The GEO Group, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, everyone. 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. We will conclude the call with a question and answer session. This conference call is also being webcast live or on 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.

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 afternoon, everyone.

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 four 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 one-third of the current national ICE population of approximately 68,000, which is distributed over 225 separate locations that are primarily short-term jail facilities. Over the last six 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 U.S. Customs and Border Protection after the longest partial government shutdown in U.S. history. Under the Secure America Act, ICE received $38.5 billion in funding available through September 30th, 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 30th, 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 two new contracts with ICE for the activation of ICE processing centers at two previously idle facilities. We have entered into a five-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 annual revenues in the first full year of operations.

We have also entered into a five-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 CapEx needed to reactivate these two 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 two 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 five 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 five-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 seven 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 V 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 in 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 would 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 earnings 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 two 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 further 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 our accelerated technology services mix in 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.