CoreCivic, Inc. Stock

Good day, and thank you for standing by. Welcome to the Q2 CoreCivic, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to CoreCivic's Second Quarter 2026 Earnings Call. Participating on today's call are Patrick Swindle, CoreCivic's President and Chief Executive Officer; and David Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds. On this call, we will discuss financial results for the second quarter of 2026 as well as updated financial guidance for the 2026 year. We will also discuss developments with our government partners and provide you with other general business updates.

During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our second quarter 2026 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and also 8-K reports.

You are cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future. Management will discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the Investors page of the company's website at corecivic.com. With that, it is my pleasure to turn the call over to our CEO, Patrick Slindle.

Thank you, Jeb. Good morning, and thank you for joining us for CoreCivic's Second Quarter 2026 Earnings Call. On this morning's call, we will discuss our second quarter operational results and provide updates on the latest developments with our government partners. Following my opening remarks, I will hand the call over to our CFO, Dave Garfinkle, who will provide greater detail on our second quarter 2026 financial results as well as our updated 2026 financial guidance. Dave will also provide an update on our capital structure, including recent actions to reduce our outstanding indebtedness and planned activities for remaining proceeds from our recent asset sale activities.

Before we discuss this quarter's financial performance, I want to highlight the activity that has occurred subsequent to the end of the second quarter. In early July, we announced the sale of 2 facilities, the California City Detention Facility and Otay Mesa Detention Center, both located in California to the Department of Homeland Security for gross proceeds of $1.5 billion.

Earlier this week, we announced the sale of 2 additional facilities, the Midwest Regional Reception Center located in Kansas and the Prairie Correctional facility located in Minnesota through our government partner for gross proceeds of $734 million. After estimated income taxes and transaction costs, we estimate our net proceeds from these 4 sales to be approximately $1.6 billion.

At an average price per bed of $307,000 and considering the location, size, cost, time and effort to replace these facilities, we believe these sales were conducted at a fair valuation for both parties and supports our continued work to be a dependable partner for government. These transactions also demonstrate the underlying value of the company's real estate portfolio. They also fortify our already strong financial position and create significant balance sheet flexibility for investments in our business, our capital allocation and our growth strategies going forward. As we've previously disclosed in the press releases for the facilities that we have sold, we will continue operating these 4 facilities under terms of the existing management contracts.

However, contract terms may be ultimately modified due to the transfer of ownership. We have adjusted fiscal 2026 guidance to account for the potential of modified terms, which Dave will discuss further. In addition to the asset sales completed to date, we have recently begun discussions with ICE about the potential acquisition of additional detention facilities. These discussions are in preliminary stages, and we can provide no assurance that any additional sales will occur. Also earlier this week and just prior to closing on the sale of the Prairie Correctional facility, we announced a new contract award to manage the 1,600-bed facility. Idle since 2010, we made significant investments in this facility over the last 18 months as we prepared it for occupancy, and we are pleased to reactivate another idle facility as we work to meet our government partner needs.

We currently expect this facility to have a minimal contribution to earnings in 2026 as we have just begun hiring staff and expect to begin receiving detainees at this facility in the fourth quarter. Bolstered by our strong cash position, we moved quickly to reduce our outstanding indebtedness to give us maximum flexibility as we consider how to best deploy remaining proceeds and continue our return of capital to our shareholders. A portion of the net sale proceeds was used to repay in full the outstanding balance under our $575 million revolving credit facility, which is available to be redrawn and our incremental term loan. We have also announced our intention to redeem on August 12, 2026, $238.5 million of senior notes due in 2027. Following these actions, on August 4, the Board approved a $500 million increase to our existing share repurchase program, providing capacity for approximately $756 million in additional repurchases. I'll now move on to a high-level overview of our second quarter operational performance.

Despite lower enforcement activity and reductions in nationwide ICE detention populations following leadership changes and funding uncertainty at the agency, our second quarter results exceeded average analyst estimates for adjusted EPS by $0.04 and adjusted EBITDA by $2 million. For purposes of reviewing results, we redefined our operating and reportable segments during the second quarter to align financial reporting with the manner in which we manage the businesses.

We now view operating results in 3 operating segments: CoreCivic Residential, CoreCivic Services and CoreCivic Properties, which Dave will describe in more detail. Total occupancy for our Residential segment for the quarter was 78.4%, up 1.6 points since the year ago quarter.

The average daily population across all of the facilities we manage was 56,363 individuals during the second quarter of 2026 compared with 54,026 in the year ago quarter. This increase was driven by more demand for our services, new contracting activity and the Farmville acquisition that was completed July 1, 2025. Federal partners, primarily ICE and the U.S. Marshals Service comprised 53% of CoreCivic's total revenue in the second quarter. Revenue from our federal partners increased 27.2% during the second quarter of 2026 compared with the prior year quarter. Further breaking down our revenue mix, revenue from ICE increased $91.3 million or 51.6%, while revenue from the U.S. Marshals Service decreased by $14.1 million versus the prior year quarter. Some of this decline is simply a mix shift where ICE and Marshals share a contract.

Revenue in the second quarter of 2026 also benefited from the contribution of Clinical Solutions Pharmacy, which was in line with our expectations. Populations from ICE and our care increased by approximately 6,000 individuals or 59.6% from the beginning of 2025 through June 30, 2026, when we cared for 16,197 individuals. Our average daily population decreased by 1,184 individuals in the second quarter of 2026 from the first quarter of 2026, net of a 793 increase that occurred at the 5 facilities we've activated. In late January 2026, nationwide ICE detention populations reached historical highs of around 70,800 individuals.

However, a government shutdown that centered around Department of Homeland Security funding, a reorganization of DHS leadership and a subsequent impact to enforcement activities, including redeployment of ICE agents to TSA checkpoints led to a 10,500 decrease in detention populations by early April 2026. Consistent with our internal forecast, populations have begun to rise again, reaching approximately 65,500 in early July. Dave will review our population assumptions at a high level reflected in our financial guidance. As demand for ICE returned, populations at activating facilities continue to increase.

We continue to receive detainee populations at our 2,560-bed California City detention facility, where we signed a new contract effective September 1, 2025, and our 2,160-bed Diamondback correctional facility where we signed a new contract effective September 30, 2025. As of June 30, 2026, we cared for 1,674 and 1,522 individuals, respectively, at these 2 facilities. As mentioned last quarter, after obtaining a special use permit at the Midwest Regional Reception Center, we began accepting Daine's previously idle facility in March. As of June 30, we cared for 379 individuals at this facility. We continue to maintain 4 idle corrections and detention facilities containing approximately 5,500 beds to meet any federal or state increase in demand.

We remain confident that the corrections and detention beds that we provide are the most humane, most efficient logistically, most compliant, most secure, readily available and provide the best value to the government. Since our last earnings call, our share price has begun to reflect the underlying value of our business and our assets. However, we believe that our current share price continues to apply a significant discount to the fair value. Based on updated guidance, our enterprise value EBITDA multiple has actually contracted since last quarter after taking into consideration the cash on our balance sheet, and we trade at a meaningful discount to our long-term average.

Accordingly, we plan to continue prioritizing our share repurchase program, taking into consideration our stock price and alternative opportunities to deploy capital. Additionally, the recently completed facility sales provide meaningful proceeds that have been used to reduce outstanding debt and can be used for further debt repayments and investments to bolster our core business.

Following on the successful acquisition of CSP, M&A could also provide opportunities for growth, but any potential transaction would need to be a strategic fit and compare favorably on a valuation basis with our other capital deployment targets. With that, I'll turn the call over to Dave to discuss our second quarter financial results in more detail, our capital allocation activities and the assumptions underlying our updated 2026 financial guidance. Dave?

Thank you, Patrick, and good morning, everyone. In the second quarter of 2026, we generated GAAP EPS of $0.37 per share and FFO per share of $0.63. Special items in the second quarter of 2026 included $0.7 million of expenses associated with M&A activities reported in G&A expense for the acquisition of Clinical Solutions Pharmacy compared with $1.5 million of M&A expenses in the prior year quarter related to the acquisition of the Farmville Detention Center.

Excluding M&A expenses from both periods, adjusted EPS was $0.38 compared with $0.36 in the second quarter of 2025, and normalized FFO per share was $0.64 per share compared with $0.59 per share in the prior year quarter. As a reminder, the prior year quarter included the collection of employee retention credits of $11.6 million, including interest or $0.08 per share.

Excluding this per share impact from the prior year, adjusted EPS and normalized FFO per share increased 35.7% and 25.5%, respectively. Adjusted EBITDA was $109.4 million compared with $103.3 million in the second quarter of 2025. Again, excluding the employee retention credits from the prior year quarter, adjusted EBITDA increased $17.7 million or 19.3%. We received the final payment we claimed for the employee retention credits in the first quarter of 2026. The increase in adjusted EBITDA from the prior year quarter resulted from the activation of 5 previously idle facilities under new management contracts with ICE and the acquisitions of the Farmville Detention Center on July 1, 2025, and Clinical Solutions Pharmacy on April 1, 2026.

Our per share results were also favorably impacted by an 8.9% decrease in weighted average diluted shares outstanding as a result of our share repurchase program. Following the acquisition of CSP to better reflect our operational strategy, beginning in the second quarter, we redefined our operating and reportable segments. Our CoreCivic Residential segment consists of the 64 correctional, detention and reentry facilities we manage.

Our CoreCivic Services segment consists of the delivery of complementary services to the corrections industry, including pharmaceutical supplies and services through CSP, transportation through our subsidiary, TransCore and electronic monitoring and case management services as alternatives to incarceration through our subsidiary recovery monitoring solutions.

Finally, our CoreCivic Property segment remains unchanged, currently consisting of 5 correctional facilities held for lease to government agencies. Operating margins in our Residential segment, which generated 92.4% of our segment net operating income decreased to 22.4% from 26.1% in the prior year quarter, primarily due to $8.2 million of ERCs reflected in facility operations during the second quarter of 2025. The operating margin was 24.5% in the prior year quarter, excluding the ERCs.

The decline in ICE populations in the second quarter of 2026, which we believe was temporary, contributed to the margin decline. Further, although we generated operating income of $21.1 million at the 4 facilities we continue to activate, they were only 55% occupied during the second quarter of 2026.

Operating margins are expected to increase in the second half of the year as occupancies increase at these facilities and as ICE populations portfolio-wide increase from the declines in the second quarter. However, margins could be negatively impacted at the facilities we sold and by start-up activities under a new management contract with ICE at the 1,600-bed Prairie Correctional facility. The operating margin in our Services segment was 10.2% in the second quarter of 2026, in line with expectations. The Services segment generated 6.1% of our segment net operating income in the second quarter of 2026, up from 0.5% in the prior year quarter due to the acquisition of CSP.

Turning next to the balance sheet. During the second quarter, we funded the $148 million initial purchase price for CSP with cash on hand and borrowings under the revolving credit facility. We also obtained a $100 million incremental term loan shortly following the acquisition to replenish the borrowings under the revolving credit facility.

We obtained the incremental term loan, which had a 364-day maturity and was prepayable without penalty as a short-term solution to maintain our strong liquidity position as we assess potential asset sales that could further enhance our liquidity. As of June 30, our leverage measured by net debt to adjusted EBITDA was 2.9x using the trailing 12 months. As of June 30, we had $108.9 million of cash on hand and an additional $273.3 million of borrowing capacity on our revolving credit facility, which had a balance of $280 million outstanding, providing us with total liquidity of $382.2 million.

On July 2, 2026, we completed the sales of our 2,560-bed California City detention facility and our 1,994-bed Otay Mesa Detention Center, both located in California to the Department of Homeland Security for a total gross sales price of $1.5 billion while retaining management of these facilities. After transaction costs and estimated federal and state income taxes, which will be paid next month, we estimate our net proceeds to be $1.1 billion. We used the net proceeds to pay down debt totaling $608.5 million as detailed in our press release, including $238.5 million of our 4.75% unsecured notes that will be repaid on August 12.

Earlier this week, after entering into a new management contract with ICE to activate our Prairie Correctional facility in Minnesota, we completed the sales of our Midwest regional reception Center and our Prairie facility for a total gross sales price of $734 million, again, retaining management of these facilities. After estimated federal and state income taxes and transaction costs, we estimate our net proceeds to be approximately $522 million. After income taxes and debt repayments, we will have approximately $1 billion of cash on hand, total debt outstanding of $739.1 million and $553.3 million of borrowing capacity under our revolving credit facility. This is more liquidity than the company has ever had and provides us with significant flexibility to execute our capital allocation strategy and growth plans.

On August 4, the Board of Directors authorized an increase to our existing share repurchase program, pursuant to which we may purchase up to an additional $500 million in shares of our common stock, increasing the total repurchase authorization to $1.2 billion. Since the share repurchase program was authorized in May 2022, we have repurchased a total of 28.1 million shares at an aggregate cost of $444.2 million or $15.82 per share.

Including the increased authorization, therefore, we have $755.8 million authorized and available under the share repurchase program. We expect to utilize a substantial portion of the remaining net proceeds from the facility sales to repurchase shares of our common stock under the recently expanded authorization. While these facility sales have created significant balance sheet flexibility following the sales, we still retain ownership of a vast real estate portfolio consisting of 56 corrections, detention and reentry facilities with a design capacity of 63,727 beds containing 12.3 million square feet, including 9 facilities contracted and dedicated fully to ICE with a design capacity of 10,750 beds containing 2.2 million square feet.

Stated differently, even after these sales, we are not simply a services company. We remain a significant owner of specialized mission-critical real estate infrastructure that is very difficult to replace with the operating expertise to manage those assets effectively for federal, state and local government agencies, providing steady, predictable cash flows.

Moving lastly to a discussion of our updated 2026 financial guidance. Because of the significant gain on sale, we expect to generate diluted EPS of $15 to $15.20 and adjusted diluted EPS, which excludes special items of $1.62 to $1.70, up from $1.53 to $1.63 in our previous guidance. We expect to generate normalized FFO per share of $2.61 to $2.70, up from $2.60 to $2.70. We expect adjusted EBITDA of $440.5 million to $445.5 million compared with $453.8 million to $461.8 million.

Our updated guidance reflects our best estimate of the financial impact of the aforementioned 4 facility sales and our expected continued management of these facilities. Although we and ICE have not yet modified the management contracts for these facilities to reflect the change in ownership, the range of our guidance incorporates our best estimate of the financial impact of the change in ownership. The updated guidance reflects the repayment of $608.5 million of debt, including $238.5 million of 4.75% unsecured notes that will be repaid August 12.

Our updated guidance for adjusted net income, FFO and EBITDA were each favorably impacted by interest income associated with the residual cash balance after the repayment of debt resulting from the facility sales. Unlike net income and FFO, EBITDA excludes the benefit of the reduction in interest expense resulting from the repayment of debt.

Our updated guidance does not include the impact of any share repurchases we may execute during the second half of 2026, which could negatively impact net income, FFO and EBITDA for a reduction in interest income associated with any cash used to repurchase shares, but could favorably impact their corresponding per share measures for the reduction in our weighted average shares outstanding.

In addition to the financial impact associated with the facility sales, our updated guidance reflects modestly higher residential populations based on recent trends compared with our previous forecast, which already contemplated higher populations in the second half of 2026. The average daily ICE populations in our care declined by 6.6% during the second quarter from the first quarter of 2026 and nationwide ICE detention populations declined from a high of 70,766 at the end of January to 60,311 in early April, a decline of 14.8%.

We believe these declines were for temporary reasons, including a partial government shutdown that centered around DHS funding, a reorganization of DHS leadership and the subsequent impact to enforcement activities, including redeployment of ICE agents to TSA checkpoints, each of which has since resolved.

Since early April, nationwide ICE detention populations increased to 65,765 or 9% in mid-July. ICE populations in our care increased by 17.7% during the same period. Although the updated guidance includes the new management contract at the Prairie facility, taking into account start-up activities and a phased commencement of intake operations at the facility, the updated guidance reflects an immaterial impact to earnings for the remainder of 2026.

The updated guidance also includes an increase in general and administrative expenses for higher incentive compensation associated with the facility sales. As Patrick mentioned, in addition to the facility sales completed to date, we have recently begun discussions with ICE about the potential acquisition of additional detention facilities from us. These discussions are in preliminary stages, and our updated guidance does not include the impact of any potential additional facility sales. We plan to spend $65 million to $75 million on maintenance capital expenditures during 2026 and $15 million for other capital expenditures, up $5 million from our prior guidance.

Our 2026 forecast also includes $35 million to $40 million for capital expenditures associated with previously idle facilities we are activating and for additional potential facility activations, down $5 million from our prior guidance. We expect adjusted funds from operations, or AFFO, which we consider a proxy for our cash flow available for capital allocation decisions, such as share repurchases and growth CapEx such as acquisitions and facility activations to range from $257.5 million to $271.5 million for 2026.

We expect our annual effective tax rate to be 25% to 28%, substantially unchanged from our prior guidance. The full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2026 to range from $173 million to $175 I will now turn the call back to the operator to open up the lines for questions.

[Operator Instructions] The first question comes from the line of Greg Gibas of Northland Securities.

Are you able to provide how much of the adjusted EBITDA guidance delta reflects the anticipated contract adjustments to the facilities sold? And maybe when does that imply contract changes were or will be effective?

Greg, it's Dave. Yes, we're not -- we've incorporated the range of outcomes from those negotiations into our guidance, but we're not specifically quantifying them for obvious reasons. Those negotiations are not yet complete, but we felt like putting -- incorporating our best estimate into the range would provide investors with what the run rate could be. I don't yet know the effective date of those contract negotiations when they'd be effective either as of yet.

Got it. Got it. And then also as it relates to guidance, could you maybe discuss what it assumes with respect to ICE populations in Q3 and Q4 and maybe how that's changed since you last provided guidance?

Yes, sure. If you recall, last quarter, we expected ICE populations to be -- to decline in the second quarter of '26 and then increasing in the second half of the year. So that was already baked into our guidance. But we did increase probably the range is probably $5 million to $10 million for seeing those increases sooner than what we had in our previous guidance. And I think you've seen the nationwide detention populations have now been published and they have reflected an increase. So that's probably going a little bit faster than what we had anticipated last quarter.

[Operator Instructions] The next question comes from the line of M. Marin of Zacks.

So given that you're currently engaged in early-stage discussions with ICE regarding additional potential asset sales, sales of facilities, is it reasonable for us to think that there might be a temporary pause on share repurchases during this current quarter, which presumably would not indicate any change in your prioritization of capital allocation?

Yes. I'll tag team with Patrick on that maybe. It all depends on the status of negotiations. You'll see we kind of changed the tone of those discussions to be very preliminary at this point. So we've been in deep discussions for the due diligence on both Prairie and Midwest for a large part of the last quarter or maybe even beyond then. So that did create some restrictions on our ability to buy back stock. So it all depends on the facts and circumstances of what we know at the time the window is open.

Obviously, we're closed for earnings currently until next week when our window would normally open up. But based on discussions right now, I think we feel pretty good about being able to buy back stock in the second half of the year, but it will all depend on the status of those discussions.

And the only thing that I would add is, obviously, we've seen meaningful price movement in the second quarter. We did not repurchase shares in the second quarter. That was not because we don't believe our stock is undervalued. And so we certainly see the value of being able to be in the market and initiate or continue our repurchase program. So certainly looking for those opportunities as they do present.

Understood. And as your occupancy, consolidated occupancy, which reflects ICE and other government partners continues to rise, can you please remind us of what the historical peak was from prior years?

Yes. So I've been with the company since 2001. That was probably the last time we were in the mid-90% occupancies. It's been that long since it's been over 90%. Pre-pandemic, I think we're in the upper 80s in terms of total occupancy. So we haven't yet hit that percentage as of yet.

[Operator Instructions] The next question comes from the line of Jordan Hymowitz of -- excuse me, of Philadelphia Financial.

A couple of things. So the $500 million buyback is not in the FFO guidance. So if you would buy that back, the FFO guidance would be like 15% or 16% on a per share basis, correct?

Well, correct. We did not include any share buybacks in our guidance. You'd have to wait -- it's a weighted average calculation. So we wouldn't get the immediate benefit for a full year. But yes, I mean, depending on what price you're buying back at the current prices, I think it's around 15% to 17% of total shares outstanding if we were to execute on the full $500.

Is there any program you can expedite that's automatic buying like there's 10b5 programs that automatically sell and there's no blackouts. Is there any such thing that a bank construction that automatically buys a certain amount every month. So even if you were in knowledge of MMPI, it would still execute?

Well, you'd have to be in an open window when you gave those instructions. So I think -- I mean, nothing really better than a 10b5 that would enable us to trade through closed windows. But again, you have to be in an open window when you enter into those agreements and then they could extend through a closed window.

And last question is, how much stock could you buy back or said a different way, what is the binding debt level to become an investment-grade company, which I assume is your goal. And so how much -- what ratios do you hope to retain that would enable you to achieve an upgrade that would bind in some ways, how much stock you could buy back?

Well, if I understand your question, Jordan, I think you're referring to the restricted payment basket covenant we have in our 2029 notes that limits our buyback -- we have a restricted payment basket unless we're below 2x leverage. And so using kind of current metrics, we could buy around $1 billion and still be below that 2x leverage. Did I get that question right, Jordan?

You answered it in a different way to the same place.

Okay. Well maybe to add on that just a bit. So what we've stated previously is our leverage policy is 2.25x to 2.75x leverage. We are below that. We want to make sure that we're in a position where we are able to deploy capital at the levels that we believe would be advantageous to our shareholders and give us that flexibility, which is under 2x.

We have not established a target of investment grade necessarily. And so we're always looking at what is optimal leverage from a value creation standpoint. We have been through periods of investment-grade ratings and periods of non-investment-grade ratings. And so that's always a calculus that we consider when we're looking at our leverage policy and how we approach that. So -- but I think today, we should look at 2x as being a limiter. But at the same time, it's somewhat a function of the amount of capital available to deploy as well as additional capital that may result from additional future asset sales if they do occur because there's a point at which leverage could drop further to the extent that there's sufficient available proceeds to give us that flexibility while availing ourselves of a repurchase program or other investments.

[Operator Instructions] The next question comes from the line of Bill Sutherland of Benchmark StoneX.

When you have Prairie up and running under contract at stable occupancy and $75 million in revenue, how should we think about the incremental EBITDA from that facility?

I would say the margins on that facility are consistent with our other ICE contracts or consistent with the portfolio average as well.

Okay. And Dave, I was also thinking about -- or is there something we should know about kind of the quarterly cadence for the rest of the year given the puts and takes that you talked about with the model?

I think the only fluctuations you're going to see are -- we're still ramping up our California City facility, our Diamondback facility. Those are 2 large facilities that continue to ramp. I think I mentioned in my prepared remarks, the 4 facilities that are really ramping -- that we're ramping during Q2 were 55%.

So we do expect them to continue ramping in the second half of the year. If you back out our annual EBITDA guidance from like what year-to-date EBITDA is, you get to a run rate around $450 million of total adjusted EBITDA. That obviously does not include the Prairie facility because the Prairie facility, we won't be able to accept the first detainees until late this year, and it won't reach full activation until the second quarter of '27.

That's helpful. And lastly, I was just thinking about the -- what DHS is trying to get done here with capacity. And curious what you've heard about anything other than, obviously, the facilities they would like to buy from you and GEO and a few others. But where is the warehouse strategy at this point in their plans?

Well, the public statements from DHS has been that there has been a deemphasis of the warehouse strategy. There were 4 of the warehouses of the 11 that they had purchased, they were continuing to explore whether they would convert those into operations. We believe they're still exploring that for some of those facilities. But again, we've seen pivots in strategy multiple times under the current administration. And so whether we look back to the beginning with the Fort Bliss concept or an Alligator Alcatraz concept or utilization of state capacity or warehouse opportunities, there's been really a number of organic shifts in demand.

And we've been there consistently through that process and continue to believe we provide an optimal solution for ICE to the extent they wish to use it. And certainly, you're seeing that evidence through the award at our Prairie facility and have seen that with awards to our competitors. So we think we provide a high-quality solution that provides great value to the government, and I think we're very well positioned to be able to meet any additional demand to the extent that it does present.

[Operator Instructions] The next question comes from the line of Edwin Groshans of Compass Point Research & Trading.

I just -- you kind of talked about the outlook. And I guess we're talking about the tensions, there were reports that July was a record break detentions for ICE. That follows a record in June. There's talk of ICE has a target of 100,000 to 120,000 beds you mentioned you have 5 or 4 or 5 still idle facilities. So can you just talk about like what you're seeing in detentions and then expectations for the idle facilities, whether that's reactivation? And I know you've discussed preliminary discussions on potential sales, but I guess really looking at reactivation given ICE activity?

So I would answer that through 2 lenses. So as you mentioned, there has been an increase in enforcement activity in the last couple of months that we've seen reflected in increases in detention populations in our facilities and in the national statistics. I believe we've seen 3 contract awards just in the last month for activation of new capacity that was previously idled -- within the industry, both ourselves and our competitor. So that clearly is an indication of anticipated additional demand needs. I think it's difficult to project what the pace would be for bringing on additional capacity beyond those contracts that have already been awarded. We have and continue to market our available capacity. As we mentioned in our press release, we have another -- or in our comments, another 5,500 beds that are traditional turnkey facilities that are available today, again, in 4 facilities. So we've got an ability to be able to provide additional capacity that's needed, and we're very well positioned to do that. We've made significant investments in that idle capacity to make it ready. Again, we've seen increased demand recently. If that continues, I think we're very well positioned for more, but I'd be reticent to provide any sense of timing at this point.

And I guess if we look at ICE's target of 100,000-plus beds, I think there's been some commentary out there that system-wide, maybe there is 85,000 beds available. Do you have a sense of how -- I mean, even if ICE were to buy or contracts for the idle facilities, it still seems to be short of their goal. Do you have any sense of how they can get to their goal, especially now in the prior question with the warehouse program on ICE at the present?

My view on that would be, I think the goal is organic. It's based on what the ultimate detention bed needs are at any given point in time. So what I would say is at this moment, we believe that demand for additional capacity has increased with the awards that have already been made. We believe we're well positioned with already existing turnkey capacity to the extent there's more. And I believe there's other turnkey capacity available in the industry. But as we've said on prior calls, we've also looked at a number of alternatives in terms of expansions of our existing facilities or different ways that we could provide capacity to the extent that, that demand did manifest.

And so I can see pathways for the provision of up to 100,000 beds in the industry through a variety of different scenarios. I continue to believe that turnkey solutions are the best initial option, and there's capacity to meet that demand initially. But we've done a number of scenario analyses and believe that there are some alternatives that could certainly leverage that capacity higher to the extent that the demand presented.

And with one of those alternatives -- I'm sorry, a third question, but I'll stop after this, but I've heard potential discussions of doing sort of subsided facilities on the sites. Is that -- when you talk about expansion, is that one of the potential alternatives?

There are a number of ways that you can flex up capacity and do it in a very humane dignified way on the locations that are already operational. So that would certainly be one pathway to achieving the additional capacity goal. And having capacity co-located can be very helpful for both the agency and for us operationally as we try to deliver the highest quality service possible is concentrating in a single location allows us to also concentrate resources. So absolutely, that would be -- I'm not going to speak to the form. You mentioned softsided. There can be a variety of forms of providing that capacity. But certainly, that would be an optimal way to scale up capacity.

[Operator Instructions] The next question comes from the line of Jordan Hymowitz of Philadelphia Financial.

I just want to follow up on Ed's very thoughtful question. And that is you've now gone down the path of being willing to sell your facilities to others and you've sold them to the government. But would you be willing to sell them to event centers or apartments -- and I think in my own mind, towards the San Francisco armory, which was a prison at one point and which became a movie theater show and now housing. In other words, are you willing to evaluate your assets at different price points to see what's there as opposed to just the use that it's currently in?

We're always evaluating the ways to maximize the value of our assets and looking at the alternatives that might present. I can say we have not, at this moment, considered actively alternative uses for our facilities. We believe the highest and best use is what they're purpose-built for. We think that generates the highest value for those assets to the extent that we do consider a sale. But if we were to be approached by a buyer that had interest in our capacity, we would certainly not turn away that conversation. So to the extent that someone did want to engage in dialogue, we're very open to that. But at this time, again, I think the best value that we can capture from our assets is for the purpose that they were originally built.

[Operator Instructions] The next question comes from the line of Joe Gomes of NOBLE Capital.

A lot of discussion today on ICE. Let's switch gears here. Maybe David, you could talk a little bit and Patrick, on the state opportunities, the U.S. Marshals, where those populations have been. And I know this time here in July is normally when you get your per diem increases. Maybe you could talk a little bit about how that unfolded this year?

So at the state level, we have made our way through the state legislative process. Our team was very effective at getting the traditional inflation-related per diem increases that we would expect we would get -- we saw adjustments in some markets for additional compensation for wages for our staff as we've provided significant wage increases in recent years. So I would say from a state perspective, very consistent with what you would expect, no anomalies. That portion of our business continues to perform well and outlook for balance of the year continues to be solid in our state operations. We find out later in the year after the legislative sessions have resolved and they begin to spend budget dollars as to what additional demand may present. So it's very possible that we could see additional demand for services from those customers, but I certainly don't have anything at this time that would be notable to share.

And then on the Marshals Service, one of the things that we referenced in both our press release and our script is that in a number of our facilities where the Marshals Service and ICE share capacity, you see a mix shift from Marshals Service to ICE.

We have seen positive movement in Marshal populations in the last quarter. But when you look at overall trends, I would say we're seeing trends that would be, I think, at this point, consistent with the seasonal expectations that we would normally see this time of year, but not more than that.

Okay. And then Patrick, 10,000-foot level type question here. Again, we made the sales, got the proceeds, increased stock buyback. The stock is up 70% year-to-date. What kind of gives you confidence? What are you looking at that the stock today is still a great value for the share repurchase program?

The -- I'd go back a little bit to the question that was asked earlier around free cash flow per share because with the cash that we have on our balance sheet with it not having been deployed, you don't see the value of that cash reflected yet in our per share metrics. And so the consequence of that is when you look at EPS or price to earnings or you look at free cash flow per share at this moment, we believe it understates the value of the cash that sits on our balance sheet. So for our purposes, the way that I've looked at the value of our company at this moment is from an enterprise value to EBITDA perspective.

And so if I think about the dynamics that we've seen since the beginning of the year, we have seen north of a 60% increase in our share price, but we're actually trading more cheaply today than we did coming into the year. And so from a multiple perspective, our multiple today -- well, there's been movement during the day-to-day, but it's approximately 6x EBITDA, which is well below our historical EBITDA multiple average over the last 20 years of 9.5x. So I'd argue we're objectively cheap.

And then how do I look at that in terms of the value creation that's occurred. So looking at the 4 transactions that we have completed, $1.6 billion in net after-tax proceeds, that's $16 a share in cash. So I think about the beginning of the year, the additional cash from these transactions, the performance and visibility that you have with the guidance that we've provided, which we believe reflects the impact that we're going to see on our operating contracts. And you're looking at a stock that despite the movement that we've experienced year-to-date, we believe is significantly undervalued. And so just using enterprise value to EBITDA and our guidance and the debt level that Dave described is $734 million as we go forward at 9.5x, our shares would trade just north of $48, which again, that's our 20-year average. If you look at 8x, we would trade at $41.50, 7x $37. And today, we're trading approximately $32.

We think the stock is still very attractively valued, and that's based on the value that we've been able to capture this year and that we would hope to be able to redeploy in a way that over time is reflected in our per share metrics.

This concludes the question-and-answer session. I will now turn the call back over to Patrick Swindle for any closing remarks.

Thank you, operator, and thank you, everyone, who's joined our second quarter earnings call today. In closing, our overall operational performance affirms that the goals that we set are translating into meaningful results. Strong operating and financial performance, successful facility activations and continued demand from our government partners reflect the confidence we have earned by delivering quality, compliance, service and care. These outcomes also demonstrate the strength of our people and our ability to respond to change with integrity, excellence, teamwork, service and impact.

Just as important, our progress confirms that we are well positioned to lead our industry's evolution, adapting, innovating and expanding our capabilities while strengthening our culture and our relationships. When we improve operations, support our employees and deliver better outcomes for those in our care and the partners and communities we serve, we turn performance into purpose. That is how we advance our strategic ambition of building safer, healthier and more productive communities one person at a time. Again, thank you all for joining today.

This concludes today's conference call. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q1 2026 CoreCivic, Inc. Earnings Conference Call.

[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeb Bachmann, Managing Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to CoreCivic's First Quarter 2026 Earnings Call. Participating on today's call are Patrick Swindle, CoreCivic's President and Chief Executive Officer; and David Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds.

On this call, we will discuss financial results for the first quarter of 2026 as well as updated financial guidance for the 2026 year. We will also discuss developments with our government partners and provide you with other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act.

Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our first quarter 2026 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and also 8-K reports. You are cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future.

Management will discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the Investors page of the company's website at corecivic.com. With that, it is my pleasure to turn the call over to our CEO, Patrick Swindle.

Thank you, Jeb. Good morning, and thank you for joining us for CoreCivic's First Quarter 2026 Earnings Call. On this morning's call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners.

Following my opening remarks, I'll hand the call over to our CFO, Dave Garfinkle, who will provide greater detail on our first quarter 2026 financial results as well as our updated 2026 financial guidance. Dave will also provide an update on our capital structure, including activity on our share repurchase program and other balance sheet initiatives.

Before we discuss this quarter's financial performance, I want to share some perspective on what I see every day in this role, the work our team does and why it matters. Every day, approximately 55,000 individuals are entrusted to our care by our government partners.

That means that every day around the country, more than 13,000 CoreCivic professionals are responsible for feeding, safeguarding, treating medical and mental health needs, facilitating religious and recreational activities, providing access to legal resources and delivering programs that help prepare people for whatever comes next in their life's journey.

Our colleagues carry out these responsibilities mainly, treating residents and each other with dignity and respect. This is an incredible responsibility and an essential service for our government partners and the communities where we operate. I'm extremely proud of our team and the professionalism and purpose with which they carry out their responsibilities, and I'm deeply grateful for the trust our government partners place in CoreCivic.

Through these tens of thousands of interactions each day, we have an opportunity to help build safer, healthier and more productive communities one person at a time. Using that as a North Star enables us to achieve success for all of our stakeholders, including our shareholders.

I'll now move on to a high-level overview of our first quarter operational performance. Total occupancy for our Safety and Community segments for the quarter was 79.6%, up 2.6 points since the year ago quarter. The average daily population across all of the facilities we manage was 57,243 individuals during the first quarter of 2026 compared with 51,429 in the year ago quarter. This increase was driven by more demand for our services, new contracting activity and the Farmville acquisition that was completed July 1, 2025.

This is a meaningful increase, and our teams continue to be focused on delivering the highest quality services and environment every day. Federal partners, primarily ICE and the U.S. Marshals Service, comprised 58% of CoreCivic's total revenue in the first quarter. Revenue from our federal partners increased 48% during the first quarter of 2026 compared with the prior year quarter.

Further breaking down our federal mix, revenue from ICE increased $128.1 million or 96.2%, while revenue from the U.S. Marshals Service decreased by $12.2 million versus the prior year quarter. Some of this decline is simply a shift in mix where ICE and Marshals share a contract.

Populations from ICE and our care increased by approximately 4,500 individuals or 45% from the beginning of 2025 through March 31, 2026, when we cared for 14,689 individuals, and our average daily population increased by 6,822 individuals in the first quarter of 2026 from the first quarter of 2025.

However, since the end of January 2026, when our ICE populations peaked through April 30, ICE populations in our care have declined by roughly 3,000 individuals. We believe this decline is temporary and event-specific and Dave will review our population assumptions at a high level reflected in our financial guidance.

A key aspect of our ability to meet the increase in demand we've experienced from ICE has been the activation of five idle facilities. Activating idle facilities is challenging work and activating numerous facilities simultaneously is particularly challenging, but I couldn't be more proud of our team's progress.

Occupancy at our 600-bed West Tennessee Detention Center, where we signed a new contract and began accepting detainees in the third quarter of 2025 has stabilized and our day-to-day operations are now fairly routine. We continue to receive detainee populations at our 2,560-bed California City Detention Facility, where we signed a new contract effective September 1, 2025, and at our 2,160-bed Diamondback Correctional Facility where we signed a new contract effective September 30, 2025.

As of March 31, 2026, we cared for 1,817 individuals and 735 individuals, respectively, at these two facilities. We received approval for a special use permit at our 1,033-bed Midwest Regional Reception Center in early March 2026 and immediately began accepting detainees. The facility has been undergoing reactivation since the new contract was awarded in the third quarter of 2025, but experienced a temporary delay in the intake process as we work through legal challenges in the SUP approval process.

I want to reiterate our thanks to the Leavenworth City Commission for their collaboration and trust and look forward to bolstering our long-standing relationship with the Leavenworth community. Because of the uncertain timing on the resolution of the SUP matter, we did not include the financial impact of the activation in our initial guidance for 2026.

We currently expect this facility to contribute approximately $0.05 to $0.06 in incremental earnings per share for the remainder of 2026, which is included in our updated financial guidance, as Dave will discuss further.

Moving to a discussion of the macro business environment with ICE. In late January 2026, nationwide ICE detention populations were at historic highs of around 70,800 individuals, an increase of approximately 1,000 from the end of the fourth quarter. However, a government shutdown is centered around Department of Homeland Security funding a reorganization of DHS leadership and a subsequent impact to enforcement activities, including redeployment of ICE agents to TSA checkpoints led to a 10,500 decrease in detention populations by early April 2026.

While we cannot predict how quickly population growth will resume, the administration continues to indicate a strong emphasis on border security and active ICE enforcement. What has potentially changed is how DHS plans to meet its detention bed needs going forward, including through the conversion of vacant warehouse facilities and immigration detention facilities and/or the acquisition of existing turnkey facilities.

As the former has garnered a lot of attention for various reasons, we do not know the future of that strategy. However, as widely reported in the media and in numerous analyst reports, we do believe the potential of turnkey facility acquisitions remains as our government partners look to secure capacity throughout the United States.

Nationwide populations from the U.S. Marshals Service, our second largest customer, have declined from the prior year, partially offsetting the increase from ICE as facilities that share contracts between the two agencies have extended the capacity to ICE due to the higher demand. Marshals populations are also down nationwide due to fewer apprehensions at the southern border. Our average daily Marshals population declined by 1,360 individuals in the first quarter of 2026 from the first quarter of 2025, although we have experienced a steady increase in average daily Marshals populations in the past few months.

Revenue from our state partners, which comprises 33% of our total revenue in the first quarter increased 3.6% from the prior year quarter. This increase includes per diem increases under a number of our state contracts and population growth from the states of Georgia, Montana and Colorado. This increase is net of a decline in revenue for the transition of populations at our Trousdale facility in Tennessee, which resulted in a decline in populations that we expect to recover in the coming quarters.

Excluding the decline in revenue at Trousdale, revenue per state partners increased 5.2%. We continue to see an increase in opportunities at the state level. In addition to increases in populations in our existing contracts, we are in discussions with several states in need of additional bed capacity. At the end of the first quarter, we began consolidating an expanding state customer population into our Tallahatchie County Correctional Facility in order to provide single location service for this customer while creating more marketable capacity for a potential new state customer in Arizona.

We continue to maintain five idle corrections and detention facilities containing approximately 7,000 beds to meet any federal or state increase in demand. We remain confident that the corrections and detention beds that we provide are the most humane, most efficient logistically, most compliant, most secure, readily available and provide the best value to the government.

Moving on to capital deployment. We remain focused on creating value for our shareholders through operational excellence and meaningful organic growth, an active share buyback program and at times, accretive acquisitions.

In April 2026, we executed on an agreement to acquire Clinical Solutions Pharmacy, one of the largest providers of mail order pharmacy services to correctional facilities in the United States. This ancillary business complements our core mission of improving the lives of those in our care while providing a diversifying revenue stream and meaningful growth opportunities as correctional populations age with more complex and chronic medical needs.

CSP's exclusive focus on the corrections market, serving over 600 correctional facilities, including CoreCivic across 28 states, uniquely positions it to support the government agencies seeking reliable, clinically advanced pharmacy solutions. CSP is at the forefront of the correctional pharmacy business with 50% of shipments being fully automated, which is a key differentiator in the industry, filling approximately 60,000 prescriptions per day with no single customer currently accounting for more than 15% of its annual revenue.

CSP is headquartered and operates a centralized distribution center in less than 30 miles from our facility support center here in Greater Nashville and has nearly 300 employees. I want to welcome the CSP employees to the CoreCivic team. We're excited about the future with CSP and look forward to reporting on the progress. Dave will provide more details on the financial impact of the acquisition.

Our first quarter results exceeded average analyst estimates for adjusted EPS by $0.12 and adjusted EBITDA by $13.3 million. While we are pleased with the first quarter results, we expect a sequential decline in per share results in the second quarter as a result of the recent reduction in nationwide ICE detention populations.

However, for the reasons I mentioned earlier, we believe this reduction is temporary. Even with this reduction, we are increasing our full year guidance, reflecting our strategic investment in Clinical Solutions and the successful activation of our Midwest Regional Reception Center, which more than offset the decline in our updated forecast for ICE populations.

As I noted on our last earnings call, despite full year 2026 EBITDA guidance near record levels, our stock continues to trade at a discount to our historical trading multiples, which we believe does not reflect the cash flows of our business, particularly considering the ongoing activations of previously idle facilities, giving us visibility for our growth potential in 2026 and beyond.

The acquisition of CSP further strengthens that growth outlook. We also believe that our current share price implies a significant discount to the fair value of our real estate assets using just about any valuation methodology. Accordingly, we plan to continue prioritizing our cash flows towards share repurchase taking into consideration our stock price and alternative opportunities to deploy capital, among other factors. Additionally, the recently completed $100 million term loan supports balance sheet flexibility as we navigate the partial government shutdown environment and assess potential asset sales that could further enhance our liquidity, enabling us to continue to deploy capital in ways we believe create shareholder value.

With that, I'll turn the call over to Dave to discuss our first quarter financial results in more detail, our capital allocation activities and the assumptions underlying our updated 2026 financial guidance. Dave?

Thank you, Patrick, and good morning, everyone. In the first quarter of 2026, we generated GAAP EPS of $0.38 per share and FFO per share of $0.64. Special items in the first quarter of 2026 included $2.4 million of expenses associated with M&A activities reported in G&A expense for the acquisition of Clinical Solutions completed subsequent to quarter end.

Excluding M&A expenses, adjusted EPS was $0.40 compared with $0.23 in the first quarter of 2025, an increase of 74%. And normalized FFO per share was $0.65 per share compared with $0.45 per share in the prior year quarter, an increase of 44%. Adjusted EBITDA was $110.1 million compared with $81 million in the first quarter of 2025, an increase of 36%, adjusted EPS exceeded average analyst estimates by $0.12 per share and adjusted EBITDA exceeded average analyst estimates by $13.3 million.

The increase in adjusted EBITDA from the prior year quarter of $29.1 million resulted from the activation of four previously idled facilities since the first quarter of 2025 under new management contracts with ICE and the acquisition of the Farmville Detention Center on July 1, 2025. The number of ICE detainees in our care followed national trends, which reached record highs again during the first quarter of 2026, although they dipped at the end of the first quarter for what we believe are transitory reasons.

We managed approximately 24% of total ICE populations at quarter end compared with 23% at year-end and 25% at March 31, 2025. The increase in adjusted EBITDA also resulted from an increase of $4.6 million in employee retention credits available under the CARES Act during the first quarter of 2026 compared with the first quarter of 2025.

During the first quarter of 2026, we collected the final amount we previously claimed. Higher state populations also contributed to the increase in EBITDA. Revenue from our state partners grew 3.6% and included notable increases from Georgia, Montana and Colorado.

Other factors affecting adjusted EBITDA and per share results included higher G&A expense for onetime transitional expenses related to executive leadership changes, offset by a 10.1% decrease in weighted average diluted shares outstanding as a result of our share repurchase program.

Operating margin in our safety and community facilities combined was 24% in the first quarter of 2026 compared with 23.6% in the prior year quarter. Excluding the employee retention credits from each quarter, operating margin was 23% for both quarters.

Revenue during the first quarter of 2026 from the four previously idled facilities that we have activated since the first quarter of 2025 totaled $100.8 million, which when annualized is approximately 93% of the total annual revenue we expect to generate from these four facilities at stabilized occupancy. As these facilities reach expected occupancy, we anticipate a slight increase in operating margin.

Turning next to the balance sheet. During the first quarter, we repurchased 2.3 million shares of our common stock at an aggregate cost of $44.7 million. Although lower than the fourth quarter, the reduction does not reflect a change in our capital allocation strategy.

Many factors can affect the magnitude of our share repurchases during any particular quarter, including share price, liquidity, earnings trajectory, alternative opportunities to deploy capital as well as legal restrictions on trading windows impacted by potential strategic transactions such as acquisitions, dispositions, new contracts and capital markets transactions.

Since the share repurchase program was authorized in 2022, through March 31, we have repurchased a total of 28.1 million shares at an aggregate price of $444.2 million or $15.82 per share. As of March 31, we had $255.8 million available under our Board authorization.

After taking into consideration these share repurchases, our leverage measured by net debt to adjusted EBITDA was 2.8x using the trailing 12 months ended March 31, 2026. As of March 31, we had $209.7 million of cash on hand and an additional $131.3 million of borrowing capacity on our revolving credit facility, which had a balance of $425 million outstanding, providing us with total liquidity of $341 million.

Just after quarter end, we completed the acquisition of Clinical Solutions, one of the largest providers of mail order pharmacy services to correctional facilities in the United States. The initial purchase price of $148 million, excluding transaction-related expenses, was funded with cash on hand and borrowings under the revolving credit facility.

As Patrick mentioned, we believe this was a unique acquisition opportunity of a segment-leading company in a growing market complementary to our existing business at a purchase price generating a return on capital deployed that equals or exceeds the accretion resulting from share repurchases, reflecting a lower multiple than our forward EV to EBITDA trading multiple.

To replenish the borrowings under the revolving credit facility used to finance the acquisition, on April 10, we amended our bank credit facility to obtain a $100 million incremental term loan. We obtained the incremental term loan, which has a 364-day maturity and is prepayable without penalty as a short-term solution to maintain our strong liquidity position as we assess the debt capital markets and potential asset sales that could further enhance our liquidity, enabling us to deploy capital in ways that we believe will create shareholder value.

Moving lastly to a discussion of our updated 2026 financial guidance. We expect to generate diluted EPS of $1.51 to $1.61 and adjusted diluted EPS of $1.53 to $1.63, up from $1.49 to $1.59 in our previous guidance. We expect to generate FFO per share of $2.58 to $2.68 and normalized FFO per share of $2.60 to $2.70, up from $2.54 to $2.64.

We expect adjusted EBITDA of $453.8 million to $461.8 million, up from $437 million to $445, the most notable changes to our guidance reflects Q1 results beating our internal forecast by about $0.05 per share, an increase from our prior guidance of $0.05 to $0.06 per share for the activation of our Midwest regional reception center that we announced on March 11, which was not in our initial guidance, and the acquisition of Clinical Solutions, which we expect to generate $215 million to $230 million of revenue in 2026 and contribute $0.03 to $0.05 per share, net of interest incurred to finance the acquisition, partially offset by a reduction of $0.09 to $0.15 per share for lower ICE populations compared with our previous forecast.

As you may recall, our initial 2026 financial guidance contemplated stable or rising ICE populations at facilities where we have federal contracts. Our forecast reflects the reduction in nationwide populations reported by ICE during the second quarter and the related reduction in our ICE populations that Patrick mentioned.

We believe the reduction in nationwide ICE populations in the second quarter is transitory, reflecting the short-term redeployment of ICE agents to augment TSA security personnel during the government shutdown and overall enforcement strategy adjustments within DHS.

Therefore, our guidance reflects growth in ICE populations under existing contracts during the second half of the year. Consistent with our past practice, guidance does not include the impact of new contract awards not previously announced because the timing of government actions on new contracts is always difficult to predict. We still have 5 remaining idle facilities containing 7,066 beds, and we believe incremental demand for more idle facilities will likely be needed once ICE absorbs the recently contracted beds and nationwide ICE populations grow during the second half of the year as we expect.

Our guidance does not include additional acquisitions or dispositions, including the impact on EBITDA, such as pricing adjustments, if any, that could result from dispositions. For modeling our quarterly results, Q2 will reflect a reduction of $0.06 per share for the employee retention credits recognized in Q1, the reduction in ICE populations compared with Q1 aside from activations, amounting from $0.05 to $0.07 per share, partially offset by a seasonally weaker Q1 due to one fewer day than Q2 and because we incur approximately 75% of our unemployment taxes during the first quarter, resulting in a collective per share increase from Q1 to Q2 of $0.01 to $0.02.

Our Q2 forecast also includes growth from the CSP acquisition and assumes higher occupancy at our California City, Diamondback and Midwest regional facilities. We plan to spend $60 million to $70 million on maintenance capital expenditures during 2026 and $15 million for other capital expenditures, unchanged from our prior guidance.

Our 2026 forecast also includes $40 million to $45 million for capital expenditures associated with previously idle facilities we are activating and for additional potential facility activations, up $5 million from our prior guidance. We expect Adjusted Funds From Operations, or AFFO, which we consider a proxy for our cash flow available for capital allocation decisions, such as share repurchases and growth CapEx, such as acquisitions and facility activations to range from $250.4 million to $264.9 million for 2026.

We do not believe the price of our common stock reflects the value of the cash flows of our business as we are trading below historical multiples despite visibility of cash flow growth in 2026, driven by recent contract awards, which is now further enhanced by the acquisition of CSP.

Therefore, we expect to prioritize our cash flows to continue executing on our share repurchase program, which has been incorporated into the range of our guidance. The amount of our share repurchases will take into consideration our stock price, liquidity, earnings trajectory and alternative opportunities to deploy capital as well as legal restrictions on trading windows that I previously mentioned.

We expect our annual effective tax rate to be 25% to 30%, unchanged from our prior guidance. The full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2026 to range from $160 million to $165 million, unchanged from our prior guidance. I will now turn the call back to the operator to open up the lines for questions.

[Operator Instructions] Our first question comes from the line of Raj Sharma of Texas Capital.

I wanted to try to understand the sale of facilities to ICE and what would be a valuation level that you would consider? And just some color on would this be a great scenario for you with or without a contract on the facility?

Thank you for the question. I would say, and I'll address that in sort of two parts. One of them is we try to be a very good partner for all of our customers. And trying to be a good partner, we evaluate the ways that we can best support their mission and their strategy. And so that may be our providing turnkey services and managing a facility that we operate. It may be managing a facility that they own. It may be leasing a facility to them. It might be selling them a facility.

And as we have conversations with each of our partners, we think about what is the optimal way for us to deliver that service. ICE has expressed the desire that they own certain of the assets that are managed on a turnkey basis nationally. So that's been publicly reported. You've seen it in a number of sources. I've seen it a number of sources. It's clear that part of their strategy that they're considering is whether it does make sense to own some of those assets.

Strategically, in thinking about the way that they would approach locations, the way that they would approach individual facilities, they've obviously mapped, you've seen references to warehouses, you've seen references to turnkey operations, what a consolidated ICE operation might look like nationally. And so, in thinking about that, we have some of the largest facilities that provide service for ICE nationally as do some of our competitors.

Some of those would be a natural fit for ICE if they were working to build out that network. They ultimately have to make that decision. When you think about valuation, that's an interesting question because there really isn't a comp for what these facilities are worth. So, if you were to look at a more actively traded market for assets, you could look at comparable sales and get a reasonable sense of what that value might be.

I'd argue in this case, we have special purpose assets. They're highly improved properties. They have been prepared for utilization by ICE, many of them are in markets or in areas of the country where cost of construction is very high. We've seen significant increases in inflation in the cost of building corrections and detention facilities. So you really can't look at what I would call comp sales as a guide for what we believe the value of our assets are worth.

I look at it through the lens of what does it cost to build a facility today and what would that be on a depreciated replacement cost basis. I think that generally gives a guide for how we would think about what those facilities might be worth in a hypothetical conversation. So I'd like to be more specific. It's very difficult to do that, obviously. But I guess in the context of the way we would think about value of our facilities, I really can't point to a public comp that would be an indicator.

If you think about depreciated replacement cost, that's something that we certainly would think more appropriate, but I would really hesitate to pinpoint a value range at this point.

And then your follow-up question, which was, would we consider an asset sale without a management contract. We certainly believe it would be the intent of ICE to the extent they were to purchase assets have the private sector continue to manage facilities.

But we have to consider the duration of that management contract long term in terms of how we might think about or approach a sale process. So, at this moment, we would expect that we would continue to operate. We would expect that we'd adjust our pricing based on their ownership of the asset versus our ownership of the asset, if, in fact, there were to be a transaction occur.

But the idea generally that ICE owning an asset would be appropriate strategically for us to consider, I would say our answer to that would be yes, depending on the value that we would derive from selling a potential asset to them or any other customer.

Great. That's very helpful. And just one follow-on question on just what facility utilization levels are you, would you expect to see end of first half and also the end of the year?

Yes, Raj, I'll take a stab at that one. We, as Patrick mentioned in his remarks, from the peak in January through late April, we saw a decline in our ICE populations of about 3,000. So, we're projecting that to sustain around those levels through the end of the second quarter and then growing back sequentially in Q3 and Q4. So hard to put a specific population number on it, but that's kind of the trajectory as we see it. I'll take it offline.

Our next question comes from the line of Greg Gibas of Northland Securities.

Dan and Dave, congrats on the quarter. I wanted to follow up on that last one actually is it just related to the implied guidance. Maybe if we could get a little bit deeper in terms of what you're implying as kind of maybe the current run rate for Q2, noting that you kind of expect populations to remain somewhat flat with where they are now and versus kind of the ramp-up you're assuming in the back half. If you could kind of bridge the quarterly expectations implied by guidance, that would be very helpful.

Yes. Thanks, Greg. As I mentioned in my prepared remarks, I bridge the Q1 to Q2. Obviously, we had the $0.06 in Q1 for the employee retention credits that would not be present in Q2. And then there was the decline in ICE populations that we're expecting to sustain themselves through Q2. So, I would say rough numbers, I think there's a lot of puts and takes, but that's around a $0.06 decline from Q1 to Q2, $0.06, $0.07 somewhere on there from Q1 to Q2 and then sequentially increasing from there.

We do have the acquisition of CSP that will be in a full quarter beginning April 1. So that will be in for a full quarter in Q2. And then we obviously continue to ramp up our California City Midwest facility and Diamondback facility. So those will be tailwinds to the decline in ICE population. So, that's the way we're kind of thinking about it.

And then we would get, I think we could still get to, we mentioned in prior calls, a $450 million run rate. So certainly see that, that's possible as we get into the second half of the year.

Understood. That is helpful. And if I could follow up on CSP. Could you discuss any synergies or, I guess, growth opportunities related to that acquisition and maybe provide a little bit more detail in terms of its financial profile, what that looks like, growth rate, margin profile, et cetera?

Yes. Thank you for that question. So I'll address those two somewhat separately, but also somewhat combined. So CSP is going to be a stand-alone subsidiary of CoreCivic. So, the opportunities for operating synergies are fairly limited. Our goal is to maintain Clinical Solutions as it operates today. to be able to support the platform, provide it with resources, but also the independence to be able to grow. This isn't a tuck-in acquisition. It is an adjacent expansion of our business.

In terms of growth rate, the company has seen exceptional growth historically. I'd rather not disclose the rate. The way that I would frame growth rates for Clinical Solutions, at least for the intermediate term, would be, if you were to look at the way we think about the growth that's built into our guidance for 2026 and calculate the 5-year compound annual growth rate would be just over 10%, if I were to look at the growth potential for Clinical Solutions, it's probably twice that.

So it is a rapidly growing platform that has evidenced ability to sustain growth rates in excess of that for an extended period of time. So our goal is to continue to support that platform, give it the space to be able to grow, but also take advantage of some administrative opportunities for synergies where those might be available. For example, consolidation on our ERP platform.

There are revenue synergies in terms of our customer relationships versus theirs. They do not presently do business with the federal agencies outside of contracting with us. So that is an opportunity for growth.

There are a number of overlapping customers. There are a number of nonoverlapping customers. And so we really, again, want to be able to support them, give them the space to be able to maximize the capability of the platform in the way that they have done in the past.

We feel good about the pipeline that's in place for them. I have a lot of visibility into growth into 2027 and think they're really well positioned beyond that. Dave, I don't know if there's anything that you would add.

Nothing to add other than the clarification on the prior comment, the $450 million in the second half of the year, that excludes Clinical Solutions. So we're still confident even with the ICE reduction that we're seeing in Q2, the second half of the year will be at a run rate of $450 million, then CSP would be on top of that.

Our next question comes from the line of Ben Briggs of StoneX Financial, Inc.

Congratulations on the quarter. Yes. So, I just wanted to kind of ask, a little bit of a follow-up on kind of your acquisition strategy. Obviously, CSP happened in early April of this year. But just as you're thinking about potential acquisitions maybe going forward, I know you listed as one of the potential uses of cash of the incremental term loan that there might be some acquisitions that could happen in the future. Any color on the type of additional acquisitions that you might make?

Is there any chance that you might build new facilities, technology platforms for alternative detention programs? Just any clarity on your thinking there would be appreciated.

Sure. We have always been opportunistic in looking at opportunities for acquisitions. And if you think about the criteria that I would use at this moment, obviously, we believe that our share price is undervalued. We think that's a very attractive use of capital for us. So for an acquisition to meet the hurdle for us that would justify buying a business instead of our stock, you have to be very attractively valued.

And I think appropriately valued at equal to or less than our ability to deploy capital via share repurchase. That's necessarily going to impact the scope and volume of acquisitions that we might consider or make. There is not an acquisition that's currently planned or in the pipeline, although, again, we're going to continue to be very opportunistic and look for acquisitions that might be a good fit for us.

From a business standpoint, strategically, we're looking at transactions that might be adjacent to us that supplement our growth that can leverage our competencies and their competencies and it can ultimately give us the ability to grow on a long-term basis in a sustainable way. We go through seasons.

This has presently been a season that has seen a lot of ICE growth. We will go through seasons that don't have that volume of growth. And so we're preparing the platform to be able to grow on a sustainable basis long term. CSP fits within that. But in terms of prioritization, I'd revert back to Dave's comment in his comments overall, which were prioritization right now would be toward share repurchases. But again, we will consider other business acquisitions as appropriate, but I don't see anything as imminent that I would point to from a cash flow prioritization perspective.

Our next question comes from the line of Joe Gomes of NOBLE Capital.

Just to kind of follow up and put a little bow tie on the CSP. I think it said they're in 28 states, so there's 22 they're not in. Would there be the potential for a similar type of purchase of another operator that may be in those 22 states to, as opposed to slowly going organically through those states? Is there others out there like a CSP that might be of interest at some point?

There are other providers in the market, and I could see that as being an attractive way to scale the CFC platform. So I would say to the extent that those opportunities did present, we would consider them. Again, in terms of time lines, I wouldn't certainly look at something as imminent, but I do think there is an opportunity for consolidation within the space.

Okay. And then Patrick, we talked on a number of quarters here that you're in discussions with other states, some that are not existing customers. Any more color you can provide us as to what timing might be as to whether you might get a new contract from a state that's not an existing customer?

Sure. That's, I appreciate that question. Time lines with any state procurement and then particularly with new state procurements can be widely varied. And so, you can go through periods of intense discussion and have that ebb and flow based on relative priorities or alternatives. And certainly, it also links to individual state budget cycles.

So as we have conversations, you're going to see periods where you think that you're close to an agreement and you find out that it lags a bit. In other cases, you're going to see demand accelerate quickly based on an imminent need that presents and something either being funded or not funded through the legislative cycle. So I don't really, I don't have an update today on timing of what some of those might be.

But I do, I would say that we have a very strong state partnership development team that is very quick to accommodate the needs of our customers when they do present and a number of those organic conversations continue. And certainly, as it warrants, we'll provide updates on timing, but historically haven't given a lot of specificity outside of RFPs that are active and underway. So again, I appreciate the question. I'd like to give you more clarity, but I really can't say more at this time.

Our next question comes from the line of Bill Sutherland of Benchmark.

Dave, I just want to make sure I'm clear on the source of growth in the ICE populations in the second half. That's based simply on the build-outs to do. You're assuming that the national sort of census levels don't change. Is that correct?

Yes, exactly right. So, we are ramping the three facilities that I mentioned, California City Midwest and Diamondback. But the growth that we're contemplating in the second half of the year would be on top of that. It would basically be, they're 10,500 lower from the peak in January nationwide ICE detention populations.

So, we would expect that growth to resume in the second half of the year. Part of that could be around reconciliation. We did see the redeployment of ICE agents toward TSA checkpoints and some other factors that contributed to the decline. So we would see nationwide populations growing during the second half of the year. So that would include not just the activation facilities that we've got, but the contracts that we've had.

Right. I am glad I clarified that. And then the second thing I've been thinking about is I've been reading about the interest ICE has in owning facilities and just the greater kind of protection they have in terms of the kind of things that facilities can run into. Are there any states where they're particularly focused on trying to acquire?

We'd rather not speak specifically to where ICE might be focused. I think I'd certainly revert back to my earlier answer, which is we believe that the broader vision is to develop a nationwide network that consolidates populations in relatively larger facilities that allows them to be able to service the needs of the entire country.

And as they map that, they're going to have to make decisions between where they might consider the purchase of a facility outright, where they might choose to continue to contract with the private sector, and where they might consider alternative like warehouses. And so ultimately, they'll settle on a strategy that makes sense for them. But I would say that's not necessarily limiting in terms of location. And so as they look back strategically and try to decide where the optimal locations might be, I certainly have ideas on where optimal locations would be from our perspective, but I also wouldn't want to limit the scope to any particular subset of markets because I think that could be unnecessarily limiting in terms of the broader vision of asset ownership by ICE.

And is this a process that just feels like it will be determined over a long period of time? Or do you feel a sense from the agency that they're wanting to get some decisions made in the relatively near term?

I guess the way I would answer that is that the first articles that I saw referencing the strategy broadly were, I believe, around the end of last year. And in that, there was a lot of discussion around 85,000 beds total, some mix of warehouses and turnkey facilities. A lots happened since then. And so they have to consider what has happened in the market and how that would impact various purchases. It's been publicly reported that they have made a number of warehouse purchases, but it's also been reported that they are actively considering those turnkey facilities.

And so as you can imagine, if that process was initiated last year, that would be a conversation that's ongoing and something that ultimately, they would make a decision on their own time. And so I really hate to speculate on timing because in dealing with government, you do see significant movement in time line from time to time, sometimes accelerating, sometimes decelerating. But obviously, they have pointed to very publicly the idea that some number of turnkey assets would be a critical part of their strategy going forward.

Our next question comes from the line of M. Marin of Zacks.

So I have a couple of follow-up questions related to CSP. So with this acquisition, you now have several business lines that are adjacent or complementary to the core business. Should we be thinking that there are any potential cross-promotional opportunities you see that could lift some of the other business lines now that you have CSP on board or they're all extremely distinct and you don't see any opportunities for that?

So on one hand, the individual service delivery aspects are distinct, but there is meaningful overlap. The more interactions that we have with a particular partner meeting their needs, the better trusted partner that we can be for them. And so I think about the opportunity for cross synergies, most importantly through the lens of expanding customer relationships where we may have a relationship that's very strong that they may not have or vice versa.

And so cross-selling opportunities absolutely will be available between the various businesses. Relationship leveraging between those is important. And one of the really attractive things to us about Clinical Solutions is we believe that both their values are very aligned with ours. Their culture is very aligned with ours. They have very strong customer relationship focus and orientation and are very well respected by their customers.

And so I think by thinking about how we might consider leveraging their capabilities or skill set, it really would be through cross-selling opportunities between the business.

That said, we know there's a limited subset of customers in our space, and we all know all of our customers. And so again, for me, it's one of those opportunities you have just to prove your value to your customers through delivering great quality service every day through two or three services instead of just one.

Okay. And one follow-up on that. You talked before, I think, in response to another question about potential for consolidation within that particular space. So very, very back of the envelope, it looks like CSP as the largest provider in that segment has only about or slightly under a 10% market share, which would suggest that there's an opportunity, significant opportunity to grow that business and potentially consolidate. Is that roughly the right neighborhood to think about 10%-ish?

It depends on how you define market, but I'd answer your question with saying there is significant runway available to Clinical Solutions, whether that be through consolidation or whether it be through outsourcing of, by customers who presently provide that service in-house. Clinical Solutions has a very technically advanced pharmacy. They are, from a service delivery standpoint, we believe they have an approach to delivery that is industry-leading and is very scalable.

And so as you think about the economics and the desirability of self-operating if you're a particular state or federal customer versus outsourcing, you certainly would have to consider both the quality aspects as well as the cost aspects of outsourcing. So I think in terms of overall market opportunity, you're in the right ZIP code.

In terms of how that would manifest, that could be both through new outsourcing of currently self-operated facilities or operations as well as through consolidation through potential acquisitions.

And I'd add that's really discussing market share, but I'd also say it's a growing industry where we have aging prison populations that have complex medical needs. And so that is growth for that business as well.

Our next question comes from the line of Edward Zhao of ParkWest.

Just wanted to understand some of the recent population changes. Like we understand that there's been declines in the population post Q1 and just want to understand the band of outcomes if it doesn't ramp. Like do we have room to change our expenses on either the fixed or variable side of the business?

And just wanted to understand, too, kind of what you're hearing that would give us confidence that the ramp will continue post Q2? And how much of a ramp do we need in those census numbers to get to the guide?

I'll take maybe we'll tag team on this one, Patrick. The first part of that, there is ability to rightsize staffing levels when populations decline. Having said that, we always want to be ready and adequately staffed to make sure we can accommodate demand. But certainly, with lower populations, you have less churn within the facility. So you have less overtime, you have less variable expenses. And so there is an opportunity to reduce expenses. But, well, I'll turn it over to you, Patrick, on the reasons why we expected growth in the second half.

Absolutely. So I'm sure as you've seen, there's been a lot of national disruption around the ICE enforcement approach and a lot of transition occurring within Homeland Security. If I pan back and look at what, a variety of variables. So one of them, what is being expressed in terms of national enforcement approach. We believe there continues to be a strong commitment to maintaining strong border enforcement and strong interior enforcement. We continue to see them act in ways that indicate that they have an expectation toward increasing need for beds.

Those conversations manifest in a variety of ways, including discussions around currently noncontracted facilities. As we mentioned on the call, we have 7,000 beds that are available and can meet that need. When you listen to conversations that have been publicly reported talking about the aggregated bed need, continue to look toward 85,000 to as many as 100,000 beds nationwide. So we've seen no lessening of intensity. We've seen no change in what the expectation would be for the supply need.

We have seen the disruption that occurred in recent months, but I believe that's more anomalous than what we've seen along a broader arc. You also have the dynamic of the significant and meaningful conversations that have occurred around funding for ICE and for CBP. The Homeland Security funding broadly has passed reconciliation 2, which is currently in process.

We've seen the initial languages come out of the Senate committees around funding for ICE and CBP that would fund ICE through the remainder of the current administration are well underway. I'm not going to handicap what happens in Congress. I've never been good at predicting that. But what I would say is it appears that funding is trending toward sufficient funding for ICE operations at a higher population level for the remainder of the administration.

So I believe that as funding is in place as new leadership is able to establish and implement its priorities that you are likely to see an increase in populations. I do think that, that's consistent with the desire to add capacity, and I think we're in a great position to do that. So in terms of being able to make adjustments to cost structure, you do see cost structure adjustments on the margin. That's typically reductions in overtime. So it isn't outright staffing reductions.

There's a long process for getting staff cleared for ramping our facilities, for preparing them for growth. And we absolutely believe that the right stance and position for us right now is to maintain a growth-focused position with full staffing in our facilities to be able to accommodate the growth that we do expect in the second half of the year.

And then to answer your question on guidance. So we feel like the range has incorporated a range of population growth during the second half of the year. And it's hard to pinpoint what the nationwide population would have to be to hit the midpoint of our guidance. But I'd say at a high level, if you get back to, we're 60,000, maybe slightly under 60,000 today. The peak was around 70,000 at the end of January. If we get back to that 70,000 number in the second half of the year, I feel our guidance would probably be right in the middle there. So it could depend on timing, too. Do they get to a 70,000 number sooner? Do they go higher than 70,000, then there would be upside to our guidance. If they don't get to 70,000 until the back half of the year, then you're towards the low end of our guidance. So that's kind of how we're looking at it.

Our next question comes from the line of Kirk Ludtke of Imperial Capital.

I'm just curious, is ICE full steam ahead with their plans to convert warehouses to detention centers? Or have they, has that slowed down?

We have seen probably the same things that you've seen in the press around the individual warehouse opportunities. There have been purchases have been completed. We've not yet seen one of those opportunities be fully built out and ramped. In terms of the feasibility of that, I think that's something that really only ICE is able to assess themselves. I will say that we've looked at those opportunities. If we think about where we have strong capabilities, it would be the traditional type of detention capacity that we've provided.

We've got a great network of traditional facilities nationwide. We've got 7,000 additional beds available to them today. We could scale that up significantly if needed. And so we've got the ability to do that with our traditional asset base. warehouse conversions are challenging. They're difficult and would have to be done in an expedited time line. And so I hate to speak in areas where I would look at what a preference or an expressed option or opportunity might be for ICE.

But I would say, certainly for us, it's not an area where we would see as much opportunity as partnering with them for whether it be a turnkey asset sale or whether it would be activation of a new facility that would meet their needs. But again, if you were to look at what, I always look at what's actually occurred. And at this point, we haven't seen a great deal of movement in terms of activation of new warehouse facilities.

Got it. And when do you think, what's the timing on that? I mean is it, are we talking months, years? I mean even if they get all the permits and all the local players go along with it, how long does it take to convert something like that?

That's very difficult for me to assess because we always look at it through the lens of what we believe we're good at and what we're capable of and we can deliver in a way that we think would meet the government's needs. And we would really struggle as a company being able to do that on an expedited time line.

The community relationships are very complex in dealing with water and sewer and utilities. The overall construction build-out to meet the requirements is complex and takes time. But again, I can only answer that through our lens. I can't address that through a broader lens and perhaps there are others that could do that more quickly than we could. But certainly, for us, it would be an extended time line to allow us to complete a conversion like that.

Got it. I appreciate it. And maybe one of the goals was these facilities are much larger than the type of facilities that you manage. Is that, I mean, is there, how many people, how many beds do you think would be in a typical warehouse?

Well, what's been described publicly is somewhat of a hub-and-spoke model. So there would be a mix of large facilities that would be hubs of 7,000 to 8,000 to even 10,000 or more detainees in a single location. Others would be smaller. What I've seen publicly described is something that's 500 or 1,500 beds. So it's a mix of both. we have developed over time a preference in the way that we operate, optimal sizing for a facility is more in the 2,000 to 3,000 bed range as opposed to something larger than that.

But again, ultimately, ICE has to make a determination on what is the best fit for them and ultimately decide whether that would be a viable option once they have proposals in place. So that is a very large facility.

Got it. I appreciate it. And then if you were to sell a facility to ICE and then operate it, how might we think about the margins on a contract like that? Would they be similar to your managed-only contracts now or higher because it's a more complicated role?

I would look at that as being more managed only like in terms of the components. There are some components of that negotiation that are very straightforward, which is what are your operating costs on a daily basis and what is the reimbursement level. There are other components that are different from a capital perspective, which is who's responsible for a roof replacement or HVAC replacement or other component FF&E within the facility. That's something that we'll obviously have to manage through.

Depending on responsibility, that could mean that the margin profile could be meaningfully different than our traditional managed only. but that's something that would have to resolve to the negotiation because, again, the ongoing CapEx that we have for our facility operations is significant and understanding responsibility for that would impact what the operating margin would be.

Obviously, on a cash flow basis, you'd expect that the answer to that question would be somewhat neutral because you'd be pricing in the additional margin that you need to cover the investments you have to make to maintain appropriate facility operation. But from a margin perspective, on an operating margin basis, you would be looking at higher margins to the extent that we're responsible for ongoing capital.

Our next question comes from the line of Greg Gibas of Northland Securities.

And first of all, sorry, Patrick, I wasn't thinking when I addressed you earlier. I wanted to just follow up on how maybe, if you could discuss how your discussions or interest levels have trended with idle facilities. And as it relates to that, do you expect any additional contracting would likely occur after appropriations are in place or made available?

That's a great question. We continually market all of our available bed capacity at both the federal and state partners. So we are in constant dialogue in some form around use of those beds. And I would say that funding being in place is obviously helpful. I think having visibility that the department is funded through the administration is particularly helpful to the extent that that's ultimately what occurs.

I think the recent decline in populations that we've seen could certainly impact timing of any new awards. But I would also say to the extent that there is additional space needed, the entire network has not been built out at this point, and we do believe there are opportunities for additional awards. I hate to get more specific than that on timing because I do think it is somewhat variable, but I would be surprised if there aren't awards within the sector during the balance of this year.

This concludes the question-and-answer session. I would now like to turn it back to Patrick Swindle for closing remarks.

Thank you, operator, and thank you all for joining our call today. In closing, as we, along with our public sector government partners and private sector peers celebrate National Correctional Officers and Employees Week, I'd like to again express my appreciation to our over 13,000 employees.

Their focus and commitment help ensure that everyone in our care is provided with a safe, secure and humane environment and that we deliver the highest quality services to every individual for whom we are responsible. We're proud of our team, and we want to celebrate them today with all of you as they make what we do possible. Thank you all for joining the call today, and have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q4 2025 CoreCivic Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the call over to Jed Bachmann. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to CoreCivic's Fourth Quarter 2025 Earnings Call.

Participating on today's call are Patrick Swindle, CoreCivic's President and Chief Executive Officer; and David Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds.

On this call, we will discuss financial results for the fourth quarter of 2025 as well as financial guidance for the 2026 year. We will also discuss developments with our government partners and provide you with other general business updates.

During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors including those identified in our fourth quarter 2025 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and also 8-K reports. You are cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future.

Management will discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the Investors page of the company's website at corecivic.com.

With that, it is my pleasure to turn the call over to our CEO, Patrick Swindle.

Thank you, Jeb. Good morning, and thanks, everyone, for joining us for CoreCivic's Fourth Quarter 2025 Earnings Call.

On this morning's call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners. Following my opening remarks, I will hand the call over to our CFO, Dave Garfinkle, who will provide greater detail on our fourth quarter and full year 2025 financial results as well as introduce our 2026 financial guidance. Dave will also provide an update on our capital structure, including activity on our share repurchase program and other balance sheet initiatives.

First, I'd like to provide an update on our activation activities, where we continue to move towards stabilized occupancy in mid-2026. As a reminder, we announced new awards in the second half of 2025 at the 600-bed West Tennessee Detention Facility, the 2,560-bed California City Immigration Processing Center, the 1,033-bed Midwest Regional Reception Center and the 2,160-bed Diamondback Correctional Facility. While 3 of the 4 previously idle facilities continue to receive additional populations, the fourth, Midwest Regional, continues to experience a delay in the intake process as we await the result of a special use permit application that we filed in December 2025. We've been engaged with the city on the application and the conversations have been productive.

In aggregate, and excluding Midwest Regional, these 3 new contract awards are expected to generate annual revenue of approximately $260 million once our operations normalize. Once we reach stabilized occupancy on these previously idle facilities, which we expect to occur during the first half of 2026, we expect our annual revenue run rate to be approximately $2.5 billion and our annual EBITDA run rate to increase by almost $100 million year-over-year to approximately $450 million. This is not counting Midwest Regional or any additional contract awards.

Let me emphasize that point. Our 2026 guidance is consistent with the commentary on our last earnings call, despite excluding Midwest Regional due to uncertainty around initial detainee intake. Once operational, that facility will provide upside to our initial 2026 guidance.

Moving to a discussion of the business climate. In early January 2026, nationwide ICE detention populations were at historical highs of around 69,900 individuals, an increase of almost 10,000 individuals from the end of the third quarter. ICE was our first customer 43 years ago and has been our largest customer for over a decade. From the end of 2024 through the end of 2025, ICE populations in our care increased 5,903 individuals to just over 16,000 or 58%.

Nationwide populations from the U.S. Marshals Service, our second largest customer, have declined from the prior year, partially offsetting the increase from ICE as facilities that share contracts between the 2 agencies have extended the capacity to ICE due to the higher demand. Marshals populations are also down nationwide due to fewer apprehensions at the southern border. Our average daily Marshals population has declined by 1,235 individuals from the fourth quarter of 2024.

As we continue to look for additional ways to meet our government partners' needs, we believe we can make available substantial capacity to meet future demand. Even after the aforementioned activations, we own 5 idle corrections and detention facilities containing approximately 7,000 beds. Along with search capacity, we've made available at certain facilities and partial capacity we have in facilities that are currently in operation, we've informed ICE that we can provide it with nearly 13,000 additional beds. And this does not include additional capacity we may be able to provide through other means.

We are confident that the detention beds that we provide are the most humane, most efficient logistically, most compliant, most secure, are readily available and provide the best value to the government.

Our Dilley Immigration Processing Facility is a great example. This is a purpose-built facility for family residential housing that we first operated in 2014 under the Obama administration. Last year, we entered into a new agreement that extends into 2030. As part of that contract, we must meet performance requirements based on a combination of rigorous accreditation and government established performance standards. There are full-time federal monitors on site to ensure accountability in compliance with the contract. This includes specific quality measures and standards for cleanliness, high-quality food and basic necessities, legal access, medical care and translation services.

For those of you interested in learning more about this facility, I would encourage you to visit our website at www.corecivic.com, where you can take a virtual-guided tour.

Beyond these federal opportunities, we are seeing an increase in opportunities at a state level as well. In addition to increases in populations under existing contracts, we're in discussions with several states in need of additional bed capacity. One or more of these opportunities could include the use of our idle correctional facilities. These opportunities could transpire in the coming quarters.

I'll now move on to a high-level overview of our top line revenue and fourth quarter operational performance. Federal partners, primarily Immigration and Customs Enforcement and the U.S. Marshals Service comprised 57% of CoreCivic's total revenue in the fourth quarter. Revenue from our federal partners increased 49% during the fourth quarter of 2025 compared with the prior year quarter. Further breaking down our federal revenue. Revenue from ICE increased $124.4 million or 103.4%, while revenue from the U.S. Marshals Service decreased by $11.3 million versus the prior year quarter. As mentioned, some of this decline is simply a shift in mix where ICE and Marshals share contract.

Revenue from our state partners increased 5% from the prior year quarter. This increase includes additional revenue from the State of Montana, resulting from 2 new contracts we signed with the state since the second quarter of 2024 and population increases in Georgia and Colorado.

Total occupancy for our Safety and Community segments for the quarter was 78.1%, up 2.6 points since the year ago quarter. The average daily population across all of the facilities we manage was 56,380 individuals during the fourth quarter of 2025 compared with 50,202 in the year ago quarter. This increase was driven by more demand for our services, new contracting activity and the Farmville acquisition that was completed July 1, 2025.

Our teams continue to be successful in working with our government partners in managing the additional people in our care for which we are focused on delivering the highest quality services and environment every day. Our fourth quarter results exceeded our internal projections for adjusted EPS and normalized FFO per share by $0.08 each and adjusted EBITDA by $8.6 million.

Despite full year 2026 EBITDA guidance near record levels, our stock is currently trading at a discount to our historical trading multiples, which we believe does not reflect the cash flows of our business particularly considering the ongoing ramp of previously idled facilities, giving us good visibility of our growth potential in 2026 and beyond. Therefore, we plan to continue to prioritize our cash flow on share repurchases taking into consideration stock price and alternative opportunities to deploy capital, among other factors. That being said, we have the balance sheet flexibility to take advantage of other growth opportunities that we may identify.

The substantial progress made during the year in reactivating previously idled facilities couldn't have been accomplished without the hard work of our employees and strong relationships with our government partners. I'm confident we have the right plan and the right teams in place to be successful, both in these and future activations. In the meantime, we continue to remain focused on effectively managing our core portfolio and ensuring we meet our high operational standards as well as those of our government partners. Without this focus and strong performance, these additional opportunities would not exist.

And so as I turn it over to Dave to discuss our fourth quarter financial results in more detail, our capital allocation activities and assumptions included in our 2026 financial guidance, I'd like to again express my appreciation to our 13,000 employees. I want to recognize their focus and commitment to ensuring that everyone in our care has provided a safe, secure and humane environment, delivering industry-leading quality to every individual for which we are responsible.

Dave?

Thank you, Patrick, and good morning, everyone.

In the fourth quarter of 2025, we generated GAAP EPS of $0.26 per share and FFO per share of $0.51. Special items in the fourth quarter of 2025 included a $1.5 million net loss on the sale of assets and $0.7 million of M&A charges reported in G&A expense. Excluding special items, adjusted EPS was $0.27 compared with $0.16 in the fourth quarter of 2024, an increase of 69% and normalized FFO per share was $0.52 per share compared with $0.39 per share in the prior year quarter, an increase of 33%.

Adjusted EBITDA was $92.5 million compared with $74.2 million in the fourth quarter of 2024, an increase of 25%. Adjusted EPS exceeded average analyst estimates by $0.09 per share and adjusted EBITDA exceeded average analyst estimates by $9 million. The increase in adjusted EBITDA from the prior year quarter of $18.3 million resulted from higher demand and utilization of our solutions by our federal and state partners, including revenue from ICE that more than doubled.

The number of ICE detainees in our care followed national trends, which reached record highs during the fourth quarter of 2025. We manage approximately 23% of total ICE populations as of both December 31 and September 30, 2025, compared with approximately 25% at year-end 2024.

Revenue from our state partners grew 5% and included notable increases from Georgia, Colorado and Montana. Results for the fourth quarter of 2025 reflect the full activation of the 2,400-bed Dilley Immigration Processing Center, which was completed in the third quarter of 2025. Funding for this facility was previously terminated effective August 9, 2024, and the facility remained idle until its reactivation in the first quarter of 2025.

Fourth quarter results also included start-up activities for new contracts at our 2,560-bed California City Immigration Processing Center and our 2,160-bed Diamondback Correctional Facility where we signed new management contracts during the year. Both of these facilities were idle at the beginning of the year and are expected to reach stabilized occupancy in the first and second quarters of 2026, respectively. These 2 facilities incurred facility net operating losses totaling $3.6 million in the fourth quarter of 2025.

Other factors affecting EBITDA and per share results included higher G&A expense, more than offset by the favorable impact of our share repurchase program and the acquisition of the Farmville Detention Center on July 1, 2025. Collectively, these 3 items accounted for an increase in adjusted EPS and normalized FFO per share of $0.03.

Operating margin in our Safety and Community facilities combined was 22.2% in the fourth quarter of 2025 compared with 23.6% in the prior year quarter. Excluding the 4 facilities in various stages of activation, operating margin was 24.1% for Q4 2025. As these facilities reach stabilized occupancy, we anticipate further margin growth.

Turning next to the balance sheet. On December 1, we amended our bank credit facility to increase the size of the accordion feature that provides for uncommitted incremental extensions of credit and expanded the capacity under our revolving credit facility from $275 million to $575 million. Including the original $125 million term loan, commitments under our bank credit facility totaled $700 million which reflects the strength of our accessibility to bank capital and our deep banking relationships.

Expanding the size of our revolving credit facility provides us with enhanced balance sheet flexibility while remaining positioned for strategic investments and long-term value creation such as through our share repurchase program. During the fourth quarter, we repurchased 5.3 million shares of our common stock at an aggregate cost of $97.3 million, increasing our year-to-date repurchases to 11.2 million shares at an aggregate cost of $218.4 million. These repurchases represent 10.2% of our outstanding shares at the beginning of the year and reduced the number of shares outstanding to 100 million as of December 31, 2025.

Since the share repurchase program was authorized in 2022 through December 31, we have repurchased a total of 25.7 million shares at an aggregate price of $399.5 million or $15.52 per share. As of December 31, we had $300.5 million available under our Board authorization which includes an increase of $200 million authorized by our board in the fourth quarter of 2025, increasing the cumulative repurchase authorization to up to $700 million.

After taking into consideration the share repurchases, our leverage measured by net debt-to-adjusted EBITDA was 2.8x using the trailing 12 months ended December 31, 2025. As of December 31, a we had $97.9 million of cash on hand and an additional $311.4 million of borrowing capacity on our expanded revolving credit facility, which had a balance of $245 million outstanding providing us with total liquidity of $409.3 million.

Moving lastly to a discussion of our 2026 financial guidance, we expect to generate diluted EPS of $1.49 to $1.59. FFO per share of $2.54 to $2.64. And EBITDA of $437 million to $445 million. Consistent with our past practice, guidance does not include the impact of new contract awards not previously announced because the timing of government actions on new contracts is always difficult to predict. Even though we entered into a new management contract with ICE at our Midwest Regional Reception Center last year, our guidance does not contemplate the ramp-up of detainee populations at this facility as the intake process continues to be delayed by a claim that a special use permit is required to operate the facility.

Although we dispute this claim and consequently filed a lawsuit in state court, which remains under appeal, we have nonetheless filed an application for the SUP. Although we can provide no assurance, discussions have been collaborative, and we are optimistic in a favorable outcome, which would be upside to our guidance.

We still have 5 remaining idle facilities containing 7,066 beds, and we believe incremental demand for more idle facilities will likely be needed once ICE absorbs the recently contracted beds. With historic funding levels for border security and immigration detention obtained under the One Big Beautiful Bill Act secured through September 2029 and an expectation of a continued increase in detention bed demand nationwide as well as growing demand from existing and potentially new state government partners, we believe there are numerous opportunities to activate additional idle facilities we own.

We also believe there could be opportunities to manage additional bed capacity not currently in our portfolio. These opportunities would also be incremental to our guidance after considering any start-up expenses. We plan to spend $60 million to $70 million on maintenance capital expenditures during 2026 and $15 million for other capital expenditures. Our 2026 forecast also includes $35 million to $40 million for capital expenditures associated with previously idled facilities we are activating and for additional potential facility activations in order to prepare these facilities to quickly accept residential populations if opportunities arise. Approximately $23.5 million of the CapEx associated with activations represents capital expenditures included in our 2025 forecast that was not spent by year-end and therefore, has been carried over to be spent in 2026.

We expect adjusted funds from operations, or AFFO, which we consider a proxy for our cash flow available for capital allocation decisions such as share repurchases and growth CapEx such as facility activations to range from $245 million to $259.3 million for 2026.

We do not believe the share price of our common stock reflects the value of the cash flows of our business as we are trading below historical multiples despite visibility of cash flow growth in 2026 driven by recent contract awards. Therefore, we expect to prioritize our cash flows to continue executing on our share repurchase program, which has been incorporated into the range of our guidance. The amount of our share repurchases will take into consideration our stock price, liquidity and earnings trajectory and alternative opportunities to deploy capital.

We expect our annual effective tax rate to be 25% to 30%. The full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2026 to range from $160 million to $165 million.

[ We're ] modeling our quarterly results. As a reminder, compared to the fourth quarter, Q1 is seasonally weaker because of 2 fewer days in the quarter, higher utilities and because we incur approximately 75% of our unemployment taxes during the first quarter, resulting in a collective $0.04 per share decline from Q4 to Q1 and negatively impacting our operating margins. However, in Q1 2026, these negative effects are expected to be offset by facility net operating income generated at our California City and Diamondback facilities, which are projected to reach profitability in the first quarter due to the continued intake of detainee populations.

I will now turn the call back to the operator to open up the lines for questions.

[Operator Instructions] And our first question for today will be coming from Raj Sharma of Texas Capital Bank.

I was -- so there were no new reactivations in 4Q. Was that because of the government shutdown or the year-end? Also, there's been a lot of talk of warehouses.

So to answer your question -- this is Patrick. So there were no new contracts that we entered into in the fourth quarter. We have been in active dialogue with our customer, and we're always exploring different ways to support their desired enforcement approach. And so I would really look at the pacing of additional capacity is driven by bed demand. We've obviously have available demand within facilities already activating as we believe our peers do as well. And so you would expect that additional capacity would be added as needed to reflect that.

And so I certainly wouldn't take the fourth quarter not having a new award is indicative of lack of potential additional demand. It's more reflective of, I think, the ebb and flow of demand that's presenting, and certainly, we're well positioned with 7,000 beds that are presently available in idle facilities, additional 5,000 beds within existing facilities that are immediately available for use. So again, we think we're very well positioned, both with existing contracts and potentially idle facilities as that demand manifests in a way that requires additional contract actions.

Next question is coming from the line from the line of Matthew Erdner of JonesTrading.

You talked a little bit about the safety margins and kind of the expectation for those to improve. Is the decline in margin there just kind of as you guys activate these facilities, bring them online, like you're talking about with California City and Diamondback.

Yes, this is Dave. So absolutely, that's correct. I think if you backed out the 3 facilities that were being activated during the quarter, our margin was around 24%. And so as those facilities do reach a stabilized occupancy in the first half of 2026, we would expect that margin to continue to grow.

Got it. That's helpful. And then as a follow-up, you talked a little bit about the increased opportunities specifically to manage other facilities. What's your confidence on, I guess, gaining the capacity for you guys to bring in employees, get it staffed up. Are there any concerns there with staffing that? Just, I guess, what's the dynamic right there at the moment?

So we reactivated our South Texas, our Dilley facility, very quickly, we're able to staff that rapidly being able to deliver our activation sooner than we had expected or modeled initially. In our other locations, we've been very successful in being able to staff up. And so we do not believe that our ability to staff would be a limiter in terms of our ability to offer or use our bed capacity.

The team is very well structured. They developed operating plans coming into 2025 that would allow them to be able to respond quickly when a new facility activated we've made preemptive investments across our portfolio to prepare those facilities for use. So really, we don't see an inhibitor in our ability to activate either through capital needs or through staffing challenges, our ability to quickly respond to demand if it presents.

And I'd add, Diamondback, we actually didn't expect that to start taking detainees in until January but we actually activated that one earlier or began accepting detainees earlier in late December. It didn't have a big impact on the quarter, it was very late December, but it was indicative of our ability to hire and meet the demands of our partner in that case.

Our next question is coming from the line of Greg Gibas of Northland Securities.

Patrick, Dave, congrats on the results. Wondering if you can maybe speak to the current contracting environment and how your dialogue with ICE and the DHS has trended of late, and also maybe wondering along those lines, if you could or would be willing to opine on the recent headlines related to the Minnesota pullback that Homan announced and possibly investors misinterpreting that as a national mandate change.

Sure. So for -- with your first question, the way I would answer that is we are a constant dialogue with our customer as we assess what their needs are and try to evaluate how we can participate in that. And so that dialogue is very consistent today as it's been all along with both current and prior administrations. So we would expect to be actively engaged at all times and discussing what is the need, how can we best support that need? Is that a need that we can deliver high-quality outcomes in a way that we believe we can be successful in supporting their mission. So that's something that we're obviously always focused on always ensuring that we're well positioned to be able to step into those places where we believe we can be helpful to our government partner.

If opportunities present in a specific way that would give you more detail, we're certainly going to do that. At this moment, there isn't a specific update I'd give you in terms of pipeline opportunity, but I can assure you that we remain an ongoing dialogue around how we can best support our partners' mission.

Second part of that question is, I think you really have to pan back to national enforcement activity and approach. At any given time, ICE is taking different enforcement approaches across the country. And so I think if you were to look at Minnesota, specifically as a discrete example, that was a larger scale discrete enforcement action that obviously is a bit different than what we've seen around the country. And so I think to extrapolate the activity or the action that was discussed this morning nationally, I think it's difficult because I think that was a unique enforcement action. And so if I look the country, I, at this point, don't see meaningful changes in enforcement style or approach as that approach has not been consistent with what we saw in Minneapolis because it was a large-scale discrete initiative.

Great. That makes sense. And if I could just maybe ask if you're willing to share any more color on buybacks and intentions there. in terms of shares bought back for the year and like 5% in Q4, pretty impressive. And I just wanted to see if you could provide any additional color on maybe your -- how aggressive you'll be with buybacks going forward?

Yes. Sure, Greg. This is Dave. I'll take that one. Yes, it was a pretty active quarter. We had indicated we were going to double the pace of the first 3 quarters of 2025 in the fourth quarter. In fact, we bought back more than double the pace in the fourth quarter. We bought back an average, I think it was $18.25 in the fourth quarter, obviously trading lower than that this morning. So we're expect to continue to buy back shares at this price. Even at the $18.25, we felt like it was a good buy trading at a significant discount to our historical EBITDA multiples. So yes, I mean, that's -- we have full support of the Board. So I expect we would continue to buy back shares subject to any legal limitations that there are.

Our next question is coming from the line of Ben Briggs of StoneX Financial.

Congratulations on the quarter and the guidance. I've got a couple of quick ones here. So fiscal year guidance is for about $441 million. And I know you said during the scripted portion of thecall that $450 million-ish is kind of the new EBITDA run rate. Can you just clarify, does that $450 million EBITDA run rate include the 2 new contracts that you discussed at the beginning of the call, but not the Midwest Regional Facility?

Yes, you got it exactly right.

Okay. All right. Great. And then over and above that, if you were to activate the Midwest Regional Facility, what do you think the potential EBITDA upside from that would be?

Well, we wouldn't disclose the EBITDA associated with that facility. I think we did disclose the revenue associated with that facility. So that's probably the best data I could give you. As you look at our full year guidance for 2026, we do expect still to be at the $450 million run rate in the second half of the year. So if you just back off half of that minus the -- or $441 million as the midpoint of our guidance minus $225 million for the second half of the year, you get to a little over $100 million per quarter in Q1 and Q2. So that's pretty detailed. There is that dip, as I mentioned in my prepared remarks, from Q4 to Q1. The $0.04 decline from Q4 to Q1 for unemployment taxes and utilities. Yes, and Midwest was a $60 million annual revenue.

And just to add a bit, I would say, when you look at the guidance that we have provided, it assumes no new incremental contract wins. So whether that's Midwest Regional and ability to activate that facility under the final approval of the SUP, which we're optimistic regarding -- but also any other new business opportunities that present would also provide incremental upside. So in terms of visibility into the guidance, this is probably the greatest visibility that we've had in providing guidance in a number of years, given the pace of growth that we're anticipating in 2026.

Understood. Understood. I appreciate that. So I guess my follow-up was going to be, so you have these -- you've got 5 idle facilities that you said have 7,000 beds over and above these new contract wins? And then did I hear you correctly when you said with surge capacity very -- the total room for additional population you could have is up to 13,000 beds.

That's correct.

Understood. Okay. I just wanted to clarify that. And then finally, I just want to touch on the revolver that you guys upsized in the share purchases. Does drawing the revolver remain an option for share repurchases? Or are you more likely to fund those repurchases with cash from operations?

Well, if you take our annual guidance, we always like to use AFFO as kind of the proxy for cash flow available for growth opportunities and buybacks and if you back out the growth CapEx that we have for the activations of the idle facilities, you're somewhere in the neighborhood of $200 million of annual cash flow. So that would be available throughout the year without increasing leverage. But certainly, the revolving credit facility can be used for whatever we wish it to be used for. So yes, it is available.

Okay. Understood. I appreciate it. Thank you guys for the call and congratulations again.

Thank you.

And the next question will be coming from the line of M. Marin of Zacks.

So I have a couple of housekeeping questions because you've answered a lot of a lot of things on the call and in the Q&A. You did say during the prepared remarks that between the idled facilities that could be reactivated and other means you have significant capacity for if and when new contracts come online. So in 2025, you made that one acquisition of Farmville, are there any other potential small tuck-ins that you've seen come up that might be on the horizon? Or there's -- it's very remote that, that would be an opportunity.

We have a business development team that's always actively out looking at opportunities that may be available. And so certainly, there's nothing that I would say that's imminent today. But we are going to evaluate opportunities that present. And from time to time, there may be opportunities to look at circumstances or situations that would be similar to Farmville. Obviously, we recognize where our stock is trading, and it's incredibly valuable at the current trading multiple. So a multiple would have to be pretty compelling to be better than our current stock price. But we do, on occasion, see those opportunities. And if they do, and we think it's a good strategic fit, we would avail ourselves.

Okay. And then one other question, which is -- and I think other callers, other participants have tried to get at this as well. You have substantial liquidity, and I think that there's potentially a sense on the Street that your liquidity cannot support everything you're trying to accomplish between satisfying new demand for capacity, potentially increasing capacity through reactivating idle facilities, the share buybacks and other potential growth initiatives. Could you just touch upon that, particularly in light of the potential for delayed payments from some of your government partners.

I think I know where you're going with that. So yes, I mean, we had at December 31, over $300 million available on our revolving credit facility. So really feel like we've got plenty of liquidity to execute our strategy even despite a slowdown in some collections of receivables. So that -- we had -- gosh, it was close to $100 million in cash on top of that. So we are not liquidity-constrained in executing our strategy. So yes. And also during the fourth quarter, expanded our revolving credit facility by $300 million through a supportive bank group. So that bank credit facility is now up to $700 million. So we don't feel like we're constrained at all by liquidity.

And maybe to build off that, we've maintained a conservative leverage approach as well. And our EBITDA is certainly growing faster than our lever debt at this point. And so when you think about leverage policy, we're certainly going to continue to maintain a conservative approach. We're going to maintain appropriate levels of liquidity. We did make meaningful investments in the facilities, our idle facilities in anticipation of activation. So we did a bit of preloading in terms of the capital that would be necessary to support activation. So we're going to continue to make measured investments as appropriate, take advantage of opportunities to buy back stock based on its attractiveness. But at this moment, there's nothing that we see on the horizon that would cause us to believe we're capacity limited from a capital perspective.

And our next question will come from the line of Bill Sutherland of Benchmark.

I thought I'd zoom out a little bit here, just thinking about what the growth trajectory might be over a multiyear period for you guys given the given the visibility you have with ICE to '29 and some of the emerging state demand. I look back at EBITDA, even back to '09, and it's kind of been in a very steady range, but no discernible CAGR. So I just wondered how should we think about a potential CAGR here for the next 3 or 4 years?

That's a great question. I think as you've said, you've gone back and done a historical review of the growth rate of the company over multiple years. And I think that's important in that what you typically see is that growth will come in periods of demand with very specific customers. So if you look back over the history of our organization, we've gone through periods where we would see significant demand from the State of California, for example, or a significant demand with the Bureau of Prisons or, at present, we're seeing meaningful demand from immigration and customs enforcement.

What we know is that you've got large aging infrastructure for many of our state and federal partners you have demand needs that are presenting as both populations grow and service offerings are changing, and we believe we're in a position to provide that. And so I would say we're always going to be in a position where we've got the greatest visibility a year out. but our team is obviously focused well beyond this year and future periods. So I'd love to give you a more precise answer in terms of what would be sustainable growth after the current period. But obviously, that's something that we continue to be focused on, and we'll give updates as our pipeline develops both with other federal and state partners as well as we consider potentially other ways to deliver services to our customers, as we mentioned earlier.

Okay. And you can't get through a conference call now without a question about AI. So are you all -- I guess, what are some of the ways you can apply it to your business model? Obviously, I think this kind of business is going to be a net beneficiary or just pure beneficiary in terms of efficiency. So how do you think it can be used in the organization?

Well, there are a number of ways that we have contemplated use of AI in our organization. I think the most obvious in straightforward is in back office efficiency. So as we think about our ERP systems and we think about the ways that we support our facility operations from administrative perspective, we're certainly seeing opportunities to enhance the way that we currently deliver those services. Out in our facilities, there are always opportunities to enhance what we're providing. So whether that be educational opportunities for the individuals in our care. Whether that be security tools that we can use both to actively monitor and make our facilities more safe. Whether that be making our cameras smarter as we're trying to evaluate activities that are occurring in the facility.

There are a number of pilots that we have underway across the organization to explore how we may be able to use AI to enhance our services. But I would say we're also very sensitive to the fact that we are in an environment where we're managing care for individuals and want to be sensitive to what we use and how we use it so we can ensure that it's being used effectively. So we do hope to give updates in future quarters. We did make a meaningful investment this year in our team. We hired an executive leader, Laura Groschen, to step in as our Chief Information and Digital Officer. So I would view that as indicative of the investment that we're making to bolster our technology team and grow and build out our capabilities. We do believe that's part of our future. And again, we'll have more to update on future quarters as we were able to talk more specifically around some of those opportunities, some of which may be ultimately commercializable.

And our next question comes from the line of Joe Gomes of Noble Capital.

So let's go a little blue sky here. You talked about potential upside for Midwest. But let's assume ICE has got the 10,000 new enforcement employees up and running, increasing the pace of detainees out there. I think you've talked about 12,000 or 13,000 beds between existing contracts and idle facilities. If we got to the point where ICE was to contract for those beds or fill all of those beds. What could that mean for upside in terms of revenue and EBITDA?

Well, it's a tough question to answer. I guess if you took 13,000 beds, an average per diem, I don't know, just say, $125 a day. That's $593 million of incremental revenue. And if you assume we're on a 23% margin in the fourth quarter, that's $136 million of incremental EBITDA just to kind of use publicly available numbers in our reports.

Okay. So it's a potential nice upside, again, blue sky, but just -- would be nice to see that. And then one of the big questions, I think, a concern for investors out there has been the pace of detention by ICE that it's been below what people -- investors had thought was going to be, I think people thought we'd be at that 100,000 level. We're at 70 -- a little over 70,000 here. And what is your kind of viewpoint here? What's your -- what are you seeing in terms of the pace of detention? Have you seen it starting to crawl back up here and we're still waiting to kind of see more of a measured pace here in terms of retention?

So I would answer that through a couple of lenses. I guess one of them is if you go back to the end of the prior administration coming into the current administration, you were looking at roughly 45,000 funded beds that were operational. And so you now have increased just over 70,000 beds in a fairly short period of time. I think one of the things that at least has been apparent to me throughout this process is the expectation that one can see a significant change in the infrastructure and ecosystem occur immediately. And when you're looking at the way that ICE approaches enforcement action, nothing occurs immediately. And I think as maybe you or someone else noted, the organization had not fully ramped its team until really the end of the year last year.

So as we think about timing, it does take time because it is a very complex ecosystem. And as that ecosystem grows, it's going to result in additional bed demand, it has been slower than I think some thought might occur. But certainly, when you look at -- take a step back at the 30,000-foot level and look at the magnitude of scale that's already increased as well as the timing of when the additional enforcement infrastructure was put in place, one can reasonably expect you would see continued growth.

Okay. Great. Congrats on the quarter.

Thanks, Joe.

Thank you.

And the next question is coming from the line of Kirk Ludtke of Imperial Capital.

Patrick, David, can you hear me? In your prepared remarks, I think you said at year-end, ICE detained what, 69,000 and of which you detained 16,000. Occasionally, you see press reports that ICE is exploring other ways of housing detainees, repurposing industrial spaces, warehouses, things like that. I'm just curious where that stands? Do you know offhand how many people are detained in facilities other than the facilities, your facilities or GEOs facility?

Yes, I'll take that one, Kirk. Yes, correct. The administration has pursued a number of alternatives since the beginning of the administration. You had facilities like Guantanamo Bay, Alligator Alcatraz, some international options, some state capacity blocks of state capacity. And I would say, I think the last time I looked at the total the total number of people in detention in those alternatives, so somewhere in the 5,000 range.

Okay. Is that pretty stable or maybe I hate to ask you to provide guidance on something like that. But I mean, do you see that increasing? Do you think that's a viable alternative for ICE?

ICE is going to continue to look at different ways to meet their capacity requirements. And as you look at, obviously, the bed need and availability, we have beds available in specific parts of the country. Our competitors have beds available in specific parts of the country. Sometimes the demand can be national. Sometimes it needs to be more localized. And so depending on locationally where that demand is manifesting, you could see traditional capacity used or you could see other alternatives use.

I think there's certainly a lot of exploration in terms of different ways that the goal and mission can be accomplished. And we believe we could be part of some of those. And some of those are probably not best suited for our business model. But certainly, I think that will be an ongoing conversation as the administration thinks about how they can best innovate service delivery and make sure that they have the right bets in the right location they need to support their mission.

Interesting. So it's not that the populations are different. It's more of a geography -- geographical consideration?

We don't see meaningful differences in populations across the facilities that we operate. So obviously, there are classification differences within each facility, but -- and facility type is really -- it's less about having a dedicated specific type of facility for a particular population than it is about being appropriately located geographically based on where demand is presenting. Again, some demand is national. So it doesn't matter the location as long as you have a transportation infrastructure that's in place to be able to support that mission. In other cases, there's a preference that it would be in specific areas where incremental need may be higher which may make a distant facility not as viable.

Got it. Okay. That's very helpful. I appreciate it. And I don't know of anywhere that ICE actually discloses the level of actual deportations or detentions. But did you -- if that's available, I'd be -- I'd love to know, or any way to back into that. But do you see anything on the horizon that would allow detentions to step up other than just building out the network incrementally? Do you see any big events that facilitate a ramp in detentions?

I believe it's really the build-out of the enforcement infrastructure and the completion of training of those individuals who are being hired and then those folks being deployed to go out and enforce the mission. So I don't view it as much sort of a singular event as I do a progressive build of infrastructure that results in higher levels of enforcement, assuming that the policy remains static.

Thank you. And this does conclude today's Q&A session. I would like to turn the call back over to Patrick Swindle for closing remarks. Please go ahead.

Thank you, operator. Since there are no further questions, I'd like to thank you all for joining our call today. We take very seriously the responsibility that we have in managing care of more than 55,000 individuals each day. We're grateful for the confidence our partners place in us as our 13,000 employees strive to deliver the highest quality services and programming for those in our care.

Just this last weekend, we were able to celebrate the exemplary service of 3 of our correctional facilities and 3 of our residential reentry facilities at the triennial ACA reaccreditation hearings with near perfect scores. This is just a small example of the work our team does but is indicative of the excellence that we aspire to every day.

Our team has also done an exceptional job delivering positive results in our core portfolio and successfully ramping our activating facilities. Our guidance with assumed EBITDA and EPS growth of 21% and 40%, respectively, both at the midpoint is the most significant annual growth of our organization as forecast in many years. As a reminder, this growth assumes only already awarded contracts, excluding Midwest Regional, which is successfully activated would be additive to this initial guidance as would any additional opportunities that present to provide additional services to our federal state or local partners.

Lastly, we believe that our shares remain significantly undervalued. Using the midpoint of EBITDA guidance, our shares are currently trading at roughly 6x forward EBITDA, well below our historical trading ranges. We're obviously evidencing our view of value with an active share repurchase program that increased in intensity during the fourth quarter while maintaining our consistent balanced leverage position. We're optimistic that as we successfully deliver on our outlook for this year, we'll see this value recognized in our shares.

With that, operator, we'll close out our call for today. Have a great day, everyone.

Thank you. This concludes today's conference call. You may now disconnect.

Good day, and welcome to CoreCivic's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Jeb Bachmann, Managing Director, Investor Relations.

Thank you, operator. Good afternoon, everyone, and welcome to CoreCivic's third quarter 2025 earnings call. Participating on today's call are Damon Hininger, CoreCivic's Chief Executive Officer; Patrick Swindle, CoreCivic's President and Chief Operating Officer; and David Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds.

On this call, we will discuss financial results for the third quarter of 2025 as well as updated financial guidance for the 2025 year. We will also discuss developments with our government partners and provide you with other general business updates.

During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our third quarter 2025 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and also 8-K reports. You are cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future.

Management will discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the Investors page of the company's website at corecivic.com.

With that, it is my pleasure to turn the call over to our CEO, Damon Hininger.

Thank you, Jeb. Good afternoon and thank you for joining us for CoreCivic's third quarter 2025 earnings call. On this afternoon's call, I will discuss our near-term and long-term outlook and recent contracting activity.

Following my opening remarks, I will hand the call over to Patrick Swindle, our President and Chief Operating Officer. Patrick will review the performance of our core portfolio, discuss in further detail our operational activities relating to facility activations during the quarter and how we are preparing for additional demand from our government partners.

We will then turn the call over to our CFO, Dave Garfinkle, who will provide detail on our third quarter financial results as well as our updated 2025 financial guidance and provide an update on our capital allocation strategy. I will then conclude with some closing remarks before we open up the call for Q&A.

First up, an update on our activation activities, where we've made substantial progress on contracting several idle facilities. Since our last earnings call, we announced new awards at the 600-bed West Tennessee Detention Facility, the 2,560-bed California City Immigration Processing Center, the 1,033-bed Midwest Regional Reception Center and the 2,160-bed Diamondback Correctional Facility. In aggregate, these 4 new contract awards are expected to generate annual revenue of approximately $320 million once we reach stabilized occupancy.

Our updated full year 2025 financial guidance reflects significant earnings growth from 2024. Although these recently announced new contract awards negatively impact our financial guidance for the fourth quarter for start-up related activities, which Dave will review in detail, these new awards set us up nicely for an even stronger 2026.

Once we reach stabilized occupancy for these new awards, which we expect to occur during the first half of 2026, we expect our annual run rate revenue to be approximately $2.5 billion and annual run rate EBITDA to increase by $100 million to over $450 million, and this is not counting any additional contract awards.

While staffing ramp continues at each of these facilities with some already accepting detainees, the intake process at our Midwest facility has been delayed by a lawsuit filed by the City of Leavenworth. And although we are optimistic, we cannot predict if or when a favorable resolution will be achieved. Patrick will provide further details on the progress of these activations.

Moving to a discussion of the business climate. At the end of September 2025, nationwide ICE detention populations were at historical highs of around 60,000, an increase of a couple of thousand from the end of the second quarter. U.S. Immigration and Customs Enforcement or ICE, has been our largest customer for over a decade.

From the end of 2024 through the third quarter, ICE populations in our facilities increased 3,700 to almost 14,000 or 37%. We believe that enforcement activity could gain additional momentum in the coming months as more agents are hired to meet ICE's 100,000-bed detention target.

Nationwide populations from the United States Marshals Service, our second largest customer, have remained relatively flat, although we expect Marshals populations to increase in 2026 due to an anticipated increase in enforcement activities and as more U.S. attorneys are put in place. Our Marshals populations have declined slightly to just over 6,300 at the end of September.

Many of our state partners continue to face complex correctional challenges either because of staffing shortages, overcrowding or outdated infrastructure. Our year-over-year state populations were up about 600 people driven most notably from new contracts with the State of Montana and increased populations in Georgia. We are in conversations with numerous existing and potential state partners to accommodate their additional demand.

As we continue to look for additional ways to meet our government partners' needs, we believe that we can make available substantial capacity to meet future demand. Even after the earlier mentioned activations, we own 5 idle corrections and detention facilities containing approximately 7,000 beds.

Along with surge capacity we have made available at certain facilities, partial capacity we have in facilities that are currently in operation and capacity we can make available through third-party leases like our great partnership with Target Hospitality I previously mentioned, we have close to 24,000 beds that we have informed ICE could be available.

We continue to believe that detention beds like these represent the best value and are the most humane, most efficient logistically, have the highest audit compliance scores in their system, are more secure, weather-proof and are readily available.

One final comment before I pass the call over to Patrick. As you all know, the company has a authorization for a share repurchase program for up to $500 million in the aggregate. During the 9 months ended September 30, 2025, we purchased 5.9 million shares of common stock under the share repurchase program at an aggregate cost of $121 million or $20.60 per share.

Since the share repurchase program was authorized in May of 2022, through September 30, 2025, we have purchased a total of 20.4 million shares of our common stock at an aggregate cost of $302 million or $14.81 per share, excluding fees, commissions and other costs related to the repurchases. As of September 30, 2025, we had approximately $198 million of repurchase authorization available under the share repurchase program.

Looking at the current stock price and our historical EBITDA trading multiples, the market is assuming a $300 million EBITDA run rate for the company, which is clearly a misalignment with our recent operating performance and anticipated forecast for 2026. With that, we expect to be executing an aggressive buyback plan this quarter, likely to be more than double the amount we have done in previous quarters.

With that, I will pass the call over to Patrick Swindle for further review of our operations activities during the third quarter.

Thanks, Damon. I'll start with a high-level overview of our top line revenue and third quarter operational performance. Federal partners, primarily Immigration and Customs Enforcement and the U.S. Marshals Service comprised 55% of CoreCivic's total revenue in the third quarter. Revenue from our federal partners increased 28% during the third quarter of 2025 compared with the prior year quarter.

Further breaking down our federal revenue, revenue from ICE increased $76.2 million or 54.6%, while revenue from the U.S. Marshals Service decreased by 5% versus the prior year quarter. Some of this decline is simply a shift mix where ICE and Marshals share a contract. As Damon mentioned, we expect increases in U.S. Marshals populations later in 2026.

Revenue from our state partners increased 3.6% from the prior year quarter. This increase includes additional revenue from the State of Montana, resulting from the 2 new contracts we signed with the state since the second quarter of 2024 and population increases in Georgia.

Total occupancy for our Safety and Community segments for the quarter was 76.7%, up 1.5 points since the year ago quarter. As we noted on our last quarter earnings call, total occupancy reflects the transfer of our 2,560-bed California City Immigration Processing Center from our Property segment, which isn't included in these occupancy statistics to our Safety segment.

Although this facility recently transitioned from a letter contract to a definitized contract, we have not yet begun receiving any detainees until late in the third quarter. Therefore, if we exclude this additional capacity from the calculation, making a more apples-to-apples comparison with prior periods, our reported occupancy would have been 79.3%.

The average daily population across all of the facilities we manage was 55,236 during the third quarter of 2025 compared with 50,757 in the year ago quarter. This increase was driven by more demand for our services and new contracting activity. Our teams continue to be successful in working with our government partners and managing the additional people in our care, which we are focused on every day.

Our third quarter results exceeded our internal projections for adjusted EPS and normalized FFO per share by $0.03 and $0.04, respectively, and adjusted EBITDA by $4.8 million.

As Damon alluded, the third quarter was a very busy quarter with reactivation activities at several previously idle facilities. We resumed operations in March at the 2,400-bed Dilley Immigration Processing Center under a new 5-year agreement and reached full operational capacity in September.

Shortly after the second quarter earnings release, we announced a new IGSA contract for our 600-bed West Tennessee Detention Facility. This contract has a 5-year term and is expected to generate $30 million of annual revenue once fully activated. Full ramp is expected to be completed by the end of the first quarter of 2026.

Effective September 1, 2025, we transitioned from a letter contract with ICE to a definitized contract at our 2,560-bed California City Immigration Processing Center. The new contract is for a 2-year period and is expected to generate annual revenue of approximately $130 million once fully activated. We began receiving detainees at the facility on August 27 and expect the activation to be completed in the first quarter of 2026.

Effective September 7, 2025, we transitioned from a letter contract with ICE to a definitized contract at our 1,033-bed Midwest Regional Reception Center. This new contract is for a 2-year period and is expected to generate annual revenue of approximately $60 million once fully activated.

However, the intake process continues to be delayed by the lawsuit with the City of Leavenworth that Damon mentioned earlier. Given the facility's centralized location, ICE is eager to begin fully utilizing this facility, and we're optimistic about successfully resolving the dispute. The recent entrance into the lawsuit by the Department of Justice could help expedite a favorable outcome.

Effective September 30, 2025, we entered into a new IGSA between the Oklahoma Department of Corrections and ICE to resume operations at our 2,160-bed Diamondback Correctional Facility. This new contract has a 5-year term and is expected to generate approximately $100 million in annual revenues once fully activated, which we currently forecast to occur in the second quarter of 2026.

In aggregate, these 4 recently announced contract awards are expected to generate annual revenue of $320 million. Despite visibility into annual run rate EBITDA, we do not believe the current stock valuation reflects the cash flows of our business, particularly considering these new contracts and our growth potential. Therefore, we plan to accelerate the pace of our share repurchases in future quarters, taking into consideration stock price and alternative opportunities to deploy capital, among other factors, as Dave will discuss further.

The substantial progress made during the quarter in reactivating previously idle facilities couldn't have been accomplished without the hard work of our employees and the strong relationship with our government partners. However, we know there's more work to be done. Activations are complex and activating 4 idle facilities simultaneously is particularly complex. But I'm confident we have the right plan and the right teams in place to be successful both in these and future activations.

In the meantime, we continue to remain focused on effectively managing our core portfolio and ensuring we meet our high operational standards as well as those of our government partners. Without this focus and performance, these additional opportunities may not exist.

And so as I turn it over to Dave to discuss our third quarter financial results in more detail, our capital allocation activities and assumptions included in our updated 2025 financial guidance, I'd like to again express my appreciation to our 13,000 employees for their focus and commitment to our mission. Dave?

Thank you, Patrick, and good afternoon, everyone. In the third quarter of 2025, we generated GAAP EPS of $0.24 per share and FFO per share of $0.48. Special items in the third quarter of 2025 included a $2.5 million gain on the sale of assets, a $1.5 million asset impairment and $0.8 million of M&A charges, including our acquisition of the Farmville Detention Center on July 1, reported in G&A expenses.

Excluding special items, adjusted EPS in the third quarter was $0.24 compared with $0.20 in the third quarter of 2024, an increase of 20%. And normalized FFO per share was $0.48 per share compared with $0.43 per share in the prior year quarter, an increase of 11.6%.

Adjusted EBITDA was $88.8 million compared with $83.3 million in the third quarter of 2024, an increase of 6.6%. Adjusted EPS and normalized FFO per share exceeded our internal forecast by $0.03 and $0.04 per share, respectively, and adjusted EBITDA exceeded our internal forecast by $4.8 million.

The increase in adjusted EBITDA from the prior year quarter of $5.5 million resulted from higher federal and state populations as well as higher average per diem rates across much of our portfolio, partially offset by start-up activities in the third quarter of 2025 and some one-time benefits in the prior year quarter. The number of ICE detainees in our care followed national trends, which remained at or near record highs throughout the third quarter of 2025.

As Damon and Patrick both mentioned, the third quarter was a very busy quarter for idle facility activations. We completed our reactivation of the Dilley Immigration Processing Center in September and are now generating revenue under a fixed monthly payment for the full 2,400-bed facility.

During the third quarter, however, this facility accounted for a net decrease in facility net operating income of $3.4 million or $0.02 per share compared with the third quarter of 2024 as the facility was fully operational during the third quarter of 2024 until the contract with ICE was terminated effective August 9, 2024.

As we previously disclosed last year, we also accelerated recognition of deferred revenue of $5.7 million in the third quarter of 2024 due to the contract termination. Shortly after last quarter's earnings release, we announced a new contract under an IGSA between the City of Mason, Tennessee and ICE to activate our previously idled 600-bed West Tennessee Detention Center, where we began receiving detainees on September 8.

In September, we announced that we transitioned from short-term letter contracts at our 1,033-bed Midwest Regional Reception Center and our 2,560-bed California Immigration Processing Center into newly signed longer-term contract structures. We began receiving detainees at the California City facility on August 27. While obviously good news, we did incur facility operating losses at these 3 facilities during the third quarter of $3.4 million or $0.02 per share for start-up related activities.

Although not impacting the third quarter, on October 1, we announced a new contract award under an IGSA between the Oklahoma Department of Corrections and ICE to activate our 2,160-bed Diamondback Correctional Facility, which commenced September 30.

Other factors affecting EBITDA and per share results included higher G&A expenses, the favorable impact of our share repurchase program and the acquisition of the Farmville Detention Center on July 1, 2025. Operating margin on our Safety and Community facilities combined was 22.7% in the third quarter of 2025 compared to 24.9% in the prior year quarter.

Excluding the aforementioned operating losses at the 3 facilities in various stages of activation, operating margin was 24% for Q3 2025. Again, margin in the prior year quarter was favorably impacted by the accelerated recognition of deferred revenue at the Dilley facility and a ramp down of populations at the facility in July 2024 despite generating a fixed revenue payment for the full facility through the August 9 termination date.

Turning next to the balance sheet. During the third quarter, we repurchased 1.9 million shares of our common stock at an aggregate cost of $40 million, increasing our year-to-date repurchases to 5.9 million shares at an aggregate cost of $121 million. As of September 30, we had $197.9 million available under our $500 million Board authorization.

As mentioned last quarter, on July 1, 2025, we acquired the Farmville Detention Center, a 736-bed facility located in Virginia for a total purchase price of approximately $71 million, including the acquisition of working capital accounts at an attractive return.

After taking into consideration these share repurchases and this acquisition, our leverage measured by net debt to adjusted EBITDA was 2.5x using the trailing 12 months ended September 30, 2025. At September 30, we had $56.6 million of cash on hand and an additional $191.4 million of borrowing capacity on our revolving credit facility, which had a balance of $65 million outstanding, providing us with total liquidity of $248 million.

Moving lastly to a discussion of our updated 2025 financial guidance. We expect to generate adjusted diluted EPS of $1 to $1.06 compared with $1.07 to $1.14 in our previous guidance and normalized FFO per share of $1.94 to $2 compared with $1.99 to $2.07 in our previous guidance. We expect adjusted EBITDA of $355 million to $359 million compared with $365 million to $371 million in our previous guidance.

Our updated guidance reflects the favorable results for the third quarter, updated occupancy projections consistent with current trends as well as updated assumptions for start-up activities related to new contracts signed during the third quarter at our West Tennessee Detention Facility, our California Immigration Processing Center, our Midwest Regional Reception Center and our Diamondback Correctional Facility.

Our revised guidance reflects a reduction in EBITDA at these 4 facilities of $10 million to $11 million compared with our prior guidance. In other words, the reduction in our guidance is essentially attributable to the updated assumptions for the start-up activities at these 4 facilities. These start-up activities will also negatively impact Q4 margins.

We are currently preparing our 2026 budget and expect to provide financial guidance for 2026 in conjunction with our fourth quarter earnings release in February. However, as Damon mentioned, upon reaching stabilized occupancy at these 4 facilities, we currently expect our run rate EBITDA to be no less than $450 million. We currently expect to reach stabilized occupancy of the last activation of these 4 facilities in the second quarter of 2026, so we will not reach a full year run rate in 2026.

Also keep in mind, activating facilities is a complex and challenging process with certain factors like the pace of intake and resolution of the legal dispute at our Midwest facility, to name a couple, not always within our control. We still have 5 remaining idle facilities containing 7,066 beds. And we believe incremental demand for more idle facilities will likely be needed once ICE absorbs the recently contracted beds.

With historic funding levels for border security and immigration detention obtained under the One Big Beautiful Bill Act, ICE's publicly stated intention to reach 100,000 detention beds nationwide as well as growing demand from existing and potential new state government partners, we believe there are numerous opportunities to activate additional idle facilities we own.

We also believe there could be opportunities to manage additional bed capacity not currently in our portfolio. These opportunities would be incremental to the aforementioned run rate EBITDA levels after considering any start-up expenses.

We plan to spend $60 million to $65 million on maintenance capital expenditures during 2025, unchanged from our prior guidance, and $14 million to $15 million for other capital expenditures increased primarily for preplanned investments at the newly acquired Farmville Detention Center.

Our 2025 forecast also includes $97.5 million to $99.5 million of capital expenditures associated with potential facility activations and additional transportation vehicles, up from our prior guidance for requests from ICE in connection with the new contracts at the California City and Diamondback facilities. During the first 3 quarters of the year, we spent $51.6 million on potential idle facility activations and additional transportation vehicles.

Finally, with respect to our capital allocation strategy, we do not believe the price of our common stock reflects the value of the cash flows of our business, particularly considering recent contract wins, and therefore, expect to accelerate the pace of our share repurchases in future quarters.

Our Q4 guidance contemplates double the space of the previous quarter. Our share repurchases will take into consideration our stock price, liquidity, earnings trajectory and alternative opportunities to deploy capital.

We expect adjusted funds from operations or AFFO, which we consider a proxy for our cash flow available for capital allocation decisions such as share repurchases and growth CapEx such as facility activations to range from $210 million to $219 million for 2025.

We expect our normalized annual effective tax rate to be 25% to 30%, unchanged from our prior guidance. The full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2025 to be approximately $167 million, excluding expenses associated with M&A transactions.

Before we turn the call back to the operator for Q&A, I'd like to turn the call back to Damon for his closing remarks.

Thank you, Dave. Well, as you all know, in August, we announced that Patrick will succeed me as CEO effective on January 1, 2026. I've had the great honor and the privilege of holding the CEO title for over 16 years, and I'm humbled by the opportunity to have served this great company since I started my career as a correctional officer in the summer of 1992.

I still clearly remember working my first post, which seems like yesterday. And I never would have, in my wildest dream, think that I would be someday the CEO of this great company. It has truly been an amazing ride.

And so as I close out my prepared remarks for my 65th and last quarterly earnings call, I want to express my gratitude to you, our investors, both new and long term for your confidence, support and ideas.

Also to our government partners, to my fellow Board members, mentors and colleagues, both current and retired and all the other people with whom I have had the honor and privilege to work with, many of whom I call very dear friends. My sincere thanks to each and every one of you.

I am tremendously excited and very proud of Patrick, and I know he will steer our company to new heights and tremendous success. Beyond my transition agreement, I do not know yet what the next chapter in my life will bring. But I do know it will be shaped by my experiences at CoreCivic, which has ingrained in me a call to continuous public service and improving people's lives. Best of luck to each and every one of you.

And with that, I turn the call over to operator for questions.

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

Before I start, let me just say, Damon, it's been a pleasure working with you, and good luck on your future endeavors. And Patrick, I'm looking forward to seeing you fill Damon's shoes going forward.

Thank you, Joe. It means a lot. You've been a tremendous friend and always grateful for your advice and support perspective. So I'm going to miss you my friend.

So to the questions. We obviously, in the news is the government shut down ICE looking to hire 10,000 people. And I think there's some concern out there that the level and pace of ICE detentions has slowed significantly from where originally people were thinking they would be. I think at one point, 3,000 a day they were talking about. And I just wanted to kind of get your thoughts, Damon, on where the pace of ICE population detentions are for you guys? Is it meeting your goals or how far below has it been your expectations? And how you see that maybe playing out the rest of this year?

Great question, and I'll probably tag team with Patrick a little bit on this. But the shorter answer is that, as you know, we're a 24/7 essential service for the government. And so on our side, on the contractor side, I mean, we're seeing the pace, admissions, discharges and activity in our facilities pretty much status quo, I mean, pretty much what we expected.

In fact, I'd say, it's increased a little bit not just on the detention side, but we're also being asked to do a lot more transportation. We are expecting that with the demands and expectations and the priorities for this administration after the inauguration. But I'd say, even that's picked up a little bit more than what we expected.

And not quite to your question, but I would say also on the contracting side. So again, we've had probably the fastest clip of 4 contracts in a period of time that I've ever seen in the company history with the 4 that we've announced here in the last 90 days. And so all the activation activities around those 4 facilities, obviously, a lot of that's on our shoulders. But I'd say, on the government side, clearances, helping people getting situated that are obviously going to be monitors and other support staff that are going to help the mission of these facilities, I'd say none of that has slowed down at all.

But Patrick, add and amplify to that, if you don't mind.

Sure. The only thing that I would add, Joe, is that really 2 things. One of them is the scale of increase in enforcement activity that has been implemented is really unprecedented and it's of a level that we really have not seen previously. And the consequence of that is you're going to see, I'll call it, an uneven or non-linear growth path.

And so I wouldn't expect that you're going to see steady increases progressively. But what we do know is our Department of Homeland Security has been very committed to hiring additional officers to help them implement the mission. We've seen no indication that there's been any change in terms of policy or policy approach that would cause us to believe that what we've experienced more recently is anything other than the natural ebb and flow of ramping up to a scale that, again, we haven't seen previously.

And so as a consequence of that, I think it's really difficult to predict exact timing. But to Damon's point, we've signed 4 contracts. We're executing those and ramping them very quickly. We're going to be bringing those online but certainly wouldn't interpret pace as being an indication of any indicator of a lessening of long-term demand potential.

Okay. And then just -- I don't know if you can provide a little more color on when you talk about the guidance and updated occupancy projections, we talk about those are less than what you originally were projecting. And same with the assumptions for start-up costs, assuming they might be higher than what you were originally projecting. And I'm just trying to get a little more color on those comments and how they relate to the updated guidance.

Yes, Joe, I'll take the second part of that question. Our updated guidance really reflects the start-up activities in Q4 relative to our last guidance. So last guidance, remember, we hadn't signed the West Tennessee contract. We didn't sign the Diamondback contract. So neither of those 2 contracts were in our guidance for the year, the fourth quarter.

So incorporating those new contracts into our guidance does result in some operating losses at those facilities as well hire staff, continue to ramp up staff before we start receiving detainees. Now we have started receiving detainees at the West Tennessee facility, but the Diamondback facility is really just beginning its ramp-up. So that did take the guidance down in Q4, which I don't take as bad news. I mean, I'd rather have the contracts with start-up activities than leaving the guidance where it was without those contracts.

And what was the first part of your question, Joe?

Just we talked about some of the updated occupancy projections...

Yes, occupancy, we expect that to increase because we are ramping up California City, our West Tennessee facilities, as I mentioned, are both taking on detainees. I would say that the rest of the core portfolio is at or near capacity. So I wouldn't expect a large increase from existing facilities. So as we ramp up additional idle capacity, the only opportunity is really to bring on new capacity and activate additional facilities with higher populations.

And Dave, maybe I can follow it up with the increased CapEx spend for ICE ask. What is ICE asking for that is going to increase the CapEx that you weren't originally anticipating?

Yes. So Diamondback and Cal City, both asked for renovations to parts of the facility. That was really the increase in our CapEx guidance. I think it was intake areas. They want to expand the intake areas because ICE is a transient population. So typically, you have a higher volume of activity compared with a state population, which is what we had previously at both of those facilities.

Okay. And then one more for me, if I may, on the buyback. You have your leverage goal of 2.25 to 2.75. I think you said 2.5 at the end of the quarter. We see where the stock price is. You already said you're looking at getting more aggressive. Would you consider exceeding your leverage goals given where the stock price is on that -- to even acquire additional shares? How aggressive would you be?

My short answer is yes, but I see we've got a couple of other people anxious to answer that question. So I'll flip it over to Damon and Patrick.

Joe, we're all nodding yes. Yes, yes, yes. I mean, if you think about it this way, and this is a pretty sweet way to end as a CEO. I mean, we look at our forecast next year, as I said in my script, $2.5 billion forecast in revenue, over $450 million in forecasted run rate EBITDA. And you look at the stock price, and that's ridiculous. I mean, so I think absolutely, we are looking at this quarter and then going into next year. If the price is going to sit around this level, this is a tremendous opportunity to buy back shares.

And so I'm saying it obviously as CEO, we've got obviously the management team here, but I know I'm very confident our Board feels the same way, and this will be a conversation we'll have in the coming days and weeks, not just the aggressiveness of the plan, but also if we need potentially more authorization.

But anything to add to that, Patrick.

The only thing that I would add is our leverage target has been based on a trailing leverage basis. And so when you look at the growth that we're expecting for 2026, it's one of the fastest growth years year-over-year that we've experienced in a very long time as a company.

And so when you think about that scale, we have to consider trailing leverage, but we can also look at it already identified cash flows. And so it's awarded contracts that would drive us to a $450 million or greater run rate. So it's not speculative in terms of our ability to achieve that level of cash flow.

And so certainly, we have to consider trailing leverage. We're not going to not think about that. But we also do have to compare that with an expectation of rapid known and cash flow growth that gives us the ability to be more aggressive on the margin.

Our next question comes from M. Marin with Zacks.

I want to follow-up on something you touched upon in the script -- in your scripted remarks. We're all hearing a lot with the government shutdown about how payments to various entities are not being processed or not being processed as quickly as they were prior to the shutdown. Can you just give us some color on what that means for you in terms of when you finally do collect the cash in that you're expecting? Will it be a flat lump sum? Will you get interest on that? How will that work for you guys?

Yes, I'll take that one, M. Thanks for the question. Yes, we expect when the government resumes operations that we will get paid in full for all the services that we've provided in the past. I don't exactly know the mechanics of how they process those. I imagine it goes into a queue. As we submitted our invoices, there'll be in a queue at ICE and Department of Homeland Security and they'll process those invoices according to due date. But I don't have visibility into exactly how they process them.

But when they do process them, they do pay with interest. I think that interest is in the low-4% today. So that's not something we have to ask for. It's automatic under the Federal Acquisition Regulations of the Prompt Payment Act. So we will collect interest with the payments when they resume operations and make their payments to us.

Okay, great. And you have a lot going on and there's a lot of noise in the third quarter numbers, as you indicated, with start-up costs, reactivating idled facilities. So you still have a handful of idled facilities after you reactivate the ones that are currently in the process of reopening. And in the earlier comments, you did say something about future activations and that you wouldn't be surprised if there were demands that warranted reactivating additional facilities. Is it right to think that there have been any kind of -- not negotiations, not at that point yet, but any kind of like early, early, early discussions about some of these other facilities?

Absolutely. Yes, this is Damon. I'll take that question. And the short answer is absolutely. So if you rewind the last quarter, we were looking at the rest of this year, there was a couple of facilities we didn't talk about on the call, but we were having conversations. One of those is Diamondback, the one in Oklahoma.

So obviously, those things happen discretely with the partner based on kind of what their needs and expectations and timing and how much capacity and whatnot. So we're having similar conversations today. So I think that's one question that's important to answer right now because you got the government shutdown, and I think there's probably assumption that all that activity is shut down. That's not the case.

We're still seeing active requests for information on facilities where we could expand, where we've got maybe a small allotment of vacant beds that they may want to contract for and then vacant facilities. We still have people or still have customers indicating interest not only about those facilities, but actively going out, touring, inspecting the facilities, determining how we can meet their mission. So all that activity is still very active even though with the government shutdown.

Our next question comes from Kirk Ludtke with Imperial Capital.

Damon, congratulations on a great run.

Thank you, Kirk. It's been a real blessing. I appreciate that.

And best of luck. I guess with respect to the 100,000 beds, I'm hearing less -- we're hearing less about fewer alternative sites being opened by ICE. But can you just maybe comment on -- are you competing with those alternative sites of military bases, et cetera? And if so, how many beds are available at those locations that you think you might be competing with?

Yes. Great question. And I think we've indicated or have alluded to anyway in the last couple of quarters, we think it's kind of the all of the above approach. So clearly, there's been some activity of both DHS leadership and ICE leadership to look at some of these alternatives for various different reasons. But indicating our value proposition here last 90 days, again, we signed 4 contracts with facilities where we had vacant capacity. So the value proposition and the location of our facility is obviously very attractive with these new contract awards.

And so I think to get to 100,000, I think, as I said earlier, I think it's going to be a little bit of all of the above approach. And I think it's also going to be a case of as they look at our capacity being more secure, but I think also maybe a little longer-term solution and then these alternatives, especially the soft side of ones where they're more short term in nature, again, I think it will just be determined on the mission and the location.

But anything to add there, Patrick?

The only thing I would add is 100,000 beds is really a guidepost more than a hard target. And so it's going to be really somewhat dependent also on enforcement. And so if you were to look at all of the beds available in the sector today and you look at the potential demand opportunity that can result from the higher enforcement rate activity, all of our beds could be used and you could still have a scenario where many more beds are needed.

And so we've talked on past calls about our having thought about how we might provide capacity in addition to our existing facilities of the 7,000 beds that we talked about being available. And again, we want to be flexible and nimble and help our partner meet the need that they have at any moment in time.

And I certainly wouldn't interpret all of our facilities not having been contracted for as an indication that, that may not be coming, because again, growth isn't going to be linear. And as the number of officers are put in place and out in our communities enforcing the law, you would expect you're going to see an ebb and flow in demand that will ultimately result in more bed need. And so I would say, from our perspective, we think that it is a both end solution.

Got it. That's very helpful. And have you staffing issues, any issues there finding people to work at your facilities you're ramping up?

No, we're having a very strong experience from a hiring perspective. As you can see in the broader economy, there has been some broader economic weakness, and we're certainly experiencing that as we hire. And so the backdrop that we've encountered as we've gone out to activate these facilities has helped us activate very efficiently approaching our staffing targets ahead of schedule in most all cases and really don't see ourselves inhibited by our ability to hire.

Got it. Great. And then last one. Are there any limitations on share repurchases in your credit agreements?

No.

Our next question comes from Raj Sharma with Texas Capital.

My first question is around how much -- your guide -- your sort of soft guide that you just gave on fiscal '26. How much of the revenue embedded in 2026? What is the reactivated of the 5 facilities? How much are they contributing in revenues and in EBITDA to that fiscal '26 guidance?

Well, the -- if you're talking about the 4 we just announced in the third quarter is about $321 million in -- yes, that's about $320 million in revenue. I would say, if you look at '26 versus '25, that's probably about $250 million of incremental revenue because we are generating some revenue at these facilities and did generate some revenue at Midwest Regional Reception Center and Cal City under the letter contracts earlier in the year.

So yes, I'd say the increment in revenue is about $250 million. It'd be hard to estimate. I don't think we're ready to put out a number on EBITDA of those facilities. But I think it's fair to say the margins would be comparable to other margins we have for other contracts that we've announced, taking into consideration both the geography and size of the facility.

Right. Is it also fair to say that those margins on the reactivated facilities are higher than the overall company EBITDA margins?

Well, I'd say, we've got some state contracts that we've had for a long time and perhaps haven't kept up with per diems. In a portfolio of our size, you don't have all contracts that are as profitable as they would be if you're entering into a new contract. So I'd say, on average, across the whole portfolio, when you're taking into consideration state contracts, local contracts and so forth, they're probably slightly higher.

Great. And then -- so we're assuming that these reactivated facilities are definitely all fully functional and normalized mid of 2026. What occupancy levels would you be -- are you targeting for mid-'26?

Well, I'd say -- yes, we're still in the process of preparing our 2026 budget. So I wouldn't put a number out there just yet. I mean, the frame of reference, we were at what, -- I'm sorry, Q4 occupancy combined safety at 76.7%. So that includes all of our idle capacity, including the facilities that we're activating. So I could easily see getting in the low-80s and perhaps mid-80s in 2026 on average.

Great. That's super helpful. And then just the idle facilities, your 7,000 idle facilities, what level of ICE demand do you see there or is it only going to be ICE to reactivate those remaining 7,000 or would there -- you think there could be some state demand, especially given the federal -- the shutdown impacting operational matters?

So this is Patrick. Much of the focus in this conversation so far has been ICE because ICE contracted for the 4 additional facilities that we're presently ramping. But our pipeline is much broader than just ICE. And so we're having ongoing conversations with state customers and other federal partners around potential bed utilization.

And so we are not a single customer story. And again, going back to the outlook that we talked about in terms of our run rate, that's only reflective of contracts that have already been awarded. And so when you look at the discussion around EBITDA run rate in excess of $450 million, utilization of any additional capacity would certainly be in excess of that.

And so again, we think we have opportunities with ICE. I don't want to diminish that, but we do also have a much broader pipeline than conversations that we're having with non-ICE partners.

And looping back, Raj, on the question you asked regarding revenue, I was talking about the contracts that we announced in the third quarter. Don't forget, we also have the Dilley Immigration Processing Center. That one became fully ramped as of September. So there's probably another, I don't know, $70 million, $60 million in incremental revenue in 2026 versus '25 since it will be on a full run rate basis here beginning in Q4.

But Damon, back to...

Patrick makes an excellent point. I just want to underline one of his comments. On the state side, we've got probably about half a dozen states that are engaging us. Some of them are existing, some of them are potentially new ones that are looking for capacity. And that's probably the strongest kind of engagement we've had from our state partners or at least state portfolio in probably 12 or 24 months. So absolutely, it's a story that touches both federal and state opportunities.

Great. That's very helpful. I had a question on the -- any indication of rising -- given rising labor costs, how are your wage trends tracking across activated facilities? Do you have rate escalators with ICE or state contracts?

We do have rate escalators in many of our contracts, but the wage environment is very much moderating across our markets. And so if you were to look at the staffing environment that we're experiencing today, I would say, it's the most favorable that we've experienced since before COVID.

And so it's not something that we take for granted, and we're out actively working to hire additional employees. So we're very actively in the market. But at this point, we do not see either market pressure or wage pressure that causes us concern.

Great. And just lastly, on any cash collection delays. I know that you addressed this question a little earlier due to the government shutdown. I know you mentioned credit line availability. Could you comment on that again, please, how long you're good for and what the working capital impact?

Yes. We're probably -- yes. So it's -- given a revenue from the federal government, it's probably about $40 million per month. So who knows how long the government shutdown is going to last. Lord help us. We hope it doesn't go through all of November. But if it does, I know we've got a very supportive bank group. We do have an accordion feature on our bank credit facility. So we could always exercise that. I've been in contact with banks as I always have been in contact with our banking group, and I know they would be very supportive.

Our next question comes from Greg Gibas with Northland Securities.

Damon, I wanted to wish you luck on your future endeavors.

Yes, sir. Thank you very much for that. Let me know if you know anybody is hiring.

Well, I was going to ask about capital allocation but really appreciate your commentary on accelerating share repurchases given the stock's valuation. I had a few kind of modeling-related questions. And I guess, first, maybe, Dave, like to what degree do you expect start-up costs from the ramping up facilities to carry into the first half of 2026, if at all?

Well, there definitely would be some carried over into '26 because we don't have -- like Diamondback is I think the last facility expected to complete stabilized occupancy, and that's in Q2. Now our Midwest Regional Reception Center, we're kind of on hold pending the resolution of the legal matter. So don't know how long that will extend. We're optimistic that we can get that favorably resolved in the fourth quarter, but don't really know and don't have complete control over the timing of that.

So there'll be a little bit of start-up in Q1. As I think about start-up, when I talk about start-up, I'm also talking about an operating loss at the facility. So we will be generating revenue, because like at Cal City, we're already accepting detainees and West Tennessee as well. So that will flip to profitability. I would imagine at least at those 3, Midwest aside, sometime during Q1 -- yes, probably during Q1.

Okay. That's fair. And probably fair to say the majority of the, I guess, impact of these start-up costs for those 4 awards in Q4?

I'm sorry, what was the question? How much is it in Q4?

Well, I guess, I was just kind of curious like the majority, I guess, of the impact from those start-up costs is recognized in Q4?

Yes, more so -- yes, exactly right.

Yes, makes sense. Great. And then I guess I would just ask, what is a fair EBITDA run rate exiting the year, excluding those one-time and start-up costs? I think last quarter, you previously spoke to expectations of close to $100 million run rate ending the year. And wondering if any assumptions have changed around that.

No assumptions have changed other than adding a couple of new contracts because the $400 million did not include our West Tennessee facility and did not include our Diamondback facility. Diamondback facility is a 2,160-bed facility, so a large facility. So yes, I mean, I don't -- I would -- it's going to be -- again, we gave the soft guidance of no less than $450 million once they reach stabilized occupancy. That's probably the best number I could give you at this point.

Yes, makes sense. And yes, that's what I was asking kind of prior to those awards. So great. And I guess, just to clarify from your previous commentary, you were saying that about $250 million or so of the $320 million expected to be recognized in 2026, excluding Dilley?

No, no. That was the increment in '26 over '25 because we recognized some revenue from those activations in 2025. So I was talking about the 4 facilities that we announced in the third quarter. So that revenue is probably $250 million 2026 over 2025 and then another $60 million if you include the Dilley facility, incremental revenue 2026 over 2025.

Our next question comes from Ben Briggs with StoneX Financial.

Damon, congratulations on a very successful career. And I hope you enjoy a well-deserved time off before whatever it is you decide to do next.

Thank you, sir. I appreciate that. Yes, sir.

Great. So the vast majority of mine have been asked and answered. I think one that I would get in here is, I know you referenced kind of a longer-term $450 million adjusted EBITDA, call it, run rate. Obviously, as you guys have discussed on the call, there are CapEx investments that are required upfront as you sign contracts that result in that longer-term increased EBITDA. Do you know -- I mean, I know you may not have an exact number, but any kind of range or just the best way to think about what the CapEx costs kind of all in, in aggregate to get there are going to be or is it just too much of an unknown with not all the contracts finalized and just too many moving pieces?

Yes, that's a really good question. Again, let me just through a little bit. So our guidance for 2025 was $97.5 million to $99.5 million. There'll probably be a carryover of another $20 million or so in 2026. That does include CapEx associated with some facilities that we have not announced new contracts on. So if you recall at the beginning of 2025, we began -- we leaned forward on CapEx because we wanted to prepare all of our facilities to accept detainees as quickly as possible.

So that number that I just gave you all in would -- I won't say it will cover every one of our facilities. And then whenever we activate a facility, there's always some stocking of equipment that we have to add to the -- in addition to the hard infrastructure renovation type assets. So I'm not sure if that answers your question, but it's probably $150 million-ish all in for all facilities.

Our next question comes from Daniel Furtado with PhillyFin.

I was a little bit late on the beginning, but did you give any -- are you willing to give any update on PECOS?

We did not say anything about that, and there's really no update today. Again, we always continue to have a dialogue with not only as our partner with ICE, but also with Target about what the needs are there in the Southwest, notably in Texas. So no real update to share today.

Okay, great. And then my follow-up is simply this discussion about the share repurchases. And I know this -- clearly not trying to put you on the spot, but have you given any thought to potentially a tender considering what the stock price has done and your desire to repurchase shares?

Yes. Probably it wouldn't be appropriate to go into kind of the weeds of what we discussed with the management team with the Board. But I guess the message is that we clearly think the stock is undervalued based on the forecast. So we'll be looking at every opportunity to deploy capital and buy back shares. And so always looking at potentially different ways to do it and maybe more efficient ways, but I wouldn't say anything more than that. We clearly see the opportunity.

Our next question comes from Edwin Groshans with Compass Point Research & Trading.

Damon, congratulations and enjoy your retirement. I just have -- I guess my question kind of focuses on -- you saw a lot in the press changes at ICE management. This seems to be the third swing at it. You've mentioned on the call the hiring of new agents, which appears that that's going to take some time. Can you just discuss like as ICE appears to get more aggressive or gets more agents, how much impact that has on your facilities and how quickly it improves activation or even if you can give some sense of bed count?

Yes, great question, and I'll probably tag team with Patrick a little bit on this. But as Patrick alluded to earlier, it's been -- and I shouldn't say just this year, it's really kind of our business. It's a little lumpy. And I think that's probably the case in this situation with ICE. So on their side, they're looking at additional 10,000 agents. They're looking also at lawyers, judges, other support staff to help with the mission. And obviously, that's going to impact the enforcement operations, both on the interior and on the Southwest border. And then in turn, obviously, that's going to impact the tension.

So I would say, as you look at kind of last 60, 90 days, I think they have been going very aggressive on hiring, but it does take some time because -- and we appreciate it on our side to get them through training, get them through the screening process and get them to where they're able to go out and affect the mission of ICE. And so I think as that continue to kind of ramps up -- and again, I'd describe it as lumpy. As they got kind of more bandwidth on their side to do more enforcement operations, then obviously, that's going to impact the need for detention capacity.

So the conversation is just real time. It's been like that for basically the last year. They're telling us kind of what the needs are, where the priorities are, where the capacity potentially is going to be needed as they kind of ramp up operations. And then obviously, we'll move on a parallel path to meet the need if we've been given the opportunity to provide a solution.

But anything to add to that, Patrick.

The only thing that I would add is that I think it's important to note that as we open a facility during activation, all beds aren't immediately available on day 1. And so we have ramp schedules that we have built into our contracts at a pace at which we believe we can safely accommodate ramps in population.

And so as we continue to open new facilities, we're seeing those beds utilized at a pace that's consistent with what we initially expected. And so I think to the point that Damon just made, I think what you're going to see is a little bit of ebb and flow. And so more beds have been contracted for both with us and with others. Those beds are progressively being utilized, and absorption is occurring, but there are beds available.

As you see a further step-up in enforcement, you would see further bed need manifest. And so again, it's not a linear growth path either for populations or for enforcement or for contracting, but the direction it appears to be very much intact. And again, as we provide beds on schedule, they're being utilized.

Great. I appreciate that. And I know you mentioned earlier in the call, a surge capacity. Is that surge capacity available as activation is occurring? And then once activation is up and running, the surge can then leak into the new facilities or is that separate?

That capacity generally is consistent in terms of the ebb and flow of what we might see on a surge basis versus inactivation. And so new beds being brought online are going to be utilized. There are still going to be times at our facilities, particularly depending on the field office where surge beds may be needed. And so it's going to be somewhat geography dependent and it's going to be somewhat facility dependent in terms of whether surge capacity would be used, when it would be used. But it is still available and in addition to the new beds that we would be bringing online.

And then just my last one on this is, there's been a lot of discussions about deportations. You mentioned the judges, which I appreciate. There's going to be work to do mass deportation. Are you seeing in your model yet, are deportations having an impact on detentions or is detention still running ahead of deportations, i.e., intake is greater than outflow?

Well, we see -- there is variation as enforcement occurs. And it really is very dependent on the field office, the country of origin that the individual is being transported to. And so I would say there's not really a universal answer to that because it really is dependent on, again, where the enforcement action occurs, where the individual is placed, the agreement that we have in place with the country of origin, all of those are going to impact the amount of time that someone would spend in detention. We do see a strong motivation for speed of deportation. But certainly, we see a lot of variation as individuals manage their way through the court process.

And last one -- I promise, this is my last one. I guess there was a lot of talk about ICE was tending to move people to different regions because of legal actions that's happening. Have you seen that or is most of the business still happening in the region where the people are picked up?

Well, I guess what I would say is -- and this has historically been the case. ICE -- so some customers have very tight geographic footprints. And so for many states, what you find is they want to stay within the border of that state. For some federal agencies, they want to stay within a particular district. In the case of ICE, we see -- we've always seen movement across the country.

And so I've not seen broadly what I would describe as purposeful intent to move folks around the country for that reason. But we do see lots of movement around the country, which is really driven by the staging aspects of managing populations and aggregating individuals in certain locations in advance of deportation.

Our next question comes from Jason Weaver with JonesTrading.

At this point, just a couple for me. I'll try to be quick. Looking past your idle capacity and the facilities that are in various stages of reactivation now, can you update us a bit on what you're seeing or looking for in the long end of the pipeline to add ICE beds? That is, if we're trying to move to 100,000 capacity or greater?

Yes. I'll tag team with Patrick on this. This is Damon. Part of that conversation has been ongoing where they'll say, ICE will say, hey, we've got a certain need for capacity today in a certain region. But in the next, say, year or 2 years, we might have a need for more capacity. So the way we look at it, and obviously it's the most efficient way to do it is to look if we've got a base of operations in a certain location, can we add capacity both short-term and long-term. So it's a 2-way conversation.

ICE says, hey, we may have a little bit of a higher population for a period of time, for 12, 24 months. So that would lend us to say we probably don't want to do a very large capital investment to meet that need. So we'll look at more kind of short-term solutions that we can maybe add to a facility and kind of leverage the base operations.

So those conversations are ongoing. It's kind of alluded back to my earlier comments and what I said in my script, which is where we can either expand capacity in existing facilities or and/or go to a third-party like Target where they could meet the need either with a standalone or again maybe add capacity to an existing operation. So it's kind of all of the above approach.

Okay. That's helpful. And then just as it pertains to Midwest Regional, do you have any upcoming hearing dates or events scheduled where we might see some developments there?

Yes. There's a couple of hearings. I don't have the exact dates in front of me, but there's a couple of hearings here in the next probably 30 -- I think, 30 to 45 days. I think there's at least a couple before Christmas.

There are no further questions at this time. I'd like to turn the call back over to Damon Hininger for closing remarks.

Thank you so much. Well, this has been a really fun call. Thank you for all the well wishes. And again, as I kind of wrap up, 16 years of service as CEO, almost 33 years as a member of this great company. I'm deeply grateful for all of you on the call and also previous investors that have given me a lot of support and guidance over the years.

I also want to say to every single employee in our company, 14,000 strong and also the ones that have worked with us previously, I'm deeply honored and grateful to work alongside you all during these 33 years. You all have inspired me in so many different ways and it has made me a better person and have made this a better company.

And really going into this year has given us a very strong 2025. I mean, this year, it is really breathtaking the amount of activity we've seen in the organization to meet the needs of not just one customer, also we've talked a lot about ICE, but also other federal partners and a lot of activity on the state side. So 2025 has been a great year. But boy, as I said earlier, next year with a forecast of $2.5 billion in revenue, over $450 million in annual run rate and EBITDA. Those would be 2 record numbers for us as an organization.

So again, thank you for the organization, for the company, employees and also for our customers to give us that trust and confidence to provide that type of service to have these type of milestones. So with that, we adjourn. Enjoy the rest of your day. Thank you for calling in today.

This concludes the program. You may now disconnect.