Geo Group Inc (The) REIT

Good morning and welcome to the GEO Group third quarter 2020 earnings conference call. All participants will be in 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. Please note this event is being recorded. I would now like to turn the conference over to Pablo Paez, Executive Vice President of Corporate Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's Third 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 GEOcare, and Blake Davis, President of GeoSecure Services. This morning, we will discuss our third 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 contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q, and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, George Zolley. George? Thank you, Pablo, and good morning to everyone.

This morning, we reported our third quarter results and increased our financial guidance for the fourth quarter in the full year. During the third quarter, we experienced a continuation of the favorable cost trends we had experienced in the second quarter, which resulted in better than expected financial performance. While we are encouraged by these favorable cost trends over the last two quarters, we continue to face operational and financial challenges associated with the ongoing COVID-19 pandemic. Our frontline employees have continued to show incredible commitment and resilience as our company manages through these unprecedented times. From the outset of the pandemic, our facilities have implemented steps to mitigate the risks of COVID-19 to all those in our care and our employees, and we are continuously evaluating these steps. We remain focused on procuring personal protective equipment, including face masks for all employees, inmates, and detainees at our residential facilities. And we've been steadily ramping up our diagnostic testing capabilities, most recently with the acquisition of 45 Abbott rapid test devices that we expect to have deployed to our geo-secure services facilities by the end of November. Ensuring the health and safety of all of those in our facilities and our employees has always been our number one priority. And we believe the steps we have taken across our facilities and our focus on personal protective equipment and testing have allowed GEO to mitigate the risks associated with the pandemic. While we have continued our operations as an essential government services provider, the COVID pandemic has had a negative financial impact across several segments of our company. Over the last two quarters, we have experienced a decline in overall occupancy levels at our federal facilities for ICE, U.S. Marshals Service, and the Bureau of Prisons. Our GL care segment has also been impacted by lower occupancy levels across our reentry centers, day reporting programs, and youth services facilities due to COVID-19. While occupancy levels have begun to stabilize, our expectation is that our ICE and U.S. Marshals facilities, as well as our GeoCare segment, will continue to operate at lower occupancy levels through the end of the year. With respect to the Federal Bureau of Prisons, we have previously announced that the agency had decided not to re-bid the contract for our D. Ray James Georgia facility. as a result of declining federal populations in part due to COVID-19. During the third quarter, we entered into a four-month extension of this contract, which was previously set to expire September 30th as the Bureau evaluates its future capacity needs. Our updated financial guidance in the fourth quarter and full year now reflects the extension of this contract through the end of January During the third quarter, we also began the activation of the Golden State Ice Annex in McFarland, California, which we expect to achieve normalized operations by the end of the year. In a recent ruling this week, the U.S. 9th Circuit Court of Appeals ruled unanimously that the conditional use permits issued by the City of McFarland for our Golden State and Central Valley annexes complied fully with all state legal requirements. Additionally, on October 26, we entered into an operational contract modification to continue the process of activating the Desert View Annex in California. And we remain hopeful to be able to activate the Central Valley Annex also in California in the near future. We believe these positive milestones are representative of the stability and strength of our earnings and cash flows despite the challenges associated with COVID-19 pandemic. We believe that our business is underpinned by long-term real assets and that they are Real estate assets are supported by high-quality contracts for the provision of essential government services. We've provided these essential services to government agencies at the federal and state levels under both Democratic and Republican administrations and during times when either party has been in control of the legislative branch of government. We expect that our company will be able to continue to provide valuable, diversified services to the federal government under either political party following the upcoming election. As we have discussed last quarter, we also recognize that the current political rhetoric and mischaracterization of our role as a government service provider has created concerns regarding our future access to capital. We recognize the importance of capital preservation and debt repayment given the current environment. To this end, our board of directors has reduced our quarterly dividend payments to 34 cents per share in order to apply our excess cash flows to paying down debt. Through the end of the third quarter, we have paid down approximately $80 million in debt, net debt, during 2020. And as we have previously stated, we expect to pay down approximately $100 million in net debt this year and hope to be able to allocate a minimum of $50 million in excess cash flow annually thereafter towards net debt repayment. Additionally, we're currently undergoing our annual budgeting process and expect to identify cost savings opportunities in the corporate and facility levels. We have also identified a number of company-owned assets and are exploring the potential sale of these assets to government agencies or to third-party individuals. At this time, I'll turn over the call to Brian Evans to review our results, outlook, and liquidity position.