The GEO Group, Inc. (NYSE: GEO) (“GEO”), a leading
provider of support services for secure facilities, processing
centers, and reentry centers, as well as enhanced in-custody
rehabilitation, post-release support, and electronic monitoring
programs, reported today its financial results for the first
quarter 2024.
First Quarter 2024 Highlights
- Total revenues of $605.7 million
- Net Income of $22.7 million
- Adjusted EBITDA of $117.6 million
For the first quarter 2024, we reported net income of $22.7
million, compared to $28.0 million for the first quarter 2023. We
reported total revenues for the first quarter 2024 of $605.7
million compared to $608.2 million for the first quarter 2023. We
reported first quarter 2024 Adjusted EBITDA of $117.6 million,
compared to $130.9 million for the first quarter 2023.
George C. Zoley, Executive Chairman of GEO, said, “During the
first quarter of 2024, our diversified business units continued to
deliver strong operational and financial performance. We are
pleased that our steady results and our multiyear strategy to
deleverage our balance sheet successfully positioned GEO to
refinance substantially all our debt. Our recent successful
refinancing has lowered our average cost of debt and has given us
greater flexibility to evaluate options to potentially return
capital to shareholders. We remain focused on the disciplined
allocation of capital to enhance long-term value for our
shareholders.”
Financial Guidance
Today, we updated our initial financial guidance for 2024. For
the full year 2024, we expect Net Income to be in a range of $55
million to $75 million on annual revenues of approximately $2.4
billion and reflecting an effective tax rate of approximately 20
percent, inclusive of known discrete items. Our full-year 2024
guidance reflects an $86 million loss on extinguishment of debt,
pre-tax, as a result of our refinancing transactions during the
second quarter of 2024. We expect full year 2024 Adjusted EBITDA to
be between $485 million and $515 million.
For the second quarter of 2024, we expect a Net Loss in a range
of $27 million to $30 million as a result of the $86 million loss
on extinguishment of debt, pre-tax, during the second quarter of
2024. We expect second quarter 2024 revenues to be in a range of
$600 million to $610 million. We expect second quarter 2024
Adjusted EBITDA to be in a range of $119 million to $125
million.
Recent Developments
On March 12, 2024, we announced that our wholly-owned
subsidiary, GEO Transport, Inc. (“GTI”) has been awarded a
five-year contract, inclusive of option periods, to provide air
operations support services on behalf of U.S. Immigration and
Customs Enforcement (“ICE”), as a subcontractor to CSI Aviation,
Inc. (“CSI Aviation”) which has been selected by ICE as the prime
contractor. CSI Aviation is a veteran-owned aviation services
company, founded in 1979, with a long-standing record as a leading
provider of aviation support services to the U.S. federal
government. GTI first began providing air operations support
services to ICE as a subcontractor to CSI Aviation, under a
nine-month emergency contract starting in July of 2023. The new
five-year contract is expected to generate approximately $25
million in annualized revenues for GEO.
Debt Refinancing
On April 18, 2024, we closed a private offering of $1.275
billion aggregate principal amount of senior notes, comprised of
$650.0 million aggregate principal amount of 8.625% senior secured
notes due 2029 (the “Secured Notes”) and $625.0 million aggregate
principal amount of 10.25% senior unsecured notes due 2031 (the
“Unsecured Notes” and, together with the Secured Notes, the
“Notes”), exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”). The
Notes are guaranteed by GEO’s domestic subsidiaries that are
guarantors under a new senior secured credit facility and
outstanding senior notes. We also closed a new five-year $450.0
million Term Loan B (the “Term Loan”), bearing interest at SOFR
plus 5.25%, under a new $760.0 million senior secured credit
facility. The new senior secured credit facility also includes a
five-year revolving line of credit for $310.0 million.
The offering of the Notes and the new Term Loan resulted in net
proceeds of approximately $1.67 billion, after deducting the
initial purchasers’ discount and estimated expenses payable by GEO.
We used the net proceeds of the offering of the Notes, borrowings
under the new Term Loan, and cash on hand to refinance
approximately $1.5 billion of existing indebtedness, including to
fund the repurchase, redemption or other discharge of our Tranche 1
Term Loan and Tranche 2 Term Loan under our prior senior credit
facility, the 9.50% senior second lien secured notes, the 10.50%
senior second lien secured notes, and the 6.00% senior notes due
2026, to pay related premiums, transaction fees and expenses, and
for general corporate purposes. On May 6, 2024, we also retired
$177.1 million principal amount of the 6.50% exchangeable senior
notes due 2026 issued by GEO Corrections Holdings, Inc., using
$177.1 million in cash and approximately 9.8 million shares of GEO
common stock.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our first quarter 2024 financial
results as well as our outlook. The call-in number for the U.S. is
1-877-250-1553 and the international call-in number is
1-412-542-4145. In addition, a live audio webcast of the conference
call may be accessed on the Webcasts section under the News, Events
and Reports tab of GEO’s investor relations webpage at
investors.geogroup.com. A replay of the webcast will be available
on the website for one year. A telephonic replay of the conference
call will be available through May 14, 2024, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 2879740.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified
government service provider, specializing in design, financing,
development, and support services for secure facilities, processing
centers, and community reentry centers in the United States,
Australia, South Africa, and the United Kingdom. GEO’s diversified
services include enhanced in-custody rehabilitation and
post-release support through the award-winning GEO Continuum of
Care®, secure transportation, electronic monitoring,
community-based programs, and correctional health and mental health
care. GEO’s worldwide operations include the ownership and/or
delivery of support services for 100 facilities totaling
approximately 81,000 beds, including idle facilities and projects
under development, with a workforce of up to approximately 18,000
employees.
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains
reconciliation tables of Net Income Attributable to GEO to Adjusted
Net Income, and Net Income to EBITDA and Adjusted EBITDA, along
with supplemental financial and operational information on GEO’s
business and other important operating metrics. The reconciliation
tables are also presented herein. Please see the section below
titled “Note to Reconciliation Tables and Supplemental Disclosure -
Important Information on GEO’s Non-GAAP Financial Measures” for
information on how GEO defines these supplemental Non-GAAP
financial measures and reconciles them to the most directly
comparable GAAP measures. GEO’s Reconciliation Tables can be found
herein and in GEO’s Supplemental Information available on GEO’s
investor webpage at investors.geogroup.com.
Note to Reconciliation Tables and Supplemental Disclosure
– Important Information on GEO's Non-GAAP Financial
Measures
Adjusted Net Income, EBITDA, and Adjusted EBITDA are non-GAAP
financial measures that are presented as supplemental disclosures.
GEO has presented herein certain forward-looking statements about
GEO's future financial performance that include non-GAAP financial
measures, including Net Debt, Net Leverage, and Adjusted EBITDA.
The determination of the amounts that are included or excluded from
these non-GAAP financial measures is a matter of management
judgment and depends upon, among other factors, the nature of the
underlying expense or income amounts recognized in a given
period.
While we have provided a high level reconciliation for the
guidance ranges for full year 2024, we are unable to present a more
detailed quantitative reconciliation of the forward-looking
non-GAAP financial measures to their most directly comparable
forward-looking GAAP financial measures because management cannot
reliably predict all of the necessary components of such GAAP
measures. The quantitative reconciliation of the forward-looking
non-GAAP financial measures will be provided for completed annual
and quarterly periods, as applicable, calculated in a consistent
manner with the quantitative reconciliation of non-GAAP financial
measures previously reported for completed annual and quarterly
periods.
Net Debt is defined as gross principal debt less cash from
restricted subsidiaries. Net Leverage is defined as Net Debt
divided by Adjusted EBITDA.
EBITDA is defined as net income adjusted by adding provisions
for income tax, interest expense, net of interest income, and
depreciation and amortization. Adjusted EBITDA is defined as EBITDA
adjusted for net loss attributable to non-controlling interests,
stock-based compensation expenses, pre-tax, start-up expenses,
pre-tax, ATM equity program expenses, pre-tax, close-out expenses,
pre-tax, other non-cash revenue and expenses, pre-tax, and certain
other adjustments as defined from time to time.
Given the nature of our business as a real estate owner and
operator, we believe that EBITDA and Adjusted EBITDA are helpful to
investors as measures of our operational performance because they
provide an indication of our ability to incur and service debt, to
satisfy general operating expenses, to make capital expenditures,
and to fund other cash needs or reinvest cash into our
business.
We believe that by removing the impact of our asset base
(primarily depreciation and amortization) and excluding certain
non-cash charges, amounts spent on interest and taxes, and certain
other charges that are highly variable from year to year, EBITDA
and Adjusted EBITDA provide our investors with performance measures
that reflect the impact to operations from trends in occupancy
rates, per diem rates and operating costs, providing a perspective
not immediately apparent from net income.
The adjustments we make to derive the non-GAAP measures of
EBITDA and Adjusted EBITDA exclude items which may cause short-term
fluctuations in income from continuing operations and which we do
not consider to be the fundamental attributes or primary drivers of
our business plan and they do not affect our overall long-term
operating performance.
EBITDA and Adjusted EBITDA provide disclosure on the same basis
as that used by our management and provide consistency in our
financial reporting, facilitate internal and external comparisons
of our historical operating performance and our business units and
provide continuity to investors for comparability purposes.
Adjusted Net Income is defined as net income attributable to GEO
adjusted for certain items which by their nature are not comparable
from period to period or that tend to obscure GEO’s actual
operating performance, including for the periods presented loss on
the extinguishment of debt, pre-tax, start-up expenses, pre-tax,
ATM equity program expenses, pre-tax, close-out expenses, pre-tax,
and tax effect of adjustments to net income attributable to
GEO.
Safe-Harbor Statement
This press release contains forward-looking statements regarding
future events and future performance of GEO that involve risks and
uncertainties that could materially and adversely affect actual
results, including statements regarding GEO’s financial guidance
for the full year and second quarter of 2024, statements regarding
GEO’s focus on reducing net debt, deleveraging its balance sheet,
and positioning itself to explore options to return capital to
shareholders. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as “may,”
“will,” “expect,” “anticipate,” “intend,” “plan,” “believe,”
“seek,” “estimate,” or “continue” or the negative of such words and
similar expressions. Risks and uncertainties that could cause
actual results to vary from current expectations and
forward-looking statements contained in this press release include,
but are not limited to: (1) GEO’s ability to meet its financial
guidance for 2024 given the various risks to which its business is
exposed; (2) GEO’s ability to deleverage and repay, refinance or
otherwise address its debt maturities in an amount and on terms
commercially acceptable to GEO, and on the timeline it expects or
at all; (3) GEO’s ability to identify and successfully complete any
potential sales of company-owned assets and businesses on
commercially advantageous terms on a timely basis, or at all; (4)
changes in federal and state government policy, orders, directives,
legislation and regulations that affect public-private partnerships
with respect to secure, correctional and detention facilities,
processing centers and reentry centers, including the timing and
scope of implementation of President Biden's Executive Order
directing the U.S. Attorney General not to renew the U.S.
Department of Justice contracts with privately operated criminal
detention facilities; (5) changes in federal immigration policy;
(6) public and political opposition to the use of public-private
partnerships with respect to secure correctional and detention
facilities, processing centers and reentry centers; (7) any
continuing impact of the COVID-19 global pandemic on GEO, GEO's
ability to mitigate the risks associated with COVID-19, and the
efficacy and distribution of COVID-19 vaccines; (8) GEO’s ability
to sustain or improve company-wide occupancy rates at its
facilities in light of any continuing impact of the COVID-19 global
pandemic and policy and contract announcements impacting GEO’s
federal facilities in the United States; (9) fluctuations in GEO’s
operating results, including as a result of contract terminations,
contract renegotiations, changes in occupancy levels and increases
in GEO’s operating costs; (10) general economic and market
conditions, including changes to governmental budgets and its
impact on new contract terms, contract renewals, renegotiations,
per diem rates, fixed payment provisions, and occupancy levels;
(11) GEO’s ability to address inflationary pressures related to
labor related expenses and other operating costs; (12) GEO’s
ability to timely open facilities as planned, profitably manage
such facilities and successfully integrate such facilities into
GEO’s operations without substantial costs; (13) GEO’s ability to
win management contracts for which it has submitted proposals and
to retain existing management contracts; (14) risks associated with
GEO’s ability to control operating costs associated with contract
start-ups; (15) GEO’s ability to successfully pursue growth and
continue to create shareholder value; (16) GEO’s ability to obtain
financing or access the capital markets in the future on acceptable
terms or at all; and (17) other factors contained in GEO’s
Securities and Exchange Commission periodic filings, including its
Form 10-K, 10-Q and 8-K reports, many of which are difficult to
predict and outside of GEO’s control.
First quarter 2024 financial tables to follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of March 31, 2024 December
31, 2023 (unaudited) (unaudited)
ASSETS Cash and
cash equivalents $
126,497
$
93,971
Accounts receivable, less allowance for doubtful accounts
356,717
390,023
Prepaid expenses and other current assets
48,276
44,511
Total current assets $
531,490
$
528,505
Restricted Cash and Investments
141,378
135,968
Property and Equipment, Net
1,929,012
1,944,278
Operating Lease Right-of-Use Assets, Net
97,318
102,204
Deferred Income Tax Assets
8,551
8,551
Intangible Assets, Net (including goodwill)
889,535
891,085
Other Non-Current Assets
87,226
85,815
Total Assets $
3,684,510
$
3,696,406
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable $
67,822
$
64,447
Accrued payroll and related taxes
89,160
64,436
Accrued expenses and other current liabilities
196,276
228,059
Operating lease liabilities, current portion
24,271
24,640
Current portion of finance lease obligations, and long-term debt
43,400
55,882
Total current liabilities $
420,929
$
437,464
Deferred Income Tax Liabilities
74,872
77,369
Other Non-Current Liabilities
85,609
83,643
Operating Lease Liabilities
77,431
82,114
Long-Term Debt
1,717,048
1,725,502
Total Shareholders' Equity
1,308,621
1,290,314
Total Liabilities and Shareholders' Equity $
3,684,510
$
3,696,406
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q1 2024 Q1 2023 (unaudited) (unaudited)
Revenues $
605,672
$
608,209
Operating expenses
441,675
433,492
Depreciation and amortization
31,365
31,923
General and administrative expenses
53,070
50,134
Operating income
79,562
92,660
Interest income
2,474
1,168
Interest expense
(51,295
)
(54,258
)
Loss on extinguishment of debt
(39
)
(136
)
Income before income taxes and equity in earnings of
affiliates
30,702
39,434
Provision for income taxes
8,071
12,362
Equity in earnings of affiliates, net of income tax
provision
28
922
Net income
22,659
27,994
Less: Net loss attributable to noncontrolling interests
9
9
Net income attributable to The GEO Group, Inc. $
22,668
$
28,003
Weighted Average Common Shares Outstanding: Basic
122,497
121,432
Diluted
130,987
125,139
Net income per Common Share Attributable to The GEO Group,
Inc.** : Basic: Net income per share — basic $
0.15
$
0.19
Diluted: Net income per share — diluted $
0.14
$
0.19
* All figures in '000s, except per share data ** In accordance with
U.S. GAAP, diluted earnings per share attributable to GEO available
to common stockholders is calculated under the if-converted method
or the two-class method, whichever calculation results in the
lowest diluted earnings per share amount, which may be lower than
Adjusted Net Income Per Diluted Share.
Reconciliation of
Net Income to EBITDA and Adjusted EBITDA,
and Net Income
Attributable to GEO to Adjusted Net Income*
(Unaudited)
Q1 2024 Q1 2023 (unaudited) (unaudited)
Net
Income $
22,659
$
27,994
Add: Income tax provision **
8,199
12,541
Interest expense, net of interest income ***
48,860
53,226
Depreciation and amortization
31,365
31,923
EBITDA $
111,083
$
125,684
Add (Subtract): Net loss attributable to noncontrolling
interests
9
9
Stock based compensation expenses, pre-tax
5,656
5,578
Start-up expenses, pre-tax
492
-
ATM equity program expenses, pre tax
264
-
Close-out expenses, pre-tax
488
-
Other non-cash revenue & expenses, pre-tax
(349
)
(355
)
Adjusted EBITDA $
117,643
$
130,916
Net Income attributable to GEO $
22,668
$
28,003
Add (Subtract): Loss on extinguishment of debt, pre-tax
39
136
Start-up expenses, pre-tax
492
-
ATM equity program expenses, pre tax
264
-
Close-out expenses, pre-tax
488
-
Tax effect of adjustment to net income attributable to GEO (1)
(323
)
(34
)
Adjusted Net Income $
23,628
$
28,105
Weighted average common shares outstanding - Diluted
130,987
125,139
Adjusted Net Income per Diluted share
0.18
0.22
* all figures in '000s, except per share data. ** including
income tax provision on equity in earnings of affiliates. ***
includes loss on extinguishment of debt. (1) Tax adjustment related
to loss on extinguishment of debt, start-up expenses, ATM equity
program expenses, and close-out expenses.
2024
Outlook/Reconciliation (1)
(In thousands, except per share
data)
(Unaudited)
FY 2024 Net Income Attributable to GEO
$
55,000
to
$
75,000
Net Interest Expense
185,000
190,000
Loss on Extinguishment of Debt, pre-tax
86,000
86,000
Income Taxes (including income tax provision on equity in
earnings of affiliates)
15,000
19,000
Depreciation and Amortization
125,500
126,500
Non-Cash Stock Based Compensation
18,500
18,500
Adjusted EBITDA
$
485,000
to
$
515,000
Net Income Attributable to GEO Per Diluted Share
$
0.40
to
$
0.55
Adjusted Net Income Per Diluted Share
$
0.87
$
1.02
Weighted Average Common Shares Outstanding-Diluted
137,000
to
137,000
CAPEX Growth
10,000
to
12,000
Technology
20,000
25,000
Facility Maintenance
45,000
48,000
Capital Expenditures
75,000
to
85,000
Total Debt, Net
$
1,675,000
$
1,625,000
Total Leverage, Net
3.4
3.2
(1) Total Net Leverage is calculated using
the midpoint of Adjusted EBITDA guidance range.
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version on businesswire.com: https://www.businesswire.com/news/home/20240506418236/en/
Pablo E. Paez (866) 301 4436 Executive Vice President, Corporate
Relations
Geo (NYSE:GEO)
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