Geo Group Inc (The) REIT

Good day and welcome to the GEO Group second quarter 2024 earnings call. All participants will be in the listen only mode. Should you need assistance, please signal 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 then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Pablo Paez, Executive Vice President of Corporate Relations. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's second quarter 2024 earnings results. With us today are George Zoli, Executive Chairman of the Board, Brian Evans, Chief Executive Officer, Wayne Calabrese, President and Chief Operating Officer, Mark Suchinski, Chief Financial Officer, and James Black, President of GeoSecure Services. This morning, we will discuss our second quarter results as well as our 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 as included in the press release and the 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 Executive Chairman, George Oli. George?

Thank you, Pablo, and good morning to everyone. Thank you for joining us on our second quarter earnings call. I'm pleased to be joined today by our senior management team, and I'd like to welcome our new CFO, Mark Suzinski, who joined GEO early in July with more than 20 years of senior-level executive experience in business management, corporate finance, capital markets, manufacturing, and supply chain management. During today's call, we will review our second quarter 2024 financial results and the operational milestones for each of our business segments. Provide an update on our continued efforts to pay down debt, reduce our leverage, and enhance long-term value for our shareholders. And discuss our financial guidance and outlook for the second half of 2024 and the full year. During the second quarter, our diversified business units continued to deliver steady operational and financial performance. Looking at our key quarterly trends, revenues in our managed-only segment increased by approximately 11% compared to one year ago. The year-over-year increase in managed-only revenues was driven by the activation of our new transportation contract to provide air support services for ICE, as well as our new contract in Australia to deliver primary health care services at 13 prisons across the state of Victoria. Revenues for our geoentry services division also increased from a year ago, driven by a 5% increase in compensated mandates for our non-residential reentry services segment. Revenues for our owned and leased secure services facilities increased by approximately 7% from a year ago. This increase was driven primarily by year-over-year population increases across our ICE and Marshalls facilities. Utilization of our ICE facilities remained consistent during the second quarter of 2024 at approximately 13,000 beds, which represents more than a 30% increase from a year ago when utilization of our ICE facilities was below 10,000 beds. We estimate that utilization across all ICE facilities nationwide is currently at approximately 37,000 beds, which is below the 41,500 beds that are funded in the current fiscal year appropriations approved by the US Congress. We believe that the current detention census of 37,000 and ICE participation levels are constrained due to financial reasons related to ICE having overspent its budget earlier in the fiscal year, which will now end on September 30th. Revenues for our electronic monitoring and supervision services segment decreased from one year ago due to a decline in number of individuals who are monitored under the Federal Government's Intensive Supervision Appearance Program, or ISAP. Participant counts under ISAF averaged approximately 184,000 individuals during the second quarter of 2024, compared to average ISAF participation counts of approximately 188,000 during the first quarter of 2024. Currently, the daily ISAF participation count is approximately 175,000. With respect to federal funding for fiscal year 2025, which begins on October 1st, the U.S. House of Representatives has approved its version of the Homeland Security Appropriations Bill. The House bill would increase funding for ICE detention to 50,000 beds, an increase of 8,500 beds from the currently funded level of 41,500 beds, and increase of approximately 13,000 beds from the current utilization level of 37,000 beds. The House bill would also require the use of electronic GPS monitoring for all individuals in the nine detained docket, which is currently estimated at a total of more than 7 million people. At this time, the U.S. Senate has not introduced its version of the Homeland Security Appropriations Bill, and the U.S. Congress has adjourned for the August recess. If a Homeland Security Appropriations Bill is not approved when Congress reconvenes in September, Congress could pass a short-term or long-term continuing resolution for fiscal year 2025. We believe that under a continuing resolution beginning on October 1st, ICE would likely start with a full year of funding consistent with the current funding levels for 41,500 detention beds and approximately $470 million for the agency's alternative to detention programs. We expect utilization rates for ICE detention beds and the alternatives to detention programs to increase in the fourth quarter of the year, with detention beds increasing up to 41,500 beds and ISAP participation up to 195,000 participants. We remain focused on providing high-quality services on behalf of ICE, and we stand ready to provide any needed services and resources to help the agency meet its needs. In early June, ICE announced a decision to discontinue a non-geofacility contract in Texas, which was considered a cost outlier and will allow ICE to free up approximately $157 million in funding to support the agency's bed needs across the country. Subsequently, in late June, ICE issued a procurement for a contractor-operated processing center with a minimum of 600 beds in Newark, New Jersey, area of responsibility. GEO has responded to this ICE procurement by submitting Phase 1 portion of the proposal. Under this procurement, ICE is expected to award a 15-year contract inclusive of all option periods. ICE also previously issued a request for information for contractor service federal processing centers in the Midwest, Texas, and Utah. Finally, during the second quarter, we completed the comprehensive refinancing of our debt, including the exchange and retirement of substantially all of our convertible notes. These important transactions have pushed out our debt maturities reduced our overall cost of debt, and given us greater flexibility for potential capital returns in the future as we continue to focus on reducing our debt and deleveraging our balance sheet. We expect to reduce our debt by between $100 million and $125 million this year, bringing our total net debt to approximately $1.65 billion and our net leveraged below 3.5 times adjusted EBITDA by year end. I will now turn the call over to our CEO, Brian Evans.