CoreCivic, Inc. Q4 FY2024 earnings call

• New presidential administration impacts: Emphasis on immigration and public safety led to policy changes. Lincoln Riley Act requires more detention beds, and reversal of Biden executive order on Marshals contracts restored direct contracting. BOP's First Step Act implementation creates opportunities.
• Fourth quarter financial results: Exceeded forecasts with 75.5% occupancy (highest since Q1 2020), revenue of $479.3M, adjusted EBITDA of $74.2M (down from prior year but full year adjusted EBITDA up).
• State partnerships: New contracts with Montana, including additional inmates at Saguaro Correctional Facility, and ongoing dialogues with other states. Safety and Community segments' occupancy improved.
• Proactive steps: Preparing facilities for potential new contracts with capital improvements, labor readiness, and activation team work to shorten activation timelines.

CoreCivic's Safety segment was the largest, providing 93% of 2024 total revenue. Fourth quarter net operating income for Safety fell 3%, but full year was up 6%. The Community segment, comprising residential reentry facilities, etc., had fourth quarter occupancy increase, but net operating income declined slightly; full year was up slightly. Federal partners, primarily ICE and US Marshal Service, made up almost half of 2024 total revenue. Fourth quarter federal revenue from ICE declined, but excluding the South Texas Family Residential Center, it increased 5%; US Marshal Service revenue grew 1%. State partners and Safety/Community segments saw 6.4% growth in the fourth quarter, driven by higher per diem rates, occupancy, and new state contracts.

2025 guidance: Diluted EPS expected 48-61 cents, FFO per share 1.37-1.50 dollars. Assumes steady federal population growth. Plans to spend $60-65M on maintenance CapEx and $40-45M on potential idle facility activations. Target leverage 2.25-2.75 times. Guidance excludes impact of new contract awards, but considers startup expenses for idle facility activations.

• Legislative and budget uncertainties could impact contract awards and revenue. Operational risks related to staffing challenges and potential delays in activating idle facilities. Uncertainty around timing and impact of new government actions on contracts.

Q: About ICE capacity needs and impact of other alternatives.

A: Damon and David discussed ICE needing ~100k-200k beds, value proposition of CoreCivic vs alternatives (cost, humanness, logistics, audits, availability, experience), and $40-45M CapEx for preparing facilities.

Q: About Q1 strength and activation costs.

A: David said Q1 populations are slightly up but guidance doesn't include big increase; startup costs for idle facilities take 4-6 months with $4k-$6k per bed startup expenses.

Q: About activating idle facilities and low-cost initiatives.

A: Patrick discussed pre-activation steps like facility leadership teams, advertising plans, and training ready to shorten activation timelines by 2-3 months in prioritized locations.

Q: About acquisitions and BOP opportunities.

A: Damon and David talked about real estate team monitoring vacant facilities, and BOP opportunities due to First Step Act implementation and interim director at BOP.

Q: About occupancy and EBITDA potential.

A: David and Damon clarified a 28k bed proposal, with 15k beds activated potentially generating $750M-$800M revenue and $200M-$275M EBITDA at historical margins.

Q: About inflation and cost coverage.

A: Patrick discussed working with vendors, pre-emptive purchases, and close cost visibility; Damon mentioned federal contracts reimburse wage increases dollar for dollar.

Q: About proposal beds and revenue/EBITDA.

A: Damon and David confirmed a 28k bed proposal, with 15k activated beds potentially contributing $750M+ revenue and $200M-$275M EBITDA.

Q: About BOP opportunities.

A: Damon discussed BOP opportunities with interim director and First Step Act implementation focusing on community confinement expansion.