CoreCivic, Inc.

Thank you for standing by and welcome to the CoreCivic 4th Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. Mike Grant. Managing Director of Investor Relations.

Thank you, Operator. Good morning, ladies and gentlemen, and thank you for joining us today. Participating on today's call are Damon Henninger, Core Civics President and Chief Executive Officer, and David Garfinkel, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammons. On today's call, we will discuss our financial results for the fourth quarter of 2023 and as well as financial guidance for the 2024 year. We'll also discuss developments with our government partners and provide you with other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provision of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2023 earnings release issued after market yesterday, and in our securities and exchange commission filings, including forms 10-K, 10-Q, and 8-K reports. You're also cautioned that any forward-looking statements reflect management's current views only, and that the company undertakes no obligation to revise or update such statements in the future. On this call, management will also discuss certain non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the investors' page of the company's website at corecivic.com. With that, it's my pleasure to turn the call over to our President and CEO, Damon Henninger.

Thank you, Mike. Good morning, and thank you for joining us for our fourth quarter 2023 earnings call. On today's call, I will provide details of our fourth quarter financial performance and introduce our 2024 full-year financial guidance. I will also discuss with you our latest operational developments, and update you on the latest developments with our government partners. Following my remarks, I will turn the call over to our CFO, Dave Garfinkel, who will review our financial results and our 2024 financial guidance in greater detail. He will also provide a more detailed update on our ongoing capital structure initiatives, including debt reduction, share buybacks, and our new bank credit facility attained in the fourth quarter. I'll now provide a brief overview of our fourth quarter financial results. In the fourth quarter, we generated revenue of $491.2 million, which was a 4% increase compared to the prior year quarter. This increase comes in spite of the expiration of our final prison contract with the Federal Bureau of Prisons at our previously owned McCray Correctional Facility in November of 2022, and the expiration of our lease agreement with the Oklahoma Department of Corrections at our North Fork Correctional Facility on June 30th, 2023. Including these two expirations, our total revenue increased 6% demonstrating strong oxy and revenue growth from our core civic safety and community portfolios. We generated normalized funds from operations or FFO of 51.3 million or 45 cents per share compared to 49.1 million or 42 cents per share in the fourth quarter of 2022, representing a per share increase of 7%. The increase in FFO was driven by the higher federal and state populations combined with lower interest expense resulting from our debt reduction strategy. The increase in FFO occurred despite the sale of our McCray facility and the expiration of the lease with Oklahoma, which resulted in a combined reductions to EBITDA of 2.3 million from the prior year quarter. We have achieved significant improvements in our attraction and retention rates resulting from our staffing strategies, as well as an overall improvement in the hiring environment. That said, labor market pressures have necessitated temporary incentives and related incremental operating expense experience through 2023, including the fourth quarter. As we leave 2023, we believe that more favorable operating expense trends should continue as the tight labor market continues to loosen and as we continue to progress toward pre-pandemic staffing and oxy levels. As mentioned on the past several conference calls, we have made significant investments in our existing staff and have successfully increased our staffing levels through improved recruiting and retention. These were the right investments to make, and they have enabled us to reduce usage of temporary incentives and costs from the prior year quarter and have positioned us well to manage our customers' higher population needs. In the fourth quarter of 2023, we achieved our highest OXY rate since the second quarter of 2020, which, as you may recall, is the quarter immediately following the start of the COVID-19 pandemic response. From the fourth quarter of 2022 to the fourth quarter of this year, OXY in our safety segment increased from 72% to 74.7%, and OXY in our community segment increased from 58.4% to 63.7%. The increase in our safety segment primarily resulted from higher detention populations from our largest government partner, Immigration Civil Customs Enforcement, or ICE. On May 11th, Title 42, a temporary public health order issued by the CDC that had essentially closed our nation's border to asylum-seeking individuals since the onset of the COVID-19 pandemic, came to an end. At the same time, proxy restrictions implemented during the pandemic at our ICE facilities also came to an end. Without the authority granted under Title 42 to deny entry to or quickly remove individuals from the United States, there has been an increase in the number of people in custody of the Department of Homeland Security or DHS. ICE is one of the two agencies within the DHS that is responsible for enforcing immigration laws arresting and detaining individuals who have entered the country illegally. These activities have increased since the end of Title 42, and the country continues to report record numbers of people encountered at the southern border. Last quarter, we reported on the increase in demand for detention capacity since Title 42 was lifted. From mid-May 2023 through December of 2023, the number of individuals in the custody of ICE increased 74%. Over the same period, ICE detention populations within our facilities increased 76%, which we believe was possible in part because of our investments in staffing. Because many of our federal contracts include a fixed payment component, The increase in residential populations do not result in proportionate increase in our financial results as such facilities until population is clear, the minimum compensated bed total associated with the fixed payment levels. Most of our facilities are now at or above that level. The increased OXY in our safety segment also resulted from broad-based higher OXY levels from many of our state government partners, notably from the states of Arizona, Georgia, Idaho, and Colorado. Now it's in second year under management contract with the state of Arizona, our La Palma Correctional Center in Eloy, Arizona continues to show improvements in Oxy as well as operating and financial metrics. During the fourth quarter, we were able to sharply reduce the facility's reliance on temporary labor resources and incentives due to strong local hiring and oversight. The fourth quarter was an exceptionally busy quarter for new contracts, as our best-of-class services, demonstrated outcomes, and facilities provide a flexible resource to partners requiring our vital services. During the quarter, we signed and commenced three new management contracts, each of which boosts incremental advocacy at already free facilities with available capacity. As a reminder, ours is a leveraged business model. and higher utilization of our facilities is correlated with expanded margins. In November, we announced a new management contract with the state of Montana to care for up to 120 male inmates at our 1,896-bed Saguaro Correctional Facility in Eloy, Arizona. The initial term of the contract is for two years, and it may be extended by mutual agreement. The total term, including renewals, is up to seven years. We completed the intake process for the 120 and Mesa 4 year end. At December 31st, 2023, we also cared for approximately 875 residents from Hawaii and nearly 600 residents from the state of Idaho at our sward correctional facility. This new contract represents an expansion of our relationship with the state of Montana as we also manage for them the fully occupied company-owned Crossroads Correctional Center in Shelby, Montana under a separate management contract. Also in November, we announced a new management contract with the state of Wyoming to care for up to 240 inmates at our 2,672-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi. This is not our first time partnering with Wyoming, as we previously cared for their inmates under a management contract that had not been utilized since 2019. The term of the new contract runs through June 30, 2026. The intake process for the 240 inmates was complete as of December 31, 2023. Finally, we announced a third new management contract during November. This new contract is with Harris County, Texas to care for up to 360 inmates at Tallahatchie County Correctional Facility. The contract includes the option for the county to access an additional 360 beds at the Tallahatchie facility. The initial contract term began on December 1st, 2023 and ends November 30th of this year. The contract may be extended at the county's option for up to four additional one-year terms. We began receiving inmates from Harris County during the fourth quarter of 2023, and we anticipate the intake process to be complete during the first quarter of this year. Also, as an update on our county relationships, at the end of the third quarter, we signed a new management contract with Hines County, Mississippi, for up to 250 adult male pretrial detainees also at our Tallahatchie County Federal Facility. We completed the intake of that population during the fourth quarter. While historically we have focused more on federal and state contracts, It is interesting to note that many large counties throughout the United States have begun to experience capacity constraints as a result of both larger populations and infrastructure problems. Expanded county jail populations typically precedes growth in state prison populations as the jail population is adjudicated and sentenced. Further, we've remained in discussions with several additional jurisdictions to help address their challenges in the near to long term. Now turning to our community segment, which is comprised of 23 residential reentry facilities, we experienced an increase in OXY of 63.7% in the fourth quarter of 2023 from 58.4% in the prior year period. Populations continue to improve across many of our facilities serving both the Bureau of Prisons, or BOP, as well as states including Texas and Colorado. We also provide electronic monitoring and case management services in our community segment. Our community segment represents a vital part of our mission and is often critical to the successful reentry of residents in our care. Net operating income in this segment increased 66% in the fourth quarter of 2023 from the prior year quarter due to the increase in occupancy as well as per diem increases we have been able to attain in contract renewals. We were also able to reduce temporary staffing incentives just as we did in our safety segment. We expect the OxyTrend to continue in the community segment now that pandemic-related public health policies have come to an end, and as more of our government partners return to these important residential reentry programs that help individuals be better prepared for successfully transitioning back from a period of incarceration into our communities. Finally, the high performance of our colleagues and the high quality of our facilities continue to be rewarded with long-term commitments from our government partners. We never take for granted renewals of existing management contracts and continue to enjoy a contract retention rate of 95% over the five years through 2023, including the renewal of all 34 management contracts in our safety and community segments that came up for renewal during the course of the year. As a reminder, we entered into an agreement with the state of Oklahoma to lease our 1,670-bed Davis Correctional Facility effective October 1, 2023. We successfully transitioned operations to the state, which is now operating our facility with government employees, effectively converting the facility from one in which we owned and operated our safety segment to one that we simply leased to the state. That facility is now named the Allen Gamble Correctional Center and is now reported in our property segment. We remain pleased to have reached a mutually advantageous contract for this facility, and we value our ongoing relationship with the state of Oklahoma. Looking forward, we remain optimistic in the long-term macro environment for our federal, state, and local business. Our governments are facing complex capacity, infrastructure, and population challenges, and we see increased opportunities to serve their growing needs. At the federal level, although we continue to see a steady increase in detention bed utilization, the long-term impact of the end of Title 42 is still unclear, as there are other factors that impact detention utilization levels by ICE. The most significant factor, historically, has been funding levels approved by Congress annually. However, the country is still facing significant challenges at the southern border, and geopolitical events only enhance the need for border security. Although we are over a third of the way into the federal fiscal year, which ends September 30, 2024, the appropriations process for funding the remaining fiscal year remains in flux. Further, a supplemental funding bill proposed by the administration that includes significant funding for DHS and ICE has not been acted upon by Congress. While there is bipartisan recognition of the need to fund DHS and ICE more robustly to address challenges at the southern border, a funding resolution has not been reached. The outcome of the appropriations process is expected to have significant impact on the overall population levels in our ice facilities moving forward and even though detention funding and related services are just part of the overall solution we are positioned well to serve their needs another part of the overall management of the border that could potentially expand the scope of services includes alternatives to detention earlier last year ice issued a request for information or rfi for release and reporting management services This RFI is seeking information about monetary technology, participant coordination services, including physical space, participant engagement and interactions, and program management and community service to help people comply with their immigration obligations. Though not yet funded by Congress and only in the early stages, the RFI is intended to apply to non-citizens released from DHS custody, and according to the RFI, involves engaging with a large portion of the 5.7 million individuals on the current non-attained docket. At the state level, overall state budgets are in very good shape. Most of our state partners are reporting increases in their prison populations, and many states are also projecting further increases in their prison populations. Jail backlogs, which are a leading indicator for state prison populations, remain significant. Additionally, courts continue to normalize operations, and as cases are adjudicated, state correctional agencies will certainly be impacted. In summary, while challenges and uncertainties remain, the general macro environment in which we operate continues to improve, and our financial results have begun to reflect that improvement. Our occupancy is at multi-year high. Our margin has begun to reflect the operating leverage that comes with higher occupancy, and we are making solid progress against labor-related cost pressures that rose sharply during the COVID-19 period. In our press release, we introduced our 2024 full-year financial guidance. It includes normalized FFO per share forecast, a range of $1.46 to $1.61, and even a range of $300 to $313 million. As we have been sharing on these calls for over a year, our release with the State of California for our California City Correctional Center ends March 31st of this year. That facility has generated slightly over $25 million in EBITDA, so the anticipated absence of that lease for the final three quarters of 2024 negatively impacts EBITDA and is reflected in our guidance. Obviously, we are focused on a solution to the pending lease expiration with the State of California at California City. Finding a positive solution for this facility, which is in a great location and is comprised of larger replicate beds, is a top priority for CoreCivic. I'll now turn the call over to Dave Garfinkel, our CFO, who will provide a more detailed look at our financial results in the fourth quarter. He will also discuss in detail our financial guidance for 2024, as well as progress on our capital markets activities and further details about our new bank credit facility and capital allocation strategy, including debt reduction and share buybacks. Over to you, Dave.