Prepared remarks
Good day, and welcome to The GEO Group Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask a question; you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Pablo Paez, Executive Vice President of Corporate Relations. Please go ahead.
Thank you, operator. Afternoon, everyone, and thank you for joining us for today's discussion of The GEO Group's Second Quarter 2026 earnings results. With us today are George C. Zoley, Chairman, Chief Executive Officer and Founder, and Shayn March, Senior Vice President and Chief Financial Officer. This afternoon, we will discuss our second quarter results as well as our outlook, and we will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our securities and exchange commission filings, including the Form 10-Ks, 10-Qs, and 8-K reports. With that, please allow me to turn this call over to our Chairman, CEO, and Founder, George C. Zoley. George?
Thank you, Pablo, and good afternoon, everyone, and thank you for joining us. Our diversified business units continue to deliver strong financial and operational performance during the second quarter of 2026. Revenues increased 15% from the second quarter of 2025, while net income increased 63% from the same period. Our better-than-expected performance reflects significant revenue growth from the contracts that we entered into throughout 2025. As we have previously discussed, in 2025 we were awarded several new or expanded contracts that represent up to approximately $520 million in annual revenues, which represent the largest amount of new business we have won in a single year in our company's history. In our secure services segment, we entered into new contracts to house ICE detainees at four facilities valued at approximately $280 million in annual revenues and totaling approximately 6,000 beds, increasing our total active ICE beds to approximately 27,000. Our current census across our active ICE facilities is approximately 24,000, representing more than one-third of the current national ICE population of approximately 68,000, which is distributed over 225 separate locations that are primarily short-term jail facilities. Over the last six weeks, we have experienced a 20% increase in ICE populations following the passage of the Secure America Act, which restored baseline appropriations funding for ICE and Customs and Border Protection after the longest partial government shutdown in U.S. history. Under the Secure America Act, ICE received $38.5 billion in funding available through 9/30/2029. This amount is in addition to the $75 billion in funding previously allocated to ICE under prior legislation, including $45 billion for detention, which is available through 9/30/2029. We believe the federal government is continuing to pursue the priority of increasing immigration detention capacity to 100,000 beds or more and consolidating to fewer, larger facilities. As a 40-year partner to ICE, we expect to be part of that solution. In the past few weeks, we have announced two new contracts with ICE for the activation of ICE processing centers at two previously idle facilities. We have entered into a five-year support services contract with ICE for the activation of a federal immigration processing center at the 1,190-bed Bighorn facility in Hudson, Colorado, while also entering into a lease agreement with the facility owner. The Bighorn support services contract is expected to generate approximately $85 million in annual revenues in the first full year of operations. We have also entered into a five-year support services contract with ICE for the activation of a federal immigration processing center at the GEO-owned 1,320-bed Rivers facility in Winton, North Carolina. The Rivers support services contract is expected to generate approximately $80 million in annual revenues in the first full year of operations. Under both contracts, ICE will reimburse GEO for the capital expenditures needed to reactivate these two facilities as well as providing funding for start-up expenses during the activation period. We expect the activation of the Bighorn and Rivers facilities to be completed by the end of 2026, with both facilities achieving normalized operations and earnings contribution in early 2027. Following the activation of these two facilities, our total ICE beds under contract will increase to approximately 29,500 beds. We also have approximately 4,500 idle beds that remain available at five company-owned facilities, which are designed for high security and therefore well suited for the current needs of the federal government. We continue to have active discussions with the federal government regarding potential reactivation of additional idle facilities. At full capacity, these 4,500 idle beds could generate approximately $250 million in combined incremental annual revenues. Our second quarter 2026 results reflect a significant expansion in our secure transportation services on behalf of both ICE and the U.S. Marshals Service. In 2025, we signed a new five-year contract with the U.S. Marshals covering 26 federal judicial districts and spanning 14 states, and we have entered into new or amended contracts to expand secure ground transportation services at seven ICE facilities. The support services that we provide under our ICE air transportation subcontract have also continued to steadily increase. Additionally, in our new Bighorn and Rivers contracts with ICE, we are expected to generate approximately $20 million combined in additional annual transportation services revenues once normalized in early 2027. Importantly, during the second quarter of 2026, our ISAP-V contract continued to experience a steady technology shift toward more intensive and higher-priced monitoring devices such as ankle monitors. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the nondetained docket. The program relies on several forms of monitoring including GPS ankle bracelet or wrist-worn devices that provide real-time tracking as well as the SmartLink phone app, which relies on facial recognition, voice ID, and GPS to confirm a person's location during predetermined check-ins. The current overall ISAP count is approximately 184,000 participants. The number of ISAP participants on GPS ankle monitors has increased to approximately 54,000 currently from 17,000 early in 2025. We also continue to experience a steady increase in the number of ISAP participants assigned to case management services, which involves staff interaction and monitoring for approximately 116,000 individuals currently. If this trend continues, the technology and case management mix shift would continue to increase the revenues and earnings generated under the ISAP contract even if overall participation counts remain relatively stable. Thus, we continue to be optimistic about the importance and growth potential of the ISAP contract, and we believe it is also well-positioned to scale up to higher overall counts. Finally, during the second quarter of 2026, we did not receive any revenues from our new skip tracing contract, which we believe was due to the lapse in ICE appropriations funding during the government shutdown. With the restoration of ICE funding, we are optimistic that the contract will begin to ramp up during the second half of 2026. Moving to our outlook, we have increased our net income and adjusted EBITDA guidance for 2026 to reflect the strength of our results in the first half of the year. Our updated guidance does not include any earnings contribution from our new Bighorn and Rivers contracts since we expect the activation period for these facilities to be completed by the end of 2026 and achieve normalized early contributions in early 2027. Our updated guidance also does not include any earnings contributions from our previously announced managed-only contracts for our 1,880-bed Graceville facility and our 985-bed Bay facility in the state of Florida, which have been rescheduled for implementation. These two contracts, valued at approximately $100 million in combined annual revenues, are now expected to transition to GEO on 7/1/2027. Looking at our improved outlook, we believe there are still several sources of potential upside. On the revenue side, sources of potential upside include additional growth in our secure services segment from the reactivation of additional idle facilities and/or higher overall population across our active facilities, additional volume increases and our accelerated technology services mix shift in our ISAP contract, additional growth in our secure transportation services business, and additional revenue from higher utilization of our skip tracing contract. On the expense side, our guidance assumes more moderate contributions from labor cost savings in the second half of the year. Before I turn the call over to our CFO, Shayn March, for a more detailed review of our second quarter results, I would like to highlight our continued commitment towards strengthening our capital structure and enhancing shareholder value. During the second quarter of 2026, we repurchased approximately 1.6 million shares for approximately $37 million, bringing the total shares repurchased to 10.1 million for approximately $177 million since the current share repurchase program was authorized in August 2025. Our current total outstanding share count is approximately 130 million, and we have approximately $323 million still available under our $500 million share repurchase authorization. We believe our stock continues to trade at a relatively low multiple despite the intrinsic value of our assets and our significant growth opportunities. We believe this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases. At this time, I will turn the call over to Shayn March to review our quarterly results and increased guidance.
Thank you, George. Good afternoon, everyone. Revenues for the second quarter of 2026 were approximately $732.1 million, up from approximately $636.2 million in the prior year's second quarter, reflecting a 15% increase. For the second quarter of 2026, we reported net income attributable to GEO operations of approximately $47.5 million, or $0.36 per diluted share. This compares to net income attributable to GEO of approximately $29.1 million, or $0.21 per diluted share, in the second quarter of 2025, reflecting a 63% increase in net income and a 71% increase in earnings per share. Our adjusted EBITDA for the second quarter of 2026 increased to approximately $142 million, up from approximately $118.6 million in the prior year's second quarter, reflecting a 20% increase. Looking at revenue trends, our owned and leased secure services revenues increased by approximately $55 million, or 16%, compared to the prior year's second quarter. This increase was driven by the activation of three company-owned facilities under new contracts with ICE, which was partly offset by revenue loss from the sale of the Lawton, Oklahoma facility and the depopulation of the Lee County, New Mexico facility. Quarterly revenues for our managed-only contracts increased by approximately $44 million, or 30%, from the prior year's second quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida ICE detention facility as well as certain transportation revenue increases that are reported in this segment. Quarterly revenues for our reentry services increased by approximately $3 million, offset by a $3 million decline in nonresidential services revenues compared to the prior year's second quarter. Finally, second quarter 2026 revenues for our electronic monitoring and supervision services decreased by less than $3 million, or approximately 3.5%, from the prior year's second quarter despite the reduced pricing on our ISAP-V contract, which demonstrates the strength of the continued favorable technology and case management mix shift in the program. Turning to expenses: during the second quarter of 2026, our operating expenses increased by approximately 12% as a result of the activation of our ICE facility contracts and increased occupancy compared to the prior year's second quarter. Operating expenses continue to be favorably impacted by lower labor costs during the second quarter of 2026. Our general and administrative expenses for the second quarter of 2026 remained steady at approximately 9% of revenue compared to the prior year's second quarter. Our second quarter 2026 results reflect a year-over-year decrease in net interest expense of approximately $4 million as a result of the reduction in our total net debt. Our effective tax rate for the second quarter of 2026 was approximately 28.7%. Moving to our outlook, we have updated our guidance for the full year 2026 and issued guidance for the third and fourth quarters of 2026. We have increased our full year 2026 GAAP net income guidance to a range of $168 million to $175 million, or a range of $1.27 to $1.32 per diluted share, on annual revenues of $2.95 billion to $3.05 billion and based on an effective tax rate of approximately 30%, inclusive of known discrete items. We have increased our full year 2026 adjusted EBITDA guidance to a range of $550 million to $560 million. We expect total unreimbursed capital expenditures for the full year 2026 to be between $135 million and $145 million and expect CapEx to decline below $100 million in 2027. For the third quarter of 2026, we expect GAAP net income to be $45 million to $48 million, or a range of $0.35 to $0.37 per diluted share, on quarterly revenues of $755 million to $805 million. We expect third quarter 2026 adjusted EBITDA to be between $140 million and $145 million. For the fourth quarter of 2026, we expect GAAP net income to be $37 million to $41 million, or a range of $0.28 to $0.31 per diluted share, on quarterly revenues of $758 million to $808 million. We expect fourth quarter 2026 adjusted EBITDA to be between $137 million and $142 million. Moving to our balance sheet: we closed the second quarter of 2026 with approximately $55 million in cash and cash equivalents and approximately $1.54 billion of total debt. At the end of the second quarter of 2026, our total net debt was approximately $1.5 billion and our total net leverage was below 3x adjusted EBITDA. At the end of the second quarter, we had total available liquidity of approximately $300 million, including cash on hand and revolver availability, to support our capital needs. At this time, I will turn the call back to George.
Thank you, Shayn March. To recap, we are very pleased with our strong second quarter results and the improved full-year outlook. Our financial performance in the first half of 2026 has been driven by the new growth opportunities which we captured in 2025 and are normalizing this year. Last year was the most successful period for new business wins in our company's history, and we expect 2026 to continue to be very active as well. We therefore believe that we have upside potential across our diversified business segments. We recently announced new contracts with ICE to reactivate two previously idle facilities totaling approximately 2,500 beds with annual revenue value of approximately $165 million once operations normalize in early 2027. With these two facility activations, we now have approximately 4,500 idle high-security beds that remain available, which could generate in excess of $250 million in annual revenues at full occupancy. We are pleased with the continued shift in technology and case management mix under our ISAP-V contract, which could also provide additional upside throughout 2026. We also remain well positioned to expand our delivery of secure ground and air transportation services for ICE and the U.S. Marshals Service beyond the significant growth we have already experienced. Finally, I would like to provide you with an update regarding the plan by ICE and DHS to purchase existing privately owned turnkey ICE processing centers. On our earnings call last quarter, we discussed that ICE was considering the purchase of approximately 10 privately owned key processing centers. As was disclosed recently by another company in our industry, four facilities totaling 7,190 beds have already been acquired by ICE for more than $2.2 billion at an average purchase price of more than $300,000 per bed. Based on our current discussions, we believe that the total number of facilities that are being considered for acquisition by ICE is likely larger than the 10 that were originally contemplated, and it is possible that the number of facilities targeted for acquisition by ICE could continue to grow in the future. Following the recently completed sales, ICE now uses approximately 36 existing detention sites nationwide that are owned and operated by private contractors. One competitor now owns and operates approximately 11 ICE detention facilities while GEO owns and operates 23 ICE detention facilities. We believe that future sales are likely to have similar valuations to the transactions that have already been completed, with standard adjustments with respect to geography and facility size. We are engaged in an active process for the sale of several of our turnkey facilities, subject to mutual agreement on price and our continued management of those facilities under long-term support services contracts. We believe we have two types of assets: the buildings and the businesses of providing support services. We are pursuing a potential sale of the buildings but we want to retain the business. We consider ourselves primarily a support services operator and will place particular importance on our ability to continue our support services at any facility sold to ICE. Several of our facilities already have long-term support services contracts in place and would likely only need to be modified so as to eliminate the ownership costs such as depreciation and property taxes embedded in our present contracts in the event of ICE ownership. One of these facilities had some unique and valuable assets that we believe require separate appraisal, which has likely resulted in a somewhat longer process of evaluation. Several other facilities have support services contracts that expire later this year. ICE has initiated a procurement process involving four facilities that we hope will result in new long-term support services contracts being awarded. At this time, there is no definitive agreement in place with ICE and no precise timeline for the closing of any transactions, and, of course, we can give no assurance that any of these transactions will take place at all. But if any of the GEO facilities are sold to ICE, we intend to use the proceeds to reduce debt, continue stock repurchases, and for other general corporate purposes. The potential sale of multiple facilities to ICE could represent a significant liquidity and shareholder-value-enhancing event for our company. While the exact timing of government actions is always difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance long-term value for our shareholders. Given the intrinsic value of our assets — 50,000 owned beds — our strong financial performance in providing diversified security support services, and our expected future growth, we believe our stock continues to be significantly undervalued and offers a very attractive investment opportunity. That completes our remarks, and we would be glad to take questions.
Questions and answers
We will now begin the question-and-answer session. To ask a question, you may press 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. The first question today comes from Joe Gomes with NOBLE Capital. Please go ahead.
Good afternoon, George and Shayn. Thanks for taking my questions. I want to start out with the Florida facilities. It is a one-year pushout here to the right. Could you give us a little more color as to why the pushout there? Secondarily on that, I am assuming since they were supposed to start in early July this year that some of those revenues were expected in your prior guidance that you put out in the first quarter. Is that accurate? That would indicate that even with this pushout to the right for these particular facilities, your guide being raised would have been raised even higher if these had not been pushed out. And then on the CapEx — you mentioned, George, getting reimbursed for CapEx on some of the new contracts — could you remind us if that is normal, if that is something new from ICE, and does that also play into the reduction in CapEx guidance on the growth side for this year? And then one more: I know you talked about the ISAP program — you got the two-year contract — and even though there has been some mix shift, which is helping maintain revenue under that contract, going back a year and a half or so there was some thought that ISAP numbers could hit well in excess of where we are today. It's been pretty flat for probably two years. Is ISAP not a focus of ICE at this point? Is it more on the detention side? Or is there something else going on that would suggest in the near future we'll start to see numbers go up to where they were a couple of years ago, up to the almost 400,000 level?
That is correct. There were some budgetary issues that remain unresolved that required the extension to July 1st.
Okay. Thank you for that. And then on the CapEx, you mentioned that getting reimbursed for CapEx in some of the new contracts — is that normal, is that something new from ICE, and does that play into the reduced CapEx guidance for this year?
It is relatively new, but the answer to the second question may be twofold. We have spent a lot of CapEx gearing up and ready for this expansion and the reactivation of ICE facilities. I think we will be pretty much complete by the end of this year or early next year. So the ongoing maintenance CapEx will come into play on a normal basis, but we will not have any unusual start-up CapEx as we have had over the last year and a half.
And then one more for me on the ISAP program. You have the two-year contract and the mix shift is helping to maintain revenue under that contract, but it has been relatively flat. Is ICE focused more on detention capacity right now, and is that why ISAP counts haven't increased? Could we see ISAP increase dramatically later, maybe next year?
I think in general the focus of ICE has been on increasing detention capacity. But there are a lot of policy shifts as to who will be subject to immigration enforcement. At a later point — maybe next year — we could see ISAP increase dramatically. But right now the focus is on increasing detention capacity.
Okay. Great. Thanks for that. I will get back in the queue.
The next question comes from Brendan Michael McCarthy. Please go ahead.
Great, good afternoon. Appreciate you taking my questions. Just a follow-up on the electronic monitoring side: is it still the expectation that ICE is looking to reach 100,000 operational beds before turning to ISAP? Is that still a reasonable expectation? And on the skip tracing contract, you mentioned there was not much impact in Q2 from the lapse in ICE funding. Is $60 million still a reasonable annualized revenue estimate from that contract? Has that changed at all and what are you seeing regarding trends in that program? And last question for me: on the potential facility sales, you mentioned ICE has initiated the procurement process involving four facilities; do you anticipate a potential sale lining up with timing of a renewal since a few of those facilities are up for renewal this fall? Just curious if you think the timing might line up.
I think so for the most part. The focus within the agency is to try to stand up approximately 100,000 beds. They are at a census presently of about 68,000, and we have of that roughly 24,000 in our facilities. So they have another roughly 30,000 or so more beds to go. Within that process, I think there is an objective of consolidation into fewer, larger facilities down from their present 225 facilities that they use nationwide. They want to be in fewer, larger facilities with a normal detention capacity of about 100,000, not including the many small jails that are just feeder locations to the main facilities.
Understood, that makes sense. And on the skip tracing contract, is $60 million still a reasonable annualized revenue estimate?
We do expect to receive another contract this quarter, possibly this month, and I think that $60 million number you quoted is correct.
Okay, thank you. And last question about the potential facility sales — you anticipate the procurement process for four facilities, and there was some discussion about timing lining up with renewals this fall. Any color there?
Well, they are not being renewed; they are being recompeted. This is a new procurement to establish a new contract term for those facilities. We are hoping the contract terms are long, and I think there is mutual interest to complete this process by the end of this quarter, although it may spill into the next quarter. As we understand it, it is a two-step process. There was originally a request for information in which potential interested parties could indicate they had such a facility in that particular location — there are four different locations. The next step is to validate where the facility is and the ability to activate it within 30 days. We think that process can take place fairly quickly. The last step of the process is pricing on that existing facility for the next contract term. As I said earlier, there is a mutual interest that this process be completed by the end of this quarter, but it could spill into the fourth quarter.
The next question comes from Gregory Thomas Gibas with Northland Securities. Please go ahead.
Great, hi George and Shayn, thanks for taking the questions. Recognize that there are no assurances of asset sales, but post asset sales, could you discuss how you are thinking about capital allocation and what your target net leverage would be? Perhaps thoughts on buybacks versus any potential considerations for a 31 exchange following any sale. Secondly, as it relates to ICE's recent push to utilize monitoring services for Haitian immigrants, would you expect that initiative to notably change the populations under the ISAP program? Similarly, with the continued technology mix shift, can you maybe quantify it in a way — what would be the impact of moving one individual from SmartLINK to ankle monitoring?
Hey Gregory, thanks for the question. Post any asset sales, we do have certain restrictions in our current debt agreements about how those proceeds have to be applied. But once we are able to satisfy those restrictions in the indenture and in the credit agreement, we would absolutely look to deploy as much capital as we can to returning it back to shareholders. So I think it would be a combination of both debt repayment and ultimately using that money to be active with share repurchases or other forms of remuneration back to our shareholders.
There is a corresponding decline in the SmartLink app to individuals on the ankle monitors, and the app is far less expensive than ankle monitors. Because of policy shifts as to who will be subject to immigration enforcement, like the Haitians, we could see a significant increase in the number of people in the ISAP program, and most of them we believe would be placed under ankle monitoring supervision.
The next question comes from Kirk Ludtke with Raymond James. Please go ahead.
Hello, George and Shayn. Thank you for the call. A follow-up on the 100,000-bed target: we have talked on past calls about ICE's efforts to build or purchase facilities. How many beds do you think might come from that effort versus from reactivations? Also, is there any time limit on the funding — does this effort have to happen before the end of this administration? And you mentioned geographic considerations; can you elaborate on what that means?
I do not think they are building all of their own facilities per se. With regard to the recent purchases, of the 11 beds purchased by ICE in recent transactions, they may activate two or three, which would be maybe 5,000 beds. The vast majority will have to come from other places. It is really a reactivation of what were formerly BOP facilities that were discontinued under prior administrations. These are generally high-security, single-cell facilities that are very desirable by ICE in expanding their detention capacity. Regarding timing, ICE has a significant amount of funding left for the buildup — roughly $36 billion allocated — and I believe that money is available through the current term, so they have time — approximately three years — to implement some of these programs. On geographic considerations, it simply refers to differences in cost in different states and locations. For example, the cost of a facility in Oklahoma is different than the cost of a facility in Colorado or Washington. The appraisal technique being used considers replacement cost in that facility's geographic location.
This concludes our question-and-answer session. I would like to turn the conference back over to George C. Zoley, Chairman and CEO, for any closing remarks.
Okay. Thank you for joining us today. We look forward to addressing you in the next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.