The GEO Group Reports First Quarter 2021 Results and Updates Full Year 2021 Guidance
The GEO Group, Inc. (NYSE: GEO) announced its financial results for Q1 2021, reporting total revenues of $576.4 million and a net income of $50.5 million, or $0.41 per diluted share. Notable gains included $13.3 million from real estate assets and $3.0 million from debt extinguishment. However, the company faces challenges with contract non-renewals due to Executive Orders affecting the DOJ's use of private detention services, impacting approximately 12% and 15% of total revenues from BOP and USMS contracts. Updated financial guidance for 2021 was also provided.
- Total revenues increased to $576.4 million.
- Net income rose to $50.5 million, up from $25.2 million year-over-year.
- Gains of $13.3 million from real estate and $3.0 million from debt extinguishment bolster financials.
- Non-renewal of contracts with BOP and USMS may negatively impact revenues.
- 12% of total revenues currently come from BOP contracts, which are at risk.
- USMS contract non-renewals could further strain revenue streams.
The GEO Group, Inc. (NYSE: GEO) (“GEO”), a fully integrated equity real estate investment trust (“REIT”) and a leading provider of enhanced in-custody rehabilitation, post-release support, and community-based programs, reported today its financial results for the first quarter 2021 and updated its financial guidance for the full-year 2021.
First Quarter 2021 Highlights
-
Total revenues of
$576.4 million -
Net Income Attributable to GEO of
$50.5 million or$0.41 per diluted share -
1Q21 results reflect
$13.3 million pre-tax gain on real estate assets and$3.0 million pre-tax gain on the extinguishment of debt -
Adjusted Net Income of
$0.28 per diluted share -
Net Operating Income of
$152.3 million -
Normalized FFO of
$0.44 per diluted share -
AFFO of
$0.60 per diluted share
We reported first quarter 2021 net income attributable to GEO of
We reported first quarter 2021 Normalized Funds From Operations (“Normalized FFO”) of
George C. Zoley, Chairman and Chief Executive Officer of GEO, said, “While we continue to face operational and financial challenges associated with COVID-19, we remain pleased with the performance of our diversified business units. We believe that our company remains resilient and is supported by long-term real estate assets and contracts entailing essential government services. We recognize that heightened political rhetoric has created concerns regarding our future access to financing, and recent federal policy actions have resulted in the non-renewal of some of our contracts. To address these challenges, we are focused on debt reduction, deleveraging, and internally funding growth, which we believe is in the best interests of our shareholders as we focus on addressing our debt maturities and enhancing long-term shareholder value.”
Recent Developments
On January 26, 2021, President Biden signed an executive order directing the United States Attorney General not to renew U.S. Department of Justice (“DOJ”) contracts with privately operated criminal detention facilities, as consistent with applicable law (the “Executive Order”). Two agencies of the DOJ, the Federal Bureau of Prisons (“BOP”) and U.S. Marshals Service (“USMS”), utilize our services. The BOP houses inmates who have been convicted of federal crimes, and the USMS is generally responsible for detainees who are awaiting trial or sentencing in U.S. federal courts.
As we have previously disclosed, prior to the signing of the Executive Order, the BOP had already decided to not renew contracts for three of our secure services facilities, one of which expired at the end of January 2021 and two of which expired at the end of March 2021. During the first quarter 2021, we were notified by the BOP that the contract for our company-owned Great Plains Correctional Facility in Oklahoma will not be renewed when the current contract period expires on May 31, 2021. We were also notified that the BOP has decided to end its contract with the county-owned and managed Reeves County Detention Center I & II effective May 10, 2021, and as a result, our management consulting contract with Reeves County, Texas for this facility has also ended. We expect that our remaining secure services contracts with the BOP will not be renewed when the current contract periods expire between the end of November 2021 and the end of September 2022. For the three months ended March 31, 2021, our secure services contracts with the BOP accounted for approximately
Unlike the BOP, the USMS does not own and operate its detention facilities. The USMS contracts for the use of facilities, which are generally located in areas near federal courthouses, primarily through intergovernmental service agreements, and to a lesser extent, direct contracts. We are cooperating with the USMS in assessing various alternatives on how to comply with the Executive Order. During the first quarter 2021, we were notified by the USMS that it would not renew the contract for our company-owned Queens Detention Facility in New York, which ended on March 31, 2021. We currently operate four additional detention facilities that are under direct contracts and eight detention facilities that are under intergovernmental agreements with the USMS. The four direct contracts are up for renewal at various times over the next few years, including two in late 2021. For the three months ended March 31, 2021, the direct contracts and intergovernmental agreements with the USMS accounted for approximately
President Biden’s Administration may implement additional executive orders or directives relating to federal criminal justice policies and immigration policies which may impact the federal government’s use of public-private partnerships with respect to correctional and detention needs, including with respect to our contracts, and/or may impact the budget and spending priorities of federal agencies, including the BOP, USMS, and U.S. Immigration and Customs Enforcement.
Updated 2021 Financial Guidance
FAQ
What were GEO's financial results for Q1 2021?
How does the Executive Order affect GEO's contracts?
What is the future outlook for GEO after the Q1 2021 results?
