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Morning, everyone, and thank you for joining us today's discussion of The GEO Group's first quarter twenty twenty five earnings results. With us today are Dave Donahue, Chief Executive Officer and Marge Cieczynski, Chief Financial Officer. This morning, we will discuss our first quarter results as well as our outlook. We will conclude the call with a question and answer session. This conference call is also being webcast live our investor website at investors.geogroup.com. Today, we will discuss non GAAP basis information. A reconciliation from non GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward looking statements. Regarding our beliefs and current expectations with respect to various matters. These forward looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward looking statements, as a result of various factors contained in our securities, and Exchange Commission filings. Including the Form ten ten Q and eight ks reports. With that, please allow me to turn this call over to our CEO, Dave Donahue.
11m 27s
Dave? Thank you, Pablo, and good morning, everybody. Thank you for joining us on our first quarter twenty twenty five earnings call. Our Executive Chairman, George Zolly, he's on personal leave today and will not be joining the call. But I am pleased to be joined by our CFO, Mark Jasinski, to review our first quarter financial results and operational highlights. We've had a very active first half of twenty twenty five, and we continue to make significant progress towards meeting our growth and capital allocation objectives. 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. And we've taken several important steps in anticipation of what we expect to be significant future growth opportunities related operational activity during 2025. In December of twenty twenty four, we announced the $70,000,000 investment to strengthen our capabilities to deliver expanded detention capacity, secure transportation, and electronic monitoring services services to ICE and the federal government. Late last year, we also announced the reorganization of our corporate management structure to strengthen our operational oversight and execution in preparation for the expected growth. 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.
12m 59s
This morning, we updated our financial guidance for 2025. Which reflects a tale of two halves of the year. The first half of twenty twenty five reflects higher overhead and operating expenses as well as higher capital expenditures without corresponding revenues. This is to position our company for anticipated future revenue growth. Which we expect to begin to layer in during the second half of twenty twenty five. Additionally, consistent with our long standing practice, our guidance does not include any new contract awards that have not been previously announced. During the first quarter of twenty twenty five, we announced several new contract awards with U. S. Immigration and Customs Enforcement. In New Jersey, we entered into a fifteen 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.
13m 54s
This new contract is expected to generate in excess of $60,000,000 of annualized revenue. With margins consistent with our company owned secure services facilities. The Delaney Hall facility began the intake process on May 1 and we expect revenues and earnings from the new contract to normalize during the second half of twenty twenty five. In Michigan, we entered into a letter contract with ICE for the phased activation of a federal immigration processing center at our company owned 1,800 bed Northlake facility. 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 twenty twenty five. We expect this new contract to generate in excess of $70,000,000 in annualized revenues with margins consistent with our company owned secure services facilities.
14m 49s
In Texas, we had announced a contract for our company owned thirteen twenty eight bed Karnes Ice Center to transition the facility from housing single adults to housing mixed populations. Subsequently, ICE decided to continue to house single adults in the Karnes ICE Center based on the assessment of the agency's current needs. The activation of the Delaney Hall and Northlake facilities will increase our total capacity under contract with ICE from approximately 20,000 beds to approximately 23,000 beds. Utilization at our facilities under contract with ICE is currently at approximately 16,000 beds which is the highest level of utilization in over five years. While we estimate the ICE detention levels are currently at about 48,000 beds nationwide. In addition, we have around 3,000 beds available to facilities currently under contract with the U. S. Marshals Service. 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. We continue to be very encouraged by the pace of these discussions and anticipate additional contract awards to be announced during the second quarter of twenty twenty five.
16m 12s
For likely activation in the second half of the year. ICE recently issued a $45,000,000,000 procurement for detention beds and related services as a strategic sourcing vehicle to contract for additional detention bed space nationwide. And the Marshfield service has issued sources sought notices to contract for additional bed space in Texas and North Carolina. Where we currently have available idle facilities. As we have previously articulated, we estimate that the utilization of our available idle and underutilized beds could generate between $500,000,000 and 600,000,000 in annualized revenues with margins consistent with our secure services owned facilities which averaged 25% to 30%. Today, the Delaney Hall and Northlake contract announcements represent in excess of $130,000,000 of this annualized revenue potential. However, these facilities are expected to generate only partial revenue and earnings contribution in 2025 due to the timing of these facility activations. As a reminder, once a contract has been awarded, our typical facility activation period is sixty to ninety days to hire train, and clear staff and to get the facility ready for occupancy. Followed by a gradual ramp up in utilization. As we have previously discussed, before the passage of the Lake and Riley Act, Trump administration had indicated a need to ramp up to 100,000 total ICE detention beds for increased interior enforcement operations.
17m 48s
Based on public statements from ICE, the implementation of the Lake and Riley Act could require an incremental 60,000 ICE detention beds or more.
17m 58s
We continue to believe that an increase to between 260,000 total detention beds will require a range of solutions for the detention and processing of migrants in The United States. We have a forty 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. 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. 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. 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. In New Mexico, we are working with the New Mexico Corrections Department to depopulate our company owned 1,200 bed Lee County facility by the end of the year.
19m 22s
We've already begun marketing this facility to both ICE and the U. S. Marshals Service.
19m 27s
As has been publicly disclosed in the media, in Oklahoma, we are in advanced discussions with the Oklahoma Department of Corrections for the potential sale of our company owned 2,400 bed Walton Correctional Facility for $312,000,000 with financial closing targeted for this July subject to legislative and executive approval. 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 for use under the intensive supervision appearance program or ISAP. ISAP participant counts averaged approximately 186,000 during the first quarter of twenty twenty five. While I sat counts declined below 184,000 in April, they have recently begun to increase and are currently above the 185,000 participants. As we have previously noted in late twenty twenty two, the ISAP contract utilization peaked at approximately 370,000 or twice the number of participants currently in the program. We estimate that returning to that utilization level could generate an incremental $250,000,000 in annualized revenues based on the current mix of the program. We have a long track record of delivering quality services under ISAT, with bipartisan support for approximately twenty years. These services entail diversified electronic monitoring technologies as well as compliance management services.
20m 59s
Which are delivered through a nationwide network of approximately 100 offices and close to 1,000 employees. Over our twenty year tenure, ISAP achieved high compliance rates with immigration court requirements while monitoring a relatively small portion of the estimated seven to 8,000,000 undocumented aliens who are on the non detained docket. In addition to another nine and a half to 10,000,000 people are also estimated to be in The United States without legal status. 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. 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 ISAF contract. And we believe that the agency's focus remains on increasing the size of the population that is currently monitored under ISAT. The existing ISAF contract is scheduled to expire 07/31/2025. 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 program.
22m 22s
We are also investing in the expansion of our secure services transportation fleet. As we have previously discussed, we expect an increase in the number of removal flights could generate an incremental $40,000,000 to $50,000,000 in annualized revenues under our existing ICE Air Support Services subcontract. On a combined basis, we estimate that the upside potential from all of these opportunities could represent as much as $800,000,000 to $1,000,000,000 in annualized revenue. Which could add as much as $250,000,000 to $300,000,000 in annualized adjusted EBITDA. Today, we have announced new contracts totaling in excess of $130,000,000 of this potential growth. Expect these opportunities to be supported by the expected continued ramp up in interior enforcement by ICE. Contingent on future funding availability either through additional appropriated or reprogrammed funds. The budget reconciliation process in Congress remains a key element for the future funding availability for ICE. The US Senate the US 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 immigration enforcement. 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 July 4.
23m 54s
Regarding our capital structure, we continue to make significant progress in our efforts to reduce debt. Deleverage our balance sheet, and evaluate potential capital returns in the future. We ended the first quarter of twenty twenty five with $1,680,000,000 in total net debt. For the full year 2025, we expect to reduce net debt by approximately $150,000,000 to $175,000,000 bringing total net debt to approximately $1,540,000,000 and total net leverage to approximately 3.3 times adjusted EBITDA. 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. During the first quarter of twenty twenty five, 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. Six of our secure services facilities received accreditation from the American Association with an average score of 99.6%. And another three facilities received PREA certification. Our GTI Transportation Division and our GO Amy UK joint venture completed approximately 2,300,000 miles driven in The United States and The UK during the first quarter. Moving to the quarterly operational milestones for GEO Care.
25m 26s
During the first quarter of twenty twenty five, 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. 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 or PREA certifications during the first quarter. Two of our residential reentry centers received accreditation from the American Correctional Association with an average accreditation score of 99.8%.
26m 7s
And two residential reentry centers received pre re certifications. Moving to our enhanced rehabilitation programs, during the first quarter of twenty twenty five, we completed approximately seven hundred thousand hours of enhanced in custody rehabilitation programming. Our academic programs awarded five seventy five high school equivalency deployments, and our vocational courses awarded more than 1,600 vocational training certifications. Our substance abuse treatment programs awarded over 900 program completions and those in our care achieved close to 2,600 behavioral treatment program and close to 4,800 individual cognitive behavioral treatment sessions. During the first quarter of twenty twenty five, we also allocated more than $300,000 towards post release services This funding supported approximately 1,900 individuals released from GEO service facilities as they return to their communities. We believe that our award winning continuum of care program provides a proven model for how the two plus million people in The United States criminal justice system can be better served in changing their lives. I'll now turn the call over to our CFO, Mark Stashinski.
27m 22s
Mark? Thank you, Dave, and good morning, everyone. For the first quarter of twenty twenty five, we reported net income attributable to GEO of approximately $19,600,000 or $0.14 per diluted share on quarterly revenues of approximately $6.00 $5,000,000 This compares to net income attributable to GEO of approximately $22,700,000 or $0.14 per diluted share in the first quarter of twenty twenty four on revenues of approximately $6.00 $6,000,000 Adjusted EBITDA for the first quarter of twenty twenty five was approximately $100,000,000 compared to approximately $118,000,000 for the prior year's first quarter.
28m 11s
Our first quarter revenue and adjusted EBITDA were in line with our internal expectations. Beginning with revenues, quarterly revenues in our owned, and leased secure service facilities, increased by approximately 3% year over year. This revenue increase was offset by lower quarterly revenue from our 10% compared to the prior year's first quarter. Combined quarterly revenues from our owned and leased reentry centers managed only facilities, and non residential service contracts were largely unchanged compared to the prior year's first quarter.
29m
Now let's turn to our operating expenses. During the first quarter of twenty twenty five, our operating expenses increased by approximately 3% compared to the prior year's first quarter. 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. Our general and administrative expenses for the first quarter of twenty twenty five increased by approximately 9% from the prior year's first quarter. In part due to recent reorganization of our senior management team and additional associated professional fees which we incurred during the first quarter of twenty twenty five in preparation for expected future growth. As well as higher employee related benefit costs. Compared to the fourth quarter of twenty twenty four, our first quarter twenty twenty five results also reflect approximately $6,000,000 in higher payroll related taxes which are front loaded in the first quarter of each year.
30m 12s
Our first quarter twenty twenty five results reflect a year over year increase year over year decrease in net interest expense of approximately $8,000,000 as a result of our debt reduction and refinancing efforts taken over the last year. Our effective tax rate for the first quarter of twenty twenty five was approximately 9% Income taxes for the first quarter of twenty twenty five 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.
30m 58s
As previously noted, our financial guidance for 2025 reflects a tale of two halves of the year. The first half of twenty twenty five 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. With growth beginning to layer in during the second half of twenty twenty five. Also importantly, consistent with our longstanding practice, our guidance does not include any new contract awards that have not been previously announced.
31m 36s
For the full year 2025, we expect net income attributable to GEO to be in the range of $0.77 to $0.89 per diluted share on revenues of approximately $2,530,000,000 and based on an effective tax rate an approximately 27% inclusive of known discrete tax items. We expect our full year 2025 adjusted EBITDA to be between $465,000,000 and $490,000,000 For the second quarter of twenty twenty five, 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 $615,000,000 to $625,000,000 We expect the second quarter of twenty twenty five adjusted EBITDA to be between 110,000,000 and $114,000,000 Our guidance does not include any assumption for new contract contract awards that have not been previously announced nor any material census growth at either existing facilities, or the ISAP contract. 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 twenty twenty five. As we progress through the year, and these growth opportunities materialize, we will continue to adjust our financial guidance accordingly. As a reminder, as contract awards are announced and we begin to reactivate idle facilities, we would expect to incur startup expenses during the initial sixty to ninety day activation period.
33m 27s
Start up expenses for any facility activations not previously announced are not included currently in our guidance. We expect total capital expenditures for the full year of 2025 to be between $120,000,000 and $135,000,000 including the impact of the $70,000,000 investment we announced in December to expand our ICE service capabilities. Moving to our capital structure, we ended the first quarter of twenty twenty five with total net debt of approximately $1680000000.00.65000000 dollars in cash on hand and approximately $235,000,000 in total available liquidity. As of the first quarter of twenty twenty five, fixed rate debt represents approximately 77% of our total indebtedness which meaningfully insulates GEO from potential interest rate volatility. In April of twenty twenty five, we were pleased to have Fitch initiate ratings on GEO. With a B plus issuer rating a BB plus rating on our secured debt a BB minus rating on our unsecured debt, and a stable outlook. We have no substantial debt maturities due before April of twenty twenty nine. 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 to shareholders.
35m 13s
Based on our current 2025 guidance, we expect to reduce our net debt by between 150,000,000 $175,000,000 this year bringing our total net debt to $1,540,000,000 by the end of the year. Our debt reduction could be augmented by the sale of one of our state correctional facilities in Oklahoma. Which we estimate could generate gross proceeds of approximately $312,000,000 In addition to allocating capital towards debt reduction, to support our capital growth needs, our goal remains to explore options for returning capital to our shareholders in the future. 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. The additional time we've spent with our federal partners have positioned us very well for the remainder of 2025. During the first quarter of twenty twenty five, announced two important contract awards for the reactivation of two company owned facilities totaling 2,800 beds and representing in excess of $130,000,000 in annualized revenue. We believe we have an unprecedented opportunity to assist the federal government in meeting its expanded immigration enforcement priorities. We have taken several important steps to be prepared to meet that opportunity and we are very well positioned.
36m 47s
We have made a significant investment commitment of $70,000,000 to strengthen our capabilities to deliver expanded detention capacity, secure transportation and electronic monitoring services to ICE and the federal government. We've also completed a reorganization of our senior management team to oversee the operational execution of this expected future growth. As a result of these steps, our guidance for '25 reflects a tale of two halves of the year. The first half of the year is expected to be impacted by higher overhead and operating expenses, as well as increased capital expenditures to position our company for 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 to ICE with four decades of partnership. And currently, we provide approximately 40% of the detention beds to ICE. We believe we are well positioned to significantly scale up secure residential care housing price from the current 16,000 utilized beds. In GEO's 100% management of the ISAT program, we believe we can quickly scale up from the present 185,000 participants to several hundreds of thousands or even millions of participants have called upon. GEO's contractual partnership with CSI Aviation has allowed us to become the largest provider of secure transportation services for ICE.
38m 17s
We believe we can scale up materially for domestic and international travel for 500,000 individuals or more if called upon. This is a unique moment in our company's history. We believe we are well positioned to meet this unprecedented opportunity and to continue to enhance value for our shareholders. With that, this completes our remarks. And we will be glad to handle any questions. Thank you.
38m 43s
We will now begin the question and answer session. To ask a question, you may press star then 1. On your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Joe Gomes with NOBLE Capital. Please go ahead.
39m 17s
Good morning. Thanks for taking my questions. [indiscernible] So wanted to start off, I'm looking in the supplement presentation, and you noted that during the quarter, or the electronic monitoring segment during the quarter revenues were down 10.5% year over year. But then operating income fell almost 20% And I'm just wondering what was behind that bigger than fall in the revenues were.
39m 56s
Yeah, Joe, I can address that. When we compare electronic monitoring revenues and profitability first quarter of this year compared to last year, It's a bit of, as you just indicated, the ICF counts were down but the bigger impact on the profitability was a mix shift. When we think about products that we offer we saw a larger reduction in the phones as part of the program first quarter of this year compared to last year. So it's really, it's a mix shift away from phones and more to GPS monitoring devices. Which puts a little bit of pressure on the margins.
40m 46s
Okay, thanks for that.
40m 48s
And then you guys mentioned [indiscernible] Are in reconciliation talking about adding 45,000,000,000 for ICE detention, They talk about adding a significant amount of money also for transportation. But one of the things, at least in the articles that I have read nothing really mentioned [indiscernible] ATD. Now, it was that included in that 45,000,000,000 or is there something else going on there with the funding bills? Potential funding bills?
41m 29s
Well, Joe, this is Dave. Let me speak to that. The funding activity right now as you identified, I think Homeland Security and Immigration Customs Enforcement are obviously focusing on interior enforcement and detention is a priority. So we've seen as a result of the agency's efforts to secure the border, at the southern side of our country that detention focus has become the reality. And so, we spent additional time with our clients working through our facilities, so they have a better understanding to maximize the available detention space in the country. As the interior enforcement matures, and the detention space is utilized, the non detained docket is very robust, as you know, and the alternative to detention and specifically ISAP is the valuable solution that provides accountability for the immigration population as they're moving through their judicial review. So 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 availability.
42m 48s
And Joe, I would just add, I think that as the funding bill matures, I think more specifics 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 the [indiscernible] process in Congress work out, and I think all of that will become more clear to all of us.
43m 12s
Okay.
43m 14s
And then you guys mentioned, I see ten days and obviously working with the ICE numbers, which are delayed. I think the most recent one I saw was from early April. The number of detainees has significantly increased from the beginning of the government fiscal year from, call it, 38,000 ish to 48,000 ish, but it's been relatively flat the last couple of months. And I don't know if that's your guys thoughts. Is that just due to funding? Is there other things going on there? And how does that kind of play into your expectations that there's likelihood that all of your idle facilities would be reactivated this year?
44m 9s
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. The transition from 2024 to 2025 the agency's objectives have significantly changed, and the executive office obviously has provided greater clarity on the expectations for interior enforcement. We're very impressed with ICE's focus 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 And I think I would add, that they were rapidly increased the number of people detained. And so they're using up very quickly the amount of space that they have. And so when you think about the back half of the year, our Delaney contract and the Northlake contract, that will help them increase the number of detainees. So it's a budget, but I also think as they're letting these contracts and increase increasing the capacity, you'll start to see those go up. It just very quickly they used the capacity that they had on contract, and now they're gonna have open up new contracts to expand that capacity.
45m 46s
Okay, thanks for that. One last one for me. Pardon me, given what we discussed today about the selling the one potentially selling the one state facility and repurposing another state facility for ice uses. Recently, and you think in the last week or so, Alabama put out RFI, I think about interest for people building a new facility for them. Given where you guys are today in in the the expected growth from ICE, would Alabama make sense for you guys to look at or is that something that would be on on a back burner, so to speak, given demand, expected demand coming from the federal government.
46m 46s
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. And we would 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.
47m 18s
Okay, great. I'll get back in queue. Thank you very much.
47m 21s
Thank you.
47m 25s
The next question comes from Jason Weaver with JonesTrading. Please go ahead.
47m 30s
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 anything like that? Sure, Jason. Good question. You know, the This is Fort Bliss for one.
47m 51s
That we've heard of.
47m 53s
Right. As as you may know, the government has retracted retracted the Fort Bliss objective and that's no longer a competitive procurement. So that's been pulled off the table by government and I'm sure they're evaluating other opportunities. 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 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. So we're working directly with our clients to understand what their needs are, and as those needs become identifiable, 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. Alright. Thank you for that. And also on the same topic, I believe in your prepared remarks, you mentioned U. S. Marshals interest in one of your Texas facilities, is Flight Line, I believe. Have you engaged in any discussions around reopening the Georgia Ray James facility with any federal partners? Again, of our Jason, all of our current idle inventory is under review and in discussions with our federal partners.
49m 19s
All right, thanks. And just one Got it.
49m 25s
And, finally, when do you think you would be would be the earliest you'd be in a position engage in share repurchase?
49m 35s
Good question, Jason. I think first things first, at our Investor Day, we talked about the priorities of capital allocation Right now, the big focus is on supporting our clients. And the reactivation and expanding of the services that we have in place here, which we believe will lead to substantial increase in revenues and profitability. That's both from an expansion and a capital standpoint, And what I would tell you is we move into the back half of this year, We have this potential opportunity in Oklahoma, which could help accelerate debt pay down I think that becomes returning capital back to shareholders becomes a close closer priority as that happens. And so I think it's something that will we'll look at. The first priority is execution. And supporting our clients. Back half of the year, we expect the financials to reflect those opportunities. And so I think we'll start to look at it more meaningfully in the back half of of 2025. And then I think it becomes a very serious conversation in '26. All right, thank you for taking my time.
51m 3s
The next question comes from Greg Gibas with Northland Securities. Please go ahead.
51m 10s
Hey, good morning, guys. Thanks for taking the questions. As it relates to the Karnes facility and that the decision or the reversal back to single adults, what spurred that change? Greg, I think it's a reflection of our partnership with Immigration Customs Enforcement and our flexibility and ability to respond to their needs. As they As they evaluate their objectives, they're looking obviously for mission specific solutions 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 help them meet their mission. Got it, that's fair. And I believe kind of last quarter and at the Investor Day, expectation was all these facilities ramping by the end of the year. As it relates to your idle facilities that is, but primarily be contracted by the end Q2. Is there an updated timeframe you estimate from a contracting timing perspective?
52m 23s
With the idle facilities? I think we're still on plan, Greg. We envision this quarter to be very active for contract awards and engagements with our federal partners. So 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 year or layover period those additional projects being brought online. Got it.
52m 54s
And then lastly, to follow-up on kind of the U. S. Marshals Service, saw a couple RFPs out there for facilities and pretty closely aligned with a couple of years a couple of your idle facilities that is, how are you kind of I know you can't provide specifics, but just kind of weighing do you expect maybe those RFPs to I guess, are you expecting timing with the Marshals 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, any color you can share on developments with the marshal service?
53m 38s
Yeah, Greg. The Marshal Service obviously a very important client of ours, no different than immigration immigration customs enforcement. Both agencies are governed by the congressional efforts to create the budget. And so as we watch Congress manage the funding necessary for the law enforcement initiatives. The US Marshals Service will, I think, be very well positioned commensurate with that funding authority. To execute their needs. And we are working very closely with them The facilities that you referenced we have frequent communication with our clients and we're having good paced discussions right now. Anticipation of future use.
54m 25s
Okay, thanks very much.
54m 31s
The next question comes from Jay McCanless with Wedbush. Please go ahead.
54m 37s
Hey, good morning, guys. So the first question I had, if if you do sell Oklahoma, [indiscernible] say, dollars 150,000,000 of what you talked about for additional debt pay down At that point, your debt to equity is gonna be sitting at about a one to one ratio How low would you want that to go? And you know, again, I guess, how much how how much would it lower would it need to go for you guys to start buying back stock?
55m 4s
Well, we get to that point, as you said, one to one. We've significantly reduced our 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. So that all comes to fruition, I think then we have the opportunity focus on returning capital maybe faster than the timeline that I had previously discussed. But you know, that would be a good place for us to be, and I think it'd be a a real good opportunity for us to start to reward our shareholders. [indiscernible] And then the second question I had how should we think about the Northlake contract Is the government covering the OpEx and CapEx 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? Yeah. So when you think about when we get a contract like that, our contracts typically don't have the government funding the capital upfront. And so the capital investment that we make is recovered over over the course of our contract timeline. Whether it's a two year contract or a five year contract and that's that's built into the pricing.
56m 36s
And Northlake, when we talked about the $70,000,000 investment that was included in our overall guidance for the year, we focus on making those investments ahead of contract awards and getting them prepared so that we could react very quickly for our clients' needs. So what I would say is that that investment on that facility from a CapEx standpoint is included in our overall guidance. As well as the revenues that we'll start to take home hold in the back half of the year. So that investment that we made is covered in the guidance and we'll be accretive over the course of that contract award. Okay, great, that's all I have. Thank you. Thank you.
57m 26s
The next question comes from Brennan McCarthy with Sidoti and Co. Please go ahead.
57m 34s
Great. Good morning. I just wanted to start off on the Q2 guidance. The top line revenue of $620,000,000 at the midpoint. Does that include any contribution from I guess, any of the three idle facility contract awards that were previously announced? And also, what does that assume as it relates to ISAT participant count? [indiscernible] thanks Brendan. The revenue guidance for the second quarter will factor in the benefits of the Delaney contract. That activated and started on May 1. We'll have a couple of months worth of revenue related to that new contract award We talked about the North Lake facility really the revenue contribution on that is more will more so start in the third quarter. From an ISAT count standpoint, we're monitoring that very closely, at least from a second quarter standpoint. We expect a significant increase in the second quarter But as Dave had mentioned earlier, we've we're starting to slowly increase 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 48,000, we're seeing nice upticks in our existing contracts and the utilization of those facilities.
59m 6s
And so all of those all of those items will help contribute to the revenue growth over the first quarter.
59m 18s
Great. That's helpful. I appreciate the detail.
59m 21s
And then as it relates to the budget reconciliation process, I think you mentioned in your prepared remarks 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?
59m 44s
Well, Brendan, I submit to you that once the chambers complete their work, obviously the budget gets reconciled, then the agency has a clear runway to focus on the mission and I submit to you that's going to be second half of the year when you see what I call the momentum associated with interior enforcement and the work that immigration customs enforcement has laid upon them to really become meaningful. It is a matter of concert with the budget approval before I think the agency really commits to extending themselves into the interior Understood. And one more question for me just on the Lea County facility in New Mexico. I think you had mentioned that is being depopulated at the moment and maybe repurposed or sold.
1h 41s
Can you just comment on that scenario and how that developed?
1h 47s
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. We've reached the decision to pursue demobing or depopulating that project and that will be done by the 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 obviously the second half of the year. So that's where it's being staged today and we're optimistic that we'll see that project become fruitful once again. And Brandon, I would only add that [indiscernible] facility for us from a a return on investment was a challenged contract. And so we tried to work with with the state with the county there to support our client there. But also get an appropriate return And so I think we'll move forward here in the depopulation and the impact on revenue and profitability has been factored into the guidance that I provided, but I think it'll give us a an opportunity here pivot to a new client and provide those needs [indiscernible] the different agencies around the country that need the beds.
1h 2m 22s
Understood, and as a follow-up, do you see further opportunity for similar you know, state facilities that may be lower margin?
1h 2m 34s
Well, think really the two facilities that we have shared with you previously, which is which is the lawn facility in Oklahoma and Lea County were the two that were really challenged for us. 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 we're focused on meeting our clients objectives, I think 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.
1h 3m 15s
Great. Thank you. Appreciate the insight. That's all for me.
1h 3m 20s
Thank you.
1h 3m 23s
The next question comes from Kirk Lodke with Imperial Capital. Please go ahead.
1h 3m 29s
Hello, Dave. Mark, Pablo. Appreciate the call. Just a couple of follow ups. With respect to demand, I'm sure you have a much better perspective on how interior enforcement is ramping. And just curious, how would you describe how it's going and are there any events on the horizon that we should we should have on our calendars that might be inflection points?
1h 4m 5s
Well, Kurt, I guess from my perspective, how things are going on interior enforcement, I'm extremely impressed with Homeland Security and Immigration Customs Enforcement. Leadership and commitment 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. Than watching the agency shift, if you will, or pivot into this new mission because as you know, for a number of years, [indiscernible] were either not sufficiently clear or had been diluted in such a way that the agency wasn't able to really even meet the needs of land 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. I'm recognizing any any trigger dates for lack of better terms. I think the objective that's the short order is the congressional work that's being done 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 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 currently out of Homeland Security and Immigration Customs Enforcement.
1h 5m 41s
That's helpful. Thank you. I appreciate it.
1h 5m 45s
On the share potential for share buybacks, do you need resolution of the ATD contract? Before you move forward with that?
1h 5m 56s
Well, think it would be important for us to have a line of sight to that. Before we would launch that share buyback. And as I had indicated earlier, we've got some constraints currently There are certain leverage levels that we need to get to before we can even consider the share buybacks. But for us, executing, it's meeting the commitments that we have out there and meeting the guidance that we've put forth. We talked about the Oklahoma opportunity to accelerate the debt pay down. We get those things in place. Think, as I said earlier, I think we can have a much more robust conversation around returning capital to shareholders.
1h 6m 45s
And Kurt to that end, we do anticipate obviously a contract extension for the ISAT service level. So that should be resolved in short order. Got it. Thank you.
1h 7m
Helpful. There's quite a disparity in your unsecured ratings and congratulations on the Fitch. Do you have target ratings for for that you want to get to before you launch something? Do you need to need to be double b at all three agencies or I wouldn't necessarily say we have to be. I would just say that I think that Fitch's ratings on us is appropriate when you think about our balance sheet, our leverage and the amount of cash that we generate. And I also think that that we spend an enormous amount of time with Fetch explaining to them our business and the opportunities. [indiscernible] we try to do the same with both S and P and Moody's as well. And as we execute and we pay down the debt, I think S and P is close behind 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 are very fair based on our actual business model today.
1h 8m 19s
Yes, agreed.
1h 8m 21s
And then lastly, on the monitoring, you mentioned the shift from phones to GPS. Is there how should we think about that? Is that Is that going to be something we should expect going forward? And Or do you see it as stabilizing?
1h 8m 41s
I think stabilizing. Right? I think our client is going to utilize all the technology that we have. And they do use it today. And so we've got a variety of technology that's being deployed out there and I think that right now with the stability in the counts that we have, think that mix of products are have been fairly consistent probably over the last month or so. And so I think I think we're in a good place and I think that the mix of our product should hold and continue as we move forward here. Got it, thank you. And then lastly, on Oklahoma, what has to happen for that to move forward? Does the state legislature need to approve something or is there something on the horizon there?
1h 9m 34s
Yes, there is, Kurt. There is a of an asset purchased by the jurisdiction and to your point, the legislature would need to support that in a funding stream and we've had robust and deliberate conversations 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.
1h 10m 10s
Fantastic. That's a big number. $312,000,000. Is that what did I hear that correctly?
1h 10m 15s
That's correct.
1h 10m 16s
Is something about that facility that makes it particularly valuable? And then that's it for me.
1h 10m 23s
It is the largest, most secure facility in the state. And provides the greatest level of flexibility based on the design and the capacity considerations for enhancing public safety. So it's a very well and well maintained project and obviously as a result of that Oklahoma Oklahoma has significant interest in it.
1h 10m 50s
Fantastic. I appreciate it. Thank you.
1h 10m 57s
The next question comes from Raj Sharma with TX Capital Bank. Please go ahead.
1h 11m 3s
Hi. Thank you for taking my questions. I wanted to ask what do you think when do you think we would you would reasonably get to the 370,000 monitoring number that you were doing just a year and a half ago. That was about 3,500 to 4,000 a week. Is there a timeline you get to that? And And just sort of in addition to that, the congressional funding approval expected by second half, is that expecting that to help with the number to go up? Raj, yeah, 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. As Mark alluded to earlier, right now what we see is a high reliance on the need for detention space, that's being managed appropriately and assertively by the federal government, and obviously we're partnering with them on that. And then we would anticipate as that detention capacity is either utilized to its fullest extent or potentially even exceeded then ICE would have the value statement to bring about the alternatives to detention as intended and historically been used. We see that congressional funding is essential to the agencies mission and once that occurs, we anticipate the second half of the year for the layover of additional support all of our business lines.
1h 12m 51s
Got it. That's That's very helpful. Thank you. And then just if I'm understanding this correctly, there were higher expenses in Q1 higher G and A expenses. I know that you had higher payroll was front loaded. So you expected are they expected to still stay at those levels for the second half? And are the second half results higher largely from the increase in revenues [indiscernible] we think about our guidance, with the activation of several idle facilities 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 [indiscernible] as a percent of our revenue, as we talked before, we're we've hired up ahead of time, we're training, we're making that investment right now. The G and A cost should tick down in the quarters to come here. But profitability will largely be driven by the revenue growth in the back half of the year.
1h 14m 8s
Got it. That's That's very helpful. And then just lastly for me, on the secured services side, what is the assumption on the number of net beds you're adding this year underlying the guidance for the year?
1h 14m 27s
Well, what what we've stated is the guidance reflects beds under current contract, as well as the wins of Delaney Hall and North Lake. [indiscernible] those two contracts are going to add roughly 2,800 additional beds to our portfolio. And then we continue to look at other opportunities with our clients to reactivate other facilities that we have and I think we've mentioned in our remarks, we've got another 6,000 to 7,000 beds available with our existing idle facility. That's what we have in play and that's what's in included in our guidance.
1h 15m 16s
Got it, thank you. That's very clear. Thank you all for taking my questions offline. Thank you again.
1h 15m 21s
Thank you.
1h 15m 26s
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.
1h 15m 35s
Thank you very much, operator, and thank all of you for being on call today. We look forward to talking to you at the end of the next quarter.
1h 15m 43s
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Key Insights
GEO reported Q1 2025 net income of $19.6 million ($0.14 per diluted share) on revenues of $605 million, with adjusted EBITDA of $100 million; full-year 2025 guidance is $0.77–$0.89 per share on $2.53 billion revenue and $465–$490 million adjusted EBITDA.
The company is positioning for significant growth in the second half of 2025, driven by new ICE contracts (Delaney Hall and Northlake facilities) expected to add over $130 million in annualized revenue and 2,800 beds, with further upside from additional idle facility activations.
GEO is investing $70 million to expand ICE service capabilities and expects total 2025 capital expenditures of $120–$135 million; net debt reduction of $150–$175 million is targeted, with potential acceleration from a $312 million Oklahoma facility sale.
Utilization at ICE-contracted facilities reached 16,000 beds (highest in 5+ years), with ongoing discussions for additional contracts that could bring total annualized revenue potential from idle/underutilized beds to $500–$600 million at 25–30% margins.
The company anticipates a "tale of two halves" in 2025: higher expenses and capex in H1 to prepare for growth, with revenue and profitability ramping in H2 as new contracts activate; share repurchases and capital returns are under consideration for late 2025 or 2026 as leverage targets are met and major contract extensions (e.g., ISAP) are secured.
