Thank you for standing by. Welcome to the CoreCivic Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered, as a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Michael Grant, Managing Director of Investor Relations.

Thank you, operator. Good morning, everyone, and welcome to CoreCivic's fourth quarter and full year 2024 earnings call. Participating on today's call are Damon T. Hininger, CoreCivic's Chief Executive Officer, Patrick Swindle, CoreCivic's President and Chief Operating Officer, and David Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds. On this call, we will discuss financial results for the fourth quarter of 2024 as well as financial guidance for the 2025 year. We will also discuss developments with our government partners and provide you with other general business updates. During today's call, our remarks, including all answers to your questions, will include forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors including those identified in our fourth quarter 2024 Earnings release issued after market yesterday, as well as in our Securities and Exchange Commission's filings including forms 10-K, 10-Q, and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only and that the company undertakes no obligation to revise or update such statements in the future. Management will also discuss certain non-GAAP metrics. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company's quarterly supplemental financial data report posted on the investors page of the company's website at corecivic.com. With that, it is my pleasure to turn the call over to our CEO, Damon T. Hininger.

Thanks, Mike. Good morning, and thanks everyone for joining us for CoreCivic's fourth quarter 2024 earnings call. On this morning's call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners. Following our opening remarks, we will turn the call over to our CFO, David Garfinkle, who will provide greater detail on our fourth quarter and full year 2024 financial results, as well as introduce our 2025 financial guidance. Dave will also provide an update on our capital structure initiatives, including progress on our leverage target and share repurchase program. I'm going to tag team to open your remarks today with our Chief Operating Officer, Patrick Swindle, who was also named CoreCivic's President in December 2024. Patrick has been with CoreCivic for seventeen years and positions of increasing responsibility within finance and operations. He has excelled as our Chief Operating Officer and Chief Corrections Officer for the past seven years. Patrick is an excellent problem solver and brings experience and a great strategic and financial to the president position. We truly look forward to his leadership during what we anticipate to be a period of rapid growth and opportunity. So let me start with this. I've worked at CoreCivic for thirty-two years, and this is truly one of the most exciting periods in my career with the company. Having just wrapped up a strong 2024, we're anticipating significant growth opportunities, perhaps the most significant growth in our company's history over the next several years. We believe CoreCivic is exceptionally well positioned operationally and financially to meet what we expect to be a sharp acceleration in demand from our partners, particularly our key federal partners, Immigration and Customs Enforcement or ICE, and the United States Marshal Service. The change in presidential…

Thanks, Damon. I'll start with a high-level overview of our fourth quarter and full year financial results. Overall, CoreCivic's financial results exceeded our internal forecast and annual assessment helped by tight cost discipline and higher occupancy. Occupancy for the quarter was seventy-five point five percent, marking our highest occupancy level since the first quarter of 2020, right at the start of the COVID-19 pandemic. In the fourth quarter, we generated revenue of four hundred and seventy-nine point three million dollars, a two percent reduction compared with the prior year quarter. Excluding the South Texas Family Residential Center, which closed during the third quarter, and the California City Correctional Center, where the lease ended in March, underlying revenue growth increased eight percent against the prior year quarter. For the full year, CoreCivic generated two billion in revenue. The fourth quarter of 2024, adjusted EBITDA, which excludes expenses associated with debt refinancing, gains on the sale of real estate, and asset impairments, was seventy-four point two million, down from ninety million in the fourth quarter of 2023. For the full year, adjusted EBITDA increased to three hundred and thirty point eight million from three eleven million dollars. The decrease in adjusted EBITDA in the fourth quarter was primarily attributable to the contract termination at the South Texas Family Residential Center and the expiration of the lease with the State of California at the California City, partially offset by an increase in occupancy throughout the remainder of our portfolio combined with a general reduction in temporary labor incentives and related costs. Federal partners, primarily Immigration and Customs Enforcement, the US Marshal Service, comprised almost exactly half of CoreCivic's total revenue in 2024. During the fourth quarter of 2024, revenue from our federal partners declined twelve percent compared with the fourth quarter of last…

Thank you, Patrick, and good morning, everyone. In the fourth quarter of 2024, we generated GAAP net income of seven cents per share, including a penny per share for a gain on sale of real estate assets. Excluding this special item, adjusted EPS during the fourth quarter was fifteen cents, exceeding average analyst estimates by six cents per share. Normalized FFO per share was thirty-nine cents during the fourth quarter of 2024, exceeding average analyst estimates by five cents per share, and adjusted EBITDA was seventy-four point two million dollars, exceeding average analyst estimates by seven point nine million dollars. A decrease in adjusted EBITDA from the prior year quarter of fifteen point eight million dollars and decreases in adjusted EPS of seven cents and normalized FFO per share of six cents resulted from the termination of our contract with ICE at the South Texas Family Residential Center effective August ninth, 2024, and a lease expiration with the state of California effective March thirty-first, 2024, at our California City Correctional Center. These terminations accounted for a decrease in facility net operating income of fifteen cents per share from the prior year quarter. These reductions were partially offset by higher occupancy from state and local partners, as well as from ICE across the remainder of the portfolio. Decreases in interest expense, a lower effective tax rate, and fewer shares outstanding also contributed to increases in per share earnings aggregating approximately four cents per share. Federal revenue in our Safety and Community segments decreased thirty-two point eight million dollars from the fourth quarter of 2023 to the fourth quarter of 2024, including a reduction in management revenue at the South Texas facility of thirty-nine point one million dollars. So excluding this facility, federal revenue in our Safety and Community segments increased six…

Certainly. And our first question for today comes from the line of Joseph Gomes from Noble Capital. Your question, please.

Good morning. Thanks for taking my questions. Nice end to the year. Can you guys hear me?

Yes.

So, Damon, first question I kinda wanted to look at big picture. You know, what total capacity do you think ICE might need with all the actions that are going on, and what impact, if any, do you see for some of the other alternatives that have been put out in the press, Guantanamo, El Salvador, idled government prisons, in terms of what demands might be for the private sector.

Hello?

And I believe our speaker line is currently muted. You'll need to unmute at this time.

Again? Great. We can hear you now. Thank you for that, Joe. Can you hear me okay?

I can hear you.

Very good. Well, good morning again, my friend. And I heard your question completely. So let me give you the answer. So big picture, first is just let me say that we've been talking to members of the transition team now of the part of administration really on a daily basis since the election in November. One thing that's very clear to us is that there is a very strong focus on detention. And, obviously, you're seeing that play out in the press, and you've got many spokes persons for the administration that are talking about that. The need for additional capacity and the detention is a key focus for the administration. So I start with that as number one. Number two, to your bed number question. So this has been a little fluid, but it feels like in the last probably two, three weeks, it's kinda circling in into a pretty close range on needed capacity. So let me give you kind of two numbers here. One is that you're hearing in the press, and, again, we're hearing this also privately, that there is a need for about a hundred thousand beds for enforcement operations, both on the southwest border, but also for interior enforcement. That's been pretty consistent here in the last thirty days. The other, which is more recent, is that you've heard obviously, is the passage of Lincoln Riley bill. I mentioned that in my scripts. And, again, this has been reported in the press two, but we've heard a range of numbers of about sixty thousand beds to a hundred and ten thousand beds needed for that requirement, which is gonna require mandatory detention for certain individuals arrested for certain crimes. So it feels like you've kinda put those two numbers together, They're going into…

Sure. Thanks, Damon. And thanks, Joe, for your question. Yeah. We were estimating if if we activated all of our idle capacity, so that's the nine facilities that that we have over thirteen thousand bed plus the South Texas Family Residential Center, which you know we don't own, but still in close contact with both Target Logistics and Target Hospitality and ICE on that facility. We estimate we could generate incremental EBITDA of two hundred to two hundred seventy-five million dollars roughly. Of EBITDA at margins consistent with where we've historically generated margins from our federal government partners. So Joe, that was a long answer, but, you know, the the punchline is is that we've gotten proposal in front of us for twenty-eight thousand beds. Obviously, Dave just went through the numbers rolled up to capacity. We've got you available today. We've got an opportunity to really double the the amount of EBITDA this company this company produces on an annual basis. So that's that's what we're focusing on and as an opportunity.

Great. Thanks for that very detailed. That Just on on South Texas for a second, know, there's indications out there from ICE, from Trump that they want to reopen a family center facility. Obviously, you know, as you see us mention, you are you remain in discussions with Target on that. But are there any other all alternatives out there to South Texas that could be family center and, you know, is that something that would have to go through, you know, an RFP, or do you think you'd get something and I'm using air quotes here, something like emergency dispensation to open that facility without going through an RFP. And how quickly could that facility be reopened since it wasn't closed that long ago?

Yeah. Great great question. And short answer is yes, we think their ICE is considering a couple alternatives. Notably, I think the Karnes facility that's under Jio's control is potentially an opportunity there for families. But to your question, yeah, we're talking to Target daily, maybe, like, maybe even hourly, and let me just say they're great great partner of ours. And looking at not just Dilly, but if the need is greater than the size of Dilly, Joe, we're talking to a target on expansion either there locally or maybe other parts of the Southwest. So we think we've got expansion capability with them above and beyond the twenty-four hundred bed that, ideally, if ICE say they needed a bigger they have a bigger requirement. But, yeah, we're leaning forward on staffing, making sure that we can activate very quickly. We've had additional conversations on this very topic with ICE in the lab, you know, seven days. So we're leaning again forward on getting ourselves self prepared. As it relates to the way they would contract it, I think they're evaluating that. Also, we've given them a couple different ideas. To your point, this just deactivated here in the last, what, six, seven months. So I think some of the things that they would never normally have to do for a new contract, they probably don't have to since, again, just was recently deactivated. So and that also gives us an advantage because since it was recently deactivated, that gives us a much quicker way to activate the facility versus if we're starting with a blank sheet of paper. But maybe, Patrick, I'll look to you, see if he would add to that.

No. Only thing I would add is that to your point, we've taken a number of steps to prepare for activation that might typically occur later in an activation cycle. So we're doing our best to minimize the cycle time that would require the time that we would need to accept our first group of detainees at the facility. So we're doing everything within our power to shorten that time horizon. To give ICE the support they need as quickly as possible. We'll be able to support the mission feel like we're in a great place to the extent that we get that phone call. Be able to deliver for them very, very quickly.

Okay. And then I had a a a question. So, you know, if I'm I'm looking through your supplemental and, you know, looking at occupancy, pardon me, The the Laredo facility has been above a hundred percent percent occupancy or capacity all year. Is that, you know, something you can do at some of your ICE other ICE facilities and know, at I guess, I'd kind of what what percent of capacity does it become you know, this is the max that we can operate at and and, you know, kind of how long could you do something like that for?

Joe, this is Patrick. So the way I would answer that is that each facility is uniquely designed. And so the answer to that would be different at each facility that we operate. Obviously, very focused on the standards that we must meet to ensure that we have safe humane environments for the detainees. But we do have an opportunity to repurpose space in many of our facilities. Would help us increase capacity beyond what might be our rated capacity least as we describe it in our supplemental. So it's going to vary from facility to facility, but all of our facilities where we currently maintain ICE contracts would give us an ability to flex our capacity up a bit certainly on a short-term basis. And then to the extent that we were to think about long term, we've also looked at potential more permanent capacity additions or conversions of space that would make that flexing up more permanent.

And one thing I'd add to that, Joe, is that the number I shared earlier, again, the twenty-eight thousand bed proposal that we've given to ICE, we have incorporated as part of the total that very that very number. So they've got some thoughts already in front of them on where we have capability by location.

Okay. And then one more for me and and I'll I'll get back in queue. So you you talked about the the the forty to, you know, forty-five million, but dish additional CapEx to you know, reopen facility, idle facilities and that other some transportation dollars in there. Does that have or or what impact, if any, would that additional CapEx have on, you know, the the amount of share repurchases that you would do?

Joe, I'll take that one. I mean, that that won't impact it. I mean, it's been factored into our thinking. As I mentioned in my prepared remarks, our leverage is projected to be within the within the target of two and a quarter and two and three-quarters times, that incorporates that forty million dollars to forty-five million dollars. So really won't impact it impact our thinking going forward. The only things I would consider that would affect the pace at which we repurchase shares are the pace of our react how much What other M&A, you know, tuck-in acquisitions are available and other capital deployment opportunities. So, you know, we could, as I as I mentioned, exceed our target leverage in the short term. That's if kinda all the stars align and we're deploying capital for all of those things. I tend to think there would be kinda more moderate moderately paced. But no doubt once a reactivation starts generating cash flow, we will be back within the targeted leverage on a sustainable basis. Over the medium and long term.

Great. Thanks for taking my questions on sure other people wanna ask them, so all step aside. Thanks again.

Great. Thanks, Joe.

Thank you, Joe. Thank you. And our next question comes from the line of Greg Gibas from Northland Securities. Your question, please?

Hey. Good morning, Dave and Dave. Thanks for taking the questions.

Good morning.

You know, I appreciate all the color that you provided earlier in terms of your proposal to ICE. And and I guess to clarify or put more of a fine point on it, I think it was, like, eighteen thousand or so available beds that you had. You know, last time we kinda got an update in Q3 and You know, one of the kinda get Better sense of, you know, maybe where those additional ten thousand where you acquired those. And as it relates to that two hundred to two seventy-five million EBITDA uplift number, So does that reflect, like, the eighteen thousand or how how should we think about that that maybe Total twenty-eight thousand opportunity in terms of EBITDA uplift.

Yeah. So let me tag team with Dave on this a little bit, but the twenty-eight thousand has made from a couple buckets of beds. So the first one is Facilities that are currently operating today but are at lower occupancy and some of those are don't have a contract with ICE Mark service, some of them do. But that's the first one. Facilities operating today with lower occupancy where we've got available capacity. The second bucket is facilities that are currently vacant today. So there's no one there's no contract to the facilities or completely mothballed. And could be activated in short order. The sec the third one is the question that Joe just asked her again, and that's capacity that where we could go in a safe and secure way above and beyond the rated capacity. So that's the third part of the total. Is what we call surge capacity in certain locations. And then the final piece of that total twenty-eight thousand is third-party capacity. And the obvious one on that and this is just one piece of that total, But obvious one is, like, South Texas. So that's a facility that we lease a half leased in the past with Target. In addition to Dilly and South Texas twenty-four hundred beds, they also have given us line of Right. Of additional capacity they can make available within within our system. So those are the building blocks that make up the total twenty-eight but Dave, I'll let you.

Yeah. And thanks, Greg. On the eighteen thousand, and then with respect to the two hundred million dollars to two seventy-five million dollars of incremental EBITDA, I was counting it's about fifteen thousand beds. The other three thousand beds and that fifteen thousand is roughly all of our idle capacity plus the South Texas facility, which we don't own. The other several thousand beds that you that you're quoting, the eighteen thousand, is already embedded in our guidance. That would be the couple thousand beds that are already under contract with ICE.

Great. Makes complete sense. And nice to hear that there's you know, seemingly a lot of opportunity above that that fifteen thousand or so that you you speak to that opportunity. So very helpful there. I guess as it relates to more near term, does your guidance account for any strength that you're seeing in Q1 so far. Wanted to get a sense of maybe how Q1 has trended relative to Q4. I know you provided some high-level ICE numbers. But if you could maybe speak to how it's trending relative to last quarter and maybe relative to your guidance.

Yeah. You know, our populations are they're up slightly. If you go back to say inauguration date, they're up a few hundred. That's not a significant increase. And so our guidance for Q1 does not include a a big increase in populations. Our guidance, I would say, includes kind of a steady increase throughout the year. From, you know, Q1 to Q4.

Fair enough. And as it relates to some of your guidance commentary mentioning, you know, the activating of an idle facility negatively impacting guidance just due to those startup expenses until the revenue catches up. Wanted to see if you could get the I guess provide a little bit more color on you know, what degree it can impact financials. And and maybe the better question would be kind of you know, how long on average or as an example would it take to maybe cover those costs?

Yeah. So it takes about four to six months to activate a facility depending on the facility. I think you know, we talked about South Texas and we already mentioned that one could probably go a little faster given that it was the contract just ended in August. So we've got a good number of those employees still within the company, and then I'm sure there's still some in the area that we could rehire. But the startup cost that I was kinda quoting in in my script, covers that four to six month period. Then you've probably got another, you know, six to twelve months where you're fully activating a a facility because you can only take on so many intakes per week.

And let me add a little bit to your earlier question and say, that, you know, budget is gonna obviously drive higher utilization. So that's being kept in obvious, but As I mentioned earlier, watch you watch you closely. You got kinda actions both on the house the senate and talk through the kinds of numbers there. And I think the timetable on that is kind of March, maybe early April. But you you're looking at those numbers off the deck, it's significantly increase utilization very, very quickly depending on where they go first where you've got available capacity. The second thing is I mentioned in my script, we do think there is some effort underway to, you know, to get maybe some funding over over to ICE to increase utilization in advance of anything done by the the congress. And so so again, being captain obvious, funding's gonna be key here in the coming, you know, days and weeks to drive higher utilization pretty quickly. Anything you wanna add to that?

Nope. I think that covers it. Yep.

Thank you. Great. Very helpful, guys. Appreciate the color, and congrats on the quarter.

Yeah. Thank you.

Thank you. And our next question comes from the line of Anne Merrick from Zacks. Your question, please.

Thank you. So good morning. I I I think in your prepared remarks, you indicated that you might act in advance of actually securing a contract if you believe the need is clear, which you know, I'm sure is based on having, you know, consistent and extensive conversations. With with potential customers. So can you walk us through what, if any, are potential low-cost initiatives that you might be able to do to shorten the startup time in activating a a currently idled facility.

Sure. This is, this is Patrick. So to give some background, we have been taking steps since the late third quarter of last year to make sure that we were prepared to meet the governor government's demand need as quickly as possible. And so we put together internal activation team built an internal project management plan for each of our facilities. We've gone and done a significant amount of the pre-activation work in those facilities to make them ready for receipt of populations. In the past, that might have been something we would have done on a pre-award basis. And so we're acting in advance of an award to make sure the facilities are prepared. Each location, we're trying to evaluate relative priority for activation timing. And so we're having conversations with our customer on a consistent basis. Trying to identify those facilities that might be highest priority. We can take steps forward as in putting our facility leadership teams in place. We can have our advertising marketing plan ready, our training teams ready to go, And so the ability to hit the go button on those activities very rapidly positions us well to shorten the timeline at which it would take to receive the first detainee. We're trying to remove any barriers that we can remove to allow us to accelerate the activation timing and we're trying to react in in a prudent way but also in an aggressive way in those locations where we believe we have the greatest to act quickly to make sure that, again, we can shorten that time horizon. And so as they've talked about, if we would look at traditionally a four to six month time horizon, if we have high levels of certainty that we may be moving forward, We may be able to take two or three months out of that timeline prior to the receipt of the first detainee. But, again, that's gonna be situational, and there are so many locations We don't think it prudent to lean that floor forward in every location but we are going to do that where that makes sense and where we believe the priority is highest.

Okay. Got it. So so then the six months could be just, you know, your You know, you are being very conservative, and it could be shorter than that depending upon what we do now, depending upon where the location so would it be fair to think that the the earlier activations would be at locations where you're already doing some prep work. And so that four to six months is probably a little too long for the the first and maybe second location if, you know, if things go the way you know, we're expecting,

I think that's a fair assessment. We are going again, we're prioritizing those facilities that we think would be a priority for our customer. We're leaning forward in those locations, progressively in some cases. And so we wanna shorten the timeline as much as possible. Now the the counterbalance then is we wanna make sure when we activate, we activate well we're able to deliver high-quality services in a safe secure, and humane environment. And so to do that, we traditionally have said to six months is optimal. But again, we've shortened that time horizon and so I can argue that we're thirty days or sixty days into activations already at a couple of locations. Based on the steps that we've already taken if we were to compare that to history. So I think short answer would be yes. We are working to to activate more quickly. If we get to a place in the activation where we are ready for the receipt of the first group of detainees, then we certainly would provide that opportunity for ICE that we would Alright. Not constrain their ability to use that capacity if we were ready sooner. We're gonna strive to do that.

Okay. Great. Thanks. And last question from me is specifically on the South Texas facility, if that were to be, you know, renewed as a as an under an ICE contract, I think the last contract was terminated because it was operating under a model that was significantly higher cost model. Than the standard one in most of your facilities. Would the facility require any retrofitting or, you know, significant changes in order to go forward as operating under a more standardized contract?

This is Damon, and thank you again for that question. I would say very modest. I mean, again, we've only had a deactivated, you know, about six, seven months. And so there is some stuff that we're working on, with with Target, but the pretty modest to your point because I said it was just recently deactivated.

Mhmm. Okay. Thank you.

Thank you. And our next question comes from the line of Kirk Ludtke from Imperial Capital. Your question, please.

Hello, everyone. Thank you for the call. Guess the can can you talk a little bit about How ICE deportations might ramp and And how you're protecting yourself with contracts that have maybe Minimum beds and contract length and, you know, how all that how all that might work and you know, how you protect yourself.

Thank you so much for your question. This is Damon. And short answer is that we expect that the structure of our ICE agreements or new agreements that we will have with ICE would be very similar to what we've done historically. So to your point, it's very, very clear on how fixed cost within the facility. ICE stands very agreeable and understands the reason behind that. So we think those type of features that are in our contracts previously would be in the contracts that would be going forward. Either new contracts or maybe modifications to existing contracts where ICE would be a a user or a a rider. The other thing I will say, as I mentioned, earlier, the value proposition, us versus you know, other all alternatives. I kinda went through the six factors that give us, we think, a superior edge on this other alternative. I wanna be very clear on this. We don't see that as an either or. We actually see it as a both of them being utilized. I think it's important to reinforce that because again, if they're looking at numbers at a hundred and fifty thousand to two hundred thousand, you obviously heard what we're proposing, and you've heard some of these other all alternatives. They're gonna need really all that capacity to meet the mission and the needs with numbers that you're looking to get from from congress. So I think that's an important point too.

That's helpful. Thank you. And I it hasn't come up on this call, but I are are you hearing anything on ISAP and how the new administrator Alternatives to detention?

Not much, to be honest with you. As I mentioned earlier, I mean, the again, it's it's almost hourly that we're we're talking to to ICE and members of the administration. And, again, the focus is been all on detention. And so all the all the discussion, all the proposals, all the information we're getting given to them on cost. I mean, we've got active tours going on at either vacant facility, the current operating facility. It's all been around detention. So we're prepared. We we think, you know, that potentially that could be a tool they'd look out down the road, and we've obviously a well recounted to this group our capabilities on that front and we think we're well positioned if the need is there. But again, that's not been top of the priority list. These are near and near term.

Got it. Great. Thank you. And then last, last topic. Mentioned acquisitions a couple times in the prepared remarks. Are are you are you thinking about others the idle facilities of other other operators, or are you thinking about actually buying other operators?

It's a little bit all of the above. So our our real estate team is really good. They have a database of all vacant facilities nationwide. That they look at a regular basis, and they look at that compare the factors rolled up to the age of facility, the size, the location the labor market, etcetera, etcetera. And so we've continue to kinda keep that refreshed. And if we think there is an opportunity, through an acquisition or maybe through a lease or maybe just to have the right first refusal if there was a need expressed by ICE in a certain location We just wanna make sure we get ourselves prepared. So that's that's an active again, analysis that we're doing with our with our real estate team. And the other thing is not to your question, but it's, I think, important to note is that you know, majority of our facilities have a lot of space. That means space, property, and availability around the actual physical structure will re operate, where we could expand either inside the actual facility itself or maybe outside fence. And so that's also part part of the analysis. And so just trying to get ourselves prepared again. If the number is gonna be a hundred and fifty to two hundred thousand beds from ICE, we wanna get ourselves prepared for, not only the near term, but also the long and look at all these alternatives.

And I'd add Kirk. We're talking about acquisitions in the core business, so they'd be that look very similar to what our existing facilities look like. We wanna make sure the cash flows are gonna be sustained over the long term. Because we have seen a number of assets become available in this marketplace, but we're gonna be very disciplined.

Great. Thank you for the extra time.

Thank you. And our next question comes from the line of Jay McCanless from Wedbush. Your question please.

Hey. Good morning, everyone. So the the first question I had And and I think, Nancy, part of this, you were talking about the marshal service. But if we think about now the the rules have essentially been reset where we were pre-COVID, that you can do business with Marshalls at BOP. I guess, what's what's the path to getting safety occupancy back up above eighty percent and keeping it there longer term?

Thank you for that question. And your is your question more about the Marshall service or more just just generally about Yeah. Just in I mean, now that now that you have the flexibility to work with with the BOP and and the subsidiaries of the BOP again, that along with with what you you guys have given us on on ICE, etcetera. Yeah. Absolutely. Well, yet, I mean, recounting all the opportunities with ICE, I mean, you can get to that number just that customer alone to your eighty-five percent number you mentioned a second ago. But let me just maybe just do a quick headline on the Marshall service. I mentioned this in the script, but it's worth noting. I mean, Marshall service, I think nationwide population around fifty-four thousand. That got us high, I think. Sixty-six, sixty-seven thousand under the previous Trump Trump administration. So that also could be a meaningful opportunity. In fact, again, we didn't really talk about this in the scripts, but, you know, that's another customer that is knocking on our door. We're already having an active conversation with the Marshall Service on facilities that maybe they weren't able to access Recently, they're interested in potentially writing on ICE contracts, or maybe using the higher utilization in their existing contracts. So more service that actually that engagement with us has picked up pretty here in the last thirty days. Anything you'd add to that, Dave?

I I was gonna say exactly what you did with, you know, October reduction of over ten thousand detainees. Since know, early two thousand late two thousand twenty, early two thousand twenty-one. So there's a large opportunity there. Would expect as US attorneys get put in place we would expect those populations to increase. So that that that is another opportunity that perhaps underappreciated by the market. That is is focused on ICE right now. And and our state business, you know, with the the contracts we've we've entered into over the past, you know, got a year plus, Montana's as early as as recently as last month, Wyoming, and a and a couple counties as well. We do see growth in the state business. So we see a number of avenues to get to the mid-eighties in terms of occupancy.

Yeah. That's a good point to kinda reinforce what Dave just said on the state side. I mean, we're really thankful for the recent contracts with Montana, but we, you know, as you know, we've had recent contracts with Wyoming and with Idaho and even a couple of counties. And our Sahuaro facility out in Arizona, I mean, as a result, a couple of those contracts coming together, we're at full utilization there at that facility by the first time in probably a decade at that facility. So lot of great kind of activity going on with state business right now and some of these contracts that we've gotten recently.

That's great. The the second one I had talked earlier in the script about two hundred to two hundred seventy-five million and potential incremental EBITDA. Can you walk us through where that comes from again, please?

Yes. So that was the EBITDA that is we could potentially generate if we activated all of our idle capacity and the South Texas Family Residential Center. So it's little over fifteen thousand beds in total.

Great. Then the only other question I had, I think you've addressed this earlier, but when you when you think about potentially rising inflationary environment tariffs, etcetera, and the cost of certain things starting to go up again. You know, I guess, how how comfortable are you with the discussion you're having with being able to cover costs especially if costs start to move against you for the different things you have to provide in into the facilities.

We work very closely with all of our vendors and have strong visibility and in some cases have made pre preemptive purchases on goods that are necessary for the activation of our facilities. So in the short run, we feel very good about how we're positioned and our ability to provide our beds in a cost-effective way that would be consistent with historical spend levels. Obviously, we'll have to watch over the long term to the extent the environment shifts and changes, then obviously have to be sensitive to that. But when you look at the mix of our cost structure, about two-thirds of our cost structure staffing. So it's a combination of staffing and benefits. If you were to look at actual supplies that you need to operate the facility, it's relatively small as a percentage of overall cost structure. So that's not to say that we're not focused on it. But in terms of where we're most sensitive to inflation, it's going to be on staffing and benefits. And we feel like we're very well positioned at the market Right now, for their ability to hire and retain staff.

And, you know, if I could just add one thing. One thing I would add to that is that I think you're aware you know, under federal contracts, we have to pay wage termination. And if the wage termination from one contract period to the next goes up, we have we have to do that raise. The wage termination tells us, okay, the new salary is this, so we have to raise those salaries. It's directed by the wage termination, but we also get reimbursed dollar for dollar from the federal government through higher compensation. And so that's a nice feature in the federal federal contracts if we are an inflationary environment and that does have an impact on salary and wages, get reimbursed from that from the the federal government.

And, of course, a hundred percent domestic operations. So unlike many other companies in corporate America, we don't have to to worry so much about tariffs.

Yeah. As Patrick mentioned, you know, we do have some supplies and things like that that would be potentially impacted. But when two-thirds of our costs are in salaries and benefits, that's that's a small component of our expense structure.

Understood. Great. Thanks for taking my questions.

Thank you, Jay.

Thank you. And our final question for today comes from the line of Ben Briggs from Stonex Financial. Your question, please.

Hey, good afternoon, guys. Thank you for taking the call and the questions.

Hey, Ben.

Yeah. Hey. So I know we've already touched on this a few times, but I just wanna make sure that I understand numbers correctly. So you currently have a proposal in front of us for up to twenty-eight thousand beds. Is that correct?

That's correct.

And if fifteen thousand of those beds are activated, that could result in up to one point five billion of additional revenue and two hundred to two hundred and seventy-five million of additional EBITDA.

So yeah. Let me I'm a tag team with Dave. On the revenue side, what I was doing the total office, the twenty-eight thousand, So if you do Oh, got it. Yep. And then Dave will walk you through the math on the contribution.

Yeah. So I was just given the contribution from the idle bed that we have. Again, that's assuming every one of our idle beds is activated. At at a margin at a margin consistent with where we have historically generated margins from the federal government. So if you do back into the math, that's probably seven hundred fifty to eight hundred million of revenue.

Okay. So the fifteen thousand doll the the fifteen thousand beds would be around seven hundred and fifty million of revenue and anywhere between two hundred million and two hundred and seventy-five million of additional EBITDA.

That's right. Seven fifty to eight hundred million. Yep. Of revenue. Yep.

Got it. I just wanted to make sure I had those numbers straight. Thank you for that clarification. And then I'd say the majority of my not asked just by way of kind of managing this and and being able to put heads in idle beds, are you able to mix populations? So, like, can you put in an ICE detainee with a state or US marshals detainee? Or does that depend by the contract? Or are are there any restrictions around that?

This is Patrick. So that each facility is designed a bit differently, but facilities can be very flexible in terms of housing. New populations. Our Tallahatchie facility in Mississippi presently houses eight different customers in that facility. We're able to manage the services for each of their individual contractual requirements appropriately. Based on some combination of combining customers in a housing unit and separating them. Generally, what you're going to see in a facility is you're gonna have separation by pod. And so you would not have the US Marshals Service and ICE, for example, in the same pod, but you could have them adjacent. And so our response and of the populations in a way that allow us to deliver services appropriate for each of those customers. But our facilities are designed in a very flexible way that allows us Maximum. Maximize utilization of the pockets of beds that we do have again, while maintaining appropriate levels of separation.

Understood. Got it. Got it. Obviously, we've been talking a lot about capacity here. And everything from, you know, using, repurpose repurposed space to maybe even M&A. Is there any chance of, like, brand new facility builds, or is that something that might be farther out?

That that's a possibility to say, Damon. That's a possibility. But, you know, again, based on what we've got in our system today, our capabilities and the again, the various kind of building blocks that make up the the total amount of the twenty-eight thousand, And, again, also our capability of the attention to expand facilities And then finally, you have facilities that may be out there today that we could you know, buy, purchase, lease, or maybe, have right of first refusal. I don't see that as a kinda near term kinda need or opportunity, but but also will be you know, watching closely to, again, see what, you know, ICE is total funding is and what their need needs are. But I think we've got a lot of capability right in front of us to provide a lot of support for ICE and their current mission. And expanding mission.

Got it. Got it. Okay. Thank you. And then final one from me is gonna be so the the new executive order that basically lifted the the prohibition on new or renewed department of justice contracts. Now that that's formally lifted, do you see anything by way of new bureau of prisons opportunities? I know that BOP was a relatively small percentage of revenue even immediately prior to Biden's executive order. But I'm curious if you see any opportunities for growth there.

Yeah. It's a great great question, and I'll give you a two answers. One is that, you may be aware that the most recent director, she left the agency, I think, within the last two weeks. So they're currently being led by an interim director. So I think the first part of the answer is that once the permanent is selected and he or she is in place, then obviously, they'll have a vision I'm sure the layout, not just for the agency, but also the partnership with the private sector. So that'd be Part a is the answer. Part b, the answer would be is what I alluded to earlier. We do we do get the sense there's a lot of frustration and consternation, especially with this new administration, about the lack of increase of community confinement and halfway house beds. As a result of the First Step ActDamon T. Hininger: And so what we're hearing pretty loudly is that they think there's an opportunity to lean on the private sector to really substantially expand that part of the business. Now that wasn't impacted by the executive order, but we do think kinda near term the bureau is gonna look to the private sector to significantly increase that capacity again for both home confinement, community confinement, growth for halfway house beds.

Okay. Got it. That's incredibly helpful. Thanks very much, guys. And that's it for me.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Damon T. Hininger for any further remarks.

Alright. Thank you, sir. Well, thank you all so very much. A lot of great questions and sorry we went over a little bit, a lot of great detail. As you know, we've got a lot of activity going on in the organization, a lot of opportunities. So it's a very exciting time within the company. As always, we're grateful for your support, your advice, all that you do for us, and all that you do to invest in our company. So we're excited about the near term and looking forward to sharing our results here in the coming days and weeks as we lead up to the second quarter. Thanks, everyone, for calling in today.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.