Geo Group Inc (The) REIT

Good day, everyone, and welcome to the GEO Group second quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Pablo Paez, Executive Vice President of Corporate Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for today's discussion of the GEO Group's second quarter 2020 earnings results. With us today are George Zoli, Chairman, Chief Executive Officer and Founder, Brian Evans, Chief Financial Officer, Ann Schlarb, President of GEO Care, and Blake Davis, President of GeoSecure Services. This afternoon, we will discuss our second quarter results and outlook. We will conclude the call with a question and answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors which are contained in our Securities and Exchange Commission filings, including the form's 10-K, 10-Q, and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, George Olie. George? Thank you, Pablo, and good afternoon to everyone.

This morning, we reported our second quarter results, updated our guidance for the full year, and issued guidance for the third and fourth quarters. We've also provided updated guidance regarding our dividend policy and our efforts to pay down debt and de-lever. During the second quarter, we experienced some favorable cost trends that resulted in better than expected financial performance. While we are encouraged by these favorable trends during the second quarter, our company continues to face challenges associated with the unprecedented COVID-19 pandemic. Our employees live in communities that have been impacted by the pandemic, and most of our facilities have experienced some cases of COVID-19 in both our staff and individuals entrusted to our care. Despite these ongoing challenges, our frontline employees have shown incredible commitment and resilience that have helped our company manage through these difficult times. From the outset of this global pandemic, our staff has implemented steps to mitigate the risks of COVID-19 to all those in our care, in our employees, and our staff continues to evaluate and refine these steps as appropriate and necessary. Working with our government partners, we have implemented the guidance issued by the CDC at all of our facilities. And early on in the pandemic, we deployed face masks for all employees, inmates, and detainees at our residential facilities, procured additional personal protective equipment, and suspended non-essential visitation. We've also been focused on ramping up testing, and today we have conducted widespread saturation COVID-19 testing at an increasing number of our secure services facilities. Ensuring the health and safety of all of those in our facilities and our employees has always been and remains our number one priority. We believe that the steps we have taken across our facilities and our focus on personal protective equipment and testing have allowed GO to mitigate the risk associated with COVID-19. While our operations as an essential government service provider have continued uninterrupted, the spread of COVID-19 has had a negative impact across several segments of our company. We have experienced a decline in overall occupancy levels at our federal facilities for ICE, US Marshals Service, and the Bureau of Prisons. Lower occupancy has been driven by a decline in crossings and apprehensions along the southwest border, as well as an overall decrease in court and sentencing activity at the federal level. ICE has also reduced operational capacity to less than 75% at all ICE processing centers to promote social distancing practices. As we noted last quarter, most of our geosecurity Services contracts contain fixed price or minimum guarantee payment provisions intended to ensure adequate staffing levels and consistent service delivery. Our current expectation is that our ICE and U.S. Marshals facilities will continue to operate at lower occupancy levels for the balance of the year. The Federal Bureau of Prisons has also experienced a decline in overall populations, in part because as a result of the COVID-19 pandemic. Due to this decline in populations, the Bureau has decided to not rebid the contract for our D. Ray James facility in Georgia, which is set to expire at the end of September 30th. Our updated guidance for the year now reflects the expiration of this contract on September 30th. We expect to market the D. Ray James facility to other governmental agencies and believe it offers an attractive, cost-effective solution for government agencies to deal with the continued challenges of managing prison populations. Our geo care segment has also experienced lower occupancy levels as a result of COVID-19 in our reentry centers. Day reporting programs, youth service facilities, which we expect to continue for the remainder of the year. Despite the significant challenges associated with this global pandemic, we believe that our business earnings and cash flows remain strong. We believe that our business is underpinned by long-term real estate assets that are supported by high-quality contracts for the provision of essential government services. We do recognize, however, that the current political rhetoric and mischaracterization of our role as the government services provider has had a negative impact on our evaluation and has created concerns regarding our future access to capital. While we don't have any upcoming debt maturities until 2022, we recognize the importance of capital preservation and debt repayment given the current environment. To this end, our board of directors and our management team have determined that it would be in the best interest of our company and shareholders to reduce our quarterly dividend payments and apply our excess cash flows to pay down debt. Beginning with our anticipated October dividend payment, we expect to pay a quarterly dividend of 34 cents per share, or a dollar and 36 cents per share annualized solely within the discretion of our board and based on various factors. With this new dividend target, we anticipate being able to apply $100 million this year and thereafter an average of $50 to $100 million in excess cash flow annually towards debt repayment. Our new dividend payment level will also allow GEO to remain structured as a REIT and will give us sufficient flexibility to sustain our dividends should our cost of debt increase in the future. We believe that remaining a publicly traded REIT will allow us to balance providing value to our shareholders while also focusing on repaying our debt. During the third and fourth quarter, we will undertake our annual budgeting process and expect to identify cost savings opportunities at the corporate and facility levels. Additionally, we expect to identify company-owned facilities that can be sold to government agencies or to third-party individuals. At this time, I'll turn the call over to Brian Evans to review our results outlook and liquidity positions. Brian?