2023 vs. 2025 Earnings Calls: Contradictions Emerge on ICE Population Growth, Occupancy Projections, and Electronic Monitoring Priorities

Date of Call: None provided

Financials Results

• Revenue: $483.7M, up 4% YOY (up 7% excluding two contract/lease expirations)
• EPS: $0.14 per share (adjusted), up from $0.08 prior year; GAAP $0.12 per share vs $0.58 prior year
• Operating Margin: 21.3% (Safety & Community NOI margin), up from 19.2% in prior year; pre-pandemic ~25% target

Guidance:

• Adjusted EPS for 2023 expected $0.54–$0.60 (raised from $0.52–$0.59)
• Normalized FFO per share expected $1.40–$1.46 (raised from $1.37–$1.45)
• AFFO expected $1.34–$1.40 per share ($153M–$160.8M)
• Full-year capex $66M–$69M (maintenance $61M–$63M)
• Normalized effective tax rate 28%–29%; G&A +3%–4% vs 2022
• Guidance assumes sustained higher federal/state populations and excludes new contract awards

Business Commentary:

• Revenue and Population Increases:
• CoreCivic reported revenue of $483.7 million in Q3 2023, which was a 4% increase compared with the prior year quarter.
• The increase was driven by strong occupancy and revenue growth in their Core Safety and Community portfolios, despite the expiration of contracts with the Federal Bureau of Prisons and the Oklahoma Department of Corrections.
• This growth was primarily due to a significant increase in ICE detention populations, which rose 84% since May, with ICE detention populations within CoreCivic's facilities increasing from 4,729 to 8,329 since May 11.

• Occupancy in the Safety segment increased from 70% to 72.6%, and in the Community segment from 57.5% to 62.8%.
• This improvement was attributed to successful staffing strategies and investments in existing staff, which reduced temporary incentives and improved hiring and retention rates.

• The increase in occupancy in the Safety segment was largely due to higher detention populations from Immigration and Customs Enforcement (ICE), while the Community segment benefited from reduced operating expenses and higher per diem increases.

• Capital Allocation and Debt Reduction:

• CoreCivic reduced interest expense by $10.1 million during the 9 months ended September 30, 2023, which was part of its debt reduction strategy.
• The company has reduced leverage to 2.8x, approaching its targeted range of 2.25x to 2.75x.
• This was achieved by significant debt repayment, including $137.7 million repaid year-to-date through September, and strategic capital allocation focused on debt reduction and opportunistic share buybacks.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • 'Revenue of $483.7M, up 4% YOY'; 'normalized FFO per share $0.35' and full-year FFO guidance raised to $1.40–$1.46; management: 'the macro environment is improving' and 'we remain optimistic'; leverage down (net debt/EBITDA 2.8x) and expanded credit facility with no maturities until April 2026.

Q&A:

• Question from Joseph Gomes (NOBLE Capital): Some of the secured services revenue growth is from population increases and some from per diems. Could you parse out relative contribution between population increases and per diem increases?
  Response: Most of the increase was driven by population growth (particularly federal); state per-diem increases effective July 1 also contributed but to a lesser extent.

• Question from Joseph Gomes (NOBLE Capital): Since the end of September ICE populations reportedly rose another ~15%; are you seeing similar increases and, with facilities now above minimum guarantees, should we expect faster revenue growth if sustained?
  Response: Yes — system ICE population rose from ~8.2k (end Jul) to ~11.8k (as of yesterday); most facilities exceeded guarantees in Q3, so sustained increases should produce incremental revenue.

• Question from Joseph Gomes (NOBLE Capital): Regarding alternative detention and the House proposal covering millions on the non-detained docket, could you handle a significant portion or would you need to ramp heavily?
  Response: Yes — CoreCivic is capable and has prepared (responded to ICE's RFI); program is early and contingent on funding, and scaling would likely involve multiple contractors.

• Question from Joseph Gomes (NOBLE Capital): Nice win with Hinds County—more to come and opportunities in the pipeline?
  Response: Yes — increased interest from counties and states; pipeline active with typical initial engagements around 200–400 beds.

• Question from Kirk Ludtke (Imperial Capital): Would the RFI/RFP be in parallel with ISAP or replace it?
  Response: Too early to tell; ICE is still defining the mission — it could be parallel or replace ISAP, and the program's scale suggests multiple contractors.

• Question from Kirk Ludtke (Imperial Capital): Aside from you and the primary competitor, who would be qualified to do this work?
  Response: Unclear who submitted; likely a mix of public companies, defense/tech firms, private firms and non-profits — multiple vendors could provide different services.

• Question from Kirk Ludtke (Imperial Capital): You mentioned discussions with a number of states — how many beds are in play?
  Response: Meaningful opportunities in discussion; typical initial state/county engagements run roughly 200–400 beds each.

• Question from Marla Marin (Zacks): Are there specific assets now targeted for divestiture after prior asset sales?
  Response: They evaluate every underutilized asset; near-term dispositions could be small residential reentry centers (modest proceeds); larger prison sales are complex and lower likelihood near-term.

• Question from Brian Violino (Wedbush Securities): Does your guidance assume ICE populations sustained at Q3 average or an incremental increase in Q4?
  Response: Guidance assumes average ICE populations modestly higher than the Q3 average (closer to late-Q3/end-Q3 levels).

• Question from Brian Violino (Wedbush Securities): Timeline to NOI margins returning to ~25% and what needs to happen?
  Response: Margins improve as occupancy moves toward pre-pandemic (~80%) and labor costs normalize; modest margin gains expected but reaching 25% by end of 2024 is unlikely.

• Question from Brian Violino (Wedbush Securities): Any uptick in U.S. Marshals populations since Title 42 ended?
  Response: No — U.S. Marshals populations have been stable to date.

• Question from Jordon Hymowitz (Philadelphia Financial Management of San Francisco): What was your occupancy in October?
  Response: Management did not provide a precise October figure; indicated it was slightly higher than the Q3 reported 72%.

• Question from Jordon Hymowitz (Philadelphia Financial Management of San Francisco): Is there anything in your numbers projecting a large expansion of electronic monitoring business?
  Response: No — nothing incorporated; expansion depends on ICE funding and an RFP, so it's not included in current guidance.

• Question from Jordon Hymowitz (Philadelphia Financial Management of San Francisco): How many banks are in your credit facility and has interest from banks changed?
  Response: There are 11 banks in the syndicate; regional bank interest has increased and the facility was expanded to $400M with longer maturity.

• Question from Jordon Hymowitz (Philadelphia Financial Management of San Francisco): Does the amended facility give more flexibility on buybacks or are there covenant constraints?
  Response: The credit facility imposes no new buyback restrictions; buybacks are governed by the unsecured-note restricted-payment basket and the internal leverage target (2.25–2.75x).

• Question from Gregory Gibas (Northland Securities): Is the ~11,800 ICE population you cited the assumption that holds through year-end for guidance?
  Response: Guidance is a range but is approximately aligned with current ~11.8k ICE level; small deviations shift you toward the high or low end of the guidance range.

• Question from Gregory Gibas (Northland Securities): Any visibility on the California City facility (lease expiring March 31, 2024) and its ~$25M EBITDA contribution?
  Response: Actively working multiple jurisdictional options; no announcement today but expect an update by February.

• Question from Gregory Gibas (Northland Securities): Once you hit target leverage (~2.5x), how will capital allocation change?
  Response: They plan to allocate free cash flow to both debt repayment and opportunistic share buybacks without a fixed formula, guided by prospects and share price while targeting leverage 2.25–2.75x.

Contradiction Point 1

ICE Population and Occupancy Trends

It directly impacts expectations regarding revenue projections and operational planning, which are crucial for investor decisions and market confidence.

How much of the sequential growth in secured services revenue is due to population increases versus per diem increases? - Joseph Gomes (NOBLE Capital)

2023Q3: If you're comparing to the prior year quarter, certainly populations, particularly on the federal side, were driving the increases. - David Garfinkle(CFO)

How does ICE detention pace compare to expectations and impact your guidance and updated occupancy projections? - Joseph Gomes (NOBLE Capital Markets, Inc., Research Division)

2025Q3: This is an unprecedented time, as you know, in terms of the ICE population escalation. And the pace of enforcement activity is unprecedented. - Damon T. Hininger(CEO)

Contradiction Point 2

Occupancy Expectations and Revenue Impact

It reflects differing expectations for occupancy levels and their impact on revenue, which are critical for financial forecasting and strategic planning.

Could you explain the timeline to return to that level? What occupancy and expense trends are needed to achieve that? - Brian Violino (Wedbush Securities)

2023Q3: If we get back to like 25% pre-pandemic margins, we'd have to get towards that occupancy level. - David Garfinkle(CFO)

What is the projected occupancy rate for mid-2026? - Raj Sharma

2025Q3: Occupancy is expected to be in the low-80s to mid-80s for 2026, based on current trends and assuming stabilization in the new facilities. - David Garfinkle(CFO)

Contradiction Point 3

Electronic Monitoring Business Prospects

It involves differing perspectives on the company's interest and focus on the electronic monitoring business, which could impact strategic direction and potential revenue streams.

Regarding the House's alternative detention proposal to monitor 5-6 million non-citizens, given your competitor's current ISAP contract is far below that scope, would your company be able to handle a significant portion or require substantial scaling to support this proposal? - Joseph Gomes (NOBLE Capital)

2023Q3: Our focus remains on detention, as directed by DHS and ICE leadership. The electronic monitoring contract is currently at the same level as last year, with no indications of significant expansion. We have the capability to handle any increase, but detention is the priority. - Damon T. Hininger(CEO)

What are the current conditions and future outlook for the electronic monitoring business? - Raj Sharma (Texas Capital)

2025Q2: Our focus remains on detention as directed by ICE priorities, and the electronic monitoring program is currently at the same level as last year. If there is a change in ICE priorities, we are well-positioned to handle any increase. - Damon T. Hininger(CEO)

Contradiction Point 4

ICE Population Growth Expectations

It involves differing expectations for ICE population growth, which could impact revenue projections and operational planning.

Have you observed a similar 15% increase in ICE populations since the end of Q3? Given that many facilities are above minimum guarantees, is a faster revenue growth likely if population increases are sustained? - Joseph Gomes (NOBLE Capital)

2023Q3: We expect incremental revenue from these facilities surpassing the guaranteed levels either in the current quarter or in the first quarter of next year. - David Garfinkle(CFO)

Will the Cal City immigration processing center start intake this quarter? - Jay McCanless (Wedbush Securities)

2025Q2: Our expectation is that we'll probably have a little bit of a stabilization there. And we feel that, that's kind of where we're going to stay for the next quarter. - David Garfinkle(CFO)