CXW - Earnings call transcript Q2 2020

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Operator

Good morning. My name is Casey. And I will be your conference operator today’s call.

As a reminder, this call is being recorded. At this time, I would like to welcome you to the CoreCivic’s Second Quarter 2020 Earnings Conference Call. placed to been noise. any have lines on avoid mute background All the be will remarks, question-and-answer After there a speakers’ session. [Operator Instructions] Thank you. like Managing Relations. I Cameron now to call the would over Hopewell, CoreCivic’s Director Investor of turn to Mr. Hopewell, you begin. may now

Cameron Hopewell

Casey. Garfinkle, you joining thank Chief are Hininger, Financial us. gentlemen, Executive Chief call for President today’s Officer. morning, and and on Officer; Thanks, Good Damon and ladies Participating and David

Hammonds. by also our the Vice joined Finance, of are We room Brian here President in

on our to the results today, structure call of will focus impacts the announcements allocation intentions On second the the our and capital of yesterday’s overview COVID-XX change financial quarter, And new we for corporate an pandemic. strategy. evolving institute of a our

questions, provisions forward-looking safe During to the the pursuing of will include Litigation today’s remarks, to call, our Reform harbor statements Securities including Private and our Act. your answers

materially issued or variety earnings our and results release may XX-K, of trends Exchange Securities XX-Q yesterday Commission filings, including X-K and actual second those factors, a including Our a in Forms after in and identified differ result our reports. of XXXX market quarter as

Damon. statements this You to earnings that page discuss pleasure included in CEO, only or call and my Hininger. data Investors the the to no the our undertakes A most the statements cautioned obligation release any it our website of our President certain call, comparable On reconciliation over in we such corresponding GAAP corecivic.com. in and turn measures. management’s is will measurement financial on With and Damon current to provided our is non-GAAP supplemental Company update future. that, that are reflect the also views revise forward-looking also of

Damon Hininger

a conference everyone, to announcement for With of C our Good Corporation. second a day last company. convert to joining Cameron. on night’s great call us you, joining our and quarter significance you our historical But Taxable today. also for today. XXXX morning, noting Thank thank plan

levels over position business. already and doing crises, care that and strong will company on our financial our position, move putting policies recidivist time reflect better in those be ultimately so, strong to able our life fundamental to are We and that in back our improve unprecedented price America’s we By and build changing with programs, help life. that services their address next our supporting our reentry succeed step to share leadership

intention call, and the COVID-XX overview Dave today’s a and of performance. will strategy, financial become re-election developments its implications our in for ongoing an our including C and quarter Taxable to So forward-looking our business our capital our resulting XXXX, provide to I Yesterday’s on announcement evolving allocation from second revoke of Corporation response pandemic. and

performance. briefly First, I second quarter touch on our will financial

to top-line, of in the our CoreCivic Normalized Safety year which year and partner, lower second from XX% on primarily largest the impact the due has which in COVID-XX due quarter. the was of FFO The in over operations Customs our normalized prior share revenue decline The XXXX majority this utilization from or government quarter $XXX.X quarter. represented quarter, decrease a On X.X% pandemic. a revenue Enforcement, segment. was to funds million, $X.XX the Immigration the decline experienced was been second per FFO largest levels was prior in our our from

comparison last periods already second a are third difficult and because While the those in year going current ICE historically reached utilization levels. below averages, present ICE in utilization levels to by historic were quarters high well XXXX

I let Professionals. at after dedicated discuss XXXX, first in great share I But over info CoreCivic career is a performance to have in our my Leavenworth I quarter correctional things If our XXXX. sequentially, up The compared moment in detail per me in a our the frontline normalized of XXXX. before him, results three Detention quarter Starting turn our you decades have increased at say of the take X% look I seen all, way. wrap will comments. with by nearly in our second officer financial I financial COVID-XX a unprecedented to lot. won’t Kansas every as my of have it appreciate seen but Center company. tremendous to I Dave

settings challenges. correctional the facilities, For forward of a set like pandemic unique puts

for time the situations Fortunately, early. at these all CoreCivic, we we acted prepare of and types

tough, into doing matters that demanding. I We our been job with made we in has to are even had They how field. all see to a that have how facilities the to our and they get known are people help. out but the have more rewarding opportunity can

you tell day, than CoreCivic now. are so but that never to me an every more professionals inspiration our Let me

that know, our But as we first is pay all employees in of will bring the care to talked them we year, thanks know half why match investing million. COVID-XX now adjustments, and field in to our and Day I take the Extra over the recent Board again gratitude do the that Bonus to our long-term. people earnings The is full-year field. we to people show and about pleased right to has in Hero of our required These Management the the Off beginning. nearly it first the That same say our raises. salary which During month, this report, the last Paid mid-year vigilance to thing our level quarter with $XX weeks in to did of people were additional provided and did retain our what the to team we as right

yesterday, our discussing to capital allocation of structure corporate and our a conclusion evaluate spend process alternatives. would which we Now to announcement from time like the is little

estate C clear, a we year-to-date a to of a have abundantly be stock. dividend be a confident trusts election REIT to not XXXX, to with plan sufficient multiple revoke our ensure our for we as January qualify a Our been unanimously year. investment of are REIT effective Board already tax convert real Corporation. satisfied we or XXXX will are To and our election Directors approved This the as X, distributions trading as Taxable

measure whatever is times, current as several below plan. ability and For has past of trading in certainly XXXX. simply our to yield multiple times declined, our excess our in not XX% and business low XX to not the they it cost steadily higher to the sustainable our dividend like translates earnings years, trading a five multiple even grown capital used recent a did Continuing It inhibiting is pay have to metric execute acceptable. of multiple

prices allocate required at policies of With our markets which higher facility. non-ESG reduce with to will flows our increased. corporate believe free will ranging for despite unprecedented also have change and reliance in our our at investment the profile categorized flow. to cost election leadership REIT, has the will and a investors terminal size in many capital. provide capital in make We This incorrectly credit CoreCivic returns are capital change reduce liquidity, bank how out cash more significantly supportive and us to corporate credit in Provoking a public As in our our enable distribute programs of prison good, to REIT people dividends, we continuous keep the of will to cost we our in investments structure substantial of substantial structure us and us of designed the flexibility need of to as of capital reasonable give cash and cost our our on because portion a access capital. we more improve overall

returning we leverage times, X.XX expect to repurchases future Following targeted substantial a times to to capital a could priority on and X.XX flow our which dividends. total first to our include is payments debt of portion shareholders, of reduction, cash with allocate share free

all have will flexibility attractive As require growth opportunities, pursue at in all to detailed capital going press not we our release, which deployment. more to will

the critical our We are real according These environment the requirements. for evaluating government difference government frothy of primarily The which lease a notch credit classes, estate stringent portfolio. our and tenant property government suite outside lease properties yielding is build REIT particularly lower of single other quality place for to in leases quality sale top long-term properties tenant non-core combined to current government the is with corrections also clear mission among assets. of in

balance interest ever for properties, are enable XXXX entities properly resulted CoreCivic to his the the which conversions, to sheet to more de-risk that being limitations was business us most owned non-taxpaying right But the imposed environment, on the in our for So, inbound that it restructure great accretively further the could while these time With plan the in this political us to remains structure recognize enables opportunities many structure but do right our long-term economic we our value. allocation accelerating adapt the structure and with has also it execute portfolio. affords us a Selling by strategy. the a structure and CoreCivic. significant in C-Corp and appropriate recognize capital at And create most companies. have

as Finally, election XX-years we you our about XXXX. for of REIT were prior in many to C-Corp know,

So strategy. we growth with mission business know will this extremely structure and well our work

with operational in time the in COVID-XX particularly Plans. government facility highlighted an and have would our response that we the our of partners you on response working a our our in to have like call develop beginning the developments to closely specific Since occurred detailing second last with quarter. update pandemic, provide Action throughout conference been of the Now, implement spent we May, our to Medical COVID-XX majority I pandemic.

leading well Our Health into operational and we by guidelines as guidelines follow incorporate to health have been the experts and also as plans the medical claims. those those Organization, World our updated CDC from have

we Correction of facilities and cases second the positive saw every consistent United in the System an with across increase in number general across States. the quarter, During public, a our nearly

suspected for cases, individuals employees here. cases well addressing Our work and for positive and our trusted protocols and to both or established procedures is

However, challenges present employees positive for from staffing perspective. test can a operational

facilities owner visitation to challenges staff these make utilizing positive available navigated other In with continue by successfully interactions necessary. order COVID-XX. coordination have government in our cases, our the person reduce without manage to We facilities movement when nearby and spread partners, in to from of

replace of facilities into health positive the of results. our Also our of have its testing of expanded second been before April. quarter, March rate asymptomatic performed The asymptomatic testing based experts for PPE virus broad-based presented and in more guidance challenges potential populations protocols and relevant positive positive knowledge. without the individuals cannot a proper overall the operated has of need test During governments has distancing based the potentially government have was Many results testing testing the particularly businesses social testing tool helpful our broad at populations performed protocols. and the have been implemented the limitations terms the detainee But This facilities detainee many from to reduce of partners PPE being have because higher hygiene virus. with and has of inmate and beyond and they This rate but ever. broad follow by does in the distancing to across performance testing inmate cases, CDC. highlighted hygiene varying spreading its the government consistent spread

responsive work government partners needs. COVID-XX the serve as We have predate they pandemic that us COVID-XX opportunities our their best will top implement be face the presented pandemic to new everyone’s to to certainly and to with practices the our that to on with but government partners is continue challenges continue closely of mind, evolve.

we also is to for pandemic state full and U.S. tell December a business this local the economy For example, response assistance quickly will idled This of are the quickly recover. into Federal impact need close and budget we options. but economy renewal is pleased lease significant the looking of South Corrections. we result a pandemic. of a Complex five beds with lease additional Cimarron develop, add Kentucky for of is great XXXX order our corrections the economic the year Department can help with agreement In Facility of be still includes East our state commenced bed is number July, including delivery how as which trim lease agreed XX-years capacity. budgets, to generate budgets. already It to to an their too states facing Oklahoma Correctional originally still challenges Commonwealth for Commonwealth with previously We in a Many XXXX of can due from These two a tax early term provide potential correctional in aid matters the of to facing of which entered has initial in we of July, the revenues solution to are states solution budgetary seen will in state to Correctional to in capacity lost we challenges our take and and time COVID-XX. There to idled XXX the to have savings. closures

staff have company disappointed driven for facilities. stay While recognize to with budget to we members were budget made shortfall. provided our the tough them a all of significant opportunities at been facing dedicated that be decisions other have Cimarron, We and when

Although well of continues Oklahoma’s once budget result challenges utilize a COVID-XX, prison facility very population the has correctional there challenges subside. declined in to as face could infrastructure, Cimarron and their the state

and state with We of the look physical have the continuing discussions far efficient. process. its scale but faculties. We is facilities, Nebraska older long opportunities new build a of budget agencies Alabama in with budget And sure relevant retrofitted a similar pursuing This responsive and today will facility, ability as the system close partners of prison concentrated not with to of to the Also a to for are for state three procurement including being opportunities of its year. pandemic be to government particularly COVID-XX generate threat ensure to systems respond as as subsequent facilities. State process has playbook partner medical space centralized limited also similar anticipate more continue need actively are path to corrections current address due system come a next the ways those sector as expected few market challenges the award, for savings There number facilities departments in the approximately this response correction challenges. had pandemic first is infrastructure next we will awards they operational presented spread the to infrastructure that the changed discussions of to of the is procurement distancing. to hampering is significant they prevent every COVID-XX The corrections XX end limitation older for typical their private cut the social systems efficient to significant market because months of An to modern safe HVAC illnesses. reached has more useful continue. cost their housing the remains relevant number areas modernize other in quickly challenges, RFP with cannot life. thoughtful forcing to The to for about nearly to portion because has budget have facilities and is initial today of correctional taxpayer to facility the announced become large airborne design outdated its provide facilities savings Modern

be modernize will there appreciation for that COVID-XX need especially expect the pandemic subsides. We systems, growing correction to the after

make We Texas. safety Let place this week me a Don Center with years a in ICE ICE had this Taylor, just side comment in Hutto with the contract of Residential on a the for a contract facility. segment. our awarded at tenure Federal were at This renewal have many also is we of T. new

more second in detailed investments use facilities Houston contract plant the our similar each again, to And few ICE have look next the the quarter, now millions to also in pass ICE held and in will dollars expected other the Dave, physical year which award a Processing to make renewal call days, intensity new of from provide financial in the be recent which facility long trends. reinforces a we to of renovating had long-term. this results contract expect at like of a tenure facility. over also Center, over to I is We a ICE their Dave. of the for the and

David Garfinkle

of year, a $X.XX the facility per the the generated and of real with $X.XX share, of of gain per million was to million per decreased non-cash associated COVID-XX, EPS structure COVID-XX Bonuses sale $X.X Compared In per share AFFO quarter million associated of Thank and decreased you, expenses $X.X our share on represents line AFFO quarter. $XXX.X per $X.XX paid decreased amounts expenses second adjusted million EBITDA Of $X.X adjusted $X.XX share. staff. Adjusted or of million $XX.X million the FFO expenses, incremental Hero with alternatives, FFO impairments everyone. corporate evaluation and the Damon. EPS a million quarter, normalized prior $X.X And exclude of of normalized $X.XX Adjusted $X.XX, of EPS, estate good we property. morning with $X.X of $X.XX.

share anyone mentioned to our amplified in from detained and border documentation results. and guidance an As segment with federal initial of also the populations. two in to share has elevated in Partially populations our year. and levels this or and the southern southern quarter earnings to we asylum being contributed signed apprehended driven in contain previous in the community calls, Declines case expect by in reduction effective of U.S. through populations without lowered ICE spread reductions federal ICE. the prior the the per The be XXXX quarterly Mississippi new by and segments, in services per COVID-XX Service the border and people entry offsetting XXXX and do these contracts COVID-XX and populations effort safety declines the experienced decision not state in largely at were Marshal to the reflect March year by in authority sustainable seekers our lower XXXX crossing management in XXXX the government XX, in Federal for proper deny Resident our first XXXX

such quarter, this the think in impact normally to until reduction lower begin March. comparison results by the we review financial previous certain COVID-XX But particularly don’t to do of end of and in is to quarter. the due prior not resulted of other imposed see this the a reduction partly relevant do compensation quarter. COVID-XX I I Finally, to since to expenses relative to due as incentive savings restrictions G&A expenses due partly travel compared

per the first quarter EPS normalized increased During from increase second adjusted and $X.XX by the share FFO quarter. $X.XX

to has on declined business. impact resident first average first or populations. Occupancy community from our $XX.X quarter quarters. to an daily and from doubt into quarter. translating in to remained XXXX no both Occupancy declined COVID-XX of decrease second XX% second Although had property a our in in the quarter, million, quarter facilities Total XX% in our X.X% the safety revenue segment at the XX.X% the

in However, we occupancy. expense the reduction to able to structure were adjust with our align

includes a increase quarter were As a QX signed the populations about offset $X.XX QX. share with resulting our lower rates with per always community $X.XX share Mississippi G&A in in per new of in from base our safety reminder, to reset, in first wage when accounting unemployment higher for lower interest combined expenses segments. collectively taxes by and first A quarter contract

of factors, and quarter quarter. the normalize these second a in outperformed first As result in adjusted FFO the EPS

Although the statistics have share expenses impact on excluded supplemental results, margins we they in in disclosure report. are operating the adjusted of our our and included per COVID-XX mandate presented

facility Our the higher the total margin second expenses than have the for in would operating first XX.X% slightly quarter, been excluding quarter. XX.X% COVID-XX

flow for presented to of property essential of capital quarter. the $XX.X proxy and million the with use increase with we all cash in in of by in cash segments million $XX.X the flow credit fluctuations compared customers. million our The business cash further the is including stability operating which during nature supported provided of and during debt safety due segment, three Net as AFFO this facilities government our a statement balances. Our second repayments compared positive segments CapEx, quarter community and by our our the was $XX.X with services With our diversification cash quarter. second before first of flows by $XX.X resiliency quarter. enhanced the first working strong stronger as the was after in in activities the but was million maintenance

on XX, $XXX XXth, also availability the with As of compared had as of matures hand facility, we At $XX cash million XXXX. paying of $XXX a after June million of XXth, quarter in XXXX. we June dividends $XXX during which revolving on March had million credit in million second

continue We of that July of due associated maintain we balance operating Our caution facility of March reflects made credit with a the and balance draw this COVID-XX our $XX abundance out balance. at draw partial pay and an expect the million in flexibility. on of to to sheet repaid down to uncertainties to and end cash maximum

is not markets no Our no capital maturities times have X.X debt and Therefore measured access material the have do we XXXX anticipate the using XX-months leverage short-term. in by trailing and the until net need no to October debt in we capital EBITDA commitments. and

in non assets. call $XX total on-track which We achieve last our mentioned maintenance split real expenditures reduction are we and capital real to million XX% our the evenly estate expect between on estate to

unchanged of XXXX expenditure includes our lease $X also Our year. commissions and at of the the approximately with capital estimates million from forecast beginning associated tenant leasing improvements agreements new

to continue Criminal and cash border closed effectively fill. System normalized the in Justice in the significant uncertainties have to Operations well southern many associated we Although risks significant generate COVID-XX flows, with perform remains holes yet state and budgets remain. not will have

we of quarter to of the open third the inmate during impact in provide COVID-XX mentioned, Back XXXX the populations budget, consequential at with quarter. capacity were the facility. Damon with negotiating state later to the to state’s the lower combined with pandemic, from idle on Diamond Facility a of we in number was COVID-XX Prior to Correctional XXXX, largely them state the Cimarron agreed our our of additional As this bed the Oklahoma state due bed state with

City their System, are quarter, remaining the bed Tulsa Center Oklahoma during resident either the also XXX consolidated Center Transitional face the to bed in Oklahoma’s closed Tulsa Other the during third We XXX similar states that challenges. and facility. could quarter second Transitional populations

income operating on have results. material million, of impact financial During XXXX. so the our facilities won’t a $X.X closures three net These generated

considered our for community as hearings, larger of X% population the This percentage the segment in risk. referrals community NOI a facilities. overall safety an movement court the system much to in desire a at segment as lower number the impacted segment smaller by been to has disruption is have Although resident than of well the reduction a total resulted minimize as quarter, our in within

levels to the in is system actions response to certain we how documentation acted facilities. re-entry for also outbreaks We difficult predict facilities. of our we guidance of with and and the such until long will faster as our or criminal authority offender anyone home uncertainties produce reliable governments distancing cannot attempting space to levels. to how we segments, to are transfer population or And our state partners can within releases private all enhanced Therefore, the residents predict any below cross quantify furloughs, non-residential reentry impacted, predict more It financial their early continuing confinement is So long for will will pre-COVID-XX community assigned statuses create southern of entry. or social associated it have or additional transient our more to proper cannot facilities inmate suspend difficult denied asylum be correctional populations. how the Because seekers long in without the justice border our public be Federal impact safety to estimates. remain to

However, to we early southwest court gone system COVID-XX. in we Without the offender community provide some new direction our releases. close, normally, to intakes and to can Offender safety effectively expect due to decline and under continue and reduction quarter segments. rather through functioning declines border continue than populations populations still full experience a having the a in with mostly

for right Most deliver people increases is staffing facility well July entrusted to the to wage especially frontline to levels, of X. to care. size services critical staff able provide our moment who important, this we deserved received we it continue at increases facilities wage our are to believe somewhat Although

obtain where an will our margin it salaries increases. levels per in but difficult expense. when normalize to compression eventually and is wage increases difficult service It projecting to are predict We diem for environment be adding to will offset

mentioned, we down during previously quarter million transition. at during third and facility, $X.X the because this facility will quarter, of Cimarron losses As the we estimate our ramp of the operating

to the Equipment to million we of other be of second will be and first by stress which expenses $X.X procure margins to Protective and miscellaneous lower the albeit operating year, incremental related half during Personal $X.X half impacted levels supplies also million estimate reported at the Our year. the during COVID-XX, to

the expanding the in segment exercised Complex. facility XXX This options. state option Arizona. our of Our expenses for from facilities Mississippi are million. X,XXX their month, has two to a these impacted million estimate Note to exclude southeast by corporate for structure be authorized conversions expenses COVID-XX that XX-year adjusted our of Corporation, since contains Last we along renewal under the and management will $X lease Department to will our a contract Correctional favorably with half core associated EPS in implementation adjusted AFFO lease that XXXX, their year the July of expansion with in FFO Despite a opportunities business the after into Taxable expenses idled needed we the continue enter first and quarter Kentucky during quarter. Kentucky Board will to segment, facility agreement of offenders XXXX at X, the safety did XXXX. a the XXXX. expenses Idaho which the evaluation of Corrections month, on second of XXXX. we and a property the operate of that progress a contracts care will pandemic, Commonwealth new Corrections XXX be service C as Last five make the $X October with G&A and from inmates Idaho been REIT to calculations number our the contract normalized second second to of impact On our negatively through to commenced with from of we Idaho that bed X,

the [indiscernible] are our have coming an that a year pandemic. of we and Nevada, yet for return be executed expected Facility not executed of at them avail Kansas another expectation both their receiving both The expiration contract, themselves contracts are state of final offenders which of weeks to optimistic to upon year in management Correctional contract their will populations during thereafter. we our with from states this shortly extended we capacity inmate Although the the a respective

the of the for for renewal at half similar the Center bed the coming in renewal year, incremental our Processing the weeks, a Texas under not facility demand. Damon contract And at with to the of Hutto Although mentioned expect T. both ICE Don our a up second procurement contract of Houston demonstrating in a same additional XX-years. we an continued

facilities continue design state build operate. we for longer would opportunity in pursue finance new term state, the to up Alabama for to three Finally, a and correctional to construction the which

on the this pleased We with property opportunity for segment. are progress our

of Damon are in become bidders the to of remaining Corp detail starting contract covered two decision our We awarded XXXX. by C remain Taxable optimistic one in and year. the a in end a

to at opportunities. share, new revised investors returning yielding the capital balance investing correctional noncore capital to build accelerate real will structure strategy. per I confident outside improving investor we $XXX an the to our you million of We and conversions on allocation presentation XXXX, sheet In sell open describes and repurchase C-Corp shareholder see to strategy. will to pathways our possibly in remarks our in our will my flows, to growth REIT implementation historical things, our accreted estate strengthening of that the would value, durable the the look it potential further our you portfolio, stock years by three ability So pointing among forward including website of are proceeding cash our profile, other in our to of FFO which lower levels because to conclude credit

and has are to of a professionals. open excellence culture business call services our questions. seeing this the in facilities the essential in operator, will Casey I we embedded long the model our to time, turn durable the strength of to now As service and financial CoreCivic nature the thanks for back of volatile standing lines and up

Operator

We Instructions] our question [Operator Gomes NOBLE Markets. first Capital take will Joe of from

Joe Gomes

Good morning. for Thanks the taking questions.

Damon Hininger

Good Joe. morning

David Garfinkle

Joe. morning Good

Joe Gomes

Lot but switch operating the conversion. here start then maybe the and to gears with to digests will let’s we results

a U.S. think the the today, I bottom populations? the you looking know On Marshal seeing they on are when where type at the do results, in are balls cloudy a ICE and on XXs I you might and bottom year, little you daily crystal view is - but kind was guys operating as below be have a high your get just getting but on near of think pop They forward on time a last versus have bit last looking guys that we now and I looked those. are we ICE of the very XXs declined in is XX,XXX the

Damon Hininger

we Yes, your much Kind it, and doing are-answer because what a and obvious of what into it this is is changes nailed Joe, all framed looking guidance be And exactly that you thank our crystal state going if this But also of And kind CDC happens turn obviously this. would we partners government point. internationally you an to question. and so ICE. ball nationally an be direction one to relative the Federal that be that partners to is in related COVID-XX. for then and local

things as recalibrate this on is and can and to give services for we that kind any this would want And a and that to our resources, also services think last be locations with is Hutto to that ICE. help and our they getting is would XX-year long-term our it with it provide facilities this of additional attorneys solution these from contract So sign solutions, based that managers resonate our on doing our days ball within like agreements. that for facility space moment. capacity, appropriate courts them of these the reinforced are view with and kind couple can’t I I case into of the continues and announcement, But and to that we ICE what It crystal a say the we clear. at on staffing pure control speculation looking a continue into very direction

will a let narrowed So hard guess I guess, with Garfinkle forecasts to it on all look give me of at the kind tad, it David I based at answer. the when mean, moment kind they any to continue or kind has you on trajectory the of is to But see - at I I the decline can flattened that look populations. but reports. on of

David Garfinkle

the are discussed about contracts guarantees a yes, federal you a So thirds is And if monthly two have pace reminder little of bit. is I last a we think our declines fixed of slowing payments. quarter, Joe

the are is somewhat. surge really conversations see partners, I to we on That federal based they our when is that are occur. say the would capacity The with or the government had populations in they eventually. we challenge in will the have an in to that protected the federal expecting increases ball crystal and predicting a downside on event federal So government population. provide increase the And

Joe Gomes

have minimum a ICE I you said we guaranteed significant decline of any Marshals But And of have U.S. back say, to drop yet have the or so just come with to the in to guarantees. renegotiate? want you them any Hey,

Damon Hininger

No.

also in Congress would folks some only point with say some potentially and always the So happens the what pandemic the the leadership they had in but and coming not in preparing we going into Dave’s it maybe and with House. XXXX kind contrary, are months days, conversations is and of outcomes I have in weeks White

working they and attractiveness thing again, an preparing the week at Houston. then South prepare. I our the contract the probably Yes, this would ICE similar again, other So there XX-year contract with solutions are to of kind Hutto. of [Indiscernible] to to And our to get probably of us without announcement we reinforce on our we this to Texas. are just saw with at think you had announcement extension week Again, right say,

they really capacity come is a reinforces about fact have to nationally maintain the wants two already, think third ICE got one I their that So for detention announcements to again, just system. the

Joe Gomes

to And switch over going segment. the to Okay. I’m community gears

quarter community a to risk we did seen I impact. impairment more the impairment see Are of larger have in you there? continue at forward bigger impact to this If noticed see segment a mentioned, charges. take guys seeing you we you start there. As going some charges

Damon Hininger

and these really Yes, is with by this strong. mission facilities would Dave a but little talk would in is invest this really, government This say great desire bit, the on the with question. Damon, I value again I

have make continues a some to the because in appreciate of message be probably the to these strong. put Rangers has level to also decisions, investment very obviously, that you company facilities, deficit. governors, with environment, think XX-years. the got I more programs, But heard that to legislators, me very The go been and a deficit. close on obviously increasing year-over-year They me, last federal say, do I encouraging jurisdictions we want fiscal have a with because have been tough has folks but that to can’t XX-years really have at almost state really, very you tough level, they

see Would widespread to potential but it obviously as on close week. of So, and are keep I action, a kind days sensitive eye add you in David? very we or something don’t obviously a coming that, the

David Garfinkle

the community I Yes. in thing I had acted I script, the add, government’s in risk a The lower as faster only mentioned as think would my segment population.

more I comfortable home on So confinement them think they putting are things.

we the happen think drop So the it facility, for fast see as and was short-term it in our NOI a can $X.X as total I community quarter million.

to those eventually, are the So, putting populations percentages. a a But still dialogue. but recidivism important significant not the is significant able dialogue about prison Damon we that very in come on is society company, as of see to eventually, very as for be expect but to segments, nationwide, a they definition we people helping reduce when Again, transition difficult, for the continue rates number, back. it and mentioned, I mentioned, is part to

we continue segment segment. even or in in that those returning the then pre safety will to and they see think to investments could populations levels a in community I pandemic resumption make So faster facilities

Joe Gomes

on And you million similar have in I of operations the think for flow, you the cash two XXX think anticipating from a Okay. generated Are kind level the quarter. you roughly next quarters?

David Garfinkle

first is are year-to-date with statement for of AFFO $XX.X the in see quarter. flat represent cash XXth. you The what flows pretty it through much our what to where June million said going was we I the QX a was in

you So out million. at the working receivables to quarter, so the number is second to back the end on XXX receivables, low some did actually capital that the of collected positive fluctuations, very we That our quarter. first include get close some

don’t quarters, So think of wouldn’t level cash flows. expect occupancies in the cash have see Again, out continue remarks, I decline. to next in two flow our to we but guidance there, populations I to, into I alluded going as the statement of that

it say ball it tough So to guidance that tough is is same be QX of but is little AFFO to predict. in bit there, that and would don’t crystal in did QX, we the a that as why achieved we level would we have of out

Joe Gomes

this to took year. guys, And cautious liquidity be earlier the down

the million paid you XX recently on sheet. have of significant a but you back, You amount still cash said, balance

down, at is out or else it large why the draw you keeping If bigger cash there not wanting XX numbers back why look pay to to something that you prior a just balance? have a

Damon Hininger

Yes, great question, Joe.

drawdown we the the As quarter are I an Then structure that with we do first corporate evaluation in the that a of dividend. of mentioned the was abundance launched of caution. going to what and

and have been that expect we and the pay second it about thinking in so something totally take continue I half is cash And to we will down year, the revolver.

Joe Gomes

REIT, through the at when access the is other just the the Okay, can being financial C-Corp there do process your advisor be brought table more your are services. and to those is that Maybe to here some talking bit you can and prior about ability the services of alternatives new walk of thought conversion. who you could then versus look It a against those. bit you conversion, those little you maybe kind to little to cost program us the a and you’d the credit going a about guys grow and tables and or into to negative make either and switch a perspective be let’s up about maybe of talk confidence able gears what on to you positive from you your

Damon Hininger

Absolutely.

of tuck-in a I Joe, So, your will Damon talked have in we again, my me say but is have course, answer you this and obviously So Dave on bit, questionnaire script. quite this that with if about reinforces this, heard

replacement at talking costs this mean, take conservatively three, for our six, mean, up multiple our costs. stock are mean, in estate, I we billion you is appropriate. I maybe to replace would and For just at valued you replacement look look real I the real estate. maybe of if estate maybe for $XX real government it what is you to underlying not at that look

estate getting our to for our environment especially not credit services, to real partners. this government we are but that we also And the so just provide in COVID-XX

board. about to And the cash our we are of where example. really share of And so meetings, And nine months would can in that places in effective in analysis. kind a it talking that [Indiscernible] with to through about way team earnest with with P&L think probably meet kind you in the probably last flow this to them we ways. alternative and of very are that talk with has with reallocate earnest also this say as our alternatives of repurchases, where maybe context, board us kind not we got of other more and only was of on seven can had we done probably to been the I and along needs other going its eight multiyear probably thoughtful along six models have been They work have the have C-Corp. discussion, great, work evaluate been it but to It is Like, process a ways return capital working going shareholders with to business, has we different but the capital a the some board.

it detailed discussion and very very, analysis. So good a was

kind other equity going were potentially you OpCo about universe heard alternatives. Those our probably and alternatives The talked private. of circles within PropCo

team, was one roof under So we board, and most that functions made have this the like just of we sense C-Corp. felt one key got management as a the all kind the that

are familiar with. a it we Second is structure

the XX-years C-Corp. XXXX were we did we actually at So before

a won’t perspective business from miss we a we part as So question, your beat. know of

at and that a holy and They So this of won’t the at as at low won’t day-to-day our and it it mean, interest that is activities. is operations, government serving of thing is would them all see look our it kind kind interest people it and of we employees all. mean, this I of say rates dead operation of I relates advantage care, rate other impact are partners will we and guess look trust able change of obviously cow. lot a responsibilities environment people you historic market. kind any I doing for our I do taking respective that business we with debt debt of of and to kind we had of are current needs in and XXXX. kind is seeing industry. the levels And mean are deals lot crazy. a organizations. that where that are a the very just to you is earnings are in and and getting you But meaningful that that increase debt looking they just kind of in yield out at seen performance outstanding low in there I their seeing that of are address the not And XX%. backdrop

of also that could to - perspective our are a calibrate nature risk kind simple a our the estate seeing down the we And and where underlying the all also kind if have our potentially a not our can needs not business control government pave right be from and dividend bond the being us. of get are of partners and credit just market we of real and yield, require going so for we our of appropriately really destiny way just any kind appropriately. C-Corp we thought way pay debt we

turnover think addressed colleague I to parts me your here. to a of but So most have I think, there still were questionnaire, my let that, I

David Garfinkle

have things. got I two Obviously,

things and that efforts structure going is labor the forward like not G&A cost material. So,

I is just it fact, really it different say. would probably is nothing In

with a with REIT, operating office requirements so deal have REIT requirements. that Our with deal to back things the in to comply as we has to the department some finance order

try as as are impact we C They what wouldn’t it Damon regular has C a and a There As the staff, engagements tax to Taxable mentioned, a Different facility facility to difference know Corporation issues attach on no Corporation. plans. doing as between whatsoever or even C-Corp. consulting Taxable operations. are REIT

it just a say would truly is I So difference.

then we structure, that really, be was going we cost business, about. Corp it structure And what with self would see terms the fund restructure. can don’t back Taxable REIT talking expenses we a debt in C compared I retain to G&A any Damon different of cash the a of the So C-Corp flows. projecting Under under our can

profile overall capital see the X.XX low but reduce get debt, from potentially a will would agencies. can credit them. overall improve priority on and the As cost should comfortable it you to our improved X.XX is definitely be prioritization improve, to very which of we would it credit we But ratings should leverage rating mentioned down times our very paying be leverage, leverage,

able if rely sheet So us, control our at rather are the and which ability issue capital capital mentioned, for markets, the a if markets like data having expensive. on we go take destiny than of to very capital push Damon But or there increasingly like to have are of to the the opportunistic markets out we thing become for is out take those and we maturities to, that, don’t have we C balance But we things. structure, to reasonable deal low the under advantage like rates, important will on that. have with a Taxable Corp rely the

Damon Hininger

this significant do of know, add I the we is You to one is this that, step, it kind part have other of to Joe is taken but steps really business. would thing

Notably, more shy taken so into risk even some know, as And managed profile five, away go so XX-years you really to company. only our I XXXX have lower continue think really from last as with is have last we the we the kind four, business. steps years, in of we the over six

So exposure we our lowered time, the CEO, this have been to XX-years the business. - have I last is

that provide So we estate, government this real service. the is again, the owns business

just We beds. have lowered that line. is XX,XXX by about It XX about top facilities the

$XXX margin facilities. revenues $X kind in these transitioned the and and it had obviously But million with XXXX of business annual government. was those to hit CapEx your XX $X this million is about in single-digit back for that to facilities have about we employees revenues that we So about with annual

but for also with we that the of against small, and but business So significant, single also this have with [May the CapEx a risks put being kind margin. business only need the completely digit aside not (Ph) business now the narrowing July]

also, XX% you So Today, are I about think, in XX% step. about BOPs And say those revenue XX% state only Bureau the with of as about of I would both then now program revenue. our and Prisons our one talked partners or individually is and X% the that XXXX California our our combined of is I California of of and State zero, revenue. or

X%. taken down So it about to we have XX%-XX% revenue again of from

partners So from obviously the taken those volatility with a been down dramatically risk perspective.

into would the steps So company a those lower along our to just to with way. able we really that control risk be destiny XXXX own yesterday, meaningful very in the a one and really going announced we positioned be think

Joe Gomes

you thanks Thank ask a answers. will and here. few step for thoughtful. back let Very I those And someone again. else

David Garfinkle

Thank you.

Damon Hininger

Joe. you Thank

Operator

question our you. [Operator Thank from next We take of [Indiscernible] will Instructions] Partners. Rubicon

Unidentified Analyst

Good taking morning, Thank my for call. gentlemen. you

on based the I you numbers debt The working debt on what the green is we couple I’m level targeting of $XXX that $XXX, current a or Just reduction and Based that around levels about here. of are at are if is questions targeting. million. can maybe at XX-months quick the you that numbers, obviously the I’m are trailing looking you looking are seeing, that

David Garfinkle

my But after comments repayments. a which talking this. maintenance $XXX AFFO I sure, time used million CapEx not over as to debt say flow which mentioned I’m period regenerate for XXXX were of before you cash are about. proxy in of In I but as would

for $XXX.X at million AFFO included say guidance midpoint pre-pandemic the Our XXXX.

tax million and in pre-pandemic XXXX. additional paid million incur for you if will an it apply the raise annual if Now pretax income, you have XXXX so XX% guidance $XX to and taxes a $XX taxes we applied would

will downs of of that slightly So million $XXX annual pay debt. into translate over

Damon Hininger

for trading earlier and bit of this too. I the industry answer will to much in kind within bond knows tighter the the tell right that me, our But bond let you virtually I last days others we in are everybody on maturities. industry add outstanding seeing bet announcement. the than And and this XX- if prices a we are watch kind already. previous to mentioned call I about XX-days, little of, what now, yield on with the you

control hands a pretty they idea to I and of market, think C-Corp destiny. his bond be his are to our the loudly, So able going liked back

it move think call of delta, follow that in versus in So XX-days again, XX-days, to the you others XXX, a the the I I industry. knows maturity last is everybody bet XXX virtually the already, is, on if basis call but points there our

a again, markets really that, in and so say the And they and it bond on. of is this kind say good turn to just step

David Garfinkle

the Yes, and more property consideration mine. comment one didn’t That of into take sales.

identified we government properties would yielding, So outside allocation that GSA lower those that even could And portfolio, we leased we the have potentially capital the strategy. creatively. only call corrections accelerate do

it is those lower they rates. killing like not be to properties because going So cap just are of by disposing the we earnings are

accelerating leverage at could able the and ratio not dilutive capital to, I being potentially And other business that those target our said, time. the do things like so dividends. then while delivering and sell point potentially certainly getting we at to allocation same but think we buy Like the creatively pay back stock sooner, significantly strategy,

Unidentified Analyst

we the Thank X.XX. to color. to the by, to I that you so reduce to the referring amount the I need debt was back amount, guess total for go

that the be that you those looking next in X.XX, much guys if down mean, for like And to paid what over I of you guidance look just we instance, the are and X.XX, that So at required level years? the of applied couple at, would numbers gave you pre-COVID. be how

David Garfinkle

sorry, it about $XXX would Yes, I’m million. be

about billion be split the If baby that have back X.XX about you would X.XX is that guidance, of our to $X.X recourse leverage, billion the $X we on to go pre-pandemic and debt. so

be that down level. to million targeted XXX level, to paying would we get So the

Unidentified Analyst

are so is are think talking then properties about guys about those the for talking you properties we a same million, $XXX properties, paid you And about? properties, once those the those them I regionally and sell if

Damon Hininger

about, are talking Those don’t sure. number the the but that remember probably exact in is that for I are we is the properties ballpark

David Garfinkle

have them of they on some them. And debt

to portfolio. are proceeds and you So the assuming whole a how down that net is getting you are

So, with so the you debt, pay and non-recourse off defeasance costs any forth.

there after we press release, million about net in put of proceeds but we kind So, is could out putting could less, for be XXX that all marker out our that be us. more, are a comfortable

Unidentified Analyst

Okay.

the above XXX was dividends I’m well. million million $XXX then this year, the were suspended, the and sorry, this as So fact year, suspended that debt

looking So at we are XXX.

I that So is, that is, overall I Is half you what guess, like conversion, raise right? correctly. without of if even already, understand the guys could target the

David Garfinkle

we year we should all saying think is And XXX paid think on That I million is annual for XXX right. basis. this I yes, an are we million

can generates. flow mean cash yes, as pretty I quickly we So business with the delever the

Unidentified Analyst

where without Right. then continue to the to want Is And pay any go. you million million extra then halfway the that dividends. you conversion, million it because Even a that $XXX REIT made. altogether with if in you I is gets don’t decision structure guys you in right. decide $XXX cash another so that to could mean, a you in $XXX properties from tax sold get have your least Even equity, is perspective, you at have them.

David Garfinkle

the XXX saw was the dividend I Yes, XXX.

the You if dividend? or maintain we dividend are reduce saying the

Unidentified Analyst

- even saying you I - still the whatever I’m I dividend year. restructure next suspended you -. level it guys could mean, guess if until retain the and at just you

David Garfinkle

is mean it been that I Yes, right. would have year. this

if So to resumed generate would saved dividend we dollars a the would proceeds have been million and net half this that And are if of it $XXX lose year, whenever year the million this from dividends the of we million sales, year. you asset $XXX had total second able suspended in sales. the year next have $XXX in we for

Unidentified Analyst

going then Okay. in guys with year. so seems next go conversion a to it And are you ahead

you or guidance. looking XXX year, the estimates and this pre-COVID what level So this are XXX based beside on next year at

they the looking payout $XXX cash. year looking what million Is telling pay level what are of down at at? you a are or a We of I’m in you that

David Garfinkle

$XXX Yes, it about million say $XXX pre-pandemic is would a have probably would been million after I taxes. level

Damon Hininger

it will with pandemic. question pre-pandemic like is what But the I the say number. appropriate XXX was is at

Unidentified Analyst

target, looking are of that middle So guess at debt I XXXX. we level reaching the

Damon Hininger

kind the get think I is you level. in ball again the question, And back normal get you crystal to normal or to if of Again, level extended. XXXX that

So than it longer could be little a that.

Unidentified Analyst

Okay.

is Okay, grade that debt? go to And maybe guess to sense. that to of of here just objective ultimate the invest creditors makes investment universe can I a the lot in expand the

Damon Hininger

nut bond is as grade, have to bit the both investor little investment And bigger is a awarded think lower profile goal the a just a that equity I crack. company in and hard this time it think the we did to one get will we credit period. REIT. for But to is side

control rating profile credit upgrades Now but away on lower flow the but keeping credit grade their do the company maturities will also need the kind the and with debt we the we lower that based to is that with again leverage say want leads have investment of also I is possibly, that needs the business. of

David Garfinkle

let think, would Yes, the not think But all. that flow leverage is be grade we MLBL and I be clear, three with we that generate. to times cash me be quarters two we investment quarter to the

get We not example. time got a rating to agencies you going the an say change continue loan levers to to one just if policy as are

the our debt are mandatory it with the to be we other not believe pay other than We will credit improved investment things going to we substantially appropriate that our flows decision business to our manage profile is manage we to leverage retain and believe to business ability this get going and level to are grade, to uses or cash of for down because dividend. the

Unidentified Analyst

more Okay, understood. Center last the of housekeeping. Detention know a New was the Jersey, in little XXXX? what contribution with was is FFO a that to bit there some I guess the center’s question issues I in

Damon Hininger

little bit answer guess there. part, context to that I you let of give last will a I just

unilateral through the current extend got And we XXXX. through lease with landlord XXXX. then have rights at a So the we least got

let So your the we answer have got will seven Dave visibility on that but property next years, I for question.

David Garfinkle

facility. is if bed don’t Yes, facility. - - beds I XXX mean, many how it we

by to to but be facility. So one reasons, are don’t relatively for it is but would facility be is operate competitive not retain. still we to one, we able EBITDA that a we that small material continue facility it believe disclose that We going it or

Unidentified Analyst

understood. Okay,

Damon Hininger

questions. for Thanks you very your much

Unidentified Analyst

Thank you.

Operator

concludes you. today’s turn the Damon I Thank will session. to for remarks. now This question-and-answer closing back conference over

Damon Hininger

coming the on or thank Dave made additional just the a this members website with little Thank everybody In more updated you today’s and conversion. the so said free weeks a and of reach And provide presentation uploaded reminder the we management and offline. with investor do Cameron earlier, context announcement, a or has joining also and to questions have color happenings strategy other team. in Hopewell to Casey, With what we been the much, today. feel much out so you for days call

for So Have the continued our good with rest that, of your support thank much your day. interest you so a and CoreCivic. of

Operator

Thank presentation. This you gentlemen. ladies and concludes today’s

You disconnect. may now

Cameron Hopewell	Director of Investor Relations
Damon Hininger	President and Chief Executive Officer
David Garfinkle	Chief Financial Officer
Brian Hammonds	Vice President of Finance
Joe Gomes	NOBLE Capital Markets

CoreCivic (CXW) 6 Aug 202020 Q2 Earnings call transcript