CoreCivic, Inc. Q4 FY2025 earnings call

• Activation activities: Moving towards stabilized occupancy in mid-2026. New contract awards in 2025 at several facilities, with 3 of 4 previously idle facilities receiving additional populations, except Midwest Regional due to special use permit delay. Once stabilized, these 3 facilities expected to generate ~$260M annual revenue and increase EBITDA run rate by ~$100M to ~$450M.
• Business climate: Nationwide ICE detention populations at historical highs, ICE being the largest customer for over a decade. U.S. Marshals Service populations declined. CoreCivic has 7,000 beds in idle corrections and detention facilities and can provide nearly 13,000 additional beds. Dilley Immigration Processing Facility is a purpose-built facility with new agreement extending to 2030.
• Top-line revenue and operational performance: Fourth quarter results exceeded internal projections for adjusted EPS, normalized FFO per share, and adjusted EBITDA. Revenue from federal and state partners saw growth. Safety and Community segments had 78.1% occupancy. Farmville acquisition completed in July 2025.
• Balance sheet: Amended bank credit facility to increase revolving credit facility from $275M to $575M, totaling $700M commitments. Repurchased 5.3 million shares in fourth quarter, year-to-date repurchases 11.2 million shares. Leverage measured by net debt-to-adjusted EBITDA was 2.8x as of December 31, 2025.
• Appreciation: Recognized employees' hard work and commitment in delivering high-quality services.

Federal partners, primarily Immigration and Customs Enforcement and the U.S. Marshals Service, comprised 57% of CoreCivic's total revenue in the fourth quarter. Revenue from federal partners increased 49% compared with the prior year quarter. Revenue from ICE increased $124.4 million or 103.4%, while revenue from the U.S. Marshals Service decreased by $11.3 million. Revenue from state partners increased 5%. Total occupancy for the Safety and Community segments for the quarter was 78.1%, up 2.6 points since the year ago quarter. The average daily population across all facilities managed was 56,380 individuals during the fourth quarter of 2025 compared with 50,202 in the year ago quarter.

• 2026 guidance: Expect to generate diluted EPS of $1.49 to $1.59, FFO per share of $2.54 to $2.64, and EBITDA of $437 million to $445 million. Guidance does not include impact of new contract awards not previously announced. Excludes Midwest Regional's detainee population ramp-up due to special use permit delay. Plans to prioritize cash flow on share repurchases.
• Capital expenditures: Plan to spend $60 million to $70 million on maintenance capital expenditures, $15 million for other capital expenditures, and $35 million to $40 million for capital expenditures related to activating previously idled facilities.

• Uncertainty around Midwest Regional's special use permit application, which is delaying detainee intake. The outcome of the appeal of the lawsuit filed in state court is uncertain.
• Market multiples may not reflect the cash flows of the business, which could impact the company's valuation.

Q: Was there no new reactivations in 4Q and was that because of the government shutdown or the year-end?

A: Patrick Swindle responded that there were no new contracts entered in the fourth quarter, and the pacing of additional capacity is driven by bed demand, not indicative of lack of potential additional demand.

Q: You talked a little bit about the safety margins and kind of the expectation for those to improve. Is the decline in margin there just kind of as you guys activate these facilities, bring them online?

A: David Garfinkle said that if you backed out the 3 facilities being activated during the quarter, the margin was around 24%, and as those facilities reach stabilized occupancy in the first half of 2026, margin is expected to continue to grow.

Q: You talked a little bit about the increased opportunities specifically to manage other facilities. What's your confidence on, I guess, gaining the capacity for you guys to bring in employees, get it staffed up?

A: Patrick Swindle said the team is well structured, developed operating plans, and made preemptive investments, so they don't see an inhibitor in ability to activate through capital needs or staffing challenges.

Q: Can you maybe speak to the current contracting environment and how your dialogue with ICE and the DHS has trended of late?

A: Patrick Swindle said they are in constant dialogue with customers, assessing their needs and how to participate, and remain actively engaged to support government partners' mission.

Q: Fiscal year guidance is for about $441 million. Can you just clarify, does that $450 million EBITDA run rate include the 2 new contracts that you discussed but not the Midwest Regional Facility?

A: David Garfinkle said yes, the $450 million EBITDA run rate includes the 2 new contracts but not the Midwest Regional Facility.

Q: You did say during the prepared remarks that between the idled facilities that could be reactivated and other means you have significant capacity for if and when new contracts come online. Are there any other potential small tuck-ins that you've seen come up that might be on the horizon?

A: Patrick Swindle said the business development team is actively looking at opportunities, but nothing is imminent today, and a compelling multiple would be needed for acquisitions.

Q: You have substantial liquidity, and there's potentially a sense on the Street that your liquidity cannot support everything you're trying to accomplish. Could you just touch upon that?

A: David Garfinkle said they have over $300 million available on the revolving credit facility and over $100 million in cash, so they are not liquidity-constrained in executing strategy.

Q: I thought I'd zoom out a little bit here, just thinking about what the growth trajectory might be over a multiyear period for you guys. How should we think about a potential CAGR here for the next 3 or 4 years?

A: Patrick Swindle said growth comes in periods of demand with specific customers, and they are in a position to provide services as demand presents, but precise CAGR is hard to predict as it depends on pipeline development.

Q: So let's go a little blue sky here. If ICE got to the point where they contracted for those beds or fill all of those beds, what could that mean for upside in terms of revenue and EBITDA?

A: David Garfinkle said using publicly available numbers, it could be a significant upside in revenue and EBITDA, with potential incremental revenue and EBITDA based on bed counts and margins.

Q: In your prepared remarks, you said at year-end, ICE detained what, 69,000 and of which you detained 16,000. Occasionally, you see press reports that ICE is exploring other ways of housing detainees, repurposing industrial spaces, warehouses, things like that. I'm just curious where that stands?

A: David Garfinkle said the administration has pursued alternatives, with somewhere in the 5,000 range of people in detention in those alternatives, and ICE will continue to look at different ways to meet capacity requirements.