Q1 2025 The GEO Group Inc Earnings Call
Good day and welcome to the Geo Group first quarter, 2025, starting conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the start key, followed by zero.
After today's presentation, there will be an opportunity to ask questions.
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Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Pablo Paez, executive vice president of corporate relations. Please go ahead.
Speaker Change: Thank you operator, good morning everyone and thank you for joining us for today's discussion of the Geo Group's first quarter
Mark Suchinski: With us today are Dave Donahue, Chief Executive Officer, and Mark Suchinski, Chief Financial Officer.
Mark Suchinski: This morning we will discuss our first quarter results as well as our outlook.
Mark Suchinski: We will conclude the call with a question and answer session.
Mark Suchinski: This conference call is also being webcast live on our investor website at investors.geogroup.com
Mark Suchinski: Today, we will discuss non-GAAP bases information, a reconciliation from non-GAAP bases information to gap bases results included in the press release and the supplemental disclosure we issued this morning.
Mark Suchinski: Additionally, much of the information we will discuss today, including the answers we give and respond to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters.
Mark Suchinski: These four-looking statements are intended to fall within the safe harbor provisions of the security's laws.
Mark Suchinski: Our actual results may differ materially from those in the forward-looking statements as the results of various factors contained in our securities and exchange commission filings, including the Forum 10K, Thank You, and 8K reports.
Mark Suchinski: With that, please allow me to turn this call over to our CEO , Dave Donahue, okay? Thank you, Pablo, and good morning everybody, and thank you for joining us on our first quarter, 2025 earnings fall.
Speaker Change: Our executive chairman, George Zoley, he's on personal leave today and will not be joining the call, but I am pleased to be joined by our CFO , Mark Suchinski, to review our first quarter financial results and operational highlights.
Mark Suchinski: We've had a very active first half of 2025 and we continue to make significant progress towards meeting our growth and capital allocation objectives [inaudible]
Mark Suchinski: As we have expressed to you previously, we believe we have an unprecedented opportunity to assist the federal government in meeting its expanded immigration enforcement priorities.
Mark Suchinski: and we've taken several important steps and anticipation of what we expect to be significant future growth opportunities and related operational activity during 2025.
Mark Suchinski: In December of 2024, we announced the $70 million investment to strengthen our capabilities to deliver expanded detention capacity, secure transportation, and electronic monitoring services to ICE and the federal government.
Mark Suchinski: Last year, we also announced the reorganization of our corporate management structure to strengthen our operational oversight and execution and preparation for the expected growth. [inaudible]
Mark Suchinski: This reorganization along with additional professional fees has resulted in higher quarterly overhead expenses incurred in anticipation of what we expect to be unprecedented future growth projects and operational activity.
Mark Suchinski: This morning we updated our financial guidance for 2025 which reflects a tale of two halves of the year
Mark Suchinski: The first half of 2025 reflects higher overhead and operating expenses as well as higher capital expenditures without corresponding revenues.
Mark Suchinski: This is the position art company for anticipated future revenue growth, which we expect to begin to layer in during the second half of 2025.
Mark Suchinski: Additionally, consistent with our longstanding practice, our guidance does not include any new contract awards that have not been previously announced.
Mark Suchinski: During the first quarter of 2025, we announced several new contract awards with U.S. Immigration and Customs Enforcing.
Mark Suchinski: In New Jersey, we entered into a 15-year contract to provide support services for the establishment of a Federal Immigration Processing Center at our company-owned 1,000-bed Delaney Hall facility.
Mark Suchinski: This new contract is expected to generate in excess of $60 million of annualized revenues, with margins consistent with our company-owned secure services facilities.
Mark Suchinski: The Delaney Hall Facility began the intake process on May 1st and we expect revenues and earnings from the new contract to normalize during the second half of 2025.
Mark Suchinski: In Michigan, we entered into a letter contract with ICE for the phase activation of a federal Immigration Processing Center and our company owned 1,800-Bed North Lake Facility.
Mark Suchinski: We're in the process of negotiating a multi-year contract with ICE, which we expect to be finalized in the next several weeks, with facility activation expected during the third quarter of 2025.
Mark Suchinski: We expect this new contract to generate an excess of $70 million in annualized revenues, with margins consistent with our company-owned secure services facilities.
Mark Suchinski: In Texas, we had announced a contract modification for our company-owned 1,328-bed Karnes Ice Center to transition the facility from housing single adults to housing mixed populations.
Mark Suchinski: Subsequently, ICE decided to continue to house single adults in the Carren's Ice Center based on the assessment of the agency's current needs.
Mark Suchinski: The activation of the Delaney Hall and North Lake facilities will increase our total capacity under contract with ICE from approximately 20,000 beds to approximately 23,000 beds.
Mark Suchinski: Utilization at our facilities under contract advice is currently at approximately 16,000 bids, which is the highest level of utilization in over five years. While we estimate the highest detention levels are currently at about 48,000 bids nationwide.
Mark Suchinski: In addition, we have around 3,000 beds available to facilities currently under contract with the US Marshal Service.
Mark Suchinski: We also have roughly 6,500 beds at idle facilities which have not received the contract award yet and for which we are currently in active discussions with both ICE and the Marshall Service regarding their interest in these facilities.
Mark Suchinski: We continue to be very encouraged by the pace of these discussions and anticipate additional contract rewards to be announced during the second quarter of 2025, for likely activation in the second half of the year.
Mark Suchinski: ICE recently issued a $45 billion procurement for detention beds and related services as a strategic sourcing vehicle to contract for additional detention bed space nationwide.
Mark Suchinski: and the Marshall Service has issued sources salt notices to contract for additional bedspaces in Texas and North Carolina, where we currently have available idle facilities.
Mark Suchinski: With margins consistent with our Secure Services' own facilities, which averaged 25 to 30 percent.
Mark Suchinski: Today, the Delaney Hall and North Lake Contract announcements represent an excess of $130 million of this annualized revenue potential.
Mark Suchinski: However, these facilities are expected to generate only partial revenue and earnings contribution in 2025 due to the timing of these facility activations
Mark Suchinski: As a reminder, once a contract has been awarded, our typical facility activation period is 60 to 90 days to hire, train, and clear staff and to get the facility ready for occupancy.
followed by a gradual ramp up in utilization.
Mark Suchinski: As we have previously discussed, before the passage of the Lake and Riley Act, the Trump administration had indicated a need to ramp up to a 100,000 total ice detention beds for increased interior enforcement operations.
Mark Suchinski: Based on public statements from ICE, the implementation of the Lincoln Riley Act could require an incremental 60,000 ICE detention beds or more.
Mark Suchinski: We continue to believe that an increase to between 100,000 and 160,000 total detention beds will require a range of solutions for the detention and processing of migrants in the United States.
Mark Suchinski: We have a 40-year record of providing special-purpose facilities that meet the unique operational needs and requirements set by ICE at a cost savings to taxpayers when compared to publicly operated facilities and to alternative solutions like soft-sided facilities.
Mark Suchinski: In addition to our current inventory of idle facilities, we are exploring additional options including the potential purchase, leasing or operation of third party owned facilities and the potential repurposing of some of our current state facilities. [inaudible]
Mark Suchinski: With respect to the latter option, we have two state correctional facilities totaling approximately 3,600 combined beds which could be repurposed for use by the federal government.
Mark Suchinski: We were initially pursuing the potential sale of both of these facilities, however, after discussions with the leadership of these two states, we are currently moving forward with the potential sale of one of these facilities while repurposing the other facility.
Mark Suchinski: In New Mexico, we are working with the New Mexico Corrections Department to defopulate our company-owned 1,200-bed Lee County facility by the end of the year.
Mark Suchinski: We've already begun marketing this facility to both ICE and the US Marshal Service.
I don't know. I don't know. I don't know. I don't know.
Mark Suchinski: As has been publicly disclosed in the media in Oklahoma, we are in advanced discussions with the Oklahoma Department of Corrections [inaudible]
Mark Suchinski: For the potential sale of our company owned 2,400 beds, Walton Correctional Facility for 312 million dollars with financial closing targeted for this July subject to legislative and executive approval.
Mark Suchinski: We've also made a significant investment commitment in our electronic monitoring and supervision services segment to ramp up for the production of GPS tracking devices per use under the intensive supervision appearance program or ISAP.
Mark Suchinski: ISAP participant counts averaged approximately 186,000 during the first quarter of 2025.
Mark Suchinski: While ICEP counts decline below 184,000 in April , they have recently begun to increase and are currently above the 185,000 participants.
Mark Suchinski: As we have previously noted in late 2022, the ISAP contract utilization peaked at approximately 370,000 or twice the number of participants currently in the program.
Mark Suchinski: We estimate that returning to that utilization level could generate an incremental 250 million dollars in annualized revenues based on the current mix of the program.
Mark Suchinski: We have a long track record of delivering quality services under ISAF with bipartisan support for approximately 20 years.
Mark Suchinski: These services entail diversified electronic monitoring technologies, as well as compliance management services, which are delivered through a nationwide network of approximately 100 offices and close to 1000 employees.
Mark Suchinski: Over our 20-year tenure, ISAP has achieved high compliance rates with immigration court requirements while monitoring a relatively small portion of the estimated 7-8 million undocumented aliens who are on the non-detained docket.
Mark Suchinski: In addition, to another 9.5 to 10 million people who are also estimated to be in the United States without legal status
Mark Suchinski: Given the size of this population, our view is that, in addition to increased detention capacity, the requirements of the federal immigration law and the Lake and Riley Act will require an increase in GPS tracking for individuals on the non-detained docket.
Mark Suchinski: With the investment commitment we have made, we believe we have the necessary resources to significantly and quickly scale up the current utilization of the ISAP contract. And we believe that the agency's focus remains on increasing the size of the population that is currently monitored under ISAP.
Mark Suchinski: The existing ISAP contract is scheduled to expire July 31st, 2025, which we do not believe provides adequate time for competitive rebid of the contract and thus we are expecting a one or two-year extension allowing for an orderly transition to a larger and more-focused
Mark Suchinski: We are also investing in the expansion of our secure services transportation fleet.
Mark Suchinski: As we have previously discussed, we expect an increase in the number of removal flights could generate an incremental $40 million to $50 million in annualized revenues under our existing ICE Air Support Services subcontract.
Mark Suchinski: On a combined basis, we estimate that the upside potential from all of these opportunities could represent as much as $800 million to $1 billion in annualized revenues.
Mark Suchinski: which could add as much as $250 million to $300 million and annualize the adjusted EBITDA.
Mark Suchinski: Today we have announced new contracts totaling in excess of $130 million of this potential growth
Mark Suchinski: We expect these opportunities to be supported by the expected continued ramp-up and interior enforcement by ICE, contingent on future funding availability, either through additional appropriated or reprogrammed funds.
Mark Suchinski: The Budget Reconciliation Process in Congress remains a key element for the future funding availability price.
Mark Suchinski: The U.S. Senate and the U.S. House of Representatives have agreed on a budget framework and are currently considering a budget reconciliation bill that is expected to provide a significant funding increase for border security and immigration enforcement.
Mark Suchinski: The US House of Representatives is aiming to complete the budget reconciliation process by Memorial Day, while the US Senate is aiming to complete it by the 4th of July .
Speaker Change: Regarding our capital structure, we continue to make significant progress in our efforts to reduce that. Delivered our balance sheet and evaluate potential capital returns in the future.
Speaker Change: We ended the first quarter of 2025 with approximately $1.68 billion in total net debt.
Speaker Change: For the full year 2025, we expect to reduce net debt by approximately $150 million to $175 million $175 million.
Speaker Change: bringing total net debt to approximately $1.54 billion, and total net leverage to approximately 3.3 times adjusted EBITDA.
Speaker Change: Finally, before I turn the call over to Mark, I would like to briefly review the quarterly operational highlights for our Geo Secure Services and Geo Care business units.
Thank you. Take care. Bye. Bye. Bye. Bye. Bye. Bye.
Speaker Change: During the first quarter of 2025, our Secure Services Facilities successfully underwent a total of 57 audits, including internal audits, government reviews, third-party accreditations, and Prison Rape Elimination Act, or PREA certifications.
Speaker Change: Six of our Secure Services Facilities received accreditation from the American Correctional Association with an average score of 99.6% and another three facilities received pre-assertifications . . . . . . . . .
Speaker Change: Our GTI Transportation Division and our Geo Amy UK Joint Venture completed approximately 2.3 million miles driven in the United States and the UK during the first quarter.
Moving to the quarterly operational milestones for GeoCare
Speaker Change: During the first quarter of 2025, we renewed five residential reentry center contracts including three contracts with the federal bureau of prisons.
Additionally, we renewed 10 non-residential day reporting center contracts [inaudible]
Speaker Change: Our residential reentry centers, non-residential day reporting centers, and ISAP offices successfully underwent a combined total of 81 audits, including internal audits, government reviews, third party accreditations and prison rape elimination act, or pre-assertifications during the first
Speaker Change: Two of our residential re-interest centers received accreditation from the American Correctional Association with an average accreditation score of 99.8% and two residential re-interest centers received free of recertifications [inaudible]
Speaker Change: Moving to our enhanced rehabilitation programs, during the first quarter of 2025, we completed approximately 700,000 hours of enhanced in-custody rehabilitation programming.
Speaker Change: Our academic programs awarded 575 high school equivalency deployments and our vocational courses awarded more than 1600 vocational training certifications.
Speaker Change: Our Substance Abuse Treatment Programs awarded over 900 program completions and those in our care achieved close to 2,600 behavioral treatment program completions.
and close to 4,800 individual cognitive behavioral treatment sessions.
Speaker Change: During the first quarter of 2025, we also allocated more than $300,000 towards post-release services.
Speaker Change: This funding supported approximately 1900 individuals released from Geo service facilities as they return to their communities.
Speaker Change: We believe that our award-winning continuum of care program provides a proven model
Speaker Change: United States, criminal justice system can be better served in changing their lives
Speaker Change: I'll now turn the call over to our CFO , Mark Suchinski Mark [inaudible]
Mark Suchinski: or 14 cents per du-loaded share on quarterly revenues of approximately $605 million.
Speaker Change: This compares the net income attributable to Geo of approximately $22.7 million, or 14 cents per due-loaded cheer in the first quarter of 2024 on revenues of approximately $606 million.
Speaker Change: Adjusted EBITDA for the first quarter of 2025 was approximately $100 million, compared to approximately $118 million for the prior year's first quarter.
Speaker Change: Our first quarter revenue in adjusted EBITDA were in line with our internal expectations.
Beginning with revenues [inaudible]
Speaker Change: quarterly revenues in our owned and leased secure service facilities increased by approximately 3% year-over-year.
Speaker Change: This revenue increase was offset by lower order quarterly revenue from our electronic monitoring and supervision services segment which declined by approximately 10% compared to the prior year's first quarter.
Speaker Change: Combined quarterly revenues from our own and least reentry centers, managed only facilities and non-residential service contracts were largely unchanged compared to the prior year's first quarter
Now let's turn to our operating expenses [inaudible]
Speaker Change: During the first quarter of 2025, our operating expenses increased by approximately 3% compared to the prior year's first quarter.
Speaker Change: The increase in our operating expenses reflect higher labor costs in our secure services segment, in part due to additional staffing and training costs as we continue to to incur these in preparation for expected future growth. The increase in our operating expenses reflect higher labor costs in our secure services segment,
Speaker Change: Our general and administrative expenses for the first quarter of 2025 increased by approximately 9% from the prior year's first quarter
Speaker Change: In part due to recent reorganization of our senior management team and additional associated professional fees which we incurred during the first quarter of 2025 in preparation for expected future growth.
as well as higher employee-related benefit costs.
Speaker Change: Compared to the fourth quarter of 2024, our first quarter 2025 results also reflect approximately $6 million in higher payroll-related taxes.
which are front-loaded in the first quarter of each year. [inaudible]
Speaker Change: Our first quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $8 million as a result of our debt reduction and refinancing efforts.
Taken over the last year. [inaudible]
Speaker Change: Our effective tax rate for the first quarter of 2025 was approximately 9%
Speaker Change: Income taxes for the first quarter of 2025 were lower than expected as a result of the increased value of equity awards which vested during the quarter.
Now let's move to our updated financial guidance for 2025
Speaker Change: As previously noted, our financial guidance for 2025 reflects a tale of two halves of the year.
Speaker Change: The first half of 2025 reflects higher overhead and operating expenses as well as higher capital expenditures to position our company for anticipated future revenue growth without the corresponding revenues. [inaudible]
Speaker Change: with growth beginning to layer in during the second half of 2025.
Speaker Change: Also importantly, consistent with our long-standing practice, our guidance does not include any new contract awards that have not been previously announced.
Speaker Change: For the full year 2025, we expect net income attributable to Geo to be in the range of $0.77 cents to an $0.89 per diluted chair on revenues of approximately $2.53 billion.
Speaker Change: and based on an effective tax rate of an approximately 27% inclusive of known discrete tax items.
Speaker Change: We expect our full year 2025 Adjusted EBITDA to be between $465 million and $490 million.
Speaker Change: For the second quarter of 2025, we expect net income attributable to Geo to be in the range of $0.15 to $0.17 per diluted share on quarterly revenues of $0.615 million to $0.625 million.
Speaker Change: We expect the second quarter of 2025 adjusted EBITDA to be between $110 million and $114 million.
Speaker Change: Our guidance does not include any assumption for new contract awards that have not been previously announced nor any material census growth at either existing facilities or the ICF contract.
Speaker Change: However, we anticipate that several upside opportunities could materialize during the year, including additional contract awards which we expect to be announced in the second quarter of 2025 .
Speaker Change: As we progress through the year and these growth opportunities materialize
We will continue to adjust our financial guidance accordingly.
Speaker Change: As a reminder, as contract awards are announced, then we begin to reactivate vital facilities.
Speaker Change: We would expect to incur startup expenses during the initial 60-90-day activation period.
Speaker Change: Start-up expenses for any facility activations, not previously announced, are not included currently in our guidance.
Speaker Change: We expect total capital expenditure for the full year of 2025 to be between $120 million and $135 million [inaudible]
Speaker Change: including the impact of the $70 million investment we announced in December to expand our ICE service capabilities.
Moving to our capital structure
Speaker Change: We ended the first quarter of 2025 with total net debt over approximately $1.68 billion.
$65 million dollars in cash on hand.
and approximately $235 million in total available liquidity.
Speaker Change: As of the first quarter of 2025, fixed rate debt represents approximately 77% of our total indebtedness.
which meaningfully insulates Geo from potential interest rate volatility.
Speaker Change: In April of 2025, we were pleased to have such initiate ratings on Geo.
with a B-plus issuer rating.
A double B plus rating on our secured debt [inaudible]
Speaker Change: A double-meat B minus rating on our unsecured debt in a stable outlook.
Speaker Change: We have no substantial debt maturities due before April of 2029, which continues to give our company significant runway to grow our business and focus on reducing our debt and eventually be able to return capital as shareholders.
Speaker Change: Based Center Current 2025 Guidance, we expect to reduce our net debt by between $150 million and $175 million this year, bringing our total net debt to approximately $1.54 billion by the end of the year.
Speaker Change: Our debt reduction could be augmented by the sale of one of our state correctional facilities in Oklahoma.
Speaker Change: which we estimate could generate gross proceeds of approximately $312 million.
Speaker Change: To support our capital growth needs, our goal remains to explore options for returning capital to our shareholders in the future.
Speaker Change: At this time I'd like to turn the call back to Dave for closing remarks. Dave? Thank you, Mark. We are pleased with the progress we've made towards meeting our growth and capital allocation objectives.
Speaker Change: The additional time we've spent with our federal partners have positioned us very well for the remainder of 2025 of 2025.
Speaker Change: During the first quarter of 2025, we announced two important contract awards for the reactivation of two company-owned facilities, totaling 2,800 beds and representing an excess of $130 million in annual honest revenues.
Speaker Change: We believe we have an unprecedented opportunity to assist the federal government in meeting its expanded immigration enforcement priorities.
Speaker Change: We have taken several important steps to be prepared to meet that opportunity, and we are very well positioned.
Speaker Change: We have made a significant investment commitment of $70 million to strengthen our capabilities to deliver expanded detention capacity, secure transportation, and electronic monitoring services to ICE and the federal government.
Speaker Change: We've also completed a reorganization of our senior management team to oversee the operational execution of this expected future growth.
Speaker Change: As a result of these steps, our guidance for 2025 reflects a tale of two halves of the year.
Speaker Change: The first half of the year is expected to be impacted by a higher overhead and operating expenses, as well as increased capital expenditures to position our company future growth, which is expected to begin to layer in during the second half of 2025 and normalize in 2026.
Geo is the single largest contractor dice with four decades of partnership
Speaker Change: and are currently, we provide approximately 40% of the detention beds to ICE.
Speaker Change: We believe we are well positioned to significantly scale up our secure residential care housing price from the current 16,000 utilized beds.
Speaker Change: In Geo's 100% management of the ISAP program, we believe we can quickly scale up from the present 185,000 participants to several hundreds of thousands or even millions of participants that called upon.
Speaker Change: Geo's contractual partnership with CSI Aviation has allowed us to become the largest provider of secured transportation services for ICE.
Speaker Change: We believe we can scale up materially for domestic and international travel for 500,000 individuals
Speaker Change: This is a unique moment in our company's history. And we believe we are well positioned to meet this unprecedented opportunity and to continue to enhance value for our shareholders.
Speaker Change: With that, this completes our remarks and we will be glad to handle any questions. Thank you.
We will now begin the question and answer session.
Speaker Change: To ask the question, you may press star and one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Speaker Change: At this time, we will pause momentarily to assemble a roster.
Speaker Change: The first question today comes from Joe Gomes with Noble Capital. Please go ahead.
Good morning. Thanks for taking my questions.
Morning, Joe.
Speaker Change: So, one of it to start off, I'm looking in the supplement.
presentation.
Paul and the revenues were.
George Zoley, George Zoley, John
Speaker Change: Joe, I can address that when we compare electronic monitoring, revenues and profitability first quarter of this year compared to last year.
Speaker Change: It's a bit of, as you just indicated, the ICEP counts were down, but the bigger impact on the profitability was a makeshift [inaudible]
Speaker Change: When we think about the products that we offer, we saw a larger reduction in the phones as part of the program, the first quarter this year compared to last year.
Speaker Change: So it's really, it's a mixed shift away from phones and more to GPS monitoring devices.
which puts a little pressure on the margins. [inaudible]
Okay, thanks for that.
and then you guys mention them. [inaudible]
Speaker Change: House funding bill in reconciliation talking about adding $45 billion for ICE detention.
Speaker Change: They talk about having a significant amount of money also for transportation and transportation.
Speaker Change: But one of the things, at least in the articles that I have read. [inaudible]
Speaker Change: Nothing really mentioned on ATD. Now it included in that 45 billion or is there something else going on there with the funding bills, potential funding bills? [inaudible]
Well, Joe, this is Dave, let me, let me speak to that, the, the, the, the, the, the,
Speaker Change: The funding activity right now is as you identify it. I think Homeland Security and Immigration Customs Enforcement are obviously focusing on interior enforcement.
Speaker Change: and detention is a priority. So we've seen as a result of the agency's efforts to secure the border.
Speaker Change: at the southern side of our country that detention focused has become the reality. And so we've been additional time with our clients working through our facilities so they have a better understanding to maximize the available detention space in the country.
Speaker Change: As the interior enforcement matures and the detention space is utilized, the non-detain docket is very robust as you know.
Speaker Change: and the alternative to detention, and specifically ISAP, is the valuable solution.
Speaker Change: that provides accountability for the immigration population as they're moving through their judicial reviews. Thank you, Joseph.
Speaker Change: Again, we have a high degree of confidence that as the budget process unfolds, as that becomes clear, you'll see greater utilization on the electronic monitoring side to enhance the detention of availability.
Speaker Change: And Joe, I would just add I think that, you know, as the funding bill matures [inaudible]
I think more specifics [inaudible]
Speaker Change: and details will merge around the ice needs and where those funds will be allocated so I think we just need to wait and let the process encounters work out and I think all of that will become more clear to all of us.
Okay.
Speaker Change: And then you guys mentioned, you know, I see tenies and obviously working with the ice numbers which are delayed, I think the most recent one I saw was from early April
Speaker Change: You know, the number of detainees has significantly increased from the beginning of the government fiscal year, from, you know, call it...
you know, 38,000-ish to, you know, 48,000-ish, but...
It's been relatively flat the last couple of months [inaudible]
Speaker Change: And I don't know if it's you know your guys thoughts is that just due to funding and there are other things going on there and how does that kind of play into
Speaker Change: Your expectations at the likelihood that all of your idle facilities would be reactivated this year.
Speaker Change: So, you know, relative to the budget conversation, as Mark said, Joe, I think that what you're seeing right now is the agency being supported by the congressional initiatives to really meet their mission.
Speaker Change: and the transition from 2024 to 2025, the agency's objectives have significantly changed.
Speaker Change: and the Executive Office obviously has provided greater clarity on the expectations for interior enforcement. So we're we're very impressed with ISIS focus.
Speaker Change: with their due diligence associated with how they're going to handle this mission and we do believe that as the funding streams become defined, we are very well positioned to help them meet their mission and we're excited about the second half of the year because of that.
And I think the, you know, I would add.
that they were rapidly increased the number of people detained. And so,
Speaker Change: They are using up very quickly the amount of space that they have. [inaudible]
Speaker Change: And so when you think about the back half of the year
Speaker Change: Our Delaney contract and the North Lake contract, that will help them [inaudible]
Speaker Change: Increase the number of detainees. So it's a budget, but I also think, you know, as they're letting these contracts and increasing the capacity, you'll start to see those go up. It's just very quickly, they used to do that.
Speaker Change: The capacity that they had on contract and now they're going to have to open up new contracts to expand that capacity.
Okay.
Thanks for joining us.
Speaker Change: Thanks for that. One last one for me, you know, it's hard to be given what we've discussed today about, you know, the...
Speaker Change: You know, selling the one potentially selling the one state facility and repurposing another state facility for ice use and you know, recently you think in the last week or so, Alabama
Speaker Change: put out RFI, I think, about interest for people building a new facility for them.
Speaker Change: given where you guys are today and the expected growth from ICE.
Speaker Change: Would Alabama make sense for you guys to look at? Or is that something that would be on a back burner, so to speak, given the...
The demand, expected demand coming from the federal government.
Speaker Change: Well, Joe, as you use the phrase back burner, we obviously want to be in a position to support any governmental client that potentially has a need.
Speaker Change: and we would look at those opportunities, but our primary focus today is supporting our federal partners and the mission at hand. So we don't have adverse opinion about the Alabama opportunity, but to your point, it's definitely a back burner issue.
Joe Gohm: Hey, great. I'll get back in queue. Thank you very much
Thank you [inaudible]
Jason Weaver: The next question comes from Jason Weaver with Jones Trading. Please go ahead.
Jason Weaver: Hey guys, good morning. Thanks for taking my question. So first we've heard about some requisitions for semi-permanent detainment facilities on military properties around the country. Do you have any context on that and whether Geo might be retained or approached as an operating partner for anything like that?
Jason Weaver: Sure Jason, a good question, you know, the Ford Blitz for one we've heard of.
Speaker Change: Right. As you may know, the government has retracted the Fort Blist.
Speaker Change: Objective and that's no longer a competitive procurement so that's been pulled off the table by the government and I'm sure they're evaluating other opportunities. [inaudible]
Speaker Change: We are very well positioned to provide additional capacity and operating support on an as needed basis.
We are focusing presently on our idle facilities [inaudible]
Speaker Change: And several of our current facilities have opportunity for expansion by way of soft-sided capacity, if in fact the government wants to pursue that.
Speaker Change: We're working directly with our clients to understand what their needs are and as those needs become a thenifiable, then we're going to stand in the corner with them to create the solution. So we're not opposed to operating any environment that ICE feels is necessary for them to meet their mission.
Speaker Change: All right, thank you for that. And also on the same topic, I believe in your prepared remarks you mentioned US Marshall's interest in one of your Texas facilities which is flight line I believe. Have you engaged any discussions around reopening the George or Ray Jane facility with any federal partners?
Speaker Change: Again, all of our Jason, all of our current idle inventory is under review and in discussions with our federal partners.
All right, thanks, and just one, Marshall, George [inaudible]
Speaker Change: Got it. And finally, when do you think you would be, would be the earliest you'd be in a position to engage in Sherry Purchase?
Speaker Change: We have this potential opportunity in Oklahoma which could help accelerate debt paydown. I think that becomes returning capital back to shareholders becomes a close
Speaker Change: A closer priority as that happens and so, you know, I think it's something that we'll look at. The first priority is execution and supporting our clients.
Speaker Change: back half of the year, we expect the financials to reflect those opportunities and so I think it will start to look at it more meaningfully in the back half of 2025 and then I think it becomes a very serious conversation in 26.
Thank you for tuning in. Have a great day.
All right. Thank you for taking my time.
Speaker Change: The next question comes from Greg Gibas with North Antircurity. Please go ahead.
Greg Gibbess: Good morning guys, thanks for taking the questions. As it relates to the current facility and that decision are the reversal back of single adults, what spurred that change?
Speaker Change: You know, Greg, I think it's a reflection of our partnership with immigration customs enforcement and our flexibility and
Speaker Change: and ability to respond to their needs. As they evaluate their objectives, they're looking obviously for missions, specific solutions.
Speaker Change: and when they completed that assessment, after that announcement was made, a re-evaluation was completed, and we worked directly with ICE to meet that objective. So it's really about making sure that we are nimble and flexible enough to meet the agency's objectives and help them meet their mission.
Got it, that's fair, and-
Speaker Change: You know, I believe kind of last quarter and at the investor day, the expectation was, you know, all these facilities ramping by the end of the year as it relates to your idle facilities that is.
Speaker Change: You know, I think we're still on plan, Greg. You know, we envision this quarter to be very active for contract awards and engagements with our federal partners.
Speaker Change: Again, consistent with where we were. At the beginning of the year, we're optimistic that the second half of the year is really the layover period for those additional projects being brought online.
You know, I guess [inaudible]
Speaker Change: Are you expecting timing with the Marshall service maybe to come through sooner than anything with ICE and kind of how you're aware of like weighing which facilities for either kind of service, right? Like I think pricing is pretty similar. So, you know, any color you can share on developments with the Marshall service.
Speaker Change: Yeah Greg, the Marshall Service obviously a very important client of ours, no different than Immigration Customs Enforcement. Both agencies are governed by the congressional efforts to create the budget.
in the law enforcement initiatives.
Speaker Change: The US Marshall Service Law, I think, be very well positioned, commensurate with that funding authority to execute their needs. And we are working very closely with them.
Speaker Change: The facilities that you referenced, we have frequent communication with our clients and we're having good pace discussions right now and anticipation of future use.
Okay, thanks very much [inaudible]
Speaker Change: Thank you for joining us. We hope you enjoyed the event. Thank you.
Jay McKenna: The next question comes from Jay McCanless with Red Bush. Please go ahead.
Jay McKenna: Hey, good morning guys. So, the first question I had, if you do sell Oklahoma...
Speaker Change: And, you know, the, say, a hundred and fifty million of what you talked about for additional debt pay down.
Jay McKenna: At that point, your debt to equity is going to be sitting at about a one-to-one ratio. How low would you want that to go?
Speaker Change: You know, again, I guess, how much, how much would it lower would it need to go for you guys to start buying back stock?
Jay McKenna: Well, we get to that point, as you said, one-to-one. And, you know, we've...
Jay McKenna: Significantly reduced overall leverage. And as we talked at our investor day, we're very comfortable with debt levels being two to two and a half times.
Jay McKenna: That all comes to fruition. I think then we have the opportunity to...
Jay McKenna: Focus on returning capital maybe faster than the timeline that I had previously discussed.
but you know
Jay McKenna: That would be a good place for us to be and I think it'd be a real good opportunity for us to start to reward our shareholders [inaudible]
Speaker Change: Great. And then the second question I had, how should we think about the North Lake contract, is the government covering the optics and Catholics related to starting up that facility so that it's basically budget neutral for you guys, or how should we think about the progression on that?
George Zoley, John
Speaker Change: Yeah, so when you think about when we get a contract like that, you know, the...
and our contracts typically.
Speaker Change: Don't have the government funding the capital up front and so the capital investment that we make is recovered over the course of our contract timeline, you know, whether it's a two year contract or a five year contract and that's built into the pricing.
Speaker Change: and North Lake, you know, when we talked about the $70 million investment that was included in our overall guidance for the year, you know, we...
Speaker Change: We focus on making those investments ahead of these contract awards and getting them prepared so that we could react very quickly.
Speaker Change: for our clients need. So, what I would say is that that investment on that facility from a cat-back standpoint is included in our overall guidance.
Speaker Change: as well as the revenues that will start to take hold in the back half of the year so that investment that we made is covered in the guidance and will be a creative over the course of that contract award.
Okay, great. That's all I have. Thank you.
Thank you.
Speaker Change: The next question comes from Brennan McCarthy with Cedodian Coal. Please go ahead.
Brendan Mccarthy: Great. Good morning. I just want to start off on the Q2 guidance, the top line revenue of 620 million at the midpoint.
Brendan Mccarthy: Does that include any contribution from I guess any of the three vital facility contract awards that were previously announced and also what does that assume as it relates to the ISAT participant count?
So, thanks, Brendan.
Brendan Mccarthy: Activated it and started on May 1, so we'll have a couple of months' worth of revenue.
related to that new contract award.
Brendan Mccarthy: We talked about the North Lake facility, really the revenue contribution on that is is more.
will more so start in the third quarter.
Brendan Mccarthy: from an ISAP count standpoint. We're monitoring that very closely, at least from a second quarter standpoint. We don't expect a significant increase in the second quarter, but as Dave had mentioned earlier, we've...
we're starting to slowly increase
Brendan Mccarthy: The ISAP counts that will help from a revenue standpoint. And I would also say this when you think about our existing contracts and the beds and we talked about the 48,000 we're seeing nice upticks in our existing contracts and the utilization of those facilities.
Brendan Mccarthy: and so all of those items will help contribute to the revenue growth over the first quarter.
Great. That's helpful. I appreciate the detail.
Brendan Mccarthy: And then as it relates to the budget reconciliation process, I think you mentioned in your preparator Marks, the House is aiming to complete their work by Memorial Day. The Senate is aiming closer to July . Just curious as to what do you think is the most likely outcome here regarding the timing of funding ultimately being appropriated?
Brendan Mccarthy: Well, you know, Brendan, I submit to you that once the chamber is complete their work, obviously
Brendan Mccarthy: The budget gets reconciled and the agency has a clear runway to …
Brendan Mccarthy: to focus on the mission and I submit to you that's going to be a second half of the year when you see what I call the momentum associated with interior enforcement and the work that immigration customs enforcement is laid upon them to really become meaningful so it is. [inaudible]
Brendan Mccarthy: A matter of concert with the budget approval before I think the agency really commits to extending themselves into the interior.
Brendan Mccarthy: Understood. And one more question for me, just on the Lee County facility in New Mexico. I think you had mentioned that that is being depopulated at the moment and maybe repurposed or sold. Can you just comment on that scenario and how that develops? What?
Brendan Mccarthy: So, as we had previously communicated, those facilities were being evaluated for either an asset sale or repurposing after discussions with the New Mexico leadership.
Brendan Mccarthy: We've reached the decision to pursue demobine or depopulating that project and that will be done by the end of June and then we began commensurate with that decision, we began providing the information to our federal partners on the potential availability of that project.
Brendan Mccarthy: Obviously the second half of the year so that's where it's being sage today and we're optimistic that we'll see that project. Let's go back up.
Brendan Mccarthy: We've become fruitful once again. And Brendan, I would only add that, you know, that Lee County facility for us.
I'll promote.
Brendan Mccarthy: from a return on investment was a challenge contract and so we tried to work with
with the state, with the county there to do. [inaudible]
Brendan Mccarthy: You know, support our client there, but also get an appropriate return.
and so I think... [inaudible]
Brendan Mccarthy: You know, we'll move forward here in the deep population and the impact on revenue and profitability has been factored into the guidance that I provided but I think it'll give us an opportunity here to pivot to a new client and and provide, you know, those needs to the different [inaudible]
Agencies are around the country that, you know, need the beds . . .
Speaker Change: Understood, as a follow-up, GCE, further opportunity for similar state facilities that may be lower margin.
Speaker Change: Well, I think, you know, really the two facilities that we have shared with you previously, which is a lot of facility Oklahoma and Lee County were the two that were really challenged for us.
John , John , John , John
Speaker Change: You know, the other contracts that we have, we feel like we're in a good place, both from a client relationship standpoint and from a profitability standpoint. So I think, you know, we're focused on meeting our clients objectives.
Speaker Change: I think we'll, you know, the two that we needed to focus on are the ones that we're working on right now and I'd leave it at that [inaudible]
Speaker Change: Great. Thank you. I appreciate the insight. That's all from me.
Thank you [inaudible]
Speaker Change: The next question comes from Kirk Ludtke with Imperial Capital. Please go ahead.
Hello Dave, Mark, Pablo, appreciate the call.
Speaker Change: You know, I'm sure you have a much better perspective on how interior enforcement is ramping and I'm just curious how would you describe
Are there any events on the horizon that we should-
Speaker Change: We should have on our calendars that might be inflection points .
Speaker Change: Well, Kirk, I guess from my perspective how things are going on in interior enforcement, I'm extremely impressed with Homeland Security and Immigration Customs Enforcement. Thank you very much.
Leadership and Commitment [inaudible]
Speaker Change: to the mission. They are very focused, very engaging, and the pace by which they're working is remarkable. So from my perspective, I couldn't be more impressed.
Speaker Change: than watching the agency shift, if you will, or pivot into this new mission because, as you know, for a number of years,
their objectives.
Speaker Change: We're either not sufficiently clear or had been diluted in such a way that the agency wasn't able to
Speaker Change: to really even meet the needs of Homeland Security from an immigration perspective so it has become laser focused and we are obviously very excited to support the mission that's at hand.
Speaker Change: I'm not recognizing any trigger dates for lack of better terms. I think the objective that the short order is the congressional work that's being done.
Speaker Change: to properly fund the law enforcement community at the federal level so that they can actually do the job and of course we're positioning ourselves.
Speaker Change: to support those agencies to meet their mission. So, we're excited about the task at hand and very optimistic with the leadership and the focus that's provided it currently out of Homeland Security and Immigration Customs Enforcement.
on the share potential for share buybacks.
Speaker Change: Do you need resolution of the ATD contract before you move forward to that?
Speaker Change: Well, I think it would be important for us to have a line of sight to that.
before we would...
Speaker Change: We would launch that share by back and as I had indicated earlier, you know, we've got some constraints currently. There's certain leverage levels that we need to get to before we can even consider the share bybacks. But
Speaker Change: You know, for us, it's executing. It's meeting the commitments that we have out there and meeting the guidance that we've put forth.
Speaker Change: We talked about the Oklahoma opportunity to accelerate the dead paydown. We get those things in place. I think, as I said earlier, I think we can have a much more robust conversation around returning Capitol shareholders. [inaudible]
Speaker Change: and Kirk to that end, we do anticipate obviously a contract extension for the ISAP service level, so that should be resolved in shore order.
George Zoley, George Zoley,
Speaker Change: Thank you, helpful. There's quite a disparity in your unsecured ratings, and congratulations on the Fitch, double B minus.
is, do you have target ratings for? We're up for,
that you want to get to before you launch something?
Speaker Change: You know, I wouldn't necessarily say we have to be. I would just say that I think that...
Speaker Change: and a lot of other people. So, thank you. I appreciate it.
Speaker Change: Fitch's ratings on us is appropriate when you think about our balance sheet, our leverage [inaudible]
Speaker Change: and the amount of cash that we generate. And I also think that we spend an enormous amount of time with fidget explaining to them our business and the opportunities.
Speaker Change: and so we try to do the same with both S&P and Moody's as well. And as we execute and we pay down the debt, I think
You know, S&P is close behind.
Speaker Change: Fitch from a rating standpoint. I think we got a little bit more work to go do on the moody side of things, but as you said, I think we're very pleased and we think that the ratings that Fitch has come out with are very fair based on our actual business model today.
Speaker Change: Yes, agreed. And then lastly, on the monitoring, you mentioned the shift from phones to GPS is there.
Speaker Change: How should we think about that? Is that is that going to be something we should expect going forward and? [inaudible]
Oh, or do you see it as stabilizing?
Speaker Change: I think stabilizing, right? I think our client is going to utilize all the technology that we have and they do use it today.
Speaker Change: and so we've got a variety of technology that's being deployed out there and I think that, you know,
Speaker Change: Right now with the stability and the counts that we have, I think that the mix of products have been fairly consistent probably over the last month or so and so I think we're in a good place and I think
Speaker Change: That the mix of our product should hold and continue as we move forward here [inaudible]
Got it. Thank you. And then lastly, on Oklahoma.
What has to happen for that to move forward? [inaudible]
Sir, is there something on the horizon there? Yeah, there is a processing of an asset purchased just by...
The jurisdiction and to your point, the legislature. The legislature.
would need to support that in the funding stream. [inaudible]
Speaker Change: and we've had robust and deliberate conversations with leadership. Everything is tracking forward with that expectation, understood, and we are looking for as we indicated in our remarks.
A potential July closing, commensurate with the legislative authority
Speaker Change: Fantastic, that's a big number, 312 million, is that what they hear that correctly? That's for
George Zoley,
Speaker Change: Is there something about that facility that makes it particularly valuable? And then that's it for me.
Speaker Change: It is the largest, most secure facility in the state, and provides the greatest...
Speaker Change: level of flexibility based on the design and the capacity considerations for enhancing public safety. So it's a very well designed and well maintained project and obviously as a result of that Oklahoma has significant interest in it.
I'm sorry, I'm sorry, I'm sorry, I'm sorry
Fantastic, I appreciate it. Thank you
Speaker Change: The next question comes from Raj Sharma with TX Capital Bank. Please go ahead.
Hi. Thank you for taking my questions.
I wanted to ask-
You're expecting that to help with the number? [inaudible]
Speaker Change: Good question and obviously the direct correlation is the Congressional budget to support the agency's objective on how they want to manage interior enforcement.
Speaker Change: As Mark alluded to earlier, right now what we see is a high reliance on the need for detention space.
That's being managed with the...
appropriately and assertively by the
Speaker Change: the federal government and obviously we're partnering with them on that and then we would anticipate
Speaker Change: as that detention capacity is either utilized to its fullest extent or potentially even exceeded.
Speaker Change: then Ice would have the value statement to bring about the alternatives to detention.
Speaker Change: as intended and historically been used. So we see that congressional funding is essential to the agency's mission and once that occurs, then we anticipate the second half of the year for the layover of additional support in all of our business lines.
George Zoley, George Zoley, John
Speaker Change: God, that's very helpful. Thank you. And then just if I'm understanding this correctly, there were higher expenses in Q1, higher GNA expenses. I know that you had a higher payroll, payroll was front-loaded. So you expected, are they expected to still...
Speaker Change: Stay at those levels for the second half, and the second half results higher largely from the increase in revenues.
Speaker Change: Yeah, when we think about our guidance, you know, with the activation of several final facilities.
Speaker Change: You know, the back half of the year, profitability is that the main driver is going to be the revenue growth. We will see the expenses come down, you know, in.
Speaker Change: As a percent of our revenue, as we talked before, we've hired up ahead of time, we're training, we're making that investment right now.
Speaker Change: The GNA cost should tip down in the quarters that come here, but profitability will largely be driven by the revenue growth in the back half of the year.
Speaker Change: Got it. That's that's very helpful. And then just lastly, for me, on the secured services side, what is what is the assumption on the number of net beds you're adding this year underlying the guidance for the year?
Speaker Change: George Zoley, John
Well, what what we've stated is
The guidance reflects FEDS under current contract.
Speaker Change: as well as the winds of Delaney Hall in North Lake and
Speaker Change: You know, those two contracts are going to add roughly 2800 to different bets.
to our to our portfolio
and then we continue to look at other... [inaudible]
Speaker Change: Opportunities with our clients to reactivate other facilities that we have and
Speaker Change: I think we've mentioned in our remarks, we've got another 6 to 7,000 beds available with our existing idle facility so that's what we have in play and that's what's included in our guidance.
Speaker Change: Thank you. Thank you. That's very clear. Thank you all for taking my questions offline. Thank you again. Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Dave Donahue, Chief Executive Officer of the Geo Group for any closing remarks.
Speaker Change: Thank you very much operator and thank all of you for being on the call today. We look forward to talking to you at the end of the next quarter.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.