Geo Group Inc (The) REIT

and welcome to the GEO Group fourth quarter 2025 earnings conference call. All participants will be in a listen-only mode. If 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 then one on a touch-tone phone. 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 Pablo Paez, Executive Vice President, 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 fourth quarter 2025 earnings results. With us today are George Zoli, Executive Chairman of the Board, and Mark Suchinski, Chief Financial Officer. This morning, we will discuss our fourth quarter and full year 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 is 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 Aldy. George?

Thank you, Pablo, and good afternoon to everyone. During the past year, we believe we've made significant progress towards meeting our financial and strategic objectives. Since the beginning of 2025, We've been awarded new or expanded contracts that represent up to approximately $520 million in new incremental annualized revenues that have staggered activation dates and are expected to primarily normalize by the end of this year. This represents the largest amount of new business we have won in a single year in our company's history. We've entered into new contracts to house ice depainees at four facilities, totaling approximately 6,000 beds, which include three company-owned facilities we announced in the first half of 25, the 1,000-bed Delaney Hall, New Jersey facility, the 1,800-bed North Lake facility in Michigan, and the 1,868-bed D. Ray James facility in Georgia. And more recently, the 1,310-bit North Florida detention facility, which is a state-owned facility where we are providing management services under a joint venture agreement that we announced in early October. The Florida contract arrangement demonstrates GEO's ability to provide management services through alternative solutions like the state of Florida's partnership with the federal government. During the third quarter, we also reactivated our 1940-bed Atalanta Ice Processing Center in California, which was already under contract but had been underutilized due to a long-standing COVID-related court case. The activation of these five facilities represent the largest startup activity in our company's history with a combined annualized revenue value of approximately $400 million. and involved the hiring and training of approximately 2,000 new employees. The census across our active ICE facilities has continued to steadily increase from the third quarter at approximately 22,000 to presently approximately 24,000, which is the highest level of ICE populations we've ever had. This past year, we also significantly expanded the delivery of our secure transportation services on behalf of both ICE and the U.S. Marshals Service, valued at approximately $60 million in incremental annualized revenue. The increase in ICE enforcement and removal operations has resulted in an increased need for secure ground and air transportation services. In 2025, we entered into a new or amended contracts to expand secure ground transportation services at four existing ICE facilities and at our three newly activated ICE facilities. And the support services that we provide under our ICE air transportation subcontract continue to steadily increase throughout this past year. In addition to the secure ground transportation services we have historically provided for the U.S. Marshals, last year we signed a new five-year contract with the agency covering 26 federal judicial districts and spanning 14 states. At the state level, we awarded two new management-only contracts in 2025 from the Florida Department of Corrections. The 1,884-bed Graceville facility and the 985-bed Bay facility are scheduled to transition to geomanagement on July 1 of this year and have combined annualized revenues of approximately $100 million. Of particular importance in 2025, we also secured a new two-year contract for the ISAP-5 program following a competitive procurement process. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the non-detained docket. It's mainly for people ICE considers a higher flight risk or who have a pending asylum or removal cases but are still allowed to live in the community. The program relies on several forms of monitoring, including GPS ankle bracelets or wrist-worn devices that provide real-time tracking, as well as a phone app, which relies on facial recognition, voice ID, and GPS to confirm a person's location during predetermined check-ins. The ISAP counts have declined slightly over the last year due to approximately 180,000 presently due to a decline in the use of a phone app called SmartLink provided by GEO at a very nominal cost. Instead, we've had a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors. The number of ISAT participants on GPS ankle monitors has increased from approximately 17,000 in early 2025 to more than 42,000 ankle monitors today. Correspondingly, the number of ISAT participants on the SmartLink mobile app has declined to less than 135,000 participants today. Currently with this trend, we've also seen an increase in the number of ISAP participants additionally assigned to case management services, which involves staff interaction and monitoring for approximately 106,000 individuals at this time. If this trend continues, the technology and case management mix shift would increase the revenues and earnings generated under the ISAP contract even if overall volume remains constant. Thus, we continue to be optimistic about the importance and growth potential of the ICE contract. The new two-year contract includes pricing for 361,000 participants year one and 465 participants in year two. With the capital investment we made in 2025, we believe we have the capability in scaling monitoring devices and case management services to achieve those significantly increased participation levels and far beyond if desired by ICE. But of course, we cannot provide definitive assurance of future ISAT participation levels which are determined by ICE Manager. In December of 2025, we were awarded a new two-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. Skip tracing entails enhanced location research primarily with identifiable information and commercial data verification to verify current address information and investigate alternative address information for individuals on the non-detained docket. This two-year contract award follows initial skip tracing pilot contract that we successfully implemented, which generated approximately $10 million in revenues during the fourth quarter of 2025. Looking at our initial guidance for 2026, we believe there are several sources of potential upside, including additional growth in our secure services segment, additional volume increases or accelerated mix shift in our ISAP contract, additional growth in our secure transportation segment, and the normalization of higher labor expenses at newly activated facilities. It is our understanding that the present ICE detention census is presently approximately 70,000, distributed over 225 separate locations, which are primarily short-term jail facilities. We believe the federal government is continuing its focus to increase immigration detention capacity and looking for solutions as to how to upscale to 100,000 beds or more and consolidate to fewer larger facilities. As a 40-year partner to ICE, we expect to be part of this solution. We continue to be in active discussions with ICE regarding our remaining available capacity and are currently in discussions for the potential activation of additional facilities. We have approximately 6,000 idle beds at six company-owned facilities, which are primarily former U.S. Bureau prison facilities and are currently there for high-security facilities, making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds would generate more than $300 million in combined incremental annualized revenue. We are obviously aware that ICE is exploring the purchase of several commercial warehouses that would be retrofitted to further increase detention capacity. This procurement process would result in the federal government owning these assets while contracting with private sector companies to retrofit and operate these potential sites. We are cautiously participating in this process and are evaluating select potential sites with the possibility of responding to this procurement opportunity. With respect to the federal government's annual appropriations process, the Department of Homeland Security is currently funded under a short-term continuing resolution that expires tomorrow night. If no additional appropriation bills is passed by Congress before the expiration of the current continuing resolution, there will be a partial government shutdown involving the Department of Homeland Security. It's important to note that this process only affects the annual appropriations ICE receives from Congress, which is approximately $10 billion. It does not impact the funding under the One Big Beautiful Bill, which is available through September 30, 2029. Under that budget reconciliation bill, ICE was allocated approximately $75 billion, including $45 billion for detention. Historically, during government shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections could be delayed, requiring us to carefully manage our liquidity and working capital needs. With the recent expansion of our revolving credit facility by $100 million, we believe we have substantial liquidity. While the exact timing of government actions, including congressional funding decisions and new contract awards, is difficult to estimate, we expect the balance of 2026 to be very active. In addition to the opportunities at the federal level, we're pursuing additional opportunities at the state level, specifically in the field of mental health services. In Florida, we are currently participating in a procurement by the Department of Children and Families for the management contract at the South Florida Evaluation and Treatment Center, which is a state forensic psychiatric hospital, which at one time we were the operator. In addition to our efforts to capture new growth, we believe we also have made significant progress towards strengthening our capital structure and enhancing shareholder value. Our efforts to strengthen our balance sheet were enhanced by the successful sale of the Lawton, Oklahoma facility for $312 million and the Hector Garza facility in Texas for $10 million. We used approximately $60 million of the Lawton facility sale gain to purchase the 770-bed downtown San Diego, California facility that we have operated for the U.S. Marshals Service for 25 years. In 2025, we also began returning capital to shareholders through a share repurchase program that was initiated in August and expanded to $500 million in November. As of year end 25, we had repurchased approximately 5 million shares for approximately $91 million, bringing our total share outstanding to approximately 136 million. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities and our expected growth, we continue to believe our stock is significantly undervalued and offers a very attractive investment opportunity. Our stock is trading at a historically low multiple despite the significant growth opportunities we expect going forward. We recognize that this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases. At this time, I will turn the call over to our CEO, Mark Schutzenstein, to review our financial highlights and guidance.