The GEO Group Reports Fourth Quarter and Full Year 2023 Results
- Strong financial performance in 2023 with total revenues of $2.41 billion
- Reduction of total net debt by $197.0 million in FY23
- Initial financial guidance for 2024 with expected net income of $110-125 million and adjusted EBITDA of $485-515 million
- Consideration of uncertainties in federal government appropriations discussions and budgetary pressures in 2024 guidance
- Year-over-year decrease in net income from $171.7 million in 2022 to $113.8 million in 2023
- Reduction in adjusted EBITDA from $540.0 million in 2022 to $507.2 million in 2023
- Decrease in total revenues from $620.7 million in Q4 2022 to $608.3 million in Q4 2023
Insights
The GEO Group's financial results for the fourth quarter and full year 2023 indicate a mixed financial performance. While the company has managed to reduce its total net debt significantly, there has been a noticeable decline in net income year-over-year, from $171.7 million in 2022 to $113.8 million in 2023. This decline can be attributed to an increase in net interest expense, which is a direct consequence of the company's transactions in August 2022 to address its outstanding debt and the impact of rising interest rates.
From an investor's perspective, the company's efforts to deleverage its balance sheet is a positive sign, as it may improve financial stability and potentially lead to future capital returns to shareholders. However, the decrease in net income and Adjusted EBITDA raises concerns about the company's profitability and operational efficiency. The provided financial guidance for 2024, with an expected net income range of $110 million to $125 million, suggests management's anticipation of a stable to slight improvement in financial performance, albeit with caution due to potential budgetary pressures from U.S. Immigration and Customs Enforcement (ICE) and uncertainty in federal government appropriations.
The GEO Group operates in a niche market providing services to secure facilities and processing centers, which is heavily reliant on government contracts and policies. The company's diversified services platform is claimed to be a competitive advantage, yet the industry is facing budgetary constraints, particularly from ICE, which is a significant revenue source for GEO. The market should note that the guidance for 2024 incorporates a range of assumptions that reflect the uncertainty of government appropriations and the potential impact on ICE Processing Centers and the ISAP contract.
For stakeholders, the mention of 9,000 idle Secure Services beds and the potential for new contract wins could represent untapped growth opportunities, but these are not included in the 2024 guidance, indicating a conservative approach by the company. The market's reaction to this news may hinge on whether investors believe GEO can secure additional contracts or reactivate idle facilities to drive future growth, in the face of the current budgetary and policy uncertainties.
Examining The GEO Group's financial results within the broader economic context, the impact of higher interest rates on the company's net interest expense is a reflection of the current monetary policy environment aimed at controlling inflation. This has a direct effect on companies with significant debt loads, such as GEO, which has to navigate these costs while attempting to maintain profitability.
Furthermore, the company's exposure to government spending and policy decisions, especially regarding immigration and corrections, highlights the sensitivity of its revenue streams to political and fiscal changes. The guidance provided for 2024 suggests that the company is preparing for a range of scenarios, which is prudent given the unpredictable nature of government appropriations. This level of fiscal prudence is essential for long-term stability but may constrain short-term growth prospects.
Full Year 2023 Highlights
-
Total revenues of
$2.41 billion -
Net Income of
$113.8 million -
Adjusted EBITDA of
$507.2 million -
Reduced Total Net Debt by Approximately
$197.0 million $1.78 billion
For the full year 2023, we reported total revenues of
Fourth Quarter 2023 Highlights
-
Total revenues of
$608.3 million -
Net Income of
$31.8 million -
Adjusted EBITDA of
$129.0 million
For the fourth quarter 2023, we reported net income of
George C. Zoley, Executive Chairman of GEO, said, “Our company delivered strong operational and financial performance in 2023, resulting in the second-best year in our company’s 40-year history. We believe that the unparalleled scope of our diversified services platform, which allows us to offer a full spectrum of innovative solutions to our government agency partners, gives GEO a unique competitive advantage to capture future quality growth opportunities. We are also pleased with the substantial progress we made in 2023 towards our objective of reducing our net debt, deleveraging our balance sheet, and positioning GEO to explore options to return capital to shareholders in the future. We believe that our disciplined allocation of capital to reduce debt, along with our demonstrated track record delivering strong and predictable annual cash flows, will meaningfully enhance value for our shareholders over time.”
Financial Guidance
Today, we issued our initial financial guidance for 2024. For the full year 2024, we expect Net Income to be in a range of
We believe that
The midpoint of our guidance range assumes stable populations across our ICE Processing Centers and stable participant counts under the federal government’s Intensive Supervision and Appearance Program (“ISAP”) contract. On the low end of our range, our guidance assumes that federal government appropriations discussions continue to be delayed throughout the year and that ongoing budgetary pressures result in some moderate decreased utilization of both ICE Processing Centers and the ISAP contract. On the high end of our range, our guidance assumes only some moderate increases in the utilization of ICE Processing Centers and the ISAP contract should additional funding be appropriated for ICE during this federal fiscal year.
Additionally, our initial 2024 guidance does not include the potential reactivation of any of our remaining idle Secure Services facilities, which total approximately 9,000 beds, or any potential new contract wins by our diversified business segments.
For the first quarter of 2024, we expect Net Income to be in a range of
Conference Call Information
We have scheduled a conference call and webcast for today at 11:00 AM (Eastern Time) to discuss our fourth quarter and full year 2023 financial results as well as our outlook. The call-in number for the
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains reconciliation tables of Net Income Attributable to GEO to Adjusted Net Income, and Net Income to EBITDA and Adjusted EBITDA, along with supplemental financial and operational information on GEO’s business and other important operating metrics. The reconciliation tables are also presented herein. Please see the section below titled “Note to Reconciliation Tables and Supplemental Disclosure - Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines these supplemental Non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures. GEO’s Reconciliation Tables can be found herein and in GEO’s Supplemental Information available on GEO’s investor webpage at investors.geogroup.com.
Note to Reconciliation Tables and Supplemental Disclosure –
Important Information on GEO's Non-GAAP Financial Measures
Adjusted Net Income, EBITDA, and Adjusted EBITDA are non-GAAP financial measures that are presented as supplemental disclosures. GEO has presented herein certain forward-looking statements about GEO's future financial performance that include non-GAAP financial measures, including Net Debt, Net Leverage, and Adjusted EBITDA. The determination of the amounts that are included or excluded from these non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period.
While we have provided a high level reconciliation for the guidance ranges for full year 2024, we are unable to present a more detailed quantitative reconciliation of the forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because management cannot reliably predict all of the necessary components of such GAAP measures. The quantitative reconciliation of the forward-looking non-GAAP financial measures will be provided for completed annual and quarterly periods, as applicable, calculated in a consistent manner with the quantitative reconciliation of non-GAAP financial measures previously reported for completed annual and quarterly periods.
Net Debt is defined as gross principal debt less cash from restricted subsidiaries. Net Leverage is defined as Net Debt divided by Adjusted EBITDA.
EBITDA is defined as net income adjusted by adding provisions for income tax, interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (gain)/loss on asset divestitures, pre-tax, net loss attributable to non-controlling interests, stock-based compensation expenses, pre-tax, transaction related expenses, pre-tax, one-time employee restructuring expenses, pre-tax, other non-cash revenue and expenses, pre-tax, and certain other adjustments as defined from time to time.
Given the nature of our business as a real estate owner and operator, we believe that EBITDA and Adjusted EBITDA are helpful to investors as measures of our operational performance because they provide an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures, and to fund other cash needs or reinvest cash into our business.
We believe that by removing the impact of our asset base (primarily depreciation and amortization) and excluding certain non-cash charges, amounts spent on interest and taxes, and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide our investors with performance measures that reflect the impact to operations from trends in occupancy rates, per diem rates and operating costs, providing a perspective not immediately apparent from net income.
The adjustments we make to derive the non-GAAP measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in income from continuing operations and which we do not consider to be the fundamental attributes or primary drivers of our business plan and they do not affect our overall long-term operating performance.
EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by our management and provide consistency in our financial reporting, facilitate internal and external comparisons of our historical operating performance and our business units and provide continuity to investors for comparability purposes.
Adjusted Net Income is defined as net income attributable to GEO adjusted for certain items which by their nature are not comparable from period to period or that tend to obscure GEO’s actual operating performance, including for the periods presented (gain)/loss on asset divestitures, pre-tax, (gain)/loss on the extinguishment of debt, pre-tax, transaction related expenses, pre-tax, one-time employee restructuring expense, pre-tax, and tax effect of adjustments to net income attributable to GEO.
Safe-Harbor Statement
This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially and adversely affect actual results, including statements regarding GEO’s financial guidance for the full year and first quarter of 2024, statements regarding GEO’s efforts to market its current idle facilities, GEO’s focus on reducing net debt, deleveraging its balance sheet, and positioning itself to explore options to return capital to shareholders, and GEO’s assumptions regarding the utilization of ICE Processing Centers and the ISAP contract during 2024. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” or “continue” or the negative of such words and similar expressions. Risks and uncertainties that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to: (1) GEO’s ability to meet its financial guidance for 2024 given the various risks to which its business is exposed; (2) GEO’s ability to deleverage and repay, refinance or otherwise address its debt maturities in an amount and on terms commercially acceptable to GEO, and on the timeline it expects or at all; (3) GEO’s ability to identify and successfully complete any potential sales of company-owned assets and businesses on commercially advantageous terms on a timely basis, or at all; (4) changes in federal and state government policy, orders, directives, legislation and regulations that affect public-private partnerships with respect to secure, correctional and detention facilities, processing centers and reentry centers, including the timing and scope of implementation of President Biden's Executive Order directing the
Fourth quarter and full year 2023 financial tables to follow:
Condensed Consolidated Balance Sheets* |
||||||
(Unaudited) |
||||||
| As of | As of | |||||
| December 31, 2023 |
December 31, 2022 |
|||||
| (unaudited) | (unaudited) | |||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 93,971 |
$ | 95,073 |
||
| Accounts receivable, less allowance for doubtful accounts | 390,023 |
416,399 |
||||
| Prepaid expenses and other current assets | 44,511 |
43,536 |
||||
| Total current assets | $ | 528,505 |
$ | 555,008 |
||
| Restricted Cash and Investments | 135,968 |
111,691 |
||||
| Property and Equipment, Net | 1,944,278 |
2,002,021 |
||||
| Operating Lease Right-of-Use Assets, Net | 102,204 |
90,950 |
||||
| Assets Held for Sale | - |
480 |
||||
| Deferred Income Tax Assets | 8,551 |
8,005 |
||||
| Intangible Assets, Net (including goodwill) | 891,085 |
902,887 |
||||
| Other Non-Current Assets | 85,815 |
89,341 |
||||
| Total Assets | $ | 3,696,406 |
$ | 3,760,383 |
||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Accounts payable | $ | 64,447 |
$ | 79,312 |
||
| Accrued payroll and related taxes | 64,436 |
53,225 |
||||
| Accrued expenses and other current liabilities | 219,159 |
237,369 |
||||
| Operating lease liabilities, current portion | 24,640 |
22,584 |
||||
| Current portion of finance lease obligations, and long-term debt | 55,882 |
44,722 |
||||
| Total current liabilities | $ | 428,564 |
$ | 437,212 |
||
| Deferred Income Tax Liabilities | 79,607 |
75,849 |
||||
| Other Non-Current Liabilities | 83,643 |
75,288 |
||||
| Operating Lease Liabilities | 82,114 |
73,801 |
||||
| Long-Term Debt | 1,725,502 |
1,933,145 |
||||
| Total Shareholders' Equity |
1,296,976 |
1,165,088 |
||||
| Total Liabilities and Shareholders' Equity | $ | 3,696,406 |
$ | 3,760,383 |
||
| * all figures in '000s | ||||||
Condensed Consolidated Statements of Operations* |
|||||||||||||||
(Unaudited) |
|||||||||||||||
| Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | ||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
| Revenues | $ | 608,283 |
|
$ | 620,682 |
|
$ | 2,413,167 |
|
$ | 2,376,727 |
|
|||
| Operating expenses | 433,042 |
|
430,565 |
|
1,735,328 |
|
1,662,885 |
|
|||||||
| Depreciation and amortization | 30,996 |
|
32,641 |
|
125,784 |
|
132,925 |
|
|||||||
| General and administrative expenses | 51,584 |
|
49,094 |
|
190,766 |
|
196,972 |
|
|||||||
| Operating income | 92,661 |
|
108,382 |
|
361,289 |
|
383,945 |
|
|||||||
| Interest income | 4,006 |
|
530 |
|
7,792 |
|
15,988 |
|
|||||||
| Interest expense | (53,211 |
) |
(53,166 |
) |
(218,292 |
) |
(164,550 |
) |
|||||||
| Loss on extinguishment of debt | (6,687 |
) |
(408 |
) |
(8,532 |
) |
(37,895 |
) |
|||||||
| Gain on asset divestitures | 1,243 |
|
- |
|
4,691 |
|
32,332 |
|
|||||||
| Income before income taxes and equity in earnings of affiliates | 38,012 |
|
55,338 |
|
146,948 |
|
229,820 |
|
|||||||
| Provision for income taxes | 7,601 |
|
14,793 |
|
37,637 |
|
62,899 |
|
|||||||
| Equity in earnings of affiliates, net of income tax provision | 1,413 |
|
984 |
|
4,534 |
|
4,771 |
|
|||||||
| Net income | 31,824 |
|
41,529 |
|
113,845 |
|
171,692 |
|
|||||||
| Less: Net loss attributable to noncontrolling interests | 70 |
|
2 |
|
142 |
|
121 |
|
|||||||
| Net income attributable to The GEO Group, Inc. | $ | 31,894 |
|
$ | 41,531 |
|
$ | 113,987 |
|
$ | 171,813 |
|
|||
| Weighted Average Common Shares Outstanding: | |||||||||||||||
| Basic | 122,081 |
|
121,165 |
|
121,908 |
|
121,040 |
|
|||||||
| Diluted | 125,224 |
|
124,545 |
|
123,698 |
|
122,281 |
|
|||||||
| Net income per Common Share Attributable to The GEO Group, Inc.** : | |||||||||||||||
| Basic: | |||||||||||||||
| Net income per share — basic | $ | 0.22 |
|
$ | 0.29 |
|
$ | 0.78 |
|
$ | 1.18 |
|
|||
| Diluted: | |||||||||||||||
| Net income per share — diluted | $ | 0.21 |
|
$ | 0.28 |
|
$ | 0.77 |
|
$ | 1.17 |
|
|||
| * All figures in '000s, except per share data |
| ** In accordance with |
Reconciliation of Net Income to EBITDA and Adjusted EBITDA, |
|||||||||||||||
and Net Income Attributable to GEO to Adjusted Net Income* |
|||||||||||||||
(Unaudited) |
|||||||||||||||
| Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | ||||||||||||
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||||||||
| Net Income | $ | 31,824 |
|
$ | 41,529 |
|
$ | 113,845 |
|
$ | 171,692 |
|
|||
| Add: | |||||||||||||||
| Income tax provision ** | 7,889 |
|
15,070 |
|
38,505 |
|
63,639 |
|
|||||||
| Interest expense, net of interest income *** | 55,892 |
|
53,045 |
|
219,032 |
|
186,457 |
|
|||||||
| Depreciation and amortization | 30,996 |
|
32,641 |
|
125,784 |
|
132,925 |
|
|||||||
| EBITDA | $ | 126,601 |
|
$ | 142,285 |
|
$ | 497,166 |
|
$ | 554,713 |
|
|||
| Add (Subtract): | |||||||||||||||
| Gain on asset divestitures, pre-tax | (1,243 |
) |
- |
|
(4,691 |
) |
(32,332 |
) |
|||||||
| Net loss attributable to noncontrolling interests | 70 |
|
2 |
|
142 |
|
121 |
|
|||||||
| Stock based compensation expenses, pre-tax | 3,013 |
|
3,194 |
|
15,065 |
|
16,204 |
|
|||||||
| Transaction related expenses, pre-tax | - |
|
- |
|
- |
|
1,322 |
|
|||||||
| One-time employee restructuring expenses, pre-tax | 814 |
|
- |
|
814 |
|
- |
|
|||||||
| Other non-cash revenue & expenses, pre-tax | (301 |
) |
- |
|
(1,319 |
) |
- |
|
|||||||
| Adjusted EBITDA | $ | 128,954 |
|
$ | 145,481 |
|
$ | 507,177 |
|
$ | 540,028 |
|
|||
| Net Income attributable to GEO | $ | 31,894 |
|
$ | 41,531 |
|
$ | 113,987 |
|
$ | 171,813 |
|
|||
| Add (Subtract): | |||||||||||||||
| Gain on asset divestitures, pre-tax | (1,243 |
) |
- |
|
(4,691 |
) |
(32,959 |
) |
|||||||
| Loss on extinguishment of debt, pre-tax | 6,687 |
|
408 |
|
8,532 |
|
37,895 |
|
|||||||
| Transaction related expenses, pre-tax | - |
|
- |
|
- |
|
1,322 |
|
|||||||
| One-time employee restructuring expenses, pre-tax | 814 |
|
- |
|
814 |
|
- |
|
|||||||
| Tax effect of adjustment to net income attributable to GEO (1) | (1,574 |
) |
(103 |
) |
(1,171 |
) |
(6,875 |
) |
|||||||
| Adjusted Net Income | $ | 36,578 |
|
$ | 41,836 |
|
$ | 117,471 |
|
$ | 171,196 |
|
|||
| Weighted average common shares outstanding - Diluted | 125,224 |
|
124,545 |
|
123,698 |
|
122,281 |
|
|||||||
| Adjusted Net Income per Diluted share | 0.29 |
|
0.34 |
|
0.95 |
|
1.40 |
|
|||||||
| * all figures in '000s, except per share data |
| ** including income tax provision on equity in earnings of affiliates |
| *** includes (gain)/loss on extinguishment of debt |
| (1) Tax adjustment related to gain on asset divestitures, one-time employee restructuring expenses and loss on extinguishment of debt. |
2024 Outlook/Reconciliation (1) |
||||||||
(In thousands, except per share data) |
||||||||
(Unaudited) |
||||||||
|
||||||||
| FY 2024 | ||||||||
| Net Income Attributable to GEO | $ |
110,000 |
|
to |
$ |
125,000 |
|
|
| Net Interest Expense |
|
190,000 |
|
|
|
200,000 |
|
|
| Income Taxes (including income tax provision on equity in earnings of affiliates) |
|
44,000 |
|
|
|
48,000 |
|
|
| Depreciation and Amortization |
|
126,000 |
|
|
|
127,000 |
|
|
| Non-Cash Stock Based Compensation |
|
16,000 |
|
|
|
16,000 |
|
|
| Other Non-Cash |
|
(1,000 |
) |
|
|
(1,000 |
) |
|
| Adjusted EBITDA | $ |
485,000 |
|
to |
$ |
515,000 |
|
|
|
||||||||
| Net Income Attributable to GEO Per Diluted Share | $ |
0.87 |
|
to |
$ |
0.99 |
|
|
| Weighted Average Common Shares Outstanding-Diluted |
|
126,500 |
|
to |
|
126,500 |
|
|
|
||||||||
|
||||||||
|
||||||||
| CAPEX |
|
|||||||
| Growth |
|
2,000 |
|
to |
|
3,000 |
|
|
| Technology |
|
20,000 |
|
to |
|
25,000 |
|
|
| Facility Maintenance |
|
48,000 |
|
to |
|
52,000 |
|
|
| Capital Expenditures |
|
70,000 |
|
to |
|
80,000 |
|
|
|
||||||||
| Total Debt, Net | $ |
1,620,000 |
|
|
$ |
1,580,000 |
|
|
| Total Leverage, Net |
|
3.3 |
|
|
|
3.1 |
|
|
(1) Total Net Leverage is calculated using the midpoint of Adjusted EBITDA guidance range.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240214653150/en/
Pablo E. Paez, (866) 301 4436
Executive Vice President, Corporate Relations
Source: The GEO Group, Inc.
FAQ
What were the total revenues reported for full year 2023 by GEO?
What was the net income for full year 2023 reported by GEO?
How much did GEO reduce its total net debt by in FY23?
What is the initial financial guidance for 2024 provided by GEO?
What factors are considered in GEO's 2024 financial guidance?
