GEO Group Inc Stock

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

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

Thank you, operator. Good afternoon, everyone, and thank you for joining us for today's discussion of the GEO Group's Second Quarter 2026 Earnings Results. With us today are George Zoley, Chairman, Chief Executive Officer and Founder; and Shayn March, Senior Vice President and Chief Financial Officer. This afternoon, we will discuss our second quarter results as well as our outlook, and we will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com.

Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports.

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

Thank you, Pablo, and good afternoon, everyone, and thank you for joining us. Our diversified business units continued to deliver strong financial and operational performance during the second quarter of 2026. Revenues increased 15% from the second quarter of 2025, while net income increased 63% from the same period. Our better-than-expected performance reflects significant revenue growth from the contracts that we entered into throughout 2025. As we have previously discussed in 2025, we were awarded several new or expanded contracts that represent up to approximately $520 million in annual revenues, which represents the largest amount of new business we've won in a single year in our company's history.

In our Secure Services segment, we entered into new contracts to house ICE detainees at 4 facilities valued at approximately $280 million in annual revenues and totaling approximately 6,000 beds, increasing our total active ICE beds to approximately 27,000. Our current census across our active ICE facilities is approximately 24,000, representing more than 1/3 of the current national ICE population of approximately 68,000, which has distributed over 225 separate locations that are primarily short-term GEO facilities. Over the last 6 weeks, we have experienced a 20% increase in ICE populations. Following the passage of the Secure America Act, which restored baseline appropriations funding for ICE and Customs and Border Protection after the longest partial government shutdown in U.S. history.

Under the Secure American Act, ICE received $38.5 billion in funding available through September 30, 2029. This amount is in addition to the $75 billion in funding previously allocated to ICE under the One Big Beautiful Bill, including $45 billion for detention, which is available through September 30, 2029. We believe the federal government is continuing to pursue the priority of increasing immigration detention capacity to 100,000 beds or more and consolidating to fewer larger facilities. As a 40-year partner to ICE, we expect to be part of that solution. In the past few weeks, we've announced 2 new contracts with ICE for the activation of ICE processing centers at 2 previously idled facilities.

We have entered into a 5-year support services contract with ICE for the activation of a federal immigration processing center at the 1,188 bed Big Horn facility in Hudson, Colorado, while also entering into a lease agreement with the facility owner. The Big Horn support services contract is expected to generate approximately $85 million in the annual revenues in the first full year of operations. We have also entered into a 5-year support services contract with ICE for the activation of a federal immigration processing center at the GEO-owned 1,320-bed Rivers Facility in Winton, North Carolina. The Rivers support services contract is expected to generate approximately $80 million in annual revenues in the first full year of operations.

Under both contracts, ICE will reimburse GEO for the capital expenditures needed to reactivate these 2 facilities as well as providing funding for start-up expenses during the activation period. We expect the activation of the Big Horn and Rivers facilities to be completed by the end of 2026, with both facilities achieving normalized operations and earnings contribution in early 2027. Following the activation of these 2 facilities, our total ICE beds under contract will increase to approximately 29,500 beds. We have also approximately 4,500 idle beds that remain available at 5 company-owned facilities, which are designed for high security and therefore, well suited for the current needs of the federal government.

We continue to have active discussions with the federal government regarding potential reactivation of additional idle facilities. At full capacity, these 4,500 idle beds could generate approximately $250 million in combined incremental annual revenues. Our second quarter 2026 results reflect a significant expansion in our secure transportation services on behalf of both ICE and the U.S. Marshals Service. In 2025, we signed a new 5-year contract with the U.S. Marshals covering 26 federal judicial districts and spanning 14 states. We have entered into new or amended contracts to expand secure ground transportation services at 7 ICE facilities. The support services that we provide under our ICE air transportation subcontract have also continued to steadily increase.

Additionally, in our new Big Horn and Rivers contracts with ICE, we are expected to generate approximately $20 million combined in additional annual transportation services revenues once normalized in early 2027. Importantly, during the second quarter of 2026, our ISAP 5 contract continued to experience a steady technology shift to more intensive and higher priced monitoring devices such as ankle monitors. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the non-detained docket. The program relies on several forms of monitoring, including GPS, ankle bracelets or wrist-worn devices that provide real-time tracking as well as the SmartLink phone app, which relies on facial recognition, Voice ID and GPS to confirm a person's location during predetermined check-ins.

The current overall ISAP count is approximately 184,000 participants. The number of ISAP participants on GPS ankle monitors has increased to approximately 54,000 currently from 17,000 early 2025. We also continue to experience a steady increase in the number of ISAP participants assigned to case management services which involves staff interaction and monitoring for approximately 116,000 individuals currently. If this trend continues, the technology and case management mix shift will continue to increase the revenues and earnings generated under the ISAP contract even if overall, participation counts remain relatively stable. Thus, we continue to be optimistic about the importance and growth potential of the ISAP contract, and we believe it is also well positioned to scale up to higher overall counts.

Finally, during the second quarter of 2026, we did not receive any revenues from our new skip tracing contract, which we believe was due to the lapse in ICE appropriations funding during the government shutdown. With the restoration of ICE funding, we are optimistic that the contract will begin to ramp up during the second half of 2026.

Moving to our outlook. We have increased our net income and adjusted EBITDA guidance for 2026 to reflect the strength of our results in the first half of the year. Our updated guidance does not include any earnings contribution from our new Big Horn and Rivers contracts since we expect the activation period for these facilities to be completed by the end of 2026, achieving normalized earning contributions in early 2027. Our updated guidance also does not include any earnings contributions from our previously announced managed-only contracts for our 1,884 bed Graceville facility and our 985-bed Bay facility in the state of Florida, which have been rescheduled for implementation. These 2 contracts, which are valued at approximately $100 million in combined annual revenues are now expected to transition to GEO on July 1, 2027.

Looking at our improved outlook, we believe there are still several sources of potential for their upside. On the revenue side, sources of potential upside include additional growth in our Secure Services segment from the reactivation of additional idle facilities and/or higher overall population across our active facilities. Additional volume increases and/or accelerated technology services mix and a shift in our ISAP contract, additional growth in our secure transportation services business, additional revenue from higher utilization of our skip tracing contract. On the expense side, our guidance assumes more moderate contributions from labor cost savings in the second half of the year.

Before I turn the call over to our CFO, Shayn March, for a more detailed review of our second quarter results, I'd like to highlight our continued commitment towards strengthening our capital structure, enhancing shareholder value. During the second quarter of 2026, we repurchased approximately 1.6 million shares for approximately $37 million, bringing the total shares repurchased to 10.1 million for approximately $177 million since the current share repurchase program was authorized in August 2025. Our current total outstanding share count is approximately 132 million and we have approximately $323 million still available under our $500 million share repurchase authorization. We believe our stock continues to trade at a relatively low multiple despite the intrinsic value of our assets and our significant growth opportunities. We believe this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases.

At this time, I will turn the call over to Shayn to review our quarterly results and increased guidance.

Thank you, George. Good afternoon, everyone. Revenues for the second quarter of 2026 increased by approximately $732.1 million up from approximately $636.2 million in the prior year second quarter, reflecting a 15% increase. For the second quarter of 2026, we reported net income attributable to GEO operations of approximately $47.5 million or $0.36 per diluted share. This compares to net income attributable to GEO operations of approximately $29.1 million or $0.21 per diluted share in the second quarter of 2025, reflecting a 63% increase for net income and a 71% increase for earnings per share. Our adjusted EBITDA for the second quarter of 2026 increased to approximately $142 million up from approximately $118.6 million in the prior year second quarter, reflecting a 20% increase.

Looking at revenue trends, our owned and leased secured services revenues increased by approximately $55 million or 16% compared to prior year's second quarter. This increase was driven by the activation of 3 company-owned facilities under new contracts with ICE, which was partly offset by revenue loss from the sale of the Lawton, Oklahoma facility and the depopulation of the Lea County, New Mexico facility. Quarterly revenues for our managed-only contracts increased by approximately $44 million or 30% from prior year's second quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida ICE detention facility as well as certain transportation revenue increases that are reported in this segment.

Quarterly revenues for our reentry services increased by approximately $3 million, offset by a $3 million decline in nonresidential services revenues compared to the prior year's second quarter. Finally, second quarter 2026 revenues for our electronic monitoring and supervision services decreased by less than $3 million or approximately 3.5% from the prior year's second quarter despite the reduced pricing on our ISAP 5 contract, which demonstrates the strength of the continued favorable technology and case management mix shift in the program.

Turning to expenses. During the second quarter of 2026, our operating expenses increased by approximately 12% as a result of the activation of our ICE facility contracts and increased occupancy compared to prior year's second quarter. Operating expenses continue to be favorably impacted by lower labor costs during the second quarter of 2026. Our general and administrative expenses for the second quarter of 2026 remained steady at approximately 9% of revenue compared to prior year's second quarter. Our second quarter 2026 results reflect a year-over-year decrease in net interest expense of approximately $4 million as a result of the reduction in our total net debt. Our effective tax rate for the second quarter of 2026 was approximately 28.7%.

Moving to our outlook. We have updated our guidance for the full year 2026 and issued guidance for the third and fourth quarters of 2026. We have increased our full year 2026 GAAP net income guidance to a range of $168 million to $175 million or a range of $1.27 to $1.32 per diluted share on annual revenues of $2.95 billion to $3.05 billion and based on an effective tax rate of approximately 30%, inclusive of known discrete items. We have increased our full year 2026 adjusted EBITDA guidance to a range of $550 million to $560 million. We expect total unreimbursed capital expenditures for the full year 2026 to be between $135 million and $145 million and expect CapEx to decline below $100 million in 2027.

For the third quarter of 2026, we expect GAAP net income to be $45 million to $48 million or a range of $0.35 to $0.37 per diluted share on quarterly revenues of $755 million to $805 million. We expect third quarter 2026 adjusted EBITDA to be between $140 million and $145 million. For the fourth quarter of 2026, we expect GAAP net income to be $37 million to $41 million or a range of $0.28 to $0.31 per diluted share on quarterly revenues of $758 million to $808 million. We expect fourth quarter 2026 adjusted EBITDA to be between $137 million and $142 million.

Moving to our balance sheet. We closed the second quarter of 2026 with approximately $55 million in cash and cash equivalents and approximately $1.54 billion of total debt. At the end of the second quarter 2026, our total net debt was approximately $1.5 billion, and our total net leverage was below 3x adjusted EBITDA. At the end of the second quarter, we had total available liquidity of approximately $300 million, including cash on hand and revolver availability to support our capital needs.

At this time, I will turn the call back to George.

Thank you, Shayn. To recap, we are very pleased with our strong second quarter results and the improved full year outlook. Our financial performance in the first half of '26 has been driven by the new growth opportunities, which we captured in 2025 and are normalizing this year. Last year was the most successful period for new business wins in our company's history, and we expect 2026 to continue to be very active as well. We therefore believe that we have upside potential across our diversified business segments. We recently announced new contracts with ICE to reactivate 2 previously idle facilities totaling approximately 2,500 beds with annual revenue value of approximately $165 million once operations normalize in early 2027.

With these 2 facility activations, we now have approximately 4,500 idle high-security beds that remain available, which could generate in excess of $250 million in annual revenues at full occupancy. We are pleased with the continued shift in technology and case management mix under our ISAP 5 contract, which could also provide additional upside throughout '26. We also remain well positioned to expand our delivery of secure ground and air transportation services for ICE and U.S. Marshals Service beyond the significant growth we've already experienced.

Finally, I'd like to provide you with an update regarding the plan by ICE and DHS to purchase existing privately owned turnkey ICE processing centers. On our earnings call last quarter, we discussed that ICE was considering the purchase of approximately 10 privately owned turnkey processing centers. As was disclosed recently by CoreCivic 4 facilities totaling 7,187 beds have been already have been acquired by ICE for more than $2.2 billion at an average purchase price of more than $300,000 per bed. Based on our current discussions, we believe that the total number facilities that are being considered for acquisition by ICE is likely larger than the 10 that were originally contemplated. And it is possible that the number of facilities targeted for acquisition by ICE could continue to grow in the future.

Following the recently completed sales, ICE now uses approximately 36 existing detention sites nationwide that are owned and operated by private contractors. CoreCivic now owns and operates approximately 11 ICE detention facilities while GEO owns and operates 23 ICE detention facilities. We believe that future sales are likely to have similar valuations to the transactions that have already been completed with standard adjustments with respect to geography and facility size. We are engaged in an active process for the sale of several of our turnkey facilities subject to mutual agreement on price and our continued management of those facilities under long-term support services contracts.

We believe we have 2 types of assets, the buildings and the businesses of providing support services. We are pursuing a potential sale of the buildings, but we want to retain the business. We consider ourselves primarily a support services operator and will place particular importance on our ability to continue our support services at any facility sold to ICE. Several of our facilities already have long-term support services contracts in place and would likely only need to be modified so as to eliminate the ownership cost such as depreciation and property taxes embedded in our present contracts in the event of ICE ownership. One of these facilities have some unique and valuable assets that we believe requires separate appraisal, which has likely resulted in somewhat longer process of the valuation.

Several other GEO facilities have support services contracts that expire later this year. ICE has initiated a procurement process involving 4 facilities that we hope will result a new long-term support services contracts being awarded. At this time, there is no definitive agreement in place with ICE and no precise timeline for the closing of any transactions. And of course, we can give no assurance that any of these transactions will take place at all. But if any of the GEO facilities are sold to ICE, we intend to use the proceeds to reduce debt, continue stock repurchases and for other general corporate purposes. The potential sale of multiple facilities to ICE could represent a significant liquidity and shareholder value-enhancing event for our company.

While the exact timing of government actions is always difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance long-term value for our shareholders. Given the intrinsic value of our assets, including 50,000 owned beds, our strong financial performance and providing diversified secure support services and our expected future growth, we believe our stock continues to be significantly undervalued and offers a very attractive investment opportunity. That completes our remarks, and we would be glad to take questions.

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

I want to start out with the Florida facilities. It's a year push out here to the right. I was wondering maybe you could give us a little more color as to why the pushout there? And then secondarily on that, I'm assuming since they were supposed to start in early July this year that there was some of those revenues that were expected in your prior guidance that you put out in the first quarter, is that accurate? And so that would indicate that even with this push out to the right for these particular facilities, the guide still being raised -- have been raised even higher if these hadn't been pushed out?

That is correct. Yes, there were some budgetary issues that remain unresolved that required the extension to July 1 of next year.

Okay. And then on the CapEx, you mentioned George, that getting reimbursed for CapEx in some of the new contracts. If you could remind us of that as normal if that's something new from ICE? And does that also play into the reduction and CapEx guidance on the growth side, especially for you guys for this year?

It is relatively new, but the answer to the second question may be twofold that we've spent a lot of CapEx gearing up ready for this expansion for the reactivation of ICE facilities. And I think we'll be pretty much complete by the end of this year or early next year. So the ongoing maintenance CapEx will come into play on a normal basis, but we won't have any unusual start-up CapEx as we've had over the last 1.5 years.

Okay. Great. And then one more for me, if I may. I know you talked about the ISAP program. You got the 2-year contract and even though there's been some mix shift which is helping maintain revenue under that contract. But we go back 5 years or so ago, and I think there was some thought out there that the numbers under the ISAP program could hit well in excess of where we are today. I mean it's been pretty flat year now for probably, what, 2 years. And just trying to get your feel for us, is this just not a focus of ICE at this point in time, it's more on the detention side. Or is there something else going on in the ISAP contract where it just maybe in the near future, we'll start to see maybe numbers go up to where they were a couple of years ago for you guys up to that almost 400,000 level?

I think in general, the focus of ICE has been on increasing detention capacity. But there's a lot of policy shifts as to who will be subject to immigration enforcement. So at a later point, maybe next year, we could see ISAP increase dramatically. But right now, the focus is on increasing detention capacity.

The next question comes from Brendan McCarthy.

Great. Just a follow-up on the electronic monitoring side. Is it still the expectation that ICE is going to reach 100,000 operational beds before turning to ISAP? Is that still a reasonable expectation?

I think so for the most part. The focus within the agency and throughout the agency is to try to stand up approximately 100,000 beds. They're at a census presently about 68,000 and we have of that 24,000 in our facilities. So they have another 30,000 or so more beds to go. But within that process, I think there's an objective of consolidation into fewer larger facilities down from their present 225 facilities that they use nationwide. So they want to be in fewer larger facilities with a normal detention capacity of about 100,000, not including maybe a lot of these little jails, which are just feeder locations to the main facilities that they want to have.

Understood. That makes sense. And on the skip tracing contract, I know you mentioned there was not much of an impact in Q2 from the lapse in ICE funding. Is $60 million still a reasonable annualized revenue estimate from that contract? Has that changed at all? And what are you seeing regarding trends in that program?

We do expect to receive another contract this quarter, possibly this month. And I think that number you quoted is correct.

Last question for me, just on the potential facility sales. I know you mentioned ICE has initiated the procurement process for involving 4 facilities. I guess do you anticipate a potential sale lining up with the timing of a renewal, which it looks like a few of those facilities are up for renewal this fall. Just curious if you think the timing might line up there.

Well, they're not being renewed. They're being recompeted. These are -- this is a new procurement to establish a new contract term for those facilities. And we're hoping the contract term is a long contract term. And I think there's a mutual interest to complete this process by the end of this quarter. Hopefully, although it may spill into the next quarter. So that means it's -- as we understand it, a 2-step process, there was originally an RFI, a request for information in which potential interested parties could submit their proposal to indicate that they had such a facility in that particular location, there's 4 different locations.

The next step of the process -- and that first step has been completed. The next step is to validate where the facility is and the ability to activate it within 30 days, we think that process will -- can take place fairly quickly. And the last step of the process is pricing on that existing facility for the next contract term. And as I said earlier, I think there's a mutual interest by us and ICE that this process hopefully be completed by the end of this quarter, but it could spill into the fourth quarter.

The next question comes from Greg Gibas with Northland Securities.

Recognize that there are no assurances of asset sales, but post asset sales, could you maybe discuss how you're thinking about capital allocation and what your target net leverage would be? And perhaps just thoughts on buybacks versus any potential considerations for a 1031 exchange following any sale?

Greg, this is Shayn and thanks for the question. So post any asset sales, we do have certain restrictions in our current debt agreements, how those proceeds have to be applied. But once we were able to satisfy those restrictions in the indenture and in the credit agreement, we would absolutely look to deploy as much capital as you can to returning it back to shareholders. So I think it's a combination of both debt repayment and ultimately using that money to get either active with share repurchases or other forms of remuneration back to our shareholder investors.

Got it. That's helpful. And secondly, as it relates to ICE's recent push to utilize monitoring services for patient immigrants. Would you expect that initiative to notably change the populations under the ISAP program. Similarly, I was just -- we've seen that continued technology mix shift. Wondering if you could maybe quantify it in a way like what would be the impact of moving one individual from SmartLink to ankle monitoring?

Well, there is a corresponding decline in the SmartLink app to individuals on the ankle monitors. And the app is far less expensive than the ankle monitors. And because of new policy shifts as to who will be subject to this immigration enforcement. Like as you mentioned, Haitians, we could see a significant increase in the number of people in the ISAP program. And most of them, we believe, would be placed under the ankle monitoring supervision technique.

The next question comes from Kirk Ludtke with Raymond James.

Maybe a follow-up on the 100,000-bed target. I know we've talked on past calls about ICE's efforts to build their own facilities. How many beds do you think might come from that effort?

I don't think they're building their own facilities per se. Well, they may be -- of the warehouse program, I think of the 11 that they purchase, they may be trying to activate maybe 2 or 3, that would be maybe 5,000 beds.

So the vast majority is going to have to come from other places I guess?

It's really a reactivation of what were formerly BOP facilities that were discontinued under the Obama administration. And these are generally high security facilities, single cell facilities that are very desirable by ICE in expanding their detention capacity.

Got it. That's helpful. And is there any time limits on the funding? Could this effort -- does this effort have to happen before the end of this administration?

No, I believe ICE has maybe approximately $36 billion left for the buildup of new facilities. And I believe that, that money is allocated through the President's current term.

So they've got some time for this...

Yes, about 3 years, 3 years.

Yes. Got it. And then you mentioned geographic considerations. Can you elaborate on what they might be looking for?

What that means? Well, it's the difference between a cost of a facility in Oklahoma versus a cost of a facility in Colorado or Washington or different states. Just like a house in Florida is a different cost than one in Mississippi. The appraisal technique that's being used is the replacement cost of that facility in that location.

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

Thank you for joining us today. We look forward to addressing you in the next quarter. Thank you.

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

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

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

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's first quarter 2026 earnings results. This morning, we will discuss our first quarter results as well as our outlook. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com.

Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure that we issued this morning.

Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements. regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports.

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

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

Our diversified business units delivered strong financial and operational performance during the first quarter of 2026. Our better-than-expected performance reflects significant revenue growth from the contracts that we entered into throughout 2025. As we have previously discussed in 2025, we were awarded new or expanded contracts that represent up to approximately $520 million in new incremental annual revenues, which represents the largest amount of new business we have won in a single year in our company's history.

In our Secure Services segment, we entered into new contracts to house ICE's at four facilities, totaling approximately 6,000 beds, including three previously idle company-owned facilities in New Jersey, Michigan, Georgia and a management services contract in Florida.

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

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

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

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

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

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

Importantly, in 2025, we also secured a new 2-year contract for the ISAP 5 program. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the non-detained docket. The program relies on several forms of monitoring, including GPS, ankle bracelets or risk worn devices that provide real-time tracking as well as the SmartLink phone app, which relies on facial recognition, Voice ID and GPS to confirm a person's location during predetermined check-ins.

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

We also continue to experience a steady increase in the number of ISAP participants assigned to case management services, which involve staff interaction and monitoring for approximately 111,000 individuals currently. If this trend continues, the technology and case management mix shift would continue to increase the revenues and earnings generated under the ISAP contract even if overall volume remains constant. Thus we continue to be optimistic about the importance and growth potential of the ISAP 5 contract, we believe that is well positioned to scale up to higher overall accounts.

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

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

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

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

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

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

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

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

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

Quarterly revenues for our managed-only contracts increased by approximately $33 million or 22% from the prior first year's quarter. This increase was driven by the joint venture agreement for the management of the North Florida ICE detention facility as well as certain transportation revenue increases that are reported in this segment.

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

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

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

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

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

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

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

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

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

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

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

There will also be a need to renegotiate select contracts so as to eliminate the ownership costs such as depreciation in property Texas embedded in our present contracts in the event of ICE ownership. At this time, there is no definitive agreement in place with ICE and no precise time line for the closing of any such transactions. And of course, we can give no assurances that these transactions will take place at all. But if select facilities are sold to ICE, GEO would use the proceeds to reduce debt and continued stock repurchases as well as other corporate purchase purposes. The potential sale of multiple facilities to ICE could represent a significant liquidity and shareholder value enhancing the event for our company.

While the exact timing of government actions is always difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance our long-term value for our shareholders. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities and our current and expected future growth, we believe that our stock is significantly undervalued and offers a very attractive investment opportunity.

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

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

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

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

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

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

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

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

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

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

You're welcome. Thank you for joining us.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The $45 billion is at their discussion.

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

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

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

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

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

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

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

This morning, we will discuss our fourth quarter and full year results as well as our outlook. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com.

Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Quarterly revenues for our managed-only contracts increased by approximately $26 million or 17% from the prior year's fourth quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida detention facility as well as certain transportation revenue increases that are reported in this segment. Quarterly revenues for our reentry services increased by approximately 3%, while quarterly revenues for our nonresidential services was largely unchanged compared to the prior year's fourth quarter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Matthew Erdner with JonesTrading.

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

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

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

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

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

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

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

The next question comes from Greg Gibas with Northland Securities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Kirk Ludtke with Imperial Capital.

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

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

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

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

Are you speaking of our facilities or the warehouses?

The warehouses, just managing facilities.

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

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

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

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

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

Good day, and welcome to The GEO Group Third Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded.

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

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group's Third Quarter 2025 Earnings Results. With us today are George Zoley, Executive Chairman of the Board; Dave Donahue, Chief Executive Officer; and Mark Suchinski, Chief Financial Officer. This morning, we will discuss our third quarter results as well as our outlook. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com.

Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters.

These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Jason Weaver with JonesTrading.

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

Yes.

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

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

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

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

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

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

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

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

The next question comes from Greg Gibas with Northland Securities.

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

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

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

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

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

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

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

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

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

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

The next question comes from Raj Sharma with Texas Capital.

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

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

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

Are you speaking regarding ISAP? Or...

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

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

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

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

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

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

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

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

The next question comes from Brendan McCarthy with Sidoti.

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

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

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

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

The next question comes from Kurt Ludtke with Imperial Capital.

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

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

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

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

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

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

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

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

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

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

Yes. Will that mean significant CapEx next year?

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

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

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

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

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

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