Guideline Geo AB (publ)

Good day, and welcome to the GeoGroup second quarter 2025 earnings 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, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note that 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, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining us for today's discussion of the GeoGroups second quarter 2025 earnings results. With us today are George Zolli, Executive Chairman of the Board, Dave Donahue, Chief Executive Officer, and Mark Stachinski, Chief Financial Officer. 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 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 the call over to our Executive Chairman, George Zolley. George?

Thank you, Pablo, and good morning to everyone. Thank you for joining us on our second quarter 2025 earnings call. I'm pleased to be joined today by our CEO, Dave Donahue, and our CFO, Mark Schuchinsky. During the first half of the year, we achieved several important milestones, and we have made significant progress towards meeting our growth and strategic objectives. In February, we entered into a 15-year contract with ICE for the establishment of an ICE processing center at our company-owned 1,000-bed Delaney Hall facility in New Jersey. Delaney Hall began intake of ICE detainees on May 1st and remains in the process of ramping up. The support services contract for Delaney Hall is expected to generate in excess of $60 million in annualized revenues in the first full year of operations. In March, we entered into a letter contract with ICE for the activation of our company-owned 1,800-bed North Lake facility in Michigan. Over the past few months, we were in discussions with ICE to definitize a two-year support services contract for that facility, which has now been finalized and executed. Based on scope of services and term of the contract, we now expect our North Lake facility facility to generate in excess of $85 million in annualized revenues in the first full year of operations. Northlake has already begun intake of ICE detainees, and we expect it to gradually ramp up during the third and fourth quarters. In June, we announced the activation of our company-owned 1868 bed D. Ray James facility in Georgia under a contract modification to the existing intergovernmental service agreement that is in place for our company-owned 1,118-bed Folkston ice processing center, thus creating a 2,986-bed facility complex. Under the modified agreement, we expect to generate approximately $66 million in additional incremental annualized revenues in the first full year of operations. D. Ray James has also begun intake of ICE detainees, and we expect the facility to gradually ramp up during the third and fourth quarters. In June, we also announced a recent court settlement, which allowed for the immediate full intake at our company-owned 1,940-bed Atalanto ICE processing center in California. Intake at Atalanto had been prohibited by a court order issued more than four years ago, based on then prevailing COVID-19 conditions. With the lifting of these court restrictions, Adelanto has begun ramping up over the last two months and is nearing full occupancy. At full occupancy, the Adelanto contract would expect it to generate up to approximately $31 million in additional incremental annualized revenues. These four facilities, which remain at different stages of activation, represent more than $240 million in combined annualized revenues with margins consistent with our company-owned secure services facilities, which average between 25% and 30%. While this revenue potential is only partially reflected in our 2025 financial guidance because of the timing of facility activations, in the gradual ramp-up of populations, we expect full-year revenue contributions from these activations to be reflected in 2026. As a reminder, facility activations generally require a 60- to 90-day period of time to hire, train, and clear staff. During this timeframe, we typically incur startup expenses. Once intake begins, populations generally increase gradually to allow for smooth operational activation. During the second quarter of this year, the utilization across our current ICE contracts has increased from approximately 15,000 beds to 20,000 beds at 21 facilities, which is the highest level of ICE utilization in our company's history. This represents more than one-third of the current ice detention levels, which we estimate to be approximately 57,000 beds nationwide. Additionally, we have 5,000 beds currently available across our existing 21 ice facilities, primarily at our four ice facilities that remain under activation. Once these facilities are fully occupied, our total ice beds are expected to increase to approximately 25,000. We also have approximately 5,900 idle beds at six company-owned facilities which remain available. These facilities include our 1,200-bed Lee County facility in New Mexico, our 1,300-bed Rivers facility in North Carolina, our 1,450-bed flight line facility, and a 900-bed Cedar Hill facility in Texas, our 700-bed Cheyenne Mountain facility in Colorado, and our 300-bed McFarland facility in California. The majority of these facilities were formally contracted to the U.S. Bureau of Prisons, and our high-security facilities which makes them ideally suited for the needs of ICE and the U.S. Marshall Service. If fully utilized, these six facilities could generate up to approximately $310 million in annualized revenues. We are in active discussions with both ICE and U.S. Marshall Service for the potential activation of these facilities. We continue to be pleased with the pace of these contract discussions and remain optimistic that additional contract awards will materialize during the third and fourth quarters of the year. As has been publicly reported, ICE is focusing on increasing its detention capacity from the current 5,700 beds to 100,000 beds or more by the end of the year. While the annual appropriations provided under the current continuing resolution only funded ICE for 41,500 detention beds, the budget reconciliation bill that was approved by Congress and signed into law by the President on July 4th included a significant increase in funding to support this expansion in detention beds and other areas of immigration enforcement. The budget reconciliation bill provides $171 billion in incremental funding for border security and immigration enforcement, including $45 billion for ICE detention and $30 billion for other ICE areas, all of which will remain available through September 30, 2029, and can be spent at the discretion of DHS and ICE. We believe that the funding provided by the budget reconciliation bill is currently in the process of being allocated by the Office of Management and Budget and will likely be available in mid to late August. To the best of our knowledge, the current debt available by the private sector at traditional hard-sided facilities would likely provide ice capacity for approximately 75 to 80,000 beds. Scaling up to 100,000 beds or more will likely require ICE to seek alternative solutions by temporary soft-sided facilities, which we believe the administration is exploring, primarily on military bases or, as has recently been supported, state-provided sites at this time in such states as Florida, Indiana, and Louisiana. While our primary focus remains on the activation on our remaining EIDL facilities by either ICE or US Marshals Service, we are also exploring other potential alternatives to further assess ICE meeting its stated objectives. To that end, we have and will continue to evaluate the potential acquisition or leasing of third-party owned facilities, and we will also identify several of our existing ice facilities where we can add approximately 5,000 combined beds using different options of temporary and permanent facilities. Additionally, we have entered into teaming agreements with an established Department of Defense contractor to position our company to pursue potential procurements that may be issued for operational support services at military sites. All of these efforts are aimed at placing our company in the best competitive position possible to pursue what we continue to believe are unprecedented growth opportunities. As a long-standing support services provider for ICE with a 40-year long track record, we believe we are uniquely positioned to assist the agency to meet its objectives. In addition to providing special purpose facilities that meet the unique operational needs and requirements set by ICE, we are also the agency's sole provider of electronic monitoring and case management services through our BI subsidiary. BI has a long track record of delivering quality services under the Intensive Supervision Appearance Program, or ISAP, as it's called, with the bipartisan support of approximately 20 years. On July 17, 2025, ICE posted a justification and approval that notified the public of ICE's intention to extend the ISAP contract for a period of 12 months to allow the agency to prepare for a new competitive procurement. On July 31st, ICE and BI agreed to extend the ISEP contract through August 31st, 2025. We believe this interim agreement provides ICE additional time to extend the ISEP contract period of performance for six to 12 months with possible further extensions during which time ICE will likely be evaluated, evaluating the ISAP program for potential programmatic changes and scale of operations. This process would likely be followed by the issuance of a national request for proposals taking place over several months to evaluate submissions from interested parties. We believe BI is in a highly competitive position, having held the ISEP contract for approximately 20 years, consistently winning multiple competitive rebids of the contract during that timeframe. We believe BI has consistently delivered high quality services under the ISEP contract. These services entail diversified and electronic monitoring technologies, as well as compliance management services which are delivered through a nationwide network of approximately 100 offices and close to 1,000 employees. Over our 20-year tenure, ISAF has achieved high compliance rates with immigration court requirements while monitoring a relatively small portion of the estimated 7 to 8 million undocumented aliens who are on the non-detained docket in addition to another 9.5 to 10 million people were also estimated to be in the United States without legal status. Given the size of this population of 17 to 18 million illegal aliens currently estimated to be in the United States, our view remains that in addition to increased detention capacity, the enforcement of federal immigration laws could lead to an increase in GPS tracking for individuals on the non-detained docket. The current number of ISAP participants is approximately 183,000 individuals, and ISAP participant counts have remained in a relatively stable range for most of the year. We believe that the lack of growth in ISAP has been primarily driven by an intense focus from ICE on increasing and maximizing the utilization of detention capacity. Once detention capacity is maximized by the end of the year, we speculate that the focus will likely shift to increasing the use of GPS tracking. Our current expectation is for ISAT participant counts to remain stable through the third and fourth quarters with growth starting to materialize late this year or early next year to coincide with the maximization of ICE detention capacity. With our previously announced investment to ramp up inventory of our GPS tracking devices to several tens of thousands, we believe we've taken the necessary resources to significantly and quickly respond to the eventual expansion of ISAP. Now turning to the important investment we've made for the continued growth of our secure transportation service. Our wholly-owned transportation subsidiary, GTI, has a long-standing record providing secure ground transportation services on behalf of ICE, primarily in connection with our existing ICE processing centers. Starting in 2023, our contractual partnership with CSI Aviation has allowed GTI to become the largest provider of secure ground and air transportation for ICE. We expect that an increase in the number of removal flights could generate an incremental $40 to $50 million in annualized revenues for GTI under this existing contractual partnership. GTI has been a longstanding partner to the U.S. Marshals Service. In June, we announced an expansion to this partnership when GTI entered into a new five-year contract with the U.S. Marshals Service for the provision of secure transportation services covering 26 federal judicial districts and spanning 14 states. This new contract is expected to generate up to approximately $30 million in annualized revenues. GTI revenues have grown 240% from $58 million in 2022 to $140 million projected for 2025. In addition to these important operational milestones, we have taken significant steps to strengthen our capital structure by deleveraging our balance sheet and positioning our company to enhance shareholder value through capital returns. In mid-July, we completed an amendment to our credit agreement to increase the size of our revolver from $310 million to $450 million, extend its maturity to July of 2030, and decrease the interest rate on outstanding borrowings by 0.5%. But we've also repaid $132 million of the term loan B outstanding under the credit agreement at the time. On July 25th, we completed the sale of our company-owned 2,388-bed Lawton facility in the state of Oklahoma for $312 million, which has been a financially transformative event in our company's history. We believe that the successful sale of our Lawton facility at approximately $130,000 per bed is representative of the intrinsic value of our company-owned facilities, which now total approximately 50,000 beds. On July 31st, we used a portion of the net proceeds from the sale of the Lawton facility to acquire the 770 beds Western Regional Detention Facility in San Diego, California for approximately $60 million in a like-kind real estate property exchange that is expected to be accretive to EBITDA. This is an important facility that recently celebrated its 25th anniversary of providing federal detention capacity on behalf of the U.S. Marshals Service under a long-standing contract that generates approximately $57 million in annualized revenues for GEO. We used the remaining net proceeds from the sale of Lawton Facility to pay off the additional senior secured debt, including the remaining balance of our term loan B. These combined transactions have reduced our total net debt to approximately $1.47 billion and positioned our company to enhance shareholder value through capital returns. Given the intrinsic value of our assets and the unprecedented growth opportunities we anticipate will materialize over the balance of this year and next year, we believe that our current equity valuation offers an attractive opportunity for investors. Similarly, we believe it offers an opportunity for our company to enhance shareholder value through share repurchases. To that end, our board of directors recently authorized a $300 million stock buyback program effective through June 30th, 2028. We expect to conduct our three-year stock buyback program at a rate of approximately $100 million per year while paying down debt at also approximately $100 million per year. We expect to execute on our new stock buyback program opportunistically, balancing it with our growth capital needs and our continued efforts to deleverage our balance sheet. At this time, I will now turn the call over to our CFO, Mark, to review our financial highlights and guidance.