CoreCivic, Inc.

Good day, and thank you for standing by. Welcome to the 2024 Second Quarter CoreCivic, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Grant, Managing Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today. Participating on today's call are Damon Heiniger, Core Civics President and Chief Executive Officer and David Garfinkel, our Chief Financial Officer. We're also joined here in the room by our Vice President of Finance, Brian Hammons. On this call, we will discuss financial results for the second quarter of 2024, as well as financial guidance for the 2024 year. We will 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 provisions 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 second quarter 2024 earnings release issued after market yesterday, as well as in our Securities and Exchange Commission filings, including forms 10-K 10Q, and 8K reports. You are 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. Management will also discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurements is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the investor's page of the company's website at CoreCivic.com. With that, it is my pleasure to turn the call over to our President and CEO, Damon Heininger.

Thanks, Mike. Good morning, and thanks, everyone, for joining us for CoreCivic's second quarter 2024 earnings call. On today's call, we'll provide details of our second quarter financial performance. I will also discuss our latest operational results and update you on our latest developments with our government partners and our capital allocation strategy. Following my remarks, I will turn the call over to our CFO, Dave Garfinkel, who will provide greater detail on our financial results and on our 2024 financial guidance. Dave will also provide an update on ongoing capital structure initiatives, including details on our stock repurchase plan debt repayments, and progress on our leverage target. I'll start with a high-level overview of our second quarter financial results. In the second quarter, we generated revenue of $490.1 million, a 6% increase compared with the prior year quarter. During this quarter, we experienced revenue growth from all three of our partner groups, federal, state, and local governments. I will provide more color on each later in this call. For the second quarter of 2024, we generated normalized funds from operations, or FFO, of 46.6 million, or 42 cents per share, compared with 37.8 million, or 33 cents per share, in the second quarter of 2023, representing a 27% per share increase. The increase in FFO was driven by higher federal, state, and local populations in our safety and community segments combined with expense normalization and lower interest expense resulting from our debt reduction strategy. These increases were partially offset by slightly higher G&A expenses and decreased lease revenue in our property segment resulting from the previously disclosed expiration of a lease with the State of California at our California City Correctional Center effective March 31, 2024. Federal partners primarily Immigration and Customs Enforcement, or ICE, and the United States Marshal Service comprise slightly over half of CoreCivic's total revenue. During the second quarter of 2024, revenue from our federal partners increased 7% versus the second quarter of last year. Revenue from ICE, our largest partner, was up significantly as Title 42 was still in place for approximately half of the comparable quarter of last year. As a reminder, Title 42, which was invoked in March of 2020 at the start of COVID-19 response, empowers federal health authorities to deny migrants entry to the United States in order to prevent the spread of contagious diseases. Title 42 officially ended May 11th of 2023, and our populations with ISF have been consistently higher since then. During the second quarter of 2024, Revenue from ICE was $151 million compared to $136.7 million during the comparable quarter of 2023. Now I'd like to review ICE's usage of detention capacity broadly. Following passage of the bipartisan funding bill in March of this year, which provided funding for 41,500 detention beds, ICE's actual usage of detention beds dipped from 39,000 at the start of March to roughly 34,000 to 35,000 in April before increasing to roughly 37,000 to 38,000 to the end of the quarter. The most recent ICE detention count was just over 37,000 on July 13, 2024. Note that funded beds also include payment for a number of beds reserved under fixed payment contracts but not fully used at certain facilities. So beds paid for do not equal beds used, and therefore the actual number in detention won't necessarily reach that full 41,500 funded level. ICE reserves these beds under fixed payment contracts to ensure that they have capacity when needed. Seasonality, economics, and geopolitical dynamics, both abroad and here in the United States, all influence immigration, and as such, ICE detention populations can fluctuate considerably. CoreCivic's role is to work closely and responsibly with ICE to assist them in their important mission of providing them with bed capacity in locations where needed in a safe, secure, and humane environment. CoreCivic's revenue from state partners in our safety and community segments in the second quarter grew 5% versus the prior year. This increase is a result of higher per diem rates and steady occupancy from our state government partners, as well as contributions from new state contracts with Montana and Wyoming signed in the fourth quarter of 2023, which contributed a bit over 1% of that growth. Additionally, as you may recall, the Allen Gamble Correctional Center in Holdenville, Oklahoma transitioned from a management contract with the state of Oklahoma to a lease in October of 2023. Excluding state revenue from the Allen Gamble facility from our second quarter of 2023, which shifted to our property segment, state revenue in our safety and community segments increased nearly 10% year over year. The largest facility occupied by a state government partner in our safety segment is the La Palma Correctional Center in Eloy, Arizona, where we pivoted from a federal contract to a contract with the state of Arizona roughly two years ago. I am pleased to report that financial performance at our La Palma facility continues to progress, with stable occupancy and improving operating and financial metrics. La Palma's year-over-year EBITDA improvement in the second quarter was nearly $3 million, as we began to realize the returns on our investments and hard work directed at local hiring made there to end the facility's reliance on temporary labor resources and incentives. There is still room for improvement, but it is heartening to see the progress there. To round out our discussion of second quarter 2024 revenue, local revenue in our safety and community segments, which is revenue generated from contracts with county governments, increased 49%, albeit off a smaller base. This growth reflects new management contracts signed in the second half of 2023 with Hinds County, Mississippi and Harris County, Texas. Both populations are housed at our Tallahatchie County Correctional Facility located in Tutwiler, Mississippi, and the populations have adapted well. CoreCivic's overall oxy in our safety and community segments for the second quarter of 2024 increased to 74.3% from 70.3% in the prior year period. This growth in OCTC stems from both higher use of existing contracts, particularly with ICE, and also from the four new contracts signed in the second half of 2024 that I have mentioned. From the second quarter of 2023 to the second quarter of this year, OCTC in our safety segment increased from 70.8% to 75.1%, where our occupancy in our community segment declined very slightly from 62.8% to 62.3%. As we have mentioned in the past, our operating model has significant embedded operating leverage from changes in occupancy, and this was a factor in our margin improvement during the second quarter. In recent calls, we have discussed labor attraction and retention, important components of our business that has become particularly challenging starting with the onset of the COVID-19 pandemic. Labor market pressures during 2022 and 2023 necessitated temporary incentives and related incremental operating expenses, including travel and expense outlays. Using the flexibility that is an integral part of the private market solution set The core civic team responded by designing and implementing differentiated human capital strategies and investing in our frontline employee compensation. As a result of these initiatives, we have increased our staffing levels through improved recruiting and labor retention. The labor markets we see today in most of our geographies are displaying significant normalization and greater workforce stability. The labor cost increases we see now have returned to relatively normal levels, both on a year-over-year basis and in relation to per diem rates. Our improved staffing has allowed us to dial back elevated spending on temporary incentives and associated travel expenses and has positioned us well operationally to manage our customers' higher population needs. Our safety segment has provided 92% of total revenue year-to-date And the net operating income for our safety segment increased 25% during the second quarter of 2024 over the second quarter of 2023, reflecting the strong occupancy trends and cost management efforts I just detailed. Turning to our community segment, which is currently comprised of 21 residential re-entry facilities serving the Bureau of Prisons, as well as state and county governments. The community segment is engaged primarily in the important activities that prepare individuals for successful reentry to their communities after a period of incarceration or as an alternative to incarceration. In addition to our 21 residential reentry facilities, our non-residential services, electronic monitoring, and case management services are also included in our community segment. As mentioned, OCCC and our community segment was essentially flat in the second quarter of 2024 compared with the second quarter of 2023. However, net operating income in this segment increased 13% due to per diem increases attained in connection with contract renewals in addition to cost discipline. Similar to our safety segment, our community segment facilities have been able to reduce temporary staffing incentives. We remain positive about the OCSE outlook for the community segment now that the pandemic-related public health policies have ended and as more of our government partners return their focus to the importance of reentry to curb the recidivism challenge. Our strong financial performance has underwritten our ability to execute on our long-term capital allocation strategy. During the second quarter of 2024, we repurchased 1.3 million shares of our common stock at a cost of $20 million. We ended the quarter of leverage measured as net debt to adjusted EBITDA at 2.5 times for the trailing 12 months, placing us at the midpoint of our two and a quarter times to two and three quarters time leverage target range that we established in August of 2020. We have accomplished what we set out to achieve, and we are proud of the strategy, focus, and diligence that contributed to our success. In his comments, Dave will provide you with further detail regarding our capital markets activities. Before discussing growth opportunities and concluding my remarks, I want to discuss our South Texas Family Residential Center in Dilley, Texas, where operations will officially cease tomorrow. And I would like to start with a bit of history. In 2014, during the Obama-Biden administration, ICE came to CoreCivic as a trusted partner to help them solve an emergent and high profile challenge of providing temporary residential space and screening for family groups crossing the southern border. Prior solutions attempted by the government have proven inadequate, and ICE recognized CoreCivic for its ability to respond to challenges nimbly and swiftly both inherent advantages of the private sector. We ultimately agreed to a contract for a unique facility, a facility that would be operated under family residential standards. In 2021, at the request of ICE, the facility shifted its mission to the detention of single adults, initially females, and then later to males. ICE chose to retain operations under the family residential standards, which embedded higher costs presumably because it preserved flexibility around future use of the facility. As we disclosed on June 10th, ICE communicated to us that based on the cost of the facility, their budgetary pressures, and desire for additional, more secure detention capacity, which provides them flexibility, they intended to terminate the contract for services at the South Texas facility on August 9th and reprogram the savings into new capacity in existing and new contracts in key strategic locations in the United States. We're extremely proud of the South Texas Family Residential Center and thankful for the nearly 10 years it was able to serve the evolving needs of ICE. Our team at South Texas is excellent, bringing compassion and a wealth of skills and disciplines, and many of them have accepted employment opportunities we have offered them at other CoreCivic facilities. While we are winding down this contract, the longer-term macro environment for our federal, state, and local business remains extremely strong. The complex challenges our government partners face include existing capacity limitations, aging infrastructure, staffing challenges, and populations that are increasing in numbers and involving in their needs. In particular, we remain in discussions with federal, state, and local government agencies including several agencies we do not currently serve, to help address their various challenges in the near to long term. Some of these opportunities may require activations of several of our idle facilities. Demonstrating this need at the federal level, on May 30th, ICE issued an RFI seeking information on facilities within three areas of responsibility, Chicago, Harlingen, and Salt Lake City. Generally, facilities should be within a two-hour commute from the listed ICE field or subfield office, comply with ICE performance-based national detention standards, have approximately 850 to 950 detention beds, and an infirmary. They prefer a dedicated facility but will consider a shared facility. Interested parties may propose one or more facilities in each area of responsibility. or AOR and may also support multiple AORs. The RFI is for informational purposes only and does not constitute an RFP or a commitment to issue an RFP. Responses to the RFI were due June 23, 2024. We have responded with multiple facility options, including our idled 1,033-bed Midwest Regional Reception Center in Kansas. This is the largest advertisement for potential new detention capacity by ICE in over 10 years, and we believe we're the only provider with available capacity in all three locations. Further demonstrating growing needs at the federal level, on June 26, ICE issued an RFP for up to 600 detention beds in the state of New Jersey, which would expand their capacity in that state. Initial responses were due on July 17. Demonstrating the growing need at the state level, as mentioned in our earnings press release yesterday, on July 25, 2024, we received a notice of intent to award a new management contract from the state of Montana. We are pleased to extend our relationship with the state of Montana. During the current quarter, we anticipate receiving 120 residents at our 1,896-bed Saguaro Correctional Facility in Eloy, Arizona, where we already manage 120 residents for the state of Montana. Upon receiving these additional residents, the Saguaro facility will be near full capacity. Under the new contract, Montana may also utilize additional facilities we operate subject to availability should they have the need. We also manage the company owned and fully occupied Crossroads Correctional Center in Shelby, Montana pursuant to a separate management contract with the state of Montana. In addition to Montana, as I previously mentioned, we are in discussions with several other existing state partners as well as new state partners that could result in the activation of one or more EIDL facilities. We believe these opportunities could manifest in both the short term as well as in the long term. So in conclusion, Our operating costs continue to improve and the agencies we serve continue to demonstrate a growing need for our solutions. Our financial results for the second quarter and first half of 2024 reflect the value of our solutions and also the ongoing hard work and improved decisions made by our focused team here at CoreCivic. Our readily available bed capacity in key locations position us well to serve the growing needs of our government partners. As Dave will explain in further detail, we are updating our financial guidance for 2024 based on our strong financial performance in the second quarter, but also reflecting the termination of the South Texas Family Residential Facility Management Contract effective on August 9th. Now we'll turn the call over to Dave, who will provide a detailed look at our second quarter financial results, our capital market activities, and assumptions included in our newly updated financial guidance. Over to you, Dave.