Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CoreCivic Inc (CXW, Financial) reported a 6% increase in revenue for the second quarter of 2024, reaching $490.1 million, driven by growth across federal, state, and local government partnerships.
- Normalized funds from operations (FFO) increased by 27% per share compared to the previous year, attributed to higher occupancy rates and effective cost management.
- The company successfully reduced its leverage to 2.5 times net debt to adjusted EBITDA, aligning with its target range, and repurchased 1.3 million shares of common stock during the quarter.
- CoreCivic Inc (CXW) experienced a 49% increase in local revenue due to new contracts with Hinds County, Mississippi, and Harris County, Texas.
- The company reported improved labor market conditions, allowing for a reduction in temporary staffing incentives and associated costs, contributing to better operational efficiency.
Negative Points
- The expiration of a lease with the State of California at the California City Correctional Center led to decreased lease revenue in the property segment.
- The termination of the South Texas Family Residential Center contract with ICE is expected to negatively impact operating margins by 150 to 200 basis points.
- Despite revenue growth, CoreCivic Inc (CXW) faced slightly higher general and administrative expenses during the quarter.
- The company's community segment saw a slight decline in occupancy from 62.8% to 62.3% year-over-year.
- CoreCivic Inc (CXW) anticipates a potential increase in leverage due to the termination of the South Texas contract, which may impact future stock repurchases.
Q & A Highlights
Q: With the South Texas contract ending, is there a possibility to keep options open for the facility given the potential for a change in administration?
A: Damon Hininger, President and CEO, confirmed that they are keeping options open. They have a good relationship with the asset owner and a history of ICE returning to them for solutions, indicating a chance they might need the facility again depending on border needs.
Q: How did state budget negotiations play out this year for per diem increases?
A: Damon Hininger noted that they had a good spring with state budget negotiations, seeing increases in the range of 2% to 4%, which is more typical compared to the outsized increases during the pandemic.
Q: Is ICE budget-constrained from moving past the 37,000 detainee number, and does the South Texas closure provide flexibility for other facilities?
A: Damon Hininger acknowledged that ICE mentioned budget constraints and a desire for more secure capacity. They expect some increase in utilization in existing contracts but not necessarily new contracts before the fiscal year ends.
Q: Does the guidance for the second half account for uncertainty around ICE appropriations starting October 1?
A: Damon Hininger explained that they expect a continuing resolution to fund the government, maintaining the 41,500 bed level. While the House proposed 50,000 beds, they are not including this in their guidance yet.
Q: Could the expansion of the ISAP program lead to more vendors, and how would CoreCivic fit into that?
A: Damon Hininger believes that if the program expands significantly, it will require multiple vendors. CoreCivic is preparing by testing various monitoring technologies and focusing on case management services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
