CoreCivic, Inc. Price & Performance (CXW)

On this call, we will discuss financial results for the fourth quarter of twenty twenty four as well as financial guidance for the twenty twenty five year We will also discuss developments with our government partners provide you with other general business updates During today's call, our remarks, including all answers to your questions, will include forward looking statements pursuant to the Safe Harbor provisions of the Private Securities and Litigation Form Act Our actual results or trends may differ materially as a result of a variety of factors including those identified in our fourth quarter twenty twenty four earnings release issued after market yesterday as well as in our Securities and Exchange Commission's filings including Forms 10 ks, 10 Q and eight ks reports. You are also 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. Management will also discuss certain non GAAP metrics A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the Investors page of the company's website at corecivic.com CoreCivic.

With that, it is my pleasure to turn the call over to our CEO, Damon Heininger. Thanks, Mike. Good morning and thanks everyone for joining us for our CoreCivic fourth quarter twenty twenty four earnings call. On this morning's call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners. Following our opening remarks, will turn the call over to our CFO, Dave Garfinkel, who will provide greater detail on our fourth quarter and full year 2024 as well as introduced our 2025 financial guidance. Dave will also provide an update on our capital structure initiatives including progress on our leverage target and share repurchase program. I'm going to tag team to open the remarks today with our Chief Operating Officer, Patrick Swindle who was also named CoreCivic's President in December 2024 CoreCivic. Patrick has been with CoreCivic for seventeen years and positions of increasing responsibility within finance, and operations. He has excelled as our Chief Operating Officer and Chief Corrections Officer for the past seven years. Patrick is an excellent problem solver and brings experience and a great strategic and financial mindset to the [indiscernible] We truly look forward to his leadership during what we anticipate and opportunity.

So let me start with this. I've worked at CoreCivic for thirty two years and this is truly one of the most exciting periods in my career with the company. Having just wrapped up a strong 2024, we're anticipating significant growth opportunities perhaps the most significant growth in our company's history over the next several years. We believe CoreCivic is exceptionally well positioned operationally and financially to meet what we expect to be a sharp acceleration particularly our key federal partners. Immigration and Customs Enforcement or ICE and the United States Marshal Service. The change in Presidential Administration on January 20 has ushered in significant policy and legislative changes that directly impact our business. And I would like to run through a few of those that are the most significant. Upon President Donald Trump issued nine executive actions intend to secure the border of The United States and remove illegal immigrants. These initial orders included the declaration of a national emergency on the southern border aiming to effectively shut down the border to illegal immigration. One notable executive order issued on January 20 was titled protecting the American people against invasion. In this EO, the President calls for the federal government to faithfully execute the immigration laws of The United States.

Including the removal of aliens particularly those who threaten the safety of American people. Included in this EO is language calling on the Secretary of Homeland Security to take all appropriate actions and allocate all legally available resources or establish contracts to construct operate, control or use facilities to detain removal aliens. The Secretary of Homeland Security further shall take all appropriate actions to assure the detention of aliens apprehended for violations of immigration law pending the outcome of their removal proceedings or their removal from the country to the extent permitted by law. Effectively, this EO increases interior enforcement by ICE, and directs the Department of Homeland Security to detain those arrested by ICE pending their removal. The Lincoln Riley Act was passed by the Senate with a bipartisan report on January 20 and signed into law by President Trump on January 29, making it the first law of the current Congress. The Act was named for Lincoln Riley, the nursing student who was murdered on the University of Georgia campus by undocumented immigrant with a history of arrests and releases. The Lincoln Riley Act requires to detain certain non U. S. Nationals who have been charged arrested or convicted of crimes including burglary, [indiscernible] assault of law enforcement officer, as well as killing or injuring another person.

ICE has estimated that this act could require 60,000 to 110,000 additional detention beds. This obligation is NYSE specifically funded However, since this requires mandatory detention, funding will have to be secured shortly. Also on January 20, President Trump reversed a 01/26/2021 Biden executive order that had directed the adjusted department, which includes the Federal Bureau of Prisons and the United States Marshal Service to not renew direct contracts with privately operated The administration had the authority to waive its own [indiscernible] where no alternative capacity is available and it often did so over the past four years renewing a number of significant Marshalls contracted facilities. Still, the Biden executive order did result in a closure of two CoreCivic facilities that were previously contracted to the Marshals. Our West Tennessee Detention Facility in Mason, Tennessee and our facility in Leavenworth, Kansas now named the Midwest Regional Reception Center. We enjoy a strong relationship with the United States Market Service our second largest customer and it is very helpful to both parties to have the tool of direct contracting available log in. The Marshall service we believe prefers the level of service the private sector can provide in relation to what they receive from local county jails and we look forward to renewing discussions about those and other locations with them.

We expect increased demand to come from the United States Marshal Service which could require an additional 10,000 or more beds over the next several years, based on past usage. Finally, as for the Bureau of Prisons, one item of note. During her Senate confirmation hearing, Attorney General Pam Bondy emphasized the importance of fully implementing the First Step Act a law that was passed with strong bipartisan support in 2018. Specifically, she referenced the need to increase capacity above their 12,000 current community placements. The first step to act allows federal adults in custody or AIC, especially in minimum and low security facilities to earn time credits through meaningful programs reducing their sentences, and expanding pre release custody options like halfway houses or home confinement. The law is intended to significantly but the Bureau of Prisons has faced criticism and lawsuits for delays in the implementation. Because of this, we think the BOP will lean on the private sector to fill this gap in implementation. For over twenty years, we have been trusted partner to the BOP for residential, and home confinement community services. We believe we are well positioned to help accelerate the First Step Act implementation with our cost effective available bed capacity and industry leading reentry technology, and services. [indiscernible] and the United States Marsh Service in preparation for their increased secure bed needs.

This has included the submission of multiple proposals of our capabilities tours of existing facilities and anticipated cost estimates Additionally, as noted in our press release, we are leaning forward on expenditures for facility CapEx and transportation assets with a current estimated range of For ICE, most new contracts may come after funding is established via a congressional budget agreement and the timing and structure of those contracts are still to be determined. That said, it is possible that contracts could precede a congressional budget agreement. We're still just a few weeks into the administration so stay tuned for more on ICE contracting. One final comment on ICE, if I may. The detention beds supplied by the private sector are the least most humane most efficient logistically have the highest audit compliance scores in the system and are readily available. Additionally, with forty two years of operating experience with ICE, the private sector beds are the least likely to be legally challenged. Looking at specifically previously public identified opportunities, little has changed since our discussion last quarter as contracting activity typically is interrupted around the handoff from one administration the next in order to incorporate the guidance of the new administration.

We only have one minor update that we mentioned last quarter to an RFP ICE issued in June of twenty twenty four for up to 600 detention beds in the state of New Jersey which would expand their capacity in the state. As a reminder, we have responded with our Elizabeth Detention Facility in Elizabeth, New Jersey ICE has extended our existing contract there several times now through the February.

As it continues to evaluate proposals, We continue to believe that the Elizabeth Detention Facility responds well to ICE's needs in that market where bed space is scarce. With respect to state opportunities, during January, we announced that we have been awarded a new management contract with the State of Montana expand the geographical range of CoreCivic facilities that can serve the state of Montana to the East of the Mississippi. We expect to care for two forty inmates at our 2,672 bed Tallahassee County commercial facility in Tuttwiler, Mississippi under this contract commencing during the first quarter of twenty twenty five. The base term of the new management contract with the State of Montana which is for unspecified number of inmates and therefore could grow beyond two forty runs through December of twenty twenty six and contract extensions could run as long as seven years. During January of twenty twenty five, we also received an additional 120 Montana inmates at our eighteen ninety six beds to World Correctional Facility in El Dorado, Arizona under existing contract with the State of Montana and those beds bring us close to that facility's capacity. We enjoy a strong partnership with Montana and we appreciate the trust they put in our company and our facility teams.

CoraCivic remains an active dialogue with several other existing state partners as well as new state partners that could result in additional populations including the possible use of one or more idle facilities. These opportunities could manifest as early as 2025. Now I'll pass it over to Patrick Schmendl for an overview of fourth quarter operations. Patrick? Thanks, Damon. I'll start with a high level overview of our fourth quarter and full year financial results. Overall, CoreCivic's financial results exceeded our internal forecast [indiscernible] helped by tight cost discipline and higher occupancy. Occupancy for the quarter was 75.5% marking our highest occupancy level since the first quarter of twenty twenty right at the start of the COVID-nineteen pandemic. In the fourth quarter, we generated revenue of $479,300,000 a 2% reduction compared with the prior year quarter. Excluding the South Texas Family Residential Center, closed during the third quarter, and the California City Correctional Center underlying revenue growth increased 8% against the prior year quarter. For the full year, CoreCivic generated $2,000,000,000 in revenue. During the fourth quarter of twenty twenty four, adjusted EBITDA excludes expenses associated with debt refinancing, gains on the sale of real estate and asset impairments was $74,200,000 down from $90,000,000 in the fourth quarter of twenty twenty three.

For the full year, adjusted EBITDA increased to $330,800,000 from $311,000,000 The decrease in adjusted EBITDA in the fourth quarter was primarily attributable to the contract termination the South Texas Family Residential Center. And the expiration of the lease with the State of California at the California City partially offset by an increase in occupancy throughout the remainder of our portfolio. Combined with a general reduction in temporary labor incentives and related costs. Federal partners, primarily Immigrations and Customs Enforcement and the U. S. Marshals Service comprised almost exactly half of CoreCivic's total revenue in 2024. During the fourth quarter of twenty twenty four, revenue from our federal partners declined 12% compared with the fourth quarter of last year. Revenue from ICE, our largest partner, declined 22% comparing the fourth quarter of twenty twenty four versus the prior year quarter. However, excluding the South Texas Family Residential Center, our revenue with ICE increased 5% versus the fourth quarter of twenty twenty four a rate indicative of ICE's continued attention capacity needs even during the political transition period. Our fourth quarter revenue with U. S. Marshal Service grew by 1%. Excluding South Texas, overall federal revenue for CoreCivic in the fourth quarter of twenty twenty four increased 3% year over Now I'd like to discuss Isis' usage of detention capacity nationally across all facilities.

As you will recall in a bipartisan funding bill passed in March 2024, Congress provided funding for 41,500 detention beds. During the fourth quarter ICE's actual uses of detention beds was within a range of 38,000 to 40,000 up slightly from $36,000 to $38,000 in the third quarter. The most recently published ICE detention total was 39,263 on 01/25/2025. Which is just after President Trump's inauguration. From what we are seeing so far, we believe that the total ICE detention population is holding about steady with more arrests from ICE's interior enforcement operations offsetting declining immigration arrest from Customs and Border Patrol at the border. Over the next month or two, we would expect to see the accelerated rate of interior enforcement arrest to result in capacity limitations at the 41,500 funded beds level. CoreCivic's fourth quarter revenue from State Partners and our Safety and Community segments grew 6.4% versus the prior year quarter. This increase is a result of higher per diem rates and higher occupancy from our state government partners, well as contributions from new state contracts with Wyoming and Montana signed in the fourth quarter of twenty twenty three and in the third quarter of twenty twenty four.

These new contracts contributed 1.3% of that growth. As Damon mentioned in his remarks, we have added another contract with Montana during January 2025 we've already received 120 inmates at our Tallahatchie facility in Mississippi anticipate receiving additional inmates in the near future. The transfer and intake processes have gone smoothly. And we are pleased to expand our relationship with Montana to boost our Tallahatchie facility to a higher level of occupancy. Within our safety portfolio, of the greatest operational improvements have come in facilities serving Much of this operational improvement has related to improved staffing levels, which have allowed us to reduce or eliminate expensive short term labor measures that were necessary during as we emerge from the COVID-nineteen pandemic. Staffing that is permanent and locally hired improves program outcomes and audit performance. It is also the most cost effective and stable approach to staffing our facility. For example, our La Palma Correctional Center in Eloy, Arizona experienced meaningful improvements in performance as our investments and hard work directed at local hiring to eliminate the facility's reliance on temporary labor resources. I'm also excited to share that Rusty Washburn, the warden at La Palma was recently recognized as Warden of the Year by the North American Association of Wardens and Superintendents.

Or NOLs. To round out our discussion of fourth quarter twenty twenty four revenue, local revenue in our Safety and Community segments, which is revenue generated from contracts with county governments, increased 26%. This growth reflects new management contracts signed in the second half of twenty twenty three with Hines County, Mississippi and Harris County, Texas. Both populations are housed at our Tallahatchie County Correctional Facility located Tuck Wyler, Mississippi. I'd like to thank Warden Luis Rosa and the whole team at the Tallahatchie facility for all their efforts in satisfying the needs of seven different government partners including four new partners at this facility over the past two years. CoreCivic's overall occupancy in our Safety and Community segment for the fourth quarter of twenty twenty four increased to 75.5% from 74% in the prior year period. This growth in occupancy stems from both higher use of existing contracts particularly with ICE and also from greater utilization of the four new contracts signed in the second half twenty twenty three as well as the new contract with Montana at Saguaro signed in the third quarter of twenty twenty four that we've previously mentioned. From the fourth quarter of twenty twenty three to the fourth quarter of this year, occupancy in our Safety segment increased from 74.7% to 76%, while occupancy in our Community segment improved from 63.7% to 68.8%.

As we have mentioned in the past, our operating model is significantly embedded operating leverage to changes in occupancy And this was a factor in our margin performance during the fourth quarter. Throughout 2024, our ongoing labor attraction and retention efforts generated operational and financial improvement. Following the very challenging labor market experienced as a result of the COVID-nineteen pandemic and its immediate aftermath, Broadly, labor inflation has now returned to relatively normal levels and labor markets in most of our geographies are displaying stability. We've invested significantly in our frontline employees and implemented human capital attract and retention strategy. I'm excited to report that our staffing has improved to nearly pre pandemic levels and that has allowed us to reduce elevated spending on temporary staffing expenses. Maintaining strong staffing levels in our current base facilities is particularly important as we now look forward to higher demand under existing contracts and the possibility of future activations. In short, our improved staffing positions as well to maintain the trust of our partners to manage their higher population needs and respond swiftly to new opportunities. Our Safety segment, which includes our large higher security level prison and detention facilities, is CoreCivic's largest segment.

Having provided 93% of twenty twenty four total revenue. Net operating income for our Safety segment fell 3% during the fourth quarter of twenty twenty four reflecting the termination of the South Texas facility that we mentioned earlier offset by cost management efforts and occupancy gains elsewhere. For the full year, Safety's facility net operating income increased 16% to $434,000,000 CoreCivic serving the Federal Bureau of Prisons as well as various state and county governments. The community segment facilities are typically smaller than our safety facilities and are engaged primarily in the vital work of preparing individuals for successful reentry to their communities after a period of incarceration or as an alternative to incarceration. CoreCivic's electronic monitoring and case management services are also included in As mentioned, occupancy in the Community segment increased in the fourth quarter of twenty twenty four compared with the fourth quarter of twenty twenty three due to the sale in the third quarter of twenty twenty four of an idle residential reentry facility. Net operating income of $6,300,000 in this segment declined $1,000,000 versus the fourth quarter of last year. For the full year, community facility net operating income increased slightly to $21,700,000 Similar to our Safety segment, our Community segment facilities have been able to normalize their staffing levels and reduce dependence on temporary solutions.

Remain positive about the occupancy outlook for the community segment as more of our government partners including the BOP, returned their focus to successful reentry in order to curb the recidivism challenge. To conclude this business update, we believe the longer term macro environment for our federal, state and local businesses remains positive particularly as we enter a new presidential administration that is emphasizing public safety and immigration Our government partners face complex challenges, including capacity limitations, aging, expensive to maintain and expensive to build facilities persistent staffing challenges and populations that are increasing in numbers and evolving in their complex Conversations with our partners highlight the growing needs as do other metrics including jail backlogs and prison population forecast. Twenty twenty five is likely to bring significant opportunities particularly on the federal side and these opportunities may require activations of several of our idle facilities. CoreCivic has already taken proactive steps including capital improvements, preparatory maintenance labor force readiness to prepare facilities for activation. From an operations perspective, CoreCivic's activation team has already exceptionally busy at a number of our facilities in anticipation potential new contracts with ICE or other partners. CoreCivic's team stands prepared to start hiring and training as soon as our government partners are ready When we believe the need is clear, we do not wait for a contract award to begin preparation.

Also, just as important as facility activations are like to be in the next several years, we recognize that growth only works if our foundation of existing facilities remains strong. With that, we are continuing to commit to the necessary resources to fortify operations at our current facilities and build on the operational progress we achieved in 2024 such areas of staffing, contraband intervention and programs outcomes. Now I will turn the call over to Dave Garfinkel, who will provide a detailed look at our fourth quarter financial results our capital market activities assumptions included in our 2025 financial guidance Dave? Thank you, Patrick, and good morning, everyone. In the fourth quarter of twenty twenty four, we generated GAAP net income including a penny per share for a gain on sale of real estate assets. Excluding this special item, adjusted EPS during the fourth quarter was exceeding average analyst estimates by $0.06 per share. Normalized FFO per share was $0.39 during the fourth quarter of twenty twenty four, exceeding average analyst estimates by $0.05 per share, and adjusted EBITDA was $74,200,000 exceeding average analyst estimates by $7,900,000 A decrease in adjusted EBITDA from the prior year quarter of $15,800,000 and decreases in adjusted EPS of $0.07 normalized FFO per share of $0.06 resulted from the termination of our contract with ICE at the South Texas Family Residential Center effective 08/09/2024, and a lease expiration with the State of California effective 03/31/2024 at our California City Correctional Center.

These terminations accounted for a decrease in facility net operating income of $22,800,000 or or $0.15 per share from the prior year quarter. These reductions were partially offset by higher occupancy from state and local partners as well as from ICE across the remainder of the portfolio. Decreases in interest expense, a lower effective tax rate, and fewer shares outstanding also contributed to increases in per share earnings aggregating approximately $0.04 per share. Federal revenue in our Safety and Community segments decreased $32,800,000 from the fourth quarter of twenty twenty three to the fourth quarter of twenty twenty four, including a reduction in management revenue at the South Texas facility of $39,100,000 So excluding this facility, federal revenue in our Safety and Community segments increased $6,300,000 or 2.8%. State revenue in the Safety and Community segments increased $12,000,000 or 6.4% from the fourth quarter of twenty twenty three to the fourth quarter of twenty twenty four which included revenue from new contracts with the states of Wyoming, and Montana awarded in the fourth quarter of twenty twenty three and the third quarter of twenty twenty four.

We expect our state revenue to further increase from another new contract award from the state of Montana we announced last month with 120 inmates having already arrived at our Tallahatchie County Correctional Facility in Mississippi. Local revenue in our Safety and Community segments Revenue in our Property segment declined $7,400,000 primarily due to the aforementioned expiration of the lease at our California City facility. Operating margin in our Safety and Community facilities combined was 23.6% in the fourth quarter of twenty twenty four compared to 24.4% in the prior year quarter. The decrease in our operating margin was due to the termination of the ICE contract at the South Texas facility. As mentioned last quarter, the margin at the South Texas Family Residential Center was higher than the portfolio average due to the size and scalability of expenses and due to the unique design and specialized services we provided at the facility. Excluding the South Texas facility, operating margin was 22.8% in the prior year quarter. The increase in our operating margin excluding the South Texas facility Were able to further reduce registry nursing, temporary wage incentives [indiscernible] all related to labor market pressures that have normalized over the past several quarters.

These 3 expense categories declined by $830,000,0.0 from the and during the were at levels comparable to pre pandemic levels. Turning next to the balance sheet. During 2024, we repaid $95,000,000 of debt net of the change in cash, including $720,000,0.0 repaid in the In recognition of our earnings outlook, and based on our confidence in the business, during the we resumed share repurchases [indiscernible] which we had deprioritized in June 0 upon receipt of the contract termination at the South Family Residential Center. During 2024, we repurchased $6,850,000,0.0 of our common stock including $9,000,000 in Dec. 0. Since our share repurchase program was announced in May 2022, through December '31, we have repurchased 1,450,000,0.0 shares of our stock a total cost of $18,110,000,0.0 or or an average price of $12,.47 per share. As of Dec. 31, 2024, we had $16,890,000,0.0 available under the Board authorization. Our leverage measured by net debt to adjusted EBITDA was 2.3x using the trailing twelve months ended December '31, '24. As of December '31, we had $107,000,000 of cash on hand and an additional $2.57,000,000 dollars of borrowing capacity on our revolving credit facility, providing us with total liquidity of $3.64,000,000 dollars We have no debt maturities until 2027 when $23,850,000,0.0 of senior unsecured notes mature.

Moving lastly to a discussion of our 2025 financial guidance. We expect to generate diluted EPS of $0,.48 to $0,.61 and FFO per share of $1,.37 to $1.5 Our guidance assumes steady increases in federal populations throughout 2025 assuming higher utilization of existing contracts. As a reminder, compared with 2024, our 2025 guidance includes a collective per share reduction of $0.4 from 2024 resulting from the termination of the contract the South Texas Family Residential Center effective Aug. 9, 2024 and the lease termination of California City Correctional Center, effective March 31, 2024. Our guidance includes some expenses in anticipation of higher populations although consistent with past practice, our guidance does not include the impact of new contract awards because the timing of government actions on new contracts is always difficult to predict. 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 1 or more of our idle facilities. We currently own 9 idle correctional and detention facilities that have over 13000 available beds although we can provide no assurance activations could also include the South Texas Family Residential Center which is owned by a third party.

We will revise our financial guidance throughout the year as new contracts are signed. The activation of an idle facility generally requires four to six months to hire, train and prepare the facility to accept residential populations which results in substantial startup expenses before we realize additional revenue. To the extent any new contract requires the activation of an idle facility, our guidance will likely be negatively impacted by these with ample time to generate sufficient EBITDA to offset our startup expenses in the calendar year. Therefore, any idle facility activations this year would likely more favorably be impactful in 2026. While activating an idle facility is a complex and fluid process, we generally estimate startup expenses to be 4,000 to 6,000 per bed for the startup period before we are able to residential populations, which positive EBITDA and cash flows occurring at approximately $50,000,000 to 65% occupancy depending on the contract structure. We plan to spend $60,000,000 to $65,000,000 on maintenance capital expenditures during 2025 compared with $6,350,000,0.0 in 2024, and $6,000,000 to $7,000,000 for other capital expenditures compared with $7,000,000 in 2024. Even though our guidance does not include any new contract awards, our 2025 forecast also includes $40,000,000 to $45,000,000 of capital expenditures associated with potential idle facility activations in order to prepare these facilities to quickly accept residential populations if opportunities arise, as well as to provide transportation services.

We review our activation plans frequently and could decide to incur additional capital expenditures in anticipation of additional activations if we have better visibility on specific needs and if the lead time to complete the capital expenditures exceeds the period needed to hire, train and prepare a facility to accept residential populations. We estimate capital expenditures to reactivate an idle facility of $2,500 to $5,000 per bed depending how long a facility has been idle. Although we have seen an increase in M and A opportunities in our core business, our guidance does not include any M and A activity. However, we could deploy additional capital for a tuck in acquisition where we believe cash flows are sustainable over the long term and where returns justify the capital deployed. Our 2025 guidance contemplates staying within our targeted leverage of 2.25 times to 2.75 times. However, as mentioned, our guidance does not include the reactivation of any idle facilities which could result in an increase in our leverage during the startup period. Our guidance also does not contemplate any share repurchases beyond those completed to date or M and A activity. Accordingly, we could temporarily exceed our leverage target in the short term maintaining focus on our leverage ratios, balancing the use of our free cash flow between reducing our debt and modifying the pace of our share repurchases taking into consideration our earnings stock price liquidity and alternative opportunities to deploy capital and would expect to naturally achieve and sustain our targeted leverage over the medium and long term.

We are entering a unique period that could result in significant growth in earnings and cash flows. Our balance sheet and cash flows remain 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. We expect adjusted funds from operations or AFFO, which we consider a proxy for our cash flow available for capital allocation decisions to range from $14,850,000,0.0 dollars for 2025. For modeling our quarterly results, as a reminder, compared to the is seasonally weaker because of two fewer days in the quarter, higher utilities and because we incur approximately 75% of our unemployment taxes during the resulting in a collective $0,.04 per share decline from to and negatively impacting our operating margins. We expect our normalized annual effective tax rate to be 25% to 30% with a lower rate in compared with the other quarters. Full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G and A expenses in 2025 to be between $145,000,000 and $150,000,000 I will now turn the call back to the operator to open up the lines for questions.

Certainly. And our first question for today comes from the line of Joe Golds. From Noble Capital. Your question please. Good morning.

Nice end to the year. Can you guys hear me?

Yes.

So Damon, the first question I kind of wanted to at big picture what total capacity do you think ICE might need with all the actions that are going on? And what impact, if any, do you see for some of the other alternatives that have been have been put out in the press, Guantanamo, El Salvador, idled government, prisons, in terms of what demand might be for the private sector? [indiscernible] I believe our speaker line is currently muted. Great. We can hear you now. Thank you for that Joe.

Can you hear me okay? I can hear you.

Very good. Well, good morning again, my friend. And I heard your question completely big picture, first, let me say that we've been talking to members of the transition team now of the part of the administration really on a daily basis since the election in Nov. 0. 1 thing that's very clear to us is that there is a very strong focus on detention and obviously you're seeing that play out in the press and you've got many spokespersons for the administration are talking about that. The need for additional capacity and the detention is a key focus for the administration. So I start with that as number 1. Number 2, to your bed number question. So this has been a little fluid, but feels like in the last probably two, three weeks, it's kind of circling in into a pretty close range on needed capacity. So let me give you kind of 2 numbers here. 1 is that you're hearing in the press and again we're hearing this also privately that there is a need for about 100000 beds for enforcement [indiscernible] So that's been pretty consistent here in the last thirty days. The other which is more recent is that you've heard obviously as the passage of Lincoln Riley Bill, I mentioned that in my script, And again, this has been reported in the press 2, but we've heard a range of numbers of about 60000 beds to 110000 beds needed for that requirement, which is going to require mandatory detention for certain individuals arrested for certain crimes.

So it feels like kind of put those 2 numbers together, they're going into a range of to 200000 if you wanted to be a little more I think precise, it feels like 150000 to 200000 is where they're going to end up. Now obviously, that is going to be driven by the budget and you're seeing this also daily being played out in the press where there is potentially an effort by the House, but also potentially an effort by the Senate to do a funding bill and there's been discussion if it's 1 bill or 2 bills.

And so I won't get into details on that, but there's a lot of press and media reports on that on a daily basis. But I will say that the Senate, it's released some detail on what a reconciliation would look like with a 2 bill approach And the 2 build approach would have 1 that would focus on border security, defense and energy.

And if you look into detail that's been released here in the last few days, for border security, again, this is a reconciliation, the 2 bill approach, If you see the dollars that are proposing for that piece for immigration and border security, it's $175,000,000,000 And just to put that perspective, I know you know this already, Joe, but for the benefit of the rest of the callers, [indiscernible] current funding budget for the current fiscal year is $960,000,000,0.0 and that's from 41000 beds.

So $960,000,000,0.0 is the current run rate for ICE for 41000 beds. Reconciliation proposed by the Senate version is $175,000,000,000 So go back to the numbers, if the numbers for 150000 to 200000 beds, that's ultimately funding, that feels pretty realistic. The second part of your question is about the value proposition. So let me touch on that a little bit. Bit. So to your point, There's been some reports about Guantanamo Bay potentially utilizing capacity or new capacity there, El Salvador And then there's also some reports about state or local governments providing land and doing some soft sided structures. As I mentioned in my script, If you look at kind of 5 to 6, what I call factors, showing our value proposition, we think we're superior on all 6 of these versus these alternatives versus which is cost. And so it's been well documented on the cost to operate Gitmo over the last ten, twenty years. That's obviously with a smaller number versus what they're talking about which is 30000 beds. But we estimate that we're 5 to 10 times less than what it would cost to operate the facility down at Gitmo. Also, if you look at the soft side of structures, we're estimating that we're probably 2 to 3 times less than those structures too.

So that'd be number 1. We think we've got a real advantage on the cost side, especially in this environment. We've got Doge out there looking at the best value for government. The second part of our value proposition is the having the most humane facilities and that's because we meet all the national key requirements around this. We have always incorporated that into our training, into our facilities relative to how we operate. And other requirements. So that'd be number 2, more humane than other alternatives. Third, and this is kind of facilities are obviously here in The U. S. They're in close to key ports of entry, they're close to airports, versus obviously the population out of the country that make it a little more challenging logistically. Fourth is that we have and we're very proud of this, we wear it as a badge of honor, we're the most audited and inspected facilities in the country and with that have the highest scores relative to audits. On a consistent basis. And so our team worked really hard don't take that for granted. We work hard every day to make sure that versus other alternatives. We have the highest review rates and also the highest audit scores versus other alternatives.

The fifth thing is that we're available today. So we got capacity available today where they could utilize it within our system very, very quickly. And then finally, we've been doing this for forty two years. So we know ICE really, really well They know us obviously very well. And so with that, we're the we think of all the alternatives, the least likely to get litigation risk versus other alternatives, because again, we've got a forty two year history showing that we've been to perform at a very high level. So that's puts the bow on the value proposition The last thing I'll just say, Joe, a little bit more to your discussion we've had with you and others in the last few days about what our capabilities are. So we have got obviously vacant capacity today We've actually given ICE a proposal to do 28000 beds And that's capacity. We've got an existing facilities that are partially operated, maybe existing That's also in vacant facilities that are currently not activated that could be activated very quickly. And then third part of that total comes from I. E. Target where we've got South Texas and Dilly. And then even behind that 28000 beds that we proposed to eyes, we're also looking at expansion capabilities within our system and then also vacant facilities that are currently potentially on the market for either purchase or for lease.

So Dave is going to touch a little bit on I think potentially the margin opportunity with this. But I'll just say with 28000 beds that we put in front of eyes, I mean if you just put a number to a relative to revenues, that could be $150,000,000,0.0 relative to potential revenues for the company. And again, I think a little later Dave will talk about potential in margin opportunity. But the final thing I'll just say, Joe, is as I said in our script and also got in a press release, we're spending $40,000,000 to $45,000,000 in CapEx So we're feeling very encouraged by the conversations with ICE to date. They've given us good sense of kind of the first five or six facilities that would be the highest priority for them to utilize within our system. So no surprise there. We think about that $40,000,000 to $45,000,000 we're obviously spending that towards the first 5 or 6 that we think are going to be the highest priority initially for ICE for capacity utilization And again, we've been spending that money in the last probably four to six weeks getting ourselves prepared along with what Patrick talked about getting ourselves ready for staffing and other kind of logistical steps we need to take to get ourselves prepared.

But Dave maybe just touch on a minute if you wouldn't mind a little the realm of the possible relative to the margin profile and the capacity being utilized Sure. Thanks, Damon.

And thanks, Joe, for your question. We were estimating if we activated all of our idle capacity, so that's the 9 facilities, that we have over 13000 beds plus the South Texas Family Residential Center, which you know we don't own, but still in close contact with both Target Logistics and Target Hospitality and ICE on that facility. We estimate we could generate incremental EBITDA of $200,000,000 to $75,000,000 roughly of EBITDA at margins consistent with where we've historically generated margins from our federal government partners. So Joe, that was a long answer, but the punch line is that we've gotten proposal in front of us for 28000 beds, obviously Dave just went through the numbers rolled up to capacity we've got available today. But we've got an opportunity to really double the amount of EBITDA this company this company produces on an annual basis. So that's what we're focusing on and looking as an Great. Thanks for that very detail. Just on South Texas for a second. [indiscernible] indications out there from ICE, from Trump that they want to reopen a family center facility Obviously, as you suggest mentioned, you remain in discussions with Target on that.

But are there any other alternatives out there to South Texas that could be a family center and is that something that would have to go to an RFP or do you think you'd get something and I'm using air quotes here, something like emergency dispensation to open that facility without going through an RFP and how quickly could that facility be reopened since it wasn't closed that long ago?

Yes, great question. And short answer is, yes, we think their ICE is considering a couple alternatives. Notably, I think the the Karnes facility that's under GEO's control is potentially an opportunity there for our families. But to your question, yes, we're talking to Target daily, maybe even hourly. And let me just say they're a great, great partner of ours. And we're looking at not just Dilly, but if the need is greater than the size Dilly, Joe, we're talking to a target on expansion either there locally or maybe other parts of the Southwest. So we think we've got expansion capability with them above and beyond the 2400 bed that ideally if ICE is say they needed a bigger they have a bigger requirement. But yes, we're leaning forward on staffing, making sure that we can activate very LA seven days. So we're leaning again forward on getting ourselves prepared As it relates to way they would contract it, I think their evaluation that. Also, we've given them a couple of different ideas. To your point, this just deactivated here in the last what, six, seven months. So I think some of the things that they would never normally have to do for a new contract they probably don't have to since again just was recently deactivated So and that also gives us an advantage because since it was recently deactivated, that gives us a much quicker way to activate the facility versus if we were starting with a blank sheet of paper.

But maybe Patrick, I'll look to you, see if you think you would add to that.

No. Only thing I would add is that your point, we've taken a number of steps prepare for activation that might typically occur later in an activation cycle. So we're doing our best to minimize the cycle time that would require the time that we would need to accept our first group of detainees at the facility. And So we're doing everything within our power to shorten that time horizon.

To give ICE the support they need as quickly as possible to be able to support the mission feel like we're in a great place to the extent that we get that phone call be able to deliver for them very, very quickly. Okay.

And then I had a question. So if I look into your supplemental and looking at occupancy, pardon me, the Laredo facility has been above 100% occupancy can see Is that something you can do at some of your ICE other ICE facilities?

And I guess, kind of what percent of capacity does it become this is the max that we can operate at and kind of how long could you do something like that for? Joe, this is Patrick.

So the way I would answer that is that each facility is uniquely designed. And so the answer to that would be different at each facility that we operate. We're obviously very focused on the standards that we must meet to ensure that we have safe humane environments for the detainees. But we do have an opportunity to repurpose space in many of our facilities would help us increase capacity beyond what might be our rated capacity at least as we describe it in our supplemental. So it's going to vary from facility to facility, but all of our facilities where we currently maintain ICE contracts would give us an ability to flex our capacity up a bit certainly on a short term basis. And then to the extent that we were to think about Long term, we've also looked at potential more permanent capacity additions or conversions of space that would make that flexing up more permanent. And 1 thing I'd add to that, Joe, is that the number I shared earlier, again, the 28000 proposal that we've given to ICE, we have incorporated as part of the total that vary number. So they've got some thoughts already in front of them on where we have capability by location.

Okay.

Then 1 more for me and I'll get back in queue. You've talked about the $40,000,000 to $45,000,000 additional CapEx reopen facility, idled facilities in I know there's some transportation dollars in there. Does that have or what impact, if any, would that additional CapEx have on the amount of share repurchases that you would do?

Joe, I'll take that 1. [indiscernible] won't impact it. I mean it's been factored into our thinking. As I mentioned in my prepared remarks, our leverage is projected to be within the within the target of 2.25 times and 2.75 times. That incorporates that $40,000,000 to $45,000,000 So really won't impact it impact our thinking going forward. The only things I would consider that would affect the pace at which we repurchase shares are the pace of our our reactivations, how much startup costs are we going to have to reactivate facilities, what other M and A tuck in acquisitions are available and other capital deployment opportunities. So we could, as I I mentioned, exceed our target leverage in the short term. That's if kind of all stars align and we're deploying capital for all of those things. I tend to think they'll be kind of more moderately paced. But no doubt once a reactivation starts generating cash flow, we will be back within the targeted leverage on a sustainable basis over the medium and long term.

Great. Thanks for taking my questions. I'm sure other people want to ask them. So I'll step aside. Thanks again. Great. Thanks, Joe. Thank you, Joe. Thank you. And our next question comes from the line of Greg Gibas from Northland Securities. Your question please.

Hey, good morning, Dave and Dave. Thanks for taking the questions.

Good morning.

I appreciate all the color that you provided earlier in terms of your proposal to ICE. And I guess just to clarify or put more a fine point on it, I think it was like 18000 or so available beds that you had Last time, we kind of got an update in and wanted to kind of get a [indiscernible] sense of maybe where those additional 10000 where you acquired those. And as it relates to that 200 to $2.75,000,000 dollars EBITDA uplift number So does that reflect like the $18,000 or how should we think about that maybe [indiscernible] 28000 opportunity in terms of EBITDA uplift.

Yes.

So let me tag team with Dave on this a little bit, but the 28000 is made from a couple buckets of beds. So the first 1 is Facilities that are currently operating today, but are at lower occupancy And some of those are don't have a contract with Isomark Service, some of them do. But that's the first 1. Facilities operating today with lower where we've got available capacity. The second bucket is facilities that are currently vacant [indiscernible] completely mothballed. And can be activated in short order. The third 1 is the question Joe just asked there again and that's capacity that where we could go a safe and secure way above and beyond the rated capacity. So that's the third part of the total.

Is what we call surge capacity. In certain locations. And then the final piece of that total 28000 is third party capacity. And the obvious 1 on that and this is just 1 piece of that total obvious 1 is like South Texas. So that's a facility that we lease and have leased in the past with in addition to Dilly and South Texas 2400 beds, they also have given us line of sight of additional capacity they can make available within their system. So those are the building blocks that make up the total 28000. But Dave, I'll let you. Yes.

And thanks Greg. On the $18,000 and then respect to the $200,000,000 to $2.75,000,000 dollars of incremental EBITDA, I was counting it's about 15000 beds. The other 3000 beds and that 15000 is roughly all of our idle capacity plus the South Texas facility, which we don't own. The other several thousand beds that that you're quoting, the 18000 is already embedded in our guidance. That would be the couple thousand beds that are already under contract with ICE. Great. Makes complete sense. Nice to hear that there's seemingly a lot of opportunity above that 15000 or so that you speak to that opportunity. So, very helpful there.

I guess as it relates to more near term, does your guidance account for any strength that you're seeing in so far? Wanted to get a sense of maybe how has trended relative to I know you provided some high level ICE numbers but if you could maybe speak to how it's trended relative to last quarter and maybe relative Yes. Our populations are they're up slightly. If you go back to say inauguration date, they're up a few hundred. That's not a significant increase. And so our guidance for does not include a a big increase in populations. Our guidance I would say, includes kind of a steady increase throughout the year. From to enough. And as it relates to some of your guidance commentary mentioning the activating an idle facility negatively impacting guidance just due to those startup expenses on till the revenue catches up Wanted to see if you could get I guess provide a little bit more color on on what degree it can impact financials? And maybe the better question would be of how long on average or as an example would it take to maybe cover those costs? [indiscernible] it takes about four to six months to activate a facility depending on the facility.

I think we talk about South Texas and we already mentioned that 1 could probably go a little faster given that it was the contract just ended in Aug. 0. So we've got a good number of those employees still within the company and then I'm sure there's still some in the area that we could rehire. But the startup cost that I was kind of quoting in my script covers that four to six month period. Then you've probably got another six to twelve months where you're fully activating a facility because you can only take on so many intakes per week.

And let me add a little bit to your earlier question and say that budget is going to obviously drive higher utilization, so that's being a captain obvious, but As I mentioned earlier, watching closely kind of actions both on the house Senate and then talk through the kind of numbers there. And I think the timetable on that is kind of March 0, maybe But you're looking at those numbers off the deck, it's significantly in utilization very, very quickly depending on where they go first where you've got available capacity. The second thing is I mentioned in my script, we do think there is some effort underway to get maybe some funding over to a higher increase utilization in advance of anything done by the Congress. And so so again, being captain obvious, funding is going to be key here in the coming days and weeks drive higher utilization pretty quickly. Anything you want to add to that? No, I think that covers Thank you.

Great. Very helpful guys. Appreciate the color. And congrats on the quarter.

Thank you.

Thank you. And our next question comes from the line of Aaron Merrick from Zacks. Your question please.

Thank you.

So good morning. I think in your prepared remarks, you indicated that you might act in advance of actually securing a contract if you believe the need is clear, which I'm sure is based on having consistent and extensive conversations with with potential customers. So can you walk us through what, if any, are potential low cost initiatives that you might be able to do to shorten the startup time in, activating currently idled facility.

Sure. This is Patrick. So to give some background, we have been taking steps since the to make sure that we were prepared meet the governor demand need as quickly as possible. And so we put together an internal activation team built an internal project management plan for each of our facilities. We've gone and done a significant amount of the pre activation work in those facilities to make them ready for receipt of populations. In the past, that might have been something we would have done on a pre award basis. And so we're acting in advance of an award to make sure the facilities are prepared. With each location, we're trying to evaluate relative priority for activation timing. And so having conversations with our customer on a consistent basis, trying to identify those facilities that might be highest priority.

We can take steps forward as in putting our facility leadership teams in place we can have our advertising marketing plan ready, our training teams ready to go, And so the ability to hit the go button on those activities very rapidly positions us well to shorten the timeline at which it would take to receive the first detainee. We're trying to remove any barriers that we can remove to allow us to accelerate the activation timing and we're trying to react in a prudent way but also in an aggressive way in those locations where we believe we have the greatest act quickly to make sure that, again, we can shorten that time horizon. And so as Dave talked about, if we would look at traditionally a four to six month time horizon, if we have high levels of certainty that we may be moving forward, We may be able to take two or three months out of that timeline prior to the receipt of the first detainee.

But again, that's going to be situational and there are so many locations We don't think it prudent to lean that floor forward in every location but we are going to do that where that makes sense and where we believe the priority is highest.

Okay, got it. So [indiscernible] six months could be just your You are being very conservative and it could be shorter than that depending upon what you do now, depending upon where the location So would it be fair to think that the earlier activations would be at locations, where you're already doing some prep work. And so that four to six months is probably a little too long for the first maybe second location if things go the way we're expecting?

I think that's a fair assessment.

We are going again, we're prioritizing those facilities that we think would be a priority for our customer We're leaning forward in those locations, progressively in some cases and want to shorten the timeline as much as possible. Now the counterbalance that is we want to make sure when we activate, we activate well we're able to deliver high quality services in a safe secure and humane environment. And so to do that, we traditionally have said to six months is optimal But again, we've shortened that time horizon. And so I can argue that we're thirty days or sixty days into activations already at a couple of locations. Based on the steps that we've already taken we were to compare that to history. So I think short answer would be yes. We are working to activate more quickly. If we get to a place in the activation where we are ready for the then we certainly would provide that opportunity for ICE that we would not constrain their ability to use that capacity if we were ready sooner. We're going to strive to do that.

Okay, great. Thanks. And last question from me is, specifically on the South Texas facility, if that were to to renewed as an under a nice contract. I think the last contract was terminated because it was up than the standard 1 in most of your facilities. Would the facility require any retrofitting or significant changes in order to go forward as operating under a more standardized contract?

This is Damon and thank you again for that question. I would say it's very modest. I mean, again, we've only had a deactive to deactivate it about six, seven months. And so there is some stuff that we're working on with Target, but pretty modest to your point because I'd say it was just recently deactivated.

Okay. Thank you.

Yes, ma'am.

Thank you. And our next question comes from the line of Kirk Luke Lucas from Imperial Capital. Your question please. [indiscernible] Hello, everyone. Thank you for the call.

Can you talk a little bit about how ice deportations might ramp and how your protecting yourself with contracts that have maybe minimum beds and contract length and how all that how all that might work and how you protect yourself?

Thank you so much for your question. This is Damon.

And short answer is that we expect that the structure of our ICE agreements or new agreements that we will have with ICE would be very similar to what we've done historically. So to your point, it's very, very clear on having some type of fixed payment to cover the fixed costs within the facility. I suspect it's been very agreeable and understands reason behind that. So we think those type of features that are in our contracts previously would be in the contracts that would be going forward. Either new contracts or maybe modifications to existing contracts where ICE would be a a user or a rider. The other thing I will say, as I mentioned earlier, the value proposition us versus other alternatives, I kind of went through the 6 factors that give us we think a superior edge on this other alternatives, I want to be very clear on this. We don't see that as an either or. We actually see is a both of them being utilized. I think it's important to reinforce that because again if they're looking at numbers at 150000 to 200000, you obviously heard what we're proposing and you've heard some of these other all alternatives, they're going to need really all that capacity to meet the mission and the needs with the numbers that they're looking to get from Congress.

So I think that's an important point too.

That's helpful. Thank you. And it hasn't come up on this call, but are you hearing anything on ISAP and how the new alternatives to detention.

Not much to be honest with you. As I mentioned earlier, I mean, again, it's almost hourly that we're talking to ICE and members of the administration. And again, the focus is been all on detention. And so all the all the discussion, all the proposals, all the information we're getting given to them on cost. I mean, we've got active tours going on at either vacant facilities or current operating facilities. It's all been around detention we're prepared. We think that potentially that could be a tool they'd look out down the road and we've obviously recounted to this group our K capabilities on that front and we think we're well positioned if the need is there. But again, that's not been top of the priority list at least in here in the near term.

Got it. Great. Thank you. And then last last topic. You mentioned acquisitions a couple of times in the prepared remarks. Are you thinking about others the idle facilities of other other operators or are you thinking about actually buying other operators? It's a little bit all of the above.

So real estate team is really good. They have a database of all vacant facilities nationwide. That they look at a regular basis and they look at that compared to factors relative to the age of facility, the size, the location, the labor markets, etcetera, etcetera. And so we've continued to kind of keep that refreshed and if we think there is an opportunity through an acquisition or maybe through a lease or maybe just to have writer first refusal if there was a need expressed by ICE in a certain location just want to make sure we get ourselves prepared. So that's an active again analysis that we're doing with our real estate team And the other thing is not to your question, but it's I think important to note is that majority of our facilities have a lot of space, that means space, property and availability around the actual physical structure will re operate where we could expand either inside the actual facility itself or maybe outside the fence So that's also part of the analysis. And so just trying to get ourselves prepared again. If the number is going to be 150000 to 200000 beds from ICE, we want to get ourselves prepared for not only the near term, but also the long term and look at all these And I'd add Kirk.

We're talking about acquisitions in the core business, so they'd be [indiscernible] that look very similar to what our existing facilities look like. We want to make sure the cash flows are going to be sustained over the long term because we have seen a number of assets become available in this marketplace, but we're going to be very disciplined.

Great.

Thank you for the extra time.

Thank you.

Thank you, sir.

Thank you. And our next question comes from the line of Jay McCanless from Wedbush. Your question please.

Hey, good morning everyone.

So the first question I had And I think you answered part of this and you're talking about the Marshall service. But if we think about now the rules have essentially been reset to where we were pre COVID, that you can do business with Marshalls at BOP. I guess what's what's the path to getting safety occupancy back up above 80% and keeping it there longer term?

Thank you for that question. And your is your question more about the Marshall service or more just generally about Yes, just in I mean, now that you have the flexibility to work with with the BOP and the subsidiaries of the BOP again, that along with you guys have given us on ICE, etcetera. Yes, absolutely. Well, yes, I mean, recounting all the opportunities with ICE, I mean, you can get to that number just that customer alone to your 85% number you mentioned a second ago But let me just maybe just do a quick headline on the Marshall service. I mentioned this in $66,000 $67,000 under the previous Trump administration. So that also could be a meaningful opportunity. In fact, again, we didn't really talk about this in the scripts, but that's another that is knocking on our door. We're already having active conversation with the market service on facilities that maybe they weren't able to access [indiscernible] Or maybe using higher utilization in their existing contracts. So Marsh Service that actually that engagement with us has picked up pretty significantly here in the last thirty days. Anything you'd add to that Dave? I was going to say exactly what you did with it over a reduction of over 10,000 detainees. [indiscernible] early two thousand late twenty twenty, early twenty twenty one.

So there's a large opportunity there. Would expect as U. S. Attorneys get put in place we would expect those populations to increase. So that is another opportunity that perhaps underappreciated by the market. That is focused on ICE right now. And our state business. The contracts we've entered into over the past year plus, Montana's as early as as recently as last month, Wyoming and a couple of counties as well. We do see growth in the state business Yes, that's a good point to kind of reinforce what Dave just said on the state side. I mean, we're really thankful for the recent contracts with Montana, but we as you know, we've had recent contracts with Wyoming and with Idaho and even a couple of counties. And our Saguaro facility out in Arizona, I mean, as a result, a couple of those contracts coming together, we're at full utilization there at that facility by the first time in probably a decade at that facility. So lot of great kind of activity going on with state business right now and some of these contracts that we've gotten recently. That's great. The second one I had talked earlier in the script about $200,000,000 to $275,000,000 in potential incremental EBITDA.

Can you walk us through where that comes from again, please? Yes. So that was the EBITDA is we could potentially generate if we activated all of our idle capacity and the South Texas Family Residential Center. So it's little over 15,000 beds in total. Great. And then the only other question I had is I think you've addressed this earlier, but when you think about a potentially rising inflationary environment, tariffs, etcetera, and the cost of certain things starting to go up again. I guess how comfortable are you with the discussion you're having with Bison being able to cover costs, especially if costs start to move against you for the different things you have to provide into the facilities? We work very close strong visibility and in some cases have made pre emptive purchases on goods that are necessary for the activation of our facilities. So in the short run, we feel very good about how we're positioned and our ability to provide our beds in a cost effective way that would be consistent with historical spend levels. Obviously, we'll have to watch over the long term to the extent the environment shifts and changes, then obviously have to be sensitive to that.

But when you look at the mix of our cost structure, about two thirds of our cost structure is staffing. So it's a combination of staffing and benefits. If you were to look at actual supplies that you need to operate the facility, it's relatively small as a percentage of overall cost structure. So that's not to say that we're not focused on it. But in terms of where we're most sensitive to inflation, it's going to be on staffing and benefits and feel like we're very well positioned in the market right now. Their ability to hire in retain staff. And if I could just add one thing I think one thing I would add to that is that I think you're aware that under federal contracts, we have to pay wage termination. And if the wage termination from one contract period to the next goes up, we have to do that raise. So the wage termination tells us, okay, the new salary is this, so we have to raise those salaries as directed by the wage termination. But we also get reimbursed dollar for dollar from the federal government through higher compensation. And so that's a nice feature in the federal federal contract if we are an inflationary environment and that does have an impact on salary and wages.

We get reimbursed from that from the federal government. And of course, 100% domestic operations. So unlike many other companies in corporate America, we don't to worry so much about tariffs As Patrick mentioned, we do have some supplies and things like that that would be potentially impacted. But when two thirds of our costs are in salaries and benefits, that's a small component of our expense structure. Understood. Great. Thanks for taking my questions. Thank you, Jay. Thank you. Thank you. And our final question for today comes from the line of Ben Briggs from Stonex Financial. Your question please. Hey, good afternoon guys. Thank you for taking the [indiscernible] So I know we've already touched on this a few times, but I just want to make sure that I understand these So you currently have a proposal in front of us for up to 28,000 beds. Is that correct?

That's correct. And if 15,000 of those beds are activated, that could result in up to $1,500,000,000 of additional revenue and $200,000,000 to $275,000,000 of additional EBITDA.

So, yes, let me I'm a tag team with Dave. On the revenue side, what I was doing the total office, the 28,000 So if you do Okay. Got it. Yes. And then Dave will walk you through the math on the contribution. Yes.

So I was just given the contribution from the idle beds that we have. Again, that's a activated. At a margin at a margin consistent with where we have historically generated margins from the federal government. So if you do back into the math, that's probably $750,000,000 to $800,000,000 of revenue.

Okay. So the $15,000 the 15,000 beds would be around $750,000,000 of revenue and anywhere between $200,000,000 and $275,000,000 of additional EBITDA. That's right. $750,000,000 to $800,000,000 Of revenue, yes.

Got it. I just wanted to make sure I had those numbers straight. Thank you for that clarification. And then I'd say the majority of mine not asked just by way of kind of managing this and being able to put heads in idle beds, are you able to mix populations? So like can you put in an ICE detainee with a state or U. S. Marshals detainee Or does that depend by the contract? Or are there any restrictions around that?

This is Patrick. So that each facility is designed a bit differently, but our facilities can be very flexible in terms of housing new populations. Our Tallahatchie facility in Mississippi presently houses eight different customers in that facility. And we're able to manage the services for each of their individual contract requirements appropriately based on some combination of combining customers in a housing unit and separating them. Generally, what you're going to see in a facility is you're going to have separation by pod. And so you would not have US Marshals Service and ICE, for example, in the same pod, but you could have them adjacent. And so our of the populations in a way that allow us to deliver services appropriate for each of those customers. But our facilities are designed in a very flexible [indiscernible] maximize utilization of the pockets of beds that we do have again, while maintaining appropriate levels of separation.

Understood. Got it. Got it. Obviously, we've been talking a lot about capacity here. And everything from using, repurpose repurposed space to maybe even M and A. Is there any chance of like brand new facility builds or is that something that might be farther out?

That's a possibility to say Damon. That's a possibility. But again, based on what we've got in our system today, our capabilities and the again the various kind of building blocks that make up the total amount of the 28,000 And again, also our capability of the attention to expand facilities And then finally, you have facilities that may be out there today that we could buy, purchase, lease or maybe have writer first refusal. I don't see that as a kind of near term kind of need or opportunity, but but also we'll be watching closely to again see what ICE is total funding is and what their needs and needs are.

But I think we've got a lot of capability right in front of us to provide a lot of support for ICE in their current mission. And expanding mission. Got it. Got it. Okay. Thank you. And then final one from me is going to be so the new executive order that basically lifted the prohibition on new or renewed Department of Justice contracts. Now that that's formally lifted, do you see anything by way of new Bureau of Prisons opportunities? I know that BOP was a relatively small percentage of revenue even immediately prior to Biden's executive order. But I'm curious if you see any opportunities for growth there?

Yes, great question. And I'll give you a two answers. One is that, you may be aware that the most recent Director, she left the agency, I think within the last two weeks. So they're currently being led by an interim director. So I think the first part of the answer is that once the permanent is selected and he or she is in place then obviously they'll have a vision that I'm sure they'll lay out, not just for the agency, but also the partnership with the private sector. So that'd be Part A is the answer. Part B, the answer would be as what I alluded to earlier, We do get the sense there's a lot of frustration and consternation, especially with this new administration about the lack of increase of community confinement at halfway house beds as a result of the First Step Act. And so what we're hearing pretty loudly is that they think there's an opportunity to lean on the private sector to really substantially expand that part of the business. Now that wasn't impacted by the executive order but we do think kind of near term the Bureau is going to look for private sector to sniffing increase that capacity again for both own confinement, community confinement, but also halfway house beds.

Okay, got it. That's incredibly helpful. Thanks very much guys. And that's it for me. Thank you. Thank you.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand program back to Damon Hadiger for any further remarks.

All right. Thank you, sir. Well, thank you all so very much A lot of great questions and sorry we went over a little bit. A lot of detail. As you know, we've got a lot of activity going on in the organization, a lot opportunities. So it's a very exciting time within the company. As always, we're grateful for your support, your advice, all that you do for us and all that you do to invest in our company. So we're excited about the near term and looking forward to sharing our results here in the coming days and weeks as we lead to the second quarter. Everyone for calling in today. This does conclude the program. You may now disconnect. Good day.