The GEO Group, Inc. (NYSE: GEO) (“GEO”), a leading provider of support services for
secure facilities, processing centers, and reentry centers, as well
as enhanced in-custody rehabilitation, post-release support, and
electronic monitoring programs, reported today its financial
results for the first quarter 2022.
First Quarter 2022 Highlights
- Total revenues of $551.2 million
- Net Income Attributable to GEO of $38.2 million, or $0.26
per diluted share
- Adjusted Net Income of $0.31 per diluted share
- Adjusted EBITDA of $125.2 million
- Adjusted Funds From Operations (“AFFO”) of $0.64 per diluted
share
For the first quarter 2022, we reported net income attributable
to GEO of $38.2 million, compared to net income attributable to GEO
of $50.5 million for the first quarter 2021. We reported total
revenues for the first quarter 2022 of $551.2 million compared to
$576.4 million for the first quarter 2021. Excluding extraordinary
items, we reported adjusted net income for the first quarter 2022
of $38.2 million, or $0.31 per diluted share, compared to $34.1
million, or $0.28 per diluted share, for the first quarter
2021.
We reported first quarter 2022 Adjusted EBITDA of $125.2
million, compared to $108.5 million for the first quarter 2021. We
reported first quarter 2022 AFFO of $78.1 million, or $0.64 per
diluted share, compared to $73.5 million, or $0.61 per diluted
share, for the first quarter 2021.
George C. Zoley, Executive Chairman of GEO, said, “We are
pleased with our strong operational and financial performance. Our
consistently robust results have allowed us to make substantial
progress towards our objective of reducing net recourse debt. Since
the beginning of 2020, we have reduced net recourse debt by
approximately $330 million, including approximately $80 million
during the first quarter of 2022.
“We remain focused on executing our multifaceted approach to
address our debt maturities, including the continued allocation of
our excess cash flow towards reducing our net recourse debt; a
comprehensive review of potential sales of company-owned assets and
businesses; and ongoing discussions with our creditor groups with
the assistance of our financial and legal advisors. We believe that
our continued financial performance is representative of the
strength of our business and our cash flows, which are supported by
valuable company-owned real estate assets and diversified contracts
entailing essential government services.”
Balance Sheet and Liquidity
As of the quarter ended on March 31, 2022, we had approximately
$598.5 million in unrestricted cash and cash equivalents on our
balance sheet. Accounting for our cash on hand, we have
approximately $2.0 billion in net recourse debt outstanding, not
including non-recourse debt, finance lease obligations, or the
mortgage loan on our corporate headquarters.
We continue to focus on reducing net recourse debt. Since the
beginning of 2020, we have reduced net recourse debt by
approximately $330 million, including approximately $80 million in
the first quarter of 2022. We also continue to evaluate the
potential sale of company-owned assets and businesses. Over the
last 18 to 24 months, we have completed sales transactions
involving facility assets, business segment contracts, and land,
totaling approximately $70 million in proceeds.
2022 Financial Guidance
We have updated our financial guidance for 2022. We expect full
year Net Income Attributable to GEO to between $145 million and
$157 million on annual revenues of approximately $2.2 billion.
Adjusting for extraordinary items, we expect Adjusted Net Income to
be in a range of $1.17 to $1.27 per diluted share. We expect
full-year 2022 AFFO to be in a range of $2.30 to $2.40 per diluted
share and full year 2022 Adjusted EBITDA to be in a range of $453
million to $471 million.
For the second quarter of 2022, we expect Net Income
Attributable to GEO to be between $36 million and $39 million on
quarterly revenues of $560 million to $565 million. We expect
second quarter 2022 Adjusted Net Income to be between $0.30 and
$0.32 per diluted share and second quarter 2022 AFFO to be between
$0.56 and $0.58 per diluted share.
Compared to our first quarter 2022 results, our second quarter
2022 guidance reflects the previously announced discontinuation of
our managed-only George W. Hill Correctional Facility contract in
Pennsylvania in early April 2022, representing approximately $47
million in annualized revenues. Additionally, we experienced
favorable cost offsets during the first quarter of 2022, which we
do not expect to re-occur in subsequent quarters.
Our full-year 2022 guidance continues to reflect the expected
non-renewal of our two U.S. Department of Justice direct contracts
that have option periods expiring during 2022, with combined
annualized revenues of approximately $90 million. Our guidance also
reflects the impact of higher wages and bonuses for our facility
staff, which we have implemented working collaboratively with our
government agency partners. We expect our effective tax rate for
the full-year 2022 to be approximately 29%, exclusive of any
discrete items.
Finally, as previously disclosed, we are engaged in ongoing
discussions with our banks and ad hoc groups of our term loan
lenders and bondholders to amend and extend our senior credit
facility and address our 2023, 2024, and 2026 senior unsecured
notes. We will update our financial guidance accordingly if we are
able to complete a transaction or series of transactions, which we
currently expect may result in an increase in our interest expense.
For each one percent increase in our weighted average cost of debt,
our interest expense would increase by approximately $18 million to
$20 million on an annualized basis based on our current net
recourse debt.
COVID-19 Information
As the COVID-19 pandemic has impacted communities across the
United States and around the world, our employees and facilities
have also been impacted by the spread of COVID-19. Ensuring the
health and safety of our employees and all those in our care has
always been our number one priority. From the beginning of the
pandemic, we have implemented mitigation initiatives to address the
risks of COVID-19, consistent with the guidance issued for
correctional and detention facilities by the Centers for Disease
Control and Prevention (“CDC”).
We will continue to evaluate
and refine the steps we take as appropriate and necessary based on
updated guidance by the CDC and best practices. We are grateful for
our frontline employees who continue to make daily sacrifices to
care for all those in our facilities. Additional information
on the COVID-19 mitigation initiatives implemented by GEO can be
found at www.geogroup.com/COVID19.
Conference Call Information
We have scheduled a conference call and simultaneous webcast for
today at 11:00 AM (Eastern Time) to discuss our first quarter 2022
financial results as well as our outlook. The call-in number for
the U.S. is 1-877-250-1553 and the international call-in number is
1-412-542-4145. In addition, a live audio webcast of the conference
call may be accessed on the Webcasts section under the News, Events
and Reports tab of GEO’s investor relations webpage at
investors.geogroup.com. A replay of the webcast will be available
on the website for one year. A telephonic replay of the conference
call will be available until May 17, 2022, at 1-877-344-7529 (U.S.)
and 1-412-317-0088 (International). The participant passcode for
the telephonic replay is 5564629.
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 the United States, Australia, South Africa, and
the United Kingdom. GEO’s diversified services include enhanced
in-custody rehabilitation and post-release support through the
award-winning GEO Continuum of Care®, secure transportation,
electronic monitoring, community-based programs, and correctional
health and mental health care. GEO’s worldwide operations include
the ownership and/or delivery of support services for 103
facilities totaling approximately 83,000 beds, including idle
facilities and projects under development, with a workforce of up
to approximately 18,000 employees.
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, Net Income to EBITDA and Adjusted EBITDA, and Net
Income Attributable to GEO to AFFO, 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, Adjusted EBITDA, and AFFO 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 Adjusted Net Income,
Adjusted EBITDA, and AFFO.
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 2022, 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.
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 real estate assets, pre-tax, net loss
attributable to non-controlling interests, stock-based compensation
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 attributable to GEO. 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 real estate assets, pre-tax, gain on the
extinguishment of debt, pre-tax, and tax effect of adjustments to
net income attributable to GEO.
AFFO is defined as net income attributable GEO adjusted by
adding depreciation and amortization, stock based compensation
expense, the amortization of debt issuance costs, discount and/or
premium and other non-cash interest, (gain)/loss on real estate
assets, pre-tax, and by subtracting facility maintenance capital
expenditures and other non-cash revenue and expenses. From time to
time, AFFO is also 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 on the extinguishment of debt, pre-tax, and tax
effect of adjustments to net income attributable to GEO.
Because of the unique design, structure and use of our GEO
Secure Services and Reentry Services facilities, we believe that
assessing the performance of our secure facilities, processing
centers, and reentry centers without the impact of depreciation or
amortization is useful and meaningful to investors. Our assessment
of our operations is focused on long-term sustainability. The
adjustments we make to derive the non-GAAP measure of AFFO exclude
items which may cause short-term fluctuations in net income
attributable to GEO but have no impact on our cash flows, or we do
not consider them to be fundamental attributes or the primary
drivers of our business plan and they do not affect our overall
long-term operating performance. We may make adjustments to AFFO
from time to time for certain other income and expenses that do not
reflect a necessary component of our operational performance on the
basis discussed above, even though such items may require cash
settlement.
Because AFFO excludes depreciation and amortization unique to
real estate as well as non-operational items and certain other
charges that are highly variable from year to year, they provide
our investors with performance measures that reflect the impact to
operations from trends in occupancy rates, per diem rates,
operating costs, and interest costs, providing a perspective not
immediately apparent from Net Income Attributable to GEO. We
believe the presentation of AFFO provides useful information to
investors as they provide an indication of our ability to fund
capital expenditures and expand our business. AFFO provides
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.
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 second quarter of 2022, GEO’s proposed steps
to address its future debt maturities, and the impact of any
proposed transaction thereto. 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 2022 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 additional 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 U.S. Attorney General not to renew the U.S.
Department of Justice contracts with privately operated criminal
detention facilities; (5) changes in federal immigration policy;
(6) public and political opposition to the use of public-private
partnerships with respect to secure correctional and detention
facilities, processing centers and reentry centers; (7) the
magnitude, severity, and duration of the current COVID-19 global
pandemic, its impact on GEO, GEO's ability to mitigate the risks
associated with COVID-19, and the efficacy and distribution of
COVID-19 vaccines; (8) GEO’s ability to sustain or improve
company-wide occupancy rates at its facilities in light of the
COVID-19 global pandemic and policy and contract announcements
impacting GEO’s federal facilities in the United States; (9)
fluctuations in our operating results, including as a result of
contract terminations, contract renegotiations, changes in
occupancy levels and increases in our operating costs; (10) general
economic and market conditions, including changes to governmental
budgets and its impact on new contract terms, contract renewals,
renegotiations, per diem rates, fixed payment provisions, and
occupancy levels; (11) GEO’s ability to timely open facilities as
planned, profitably manage such facilities and successfully
integrate such facilities into GEO’s operations without substantial
costs; (12) GEO’s ability to win management contracts for which it
has submitted proposals and to retain existing management
contracts; (13) risks associated with GEO’s ability to control
operating costs associated with contract start-ups; (14) GEO’s
ability to successfully pursue growth and continue to create
shareholder value; (15) GEO’s ability to obtain financing or access
the capital markets in the future on acceptable terms or at all;
and (16) other factors contained in GEO’s Securities and Exchange
Commission periodic filings, including its Form 10-K, 10-Q and 8-K
reports, many of which are difficult to predict and outside of
GEO’s control.
First quarter 2022 financial tables to follow:
Condensed
Consolidated Balance Sheets*
(Unaudited)
As of As of March 31, 2022 December
31, 2021 (unaudited) (unaudited)
ASSETS Cash and
cash equivalents $
598,508
$
506,491
Restricted cash and cash equivalents
23,795
20,161
Accounts receivable, less allowance for doubtful accounts
358,648
365,573
Contract receivable, current portion
6,866
6,507
Prepaid expenses and other current assets
34,998
45,176
Total current assets $
1,022,815
$
943,908
Restricted Cash and Investments
84,886
76,158
Property and Equipment, Net
2,017,322
2,037,845
Contract Receivable
376,775
367,071
Operating Lease Right-of-Use Assets, Net
105,617
112,187
Assets Held for Sale
14,488
7,877
Intangible Assets, Net (including goodwill)
913,933
921,349
Other Non-Current Assets
73,048
71,013
Total Assets $
4,608,884
$
4,537,408
LIABILITIES AND SHAREHOLDERS' EQUITY Accounts
payable $
80,313
$
64,073
Accrued payroll and related taxes
87,699
67,210
Accrued expenses and other current liabilities
193,704
200,712
Operating lease liabilities, current portion
28,038
28,279
Current portion of finance lease obligations, long-term debt, and
non-recourse debt
18,617
18,568
Total current liabilities $
408,371
$
378,842
Deferred Income Tax Liabilities
80,768
80,768
Other Non-Current Liabilities
82,500
87,073
Operating Lease Liabilities
83,408
89,917
Finance Lease Liabilities
1,805
1,977
Long-Term Debt
2,626,473
2,625,959
Non-Recourse Debt
304,724
297,856
Total Shareholders' Equity
1,020,835
975,016
Total Liabilities and Shareholders' Equity $
4,608,884
$
4,537,408
* all figures in '000s
Condensed Consolidated Statements of
Operations*
(Unaudited)
Q1 2022
Q1 2021
(unaudited) (unaudited)
Revenues $
551,185
$
576,377
Operating expenses
385,161
428,151
Depreciation and amortization
35,938
34,117
General and administrative expenses
48,560
48,479
Operating income
81,526
65,630
Interest income
5,628
6,202
Interest expense
(31,621
)
(31,844
)
Gain on extinguishment of debt
-
3,038
Net gain/(loss) on dispositions of assets
(627
)
13,329
Income before income taxes and equity in earnings of
affiliates
54,906
56,355
Provision for income taxes
17,962
7,936
Equity in earnings of affiliates, net of income tax
provision
1,235
2,064
Net income
38,179
50,483
Less: Net loss attributable to noncontrolling
interests
40
61
Net income attributable to The GEO Group, Inc. $
38,219
$
50,544
Weighted Average Common Shares Outstanding:
Basic
120,714
120,022
Diluted **
121,394
120,417
Net income per Common Share Attributable to The GEO
Group, Inc. **: Basic: Net income per share —
basic $
0.26
$
0.41
Diluted: Net income per share — diluted $
0.26
$
0.41
* All figures in '000s, except per share data ** In
accordance with U.S. GAAP, diluted earnings per share attributable
to GEO available to common stockholders is calculated under the
if-converted method or the two-class method, whichever calculation
results in the lowest diluted earnings per share amount, which may
be lower than Adjusted Net Income Per Diluted Share.
Reconciliation of Net Income Attributable
to GEO AFFO*
(Unaudited)
Q1 2022
Q1 2021
(unaudited) (unaudited)
Net Income attributable to
GEO $
38,219
$
50,544
Add (Subtract): Depreciation and amortization
35,938
34,117
Facility maintenance capital expenditures
(4,728
)
(2,667
)
Stock based compensation expenses
6,313
7,402
Other non-cash revenue & expenses
-
(1,102
)
Amortization of debt issuance costs, discount and/or premium and
other non-cash interest
1,848
1,683
(Gain)/Loss on real estate assets, pre-tax
627
(13,329
)
Other Adjustments: Add (Subtract): Gain on
extinguishment of debt, pre-tax
-
(3,038
)
Tax effect of adjustments to net income attributable to GEO **
(158
)
(92
)
Equals: AFFO $
78,059
$
73,518
Weighted average common shares outstanding - Diluted
121,394
120,417
AFFO per Diluted Share
0.64
0.61
* All figures in '000s, except per share data ** Tax
adjustments related to gain/loss on real estate assets and gain on
extinguishment of debt.
Reconciliation of
Net Income to EBITDA, Adjusted EBITDA,
and Net Income
Attributable to GEO to Adjusted Net Income*
(Unaudited)
Q1 2022
Q1 2021
(unaudited) (unaudited)
Net Income $
38,179
$
50,483
Add (Subtract): Income tax provision **
18,074
8,276
Interest expense, net of interest income ***
25,993
22,604
Depreciation and amortization
35,938
34,117
EBITDA $
118,184
$
115,480
Add (Subtract): (Gain)/Loss on real estate assets, pre-tax
627
(13,329
)
Net loss attributable to noncontrolling interests
40
61
Stock based compensation expenses, pre-tax
6,313
7,402
Other non-cash revenue & expenses, pre-tax
-
(1,102
)
Adjusted EBITDA $
125,164
$
108,512
Net Income attributable to GEO $
38,219
$
50,544
Add (Subtract): (Gain)/Loss on real estate assets, pre-tax
-
(13,329
)
(Gain) on extinguishment of debt, pre-tax
-
(3,038
)
Tax effect of adjustments to Net Income attributable to GEO (1)
-
(92
)
Adjusted Net Income $
38,219
$
34,085
Weighted average common shares outstanding - Diluted
121,394
120,417
Adjusted Net Income Per Diluted share
0.31
0.28
* 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 adjustments
related to gain on real estate assets and gain on extinguishment of
debt.
2022
Outlook/Reconciliation
(In thousands, except per share data)
(Unaudited)
FY 2022 Net Income Attributable to GEO
$
145,000
$
157,000
Depreciation and Amortization
136,000
136,000
(Gain)/Loss on Real Estate
(2,300
)
(2,300
)
Facility Maintenance Capex
(24,000
)
(24,000
)
Non-Cash Stock Based Compensation
16,500
16,500
Non-Cash Interest Expense
7,800
7,800
Adjusted Funds From Operations (AFFO)
$
279,000
to
$
291,000
Net Interest Expense
100,000
102,000
Non-Cash Interest Expense
(7,800
)
(7,800
)
Facility Maintenance Capex
24,000
24,000
Income Taxes (including income tax provision on equity in
earnings of affiliates)
58,000
62,000
Adjusted EBITDA
$
453,200
to
$
471,200
Adjusted Net Income Per Diluted Share
$
1.17
to
$
1.27
AFFO Per Diluted Share
$
2.30
to
$
2.40
Weighted Average Common Shares Outstanding-Diluted
121,500
121,500
CAPEX Growth
7,000
8,000
Electronic Monitoring
37,000
39,000
Facility Maintenance
23,000
25,000
Capital Expenditures
67,000
to
72,000
In accordance with GAAP, diluted earnings per share attributable
to GEO available to common stockholders is calculated under the
if-converted method or the two-class method, whichever calculation
results in the lowest diluted earnings per share amount, which may
be lower than Adjusted Net Income Per Diluted Share.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220502005931/en/
Pablo E. Paez (866) 301 4436 Executive Vice President, Corporate
Relations
Geo (NYSE:GEO)
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