GEO Group Inc Aktie

Good day, and welcome to the GEO Group First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Pablo Paez, Executive Vice President, Corporate Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's first quarter 2026 earnings results. This morning, we will discuss our first quarter results as well as our outlook. 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 the supplemental disclosure that 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-K, 10-Q and 8-K reports.

With that, please allow me to turn this call over to our Chairman, CEO and founder, George Zoley. George?

Thank you, Pablo. Good morning to everyone, and thank you for joining us on this call. I will conduct the entire conference call due to Shayn being out for the next couple of weeks. .

Our diversified business units delivered strong financial and operational performance during the first quarter of 2026. 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 new or expanded contracts that represent up to approximately $520 million in new incremental annual revenues, which represents 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's at four facilities, totaling approximately 6,000 beds, including three previously idle company-owned facilities in New Jersey, Michigan, Georgia and a management services contract in Florida.

We also reactivated our company-owned Adelanto ICE Processing Center in California, which was already under contract, but had been severely underutilized due to a long-standing COVID-related court case. These facility activations represent annual revenues of approximately $300 million and increased our total beds under contract with ICE to approximately 26,000 beds. The census across our ICE facilities reached a high of 24,000 early this year but has since declined to approximately 21,000, but still representing more than 1/3 of the national ICE population of approximately 58,000. We believe that this recent decline is likely due to several factors, including the recent transition in leadership at the Department of Homeland Security, and the 82-day partial government shutdown of DHS resulting in a lapse in annual appropriations for ICE.

During this lapse in annual appropriations, we believe ICE Detention operations have been supported with funding from the one big beautiful bill. As a reminder, under the budget reconciliation bill, ICE received approximately $45 billion for detention available through September 30, 2029, and this funding is not impacted by the partial government shutdown.

Congress has approved legislation that reopened most of DHS, excluding ICE and Customs and Border Protection, through an annual cooperations bill while proposing legislation through reconciliation for $70 billion to fund ICE and CPB through the next 3.5 years.

Consistent with prior shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections has been somewhat delayed, requiring us to carefully manage our liquidity and working capital needs.

With the expansion of our revolving credit facility by $100 million earlier this year, we believe we have substantial liquidity. Our first quarter 2026 results also reflected significant expansion in our secure transportation services on behalf of both ICE and the U.S. Marshals Service.

In 2025, we entered into a new or amended contracts to expand secured ground transportation services at four existing ICE facilities and add our three newly activated ICE facilities. And the support services that we provide under our ICE air transportation subcontract have continued to steadily increase. In addition, in 2025, we signed a new 5-year contract with U.S. Marshals Service covering 26 federal judicial districts in spanning 14 states. Overall, these new and expanded transportation contracts are valued at approximately $60 million in incremental annual revenue.

Importantly, in 2025, we also secured a new 2-year contract for the ISAP 5 program. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the non-detained docket. The program relies on several forms of monitoring, including GPS, ankle bracelets or risk 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.

ISAP counts remained relatively stable during the first quarter of 2026 at approximately 180,000 to 181,000 participants. Consistent with the trend we highlighted last quarter, we have continued to see steady technology shift to more intensive and higher priced and monitoring devices such as ankle monitors. The number of ISAP participants on GPS ankle monitors has increased to more than 48,000 currently from 17,000 in early 2025. Correspondingly, the number of ISAP participants on the SmartLink mobile app has declined to approximately 131,000 today from approximately 159,000 in early 2025.

We also continue to experience a steady increase in the number of ISAP participants assigned to case management services, which involve staff interaction and monitoring for approximately 111,000 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 volume remains constant. Thus we continue to be optimistic about the importance and growth potential of the ISAP 5 contract, we believe that is well positioned to scale up to higher overall accounts.

In the fourth quarter, we were also awarded a new 2-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. We began providing skip tracing services under this new 2-year contract in the month of March and are optimistic that the contract can ramp up to higher volumes later this year.

Finally, at the state level, we were awarded two new management-only contracts in 2025 from the Florida Department of Corrections valued at approximately $100 million in combined annual revenues. They include the 1,884 bed Graceville facility and the 985-bed Bay facility and are scheduled to transition to GEO management on July 1, 2026.

Moving to our updated guidance. We have increased our outlook for 2026 to reflect the strength of our first quarter results, and we believe there are still several sources of potential upside that are not currently included in our guidance. 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 populations across our active facilities. Additional volume increases and/or accelerated technology service mix in our ISAP 5 contract. Additional revenue from a higher utilization of our skip tracing contract, and additional growth potential in our secure transportation segment. On the expense side, our guidance assumes more moderate contribution from labor savings in subsequent quarters.

Moving to our outlook for new business opportunities in 2026. We will continue to be in active discussions with ICE and the U.S. Marshals Service regarding the potential reactivation of additional idle facilities. It is our understanding that the present ICE Detention census is approximately 58,000 distributed over 2025 separate locations, which are primarily short-term GL facility. We believe the federal government is continuing to pursue the priority of increasing immigration detention capacity to approximately 100,000 beds or more and consolidate to fewer larger facilities. As a 40-year partner to ICE, we expect to be part of the solution. We have approximately 6,000 idle beds at 6 company-owned facilities, which are primarily former U.S. Bureau of Prisons facilities, and therefore, high security, making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds could generate more than $300 million in combined incremental revenues.

Before moving on to a more detailed review of the first quarter results, I'd like to highlight our continued progress towards strengthening our capital structure and enhancing shareholder value. During the first quarter, we purchased approximately 3.6 million shares for approximately $50 million, bringing the total number of shares repurchased to $8.5 million for approximately $141 million. Our current total outstanding share count is approximately 133.7 million shares, and we have approximately $359 million still available under our $500 million share repurchase authorization.

We believe our stock continues to trade at historically low multiple despite the intrinsic value of our assets and our significant growth opportunities. And we recognize that the imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases.

Moving to a more detailed review of our financial results. Revenues for the first quarter of 2026 increased to approximately $705.2 million, up from approximately $604.6 million in the prior year's first quarter, reflecting a 17% increase. For the first quarter of 2026, we reported net income attributable to GEO operations of approximately $38.3 million or $0.29 per diluted share. This compares to net income attributable to GEO operations of approximately $19.6 million or $0.14 per diluted share for the first quarter of 2025, reflecting a 96% increase this year.

Our adjusted EBITDA for the first quarter of 2026 increased to approximately $131.4 million, up from approximately 99.8 million in the prior year's first quarter, reflecting a 32% increase.

Looking at revenue trends, our own and leased secured services revenues increased by approximately $70 million or 23% increase compared to the prior year's first quarter. This increase was driven by the activation of our 3 company-owned facilities under new contracts with ICE, which was offset by revenue loss from the sale of the Lawton, Oklahoma facility and the depopulation of Lea County, New Mexico facility.

Quarterly revenues for our managed-only contracts increased by approximately $33 million or 22% from the prior first year's quarter. This increase was 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 5%, offset by a 5% decline in nonresidential services revenues compared to the prior year's first quarter. Finally, first quarter 2026 revenues for our electronic monitoring and supervision services decreased by approximately 4% from the prior year's first quarter. This decrease was driven by the reduced pricing for our ISAP 5 contract, which was offset by favorable technology and case management mix shift and some modest skip tracing revenues.

Turning to the expenses during the first quarter of 2026. Our operating expenses increased by approximately 15% as a result of the activation of our new ICE facility contracts and increased occupancy compared to the prior year's first quarter. Operating expenses were favorably impacted by lower-than-expected labor costs compared to our prior guidance for the first quarter of 2026.

Our general and administrative expenses for the first quarter of 2026 decline to 8.6% of revenue as compared to 9.6% of revenue in the prior year's first quarter. Our first quarter 2026 results reflect a year-over-year decrease in net interest expense of approximately $4 million as a result of the reduction of our total net debt. Our effective tax rate for the first quarter of 2026 was approximately 28.5%.

Moving to our outlook. We have increased our guidance for the full year of 2026 and issued guidance for the second quarter of 2026. We expect full year 2026 GAAP net income to be $153 million to $166 million or a range of $1.15 to $1.25 per diluted share on annual revenues of $2.95 billion to $3.1 billion based on effective tax rate of approximately 30%, inclusive of known discrete items. We expect full year 2026 adjusted EBITDA to be in the range of $525 million to $545 million. We expect total capital expenditures for the full year of 2026 to be between $137.5 million and $162.5 million.

For the second quarter of 2026, we expect GAAP net income to be $33 million to $39 million or a range of $0.25 to $0.29 per diluted share on a quarterly revenues of $715 million to $725 million. We expect second quarter 2026 adjusted EBITDA to be between $130 million and $135 million.

Moving to our balance sheet. We closed the first quarter of 2026 with approximately $80 million in cash on hand and approximately $1.61 billion in total debt. At the end of the first quarter of 2026, our total net debt was approximately $1.53 billion, and our total net leverage was below 3.2x adjusted EBITDA.

With the expansion of our revolving credit facility by $100 million, which we announced in January, we believe we have substantial liquidity to support our diverse capital needs as we manage through the current partial government shutdown.

In closing, we are very pleased with our first quarter results and improved full year outlook. Our strong performance has been driven by the new growth opportunities we captured in 2025 and are normalizing in 2026. Last year was the most successful period for new business wins in our company's history, and we expect 2026 to be a very active year as well. We have, therefore, believe we have upside potential across our diversified business segments. We have approximately 6,000 idle high-security beds that remain available, which could generate in excess of $300 million in annual revenues at full occupancy.

The continued shift in technology and case management mix and potential increases in accounts under our ISAP 5 contract could also provide additional upside through 2026. We are also well positioned to continue to expand our delivery of secure ground and air transportation services for ICE and the U.S. Marshals beyond the significant growth we have already experienced.

Finally, as we discussed last quarter, ICE has purchased 11 commercial warehouses that we -- that were to be retrofitted as detention facility while contracting with private sector companies for operations. These purchases were part of a plan to acquire 24 warehouses and retrofit them as detention facilities using funds from the $45 billion provided for detention in the one big beautiful bill. At this time, the warehouse project has been paused, and DHS is evaluating how to proceed with this initiative to increase and consolidate the tension capacity.

It has also been widely reported that ICE is considering the purchase of approximately 10 privately owned turnkey ICE processing centers. ICE has approximately 40 existing detention sites nationwide that are owned and operated by private contractors. CoreCivic owns and operates approximately 15 detention facilities, while GEO owns and operates 23 ICE detention facilities. I can respectfully acknowledge that we have been in discussions with ICE regarding the potential sale of multiple facilities subject to mutual agreement on price and our continued management of those facilities under long-term support services contracts. 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.

There will also be a need to renegotiate select contracts so as to eliminate the ownership costs such as depreciation in property Texas embedded in our present contracts in the event of ICE ownership. At this time, there is no definitive agreement in place with ICE and no precise time line for the closing of any such transactions. And of course, we can give no assurances that these transactions will take place at all. But if select facilities are sold to ICE, GEO would use the proceeds to reduce debt and continued stock repurchases as well as other corporate purchase purposes. The potential sale of multiple facilities to ICE could represent a significant liquidity and shareholder value enhancing the 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 our long-term value for our shareholders. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities and our current and expected future growth, we believe that our stock is significantly undervalued and offers a very attractive investment opportunity.

That completes my remarks, and I would be glad to take on any questions from our audience. Thank you.

[Operator Instructions] And the first question will come from Greg Gibas with Northland Securities.

Congrats on the execution there. I wanted to follow up on the potential facility sales and maybe how we should think about potential valuations in relation to the Lawton facility sale last year at, I believe, $130,000 per bed?

Thank you for the question. I think the Lawton bed valuation is a good baseline to be followed by several other factors that should be the result in a meaningful higher valuation of our ICE facilities. First, the physical plant at an ICE processing center is much more complicated with the addition of courtrooms and office space requirements for ICE personnel, which adds to the cost. Second, the ICE facility locations are in or near urban areas, which add to the land and construction costs. And third, several of the ICE facility locations are in blue states, which makes their development very difficult to establish and very problematic to replicate thus adding to their value. So again, the Lawton sale at Oklahoma is a good baseline, but there's many things to consider beyond that, which would drive the price to a higher level.

Got it. That makes sense. Appreciate that. And I know you mentioned it's difficult to predict the timing of these sales, but do you believe initial sales could still be, I guess, realized or announced within Q2 or is Q3 a more likely time frame?

I would guess at late Q2, maybe early Q3. But that's just the guess.

Fair enough. Fair enough. And I guess last one for me as it related to some reports that ICE was activating the Central Valley Annex facility in California, next to the gold and State Annex. I wonder if you could comment on, is that a transfer facility? Or is that new? Any color you can provide there would be helpful.

The Central Valley facility actually was under ICE to begin with in 2020. And it was led to the U.S. Marshals Services -- to only recently. And then ICE has taken it over, since then, it's a 700-bed facility. It's located in the McFarland, California area next to another ICE facility actually adjacent to it. So it's part of a complex that is entirely ICE controlled.

The next question will come from Joe Gomes with NOBLE Capital.

Thanks for the detailed overview, George. Much appreciate it.

You're welcome. Thank you for joining us.

So I just wanted to kind of circle back on the Q1 performance, especially given the decline in ICE populations over the period, they were down roughly from 24,000. I think you said in the end of the fourth quarter to 21,000 at the end of the first quarter or to today. Maybe you can give a little more color on the kind of how that progressed through the quarter? And also maybe some more color on the ramp-up of the reactivated facilities. Is that going as expected? Are they going slower than expected, given the decline in ICE populations here recently. And what that possibly means for getting those facilities up to normalized occupancy levels?

Well, two very good questions. So let me take the first questions regarding lower populations, which actually promoted an increase in our EBITDA. With respect to lower populations, it required less intake duties, less housing assignments, less off-site travel, less labor and overtime for servicing these facilities, which, at one point, we're extremely active as to the intake and outflow of detainees, which was very costly in bringing people in on an overtime basis often to handle those areas of intake, housing and off-site requirements. But it is stabilized at this point. And -- we think it will be fairly stable through the second quarter as well with a pickup starting probably in the second half of the year. The new facilities were -- had very rapid intakes at one point, and that has slowed down because of the general scale down of the populations nationally. So we're kind of in a holding pattern, I guess, to a large extent because of the change in administration and the lack of specific funding for ICE and a reevaluation of the immigration enforcement policies and programs.

Right. Okay. And then you talked about lower-than-anticipated labor cost. Maybe you could talk a little bit more -- also a little more color on where that is coming from or what is driving that?

Well, as I said, it's the lower number of intakes and lower overall population that drives -- it's primarily in the overtime costs to have additional people in the intake area, additional people serving in special needs cases, particularly in mental health case is you have to have additional staff, and that requires many cases over time. And we're seeing a population that I'm told is more strictly than we've historically had. And these people require more off-site visits, requiring more staff involvement, more overtime expense. So it's been a different situation for us. But with the pause in the overall population levels and the intake activity, it's given us a welcome breather from that very rapid intake and outflow processing that we experienced last year.

Okay. And then one more for me, if I may. Last quarter, I believe it was, you talked about looking at some additional opportunities in the mental health area. And I'm just wondering how that is progressing, those efforts.

We do have a pending proposal with the State of Florida Department of Children families for a forensic facility in the state that we, at one time, developed, constructed and operated for 8 years. So we expect there will be a decision on that procurement in the next 30 days...

The next question will come from Brendan McCarthy with Sidoti & Co.

Great. I wanted to start off on the skip tracing business. I know you're only about maybe 2 months or so into operations there. But can you give us any detail on the current volume in that program and the revenue model associated with the program?

Our guidance really reflects some modest improvement in that program. We received an initial contract. We delivered it very quickly. There are other contractors that were awarded similar contracts. They're still working on their assignments and we're waiting for them to catch up so we can get our next assignment.

Understood. And then just on the updated 2026 guidance. I know the low end of the revenue guide was brought up, but it looks like there was a more meaningful uplift in the adjusted EBITDA and EPS guidance for the year. Just curious as to what's the read-through there? And is it really just in line with your prior comments on kind of a lower cost structure at these new facilities?

It really is at this point. I think that's our view as to what taking place in the financials of these facilities, we've had one month of activity to reflect on that. And it -- I think we're on track as to our guidance and our -- the underlying assumptions in that guidance. So yes, I think we've given you good guidance.

Got it. One more question for me on the updated guidance for CapEx. I think it was up 10% to 11% at the midpoint. Any insight into that increase? And maybe what specific segment in the business is going to consume that incremental capital?

Well, we have, as I said, [ 6,000 ] idle beds and some of those facilities need some retrofitting to bring them up to date and revise them according to the new updated needs of ICE. As we get these new contracts, ICE is typically asking for more office space, more areas for their use for more staff, and we have to pay for those improvements to the capital structure of the facility.

The next question will come from Raj Sharma with Texas Capital.

Congratulations on the solid results and raising the guidance. I wanted to get some clarity on the $520 million of revenues from wins last year. Are they -- they don't seem to be fully reflected in the increase in the revenue guidance. Could you please help bridge how much of this -- the 5 wins will be fully ramped versus still to come? And also perhaps comment on the utilization at Adelanto and the other the 3 activated ICE facilities by end of year and sort of rate?

Okay. Well, $100 million of the new $520 million was related to two facilities in the state of Florida, those facilities have not yet been activated. I think they started July 1. So only half of the $100 million will take place this year. Then we had an offset of 2 facilities with the discontinuation of the Lawton, Oklahoma facility, which was approximately 2,400 beds and the Lee County facility, which was approximately 1,200 beds.

Got it. Got it. And then just I wanted to understand how soon do you see a pickup in the ICE detention staff? And has your outlook on achieving the overall -- ICE achieving the overall 100,000 detentions, has that changed at all with the change in the DHS administration...

Well, we don't have any special insight as to what the administration is doing as to how the reassessing the initiative to convert warehouses to the detention facilities. But I think there is still an objective of trying to increase overall nationwide capacity as close as possible to the 100,000, and to consolidate to less than the 250 approximately locations they have now to fewer larger scale facilities. But as I think people are aware that as I've said today, we have 6,000 beds that can be activated within a few months. I think CoreCivic has maybe 10,000 beds. So that -- and I think both have further expansion capabilities on those beds that I'm citing that we could expand our 6,000 to maybe 10,000. And so the private sector with the two major providers can provide a very material, meaningful increase in nationwide capacity at a very comparable favorable cost.

The next question will come from Kirk Ludtke with Imperial Capital.

George, you mentioned the 100,000 beds and fewer facilities. Do you have a sense for how many of those 100,000 beds ICE would want to own?

Probably as many as possible. But I think they're starting to look at the price tags of each of the facilities and doing comparisons as to whether the existing turnkey facilities maybe a better play financially, operationally, so forth than some of these other locations, which have been politically problematic. But -- so all of the plans, I think, are being reviewed, assessed and I'm sure they will come up with some reasonable conclusions.

Got it. Why do they want to own the facilities rather than contract with third parties?

I think it's been reported that through federal ownership that there is more protections from litigation -- unwarranted litigation that infringes upon the activities of the ICE processing centers. There's been a litigation regarding overseeing medical services, food services, general et cetera. And it's really unprecedented. And I believe it's fundamentally unconstitutional. And as some blue states are considering more active involvement in oversight of facilities, I think the logical solution to much of that is federal ownership of the facilities. They are federal facilities to begin with, in my opinion. It's the federal government who is paying for the operations of the facilities. But the ownership of the buildings will provide stronger credibility in the ports as to the pharmacy clause in the constitution that these are federal facilities, and they are carrying out the congressional priorities of the immigration of programs and policies that Congress has passed and that states can only have very limited involvement in those policies and programs.

Interesting. How many beds are in your 23 ICE facilities?

We have 25,000 beds in those 23 owned facilities.

Great. And then lastly, you mentioned the $45 billion. Do they -- would ICE need any type of incremental approval to do this? Or is that at their discretion, the $45 billion at their discretion?

The $45 billion is at their discussion.

This concludes our question-and-answer session. I would like to turn the conference back over to George Zoley, Executive Chairman and CEO of the GEO Group for any closing remarks.

Thank you for being on this call, and we look forward to addressing you on the next one.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the GEO Group Fourth Quarter 2025 Earnings Conference Call.

[Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Pablo Paez, Executive Vice President, Corporate Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for today's discussion of the GEO Group's Fourth Quarter 2025 Earnings Results. With us today are George Zoley, Executive Chairman of the Board; and Mark Suchinski, Chief Financial Officer.

This morning, we will discuss our fourth quarter and full year results as well as our outlook. 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 the 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-K, 10-Q and 8-K reports.

With that, please allow me to turn this call over to our Executive Chairman, George Zoley. George?

Thank you, Pablo, and good afternoon to everyone. During the past year, we believe we've made significant progress towards meeting our financial and strategic objectives. Since the beginning of 2025, we've been awarded new or expanded contracts that represent up to approximately $520 million in new incremental annualized revenues that have staggered activation dates and are expected to primarily normalize by the end of this year. This represents the largest amount of new business we have won in a single year in our company's history.

We've entered into new contracts to house ICE detainees at 4 facilities totaling approximately 6,000 beds, which include 3 company-owned facilities we announced in the first half of '25, the 1,000-bed Delaney Hall, New Jersey facility, the 1,800-bed North Lake facility in Michigan and the 1,868-bed D. Ray James facility in Georgia. And more recently, the 1,310-bed North Florida detention facility, which is a state-owned facility where we are providing management services under a joint venture agreement that we announced in early October.

The Florida contract arrangement demonstrates GEO's ability to provide management services through alternative solutions like the State of Florida's partnership with the federal government. During the third quarter, we also reactivated our 1,940-bed Adelanto ICE Processing Center in California, which was already under contract but had been underutilized due to a long-standing COVID-related court case. The activation of these 5 facilities represent the largest start-up activity in our company's history with a combined annualized revenue value of approximately $400 million and involved the hiring and training of approximately 2,000 new employees.

The census across our active ICE facilities has continued to steadily increase from the third quarter at approximately 22,000 to presently approximately 24,000, which is the highest level of ICE populations we've ever had. This past year, we also significantly expanded the delivery of our secure transportation services on behalf of both ICE and the U.S. Marshals Service, valued at approximately $60 million in incremental annualized revenue. The increase in ICE enforcement and removal operations has resulted in an increased need for secure ground and air transportation services.

In 2025, we entered into a new or amended contracts to expand secure ground transportation services at 4 existing ICE facilities and at our 3 newly activated ICE facilities. And the support services that we provide under our ICE air transportation subcontract continued to steadily increase throughout this past year. In addition to the secure ground transportation services we have historically provided for the U.S. Marshals, last year, we signed a new 5-year contract with the agency covering 26 federal judicial districts and spanning 14 states. At the state level, we were awarded 2 new management-only contracts in 2025 from the Florida Department of Corrections. The 1,884-bed Graysville facility and the 985-bed Bay facility are scheduled to transition to GEO management on July 1 of this year and have combined annualized revenues of approximately $100 million.

Of particular importance in 2025, we also secured a new 2-year contract for the ISAP 5 program following a competitive procurement process. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the 9 detain docket. It's mainly for people ICE considers a higher flight risk or who have a pending asylum or removal cases but are still allowed to live in the community. The program relies on several forms of monitoring, including GPS ankle bracelets or wrist-worn devices that provide real-time tracking as well as a phone app, which relies on facial recognition, voice ID and GPS to confirm a person's location during predetermined check-ins.

The ISAP counts have declined slightly over the last year due to approximately 180,000 presently due to a decline in the use of a phone app called SmartLink provided by GEO at a very nominal cost. Instead, we've had a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors. The number of ISAP participants on GPS ankle monitors has increased from approximately 17,000 in early 2025 to more than 42,000 ankle monitors today. Correspondingly, the number of ISAP participants on the SmartLink mobile app has declined to less than 135,000 participants today. Currently, with this trend, we've also seen an increase in the number of ISAP participants additionally assigned to case management services, which involves staff interaction and monitoring for approximately 106,000 individuals at this time.

If this trend continues, the technology and case management mix shift would increase the revenues and earnings generated under the ISAP contract even if overall volume remains constant. Thus, we continue to be optimistic about the importance and growth potential of the ICE contract. The new 2-year contract includes pricing for 361,000 participants in year 1 and 465,000 participants in year 2. With the capital investment we made in 2025, we believe we have the capability in scaling monitoring devices and case management services to achieve those significantly increased participation levels and far beyond, if desired by ICE. But of course, we cannot provide definitive assurance of future ISAP participation levels, which are determined by ICE management.

In December of 2025, we were awarded a new 2-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. Skip tracing entails enhanced location research primarily with identifiable information and commercial data verification to verify current address information and investigate alternative address information for individuals on the non-detained docket. This 2-year contract award follows initial skip tracing pilot contract that we successfully implemented, which generated approximately $10 million in revenues during the fourth quarter of 2025.

Looking at our initial guidance for 2026, we believe there are several sources of potential upside including additional growth in our Secure Services segment, additional volume increases or accelerated mix shift in our ISAP contract, additional growth in our Secure Transportation segment and the normalization of higher labor expenses at newly activated facilities. It is our understanding that the present ICE detention census is presently approximately 70,000 distributed over 225 separate locations, which are primarily short-term jail facilities. We believe the federal government is continuing its focus to increase immigration detention capacity and looking for solutions as to how to upscale to 100,000 beds or more and consolidate to fewer larger facilities.

As a 40-year partner to ICE, we expect to be part of this solution. We continue to be in active discussions with ICE regarding our remaining available capacity and are currently in discussions for the potential activation of additional facilities. We have approximately 6,000 idle beds at 6 company-owned facilities, which are primarily former U.S. Bureau of Prisons facilities and are currently there for high-security facilities, making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds would generate more than $300 million in combined incremental annualized revenues.

We are obviously aware that ICE is exploring the purchase of several commercial warehouses that would be retrofitted to further increase detention capacity. This procurement process would result in the federal government owning these assets while contracting with private sector companies to retrofit and operate these potential sites. We are cautiously participating in this process and are evaluating select potential sites with the possibility of responding to this procurement opportunity.

With respect to the Federal Government's annual appropriations process, the Department of Homeland Security is currently funded under a short-term continuing resolution that expires tomorrow night. If no additional appropriation bill is passed by Congress before the expiration of the current continuing resolution, there will be a partial government shutdown involving the Department of Homeland Security. It's important to note that this process only affects the annual appropriations ICE receives from Congress, which is approximately $10 billion. It does not impact the funding under the One Big Beautiful Bill, which is available through September 30, 2029.

Under that budget reconciliation bill, ICE was allocated approximately $75 billion, including $45 billion for detention. Historically, during government shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections could be delayed, requiring us to carefully manage our liquidity and working capital needs.

With the recent expansion of our revolving credit facility by $100 million, we believe we have substantial liquidity. While the exact timing of government actions, including congressional funding decisions and new contract awards is difficult to estimate, we expect the balance of 2026 to be very active. In addition to the opportunities at the federal level, we are pursuing additional opportunities at the state level, specifically in the field of mental health services. In Florida, we are currently participating in a procurement by the Department of Children and Families for the management contract at the South Florida Evaluation and Treatment Center, which is a state forensic psychiatric hospital, which at one time, we were the operator.

In addition to our efforts to capture new growth, we believe we also have made significant progress towards strengthening our capital structure and enhancing shareholder value. Our efforts to strengthen our balance sheet were enhanced by the successful sale of the Lawton, Oklahoma facility for $312 million and the Hector Garza facility in Texas for $10 million. We used approximately $60 million of the Lawton facility sale gain to purchase the 770-bed downtown San Diego, California facility that we have operated for the U.S. Marshals Service for 25 years.

In 2025, we also began returning capital to shareholders through a share repurchase program that was initiated in August and expanded to $500 million in November. As of year-end '25, we had repurchased approximately 5 million shares for approximately $91 million, bringing our total share outstanding to approximately 136 million. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities and our expected growth, we continue to believe our stock is significantly undervalued and offers a very attractive investment opportunity. Our stock is trading at a historically low multiple despite the significant growth opportunities we expect going forward. We recognize that 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 our CEO, Mark Suchinski, to review our financial highlights and guidance.

Thank you, George, and good afternoon, everyone. For the fourth quarter of 2025, we reported net income attributable to GEO operations of approximately $32 million or $0.23 per diluted share on quarterly revenues of approximately $708 million. This compares to net income attributable to GEO operations of approximately $15.5 million or $0.11 per diluted share in the fourth quarter of 2024 on revenues of approximately $608 million. Excluding extraordinary items, we reported adjusted net income of approximately $35 million or $0.25 per diluted share for the fourth quarter of 2025 compared to approximately $18 million or $0.13 per diluted share for the prior year's fourth quarter. Adjusted EBITDA for the fourth quarter of 2025 was approximately $126 million, up from approximately $108 million reported for the prior year's fourth quarter.

Looking at revenue trends, our owned and leased secure service revenues increased by approximately $70 million or 23% in the fourth quarter of 2025 compared to the prior year's fourth quarter. This increase was primarily driven by the activation of our 3 company-owned facilities under new contracts with ICE, which was offset by revenue loss from the sale of the Lawton, Oklahoma facility and the depopulation of the Lea County, New Mexico facility.

Quarterly revenues for our managed-only contracts increased by approximately $26 million or 17% from the prior year's fourth quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida 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%, while quarterly revenues for our nonresidential services was largely unchanged compared to the prior year's fourth quarter.

Finally, quarterly revenues for our electronic monitoring and supervision services increased by approximately 3%, while quarterly revenues for our nonresidential services was largely unchanged compared to the prior year's fourth quarter. Finally, quarterly revenues for our electronic monitoring and supervision services increased by approximately 3% from the prior year's fourth quarter.

Fourth quarter 2025 results for our electronic monitoring and supervision services reflect the reduced pricing for our ISAP 5 contract, which was offset by favorable technology and case management mix shift and the skip tracing pilot contract that was implemented during the quarter. Additionally, our fourth quarter 2025 results for our electronic monitoring and supervision services was impacted by $1.6 million in employee severance costs as part of our efficiency initiative, which will lead to labor cost improvements in '26 of approximately $2 million to $3 million per quarter.

Turning to our expenses. During the fourth quarter of 2025, our operating expenses increased by approximately 18.5% as a result of activation of our new ICE facility contracts and increased occupancy compared to the prior year's fourth quarter. Our general and administrative expenses for the fourth quarter of 2025 declined to 8.4% of revenue as compared to 10% of revenue in the prior year's fourth quarter. Our fourth quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $6 million as a result of our reduction in our net debt. Our effective tax rate for the fourth quarter of 2025 was approximately 35%.

For the full year 2025, we reported net income attributable to GEO operations of approximately $254 million or $1.82 per diluted share on annual revenues of approximately $2.63 billion. This compares to net income attributable to GEO operations of approximately $32 million or $0.22 per diluted share on annual revenues of $2.42 billion for the full year 2024. In 2025, we completed the sale of our Lawton, Oklahoma facility for $312 million and the Hector Garza, Texas facility for $10 million. These 2 transactions resulted in a $232 million pretax gain on asset sales during the third quarter.

Additionally, during '25, we incurred a noncash contingent litigation reserve of approximately $38 million, which we disclosed last quarter. Excluding the noncash contingent litigation reserve, the gain on asset sales and extraordinary items, adjusted net income for the full year of 2025 was approximately $120 million or $0.86 per diluted share compared to approximately $101 million or $0.75 per diluted share for the full year 2024. Full year 2025 adjusted EBITDA was approximately $464 million, largely in line with the approximate $463 million reported for the full year 2024.

Moving to our outlook. We have issued our initial financial guidance for the full year and first quarter of 2026. We expect full year 2026 GAAP net income to be in the range of $0.99 to $1.07 per diluted share on annual revenues of $2.9 billion to $3.1 billion and based on an effective tax rate of approximately 28%, inclusive of known discrete items. We expect full year 2026 adjusted EBITDA to be in the range of $490 million to $510 million. We expect capital -- total capital expenditures for the full year of 2026 to be between $120 million and $155 million.

Our 2026 guidance includes an assumption for some modest organic growth in the second half of the year as well as the corresponding impact of start-up expenses. While the assumptions we have included in our 2026 guidance result in a temporary compression in our margins due to the impact of start-up expenses and the gradual nature of contract activations, we would expect our margins to normalize as growth begins to layer in, resulting in higher adjusted EBITDA run rates as we exit the year.

For the first quarter of 2026, we expect GAAP net income to be in the range of $0.17 to $0.19 per diluted share on quarterly revenues of $680 million to $690 million. We expect first quarter 2026 adjusted EBITDA to be between $107 million and $112 million. Compared to the fourth quarter of 2025 results, our first quarter 2026 guidance reflects higher payroll tax expenses, which are front-loaded in the beginning of every year, 2 fewer days during the period and no revenue or earnings assumptions for the skip tracing contract as we transition from the pilot contract that was implemented in the fourth quarter to the new 2-year contract. As a result of these factors, along with the assumptions we have made in our guidance related to start-up expenses, our first quarter 2026 guidance reflects a decline from our fourth quarter '25 results. However, we would expect subsequent quarters in 2026 to reflect more normalized results.

Moving to our balance sheet. We closed 2025 with approximately $70 million in cash on hand and approximately $1.65 billion in total debt. During the fourth quarter of 2025, we experienced a temporary increase in accounts receivable in part as a result of the federal government shutdown in October and November, which resulted in a temporary increase in our outstanding debt borrowings. In recent weeks, we have been able to significantly improve our accounts receivable position, further improving our liquidity, resulting in improvement in our current net debt balance to approximately $1.5 billion.

With the recent expansion of our revolving credit facility by $100 million, which we announced last month, we believe we have adequate liquidity to support our diverse capital needs. Additionally, with the prospect of a potential partial government shutdown in the future, we believe we have strong support from our lenders and creditors to address our liquidity should it be necessary. The significant achievements in 2025 have allowed us to make good progress towards strengthening our balance sheet as we enter 2026. As a result of these efforts, we achieved an annual reduction in interest expense of approximately $30 million in 2025 compared to the prior year.

We also believe we've made great progress towards enhancing long-term value for our shareholders through our share repurchase program, which we only initiated in August and was later increased to $500 million in November. As of year-end 2025, we had repurchased approximately 5 million shares for approximately $91 million, leaving approximately $409 million available under our current stock buyback authorization. We recognize the unique opportunity to enhance value for our shareholders through our share repurchases, given the current valuations of our stock, which reflects a historical low multiple despite the growth we have already captured and the significant growth opportunities we expect going forward. We believe that our strong cash flows will allow us to support all of our capital allocation priorities.

At this time, I will turn the call back to George for some closing comments.

Thank you, Mark. In closing, we're pleased with our strong fourth quarter results and the significant progress we've made in '25 towards meeting our financial and strategic objectives. Over the past year, we've captured new growth opportunities that could generate up to $520 million in annualized revenues, making it the most successful period for new business wins in our company's history. We expect '26 to be as active as '25, and we believe we have upside potential across our diversified business segments.

We have approximately 6,000 idle high-security beds that remain available and could generate in excess of $300 million in annualized revenues at full capacity. The continued shift in technology and case management mix and potential increases in counts under our ISAP 5 contract could also provide upside throughout 2026. We're also well positioned to continue to expand our delivery of secure ground and air transportation services for ICE and the U.S. Marshals Service. While the exact timing of government actions and including new contract awards is difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance long-term value for our shareholders.

Finally, as we announced this morning, our CEO, Dave Donahue, has informed GEO of his decision to retire at the end of February. I'd like to thank Dave for his more than 11 years of service to GEO and wish him well in his retirement. I will be returning to my previous position of Chairman and CEO under an amended employment agreement effective through April 2, 2029. I look forward to working with our management team and our Board of Directors and leading our company through what we expect to be a very active period with significant growth opportunities that lie ahead.

That completes our remarks, and we would be glad to take some questions.

[Operator Instructions] The first question today comes from Joe Gomes with NOBLE Capital.

George, I know in the past, you've said that if ICE wanted to get to that 100,000 bed level, it all couldn't come from the existing private that there would have to be alternatives out there. And with these warehouses, I guess kind of the question is, and I know you've talked about something that you are exploring, participating in. But do you see ICE's focus on this? Is that somewhat potentially behind the, I'll say, delay in awarding new contracts for currently idle facilities? Or have they kind of taken their focus off of that and moved over there to the warehouses?

Well, I think they're on a dual track to do both. But the warehouse initiative is large scale and is coast-to-coast and it's very complicated to find locations in areas that are suitable to their needs and would meet with the less political resistance. You got red states versus blue states issues that you got to solve through. But you're right, the private sector available bed capacity at this time will not get them to the 100,000. I estimate they need to do at least 20,000 if they want to get to 100,000, and they may very well want to go beyond 100,000 and do 20,000, 30,000, 40,000 new beds.

So we're looking at it, and we've been a long-term 4-decade partner with ICE, and we want to be supportive in playing a role in this new initiative and hopefully see our idle facilities be utilized because, as I've said, most of our idle beds are prior BOP facilities, which are high security facilities, which I think are very well suitable to their needs.

And on ISAP, yes, the populations have been slightly declining here over the past year, about 180,000 as you mentioned. And then the new contract, they talk about up to funding for, I think, up to like 360,000 in year 1 and 460,000-some-odd in year 2. In the past, you did hit that 370,000 type of level. If ICE came to you and said, "Hey, in 2026, we want to start really increasing the number of people under ISAP to that -- get up to that 360,000 level." Are you set up that you could move quickly and get up to those levels?

Absolutely. We've made the investments on all of our devices from ankle monitors to wrist-worn devices to the phone apps that we can reach the levels you described that were included in the procurement as well as go beyond those levels.

Okay. Perfect. And then one last one for me. Looking at the stock price, and it's something that there's a lot of discussion about but you hit a new 52-week low today, and you guys have done a great job on the buyback. But given where the stock is, is it possible or something to consider maybe even getting more aggressive on the buyback at these levels?

Joe, as you said, I think we've done a great job. We launched our stock purchase program in August, late August, and we were able to buy back over 5 million shares in a short period of time. And so our focus is to lean in hard when there are opportunities, as you just mentioned. And I think we've been very diligent about making sure that we manage our liquidity and take advantage of the stock buyback program when we can. And so we're going to lean into it hard. We're looking at it, and we'll continue to do that. But we're -- as I said, we've done a good job, and we'll continue to look at buying back stock and create some value for our shareholders. But I think that's what we can say at this point.

The next question comes from Matthew Erdner with JonesTrading.

Yes, I'd like to kind of touch on the monitoring as well. You mentioned the investments that you guys have made there kind of on the forefront. But I see the margin kind of coming down to around 42.5% from a little under 50% quarter-over-quarter. And I apologize if I missed it earlier but is there a reason as to why the margin is compressing? Or is that just the mix shift change?

It's primarily the mix shift change that is related to the reduction in the phone apps, which we have had in the past, and those have reduced. What is increasing significantly are the ankle monitors. There's a desire to have a higher level of security for these individuals and as well as increased case management services. So the top-level numbers kind of obscure what's happening below those numbers. There's a mix change that's occurring that goes beyond the top-level numbers because the 100,000-and-some people that get the case management services is really on top of the 180,000 participants. It's just another billing mechanism within the 180,000.

So it's I don't know that the 180,000 is an accurate metric to be using anymore when we have different -- they call them claims and these are billing mechanisms of which there are 40 within that program. And they're kind of all amalgamated into that 180,000, but it's -- that's the top level number. But below that number, there's 40 different pricing that support the services that are rendered to the 180,000 participants.

Got it. And then I guess on a go-forward basis, I guess, assuming that, say there's the 360,000 in year 1, I guess what would the margin be if say that 360,000 was all on ankle monitors versus it's kind of a half split between SmartLink and ankle monitor?

Well, the ankle monitors, I believe, is our most expensive monitoring devices. So the margins would substantially increase because of that. And we are -- I think we are the largest providers of ankle monitors in the world. We make all of our devices in Boulder, Colorado, and we are -- we have properly resourced that company, which is called B.I. to scale up to whatever level services ICE wants, whether it's a few more hundred thousand or beyond that. We're ready to go.

Got it. Yes, that makes sense. And then last one for me and then I'll step out. In the guidance, it has about 134 million to 136 million for end of year share count. If you guys repurchased the same amount that you did in the fourth quarter, you'd already be at the low range of that target. Should we expect you guys to be a little more aggressive there? Or how are you thinking about capital allocation throughout the year?

Again, we're going to -- we've talked about in the past, we're going to look at the capital allocation process. We're very diligent about allocating capital to our growth needs, addressing paydown of debt and returning capital back to shareholders. And as you indicated, when the stock price goes low, there's opportunities for us to jump in the market and be more aggressive. And I think if you look at the last 5 months, we've done a pretty good job with that.

The next question comes from Greg Gibas with Northland Securities.

First, with the midpoint of guidance set below your Q4 EBITDA run rate, it seems conservative when considering uplift in '26 from a number of items like ISAP cost savings that I think you previously said are $8 million to $12 million Adelanto cost normalization, ongoing mix shift in ISAP tech and then those incremental Florida contracts. Is that fair? Or is there some offset to take into account there?

Greg, I wouldn't say there's nothing that we're aware of in the business that would create a big offset to that. I think we're starting out here. I think we're prudent as it relates to the guidance that we've provided here. The skip tracing contract that we talked about that we won, that's coming off a protest. So we don't think it will contribute much here in the first quarter. But we're starting the year. We're executing well. We've factored in some modest growth, particularly as it relates to ISAP, as George talked about, the mix shift to GPS and higher case management services. We're looking at continued expansion and growth around our Marshals transportation contract and ICE air.

We're going to factor -- we factor in some skip tracing later in the year. So it's earlier in the year. I think we've done a good job of balancing the risks and opportunities that we've looked at our forecast, and as you indicated, we know what our run rate was in the fourth quarter. But we think at this point in time, it's a well-balanced approach to guidance. And as the quarters unfold and we continue to pursue these growth opportunities, we'll have opportunities to update that our guidance.

Great. And I wanted to touch on your commentary around participating in the process. I think you said on the potential warehouse managed-only opportunities. Wondering if you could maybe add any color there and kind of what phase those negotiations or bidding that process is in?

Well, we have a relationship with the prime contractor that's listed as eligible to participate in that procurement. And we're looking at some sites, predominantly in the Sun Belt states, predominantly in red states to be very frank about it. So we want to be careful as to where we extend our financial and operational commitments.

The next question comes from Raj Sharma with Texas Capital Bank.

Good quarter. Congratulations. I had a question on the guidance. Again, just trying to understand that fiscal '26 does seem that the guidance seems to have been sort of taken down from just about a quarter ago. Even if the facilities get activated at pace and even outside of new activations plus the ISAP dynamics in the ankle monitors, it seems like the numbers are conservative. And are you incorporating -- and what sort of start-up expenses are you incorporating? Can you give more color on that? And I know you've talked about this earlier too. I just wanted to understand if you're being more conservative than not.

Well, again, I think I tried to talk a little bit about the guidance with Greg's question a few moments ago. But the truth is we're -- we still are incurring some level of start-up expenses on the activation of our idle facilities, particularly on the West Coast. So that's creating a little bit of headwind as we move into the year here. But as I said earlier, we expect the back half of the year to really normalize, and we expect to see some expansion of our margins as we get into the back half of the year. So I would say this, there's nothing inherently going on from a business standpoint. Fourth quarter was helped a little bit by the skip tracing contract, and we talked about the fact that we haven't built that into our first quarter forecast. So as I said earlier, I think it's a balanced and prudent approach, and we'll look to update things as the business progresses over the coming quarters.

Got it. Got it. And then just the second -- my next question is also you kind of talked about this. So there were no new activations in Q4. Was that sort of government shutdown or year-end related? And also, there's been a lot of talk of warehouses and given -- but given -- can you help us understand a little bit, given your favorable history with ICE and the low to reasonable sort of cost per detention bed, shouldn't all your idle facilities be reactivated soon for ICE to meet their detention goals?

Well, you're correct that there have been no new awards but we are in active discussions with ICE about all of our facilities. They're aware of where the facilities are. They're assessing the facilities to their needs. So fourth quarter did have the shutdown and did have the conceptualization, let's say, of this new warehouse initiative. All that takes time and the government, I guess, slowed down is a fair way of saying that in the fourth quarter and may be a bit delayed if there's another shutdown. You can't say what exactly is going to happen. But we do expect more activations in '26 and more activity that will drive our financial results.

Right. Yes. I just wanted to kind of understand that given the stock price reaction and trying to make sense of what the concerns are. And so I wanted to understand that even outside of this talk of warehouses, it's fairly certain that the pace of reactivations should continue given where ICE goals stand and right? And so you're saying, yes.

Yes, we're in discussions. We're hopeful of awards. And these are high security facilities of which I believe are more desirable by ICE compared to lower security facilities. And so as that plays out, we think there will be more awards sometime this year.

The next question comes from Brendan McCarthy with Sidoti & Co.

I wanted to ask a follow-up on the facility reactivation side. I know in recent quarters, we had discussed certain headwinds around the fall government shutdown, maybe ICE staffing challenges and then the DHS policy around contract approvals. Do you still sense that those headwinds are in force today? Or what's your kind of sense around how that's impacting contract or facility reactivations?

Well, I think it's similar to what I just discussed. I think there was a slowdown because of the government shutdown, the time spent on conceptualizing this warehouse program. But as I said, we are active discussions with ICE about our available facilities and their high security, they're high quality and they're -- I think, comparatively speaking, they're very high quality compared to any other facilities in the country actually because they were formerly Bureau of Prisons facilities. Several of them are mostly cellular type facilities, not dormitories. And I think they're well suited for ICE needs. And we just continue to have discussions with ICE about those things and not only just the facilities but what physical plant changes they want to those facilities, all of which takes time and has to be evaluated by different sections of the department. You have the security section of the department. You have the health services section of the department, you have transportation, putting -- standing up a new facility is a very complicated process.

And particularly now as the objectives of ICE has expanded. They've hired another 10,000 staff. Those staff have to go somewhere. And in part, they will be going at to these facilities around the country. There's been a request to add more space, I think, at most of our facilities actually. So that is part of the discussion, providing office space, courtroom space, transportation space, expanded health care space. All those things take time to be worked out, and that we hope will eventually lead to more awards.

Understood there. I appreciate the detail. And I wanted to ask a question on the skip tracing contract. I think you mentioned that contract is included in guidance, likely to have an impact in the back half of 2026. Just curious as to what kind of case volume assumptions you make with that contract? And maybe if you could provide detail on the margin profile there.

Brendan, we're not going to get into margins. We don't go to that level of specificity on these types of calls here. So we won't talk about that. And as George indicated, it's the award, it was a 2-year award for $121 million, approximately $60 million per year. We talked about the fact that the protest just was removed. We don't anticipate any activity on that here in the first quarter. We expect there to start to ramp up in the second quarter but we expect that mainly to occur in the back half of the year. And so as that -- it's a new program for us. It's one that we don't have a lot of history with. from a projection standpoint. So we're working closely with our client on that to understand their needs and help support them.

So again, we've factored in some modest assumptions as it relates to this. And then as we start to execute with our client, I think we'll be able to provide more specifics on that in the coming quarters.

Got it. And lastly, on capital allocation. I know that you mentioned net debt has stepped down to about $1.5 billion in recent weeks. What's your sense for how much debt you may look to pay down in 2026 just regarding your priorities?

Yes. Again, we're going to focus on continuing to pay down debt. The goal here in 2026 is to get our net debt below 3x levered, right? And so we believe as we move through the course of the year, we'll be able to achieve that goal.

The next question comes from Kirk Ludtke with Imperial Capital.

You mentioned that ICE was looking to consolidate those 225 facilities, mostly short-term jail facilities. There's a lot of people in those -- as you know, a lot of people in those facilities. I'm just curious, what's the motivation there? Is it cost? Is it that those facilities don't do a good job? Or what -- is there any background you can share?

Well, the complexity of overseeing 225 facilities is enormous. I think just a human preference would be to have fewer facilities. But they need some level of access because interior ICE enforcements occur throughout the country, and they need to have a relationship with county jails throughout the country, and that's what most of those things are. So they have a few beds here, a few beds there. But those people are in a short-term detention confinement. And most of them will eventually go to an ICE processing center for evaluation of their cases.

And most of them will be then deployed outside the country. But they have to go through a process, which typically does not occur at the county jail level. They need to go to a formal ICE processing facilities. And of course, the federal government would prefer to enjoy economies of scale of having larger facilities rather than smaller facilities, which would be a force multiplier in the ability to process and detain and deport approximately 100,000 people per month.

Yes. No, that all makes sense. And I'm sure you would prefer to utilize your own beds first before you facilitated additional government-owned capacity. But the contracts to just operate the facilities, those are pretty attractive contracts, aren't they? I mean, in terms of ROI, that's operating those facilities could be a pretty good business, right?

Are you speaking of our facilities or the warehouses?

The warehouses, just managing facilities.

I think it's a reasonable opportunity that we're assessing. We've only had one experience in renovating a warehouse, and that occurred maybe 30 years ago. So it's more complicated than you may think. As far as the physical plant renovations of a warehouse to get it operational, it's complicated. And then the operational implications of how you manage such a facility, particularly a large-scale facility is going to be concerning because our prior experience was only on a -- I think it was like 200-bed facility.

What is being discussed are 500-bed facilities, 1,500-bed facilities and facilities of several thousands of beds, 7,000, 8,000 or 9,000 beds per facility, which is an enormous capacity and has to be carefully evaluated as to how you would do that. Because those are larger numbers than any in existence now. I think the largest facility is probably 2,500 beds, not more than 3,000 beds in the country.

This concludes our question-and-answer session. I would like to turn the conference back over to George Zoley for any closing remarks.

Well, thank you for participating in today's call, and we look forward to addressing you on the next one.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to The GEO Group Third Quarter 2025 Earnings Call. [Operator Instructions] 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. Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group's Third Quarter 2025 Earnings Results. With us today are George Zoley, Executive Chairman of the Board; Dave Donahue, Chief Executive Officer; and Mark Suchinski, Chief Financial Officer. This morning, we will discuss our third quarter results as well as our outlook. 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 the 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-K, 10-Q and 8-K reports.

With that, please allow me to turn this call over to our Executive Chairman, George Zoley. George? .

Thank you, Pablo, and good morning to everyone. Thank you for joining us on our third quarter earnings call. During the first 3 quarters of the year, we believe we've made significant progress toward meeting our financial and strategic objectives. Since the beginning of 2025, we've entered into new or expanded contracts that represent over $460 million in new incremental annualized revenues that are already under contract and are expected to normalize next year.

This represents the largest amount of new business that we have won in a single year in our company's history. We've entered into new contracts to house ICE detainees at 4 facilities totaling approximately 6,000 beds, which include 3 company-owned facilities where we announced in the first half of 2025 the 1,000-bed Delaney Hall New Jersey Facility, the 1,800-bed North Lake Facility in Michigan and the 1,868-bed D. Ray James Facility in Georgia and, more recently, the 1,310-bed North Florida Detention Facility, which is a state-owned facility where we are providing management services under a joint venture agreement that we announced in early October.

The Florida contract arrangement demonstrates GEO's ability to provide management services through alternative solutions like the State of Florida's partnership with the federal government. Additionally, during the third quarter, we reactivated our 1,940-bed Adelanto ICE facility in California, which was previously underutilized due to COVID-related court cases.

On a combined basis, these 5 facilities are expected to generate more than $300 million in incremental annualized revenues at full occupancy as they normalize their financial contributions next year. These facility activations have increased our total ICE capacity to over 26,000 beds, and our current census is over 22,000, which is the highest ICE population we've ever had.

In addition to these facility activations, we are reviewing the physical plant at 20 of our ICE facilities to determine our capacity to expand the office space for additional ICE staff and their expanding mission. Our Delaney Hall and D. Ray James Facility will have added ICE office space as part of our new contracts, and we have submitted a similar proposal for Moshannon Valley in response to a request from the agency. This effort is representative of our long-standing partnership with ICE and our company's flexibility in adjusting to and addressing the ever-changing needs of ICE.

With respect to our secure transportation, we have significantly expanded our footprint for ICE and the U.S. Marshals over the course of 2025. Earlier this year, we signed a new 5-year contract with the U.S. Marshals for the provision of secure transportation services covering 26 federal judicial districts and spanning 14 states. Throughout the year, we've executed new or amended contracts to expand secure ground transportation services at 4 existing ICE facilities and at our 3 new recently activated ICE facilities. Additionally, the services we provide under our ICE air support contract have steadily increased throughout this year. On a combined basis, this new transportation business represents approximately $60 million in expected incremental annualized revenues.

We are encouraged by the growth opportunities at the state level as evidenced by the 3 recently manage-only contract awards from the Florida Department of Corrections, including 2 facilities we do not currently manage, which are expected to generate approximately $100 million in incremental annualized revenues beginning in July of 2026.

Of particular importance, we are very honored to have been awarded a new 2-year contract for the ISAP 5 program at the end of September. We believe this significant contract award is a testament to the high-quality electronic monitoring and case management services our wholly owned subsidiary, BI, has consistently delivered for over 20 years. There are presently approximately 7.6 million immigrants on the non-detained docket with approximately 82,000 enrolled in the ISAP program at this time.

As part of the ICE's alternative-to-detention, or ATD system, many immigrants are placed in the Intensive Supervision Appearance Program, ISAP, as a sub-program within ATD. It's mainly used for people ICE considers a higher flight risk or who have been pending asylum or removal cases but are still allowed to live in the community. The program relies on several forms of surveillance. Some are required to wear GPS ankle or wrist monitors that track their movements in real time. Others are enrolled in SmartLINK mobile app, which relies on facial recognition, voice ID and GPS to confirm a person's location during check-ins.

Under the previous 5-year ISAP contract, the participant count started at 91,000 individuals and thereafter doubled into net 183,000 individuals. The present ISAP 5 participant count is more than 182,000, but the new contract includes pricing for 361,000 participants in year 1 and 465,000 participants in year 2. In order to further assure our success in the rebate competition and provide lower unit cost for further ISAP growth, we reduced our pricing, as in the past, on a variety of services, which has resulted in a new financial baseline, which will later be discussed by Mark.

We are able to implement this strategy by identifying staffing efficiencies through the program services along with the continued development of less costly, new-generation monitoring devices, which also required margin compression. We are optimistic that ISAP ramp-up could begin early next year. GEO has the capability in monitoring devices and case management services to achieve those significantly increased participation levels and far beyond if desired by ICE. But of course, we cannot provide definitive assurance of future ISAP participation levels, which are determined by ICE management.

And as I said on our previous call, the focus of ICE at this time has been towards the increase in detention capacity, in which we are participating. But what we have seen is a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors and a steady decrease in the less intensive and lower-priced use of phones or phone apps. This new policy seems to be consistent with the objective of more aggressive supervision of the 7.6 million immigrants on the non-detained docket.

As the world's largest service provider of electronic monitoring devices, we remain optimistic in the importance and growth potential of the ISAP 5 contract. Going forward, we expect to be able to capture additional growth opportunities. We believe the federal government's objective continues to be to scale up immigration detention to approximately 100,000 beds or more from the approximately 60,000 beds ICE is currently utilizing. This objective of scaling up to 100,000 detention beds is a 270% increase from the 2024 average of 37,000 beds.

However, the pace of new detention contracts has been slower than anticipated, which we believe is possibly due to three factors. First, as has been reported in the media, the Department of Homeland Security has implemented a policy that requires Homeland Security Service Secretary to review and approve all contracts above $100,000, which is time and staff intensive. We have been intently cooperating in this financial and staffing review process towards providing assurance that the government is receiving best value at GEO facilities and services.

Second and more recently, the government shutdown has likely delayed the award of new contracts. During the government shutdown triggered by a lapse in appropriations, federal agencies are generally careful about making new contract awards unless the award is related to an accepted activity or is funded by a source other than the regular appropriations.

Third is the need for ICE to have more staff to carry out its enforcement efforts, which is indicated by ICE's new recruitment program to double its employees from approximately 10,000 to 20,000, which is also time and staff intensive.

Following the resolution of the current government shutdown, we believe ICE will have ample funding to support its priorities. Not only will ICE receive annual appropriations baseline of approximately $8.7 billion but the agency also has access to $45 billion in incremental funding for detention services, which is available through September 30, 2029.

While the exact timing of government actions including our new contract awards is difficult to estimate, we believe that our remaining idle facilities are likely to play an important role in supporting the objective of increasing overall detention capacity. We have approximately 6,000 idle beds at 6 company-owned facilities, which remain available. Most of these facilities were formerly contracted to the U.S. Bureau of Prisons and are high security, which makes them ideally suited for the current needs of the federal government.

On a combined basis, these 6,000 beds could generate more than $300 million in additional incremental annualized revenues. We also believe that increasing detention capacity to 100,000 beds or more will likely require ICE to seek alternative solutions in addition to traditional hard-sided facilities. Based on our best estimate, the current beds available by the private sector at traditional hard-sided facilities would likely provide ICE capacity for approximately 80,000 beds, thus, scaling up to 100,000 detention beds or more will likely require additional partnerships with states or additional temporary soft-sided facilities on military bases or other sites.

We will be exploring opportunities to participate in these new government sites, whether state sponsored or procured by the military. Meanwhile, our focus is also on the activation on our remaining idle facilities. As evidenced by our recent joint venture agreement in Florida, we believe GEO is well positioned to pursue other state partnership opportunities that increase detention capacity for ICE.

Finally, we have and will continue to evaluate the potential acquisition or leasing of third-party-owned facilities, and we've identified approximately 5,000 combined beds that could be added using several options of temporary and permanent facilities at several of our existing ICE sites. We are also pursuing additional diversified opportunities in the field of mental health services, which we exited approximately 13 years ago when we became a REIT and subsequently de-REITed. We are currently participating in a procurement in the State of Florida for the management contract at the South Florida Valuation Treatment Center, which we expect to be awarded in Q1 of next year.

Our goal with all these efforts is to place GEO in the best competitive position to pursue available growth opportunities. In addition to the steps we have taken to capture quality growth opportunities, we have made significant progress towards strengthening our capital structure by reducing outstanding debt, deleveraging our balance sheet and enhancing shareholder value through capital returns.

In 2025, we reduced our total net debt by approximately $275 million close in the third quarter with approximately $1.4 billion and total net debt with a total net leverage of approximately 3.2x adjusted EBITDA at this time. Our debt reduction efforts were boosted by the successful sale of the Lawton Oklahoma facility for $312 million or $130,000 per bed, which was a transformative event for our company, allowing us to significantly deleverage our balance sheet and launch a stock buyback program ahead of our prior expectations.

Approximately $60 million of the Lawton facility sale gain was used to purchase the 770-bed Downtown San Diego California Facility that we've been operating for 25 years for the U.S. Marshals Service. During the third quarter, we repurchased approximately 2 million shares for approximately $42 million under our newly launched buyback program. Our total shares outstanding to approximately $140 million at the end of the third quarter.

Given the intrinsic value of our assets and already captured expected future growth, we believe that our current equity valuation offers a very attractive opportunity. To this end, our Board of Directors has increased our stock buyback program authorization by $200 million, increasing the total authorization to $500 million and extending expiration date to December 31, 2029. We plan to execute our stock buyback program opportunistically, balancing it with our growth capital needs and our objective to reduce debt and deleverage our balance sheet.

At this time, I will turn the call over to our CFO, Mark Suchinski, to review our financial highlights and guidance.

Thank you, George. Good morning, everyone. I am happy to report that we had a very solid third quarter. For the third quarter of 2025, we reported net income attributable to GEO of approximately $174 million or $1.24 per diluted share on quarterly revenues of approximately $682 million. This compares to net income attributable to GEO of approximately $26 million or $0.19 per diluted share in the third quarter of 2024 on revenues of approximately $603 million.

During the third quarter of 2025, we completed the sale of the Lawton, Oklahoma Facility for $312 million and the Hector Garza Texas facility for $10 million. These two transactions resulted in a $232 million gain on asset sales during the third quarter. Approximately $60 million of the Lawton Facility sale was used to purchase the 770-bed Downtown San Diego, California facility that we have been operating for 25 years for the U.S. Marshals Service.

Additionally, during the third quarter of 2025, we incurred a noncash contingent litigation reserve of approximately $38 million in connection with a legal case in the state of Washington involving claims of individuals who participate in the voluntary work program while in ICE detention. The Ninth Circuit Court of Appeals has ruled that the ICE volunteer detainees are entitled to state minimum wage payments but stayed their ruling pending GEO's appeal to the U.S. Supreme Court.

The Ninth Circuit of Appeals ruling is in stark conflict with other federal court rulings on individuals providing work while in confinement. No company has ever paid state minimum wages to individuals working in confinement facilities. While we are appealing the case to the U.S. Supreme Court, due to accounting rules, we recorded this noncash contingent litigation reserve during our most recent third quarter.

Excluding this noncash contingent litigation reserve, the gain on asset sales and other items, adjusted net income for the third quarter of 2025 was approximately $35 million or $0.25 per diluted share compared to $29 million or $0.21 per diluted share for the prior year's third quarter. Adjusted EBITDA for the third quarter of 2025 was approximately $120 million, up from the approximately $119 million reported for the prior year third quarter.

Beginning with revenues. Quarterly revenues in our owned and leased secure service facilities increased by approximately 22% year-over-year driven by the activation of our new ICE contracts, which drove the census across our contracted ICE processing centers to an all-time high. Revenues for our nonresidential contracts increased by approximately 10% from the prior year third quarter. Revenues for our managed-only contracts increased by approximately 8% from the prior third quarter. Revenues of our electronic monitoring and supervision services and for our reentry centers were largely unchanged from the prior year third quarter.

Now let's turn to our expenses. During the third quarter of 2025, our operating expenses increased by approximately 15% due to the start-up of new contract awards and increased occupancies compared to the prior year quarter. Our G&A expense for the third quarter of 2025 increased from the prior third quarter, in part due to the reorganization of the senior management team at the end of last year, higher employee-related benefit costs and support for the revenue growth from our new contract awards.

Our third quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $7 million as a result of the reduction in our net debt. Our effective tax rate for the third quarter of 2025 was approximately 25%.

Now let's move to our outlook. We have updated our financial guidance for the fourth quarter and full year 2025. Our updated guidance for the fourth quarter incorporates a new reduced contract pricing for ISAP 5 which, as George mentioned, is being favorably impacted by a steady shift in technology mix as well as higher intensity of case management services and the potential for higher volumes, all of which could improve the economics of the new contract.

Based on these variables, the federal government assigned an estimated value to the 2-year contract of over $1 billion. Because the exact scope and timing of the government actions are difficult to estimate and are outside of our control, we have not included any assumptions with respect to favorable mix shift or census growth in the ISAP contracts in our 2025 guidance. Additionally, we are in the process of implementing several cost mitigation measures for the ISAP contract by the end of this year, which we expect to result in cost savings of approximately $2 million to $3 million per quarter beginning in 2026.

The fourth quarter was also impacted by additional start-up costs at the Adelanto California Facility, which has required the hiring of 179 additional staff due to its reopening and the increase of overtime costs due to new staff awaiting their final ICE clearance before being allowed to perform their responsibilities. We expect both issues to normalize in 2026. As a result, we expect fourth quarter 2025 GAAP net income to be in the range of $0.23 to $0.27 per diluted share on quarterly revenues of $651 million to $676 million. We expect fourth quarter '25 adjusted EBITDA to be between $117 million and $127 million.

Taking into account our updated fourth quarter guidance, we expect full year 2025 GAAP net income to be in the range of $1.81 to $1.85 per diluted share, including the $232 million gain on the sale of the Lawton Oklahoma and Hector Garza Texas facilities. We expect full year 2025 adjusted net income to be in the range of $0.84 and to $0.87 per diluted share on increased annual revenues of approximately $2.6 billion and based on an effective tax rate of approximately 25%, inclusive of known discrete items.

We expect full year 2025 adjusted EBITDA to be in the range of $455 million to $465 million. We expect total capital expenditures for the full year of 2025 to be between $200 million and $205 million, which includes our previous announced $100 million investment to enhance our ICE facilities and services and the approximate $60 million for the purchase of the Western Region Detention Facility. With the already announced contracts that are expected to normalize next year and new opportunities that are in discussions, we could see a path to approximately $3 billion in annual revenues in 2026.

Now let's move to our balance sheet. We closed the third quarter of 2025 with approximately $184 million in cash on hand and approximately $143 million in available capacity under our revolving credit facility. We believe we have ample liquidity to support our working capital needs during the current government shutdown. We have received verbal support from several of our banks to provide additional liquidity should the government shutdown continue for a prolonged period of time.

We also believe we've made significant progress towards deleveraging our balance sheet. Year-to-date, we've reduced our net debt by approximately $275 million, closing the third quarter with total net debt of approximately $1.4 billion and total net leverage of 3.2x adjusted EBITDA. As a result, we've achieved an annualized reduction in interest expense of over $25 million. Our debt reduction efforts were bolstered by the successful sale of the Lawton Oklahoma facility for $312 million during the third quarter. We believe this important transaction is representative of the intrinsic value of our real estate assets, totaling 50,000 owned beds, and it allowed us to significantly deleverage our balance sheet and begin to return capital to our shareholders.

During the third quarter, we repurchased approximately 2 million shares for approximately $42 million under our recently launched stock buyback program, which our Board has increased by $200 million, bringing the total authorization to $500 million. We expect to continue to execute our buyback program opportunistically within the covenant requirements of our debt agreements. We remain focused on disciplined allocation of capital to enhance long-term value for our shareholders, and we believe that our strong cash flows will allow us to support all of our capital allocation priorities.

At this time, I will return the call back to George for some closing comments.

Thank you, Mark. In closing, we believe we've made significant progress toward meeting our strategic objectives. So far in 2025, we've announced new or expanded contracts that are expected to generate more than $460 million in new incremental annualized revenues, which will normalize next year and likely achieve approximately $3 billion in total company revenues for 2026. The amount of new contracted revenues is the largest in our history of our company.

Going forward, we expect to be able to capture additional growth opportunities. We have approximately 6,000 idle high-security beds that remain available, which could generate in excess of $300 million in annualized revenues if fully activated. With the award of the new 2-year ISAP contract and the investments we've made to stock up on the inventory of GPS tracking devices and development of new generation devices, BI is well positioned to respond to the future demands under the ISAP 5 contract. We are also well positioned to continue to expand our delivery of secure transportation services for ICE and the U.S. Marshals.

While the exact timing of government actions, including new contract awards is difficult to estimate, as a management team, we are focused on maintaining a level of readiness to successfully pursue and capture future growth and continuing to allocate capital to enhance value for our shareholders.

That completes our remarks, and we would be glad to take questions. Thank you.

[Operator Instructions] Our first question comes from Joe Gomes with NOBLE Capital.

Wanted to start off here, I think there's a big question hanging out there with the government shutdown, with the ICE focus on hiring the extra 10,000 people that the rate of ICE population detentions has not been as robust here as originally anticipated. Just was wondering what you guys are seeing out there. Is it flowing at what your expectations were? Or has it come in a little less than what you may have been previously expecting given the current status there with the federal government?

It's obviously gone slower than we previously expected. And our existing facilities are at almost full capacity and they're churning out deportations almost at the rate of approximately 100% of their capacity per month. So we've never seen anything like this before. So our existing facilities are on our full throttle. We were expecting additional contract awards, but there's a need for additional ICE staff to support additional facilities. That's why they're trying to recruit 10,000 staff.

Well, as I said in my remarks, it takes a lot of time and staff-intensive activities to recruit, hire, train and bring on board that ICE staff to support new facilities around the country. We think our idle facilities totaling 6,000 beds are ideal high-security facilities that are available. But just looking at a combination of factors of the government shutdown, the need for additional ICE staff, those factors have caused the delays that we hope will be concluded by the end of the year, if not the end of this month.

Okay. George, I really appreciate the color there. On the ISAP, congrats on the contract win. Understand there's going to be some puts and takes there, some changes. But historically, if you look at that contract, it's run roughly about a 50% NOI margin. Do you think even with all these puts and takes that, that stays at least at that level? Or do you think there will be contraction in that NOI margin?

Well, we really don't discuss our margins by business unit to that level of granularity. We've made a pricing cut to be competitive in this last rebid as we have done, I think, in 2 or 3 times previously. So every time there's a rebid of the ICE contract, there's a lot of competition. And we've reduced our unit pricing and there's 40 different units in that pricing.

So we took a hard look and we identified cost savings opportunities at the corporate level regarding staff in field level, cost savings on devices, the identification new-generation devices on a less costly basis. So all of that was combined to present the government with the best value and winning the contract. Now the count, as I've said, has been fairly stable, which is a little disappointing obviously. But the mix of monitoring devices is leading towards more intensive devices that cost a bit more and more intensive supervision of case management services regarding the existing population.

That will be applied to the increasing population as priced in years 1 and year 2. Remember, year 1 is priced to double the existing capacity and year 2 is almost tripling. So that remains to be seen. It's up to the government as to how do they get to those levels. But right now, I think we've been fairly consistent in saying the focus has been on increasing detention capacity, and that's where the activity has been. And ISAP will have to wait, as we've said, probably until early next year before the actual participation levels increase?

Joe, it's Mark. I would just add that our electronic monitoring business has been and will continue to be our highest margin business. We publish that quarterly. We're fully transparent about that. And as George indicated, we've made some adjustments, but we're working on the cost side of things. And we expect those actions to be complete by the end of the year and reap those benefits in 2026.

Okay. And then one more, if I may. Staffing has always been a challenge especially when you're opening so many idle facilities at one time. I was just wondering how are you guys looking at or seeing the ability to staff up the facilities that you're opening.

Great question. I think we've been targeting hiring 1,000 or 1,500 additional staff this year, which is an enormous amount, comparably speaking. And that's been a very costly feature that has impacted our earnings this year, which I don't think a lot of the new shareholders are aware of the impact. When you hire people, you have to recruit them, you have to do background checks, you have to put them in training.

All of that is a cost that's predominantly borne by us and not the client until the facility opens and normalizes. So almost all of those staff are paid according to Department of Labor determined wages. And so I think we're having a good shot at finding the people, but it takes a long time to get them through the ICE clearance process. And that's a costly weight for us.

The next question comes from Jason Weaver with JonesTrading.

This is Matthew Erdner on for Jason. So going back to the ISAP, I just kind of want two clarification questions. First, the $1 billion, that is over the 2-year term period. And then I just want to make sure I get the numbers right on the scale up. It was, I believe, 361 you said in the first year and then 465 for year 2.

Yes.

Okay. And then as it relates to that, should we kind of expect that 1/3 of that revenue trickles through over '27 with the remainder kind of coming through in 2027 as that program continues to scale?

Well, as we indicated, we responded to the government's request. And the government had in the RFP identified those counts for us to respond to. And so we -- today, the accounts are at 182,000. We really -- we don't know exactly the exact timing of the change in ISAP participants over time. But I think, as George has articulated, their focus right now is on detention. And once we get to 100,000 beds, the pivot will be to ADT.

So I think it's hard for us to predict the exact timing of that. But what we do know is that the RFP had allocated significantly higher funding and participant counts than as compared to where we are today. And so I think that's what we know.

The contract term will go into 2027, obviously. That's part of the answer to your question. The exact counts are beyond our control. They are identified in the pricing procurement document that everybody had to bid on. So the counts are as we've discussed. And it remains to be seen if we achieve or exceed those counts because as I said in my comments previously, that the count on the previous ISAP 4 award started at 91,000 and ended at 183,000. If that's any indication of the future, I think we're going to be on solid ground.

Got it. That's helpful. And then touching on the additional growth opportunities and alternative solutions that you guys said are still on the table. It's nice to see you guys working with the State of Florida. How big is that opportunity set? And how many states are looking for these kind of management services as ICE continues to try to look for additional beds?

There are several which we can't name at this time. But they're generally beds that would be part of their correctional system, idle beds or refurbished beds. And that number typically in the hundreds, possibly getting up to 1,000 beds per location that we're aware of. But we're not fully privy to what DHS is doing or who they're talking to, obviously.

Got it. And then looking at that from kind of a margin perspective, would that kind of fit in with the historical managed services margins?

It's actually a bit better than that because the staffing levels for this kind of population is different than what we typically see at our state facilities that were managed-only. This is a higher security population requiring more staffing, and we make a margin on the staffing.

The next question comes from Greg Gibas with Northland Securities.

I wanted to ask, I guess, regarding your commentary on the mix shift within the ISAP program. Can you confirm that, that mix shift toward more intensive uses is currently happening but not included in your Q4 guidance? I guess, what assumptions with mix are you implying by guidance?

It's Mark. Let me address that. As George said, we are seeing a shift of -- a movement towards less usage of an app or a phone and higher purchase and counts using our ankle bracelets. And so what we've seen to date has been a slow and steady growth on the ankle bracelets, which are higher cost and more intensive as it relates to the case management services. And to a certain degree, we've built that in.

What we're saying is we only have a couple of months left in the year. We've factored that into our overall assumptions. But over the coming next 2 years, we're expecting the continued shift towards the higher intensive supervision, which is the higher cost services from a technology device standpoint as well as a case management. So the point we're making is we think there's some opportunities as we've rebid that contract both on the mix shift and some of the cost actions that we're taking to mitigate things.

Obviously, the new pricing went to effect on October 1. It's going to take us a little while to implement the actions that we have and that had an impact on the fourth quarter, but we're working hard to push through that and potentially take advantage of the shift towards the more intense services. And we think that would continue into 2026. And we'll know better when we provide guidance in February of next year.

Got it. That's helpful. And nice to see the increased share repurchase authorization. With where the stock is trading now, could you maybe discuss your thoughts on leaning into it more or considerations of an acceleration of repurchase activity?

Well, we're aligned. We think our share price is way undervalued, right? George talked about our business. When we look at our profitability and our cash flows and the growth that we've achieved here, we think our stock price is significantly undervalued. That's why we launched our share purchase program with George's support and the Board. With where the stock price is, we had another dialogue with our Board at our Board meeting and we increased the size of that.

And we're confident of our cash flows over time here, and we're leaning into this. I think earlier in the year, we talked about shareholder returns. We talked about doing that once we got less than 3x levered. We're over 3x levered but we're leaning into it, and our banks are supportive of that. So we're going to lean into it. We're going to, as George said, be opportunistic about it and balanced. But where our stock price is, we're going to continue to pursue the buybacks and take advantage of the lower stock price and our cash flows and our ability to go do that.

Got it. Makes sense. And I know timing, like you said, is difficult to predict. Just, I guess, referring to your prepared remarks, you mentioned being optimistic on ISAP ramping up early next year. I guess I would just ask, like what leads you to expect that or support that expectation? Is there anything new you've heard since maybe last quarter?

Well, there's millions of people that are on the non-detain docket, and there's going to be a desire to provide more clarity as to where they are, what stage they are in with respect to their hearing process and making sure they get to their hearing and, if they're not qualified to be in the country, to deport them. So I think those are all publicly identified objectives of this administration. And I think the ISAP contract will be an important tool towards that, towards those objectives.

And as we've mentioned in the past, once the detention continues to grow, the government has talked about targeting 100,000 beds at that point in time. Once they max out that capacity and they continue the enforcement efforts that they have, the next logical tool to use is the ISAP program.

The next question comes from Raj Sharma with Texas Capital.

Quite a few of my questions have been answered. But can I go back to the question on margin and the ISAP program? I guess, and I know you're not providing that much detail, but could the margins match or exceed your existing or earlier margins at a certain volume of monitored and supervised counts? How do we sort of model that out?

Well, I think it will have to be over time as both Mark and I have said that we have to implement some cost savings with regard to staffing, efficiencies and service efficiencies as well as cost of devices. All of that will take place over the next succeeding months. And if the numbers materialize as they're identified in the pricing that was required of all the bidders, our margins and revenues and will exceed what we had previously, I believe.

Got it, got it. And then on the guide, the fiscal '25 guide, the margins of about 23%, 24%, historical has been 26%. Should we consider this to be sort of a new base of EBITDA margins?

Are you speaking regarding ISAP? Or...

No, I'm talking about the overall, sorry, talking about the overall margins. This quarter was flat to last year on higher revenues. Anything that explains the EBITDA margins not picking up as much? And should we consider that as the base EBITDA margin going forward? .

No, I think we tried to articulate it. We talked about the fact that as we're starting up these contracts, there's a cost investment that takes place. We talked about the Adelanto facility and the rapid increase in the participants and us working hard to hire those folks. So both in the third quarter and the fourth quarter are going to be impacted to a certain degree by those costs. And we're working hard to get those operations normalize like our existing facilities.

So I wouldn't necessarily say that the third quarter is the new baseline. It has been impacted by some puts and takes. And so I would just say we're going to continue to work hard to satisfy our clients and work hard to manage our business and continue to do the best job that we can here. But there was a few anomalies that took place in the quarter.

Great. That's really helpful. And then just lastly, on the activated facilities normalizing in 2026, what revenue and EBITDA step-up should we expect for '26?

I don't think we've given guidance for '26 as yet.

No. We want to wrap up the quarter. And I think we'll be able to provide you further details when we see you guys or when we chat with you guys early next year.

Got it. I guess the activated facilities would have normalized by Q1 or by Q2 next year?

Well, the ones that have been activated this year, that would be correct. But we have 2 that will be activated the middle of next year.

The next question comes from Brendan McCarthy with Sidoti.

I wanted to start off in electronic monitoring. I think you mentioned you're continuing to invest to stock up on some of the higher intensity wearables. Can you quantify what your ultimate capacity is for some of the higher intensity wearables, perhaps what number of population count could you monitor under that kind of segment of your products?

I don't know how high is high. We are capable of monitoring obviously several hundreds of thousands in concurrence with our pricing model, but we can go far beyond that and have -- we're the largest monitoring company in the world, and we've streamlined our operations over the course of this year. And we are developing new generation products for every 1 of our products that will be rolling out sometime next year. And we have the largest capacity of any monitoring company in the world to roll out new devices each and every week.

Great. That makes sense. And then last question for me, just amid the government shutdown. Are you still having active negotiations for the remaining idle beds that you have available? Or you have those negotiations paused? I'm just curious if anything has really changed as it relates to your discussions with reactivations.

I would characterize them as discussions. I don't think they fall in the formal negotiation stage. But our discussions with ICE really take place almost on a continuous basis.

The next question comes from Kurt Ludtke with Imperial Capital.

With respect to ISAP, if I remember correctly, ISAP 4 was a 5-year deal, and this is now a 2-year inclusive of the option periods. What is it that exclusive of the option periods?

With the option period, it would be a 1-year contract.

It's a 1-year deal with a 1-year option.

Yes. A lot of our contracts are 1 year with 4 1-year extensions and we call them 5-year contracts because they almost always take all options of the contract.

Okay. Got it. And so it's a shorter deal. What the takeaway there?

There's been no formal policy announcement of the change that I'm aware of. But it is a technology-driven kind of service, and technology changes fairly rapidly. So it may make sense to make it a 2-year contract. And that's one of the reasons that we are doing new generation devices.

So just given the, I guess, uncertainty about how they want to proceed, they decided to pursue a shorter deal.

It's the large population base that you're grappling with. It's almost 7 million people and it's the services in two forms, as I said, technology and case management services. And there may be a better way of doing that 2 years from now. That's possible, and we have the flexibility to respond to whatever the policy change may or may not be 2 years from now.

Got it. Okay. That's fair. And you've committed to be prepared to monitor 361,000 people next year at some point?

For next year, and we could monitor far beyond that.

Yes. Will that mean significant CapEx next year?

It will be some CapEx, yes. What we've been stocking up on our devices this year, as we've said. We've made significant investments. And I think we have more devices than any other company in the world.

Got it. Okay. I appreciate it. And you mentioned increasing the authorization to $500 million and you've got some limitations under the credit documents. How much stock could you buy back under your covenants today?

I think we've said that we would be buying back approximately $100 million of stock per year. And I think at this present time, we're sticking to that. We've done $42 million so far this year that would leave the balance for the balance of the year.

This concludes our question-and-answer session. I would like to turn the conference back over to George Zoley, Executive Chairman of The GEO Group, for any closing remarks.

Well, thank you for listening and giving us your questions, and we hope to address you at the next conference call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to The GEO Group Second Quarter 2025 Earnings Call. [Operator Instructions] Please note that 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, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group's second quarter 2025 earnings results. With us today are George Zoley, Executive Chairman of the Board; Dave Donahue, Chief Executive Officer; and Mark Suchinski, Chief Financial Officer.

This morning, we will discuss our second quarter results as well as our outlook. 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 the 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-K, 10-Q and 8-K reports.

With that, please allow me to turn the call over to our Executive Chairman, George Zoley. George?

Thank you, Pablo, and good morning to everyone. And thank you for joining us on our second quarter 2025 earnings call. I'm pleased to be joined today by our CEO, Dave Donahue; and our CFO, Mark Suchinski.

During the first half of the year, we achieved several important milestones and we have made significant progress towards meeting our growth and strategic objectives. In February, we entered into a 15-year contract with ICE for the establishment of an ICE processing center at our company-owned 1,000-bed Delaney Hall Facility in New Jersey. Delaney Hall began intake of ICE detainees on May 1, and remains in the process of ramping up. The support services contract for Delaney Hall is expected to generate in excess of $60 million in annualized revenues in the first full year of operations.

In March, we entered into a letter contract with ICE for the activation of our company-owned 1,800-bed North Lake Facility in Michigan. Over the past few months, we were in discussions with ICE to definitize a 2-year support services contract for that facility, which has now been finalized and executed.

Based on the scope of services and term of the contract, we now expect our North Lake Facility to generate in excess of $85 million in annualized revenues in the first full year of operations. North Lake has already begun intake of ICE detainees, and we expect it to gradually ramp up during the third and fourth quarters.

In June, we announced the activation of our company-owned 1,868-bed D. Ray James Facility in Georgia under a contract modification to the existing intergovernmental service agreement that is in place for our company-owned 1,118-bed Folkston ICE Processing Center, thus creating a 2,986-bed facility complex.

Under the modified agreement, we expect to generate approximately $66 million in additional incremental annualized revenues in the first full year of operations. D. Ray James has also begun intake of ICE detainees, and we expect the facility to gradually ramp up during the third and fourth quarters.

In June, we also announced a recent court settlement, which allowed for the immediate full intake at our company-owned 1,940-bed Adelanto ICE Processing Center in California. Intake at Adelanto had been prohibited by a court order issued more than 4-years ago based on then prevailing COVID-19 conditions. With the lifting of these court restrictions, Adelanto has begun ramping up over the last 2 months and is nearing full occupancy. At full occupancy, the Adelanto contract would expect it to generate up to approximately $31 million in additional incremental annualized revenues.

These 4 facilities, which remain at different stages of activation, represent more than $240 million in combined annualized revenues with margins consistent with our company-owned Secure Services facilities, which average between 25% and 30%. While this revenue potential is only partially reflected in our 2025 financial guidance because of the timing of facility activations and the gradual ramp-up of populations, we expect full-year revenue contributions from these activations to be reflected in 2026.

As a reminder, facility activations generally require a 60 to 90-day period of time to hire, train and clear staff. During this time frame, we typically incur startup expenses. Once intake begins, populations generally increase gradually to allow for smooth operational activation.

During the second quarter of this year, the utilization across our current ICE contracts has increased from approximately 15,000 beds to 20,000 beds at 21 facilities, which is the highest level of ICE utilization in our company's history. This represents more than 1/3 of the current ICE detention levels, which we estimate to be approximately 57,000 beds nationwide.

Additionally, we have 5,000 beds currently available across our existing 21 ICE facilities, primarily at our 4 ICE facilities that remain under activation. Once these facilities are fully occupied, our total ICE beds are expected to increase to approximately 25,000. We also have approximately 5,900 idle beds at 6 company-owned facilities, which remain available. These facilities include our 1,200-bed Lea County Facility in New Mexico, our 1,300-bed Rivers Facility in North Carolina, our 1,450-bed Flightline Facility and a 900-bed Cedar Hill Facility in Texas, our 700-bed Cheyenne Mountain Facility in Colorado and our 300-bed McFarland Facility in California.

The majority of these facilities were formally contracted to the U.S. Bureau of Prisons and are high security facilities, which makes them ideally suited for the needs of ICE and the U.S. Marshals Service. If fully utilized, these 6 facilities could generate up to approximately $310 million in annualized revenue. We are in active discussions with both ICE and U.S. Marshals Service for the potential activation of these facilities.

We continue to be pleased with the pace of these contract discussions and remain optimistic that additional contract awards will materialize during the third and fourth quarters of the year. As has been publicly reported, ICE is focusing on increasing its detention capacity from the current 5,700 beds to 100,000 beds or more by the end of the year.

While the annual appropriations provided under the current continuing resolution only funded ICE for 41,500 detention beds, the budget reconciliation bill that was approved by Congress and signed into law by the President on July 4th included a significant increase in funding to support this expansion in detention beds and other areas of immigration enforcement.

The budget reconciliation bill provides $171 billion in incremental funding for border security and immigration enforcement, including $45 billion for ICE detention and $30 billion for other ICE areas, all of which will remain available through September 30th, 2029 and can be spent at the discretion of DHS and ICE.

We believe that the funding provided by the budget reconciliation bill is currently in the process of being allocated by the Office of Management and Budget and will likely be available in mid-to-late August. To the best of our knowledge, the current beds available by the private sector at traditional hard-sided facilities would likely provide ICE capacity for approximately 75,000 to 80,000 beds.

Scaling up to 100,000 beds or more will likely require ICE to seek alternative solutions like temporary soft-sided facilities, which we believe the administration is exploring, primarily on military basis or, as has recently been supported, state-provided sites at this time in such states as Florida, Indiana and Louisiana.

While our primary focus remains on the activation on our remaining idle facilities by either ICE or U.S. Marshals Service, we are also exploring other potential alternatives to further assess ICE meeting its stated objectives. To that end, we have and will continue to evaluate the potential acquisition or leasing of third-party-owned facilities, and we will also identify several of our existing ICE facilities where we can add approximately 5,000 combined beds using different options of temporary and permanent facilities.

Additionally, we have entered into teaming agreements with an established Department of Defense contractor to position our company to pursue potential procurements that may be issued for operational support services at military sites. All of these efforts are aimed at placing our company in the best competitive position possible to pursue what we continue to believe are unprecedented growth opportunities. As a long-standing support services provider for ICE with a 40-year long track record, we believe we are uniquely positioned to assist the agency to meet its objectives.

In addition to providing special-purpose facilities that meet the unique operational needs and requirements set by ICE, we are also the agency's sole provider of electronic monitoring and case management services through our BI subsidiary. BI has a long track record of delivering quality services under the Intensive Supervision Appearance Program, or ISAP as it's called, with the bipartisan support of approximately 20 years. On July 17, 2025, ICE posted a justification and approval that notified the public of ICE's intention to extend the ISAP contract for a period of 12 months to allow the agency to prepare for a new competitive procurement.

On July 31, ICE and BI agreed to extend the ISAP contract through August 31, 2025. We believe this interim agreement provides ICE additional time to extend the ISAP contract period of performance for 6 to 12 months with possible further extensions during which time ICE will likely be evaluating the ISAP program for potential programmatic changes and scale of operations.

This process would likely be followed by the issuance of a national request for proposals taking place over several months to evaluate submissions from interested parties. We believe BI is in a highly competitive position, having held the ISAP contract for approximately 20 years, consistently winning multiple competitive rebids of the contract during that timeframe.

We believe BI has consistently delivered high-quality services under the ISAP contract. These services entail diversified electronic monitoring technologies as well as compliance management services, which are delivered through a nationwide network of approximately 100 offices and close to 1,000 employees.

Over our 20-year tenure, ISAP has achieved high compliance rates with immigration court requirements while monitoring a relatively small portion of the estimated 7 million to 8 million undocumented aliens who are on the non-detained docket, in addition to another 9.5 million to 10 million people who are also estimated to be in the United States without legal status.

Given the size of this population of 17 million to 18 million illegal aliens currently estimated to be in the United States, our view remains that in addition to increased detention capacity, the enforcement of federal immigration laws could lead to an increase in GPS tracking for individuals on the non-detained docket. The current number of ISAP participants is approximately 183,000 individuals, and the ISAP participant counts have remained in a relatively stable range for most of the year.

We believe that the lack of growth in ISAP has been primarily driven by an intense focus from ICE on increasing and maximizing the utilization of detention capacity. Once detention capacity is maximized by the end of the year, we speculate that the focus will likely shift to increasing the use of GPS tracking. Our current expectation is for ISAP participant counts to remain stable through the third and fourth quarters, with growth starting to materialize late this year or early next year to coincide with the maximization of ICE detention capacity.

With our previously announced investment to ramp up inventory of our GPS tracking devices to several tens of thousands, we believe we've taken the necessary resources to significantly and quickly respond to the eventual expansion of ISAP.

Now turning to the important investment we've made for the continued growth of our secure transportation services. Our wholly owned transportation subsidiary, GTI, has a long-standing record providing secure ground transportation services on behalf of ICE, primarily in connection with our existing ICE processing centers.

Starting in 2023, our contractual partnership with CSI Aviation has allowed GTI to become the largest provider of secure ground and air transportation for ICE. We expect that an increase in the number of removal flights could generate an incremental $40 million to $50 million in annualized revenues for GTI under this existing contractual partnership.

GTI has been a long-standing partner to the U.S. Marshals Service. In June, we announced an expansion to this partnership when GTI entered into a new 5-year contract with the U.S. Marshals Service for the provision of secure transportation services covering 26 federal judicial districts and spanning 14 states. This new contract is expected to generate up to approximately $30 million in annualized revenues. GTI revenues have grown 240% from $58 million in 2022 to $140 million projected for 2025.

In addition to these important operational milestones, we have taken significant steps to strengthen our capital structure by deleveraging our balance sheet and positioning our company to enhance shareholder value through capital returns. In mid-July, we completed an amendment to our credit agreement to increase the size of our revolver from $310 million to $450 million, extend its maturity to July of 2030, and decrease the interest rate on outstanding borrowings by 0.5%.

But we've also repaid $132 million of the Term Loan B outstanding under the credit agreement at the time. On July 25th, we completed the sale of our company-owned 2,388-bed Lawton Facility in the State of Oklahoma for $312 million, which has been a financially transformative event in our company's history. We believe that the successful sale of our Lawton Facility at approximately $130,000 per bed is representative of the intrinsic value of our company-owned facilities, which now total approximately 50,000 beds.

On July 31st, we used a portion of the net proceeds from the sale of the Lawton Facility to acquire the 770-bed Western Regional Detention Facility in San Diego, California, for approximately $60 million in a like-kind real-estate property exchange that is expected to be accretive to EBITDA. This is an important facility that recently celebrated its 25th anniversary of providing federal detention capacity on behalf of the U.S. Marshals Service under a long-standing contract that generates approximately $57 million in annualized revenues for GEO.

We used the remaining net proceeds from the sale of Lawton Facility to pay off the additional senior secured debt, including the remaining balance of our Term Loan B. These combined transactions have reduced our total net debt to approximately $1.47 billion and positioned our company to enhance shareholder value through capital returns.

Given the intrinsic value of our assets and the unprecedented growth opportunities we anticipate will materialize over the balance of this year and next year, we believe that our current equity valuation offers an attractive opportunity for investors. Similarly, we believe it offers an opportunity for our company to enhance shareholder value through share repurchases.

To that end, our Board of Directors recently authorized a $300 million stock buyback program effective through June 30, 2028. We expect to conduct our 3-year stock buyback program at a rate of approximately $100 million per year while paying down debt at also approximately $100 million per year. We expect to execute on our new stock buyback program opportunistically, balancing it with our growth capital needs and our continued efforts to deleverage our balance sheet.

At this time, I will now turn the call over to our CFO, Mark, to review our financial highlights and guidance.

Thank you, George, and good morning, everyone. We're pleased with our strong second quarter results, which exceeded our previously issued guidance. For the second quarter of 2025, we reported net income attributable to GEO of approximately $29 million or $0.21 per diluted share on quarterly revenue of approximately $636 million. This compares to a net loss attributable to GEO of approximately $32.5 million or $0.25 per diluted share in the second quarter of 2024 due to the refinancing costs of $82 million on revenues of approximately $607 million.

Adjusted net income for the second quarter of 2025 was approximately $31 million or $0.22 per diluted share compared to approximately $30 million or $0.23 per diluted share for the prior year's second quarter. Adjusted EBITDA for the second quarter of 2025 was approximately $119 million, consistent with approximately $119 million reported in the prior year's second quarter. Our second quarter 2025 revenue, net income and adjusted EBITDA were well ahead of our previously issued guidance.

Beginning with revenues, quarterly revenues in our owned and leased secure facilities increased by approximately 12% year-over-year, primarily driven by the activation of our new ICE contracts and census growth across our existing ISAP ICE processing centers. While revenues in our owned and leased secure service facilities increased in the second quarter, net operating income for this segment was largely unchanged year-over-year as a result of start-up expenses incurred during the quarter in connection with the activation of our new ICE facilities.

Revenues for our non-residential contracts increased by approximately 10% from the prior year's second quarter. These quarterly revenue increases were offset by lower quarterly revenues in 3 of our business units: a 7% reduction in our electronic monitoring and supervision services unit, a 2% reduction in our reentry centers and a 3% reduction in our managed-only contracts.

Turning to our expenses. During the second quarter of 2025, our operating expenses increased by approximately 7% compared to the prior year's second quarter. The increase in our operating expenses reflects start-up expenses related to the hiring of additional staff in connection with the activation of our new ICE facilities. We have increased our budget to approximately $100 million in physical plant and technology improvement to better position GEO in responding to ICE's expanding needs.

Our general and administrative expenses for the second quarter of 2025 increased by approximately 8% from the prior year's second quarter in part due to the reorganization of our senior management team at the end of last year, higher employee-related benefit costs and additional support for our new contract awards.

Our second quarter 2025 results reflect a year-over-year decrease in our net interest expense of approximately $9 million as a result of our continued debt reduction efforts. Our effective tax rate for the second quarter of 2025 was approximately 28%.

Now, if we move to our outlook. We have updated our financial guidance for the full year and have issued guidance for the third and fourth quarters of 2025. Our updated guidance reflects several moving pieces, but the deleveraging component is anchored by the $312 million sale of our Lawton, Oklahoma facility.

First, we have several facilities at different stages of activation. Second, the sale of our Lawton Facility in Oklahoma and the depopulation of our Lea County Facility in New Mexico will result in some revenue and earnings loss, while the recent purchase of the Western Regional Detention Facility will be accretive to our adjusted EBITDA in the second half of the year.

Third, we have recalibrated our expectations regarding our ISAP contract to remain stable in the third and fourth quarters. Fourth, our net interest expense is expected to decrease significantly in the second half of 2025 as a result of our recent efforts to repay outstanding portions of our higher cost debt. Finally, consistent with our long-standing practice, our guidance does not include any new contract awards that have not yet been previously announced.

Taking into account these moving pieces, we have increased our full-year 2025 guidance for GAAP net income to a range of $1.99 to $2.09 per diluted share, including a $228 million gain on the sale of our Lawton Facility. We've increased our full year '25 guidance for adjusted net income to a range of $0.84 to $0.94 per diluted share on increased annual revenues of approximately $2.56 billion and based on an effective tax rate of approximately 26%, inclusive of known discrete items.

We expect total capital expenditures for the full year of 2025 to be approximately $200 million and $210 million, which includes approximately $60 million for the purchase of our Western Regional Detention Facility. And we are maintaining our full-year 2025 adjusted EBITDA guidance in the range of $465 million to $490 million.

For the third quarter of 2025, we expect adjusted net income to be in the range of $0.20 to $0.23 per diluted share on quarterly revenues of $650 million to $660 million. We expect third quarter 2025 adjusted EBITDA to be between $115 million and $125 million. For the fourth quarter of 2025, we expect adjusted net income to be in the range of $0.28 to $0.35 per diluted share on quarterly revenues of $658 million to $673 million. And we expect fourth quarter 2025 adjusted EBITDA to be between $132 million and $147 million.

Let's now move to our capital structure. We ended the second quarter of 2025 with total net debt of approximately $1.7 billion. Subsequent to the end of the second quarter, we completed several important steps to strengthen our capital structure and further delever our balance sheet, largely due to the $312 million sale of our Lawton, Oklahoma facility. First, we completed an amendment to our credit agreement to increase the size of the revolver from $310 million to $450 million. The amendment also extended our revolver's maturity to July of 2030 and lowered the interest rate on borrowings under the revolver by 50 basis points.

This important financing transaction is representative of the support we are enjoying from our existing and new banking partners. Prior to the execution of the credit amendment, we had repaid $132 million of outstanding borrowings under the Term Loan B. Following the closing of the $312 million sale of our Lawton Facility in Oklahoma, we used $222 million in net proceeds to pay off additional senior secured debt, including the remaining balance of our Term Loan B.

On a pro forma basis, these combined transactions have reduced our total net debt to approximately $1.47 billion and our total net leverage to approximately 3.3x adjusted EBITDA. Additionally, our debt maturities are now fairly evenly staggered between 2029 and 2031.

Given the intrinsic value of our owned real estate assets, as evidenced by the sale of our Lawton Facility, the significant steps we have taken to reduce debt, the growth we have already captured and the additional growth we expect to capture going forward, we believe strongly that our current equity valuation presents a very attractive proposition.

We believe this represents a significant opportunity for our company to enhance long-term value for our shareholders. To this end, our Board of Directors have authorized a $300 million share repurchase program effective through June 30th of 2028. The expiration date can be extended, the size of the program can be increased in the future at our Board's sole discretion.

We intend to execute on our new stock buyback program at a rate of approximately $100 million per year while opportunistically balancing it with our other capital allocation priorities to support continued company growth, capital needs and achieve long-term debt reduction.

We are also targeting to further reduce debt at a rate of approximately $100 million per year, thus balancing the capital benefits to our shareholders. We remain focused on disciplined allocation of capital to enhance long-term value for our shareholders, and we believe that our strong cash flows, which we expect to grow forward, will also allow us to support our capital allocation priorities.

At this time, I will turn the call over to our CEO, Dave Donahue, to review our GEO Secure Services and GEO Care highlights. Dave?

Thanks, Mark, and good morning, everyone. I'm pleased to review our quarterly highlights for GEO Secure Services and GEO Care. During the second quarter of 2025, we renewed 2 secure service contracts at the state level in Georgia and Arizona. On June 30th, we completed the previously announced depopulation of our company-owned 1,200-bed Lea County, New Mexico facility, which was previously under contract with the New Mexico Corrections Department, and we are currently marketing this facility to the federal government.

During the second quarter, our Secure Services facilities successfully underwent a total of 144 audits, including internal audits, government reviews, third-party accreditations, and Prison Rape Elimination Act, or PREA certifications. Three of our Secure Services facilities underwent accreditation audits from the American Correctional Association with an average score of 99.1%, and another 3 facilities received PREA certifications.

Our GTI Transportation Division and our GEOAmey U.K. joint venture completed approximately 4.9 million miles driven in the United States and the U.K. during the second quarter. Over the last 3 months, utilization across our ICE processing centers increased from approximately 15,000 beds to 20,000 beds, with an additional 5,000 beds at different stages of activation. This census level represents the highest utilization of our contracted ICE facilities in our company's history.

GEO has a long-standing track record of delivering professional support services on behalf of ICE at GEO-contracted federal immigration processing centers, and we stand ready to support ICE with any additional needs. GEO-contracted ICE processing centers offer around-the-clock access to quality healthcare services. Our healthcare staffing at the ICE processing centers, where we provide residential healthcare, is generally more than double the number of healthcare staff in a typical state correctional facility.

GEO-contracted ICE processing centers offer full access to legal counsel and legal libraries and resources, and we have dedicated space at each ICE center to provide residents with confidential meetings with their legal counsel. GEO-contracted ICE processing centers provide residents with 3 daily meals that are culturally sensitive, special diet-appropriate and approved by registered dieticians.

We also provide access to faith-based and religious opportunities at each GEO-contracted ICE processing center, and we partner with community volunteers, as needed, to ensure fair representation of various faiths and denominations. GEO-contracted ICE processing centers also offer access to enhanced amenities, including artificial turf soccer fields, covered pavilions, exercise equipment and multipurpose rooms.

Moving to our GEO Reentry segment, during the second quarter of 2025, we renewed 17 residential reentry center contracts, including 5 contracts with the Federal Bureau of Prisons and 1 non-residential day reporting center contract. During the second quarter, our residential reentry centers, non-residential day reporting centers, and ISAP offices successfully underwent a combined total of 79 audits, including internal audits, government reviews, third-party accreditations and Prison Rape Elimination Act, or PREA certifications.

Our 35 residential reentry centers, including 14 centers under contract with the Federal Bureau of Prisons, provide transitional housing and rehabilitation programs for individuals reentering their communities across 14 states.

Average daily census levels at these centers remain stable at approximately 5,000 individuals during the second quarter of 2025. Three of our non-residential -- excuse me, three of our residential reentry centers received reaccreditation during the second quarter from the American Correctional Association, with an average accreditation score of 100%, and 3 additional residential reentry centers received PREA certifications.

Our non-residential and day reporting centers provide high-quality community-based services, including cognitive behavior treatment for up to 10,700 parolees and probationers at approximately 102 locations across 10 different states.

Moving to our Enhanced Rehabilitation Program. We currently deliver in-custody rehabilitation to an average daily population of approximately 2,700 individuals at 38 in-prison program sites in 7 states and engage approximately 30,000 program participants at 10 GEO Continuum of Care sites in 6 states. Our in-custody rehabilitation services include academic programs focused on the attainment of high school equivalency diplomas.

We have made a significant investment to equip all of our classrooms with smart boards in our education departments to aid in the delivery of academic instruction. We've also focused on developing vocational programs that lead to certification for good jobs in the markets where our graduates will live upon release. Our substance abuse treatment programs are an important part of our rehabilitation services because many of the individuals in our facilities suffer from addiction and substance use disorder.

Our facilities also provide extensive faith-based and character-based programs with designated housing units across our facilities designed to enhance the delivery of these programs. During the second quarter of 2025, we completed approximately 1.7 million hours of enhanced in-custody rehabilitation programming.

Our academic programs and learning academies awarded more than 1,200 high school equivalency diplomas. Our vocational training programs awarded more than 2,100 vocational training certifications. Our substance abuse treatment programs awarded over 2,000 program completions. The individuals in our Continuum of Care programs achieved approximately 2,200 behavioral treatment program completions and close to 5,400 individual cognitive behavioral treatment sessions.

During the second quarter, we also allocated approximately $380,000 towards post-release services. This funding supported close to 1,700 individuals released from GEO service facilities as they continued to return to their communities. Our GEO Continuum of Care program integrates enhanced in-custody rehabilitation, including cognitive behavioral treatment, with post-release support services that address the critical community needs of released individuals.

We believe our award-winning program provides a proven model for how the 2-plus million people in the U.S. criminal justice system can be better served in changing their lives. Our GEO Continuum of Care has had a positive impact in the reduction of criminal recidivism rates, with our programs achieving a reduction of between 42% and 47% in recidivism over 3- and 5-year periods when compared to the national averages.

Finally, turning to our Electronic Monitoring and Supervision Services segment, our BI subsidiary continues to provide a full suite of monitoring and supervision solutions, products and technologies for government agency partners at the local, state and federal levels. BI is continuously evaluating the development of new cutting-edge electronic monitoring technologies to support the growing need for these services from government agencies across the United States.

At this time, I'll turn the call back over to George for closing remarks.

Thank you, Dave. In closing, we are very pleased with our strong second quarter results and with the significant progress we've made towards meeting our growth and strategic objectives. Since the beginning of the year, we've announced the activation of 4 facilities, totaling approximately 6,600 beds under contracts with ICE, with expected annualized revenues in excess of $240 million.

We have approximately 5,900 idle high-security beds that remain available for use either by ICE or the U.S. Marshals Service, which could generate an additional $310 million in annualized revenues if fully activated. Additionally, we've identified several of our existing ICE facilities where we could add approximately 5,000 combined beds either through temporary or permanent facility expansions.

We've stocked up the inventory of our monitoring devices and are well-positioned to assist the federal government to scale up the use of GPS tracking for non-detained illegal aliens once the ICE detention capacity has been maximized. We expect growth in our ISAP contract could begin to materialize late this year or early next year to coincide with the maximization of the ICE detention capacity.

We're pleased with the continued growth of our ground and air secure transportation services for ICE and the U.S. Marshals. This is a unique moment in our company's history as a long-standing support services provider for ICE with a 40-year long track record. We believe we are uniquely positioned to assist the agency in meeting its objectives.

All of our efforts are aimed at placing our company in the best competitive position possible to pursue what we believe to be unprecedented growth opportunities, and we've budgeted $100 million in physical plant, vehicles and electronic monitoring improvements towards that objective. Given the intrinsic value of our owned real estate assets, as evidenced by the sale of our Lawton Facility and the unprecedented growth opportunities in front of our company, we believe strongly that our current equity evaluation offers an attractive opportunity for our investors.

We believe we've taken significant steps to strengthen our capital structure, deleverage our balance sheet and position our company to enhance shareholder value through capital returns. To capitalize on this unique opportunity to enhance the long-term shareholder value, our Board of Directors recently authorized a 3-year $300 million stock buyback program, which we expect to execute opportunistically while balancing it with our continued objective of deleveraging our balance sheet at a rate of approximately $100 million per year. Our focus as a management team remains on enhancing value for our shareholders through the disciplined allocation of capital and achieving a new level of financial success in 2026.

On a personal note, I would like to thank the GEO Board for extending my employment contract to April 2029, allowing me to participate in guiding our company through the remainder of this presidential administration.

That completes our remarks, and we'd be glad to take any questions. Thank you.

[Operator Instructions] And your first question today will come from Joe Gomes with Noble Capital.

Congrats on the quarter and all the positive news. So I just kind of wanted to run through some of the numbers that you guys have given just to make sure we're all on the same page. So it sounds like you've got roughly 5,000 beds at existing facilities that are under contract, another 5,900 beds at the idle facilities, and the potential that you could ramp up another 5,000 beds kind of in temporary, let's call it, conditions at existing facilities. So say that's roughly about another 16,000 beds that you could ramp up today. And you gave a number for the idle, would be about $310 million. But if all 16,000 were to come on, what kind of revenue would that generate?

Well, I think we're talking about an additional 5,000 or 10,000 beds.

It would really be -- full off pricing would be on the 5,000 temporary beds. The existing facilities, pricings already established for that, right? So I mean, we'd really be talking about 5,000 additional beds. There's some upside in the existing facility beds.

That's probably about $250 million at approximately $50 million per 1,000 beds of that type, because those would be incremental beds where the overhead is already paid for. There would be expansions of the existing facility. So approximately $250 million.

Okay. Great. And then just wanted to turn to ISAP for a second here. So the populations, they said they've been stable to modestly declining from the 185 to roughly 183 today, are most recent ICE numbers. But there's been a lot of discussion -- reports, I guess, I should say, of the potential of moving from the SmartLINK application to the ankle monitor application. Are you guys hearing that? What could be the implication of that? Because the ankle monitors generate almost 3x the amount on a tech cost on a daily basis as the SmartLINK does and that would use up funding faster, I guess, so to speak. So I'm just wondering, a, what you guys are hearing on that? What you think the potential would be? Would you have the capacity on the ankle monitors if all of a sudden they decided to move more towards ankle monitors than the SmartLINK application?

We've stocked up the inventory on ankle monitors. And as you've point out, it is a more expensive device. It would require, I believe, additional funding to the ISAP contract, which may be available through a reprogramming of some of this money that will be coming -- available later on this month through the Reconciliation Act.

Okay. And then as you talked about the goals here, the share repurchase program, congrats on us finally getting there, but also looking to continue to reduce debt by about -- I think you said $100 million. Historically, the goal has been that $150 million to $175 million. That was obviously prior to the Oklahoma facility sale. Are you looking to do any additional debt reduction in the second half of this year? Or are we good at where we are and then we'll start looking at that $100 million going in '26 and beyond?

Joe, I think the way I would characterize it, we expect to generate additional cash -- excess cash in the back half of the year. So that's going to enable us to continue to delever in the back half of this year. And really, when we think about the play here of $100 million share repurchase and we target the $100 million continued reduction in debt over the next couple of years, the benefits that I see for us is we have opportunities to have excess cash in excess of that $200 million.

We're looking at deleveraging, which reduces our cash interest expense that frees up cash. We have the growth as we move into 2026. The top-line will be higher, and that'll enable us to generate more cash flow. And then as we move into 2026, we'll get back to more normal capital expenditure -- annual capital expenditure.

So as we move forward here, we have the ability to generate more than $200 million of cash flow. And then at that point in time, it will give us an opportunity here to further pay down debt and reduce cash interest expense. But getting back to your original point, we expect to further reduce our debt balances over the course of the remainder of the year while opportunistically looking at buying back shares.

Okay. Great. And one more, if I may. There's been a lot of talk, obviously, because it's in the news, on ICE and the whole opportunity at ICE. On the state level, I'm just wondering how things are going there. Oftentimes you see per diem increases in the June-July timeframe. I'm wondering if you guys saw any of that. And are there any opportunities on the state level? Or are we just really focused on ICE at this point?

Well, in Florida, we're involved in competitive bidding on 3 facilities, 2 of which we operate presently.

One.

One? Dave, maybe you should comment on that.

So Joe, to your point, our focus on our state clients hasn't diminished at all. It's actually increased. And to George's point, we're involved in a competitive re-procurement of 3 major correctional facilities here in Florida, which we have operational experience with. And then also, we're working with our other clients around the country to support their initiatives as well.

And increased capacity at the state level is driven, generally speaking, by the budget process. And this year, the legislative activity that you referenced, the June-July timeline, we did see improvement operationally in our Georgia environment. The legislative process supported an additional increase in our funding streams for that project. And again, we're optimistic that other jurisdictions are supporting those discussions presently with their general assemblies. And so, again, very committed to the efforts of supporting our state clients and meeting their needs as they present them.

Congrats again on the quarter and on the fantastic growth opportunities ahead of us.

And your next question today will come from Matt Erdner with Jones Trading.

Congrats on getting that share repurchase agreement from the Board. That's great there. So as private beds kind of fill up towards that 100k level, and it looks like we've got a pretty decent line of sight into that ramping up kind of by year end, early 1Q of next year, how are you guys positioning yourselves for management contracts at some government facilities? You touched on it during the prepared remarks a little bit with the defense contractor and those agreements there, but any expansion would be great.

I'm really kind of unclear as to what your question is. Could you repeat that?

Yes. So kind of the management of government facilities, so not company-owned.

Well, we look at that fairly carefully. We had some opportunities here in Florida, and we kind of passed on it. But we prefer to be the owner of the facility, and we have several that are idle that we would like to reactivate and they're primarily former BOP facilities that are high security and really ideally suited for -- as I said in my previous remarks, ideally suited for ICE and the U.S. Marshals Service as well as the Bureau of Prisons, who was the previous user of these facilities. They're primarily cell facilities, so it's high security. They have perimeter fencing. In some places, they have towers that overlook the facility.

So our physical plant inventory that's available to the 3 federal agencies is quite substantial, and that's really where our focus is right now. As well as I said earlier, that there's a lot of activity going on in our Transportation division, where they are -- I think they're doing approximately 80 to 90 flights per week domestically and internationally. So that division has really taken off, literally and figuratively.

But Matt, to further state the obvious, obviously, we're partnered with a defense contractor positioning ourselves for procurement activity in the event that DoD in partnership with Homeland Security considers projects in the future. And obviously, we're committed to ensuring that we support the mission of the client, Immigration Customs Enforcement. So we're always evaluating next steps, if you will, and positioning ourselves to support ICE.

Your next question today will come from Greg Gibas with Northland Securities.

Congrats on the quarter. Wondering if you could maybe follow – or, I guess, if I could follow up on an update on the opportunity to contract additional facilities with the Marshals Service. I know that there's the New Mexico facility, Big Spring in Texas, Rivers Facility in North Carolina with multiple RFPs out there. If you can give kind of an update on your outlook there and timing on those?

Well, the discussions are underway. They've begun some time ago. And I think there's a general awareness of the location of these facilities. And funding is always the big issue. I think all the agencies are towards the tail end of their budget year, which expires the end of September. And particularly if -- ICE, they have a -- we have read that they have a budget deficit of excess of $1 billion. So they have to be careful as to when they contract. I think everybody is waiting for this reconciliation funding, which will occur towards the middle or the end of this month. But the agencies are well aware of these locations.

For some of the agencies, like maybe the Marshals Service in particular, it constitutes a consolidation play based on certain geographic areas in the east or the west of the country. And we're -- a lot of times, the Marshals Service is really contracting for beds with several sheriffs' jurisdictions in a geographic area, and our facilities allow them to consolidate those beds into one secure –- a high secure facility where they're the exclusive client, they have the exclusive control of the facility, which is generally their preference, rather than a fragmented system covering a large geographic area.

Yes, Greg. I mean, I think as George just described, we are in discussions with the Marshals. We're cautiously optimistic. There's some opportunities ahead for us. But as it relates to growth, obviously, ICE is a big priority. But as somebody mentioned earlier, we've got some good opportunities at the state level, the Marshal level as well and transportation. So we think about our business holistically. We think that we're fairly diversified. In multiple components within our business segments, we're seeing lots of different growth opportunities, and we think that over the coming months, that's going to pay dividends.

Great. That's helpful and good to hear. Given the budget deficit with ICE and now that we're past budget reconciliation or additional funding, I guess how are you expecting the pace of facility reactivation timing once that funding is available, call it middle or end of this month? And I guess secondly, like, has ICE kind of communicated to you that they intend to ramp ISAP participants once that detention capacity is maximized? And do you still anticipate that contract to be extended for 12 months?

They haven't communicated at this time the expansion of ISAP. Their focus is intensely on scaling up the detention capacity. So they are communicating with many red states, in particular, as I said, Florida, Indiana, Louisiana, and Texas is probably one of them, to scale up from the capacity that's prospectively available by the private sector, which I estimate to be 75,000 to 80,000 beds.

For them to get to 100,000, they need several governmental partners, as indicated by the facility recently in South Florida that has capacity for, I believe, 3,000 beds. And there'll be another one for 2,000 beds. It'll take several of these facilities to patch together the gap between the private sector and the ultimate objective of 100,000 beds. And that's about 30,000 beds that they need to patch together to get to the 100,000.

And then on ISAP, you said we're under a 30-day extension. And as George made in his remarks, we do anticipate an extension of 6 to 12 months to be awarded to us here in the near future.

Great to see the buyback, and congrats on the quarter again.

And your next question today will come from Brendan McCarthy with Sidoti & Co.

Great. I wanted to start off on the Laken Riley Act. I think at one point, it was discussed that the act could lead to the need for an incremental 60,000 beds. But it sounds like the base case here is really close to 100,000 beds potentially by year-end. Just curious if that base case includes the impact of that act? And I guess how we can think about the overall impact on industry detention numbers.

I'm not really sure how to think about it because the original objective was just to get to the 100,000 beds before the passage of that act. And as I've said, the present estimated capacity of the private sector, as we sit today, is about 75,000 to 80,000. That's before considering scoping out vacant facilities that may be at the federal and state level as to whether they can be renovated and repurposed for additional capacity, which I think has a lot of potential.

So as ICE and Marshals scale up to this 100,000 beds, once they reach that through the current known means, I think that there will be a reevaluation of how do you get beyond that and what structures are available that meet legal requirements and agency requirements. And I think some of those structures are probably available at the federal and state levels around the country. They're not getting the attention right now. Because our structures are readily available, and ICE is pursuing some temporary type of structures with various Republican states. And so it's the low-hanging fruit that gets the attention first. And then after that's accomplished, there'll be a reevaluation of what other opportunities exist around the country.

Understood. I appreciate the detail there. And then I wanted to touch on the fiscal year 2026 Homeland Security Appropriations Bill. Can you provide an update on maybe the verbiage in that bill? Has there been any release there or any detail on whether it be alternative detention or new updates with detention?

I believe in that bill, there's no specific text or narrative about the ISAP program. It was a bundle of money for broad categories of services. And $45 billion, I believe, is going to detention. Other billions are going to transportation. But within all these billions, the agency has the ability to reprogram money as it sees fit. And those are such large amounts because I think ICE's budget presently is only $8 billion. So you're talking about tremendous scaling up of the budget that will occur over a period of time.

And I believe all those monies are -- have been appropriated and approved for the next 4 years. One of their objectives that they are focusing on right now is hiring 10,000 more ICE officers, which is very expensive and very complicated and very time consuming. It will take a long time to get 10,000 people recruited, screened, trained and knowledgeable about how to carry out their jobs. And they are needed to facilitate the filling of those 100,000 beds. You need more people to go across the country and identify people who are here unlawfully and who have committed crimes. It takes several people at any given event. One person doesn't go out and do this job by themselves. It's a whole team of people. And ICE definitely needs more employees. And that is definitely one of their priorities right now.

And your next question today will come from Raj Sharma with Texas Capital.

Congratulations on the solid results and the outlook. I had a question on -- just if you could delve into the dynamics of why you expect the ICE monitoring and supervision to stay stable Q3 and Q4. Is this due to the ICE budgeting constraints solely till they get funding in August? I mean, how does that work with them wanting to -- is that when detentions get up to max levels? And they've talked about wanting to detain 180,000 more. Can you talk about the timing of that and the color around that?

Well, as -- I think we've said that we think that the focus of ICE right now and through the balance of the year will be on maximizing detention capacity. With respect to the ISAP program, certainly this budgeted year, they've tried to stay within their budget, which has not been expanded. And as we've said, even the detention budget has been exceeded. So they've had a balancing act, as we speak at this time, of the budget. And the additional funds will not materialize until, we believe, later this month.

But once they get those funds, additional funds, I think that the priority and the focus is still going to be for -- we believe the balance of this year will be on maximizing detention capacity. Because it's complicated. Getting a facility up and going and operational with respect to who's involved in operating the facility as well as the ICE personnel that are supporting that facility is very complicated, and it's never been done at this level before in our history.

So these are unchartered waters for the agency to expand their platform of detention nationally around the country to literally more than doubling the size of the previous administration. It can't be done overnight, and it requires a lot of attention, it requires more ICE staff.

Got it. Got it. And then of the $118 million of adjusted EBITDA in Q2, what was the contribution from the newly ramping facilities, the 4 facilities? And then I will follow-on on the contribution going forward.

Well, Raj, we don't give specific contributions by facility. But what we can tell you is owned facilities, activation of those facilities, we've talked about the annual revenues that will be driven out by those facilities. And as we've said in the past, the owned facilities, typically margins are somewhere between 25% and 30% margins on those revenues. And so as we talk about activating 4 facilities to the tune of $200 million to $250 million, if you think about the math on that, that will generate 25% to 30% margins on that. So really, I think the big focus is, as we ramp those up and they're fully active and we're achieving the maximum revenues, which we expect to take place in 2026, that's where you're going to see the significant growth in EBITDA.

Got it. So you've given the revenue contribution from the 4 facilities. Can I ask this another way? When do you expect them to reach mature margin profiles so that we can get that full 25% or 30% EBITDA margins on the 4 facilities?

Yes, I'd say essentially 3 to 4 months after activation of those facilities. So I think if you think about Delaney Hall, D. Ray, North Lake, we'd expect really the fourth quarter for us to be really maximizing the profitability and gotten through what we'll call as the activation period, the hiring of the officers, the training of the officers. Right now, that's -- it's a very costly effort. And I'd say by the time we get to the fourth quarter, those facilities should be back, should be in a kind of what we'll call a normal recurring operation.

I'll take my questions offline. Once again, congratulations on the solid results.

And your next question today will come from Ted Franchetti with Wedbush.

Jay had to step off and will be likely following-up with you guys this afternoon. But I just wanted to ask a couple of quick questions. Sorry to keep going on ISAP and monitoring, but just wondering about the timing of the extension to the end of August. And you mentioned in a previous question about the funding potentially being sort of reallocated or re-procured post the OBB Bill getting done. Was the ISAP contract moved to end of August this year to sort of allow for that money to flow? And is that a reason for that timing?

And then I guess another question sort of about ISAP and the extension is essentially -- for me is, do you have any different level of conviction about winning that contract over the next 12 months versus your expectations over the last 6 to 12? Like, has anything changed there for you?

No, nothing's changed. The short-term extension, we interpret, is to give additional time to consider whether it's a 6-month extension or a 12-month extension. It's simple as that. Which may require additional extensions as well, because the -- once they -- it takes time for them to decide what their programmatic needs are within that kind of program. Do they take a different direction on who the population is? What the monitoring devices are? What the scale of the operation is? Then they have to put all that together in an RFP, give time for proposers to submit proposals. That's followed by a fairly lengthy evaluation process before there's a final award.

So we expect that, that process will take place sometime next year. And we feel we've provided an excellent service for 20 years. Our ratings are excellent. As we get rated, I believe, annually, we've achieved excellent ratings, and we think we're in a highly competitive position for any rebid of this contract.

And we've invested the infrastructure. We have 100 locations that we service. We have 2 call centers. And as George said, we've been the provider for the last 20 years. And we really appreciate the partnership with ICE and ISAP and we're going to work really hard to do a great job for them.

One quick follow-up on just as far as cash flow goes. If in '26, you exceed $200 million in free cash flow and you allocate half of that to debt pay down and half of that to buyback, if you sort of exceed that $200 million level, would the incremental be pro rata allocated to debt pay down and buyback? Or would you prioritize repurchases?

Well, it's most likely to be pro rata, but we'll also be opportunistic. It depends on what the stock price is. Right now, we think it's a very attractive price, and that's why we're looking to buy back stock. But as we said before, it'd probably be split between the 2, both contributing some value back to our shareholders while continuing to pay down debt.

And your next question today will come from Kirk Ludtke with Imperial Capital.

I really appreciate you staying late.

No problem.

Do you have a sense for the detention rate required to justify 100,000 detention beds? In other words, is it 3,000 a day equals 100,000 beds? Or is there some simple rule of thumb we can use?

It is that simple rule of thumb, as you described it. I think the -- it was based on the objective of deporting 1 million people a year. How do you deport 1 million people a year? You'd need 100,000 beds and you need to process those people in 30-day increments. So each month 100,000 people would be deported, or approximately, to get to the 1 million. But that's just a theoretical model.

I don't -- and it's impacted by lawsuits probably in different jurisdictions around the country and it's impacted by different rulings on expedited removals and environmental issues and all kinds of things. But that's some model that somebody came up with that we've heard many times, it's you need 100,000 beds and moving people out 100,000 per month to get to the 1 million.

Yes, I think the other way you can kind of think about it is, call it at the end of February or March, there was 41,000 beds full. It's grown to 57,000. So call it over the last 3 months, the detention has grown by about 20,000. And it started off slow. So it's probably possible to grow the detention by 20,000 to 30,000 every 3 months or so. And if you did the math that way, that's how you get to roughly 100,000 people detained by the end of the year. But I don't think there's an exact science, as George just described.

Got it. Yes, that's super helpful and I appreciate. And what percentage of the beds you contract to ICE are under minimums or take or pay or contractually guaranteed?

I think most of our beds now have some form of fixed price.

Okay. That's helpful. And then last topic. I mean, a lot of questions about ISAP. How would you characterize the 180,000 people they're monitoring today? Is there a certain way to describe that group? And is there a -- if funding was no longer a limitation, how many people are actually in that group?

Well, the 183,000 is part of a 8 million to 10 million or 18 million group of undetained -- non-detained docket of people who have been determined previously not to go into detention but need to be monitored. And that is a moving target and can be reevaluated subsequently, as some members in Congress have articulated in -- particularly, I think, on a House resolution, that all the people on the undetained docket should be monitored so you know where they are and where they are in their process of going before a judge and making sure they get to that court hearing. So I think that's still yet to be evaluated or reevaluated, and I assume it will be as there is a re-bid of the ISAP contract and what are the programmatic objectives of that program.

And your next question today will come from Ben Briggs with StoneX.

So first of all, congratulations on the quarter and the great work that you're doing. So I just wanted to get a little bit of clarity and make sure that I'm doing the math right here. So in the scripted portion of your call, it sounded like you said that there were $310 million of additional revenue opportunities that are not baked into guidance that are potentially going to come from ICE. Did I hear that $310 million, right?

That's right. As it relates to detention, it's either ICE or Marshals. That's right. Our available capacity that hasn't been contracted.

Okay. So that $310 million was from ICE or U.S. Marshals of additional revenue...

Correct.

Got it. Okay. And then on top of that $310 million, there is $40 million to $50 million of potential ICE transportation revenue that you could potentially realize?

Correct.

Understood. Is 15% EBITDA margin the right way to think about that transportation revenue, just back of the envelope?

We haven't given that out. We haven't given that out specifically.

Okay. Fair enough. Fair enough. And then as far as potential ISAP revenue is concerned, is there a revenue number that's not baked into EBITDA where I should think longer term potentially that you guys could realize? Or is that not a number that you're prepared to give out there?

I think we -- our number is flat for the rest of the year.

Yes. Exactly. So we're assuming just stable ISAP counts for the remainder of the year. I think what you're talking about is potential growth beyond that sometime later this year into 2026 is what could that be.

Correct.

That's really out of our hands. As George said, it's how does the ICE want to run the ISAP program going forward. For us, we can give you our history. The history says back in 2022, 2023, revenues at the highest level were $370 million compared to where we are today. And so I think it would be -- probably wouldn't be appropriate for us to try to guess that. But we do think that there's opportunity for growth there, and that's going to generate additional revenue and profitability. But it's hard to quantify at this point.

Most of the rest of mine were answered. And again, congratulations on the quarter and the growth.

This will conclude our question-and-answer session. I would like to turn the conference back over to George Zoley, Executive Chairman of the GEO Group, for any closing remarks.

We thank everyone who has joined us in this lengthy presentation today, and look forward to the next call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.