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 fourth quarter and full year
2023.
Full Year 2023 Highlights
- Total revenues of $2.41 billion
- Net Income of $113.8 million
- Adjusted EBITDA of $507.2 million
- Reduced Total Net Debt by Approximately $197.0 million in
FY23 to $1.78 billion
For the full year 2023, we reported total revenues of $2.41
billion compared to $2.38 billion for the full year 2022. We
reported net income for the full year 2023 of $113.8 million,
compared to $171.7 million for the full year 2022. Results for the
full year 2023 reflect a year-over-year increase of $61.9 million
in net interest expense as a result of the transactions we
completed in August 2022 to address the substantial majority of our
outstanding debt and the impact of higher interest rates. For the
full year 2023, we reported Adjusted EBITDA of $507.2 million,
compared to $540.0 million for the full year 2022. During 2023, we
reduced our total net debt by approximately $197.0 million to
approximately $1.78 billion.
Fourth Quarter 2023 Highlights
- Total revenues of $608.3 million
- Net Income of $31.8 million
- Adjusted EBITDA of $129.0 million
For the fourth quarter 2023, we reported net income of $31.8
million, compared to $41.5 million for the fourth quarter 2022. We
reported total revenues for the fourth quarter 2023 of $608.3
million compared to $620.7 million for the fourth quarter 2022. We
reported fourth quarter 2023 Adjusted EBITDA of $129.0 million,
compared to $145.5 million for the fourth quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “Our company
delivered strong operational and financial performance in 2023,
resulting in the second-best year in our company’s 40-year history.
We believe that the unparalleled scope of our diversified services
platform, which allows us to offer a full spectrum of innovative
solutions to our government agency partners, gives GEO a unique
competitive advantage to capture future quality growth
opportunities. We are also pleased with the substantial progress we
made in 2023 towards our objective of reducing our net debt,
deleveraging our balance sheet, and positioning GEO to explore
options to return capital to shareholders in the future. We believe
that our disciplined allocation of capital to reduce debt, along
with our demonstrated track record delivering strong and
predictable annual cash flows, will meaningfully enhance value for
our shareholders over time.”
Financial Guidance
Today, we issued our initial financial guidance for 2024. For
the full year 2024, we expect Net Income to be in a range of $110
million to $125 million on annual revenues of approximately $2.4
billion and reflecting an effective tax rate of approximately 28
percent, exclusive of any discrete items. We expect full year 2024
Adjusted EBITDA to be between $485 million and $515 million.
We believe that U.S. Immigration and Customs Enforcement (“ICE”)
continues to face budgetary pressures, and the outcome and timing
of ongoing federal government appropriations discussions in the
United States Congress remain uncertain. As a result of these
factors, our initial financial guidance for 2024 incorporates a
range of assumptions.
The midpoint of our guidance range assumes stable populations
across our ICE Processing Centers and stable participant counts
under the federal government’s Intensive Supervision and Appearance
Program (“ISAP”) contract. On the low end of our range, our
guidance assumes that federal government appropriations discussions
continue to be delayed throughout the year and that ongoing
budgetary pressures result in some moderate decreased utilization
of both ICE Processing Centers and the ISAP contract. On the high
end of our range, our guidance assumes only some moderate increases
in the utilization of ICE Processing Centers and the ISAP contract
should additional funding be appropriated for ICE during this
federal fiscal year.
Additionally, our initial 2024 guidance does not include the
potential reactivation of any of our remaining idle Secure Services
facilities, which total approximately 9,000 beds, or any potential
new contract wins by our diversified business segments.
For the first quarter of 2024, we expect Net Income to be in a
range of $22 million to $24 million and quarterly revenues in a
range of $600 million to $610 million. We expect first quarter 2024
Adjusted EBITDA to be in a range of $117 million to $122 million.
Compared to fourth quarter 2023, our first quarter 2024 guidance
reflects the impact of having one fewer day in the quarter.
Additionally, our first quarter of the year is impacted by higher
costs related to payroll taxes, which are frontloaded in the
beginning of each year.
Conference Call Information
We have scheduled a conference call and webcast for today at
11:00 AM (Eastern Time) to discuss our fourth quarter and full year
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 February 22, 2024, at 1-877-344-7529
(U.S.) and 1-412-317-0088 (International). The participant passcode
for the telephonic replay is 5397718.
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 100 facilities totaling
approximately 81,000 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, 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 2024, 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, transaction related expenses, pre-tax, one-time
employee restructuring 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, transaction related expenses,
pre-tax, one-time employee restructuring expense, 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 and first quarter of 2024, statements regarding
GEO’s efforts to market its current idle facilities, GEO’s focus on
reducing net debt, deleveraging its balance sheet, and positioning
itself to explore options to return capital to shareholders, and
GEO’s assumptions regarding the utilization of ICE Processing
Centers and the ISAP contract during 2024. 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 2024 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) any continuing impact of the COVID-19
global pandemic 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 any
continuing impact 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.
Fourth quarter and full year 2023 financial tables to
follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of December 31,2023
December 31,2022 (unaudited) (unaudited)
ASSETS
Cash and cash equivalents $
93,971
$
95,073
Accounts receivable, less allowance for doubtful accounts
390,023
416,399
Prepaid expenses and other current assets
44,511
43,536
Total current assets $
528,505
$
555,008
Restricted Cash and Investments
135,968
111,691
Property and Equipment, Net
1,944,278
2,002,021
Operating Lease Right-of-Use Assets, Net
102,204
90,950
Assets Held for Sale
-
480
Deferred Income Tax Assets
8,551
8,005
Intangible Assets, Net (including goodwill)
891,085
902,887
Other Non-Current Assets
85,815
89,341
Total Assets $
3,696,406
$
3,760,383
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable $
64,447
$
79,312
Accrued payroll and related taxes
64,436
53,225
Accrued expenses and other current liabilities
219,159
237,369
Operating lease liabilities, current portion
24,640
22,584
Current portion of finance lease obligations, and long-term debt
55,882
44,722
Total current liabilities $
428,564
$
437,212
Deferred Income Tax Liabilities
79,607
75,849
Other Non-Current Liabilities
83,643
75,288
Operating Lease Liabilities
82,114
73,801
Long-Term Debt
1,725,502
1,933,145
Total Shareholders' Equity
1,296,976
1,165,088
Total Liabilities and Shareholders' Equity $
3,696,406
$
3,760,383
* all figures in '000s
Condensed
Consolidated Statements of Operations*
(Unaudited)
Q4 2023 Q4 2022 FY 2023 FY 2022
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $
608,283
$
620,682
$
2,413,167
$
2,376,727
Operating expenses
433,042
430,565
1,735,328
1,662,885
Depreciation and amortization
30,996
32,641
125,784
132,925
General and administrative expenses
51,584
49,094
190,766
196,972
Operating income
92,661
108,382
361,289
383,945
Interest income
4,006
530
7,792
15,988
Interest expense
(53,211
)
(53,166
)
(218,292
)
(164,550
)
Loss on extinguishment of debt
(6,687
)
(408
)
(8,532
)
(37,895
)
Gain on asset divestitures
1,243
-
4,691
32,332
Income before income taxes and equity in earnings of
affiliates
38,012
55,338
146,948
229,820
Provision for income taxes
7,601
14,793
37,637
62,899
Equity in earnings of affiliates, net of income tax
provision
1,413
984
4,534
4,771
Net income
31,824
41,529
113,845
171,692
Less: Net loss attributable to noncontrolling
interests
70
2
142
121
Net income attributable to The GEO Group, Inc. $
31,894
$
41,531
$
113,987
$
171,813
Weighted Average Common Shares Outstanding: Basic
122,081
121,165
121,908
121,040
Diluted
125,224
124,545
123,698
122,281
Net income per Common Share Attributable to The GEO
Group, Inc.** : Basic: Net income per share —
basic $
0.22
$
0.29
$
0.78
$
1.18
Diluted: Net income per share — diluted $
0.21
$
0.28
$
0.77
$
1.17
* 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)
Q4 2023 Q4 2022 FY 2023 FY 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net Income $
31,824
$
41,529
$
113,845
$
171,692
Add: Income tax provision **
7,889
15,070
38,505
63,639
Interest expense, net of interest income ***
55,892
53,045
219,032
186,457
Depreciation and amortization
30,996
32,641
125,784
132,925
EBITDA $
126,601
$
142,285
$
497,166
$
554,713
Add (Subtract): Gain on asset divestitures, pre-tax
(1,243
)
-
(4,691
)
(32,332
)
Net loss attributable to noncontrolling interests
70
2
142
121
Stock based compensation expenses, pre-tax
3,013
3,194
15,065
16,204
Transaction related expenses, pre-tax
-
-
-
1,322
One-time employee restructuring expenses, pre-tax
814
-
814
-
Other non-cash revenue & expenses, pre-tax
(301
)
-
(1,319
)
-
Adjusted EBITDA $
128,954
$
145,481
$
507,177
$
540,028
Net Income attributable to GEO $
31,894
$
41,531
$
113,987
$
171,813
Add (Subtract): Gain on asset divestitures, pre-tax
(1,243
)
-
(4,691
)
(32,959
)
Loss on extinguishment of debt, pre-tax
6,687
408
8,532
37,895
Transaction related expenses, pre-tax
-
-
-
1,322
One-time employee restructuring expenses, pre-tax
814
-
814
-
Tax effect of adjustment to net income attributable to GEO (1)
(1,574
)
(103
)
(1,171
)
(6,875
)
Adjusted Net Income $
36,578
$
41,836
$
117,471
$
171,196
Weighted average common shares outstanding - Diluted
125,224
124,545
123,698
122,281
Adjusted Net Income per Diluted share
0.29
0.34
0.95
1.40
* 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 on asset divestitures, one-time employee restructuring
expenses and loss on extinguishment of debt.
2024
Outlook/Reconciliation (1)
(In thousands, except per share data)
(Unaudited)
FY 2024 Net Income Attributable to GEO
$
110,000
to
$
125,000
Net Interest Expense
190,000
200,000
Income Taxes (including income tax provision on equity in
earnings of affiliates)
44,000
48,000
Depreciation and Amortization
126,000
127,000
Non-Cash Stock Based Compensation
16,000
16,000
Other Non-Cash
(1,000
)
(1,000
)
Adjusted EBITDA
$
485,000
to
$
515,000
Net Income Attributable to GEO Per Diluted Share
$
0.87
to
$
0.99
Weighted Average Common Shares Outstanding-Diluted
126,500
to
126,500
CAPEX
Growth
2,000
to
3,000
Technology
20,000
to
25,000
Facility Maintenance
48,000
to
52,000
Capital Expenditures
70,000
to
80,000
Total Debt, Net
$
1,620,000
$
1,580,000
Total Leverage, Net
3.3
3.1
(1) Total Net Leverage is calculated using the midpoint of
Adjusted EBITDA guidance range.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240214653150/en/
Pablo E. Paez, (866) 301 4436 Executive Vice President,
Corporate Relations
Geo (NYSE:GEO)
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