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 second
quarter and first six months of 2024.
Second Quarter 2024 Highlights
- Total revenues of $607.2 million
- Net Loss Attributable to GEO of $0.25 per diluted share,
reflects costs associated with the extinguishment of debt of $82.3
million, pre-tax, in connection with the April 2024 debt
refinancing
- Adjusted Net Income of $0.23 per diluted share
- Adjusted EBITDA of $119.3 million
For the second quarter 2024, we reported a net loss attributable
to GEO of $32.5 million, or $0.25 per diluted share, compared to
net income attributable to GEO of $29.6 million, or $0.20 per
diluted share, for the second quarter 2023. Second quarter 2024
results reflect costs associated with the extinguishment of debt of
$82.3 million, pre-tax, in connection with the April 2024
refinancing of our debt. Excluding the costs associated with the
extinguishment of debt and other unusual and/or nonrecurring items,
we reported adjusted net income for the second quarter 2024 of
$30.1 million, or $0.23 per diluted share, compared to $29.2
million, or $0.24 per diluted share, for the second quarter
2023.
We reported total revenues for the second quarter 2024 of $607.2
million compared to $593.9 million for the second quarter 2023. We
reported second quarter 2024 Adjusted EBITDA of $119.3 million,
compared to $129.0 million for the second quarter 2023.
George C. Zoley, Executive Chairman of GEO, said, “Our
diversified business units have continued to deliver steady
financial and operational performance. We are pleased to have
completed the comprehensive refinancing of our debt, including the
exchange and retirement of substantially all of our convertible
notes, during the second quarter of 2024. We believe that these
important transactions significantly enhanced our balance sheet,
lowered our average cost of debt, and have given us greater
flexibility to evaluate options for capital returns in the future.
We remain focused on the disciplined allocation of capital to
enhance long-term value for shareholders as we execute our
company’s strategic priorities and pursue quality growth
opportunities.”
First Six Months 2024 Highlights
- Total revenues of $1.21 billion
- Net Loss Attributable to GEO of $0.08 per diluted share,
reflects costs associated with the extinguishment of debt of $82.4
million, pre-tax
- Adjusted Net Income of $0.43 per diluted share
- Adjusted EBITDA of $236.9 million
For the first six months of 2024, we reported a net loss
attributable to GEO of $9.9 million, or $0.08 per diluted share,
compared to net income attributable to GEO of $57.6 million, or
$0.39 per diluted share, for the first six months of 2023. Results
for the first six months of 2024 reflect costs associated with the
extinguishment of debt of $82.4 million, pre-tax. Excluding the
costs associated with the extinguishment of debt and other unusual
and/or nonrecurring items, we reported adjusted net income for the
first six months of 2024 of $53.8 million, or $0.43 per diluted
share, compared to $57.3 million, or $0.46 per diluted share, for
the first six months of 2023.
We reported total revenues for the first six months of 2024 of
$1.21 billion compared to $1.20 billion for the first six months of
2023. We reported Adjusted EBITDA for the first six months of 2024
of $236.9 million, compared to $259.9 million for the first six
months of 2023.
Financial Guidance
Today, we updated our financial guidance for 2024. For the full
year 2024, we expect net income Attributable to GEO to be in a
range of $0.40 to $0.51 per diluted share, on annual revenues of
approximately $2.44 billion and reflecting an effective tax rate of
approximately 24 percent, inclusive of known discrete items. Our
full-year 2024 guidance reflects the costs associated with the
extinguishment of debt of $82.4 million, pre-tax, in connection
with the refinancing of our debt.
Excluding the costs associated with the extinguishment of debt
and other unusual and/or nonrecurring items, we expect full year
2024 Adjusted Net Income to be in a range of $0.82 to $0.93 per
diluted share. We expect full year 2024 Adjusted EBITDA to be
between $485 million and $505 million.
For the third quarter 2024, we expect net income attributable to
GEO to be in a range of $0.21 to $0.25 per diluted share. We expect
third quarter 2024 revenues to be in a range of $606 million to
$616 million. We expect third quarter 2024 Adjusted EBITDA to be in
a range of $123 million to $130 million.
For the fourth quarter 2024, we expect net income attributable
to GEO to be in a range of $0.22 to $0.29 per diluted share. We
expect fourth quarter 2024 revenues to be in a range of $611
million to $621 million. We expect fourth quarter 2024 Adjusted
EBITDA to be in a range of $125 million to $138 million.
Recent Developments
During the second quarter 2024, U.S. Immigration and Customs
Enforcement (“ICE”) issued a task order for the GEO-owned
1,940-bed Adelanto ICE Processing Center
in California (the “Adelanto Center”), which provides for
continued funding through October 19, 2024, allowing
additional time for ICE to obtain relief from previously disclosed
COVID-related litigation that currently prevents full use of the
Adelanto Center. ICE and GEO entered into a 15-year contract on
December 19, 2019, for the provision of secure residential housing
and care at the Adelanto Center, consisting of a 5-year base
period, ending on December 19, 2024, followed by two 5-year option
periods.
On June 20, 2024, we announced that GEO had given the Oklahoma
Department of Corrections (“ODOC”) notice of our intent to
discontinue our management contract for the company-owned,
2,388-bed Lawton Correctional and Rehabilitation Facility (the
“Lawton Facility”), which was set to expire on June 30, 2024.
Subsequently, on June 26, 2024, GEO and the ODOC agreed to enter
into a new one-year contract, continuing GEO’s operation of the
Lawton Facility through June 30, 2025, under revised terms.
Balance Sheet
During the second quarter 2024, we completed the comprehensive
refinancing of our debt, including the exchange and retirement of
$229.4 million of the $230 million in aggregate principal amount of
our senior unsecured exchangeable notes due 2026 using a
combination of $229.4 million in cash and approximately 12.4
million shares of GEO common stock.
As of June 30, 2024, our senior debt was comprised of $650.0
million aggregate principal amount of 8.625% senior secured notes
due 2029; $625.0 million aggregate principal amount of 10.25%
senior unsecured notes due 2031; $444.4 million in borrowings under
a Term Loan B due 2029, bearing interest at SOFR plus 5.25%; $40.0
million in borrowings outstanding under a $310 million Revolving
Credit Facility bearing interest at SOFR plus 3.00%; and $40.7
million in other secured and unsecured debt. Net of cash-on-hand of
$46.3 million, our total net debt was approximately $1.754 billion
at the end of the second quarter 2024.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our second 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 August 14, 2024, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 4116450.
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 gain/(loss) on asset divestitures/impairment, pre-tax,
net loss attributable to non-controlling interests, stock-based
compensation expenses, pre-tax, start-up expenses, pre-tax, ATM
equity program expenses, pre-tax, transaction fees, pre-tax,
close-out expenses, pre-tax, other non-cash items, 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/(loss) 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, transaction fees, pre-tax, ATM equity program expenses,
pre-tax, close-out expenses, pre-tax, discrete tax benefit, 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, third quarter, and fourth quarter of 2024,
statements regarding GEO’s focus on reducing net debt, deleveraging
its balance sheet, positioning itself to explore options to return
capital to shareholders in the future, and pursuing a disciplined
allocation of capital to enhance long-term value for shareholders,
executing on GEO’s strategic priorities, and pursuing quality
growth opportunities. 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 or potential
acquisitions of assets or 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 and GEO's ability to mitigate the risks
associated with COVID-19; (8) GEO’s ability to sustain or improve
company-wide occupancy rates at its facilities; (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 opportunities 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.
Second quarter and first six months 2024 financial tables to
follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of June 30, 2024 December
31, 2023 (unaudited) (unaudited)
ASSETS Cash and
cash equivalents $
46,299
$
93,971
Restricted cash and cash equivalents
6,240
-
Accounts receivable, less allowance for doubtful accounts
384,072
390,023
Prepaid expenses and other current assets
53,802
44,511
Total current assets $
490,413
$
528,505
Restricted Cash and Investments
141,312
135,968
Property and Equipment, Net
1,919,541
1,944,278
Operating Lease Right-of-Use Assets, Net
95,365
102,204
Assets Held for Sale
6,080
-
Deferred Income Tax Assets
8,551
8,551
Intangible Assets, Net (including goodwill)
887,235
891,085
Other Non-Current Assets
95,491
85,815
Total Assets $
3,643,988
$
3,696,406
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable $
76,287
$
64,447
Accrued payroll and related taxes
64,940
64,436
Accrued expenses and other current liabilities
198,626
228,059
Operating lease liabilities, current portion
24,568
24,640
Current portion of finance lease obligations, and long-term debt
24,442
55,882
Total current liabilities $
388,863
$
437,464
Deferred Income Tax Liabilities
72,604
77,369
Other Non-Current Liabilities
87,869
83,643
Operating Lease Liabilities
74,924
82,114
Long-Term Debt
1,739,191
1,725,502
Total Shareholders' Equity
1,280,537
1,290,314
Total Liabilities and Shareholders' Equity $
3,643,988
$
3,696,406
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q2 2024 Q2 2023 YTD 2024 YTD
2023 (unaudited) (unaudited) (unaudited) (unaudited)
Revenues $
607,185
$
593,891
$
1,212,857
$
1,202,100
Operating expenses
443,529
428,128
885,204
861,620
Depreciation and amortization
31,313
31,691
62,678
63,614
General and administrative expenses
52,198
41,692
105,268
91,826
Operating income
80,145
92,380
159,707
185,040
Interest income
1,992
1,297
4,466
2,465
Interest expense
(50,644
)
(55,046
)
(101,939
)
(109,304
)
Loss on extinguishment of debt
(82,339
)
(1,618
)
(82,378
)
(1,754
)
Gain/(loss) on asset divestitures/impairment
(2,907
)
2,175
(2,907
)
2,175
Income/(loss) before income taxes and equity in earnings
of affiliates
(53,753
)
39,188
(23,051
)
78,622
Provision for/(benefit from) income taxes
(20,379
)
11,153
(12,308
)
23,515
Equity in earnings of affiliates, net of income tax
provision
811
1,490
839
2,412
Net income/(Loss)
(32,563
)
29,525
(9,904
)
57,519
Less: Net loss attributable to noncontrolling
interests
50
46
59
55
Net income/(loss) attributable to The GEO Group, Inc.
$
(32,513
)
$
29,571
$
(9,845
)
$
57,574
Weighted Average Common Shares Outstanding:
Basic
130,518
122,045
125,631
121,740
Diluted
130,518
123,278
125,631
123,496
Net income per Common Share Attributable to The GEO
Group, Inc.** : Basic: Net income/(loss) per
share — basic $
(0.25
)
$
0.20
$
(0.08
)
$
0.39
Diluted: Net income/(loss) per share — diluted $
(0.25
)
$
0.20
$
(0.08
)
$
0.39
* 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)
Q2 2024 Q2 2023 YTD 2024 YTD
2023 (unaudited) (unaudited) (unaudited) (unaudited)
Net
Income/(Loss) $
(32,563
)
$
29,525
$
(9,904
)
$
57,519
Add: Income tax provision/(benefit) **
(20,193
)
11,487
(11,994
)
24,029
Interest expense, net of interest income ***
130,991
55,366
179,851
108,593
Depreciation and amortization
31,313
31,691
62,678
63,614
EBITDA $
109,548
$
128,069
$
220,631
$
253,755
Add (Subtract): Gain/(loss) on asset
divestitures/impairment, pre-tax
2,907
(2,175
)
2,907
(2,175
)
Net loss attributable to noncontrolling interests
50
46
59
55
Stock based compensation expenses, pre-tax
3,132
3,357
8,788
8,935
Start-up expenses, pre-tax
15
-
507
-
ATM equity program expenses, pre tax
-
-
264
-
Transaction fees, pre-tax
3,097
-
3,097
-
Close-out expenses, pre-tax
1,386
-
1,874
-
Other non-cash items, pre-tax
(885
)
(331
)
(1,234
)
(687
)
Adjusted EBITDA $
119,250
$
128,966
$
236,893
$
259,883
Net Income/(Loss) attributable to GEO $
(32,513
)
$
29,571
$
(9,845
)
$
57,574
Add (Subtract): Gain/(loss) on asset
divestitures/impairment, pre-tax
2,907
(2,175
)
2,907
(2,175
)
Loss on extinguishment of debt, pre-tax
82,339
1,618
82,378
1,754
Start-up expenses, pre-tax
15
-
507
-
ATM equity program expenses, pre tax
-
-
264
-
Close-out expenses, pre-tax
1,386
-
1,874
-
Discrete tax benefit (1)
(4,519
)
-
(4,519
)
-
Transaction fees, pre-tax
3,097
-
3,097
-
Tax effect of adjustment to net income attributable to GEO (2)
(22,568
)
140
(22,891
)
106
Adjusted Net Income $
30,144
$
29,154
$
53,772
$
57,259
Weighted average common shares outstanding - Diluted
130,518
123,278
125,631
123,496
Adjusted Net Income/(loss) per Diluted share
0.23
0.24
0.43
0.46
*
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)
Discrete tax benefit primarily relates to interest deduction
related to shares of common stock issued to note holders as a
result of our private convertible note exchange transactions.
(2)
Tax adjustment related to gain/loss on asset
divestitures/impairment, loss on extinguishment of debt, start-up
expenses, ATM equity program expenses, close-out expenses, and
transaction fees.
2024
Outlook/Reconciliation*
(In thousands, except per share data)
(Unaudited)
FY 2024 Net Income Attributable to GEO(1)
$
55,000
to
$
70,000
Net Interest Expense
185,000
186,000
Loss on Extinguishment of Debt, pre-tax
82,000
82,000
Income Taxes(1) (including income tax provision on equity in
earnings of affiliates)
15,000
17,000
Depreciation and Amortization
126,000
127,500
Non-Cash Stock Based Compensation
16,000
16,500
Other Non-Cash
6,000
6,000
Adjusted EBITDA
$
485,000
to
$
505,000
Net Income Attributable to GEO Per Diluted Share
$
0.40
to
$
0.51
Adjusted Net Income Per Diluted Share
$
0.82
to
$
0.93
Weighted Average Common Shares Outstanding-Diluted
137,000
137,000
CAPEX
Growth
10,000
to
12,000
Technology
25,000
30,000
Facility Maintenance
45,000
48,000
Capital Expenditures
80,000
to
90,000
Total Debt, Net
$
1,675,000
to
$
1,625,000
Total Leverage, Net
3.4
to
3.3
(1) Net of ~$25M of tax benefits related to loss on
extinguishment of debt and interest deduction for shares of common
stock as a result of the convertible note exchange
* 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/20240806966373/en/
Pablo E. Paez (866) 301 4436 Executive Vice President, Corporate
Relations
Geo (NYSE:GEO)
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