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 2023.
First Quarter 2023 Highlights
- Total revenues of $608.2 million
- Net Income of $28.0 million
- Net Income Attributable to GEO of $0.19 per diluted
share
- Adjusted Net Income of $0.22 per diluted share
- Adjusted EBITDA of $130.9 million
- Reduced net debt by approximately $70 million in
1Q23
For the first quarter 2023, we reported net income of $28.0
million, compared to net income of $38.2 million for the first
quarter 2022. We reported total revenues for the first quarter 2023
of $608.2 million compared to $551.2 million for the first quarter
2022.
First quarter 2023 results reflect a year-over-year increase of
$22.6 million in interest expense as a result of the completed
transactions to address the substantial majority of our outstanding
debt, which closed on August 19, 2022, as well as the impact of
higher interest rates.
We reported first quarter 2023 Adjusted EBITDA of $130.9
million, compared to $125.2 million for the first quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “Our
diversified business units have continued to deliver steady
operating and financial results. Our financial performance remains
strong, which has allowed us to continue to make substantial
progress towards our debt reduction and deleveraging objectives.
During the first quarter of 2023, we reduced our net debt by
approximately $70 million. Our goal remains to reduce our net
leverage to below 3.5 times Adjusted EBITDA by the end of 2023 and
to below 3 times Adjusted EBITDA by the end of 2024, and we are
optimistic that the successful execution of our debt reduction
strategy can unlock equity value for our shareholders.”
Recent Developments
On April 19, 2023, we entered into a lease agreement with the
State of Oklahoma for the use of our previously idle 1,900-bed
Great Plains Correctional Facility. The lease agreement will have a
term of five years and six months effective May 1, 2023, with
subsequent unlimited one-year option periods, and is expected to
generate annual straight-line lease revenue for GEO of
approximately $8.5 million.
2023 Financial Guidance
Today, we updated our financial guidance for 2023. We expect
full year 2023 Net Income to be between $105 million and $125
million on annual revenues of between $2.38 billion and $2.46
billion. Our GAAP Net Income guidance for 2023 reflects an expected
increase in our net interest expense of approximately $67 million,
due to higher interest rates and the debt restructuring
transactions we completed in August of 2022. We expect our
effective tax rate for the full year 2023 to be approximately 29
percent, exclusive of any discrete items.
We expect our full year 2023 Adjusted EBITDA to be between $507
million and $537 million.
For the second quarter of 2023, we expect Net Income to be
between $24 million and $26 million on quarterly revenues of $585
million to $590 million, and we expect our second quarter 2023
Adjusted EBITDA to be in a range of $124 million and $129
million.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our first quarter 2023 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 2, 2023, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 6273779.
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 102 facilities totaling
approximately 82,000 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, Adjusted Net Income,
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 2023, 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 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 (gain)/loss on asset divestitures, pre-tax, net loss
attributable to non-controlling interests, stock-based compensation
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
gain/loss on the extinguishment of debt, 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 2023 and GEO’s expected
targets for net debt reductions and net leverage decreases.
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 2023 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) the magnitude, severity, and duration of
the current COVID-19 global pandemic, its impact 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 the COVID-19 global pandemic and policy and
contract announcements impacting GEO’s federal facilities in the
United States; (9) fluctuations in our operating results, including
as a result of contract terminations, contract renegotiations,
changes in occupancy levels and increases in our 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 2023 financial tables to follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of
March 31, 2023 December 31, 2022
(unaudited) (unaudited)
ASSETS
Cash and cash equivalents $
110,916
$
95,073
Accounts receivable, less allowance for doubtful accounts
349,337
416,399
Prepaid expenses and other current assets
40,995
43,536
Total current assets $
501,248
$
555,008
Restricted Cash and Investments
129,832
111,691
Property and Equipment, Net
1,972,859
2,002,021
Operating Lease Right-of-Use Assets, Net
85,294
90,950
Assets Held for Sale
14,594
480
Deferred Income Tax Assets
8,005
8,005
Intangible Assets, Net (including goodwill)
899,435
902,887
Other Non-Current Assets
90,717
89,341
Total Assets $
3,701,984
$
3,760,383
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $
78,851
$
79,312
Accrued payroll and related taxes
69,020
53,225
Accrued expenses and other current liabilities
182,768
237,369
Operating lease liabilities, current portion
20,723
22,584
Current portion of finance lease obligations, long-term debt, and
non-recourse debt
44,736
44,722
Total current liabilities $
396,098
$
437,212
Deferred Income Tax Liabilities
75,849
75,849
Other Non-Current Liabilities
76,232
74,008
Operating Lease Liabilities
69,698
73,801
Finance Lease Liabilities
1,102
1,280
Long-Term Debt
1,883,956
1,933,145
Total Shareholders' Equity
1,199,049
1,165,088
Total Liabilities and Shareholders'
Equity $
3,701,984
$
3,760,383
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q1 2023 Q1 2022
(unaudited) (unaudited)
Revenues $
608,209
$
551,185
Operating expenses
433,492
385,161
Depreciation and amortization
31,923
35,938
General and administrative expenses
50,134
48,560
Operating income
92,660
81,526
Interest income
1,168
5,628
Interest expense
(54,258
)
(31,621
)
(Loss) on extinguishment of debt
(136
)
-
Gain on asset divestitures
-
(627
)
Income before income taxes and equity in
earnings of affiliates
39,434
54,906
Provision for income taxes
12,362
17,962
Equity in earnings of affiliates, net of income tax
provision
922
1,235
Net income
27,994
38,179
Less: Net loss attributable to
noncontrolling interests
9
40
Net income attributable to The GEO Group,
Inc. $
28,003
$
38,219
Weighted Average
Common Shares Outstanding: Basic
121,432
120,714
Diluted
125,139
121,394
Net income per Common Share Attributable to
The GEO Group, Inc.** :
Basic: Net income per share — basic $
0.19
$
0.26
Diluted: Net income per
share — diluted $
0.19
$
0.26
* 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 2023 Q1 2022
(unaudited) (unaudited)
Net Income $
27,994
$
38,179
Add: Income tax provision **
12,541
18,074
Interest expense, net of interest income ***
53,226
25,993
Depreciation and amortization
31,923
35,938
EBITDA $
125,684
$
118,184
Add (Subtract): (Gain)/Loss on
asset divestitures, pre-tax
-
627
Net loss attributable to noncontrolling interests
9
40
Stock based compensation expenses, pre-tax
5,578
6,313
Other non-cash revenue & expenses, pre-tax
(355)
-
Adjusted EBITDA $
130,916
$
125,164
Net Income attributable to GEO $
28,003
$
38,219
Add (Subtract): (Gain)/Loss on
extinguishment of debt, pre-tax
136
-
Tax effect of adjustment to net income attributable to GEO (1)
(34)
-
Adjusted Net Income $
28,105
$
38,219
Weighted average common shares outstanding -
Diluted
125,139
121,394
Adjusted Net Income per Diluted share
0.22
0.31
* all figures in '000s, except per share data
** including income tax provision on equity in
earnings of affiliates *** includes (gain)/loss on
extinguishment of debt (1) Tax adjustment related to
gain/loss on extinguishment of debt.
2023
Outlook/Reconciliation (1)
(In thousands, except per share data)
(Unaudited)
FY 2023 Net Income Attributable to
GEO
$
105,000
to
$
125,000
Net Interest Expense
214,000
217,000
Income Taxes (including income tax provision on equity in
earnings of affiliates)
43,000
49,000
Depreciation and Amortization
128,500
129,500
Non-Cash Stock Based Compensation
16,500
16,500
Adjusted EBITDA
$
507,000
to
$
537,000
Adjusted Net Income Per Diluted Share
$
0.84
$
1.00
Weighted Average Common Shares Outstanding-Diluted
125,300
to
125,300
CAPEX
Growth
8,000
to
10,000
Technology
25,000
to
30,000
Facility Maintenance
45,000
to
50,000
Capital Expenditures
78,000
to
90,000
Total Debt, Net
$
1,815,000
$
1,775,000
Total Leverage, Net
3.49
3.41
(1) Total Net Leverage is calculated using
the midpoint of Adjusted EBITDA guidance range.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230424005958/en/
Pablo E. Paez Executive Vice President, Corporate Relations
(866) 301 4436
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