letter contract is it really allows us to go.
Patrick Swindle: Go fully into activation mode for those facilities and over the six months were under letter contract agreement put ourselves in a place where when the final agreement is in place we're able to begin ramping.
Patrick Swindle: The facility operations very quickly in other words, we can be ready for receipt of the first group of detainees even in advance of the end of the six months later contract. So it really accelerates the timeline under which we can prepare.
Patrick Swindle: We are pacing ourselves during the litter contract period that we are working toward being fully activated so that when the final agreement is in place we're ready to immediately begin supporting our customers' needs. So.
Patrick Swindle: Certainly a key focus of us and it's a benefit of litter contract structure.
Patrick Swindle: One thing I'd mention is letter contracts early win mechanism that ice is using presently to solicit beds and so we've talked a lot about letter contracts and the potential for activations underwriter contracts, but they're also or other mechanisms that.
Patrick Swindle: We can use as well to activate facilities and so I think certainly that is one pathway toward a contract and the activation. There are also others.
Patrick Swindle: Are available to us as well and so each individual location may have specific.
Patrick Swindle: Intricacies that may require one pathway or another but we're very well prepared whether it would be under letter contract with a six month ramp or another mechanism that might allow us to also activate very quickly.
Patrick Swindle: Great really appreciate the color there.
Patrick Swindle: And I guess lastly, because I don't think it was touched on yet could you provide an update on how youre thinking about the potential re bidding on the <unk> contract.
Patrick Swindle: Positioning core civic for that and maybe anything you've heard on it.
Patrick Swindle: Yes, thank you for that question.
Patrick Swindle: Obviously her what GSA yesterday on their call. They mentioned, maybe a one or two year extension.
Patrick Swindle: We haven't heard too, but we heard maybe there is going to be a one year extension and obviously awaiting the timing on the RFP, but I think we've made it very clear we've been preparing ourselves for the last couple of years for the rebid of this contract. We've got the capability is something that we do already and are.
Patrick Swindle: Community Division. So we continue to get ourselves prepared for not just the needs relative to the contract itself, but also getting ourselves aligned with the appropriate technology and third party providers helped support our proposal. So again, we're watching very closely I think in this environment, especially when you've got <unk>.
Patrick Swindle: Others looking at.
Patrick Swindle: <unk> cost effective solutions for government, we think introducing some additional competition for innovation and cost effectiveness would be.
Patrick Swindle: Value added to the federal government, but anything you add to that Dave I think you covered it.
Patrick Swindle: Got it thanks very much.
Patrick Swindle: Sir.
Patrick Swindle: Thank you for your question.
Patrick Swindle: One moment.
Speaker Change: Our next question is from Benjamin Bray with Sonic Finance, Sir Your line is open.
Speaker Change: Hey, guys. Thank you for thank you for holding the call and taking the questions.
Speaker Change: A lot of mine got answered, but Ive got a couple of last year.
So I think the last guy asking questions brought up the.
Speaker Change: I stop of the monetary and contracts.
Speaker Change: So.
Speaker Change: How many individuals are you monitoring under ICF as it stands today.
Speaker Change: While we currently don't have a contract with ice for ice App, that's again completely under the contract that <unk> got at the moment. So we've got we've got contracts, but with other jurisdictions.
Speaker Change: Okay. So I guess, that's what I'm, referring to under those jurisdictions.
Speaker Change: How many how many individuals are you are you monitoring.
Speaker Change: Ill keep me honest here, Dave I want to say, it's probably 20% to 30000.
Speaker Change: Thinking more towards the 25%.
Speaker Change: And so yes, that's probably about right.
Speaker Change: Okay got it what is your ability to ramp there would there be kind of a long process, where you have to get additional infrastructure or is it a relatively fast ramping period is relatively fast and again, we've been watching this disagreement in this requirement for gosh, probably going on six seven years and so.
Speaker Change: We've got again the capabilities, we know that there will be a requirement to very quickly provide office space in certain locations, where they've got great. Our high utilization. So again, we know those locations, we know we'd have to kind of ramp up.
Speaker Change: Leases were probably storefront office space and again from us from a staffing perspective, we feel like we can do that both in our community division, but also probably pull some folks from our safety division on a high side to help support that activation. So.
Speaker Change: So yes, we've got we definitely got the capabilities and we've got that we've got the plan that we if we get some.
Speaker Change: That contract going forward.
Speaker Change: Again, we've got the plant, Oregon scale up and ramp up very quickly if anything add to that Dave is something we do differently, so and are monitoring.
Speaker Change: Subsidiary.
Speaker Change: Use a teaming agreement with a third party to provide the devices and we've checked in with them to make sure to ask them how quickly. They can scale up and we don't have any concerns about scaling up to the size that.
Speaker Change: It would be certainly under the current ICF contract or potentially larger so our very comfortable with our ability to scale there.
Speaker Change: Okay got it that's very helpful. So it sounds like it's mostly kind of offices and some administrative stuff. The technology is already in place yet correct. That's a good way to frame it.
Speaker Change: Got it understood. Thank you.
Speaker Change: So moving on again.
Speaker Change: Your.
Speaker Change: Growth opportunities I think you said that you have got nine facilities have a total of 13000 beds that are.
Speaker Change: That are idle.
Speaker Change: Those were all activated can you can you ballpark for me what the total incremental revenue might be.
Speaker Change: Well I'd say no.
Speaker Change: Back into that but I think last call. We said it was probably anywhere from $2 50 to $2 $75 million, we've activated a daily.
Speaker Change: Yes.
Speaker Change: We're not putting any further pen to paper, it's probably.
Speaker Change: Oh gosh, the two $200 million to $225 million.
Speaker Change: And EBITDA as well if reactivated all of them at this point that would be the upside.
Speaker Change: Okay got it 200 and $225 million.
Speaker Change: EBITDA Thats helpful.
Speaker Change: And then as far as I know.
Speaker Change: I know that you've got some questions earlier.
Speaker Change: Try to ask it different way.
Speaker Change: As far as timing is concerned I know it can be unpredictable there has to be budget appropriations and youre waiting for some government sign offs.
Speaker Change: As far as what the pace is for.
Speaker Change: For a ramp.
Speaker Change: When do you think is a fair time to model you guys sitting.
Speaker Change: Call. It a run rate peak EBITDA do you think by second half of 2026.
Speaker Change: It should be realized do you think it might take a little longer.
Speaker Change: Potentially faster how is it that you guys think about that.
Speaker Change: Yes, let me.
Speaker Change: Got it.
Speaker Change: Team with Patrick on this a little bit, but I would say, let me I.
Speaker Change: I guess talk about kind of the coming days and weeks and kind of key milestones and so we've talked about offtake contract with delay we've talked about the letter contracts leading into permanent contracts on Cal City.
Speaker Change: We feel like on those two probably will get finalized again as we go into summer maybe early early fall additional power attracting actions again, I talked about our capacity in Tennessee, and Oklahoma and Colorado, probably to be in the next round of most attracted capacity to ice. It feels like we will get additional gate engagement on that again in the coming days and weeks.
Speaker Change: Thank reconciliation has to get done for them to engage on US again I wouldn't be surprised that call is tomorrow and say hey, we're ready to do a letter contract on named the facility Diamond Diamondback.
Speaker Change: But we do feel like that reconciliations will then will be a catalyst, especially to get if its the latter contract going into a permanent contract because I think again, no wont start showing activity in the third or fourth quarter of having this capacity available as they kind of ramp up the rest of the part of the infrastructure again, especially around law enforcement and other assets <unk> got.
Speaker Change: <unk> side that are probably come from the funding so a long way of saying that yes. It feels like that if reconciliation gets done and I'll just say again I don't have anything unique to offer on this call, but if you just listen to the media on any given day it feels like all.
Speaker Change: All leadership and Congress' House Senate and obviously the White house are focused on getting this done.
Speaker Change: By the fourth of July is definitely the August August recess.
Speaker Change: It feels like again the momentum there on the funding side and again I think that will be on a parallel path on all of these contracting activities. The Apache Let me, let you kind of add to amplify to that.
Speaker Change: Thank you Damian the only thing that I would add is I think a lot of it.
Speaker Change: Part of your question depends on.
Speaker Change: Where peak demand ultimately stops in other words, what is the ultimate aggregated bad number when you look across all of the alternative solutions that we can provide so whether thats the utilization of our existing capacity I know that was the question that was asked previously whether that would be the work that we're doing with our partner target.
Speaker Change: To look at solutions that might be and non traditional or soft sided type structures.
Speaker Change: It could be additional.
Speaker Change: Pasty related to opportunities currently contemplated for military basis. So I think in some respects theres a lot of dependency on where peak demand ultimately settles out as to what the timing might be because it certainly could extend beyond the second half of 2026, but I would say just thinking about the timeline around activations when we.
Speaker Change: Expect full funding will be in place I think second half of 2006 is a reasonable assumption for when we could hit peak EBITDA run rate based on the demand level that ultimately presents.
Speaker Change: Alright, that's very helpful. I appreciate that thank you for taking the questions and congratulations on the quarter.
Speaker Change: Yes, Sir thank you.
Speaker Change: Thank you for your question.
Speaker Change: Our next question comes from Kirk Ludtke with Imperial capital. Your line is open.
Speaker Change: Well, thank you everyone.
Speaker Change: Appreciate the call and for your staying late.
Eric: Thanks, Eric.
Brian Hammonds: Hi, Brian.
Eric: I just I just had a.
Speaker Change: Let's assume that that there are zero border crossings no funding limitations what is the relationship between.
Speaker Change: The deportation rate and the number of beds. So in other words, you mentioned $1 million a year. You mentioned 100000 beds is that roughly the relationship there yes, that's what.
Speaker Change: And I think I think I heard Tom home and say that again. This morning on one of the morning shows but thats.
Speaker Change: That's the near term goal is 100000 bed capacity at the presentations on an annual basis and so.
Speaker Change: We mentioned on the last call. It 100000 feels like kind of the new base going forward again, we will see what happens with funding through reconciliation, but at the moment feels like a pretty good number Patrick I don't think anything you'd add to that.
Speaker Change: Nothing to add payments.
Speaker Change: Okay.
Speaker Change: Great. Thank you and do you have a sense for when they'll get to $1 billion run rate of 1 million a year.
Speaker Change: I don't think I've heard.
Speaker Change: I think they've expressed that in the press again I'm sure part of it is also.
Speaker Change: Through reconciliation the additional funding need for staffing for law enforcement and processing case managers whatnot.
Speaker Change: So I'm sure they've done that scenarios.
Speaker Change: On the on their side of the fence relative to that but I have not heard of ramp plan.
Speaker Change: Okay got it thank you.
Speaker Change: Libya was added to the list of foreign locations.
Speaker Change: Suspect these foreign locations are serving a different mission you don't really view them as.
Speaker Change: Competition, but ill.
Speaker Change: How should we think about those yes, exactly right, we don't see them as competition and I think theres, probably strategic and political reasons why some of those locations makes sense, but.
Again for all the reasons we've talked about.
Speaker Change: 42 years in business highest quality best audit scores logistically more favorable.
Speaker Change: Obviously, not only just location wise, where we can provide provide transportation and less likely to get challenging courts, which.
Speaker Change: We're seeing that obviously play out more and more here. The last few weeks. So so yes, I don't see it as competition.
Speaker Change: Got it I appreciate it thank you and congratulate Tom congratulations on the quarter.
Speaker Change: Yes.
Speaker Change: Our next question comes from Jordan, Hymowitz, with Philadelphia Financial management of San Francisco. Your line is open hi.
Speaker Change: Thanks, guys couple of questions. If the numbers you're talking about come to fruition. It seems like in the second half of 2006, you guys could be in a place to initiate a close to a double digit dividend yield. If you don't do M&A is that a reasonable thought process you are not going to take the debt down any more than two to two and a quarter or year.
Speaker Change: No.
Speaker Change: No that's right Jordan.
Speaker Change: Dividend, we have not had a lot of conversations lately with our board or quite frankly, even with investors about a dividend because we think the the share repurchases more compelling at this point, but if we were to <unk>.
Speaker Change: Executing on a number of contracts in the stock price responds, obviously, we don't want to overpay for sure. So at that point a dividend might make.
Speaker Change: Mike might make sense.
Speaker Change: Okay second question, you've spoken incredibly favorably.
Speaker Change: During this call and essentially in a number of joint ventures with them would there be a possibility of an interest in them as an M&A candidate they were approached by a different private equity, but might that potentially fit with your M&A potential list of things Oh, Wow, what a direct question Jordan.
Speaker Change: Yeah.
Speaker Change: This never crossed our mind they are a great great partner and I'll say, it's not something that we've talked about or have entertained.
Speaker Change: <unk> question, but it wouldn't be appropriate for me to provide any additional feedback on that okay.
Speaker Change: Okay and last question is how big do you think the ice.
Speaker Change: This has to be for our government to entertain two people splitting the contract versus one.
Speaker Change: Oh, that's a great question and I don't think they have to I don't think it has to grow I mean, I think there could be a path forward where.
Speaker Change: They say, okay, we want to introduce a little bit of diversification with with providers in anticipation of growth, but I think it could be what it is today allow for two providers and if they do think theres going to growth and I think having two providers that can help with the scale of that growth would be I think a.
Speaker Change: Good idea on government on the governors on the government side.
Speaker Change: Okay. Thank you.
Speaker Change: Yes, Sir thanks, Sean.
Speaker Change: Ken This is Dan.
Damon Heininger: Q&A session I would now like to turn back to Damon Heininger for closing remarks.
Damon Heininger: Thank you so much operator and before I, let you all go let me just note one quick thing this week nationally as National Correctional Officer employees week. This was put in place by our President Ronald Reagan back in 1984, and the intent is to recognize people in our profession, both public and private.
Damon Heininger: <unk> officers Correctional workers around the country for the important work they do day in and day out it is a tough business as you all note as many of you on the call our longtime investors. It's tough tough work, but it is also very rewarding work. So I didn't want this moment of pass without recognizing our employees are the best in the business that do this work again can be very challenging.
Damon Heininger: But also very rewarding and they are obviously executed really really effective right now with all of these opportunities, but also great outcomes for people in our facilities. So again my hats off to our entire team here within their core civic with that we're adjourned. Thank you so much for today's.
Damon Heininger: Today's call and thank you again for your continued support of the company.
Damon Heininger: This does conclude the program you may now disconnect.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Yes.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: Okay.
Damon Heininger: [music].
Damon Heininger: No.