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 third
quarter and first nine months of 2023.
Third Quarter 2023 Highlights
- Total revenues of $602.8 million
- Net Income of $24.5 million
- Net Income Attributable to GEO of $0.16 per diluted
share
- Adjusted Net Income of $0.19 per diluted share
- Adjusted EBITDA of $118.7 million
- Reduced Total Net Debt by $109 million to approximately $1.8
billion
For the third quarter 2023, we reported net income of $24.5
million, compared to net income of $38.3 million for the third
quarter 2022. We reported total revenues for the third quarter 2023
of $602.8 million compared to $616.7 million for the third quarter
2022. Third quarter 2023 results reflect a year-over-year increase
of $13.0 million in net 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 third quarter 2023
Adjusted EBITDA of $118.7 million, compared to $136.2 million for
the third quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “Our
diversified business units continued to deliver steady operational
and financial performance. We have also made further progress
towards our objective of reducing our net debt, which remains a
strategic priority for our company. During the third quarter of
2023, we reduced our total net debt by $109 million, ending the
period with approximately $1.8 billion in total net debt. We
believe that our ongoing efforts to reduce debt and deleverage our
balance sheet will enhance value for our shareholders over
time.”
First Nine Months 2023 Highlights
- Total revenues of $1.80 billion
- Net Income of $82.0 million
- Net Income Attributable to GEO of $0.55 per diluted
share
- Adjusted Net Income of $0.66 per diluted share
- Adjusted EBITDA of $378.6 million
For the first nine months of 2023, we reported net income of
$82.0 million, compared to net income of $130.2 million for the
first nine months of 2022. We reported total revenues for the first
nine months of 2023 of $1.80 billion compared to $1.76 billion for
the first nine months of 2022.
Results for the first nine months of 2023 reflect a
year-over-year increase of $66.2 million in net 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. For the first nine
months of 2023, we reported Adjusted EBITDA of $378.6 million,
compared to $393.7 million for the first nine months of 2022.
2023 Financial Guidance
Today, we updated our guidance for the full-year and fourth
quarter of 2023 to reflect our updated expectations regarding the
U.S. Department of Homeland Security’s Intensive Supervision and
Appearance Program (“ISAP”).
Our previous guidance for the fourth quarter of 2023 assumed a
moderate increase in ISAP participants during the quarter. While
the ISAP participant count has remained relatively stable over the
last three months, we have not experienced the moderate increase
that was contemplated in our previous guidance. We believe that
U.S. Immigration and Customs Enforcement (“ICE”) continues to face
budgetary pressures, and the timing of the passage of federal
appropriations bills for the fiscal year 2024 remains uncertain. As
a result of these factors, we have updated our guidance assumptions
and now assume for budget purposes that the ISAP participant count
will be flat to slightly down for the balance of the year.
For the fourth quarter 2023, we expect GAAP Net Income to be in
a range of $19 million to $24 million and quarterly revenues to be
in a range of $590 million to $600 million. We expect fourth
quarter 2023 Adjusted EBITDA to be in a range of $117 million to
$122 million.
For the full-year 2023, we expect GAAP Net Income to be in a
range of $100 million to $105 million on annual revenues of
approximately $2.4 billion. We expect our full-year 2023 Adjusted
EBITDA to be between $495 million and $500 million dollars. We
expect our effective tax rate for the full-year 2023 to be
approximately 29 percent, exclusive of any discrete items.
Our guidance does not include the potential reactivation of any
of our remaining idle Secure Services facilities, which total
approximately 9,000 beds.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our third 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 November 14, 2023, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 4528594.
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 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 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 (gain)/loss on asset divestitures, pre-tax, net loss
attributable to non-controlling interests, stock-based compensation
expenses, pre-tax, transaction related 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 asset divestitures, pre-tax, (gain)/loss on the
extinguishment of debt, pre-tax, transaction related 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 fourth quarter of 2023, statements regarding
GEO’s efforts to market its current idle facilities, GEO’s focus on
reducing net debt, and GEO’s assumptions regarding the number of
ISAP participants during the fourth quarter of 2023.
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 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 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.
Third quarter and first nine months of 2023 financial tables
to follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of September 30,
2023 December 31, 2022 (unaudited)
(unaudited)
ASSETS Cash and cash
equivalents
$
141,020
$
95,073
Accounts receivable, less allowance for doubtful accounts
356,501
416,399
Prepaid expenses and other current assets
41,138
43,536
Total current assets
$
538,659
$
555,008
Restricted Cash and Investments
130,729
111,691
Property and Equipment, Net
1,951,524
2,002,021
Operating Lease Right-of-Use Assets, Net
106,552
90,950
Assets Held for Sale
5,130
480
Deferred Income Tax Assets
8,005
8,005
Intangible Assets, Net (including goodwill)
893,449
902,887
Other Non-Current Assets
90,335
89,341
Total Assets
$
3,724,383
$
3,760,383
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable
$
66,758
$
79,312
Accrued payroll and related taxes
78,568
53,225
Accrued expenses and other current liabilities
200,187
237,369
Operating lease liabilities, current portion
24,506
22,584
Current portion of finance lease obligations, and long-term debt
63,307
44,722
Total current liabilities
$
433,326
$
437,212
Deferred Income Tax Liabilities
75,849
75,849
Other Non-Current Liabilities
79,797
74,008
Operating Lease Liabilities
86,849
73,801
Finance Lease Liabilities
740
1,280
Long-Term Debt
1,789,273
1,933,145
Total Shareholders' Equity
1,258,549
1,165,088
Total Liabilities and Shareholders' Equity
$
3,724,383
$
3,760,383
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q3 2023 Q3 2022 YTD 2023 YTD
2022 (unaudited) (unaudited) (unaudited) (unaudited)
Revenues $
602,785
$
616,683
$
1,804,885
$
1,756,045
Operating expenses
440,667
436,210
1,302,287
1,233,162
Depreciation and amortization
31,173
32,330
94,787
100,284
General and administrative expenses
47,356
50,022
139,182
147,878
Operating income
83,589
98,121
268,629
274,721
Interest income
1,320
5,111
3,785
16,301
Interest expense
(55,777
)
(46,537
)
(165,081
)
(111,383
)
Loss on extinguishment of debt
(91
)
(37,487
)
(1,845
)
(37,487
)
Gain on asset divestitures
1,274
29,279
3,449
32,332
Income before income taxes and equity in earnings of
affiliates
30,315
48,487
108,937
174,484
Provision for income taxes
6,521
11,246
30,036
48,106
Equity in earnings of affiliates, net of income tax
provision
709
1,071
3,121
3,786
Net income
24,503
38,312
82,022
130,164
Less: Net loss attributable to noncontrolling
interests
16
25
71
119
Net income attributable to The GEO Group, Inc. $
24,519
$
38,337
$
82,093
$
130,283
Weighted Average Common Shares Outstanding:
Basic
122,066
121,154
121,850
120,998
Diluted
123,433
122,426
123,479
121,907
Net income per Common Share Attributable to The GEO
Group, Inc.** : Basic: Net income per share —
basic $
0.17
$
0.26
$
0.56
$
0.89
Diluted: Net income per share — diluted $
0.16
$
0.26
$
0.55
$
0.89
* 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)
Q3 2023 Q3 2022
YTD 2023 YTD 2022 (unaudited)
(unaudited) (unaudited) (unaudited)
Net Income
$
24,503
$
38,312
$
82,022
$
130,164
Add: Income tax
provision **
6,588
11,435
30,617
48,570
Interest expense, net of interest income ***
54,548
78,913
163,141
132,569
Depreciation and amortization
31,173
32,330
94,787
100,284
EBITDA $
116,812
$
160,990
$
370,567
$
411,587
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,332
)
Net loss attributable to noncontrolling interests
16
25
71
119
Stock based compensation expenses, pre-tax
3,116
3,141
12,052
13,010
Transaction related expenses, pre-tax
-
1,322
-
1,322
Other non-cash revenue & expenses, pre-tax
-
-
(687
)
-
Adjusted EBITDA $
118,670
$
136,199
$
378,554
$
393,706
Net Income
attributable to GEO $
24,519
$
38,337
$
82,093
$
130,283
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,958
)
Loss on extinguishment of debt, pre-tax
91
37,487
1,845
37,487
Transaction related expenses, pre-tax
-
1,322
-
1,322
Tax effect of adjustment to net income attributable to GEO (1)
297
(7,697
)
403
(6,772
)
Adjusted Net Income $
23,633
$
40,170
$
80,892
$
129,362
Weighted average common shares
outstanding - Diluted
123,433
122,426
123,479
121,907
Adjusted Net Income per Diluted
share
0.19
0.33
0.66
1.06
* 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 gain on asset divestitures and loss on
extinguishment of debt.
2023
Outlook/Reconciliation (1)
(In thousands, except per share
data)
(Unaudited)
FY 2023 Net Income
$
100,000
to
$
105,000
Net Interest Expense
217,000
217,000
Income Taxes (including income tax provision on equity in
earnings of affiliates)
40,000
40,000
Depreciation and Amortization
127,000
127,000
Non-Cash Stock Based Compensation
15,700
15,700
Other Non-Cash
(4,700
)
(4,700
)
Adjusted EBITDA
$
495,000
to
$
500,000
Net Income Attributable to GEO Per Diluted Share
$
0.80
to
$
0.85
Weighted Average Common Shares Outstanding-Diluted
123,500
to
123,500
CAPEX Growth
9,000
to
10,000
Technology
16,000
to
20,000
Facility Maintenance
45,000
to
50,000
Capital Expenditures
70,000
to
80,000
Total Debt, Net
$
1,820,000
$
1,780,000
Total Leverage, Net
3.66
3.58
(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/20231106979057/en/
Pablo E. Paez (866) 301 4436 Executive Vice President, Corporate
Relations
Geo (NYSE:GEO)
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