GEO - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to The GEO Group Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Pablo Paez. ahead. go Please

Pablo Paez

Zoley, Good us operator. third and you Chief will Schlarb, President Financial are business thank quarter XXXX Executive Thank today's and discuss morning, David our Care; of Detention. & development Ann discussion joining George GEO current today of third us for results. Group's President and of Corrections for Officer; Chief earnings activities. This Officer; Evans, you, With GEO everyone, Chairman The quarter and Brian Donahue, morning, we results GEO

basis We will will with press the investor's a live This information information. morning. session. supplemental results website and also issued question-and-answer release this GAAP from non-GAAP our discuss is being we is conclude the reconciliation included on we call conference basis A call in Today, disclosure basis at investors.geogroup.com. non-GAAP webcast to

we current Safe information in forward-looking today, the of to and beliefs response of the respect statements fall These are within the your intended provisions forward-looking the give statements, questions, to much will may include to various laws. expectations answers our we securities matters. Harbor discuss Additionally, with regarding including

George this in Commission over a XX-Q may Our forward-looking Securities as those George? factors call Chairman reports. materially With result Zoley. X-K CEO, and filings, me Exchange our contained turn of to allow in differ statements, and to including the various XX-K, the from actual results Form and please that, our

George Zoley

you, Thank morning good everyone. Pablo, and to

During and up the ramp of three third quarter, important projects. commence we activation the

new contract In of we our Georgia expanding million County, beds by in company-owned company-owned X,XXX previously $XXX we a in Texas intake of completed annex year XX renovation XXX began year the inmates facility the Processing in an the Idaho. ICE activated of August, ICE. bed Center for then Montgomery contract X,XXX Folkston $X Processing XXX a completed ICE out-of-state we new million Center two with company-owned Eagle facility July, beds. September, idle in a State total idle of And with under First Pass our the development and the of a under at

up these during the complete We fourth facilities for to the expect ramp quarter. be

Care GEO as the services by delivered community subsidiary our sector, well results is our increasing during also quarter. operational strong beds. monitoring our electronic third Ravenhall reentry unit and the facility as Our totaling international two expansions for bed XXXX in providing beds XXX business In capacity at Australian facility XXX negotiation

the we across are participating our procurements optimistic management Looking next growth and estate forward Bureau of XX,XXX to quarters, opportunities programmatic real beds. diversified platform remain close solutions. of Prisons Federal for several the we about over to There in totaling are pursue ability active two

procurements next could these the in some result reactivation which to of our of year-end two the We quarter year, in awards expect between and of facilities. first contract idle result

We are XX which Care Continuum have also continuing now across programs, our efforts of implemented facilities. to expand GEO our been GEO

We enhanced are programs to post-release industry we services. through developed the reduce recidivism leading proud rehabilitation have very of and

underscores reform in employable the leader best company, of citizens. our are justice we as important offenders at be to helping desire is society belief our area Our criminal world and productive re-enter that as this a when

predictable dividend enhance management capital Directors value effective is of team our cash We focused long on shareholders. allocation remained believe by operational and our supported of Board our to for and flows. Our term stable

a by our remaining was authorization program repurchases year. can two capacity stock repurchase with opportunistically. under this million shareholder enhance times recognize our our stock we program have plan we stock to buyback at earlier utilize value also We that available $XXX believe authorized the that undervalued we stock currently and We is when under board year approximately

to like Finally to midterm elections. Brian, over briefly on call I turn would I the yesterday's before comment

in record levels. long decade Republic thee under a and administrations federal quality providing state Democratic has services at high company and the both Our

meet have helped and operation the challenges detention services and of development environments. government state-of-the-art secure with partners their in correctional our humane safe, We and consistently facilities providing

constant and branches under third Continuum seen by achieve recidivism special believe advocated state to scrutiny reduce Care are we bipartisan delivery programs, our government criminal facilities to And our justice agencies strengthening will agencies now, or have government legislative as and We representatives government our At and Brian and enforcement ask by to monitors time Republican Evans At GEO three on-site of than review continue that country. look inspections results the forward partnerships organizations. policies. we the of support. for working against operational improved federal party Our across under widespread immigration or elected of never our level, worked which and sentence will with level, offender we chambers for executive with Democratic the At and forward more we elected both this rehabilitation have we quarterly look decades newly and controlled commerce with work Congress. I'll accredited to our the outlook. newly C.F.O. with

Brian Evans

we per quarterly morning, revenues approximately $XXX.X of reported attributable share net to million. diluted George. income third GEO on everyone. Today, quarter you, Thank Good a $X.XX

financial Folkston the Our projects associated expanded after annex Center, third bed including X,XXX ICE to XXX the tax our facility the Processing results at which startup $X.X with company-owned activation and during the of of idle million reflect expenses Eagle two Pass idle the new Montgomery quarter, three a The bed contract XX Processing Correctional under ICE which State Center the bed X,XXX year Facility XXX a ICE. in with Texas which Idaho under year and contract is with beds. is

building company loss reflect also improvements tax at Our to the leasehold facilities after under which X,XXX in New two estate new was contracts lease part of million assets of company-owned consolidation of leased Texas bed populations write-off re-entry of two several following our in including XX The only $X.X the Big facility acquisition Pennsylvania was real discontinuation facilities two year reconfigured as of separate at the with discontinuation leased and centers company-owned BOP. beds and acquisition the which a of third facility small results County-owned the in the related reentry quarter managed into on the into a Texas, our Jersey CEC. assets larger result X,XXX CEC a the discontinuation Spring of of a detention

disclosed adjusted in of we've XXXX attributable increase items. items, $X.X outstanding X, last activation XXXX contract year-over-year Texas of had in AFFO Spring XXXX. same $X.XX of quarter to November Ravenhall for $X.XX following well Australia reported on to period and these overall net interest XX rates, of year Correctional higher interest debt our the and the facilities, as share. income third Excluding approximately expense A diluted began the new December per balances, the million pricing Big net as of the as we Compared previously under results higher terms revised Center which reflect year,

Moving to the our XXXX. outlook for balance of

XXXX. have in for the We quarter fourth our guidance AFFO earnings provided

attributable We net income GEO in range our XXXX fourth be quarter expect a to diluted $XX.XX to of to per share. $X.XX

quarter reentry reflects share Pennsylvania. guidance reentry expenses leased facilities per consolidation out Our close $X.XX companies the our of related diluted in and populations larger on to approximately fourth company facilities into from

we the in to also the diluted Bay damage Our reflects with which expect reimbursement quarter share to by receive Florida associated losses for guidance Michael Hurricane Correctional caused per insurance and Facility XXXX. in $X.XX approximately fourth

range to and to we in per be these $X.XX AFFO $XX.XX to items, in $X.XX, diluted a be Excluding net a fourth range adjusted of share. to expect income quarter of $X.XX XXXX

a We in expect our of range $XXX range range attributable $XXX of to share. a GEO The annual quarter $X.XX income to $X.XX we a of for revenues per full year $X.XX of in be guidance, to XXXX $X.XX diluted a resulting per income approximately a a fourth a to to net million full be AFFO a to share in diluted $X.XX billion. And $X.XX net range adjusted range revenues million. per share of and on in diluted to $X.X expect year

approximately at credit capacity $XXX our we have facility, in accordion facility. in an liquidity available under feature Looking million $XXX revolving credit our million addition our of to under position,

to cash, million through was third of is uses in approximately our end growth spent XXXX to which the $XXX quarter. Turning approximately CapEx $XXX our million of of expected be the

We per dividend our quarterly Last annualized. also have $X.XX share per million debt. $XX a month, of $X.XX a declared cash scheduled approximately or annual payments principal share of in board

of flows. Corrections for At cash Our dividend guiding range XX% XX% I'll payout to operational believe of segment. time, our a we and GEO it's predictable the well AFFO within David payment this of call is Donahue our Detention & and stable to turn by supported over review

David Donahue

on like give to and an business update GEO Detention everyone. you Thanks unit. Corrections good & our I'd Brian morning,

wage provides important project three earlier Correctional out-of-state increases to two Mexico, security facilities, our the New annual is significant represents XXXX expansion the entered the XXX for In or of increases level, with amendments Eagle legislative several new Department state the completed for falls have into California, expected of correctional State we increases Looking partnerships the state during year beginning a Virginia with to into most all into receive Idaho medium Oklahoma, that our ability of with of intake contract our from under new renewals, inmates. quarter, and generate of of New employees in Idaho contract contract around bed is Correction Mexico our year serve for the This million for This new our The the of funding the we pleased correctional contracts cycle, supports for employees. third emergency in at for we we to of the signed indicative Idaho. this facilities entered the in since are Facility incremental private across jurisdiction the XXX now State the in funding this of the Recession. that we project This renovation beginning the wage contract, build inmates have $XXX Great which we the an entered public Pass our support the country. and to on agreement and of funding year, approximately revenue. began amendments Since housing past our Texas for year. we process new activation state

have be age budgets states many more ranges face state facilities, prisons facing with continued efficient state are replaced to to improve, older XX prison and approximately from we to XX need or average operate, customers several our continue the challenges In which currently newer state capacity where years. of While to of state facilities. constraints cost the to related

discussed pursuing possibility need for of a option we new of state's prisons. privately for replace of explored new State also has oldest one in facility. correctional jurisdictions quarters, prior State The facilities X,XXX publicly mentioned a state The the acknowledge facilities. more financed of Wisconsin of the and development As the the have Vermont or several developed replacement have to bed

began Montgomery and facility ICE. command company-owned center XX complexity bed cost story XXX,XXX the facility a million, feet to approximately development from Bureau by federal level, The ICE aliens. the new in facility. BOP the Texas. to activation activated to quarter, annex pending is ones of outer X,XXX of Center revenues. due an the Processing staff the third quarter, the ICE a is than the to annualized X as expected we the to This and XXX housing ICE. ICE XXX emergency solicitation, Center million investment the for approximately our Moving the X,XXX is more the contract lengthy the bed square for Under California contract previously idle second approximately supported of Montgomery ICE generate solicitations is Taft, the facility. year hurricane, of was conserve beds. the With active exclusive XXX space process for the federal The expanding provide Prisons to with criminal center in bed procurement, designed $XX of Georgia, GEO's during Processing $XXX beds most rebidding at CAR we respect XX two is the Processing Category County, has management withstand during capital the the Center completed Montgomery previous and Also center government-owned in X,XXX Folkston a for At new activation expensive

beds be award BOP be the made year. year X,XXX by the last procurement, now We expect the management facilities. first BOP we under proposals expect of Under end. next at year for submitted an XX contract award to made The to this an to existing during to decision expects decision and procurement quarter this award the were by CAR up

effect our well in This custody joint for generate are XX venture. our we operational take Moving to will our year new revenues international preparations expected our venture. Scotland for readiness markets, our in annual January $XX is underway contract new contract and escort joint provision the GEOAmey to services of with million XXXX prisoner in under approximately through court and

we moving to growth undertaking ramping of expansion Ravenhall begun In Center, capacity Australia, center to Correctional at State we to the to we beds. populations. are up center will a Centre, the our Fulham capacity total bring beds forward state the support the Correctional projects expansion total beds. the will are with in Victoria, XXX prison a Finally, X.XXX bed at which XXX three in have at which Victoria, Also of the XXX bring

expect South the the bringing about process expansion more Wales, to And be Correctional the to of XXXX. total We this Junee capacity in New late expanding we than in completed XXX are beds. Center in X,XXX beds,

to Correctional bed disclosed, new previously At this Ann to Wales for in we in call review to of a we transitioning the Ann? provider time, over XXXX. South service are I'd turn the April by Parklea as XXX operation Finally, process CEO a New of the our Care the of Center segment. like have

Ann Schlarb

Thank I'd like divisions on morning, good our Dave, beginning Care update you, to with division. and our you reentry Geo GEO everyone. give four an

thoughtful the company-owned customers, of to to we education the continue utilization in smaller has strategy us government maximize number part as a which idling allowed of assets utilization we During the our acquisition alongside entailed has of acquired our reentry execute community improve lease larger company strategy sites. a the the underperforming assets, third our review of of quarter, This while centers. to operational

scale is division. provide quality efficiently high strategy to of our achieve customers our Our more in this and for economies services executing for overarching GEO better goal reentry

be new programs optimistic revenue platform. continue reentry to synergies growth for and custody treatment We about potential expanded the and services under opportunities in our

We significant new reentry with revenue are opportunities growth currently pursuing our potential. several division business in

we across utilization our In terms performance and continue steady our stable rates services facilities. division, youth experience to operational of

number prior As sites. marketing utilization allowed years the after have we we initiatives maximize and in a noted for performing larger youth better several have division our has that undertook to our quarters, remained stable consolidation of of us

program location At monitoring market Moving to expect diversified of utilization and our local with ISAP continue current state of BI increased ICE across trend continues to contract opportunities and BI the electronic grow to to utilization share look the electronic monitoring level, our division, a continue spectrum we forward. we the experience its would for under to going and technologies.

Care be the with efforts federal criminal have to been programs of the in which focus Finally, GEO which implemented U.S. we expansion We consistent program, reduction undertaken from GEO bipartisan the legislators reform continue policymakers. recidivism of have justice across on now support our and rehabilitation pleased our Continuum at facilities. levels being with XX and received believe and state is prison and that

and such programs Care integrates with Our in clothing, including transportation, GEO assistance. custody of housing, treatment cognitive rehabilitation food support Continuum post-release services, enhanced behavioral job transitional as placement

programs Continuum industry. Importantly, unparalleled of we and GEO are expansion substance Care of believe that scope, rapid our the our in

opportunities this to efforts our Care our closing his pursue the divisions. company turn time, George GEO these allow growth diversified expect new quality call to At for across back will I'll We remarks.

George Zoley

Ann. you, Thank

pleased third and are financial performance quarter. our with the operational and our outlook We fourth for quarter

be out-of-state ICE. We inmates are $XXX X,XXX-bed three XXX-bed activations facility and XXX In Montgomery Pass Annex the international Processing Texas a our quarter expansion bed, the for Folkston, particularly with sector, this at we've which Texas, pleased Center Georgia between Australian County, facility quarter XXX-beds. Idaho and ICE federal Eagle new year in two facility includes decided XXX-bed begun the next facilities for million, the expected outlook optimistic the our awards expansions totaling of BOP end approximately the regarding contract and are XX,XXX-beds new approximately of two negotiating this We the other the to in procurements large first Ravenhall year. with at for remain totaling

program enter Continuum of expansion capital and best of in the enhance GEO productive We and our as continue order individuals. our rehabilitation citizens. thousands society shareholders, Care enhanced we strongly of care, long term offenders into of are to of carefully delighted its when value evaluate our tens We allocation early the facilities that of believe GEO helping for involving to success are in our we employable and at XX with

and company's legislators support in rehabilitation We programs improved success will policy also achieve from and person expect makers. continue by recidivism our to

whose would our thank As worldwide success. and professionalism like GEO's always I to employees dedication of have all created

We are now your happy to open questions. the call to

Operator

will SunTrust. Please question We [Operator ahead. the now Tobey Sommer from come begin session. question-and-answer first of Instructions] The will go

Tobey Sommer

something impacts question, a with mentioned parties impact Thank or initiatives the Starting see ballot the for out the with about influence Any industry? election election you. in cetera. Thank your you. just but et that the results prepared and might you not topical you themselves that remarks

George Zoley

at there's house probably expect with or the of see nothing to of a continuing No, will that will the either has because from consolidation federal was particular, budgetary detention in state more consistent within funding that the the Democrats we it in been. still approximately levels. material now sector make At on But federal efforts throughout be standpoint level, we nature with verge continuing resolutions agency the the we opportunities see which there the of what our by country. the ICE, control particularly

Tobey Sommer

immigration kept it's their underneath if to shuffle ICE funding, total some budget the a accommodate case to of including have respect allocation the patterns levels, to monies flexibility ICE? specifically agencies changes CR in in do With

George Zoley

of they I can Homeland overall within Security. Department believe the

Tobey Sommer

this opportunity sort of we does represents for Okay. in anticipating What what should be in expansions and point? at Australia timeline the those dollars

George Zoley

two as the their calculation on think two And is I for timeline don't I the think expansions. of activation dollars the particularly we've done specific years. a approximately

Tobey Sommer

given population elevated been ICE quarters Marshals and populations populations do been see have BOP on BOP we headed curious have do future? beyond some in have populations that in in period next that glimpses How for I'm U.S. the and a trending your rising of time. recent into the you perspective Okay. that into the about year

George Zoley

agency the we into time because is typically the has population to BOP, have take increased the that dedication those Marshal as finals place But time over this be several steadily obviously settlement individuals feeder of many and The to of lag is BOP which a going so expect months. year, Service last there's a U.S. for Marshals the will facilities. that

Tobey Sommer

Okay.

opportunity of standalone XX think as the there an Continuum curious potential a remark the if of for sort service in license a said customers to facilities. core of there's your then I kind your it Care, for prepared approach? I'm just Thanks. company using Is there this On in to more a future? differentiator the you

George Zoley

in ourselves, there's GEO than presently rehabilitation state on opportunities proved - other a those services to enhanced presently do perform the contract those clients federal yes other continuing because more expect rehabilitation. so basis. to provides at Fender the governmental levels and And we interest we services of separate of do

Tobey Sommer

How what business agencies now in increasing if dollars adoption big in across in but is you're that other future is you the at successful opportunity states? necessarily, and the for talk the

George Zoley

approximately facility. per it billion of scale The less $X than a is

opportunity be - several the of but would tens So our general dollars millions company. of for

Tobey Sommer

question color in how dollar as what maybe a are you. out a the be timing head Brian little for you Thank on bit And will that that last year? mentioned, values play reimbursement insurance next we The into me. could and

Brian Evans

staff with continuing to company. losses will in which fourth our related the are we're which primarily quarter the the currently are absorb So

also we results. companies. for to going repair and a But So the process we're quarter facility. those costs the to year, company in costs damage costs the next those They typical are audit we to reimbursed those probably as or get and with second and the again losses them well. cover and through those we first expect continuing will will work incur insurance the then of facility to rebuild insurance to review There's the as physical pay

we're So losses the going and material the just from the expect P&L companies to have revenue likely then insurance or reimbursement the it's later. really but first any accounting a our We timing. way to works, the don't impact

you're is But as it be at the later. the issues the and it to those any those guidance at sure able revenue the to contingent the rules costs looking for those within match kind quarter as going now trying well. look reimbursements does, And to but and we'll at don't are you prudent, We in until of quarter the we and is difficult expect but we and it's what just come gain we're to may look pro-forma difficult absorb up match getting. up that more we're when to offset insurance recognize may be it right a providing revenue is really

Tobey Sommer

Thank much. you very

Operator

come Instructions] [Operator next Strouse of Morgan. Mark from go The question Please will J.P. ahead.

Mark Strouse

taking Thanks our Good for Hi. questions. morning.

getting XXXX think. kind sounds what procurements the just bit slippage? or Just been the the program anyway? I'm than was see word message two closer quarter is curious we're quick there's I It BOP good the just Just the later ones to to if of last in of normal contract kind a current little awards. of specs that like change any

George Zoley

say from Normal and quarter movement a which the includes has would environment proposals I seen by this National slippage, every procurement which is recently states and different proposal the of expect process go BOP complicated. we review because first that next in we've the through But on results some procurement quite progressing of they're it's number to a year.

Mark Strouse

makes Yeah Right. sense.

on then material lastly, were just anyway for during like buybacks, there look And the anything share repurchases XQ. Okay. doesn't

how you're of program? - anything kind about should guess we Just thinking if and that I curious has changed

Brian Evans

there's capital capacity it in million to against $XXX and needs and mentioned, George initiatives evaluate as in mean growth I monitor continue No, will other opportunistically opportunities. additional our

that effectively continue and this we've look So forward. we'll I it to at year think going done

Mark Strouse

you very Okay. Thank much.

Operator

over conference any remarks. the our back to for Zoley this I like to closing would question-and-answer And George concludes turn session.

George Zoley

the to future. Okay. And on we you this near look joining in to addressing conference. everyone for us thanks Well, forward

Operator

presentation. conference you for This now Thank today's concluded. attending is

You Have great day. may lines. now a disconnect your

The GEO Group, Inc. (GEO) 7 Nov 182018 Q3 Earnings call transcript