The GEO Group, Inc. (NYSE: GEO) (“GEO”), a leading provider of
support services for secure facilities, processing centers, and
reentry centers, as well as enhanced in-custody rehabilitation,
post-release support, and electronic monitoring programs, reported
today its financial results for the second quarter and first six
months of 2023.
Second Quarter 2023 Highlights
- Total revenues of $593.9 million
- Net Income of $29.5 million
- Net Income Attributable to GEO of $0.20 per diluted
share
- Adjusted Net Income of $0.24 per diluted share
- Adjusted EBITDA of $129.0 million
For the second quarter 2023, we reported net income of $29.5
million, compared to net income of $53.7 million for the second
quarter 2022. We reported total revenues for the second quarter
2023 of $593.9 million compared to $588.2 million for the second
quarter 2022. Second quarter 2023 results reflect a year-over-year
increase of $26.1 million in net interest expense as a result of
the completed transactions to address the substantial majority of
our outstanding debt, which closed on August 19, 2022, as well as
the impact of higher interest rates. We reported second quarter
2023 Adjusted EBITDA of $129.0 million, compared to $132.3 million
for the second quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “We are
pleased with our performance for the second quarter 2023, which
exceeded our previously issued financial guidance. Our diversified
business units delivered overall strong operational and financial
performance during the first half of 2023 despite some headwinds in
our Electronic Monitoring and Supervision Services segment. Our
management team remains focused on reducing our net debt, which is
a key strategic priority for our company. We are also continuing
our efforts to market our current idle facilities to federal and
state government agencies.”
First Six Months 2023 Highlights
- Total revenues of $1.20 billion
- Net Income of $57.5 million
- Net Income Attributable to GEO of $0.39 per diluted
share
- Adjusted Net Income of $0.46 per diluted share
- Adjusted EBITDA of $259.9 million
For the first six months of 2023, we reported net income of
$57.5 million, compared to net income of $91.9 million for the
first six months of 2022. We reported total revenues for the first
six months of 2023 of $1.20 billion compared to $1.14 billion for
the first six months of 2022.
Results for the first six months of 2023 reflect a
year-over-year increase of $53.2 million in net interest expense as
a result of the completed transactions to address the substantial
majority of our outstanding debt, which closed on August 19, 2022,
as well as the impact of higher interest rates. For the first six
months of 2023, we reported Adjusted EBITDA of $259.9 million,
compared to $257.5 million for the first six months of 2022.
2023 Financial Guidance
Today, we updated our guidance for the full-year 2023 to reflect
our updated expectations regarding the timing of participant levels
under the U.S. Department of Homeland Security’s Intensive
Supervision and Appearance Program (“ISAP”).
Our previously issued guidance for 2023 assumed that the number
of ISAP participants would stabilize at the mid-point of 2023 and
then moderately increase during the third quarter of 2023 and the
fourth quarter of 2023.
Although the number of ISAP participants continued to decline
throughout the month of July of 2023 and in early August of 2023,
which was longer than we previously estimated, we continue to
believe that the ISAP participant count is likely to stabilize and
then begin to increase moderately.
We expect full-year GAAP Net Income to be between $95 million
and $110 million, on annual revenues of approximately $2.4 billion.
We expect our full-year 2023 Adjusted EBITDA to be between $490
million and $520 million. We expect our effective tax rate for the
full-year 2023 to be approximately 29 percent, exclusive of any
discrete items.
For the third quarter of 2023, we expect Net Income to be
between $19 million and $26 million on quarterly revenues of $588
million to $603 million. We expect third quarter 2023 Adjusted
EBITDA to be in a range of $115 million to $130 million.
For the fourth quarter of 2023, we expect Net Income to be
between $19 million and $27 million on quarterly revenues of $595
million to $610 million. We expect fourth quarter 2023 Adjusted
EBITDA to be in a range of $115 million to $130 million.
Our guidance assumes steady performance from our other segments
and does not include the potential reactivation of any of our
remaining idle Secure Services facilities, which total
approximately 9,000 beds.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our second quarter 2023
financial results as well as our outlook. The call-in number for
the U.S. is 1-877-250-1553 and the international call-in number is
1-412-542-4145. In addition, a live audio webcast of the conference
call may be accessed on the Webcasts section under the News, Events
and Reports tab of GEO’s investor relations webpage at
investors.geogroup.com. A replay of the webcast will be available
on the website for one year. A telephonic replay of the conference
call will be available through August 16, 2023, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 4095233.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified
government service provider, specializing in design, financing,
development, and support services for secure facilities, processing
centers, and community reentry centers in the United States,
Australia, South Africa, and the United Kingdom. GEO’s diversified
services include enhanced in-custody rehabilitation and
post-release support through the award-winning GEO Continuum of
Care®, secure transportation, electronic monitoring,
community-based programs, and correctional health and mental health
care. GEO’s worldwide operations include the ownership and/or
delivery of support services for 102 facilities totaling
approximately 82,000 beds, including idle facilities and projects
under development, with a workforce of up to approximately 18,000
employees.
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains
reconciliation tables of Net Income Attributable to GEO to Adjusted
Net Income, and Net Income to EBITDA and Adjusted EBITDA, along
with supplemental financial and operational information on GEO’s
business and other important operating metrics. The reconciliation
tables are also presented herein. Please see the section below
titled “Note to Reconciliation Tables and Supplemental Disclosure -
Important Information on GEO’s Non-GAAP Financial Measures” for
information on how GEO defines these supplemental Non-GAAP
financial measures and reconciles them to the most directly
comparable GAAP measures. GEO’s Reconciliation Tables can be found
herein and in GEO’s Supplemental Information available on GEO’s
investor webpage at investors.geogroup.com.
Note to Reconciliation Tables and Supplemental Disclosure
– Important Information on GEO's Non-GAAP Financial
Measures
Adjusted Net Income, EBITDA, and Adjusted EBITDA are non-GAAP
financial measures that are presented as supplemental disclosures.
GEO has presented herein certain forward-looking statements about
GEO's future financial performance that include non-GAAP financial
measures, including Net Debt, Net Leverage, Adjusted Net Income,
and Adjusted EBITDA. The determination of the amounts that are
included or excluded from these non-GAAP financial measures is a
matter of management judgment and depends upon, among other
factors, the nature of the underlying expense or income amounts
recognized in a given period.
While we have provided a high level reconciliation for the
guidance ranges for full year 2023, we are unable to present a more
detailed quantitative reconciliation of the forward-looking
non-GAAP financial measures to their most directly comparable
forward-looking GAAP financial measures because management cannot
reliably predict all of the necessary components of such GAAP
measures. The quantitative reconciliation of the forward-looking
non-GAAP financial measures will be provided for completed annual
and quarterly periods, as applicable, calculated in a consistent
manner with the quantitative reconciliation of non-GAAP financial
measures previously reported for completed annual and quarterly
periods.
Net Debt is defined as gross principal debt less cash from
restricted subsidiaries. Net Leverage is defined as Net Debt
divided by Adjusted EBITDA.
EBITDA is defined as net income adjusted by adding provisions
for income tax, interest expense, net of interest income, and
depreciation and amortization. Adjusted EBITDA is defined as EBITDA
adjusted for (gain)/loss on asset divestitures, pre-tax, net loss
attributable to non-controlling interests, stock-based compensation
expenses, pre-tax, other non-cash revenue and expenses, pre-tax,
and certain other adjustments as defined from time to time.
Given the nature of our business as a real estate owner and
operator, we believe that EBITDA and Adjusted EBITDA are helpful to
investors as measures of our operational performance because they
provide an indication of our ability to incur and service debt, to
satisfy general operating expenses, to make capital expenditures,
and to fund other cash needs or reinvest cash into our business. We
believe that by removing the impact of our asset base (primarily
depreciation and amortization) and excluding certain non-cash
charges, amounts spent on interest and taxes, and certain other
charges that are highly variable from year to year, EBITDA and
Adjusted EBITDA provide our investors with performance measures
that reflect the impact to operations from trends in occupancy
rates, per diem rates and operating costs, providing a perspective
not immediately apparent from net income. The adjustments we make
to derive the non-GAAP measures of EBITDA and Adjusted EBITDA
exclude items which may cause short-term fluctuations in income
from continuing operations and which we do not consider to be the
fundamental attributes or primary drivers of our business plan and
they do not affect our overall long-term operating performance.
EBITDA and Adjusted EBITDA provide disclosure on the same basis
as that used by our management and provide consistency in our
financial reporting, facilitate internal and external comparisons
of our historical operating performance and our business units and
provide continuity to investors for comparability purposes.
Adjusted Net Income is defined as net income attributable to GEO
adjusted for certain items which by their nature are not comparable
from period to period or that tend to obscure GEO’s actual
operating performance, including for the periods presented
(gain)/loss on asset divestitures, pre-tax, (gain)/loss on the
extinguishment of debt, pre-tax, and tax effect of adjustments to
net income attributable to GEO.
Safe-Harbor Statement
This press release contains forward-looking statements regarding
future events and future performance of GEO that involve risks and
uncertainties that could materially and adversely affect actual
results, including statements regarding GEO’s financial guidance
for the full-year, third quarter, and fourth quarter of 2023,
statements regarding GEO’s efforts to market its current idle
facilities, GEO’s focus on reducing net debt, and GEO’s assumptions
regarding the number of ISAP participants during the second half of
2023. Forward-looking statements generally can be identified by the
use of forward-looking terminology such as “may,” “will,” “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” or
“continue” or the negative of such words and similar expressions.
Risks and uncertainties that could cause actual results to vary
from current expectations and forward-looking statements contained
in this press release include, but are not limited to: (1) GEO’s
ability to meet its financial guidance for 2023 given the various
risks to which its business is exposed; (2) GEO’s ability to
deleverage and repay, refinance or otherwise address its debt
maturities in an amount and on terms commercially acceptable to
GEO, and on the timeline it expects or at all; (3) GEO’s ability to
identify and successfully complete any potential sales of
company-owned assets and businesses on commercially advantageous
terms on a timely basis, or at all; (4) changes in federal and
state government policy, orders, directives, legislation and
regulations that affect public-private partnerships with respect to
secure, correctional and detention facilities, processing centers
and reentry centers, including the timing and scope of
implementation of President Biden's Executive Order directing the
U.S. Attorney General not to renew the U.S. Department of Justice
contracts with privately operated criminal detention facilities;
(5) changes in federal immigration policy; (6) public and political
opposition to the use of public-private partnerships with respect
to secure correctional and detention facilities, processing centers
and reentry centers; (7) the magnitude, severity, and duration of
the COVID-19 global pandemic, its impact on GEO, GEO's ability to
mitigate the risks associated with COVID-19, and the efficacy and
distribution of COVID-19 vaccines; (8) GEO’s ability to sustain or
improve company-wide occupancy rates at its facilities in light of
the COVID-19 global pandemic and policy and contract announcements
impacting GEO’s federal facilities in the United States; (9)
fluctuations in GEO’s operating results, including as a result of
contract terminations, contract renegotiations, changes in
occupancy levels and increases in GEO’s operating costs; (10)
general economic and market conditions, including changes to
governmental budgets and its impact on new contract terms, contract
renewals, renegotiations, per diem rates, fixed payment provisions,
and occupancy levels; (11) GEO’s ability to address inflationary
pressures related to labor related expenses and other operating
costs; (12) GEO’s ability to timely open facilities as planned,
profitably manage such facilities and successfully integrate such
facilities into GEO’s operations without substantial costs; (13)
GEO’s ability to win management contracts for which it has
submitted proposals and to retain existing management contracts;
(14) risks associated with GEO’s ability to control operating costs
associated with contract start-ups; (15) GEO’s ability to
successfully pursue growth and continue to create shareholder
value; (16) GEO’s ability to obtain financing or access the capital
markets in the future on acceptable terms or at all; and (17) other
factors contained in GEO’s Securities and Exchange Commission
periodic filings, including its Form 10-K, 10-Q and 8-K reports,
many of which are difficult to predict and outside of GEO’s
control.
Second quarter and first six months of 2023 financial tables
to follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of June 30, 2023 December
31, 2022 (unaudited) (unaudited)
ASSETS Cash and
cash equivalents $
48,716
$
95,073
Accounts receivable, less allowance for doubtful accounts
350,961
416,399
Prepaid expenses and other current assets
52,299
43,536
Total current assets $
451,976
$
555,008
Restricted Cash and Investments
136,497
111,691
Property and Equipment, Net
1,963,880
2,002,021
Operating Lease Right-of-Use Assets, Net
108,975
90,950
Assets Held for Sale
14,113
480
Deferred Income Tax Assets
8,005
8,005
Intangible Assets, Net (including goodwill)
896,160
902,887
Other Non-Current Assets
92,283
89,341
Total Assets $
3,671,889
$
3,760,383
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable $
73,076
$
79,312
Accrued payroll and related taxes
46,136
53,225
Accrued expenses and other current liabilities
174,835
237,369
Operating lease liabilities, current portion
23,784
22,584
Current portion of finance lease obligations, and long-term debt
29,377
44,722
Total current liabilities $
347,208
$
437,212
Deferred Income Tax Liabilities
75,849
75,849
Other Non-Current Liabilities
79,763
74,008
Operating Lease Liabilities
90,127
73,801
Finance Lease Liabilities
922
1,280
Long-Term Debt
1,845,649
1,933,145
Total Shareholders' Equity
1,232,371
1,165,088
Total Liabilities and Shareholders' Equity $
3,671,889
$
3,760,383
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q2 2023 Q2 2022 YTD 2023 YTD
2022 (unaudited) (unaudited) (unaudited) (unaudited)
Revenues $
593,891
$
588,177
$
1,202,100
$
1,139,362
Operating expenses
428,128
411,791
861,620
796,952
Depreciation and amortization
31,691
32,016
63,614
67,954
General and administrative expenses
41,692
49,296
91,826
97,856
Operating income
92,380
95,074
185,040
176,600
Interest income
1,297
5,562
2,465
11,190
Interest expense
(55,046
)
(33,225
)
(109,304
)
(64,846
)
(Loss) on extinguishment of debt
(1,618
)
-
(1,754
)
-
Gain on asset divestitures
2,175
3,680
2,175
3,053
Income before income taxes and equity in earnings of
affiliates
39,188
71,091
78,622
125,997
Provision for income taxes
11,153
18,898
23,515
36,860
Equity in earnings of affiliates, net of income tax
provision
1,490
1,480
2,412
2,715
Net income
29,525
53,673
57,519
91,852
Less: Net loss attributable to noncontrolling
interests
46
54
55
94
Net income attributable to The GEO Group, Inc. $
29,571
$
53,727
$
57,574
$
91,946
Weighted Average Common Shares Outstanding:
Basic
122,045
121,119
121,740
120,918
Diluted
123,278
121,881
123,496
121,650
Net income per Common Share Attributable to The GEO
Group, Inc.** : Basic: Net income per share —
basic $
0.20
$
0.37
$
0.39
$
0.63
Diluted: Net income per share — diluted $
0.20
$
0.37
$
0.39
$
0.63
* All figures in '000s, except per share data ** In
accordance with U.S. GAAP, diluted earnings per share attributable
to GEO available to common stockholders is calculated under the
if-converted method or the two-class method, whichever calculation
results in the lowest diluted earnings per share amount, which may
be lower than Adjusted Net Income Per Diluted Share.
Reconciliation of
Net Income to EBITDA and Adjusted EBITDA,
and Net Income
Attributable to GEO to Adjusted Net Income*
(Unaudited)
Q2 2023 Q2 2022 YTD 2023 YTD
2022 (unaudited) (unaudited) (unaudited) (unaudited)
Net
Income $
29,525
$
53,673
$
57,519
$
91,852
Add: Income tax provision **
11,487
19,061
24,029
37,136
Interest expense, net of interest income ***
55,366
27,663
108,593
53,656
Depreciation and amortization
31,691
32,016
63,614
67,954
EBITDA $
128,069
$
132,413
$
253,755
$
250,598
Add (Subtract): (Gain)/Loss on asset divestitures, pre-tax
(2,175
)
(3,680
)
(2,175
)
(3,053
)
Net loss attributable to noncontrolling interests
46
54
55
94
Stock based compensation expenses, pre-tax
3,357
3,556
8,935
9,869
Other non-cash revenue & expenses, pre-tax
(331
)
-
(687
)
-
Adjusted EBITDA $
128,966
$
132,343
$
259,883
$
257,508
Net Income attributable to GEO $
29,571
$
53,727
$
57,574
$
91,946
Add (Subtract): (Gain)/Loss on asset divestitures, pre-tax
(2,175
)
(3,680
)
(2,175
)
(3,680
)
(Gain)/Loss on extinguishment of debt, pre-tax
1,618
-
1,754
-
Tax effect of adjustment to net income attributable to GEO (1)
140
926
106
926
Adjusted Net Income $
29,154
$
50,973
$
57,259
$
89,192
Weighted average common shares outstanding - Diluted
123,278
121,881
123,496
121,650
Adjusted Net Income per Diluted share
0.24
0.42
0.46
0.73
* all figures in '000s, except per share data ** including
income tax provision on equity in earnings of affiliates ***
includes (gain)/loss on extinguishment of debt (1) Tax adjustment
related to gain/Loss on asset divestitures and gain/loss on
extinguishment of debt.
2023
Outlook/Reconciliation (1)
(In thousands, except per share data)
(Unaudited)
FY 2023
Net Income
$
95,000
to
$
110,000
Net Interest Expense
215,000
221,000
Income Taxes (including income tax provision on
equity in earnings of affiliates)
40,500
46,000
Depreciation and Amortization
126,500
130,000
Non-Cash Stock Based Compensation
16,500
16,500
Other Non-Cash
(3,500
)
(3,500
)
Adjusted EBITDA
$
490,000
to
$
520,000
Net Income Attributable to GEO Per Diluted Share
$
0.76
to
$
0.89
Weighted Average Common Shares Outstanding-Diluted
123,500
to
123,500
CAPEX
Growth
9,000
to
10,000
Technology
16,000
to
20,000
Facility Maintenance
45,000
to
50,000
Capital Expenditures
70,000
to
80,000
Total Debt, Net
$
1,820,000
$
1,780,000
Total Leverage, Net
3.60
3.52
(1) Total Net Leverage is calculated using
the midpoint of Adjusted EBITDA guidance range.
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version on businesswire.com: https://www.businesswire.com/news/home/20230808455759/en/
Pablo E. Paez Executive Vice President, Corporate Relations
(866) 301 4436
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