Good day, and thank you for standing by. Welcome to the Q4 2025 CoreCivic Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to Jed Bachmann. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to CoreCivic's Fourth Quarter 2025 Earnings Call. Participating on today's call are Patrick Swindle, CoreCivic's President and Chief Executive 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 2025 as well as financial guidance for the 2026 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 our 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 2025 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and also 8-K reports. You are 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 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, Patrick Swindle.

Thank you, Jeb. Good morning, and thanks, everyone, for joining us for CoreCivic's Fourth Quarter 2025 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 my opening remarks, I will hand the call over to our CFO, Dave Garfinkle, who will provide greater detail on our fourth quarter and full year 2025 financial results as well as introduce our 2026 financial guidance. Dave will also provide an update on our capital structure, including activity on our share repurchase program and other balance sheet initiatives. First, I'd like to provide an update on our activation activities, where we continue to move towards stabilized occupancy in mid-2026. As a reminder, we announced new awards in the second half of 2025 at the 600-bed West Tennessee Detention Facility, the 2,560-bed California City Immigration Processing Center, the 1,033-bed Midwest Regional Reception Center and the 2,160-bed Diamondback Correctional Facility. While 3 of the 4 previously idle facilities continue to receive additional populations, the fourth, Midwest Regional, continues to experience a delay in the intake process as we await the result of a special use permit application that we filed in December 2025. We've been engaged with the city on the application and the conversations have been productive. In aggregate, and excluding Midwest Regional, these 3 new contract awards are expected to generate annual revenue of approximately $260 million once our operations normalize. Once we reach stabilized occupancy on these previously idle facilities, which we expect to occur during the first half of 2026, we expect our annual revenue run rate to be approximately $2.5 billion and our annual EBITDA run rate to increase by almost $100 million year-over-year to approximately $450 million. This is not counting Midwest…

Thank you, Patrick, and good morning, everyone. In the fourth quarter of 2025, we generated GAAP EPS of $0.26 per share and FFO per share of $0.51. Special items in the fourth quarter of 2025 included a $1.5 million net loss on the sale of assets and $0.7 million of M&A charges reported in G&A expense. Excluding special items, adjusted EPS was $0.27 compared with $0.16 in the fourth quarter of 2024, an increase of 69% and normalized FFO per share was $0.52 per share compared with $0.39 per share in the prior year quarter, an increase of 33%. Adjusted EBITDA was $92.5 million compared with $74.2 million in the fourth quarter of 2024, an increase of 25%. Adjusted EPS exceeded average analyst estimates by $0.09 per share and adjusted EBITDA exceeded average analyst estimates by $9 million. The increase in adjusted EBITDA from the prior year quarter of $18.3 million resulted from higher demand and utilization of our solutions by our federal and state partners, including revenue from ICE that more than doubled. The number of ICE detainees in our care followed national trends, which reached record highs during the fourth quarter of 2025. We manage approximately 23% of total ICE populations as of both December 31 and September 30, 2025, compared with approximately 25% at year-end 2024. Revenue from our state partners grew 5% and included notable increases from Georgia, Colorado and Montana. Results for the fourth quarter of 2025 reflect the full activation of the 2,400-bed Dilley Immigration Processing Center, which was completed in the third quarter of 2025. Funding for this facility was previously terminated effective August 9, 2024, and the facility remained idle until its reactivation in the first quarter of 2025. Fourth quarter results also included start-up activities for new contracts at our 2,560-bed…

[Operator Instructions] And our first question for today will be coming from Raj Sharma of Texas Capital Bank.

I was -- so there were no new reactivations in 4Q. Was that because of the government shutdown or the year-end? Also, there's been a lot of talk of warehouses.

So to answer your question -- this is Patrick. So there were no new contracts that we entered into in the fourth quarter. We have been in active dialogue with our customer, and we're always exploring different ways to support their desired enforcement approach. And so I would really look at the pacing of additional capacity is driven by bed demand. We've obviously have available demand within facilities already activating as we believe our peers do as well. And so you would expect that additional capacity would be added as needed to reflect that. And so I certainly wouldn't take the fourth quarter not having a new award is indicative of lack of potential additional demand. It's more reflective of, I think, the ebb and flow of demand that's presenting, and certainly, we're well positioned with 7,000 beds that are presently available in idle facilities, additional 5,000 beds within existing facilities that are immediately available for use. So again, we think we're very well positioned, both with existing contracts and potentially idle facilities as that demand manifests in a way that requires additional contract actions.

Next question is coming from the line from the line of Matthew Erdner of JonesTrading.

You talked a little bit about the safety margins and kind of the expectation for those to improve. Is the decline in margin there just kind of as you guys activate these facilities, bring them online, like you're talking about with California City and Diamondback.

Yes, this is Dave. So absolutely, that's correct. I think if you backed out the 3 facilities that were being activated during the quarter, our margin was around 24%. And so as those facilities do reach a stabilized occupancy in the first half of 2026, we would expect that margin to continue to grow.

Got it. That's helpful. And then as a follow-up, you talked a little bit about the increased opportunities specifically to manage other facilities. What's your confidence on, I guess, gaining the capacity for you guys to bring in employees, get it staffed up. Are there any concerns there with staffing that? Just, I guess, what's the dynamic right there at the moment?

So we reactivated our South Texas, our Dilley facility, very quickly, we're able to staff that rapidly being able to deliver our activation sooner than we had expected or modeled initially. In our other locations, we've been very successful in being able to staff up. And so we do not believe that our ability to staff would be a limiter in terms of our ability to offer or use our bed capacity. The team is very well structured. They developed operating plans coming into 2025 that would allow them to be able to respond quickly when a new facility activated we've made preemptive investments across our portfolio to prepare those facilities for use. So really, we don't see an inhibitor in our ability to activate either through capital needs or through staffing challenges, our ability to quickly respond to demand if it presents.

And I'd add, Diamondback, we actually didn't expect that to start taking detainees in until January but we actually activated that one earlier or began accepting detainees earlier in late December. It didn't have a big impact on the quarter, it was very late December, but it was indicative of our ability to hire and meet the demands of our partner in that case.

Our next question is coming from the line of Greg Gibas of Northland Securities.

Patrick, Dave, congrats on the results. Wondering if you can maybe speak to the current contracting environment and how your dialogue with ICE and the DHS has trended of late, and also maybe wondering along those lines, if you could or would be willing to opine on the recent headlines related to the Minnesota pullback that Homan announced and possibly investors misinterpreting that as a national mandate change.

Sure. So for -- with your first question, the way I would answer that is we are a constant dialogue with our customer as we assess what their needs are and try to evaluate how we can participate in that. And so that dialogue is very consistent today as it's been all along with both current and prior administrations. So we would expect to be actively engaged at all times and discussing what is the need, how can we best support that need? Is that a need that we can deliver high-quality outcomes in a way that we believe we can be successful in supporting their mission. So that's something that we're obviously always focused on always ensuring that we're well positioned to be able to step into those places where we believe we can be helpful to our government partner. If opportunities present in a specific way that would give you more detail, we're certainly going to do that. At this moment, there isn't a specific update I'd give you in terms of pipeline opportunity, but I can assure you that we remain an ongoing dialogue around how we can best support our partners' mission. Second part of that question is, I think you really have to pan back to national enforcement activity and approach. At any given time, ICE is taking different enforcement approaches across the country. And so I think if you were to look at Minnesota, specifically as a discrete example, that was a larger scale discrete enforcement action that obviously is a bit different than what we've seen around the country. And so I think to extrapolate the activity or the action that was discussed this morning nationally, I think it's difficult because I think that was a unique enforcement action. And so if I look the country, I, at this point, don't see meaningful changes in enforcement style or approach as that approach has not been consistent with what we saw in Minneapolis because it was a large-scale discrete initiative.

Great. That makes sense. And if I could just maybe ask if you're willing to share any more color on buybacks and intentions there. in terms of shares bought back for the year and like 5% in Q4, pretty impressive. And I just wanted to see if you could provide any additional color on maybe your -- how aggressive you'll be with buybacks going forward?

Yes. Sure, Greg. This is Dave. I'll take that one. Yes, it was a pretty active quarter. We had indicated we were going to double the pace of the first 3 quarters of 2025 in the fourth quarter. In fact, we bought back more than double the pace in the fourth quarter. We bought back an average, I think it was $18.25 in the fourth quarter, obviously trading lower than that this morning. So we're expect to continue to buy back shares at this price. Even at the $18.25, we felt like it was a good buy trading at a significant discount to our historical EBITDA multiples. So yes, I mean, that's -- we have full support of the Board. So I expect we would continue to buy back shares subject to any legal limitations that there are.

Our next question is coming from the line of Ben Briggs of StoneX Financial.

Congratulations on the quarter and the guidance. I've got a couple of quick ones here. So fiscal year guidance is for about $441 million. And I know you said during the scripted portion of thecall that $450 million-ish is kind of the new EBITDA run rate. Can you just clarify, does that $450 million EBITDA run rate include the 2 new contracts that you discussed at the beginning of the call, but not the Midwest Regional Facility?

Yes, you got it exactly right.

Okay. All right. Great. And then over and above that, if you were to activate the Midwest Regional Facility, what do you think the potential EBITDA upside from that would be?

Well, we wouldn't disclose the EBITDA associated with that facility. I think we did disclose the revenue associated with that facility. So that's probably the best data I could give you. As you look at our full year guidance for 2026, we do expect still to be at the $450 million run rate in the second half of the year. So if you just back off half of that minus the -- or $441 million as the midpoint of our guidance minus $225 million for the second half of the year, you get to a little over $100 million per quarter in Q1 and Q2. So that's pretty detailed. There is that dip, as I mentioned in my prepared remarks, from Q4 to Q1. The $0.04 decline from Q4 to Q1 for unemployment taxes and utilities. Yes, and Midwest was a $60 million annual revenue.

And just to add a bit, I would say, when you look at the guidance that we have provided, it assumes no new incremental contract wins. So whether that's Midwest Regional and ability to activate that facility under the final approval of the SUP, which we're optimistic regarding -- but also any other new business opportunities that present would also provide incremental upside. So in terms of visibility into the guidance, this is probably the greatest visibility that we've had in providing guidance in a number of years, given the pace of growth that we're anticipating in 2026.

Understood. Understood. I appreciate that. So I guess my follow-up was going to be, so you have these -- you've got 5 idle facilities that you said have 7,000 beds over and above these new contract wins? And then did I hear you correctly when you said with surge capacity very -- the total room for additional population you could have is up to 13,000 beds.

That's correct.

Understood. Okay. I just wanted to clarify that. And then finally, I just want to touch on the revolver that you guys upsized in the share purchases. Does drawing the revolver remain an option for share repurchases? Or are you more likely to fund those repurchases with cash from operations?

Well, if you take our annual guidance, we always like to use AFFO as kind of the proxy for cash flow available for growth opportunities and buybacks and if you back out the growth CapEx that we have for the activations of the idle facilities, you're somewhere in the neighborhood of $200 million of annual cash flow. So that would be available throughout the year without increasing leverage. But certainly, the revolving credit facility can be used for whatever we wish it to be used for. So yes, it is available.

Okay. Understood. I appreciate it. Thank you guys for the call and congratulations again.

Thank you.

And the next question will be coming from the line of M. Marin of Zacks.

So I have a couple of housekeeping questions because you've answered a lot of a lot of things on the call and in the Q&A. You did say during the prepared remarks that between the idled facilities that could be reactivated and other means you have significant capacity for if and when new contracts come online. So in 2025, you made that one acquisition of Farmville, are there any other potential small tuck-ins that you've seen come up that might be on the horizon? Or there's -- it's very remote that, that would be an opportunity.

We have a business development team that's always actively out looking at opportunities that may be available. And so certainly, there's nothing that I would say that's imminent today. But we are going to evaluate opportunities that present. And from time to time, there may be opportunities to look at circumstances or situations that would be similar to Farmville. Obviously, we recognize where our stock is trading, and it's incredibly valuable at the current trading multiple. So a multiple would have to be pretty compelling to be better than our current stock price. But we do, on occasion, see those opportunities. And if they do, and we think it's a good strategic fit, we would avail ourselves.

Okay. And then one other question, which is -- and I think other callers, other participants have tried to get at this as well. You have substantial liquidity, and I think that there's potentially a sense on the Street that your liquidity cannot support everything you're trying to accomplish between satisfying new demand for capacity, potentially increasing capacity through reactivating idle facilities, the share buybacks and other potential growth initiatives. Could you just touch upon that, particularly in light of the potential for delayed payments from some of your government partners.

I think I know where you're going with that. So yes, I mean, we had at December 31, over $300 million available on our revolving credit facility. So really feel like we've got plenty of liquidity to execute our strategy even despite a slowdown in some collections of receivables. So that -- we had -- gosh, it was close to $100 million in cash on top of that. So we are not liquidity-constrained in executing our strategy. So yes. And also during the fourth quarter, expanded our revolving credit facility by $300 million through a supportive bank group. So that bank credit facility is now up to $700 million. So we don't feel like we're constrained at all by liquidity.

And maybe to build off that, we've maintained a conservative leverage approach as well. And our EBITDA is certainly growing faster than our lever debt at this point. And so when you think about leverage policy, we're certainly going to continue to maintain a conservative approach. We're going to maintain appropriate levels of liquidity. We did make meaningful investments in the facilities, our idle facilities in anticipation of activation. So we did a bit of preloading in terms of the capital that would be necessary to support activation. So we're going to continue to make measured investments as appropriate, take advantage of opportunities to buy back stock based on its attractiveness. But at this moment, there's nothing that we see on the horizon that would cause us to believe we're capacity limited from a capital perspective.

And our next question will come from the line of Bill Sutherland of Benchmark.

I thought I'd zoom out a little bit here, just thinking about what the growth trajectory might be over a multiyear period for you guys given the given the visibility you have with ICE to '29 and some of the emerging state demand. I look back at EBITDA, even back to '09, and it's kind of been in a very steady range, but no discernible CAGR. So I just wondered how should we think about a potential CAGR here for the next 3 or 4 years?

That's a great question. I think as you've said, you've gone back and done a historical review of the growth rate of the company over multiple years. And I think that's important in that what you typically see is that growth will come in periods of demand with very specific customers. So if you look back over the history of our organization, we've gone through periods where we would see significant demand from the State of California, for example, or a significant demand with the Bureau of Prisons or, at present, we're seeing meaningful demand from immigration and customs enforcement. What we know is that you've got large aging infrastructure for many of our state and federal partners you have demand needs that are presenting as both populations grow and service offerings are changing, and we believe we're in a position to provide that. And so I would say we're always going to be in a position where we've got the greatest visibility a year out. but our team is obviously focused well beyond this year and future periods. So I'd love to give you a more precise answer in terms of what would be sustainable growth after the current period. But obviously, that's something that we continue to be focused on, and we'll give updates as our pipeline develops both with other federal and state partners as well as we consider potentially other ways to deliver services to our customers, as we mentioned earlier.

Okay. And you can't get through a conference call now without a question about AI. So are you all -- I guess, what are some of the ways you can apply it to your business model? Obviously, I think this kind of business is going to be a net beneficiary or just pure beneficiary in terms of efficiency. So how do you think it can be used in the organization?

Well, there are a number of ways that we have contemplated use of AI in our organization. I think the most obvious in straightforward is in back office efficiency. So as we think about our ERP systems and we think about the ways that we support our facility operations from administrative perspective, we're certainly seeing opportunities to enhance the way that we currently deliver those services. Out in our facilities, there are always opportunities to enhance what we're providing. So whether that be educational opportunities for the individuals in our care. Whether that be security tools that we can use both to actively monitor and make our facilities more safe. Whether that be making our cameras smarter as we're trying to evaluate activities that are occurring in the facility. There are a number of pilots that we have underway across the organization to explore how we may be able to use AI to enhance our services. But I would say we're also very sensitive to the fact that we are in an environment where we're managing care for individuals and want to be sensitive to what we use and how we use it so we can ensure that it's being used effectively. So we do hope to give updates in future quarters. We did make a meaningful investment this year in our team. We hired an executive leader, Laura Groschen, to step in as our Chief Information and Digital Officer. So I would view that as indicative of the investment that we're making to bolster our technology team and grow and build out our capabilities. We do believe that's part of our future. And again, we'll have more to update on future quarters as we were able to talk more specifically around some of those opportunities, some of which may be ultimately commercializable.

And our next question comes from the line of Joe Gomes of Noble Capital.

So let's go a little blue sky here. You talked about potential upside for Midwest. But let's assume ICE has got the 10,000 new enforcement employees up and running, increasing the pace of detainees out there. I think you've talked about 12,000 or 13,000 beds between existing contracts and idle facilities. If we got to the point where ICE was to contract for those beds or fill all of those beds. What could that mean for upside in terms of revenue and EBITDA?

Well, it's a tough question to answer. I guess if you took 13,000 beds, an average per diem, I don't know, just say, $125 a day. That's $593 million of incremental revenue. And if you assume we're on a 23% margin in the fourth quarter, that's $136 million of incremental EBITDA just to kind of use publicly available numbers in our reports.

Okay. So it's a potential nice upside, again, blue sky, but just -- would be nice to see that. And then one of the big questions, I think, a concern for investors out there has been the pace of detention by ICE that it's been below what people -- investors had thought was going to be, I think people thought we'd be at that 100,000 level. We're at 70 -- a little over 70,000 here. And what is your kind of viewpoint here? What's your -- what are you seeing in terms of the pace of detention? Have you seen it starting to crawl back up here and we're still waiting to kind of see more of a measured pace here in terms of retention?

So I would answer that through a couple of lenses. I guess one of them is if you go back to the end of the prior administration coming into the current administration, you were looking at roughly 45,000 funded beds that were operational. And so you now have increased just over 70,000 beds in a fairly short period of time. I think one of the things that at least has been apparent to me throughout this process is the expectation that one can see a significant change in the infrastructure and ecosystem occur immediately. And when you're looking at the way that ICE approaches enforcement action, nothing occurs immediately. And I think as maybe you or someone else noted, the organization had not fully ramped its team until really the end of the year last year. So as we think about timing, it does take time because it is a very complex ecosystem. And as that ecosystem grows, it's going to result in additional bed demand, it has been slower than I think some thought might occur. But certainly, when you look at -- take a step back at the 30,000-foot level and look at the magnitude of scale that's already increased as well as the timing of when the additional enforcement infrastructure was put in place, one can reasonably expect you would see continued growth.

Okay. Great. Congrats on the quarter.

Thanks, Joe.

Thank you.

And the next question is coming from the line of Kirk Ludtke of Imperial Capital.

Patrick, David, can you hear me? In your prepared remarks, I think you said at year-end, ICE detained what, 69,000 and of which you detained 16,000. Occasionally, you see press reports that ICE is exploring other ways of housing detainees, repurposing industrial spaces, warehouses, things like that. I'm just curious where that stands? Do you know offhand how many people are detained in facilities other than the facilities, your facilities or GEOs facility?

Yes, I'll take that one, Kirk. Yes, correct. The administration has pursued a number of alternatives since the beginning of the administration. You had facilities like Guantanamo Bay, Alligator Alcatraz, some international options, some state capacity blocks of state capacity. And I would say, I think the last time I looked at the total the total number of people in detention in those alternatives, so somewhere in the 5,000 range.

Okay. Is that pretty stable or maybe I hate to ask you to provide guidance on something like that. But I mean, do you see that increasing? Do you think that's a viable alternative for ICE?

ICE is going to continue to look at different ways to meet their capacity requirements. And as you look at, obviously, the bed need and availability, we have beds available in specific parts of the country. Our competitors have beds available in specific parts of the country. Sometimes the demand can be national. Sometimes it needs to be more localized. And so depending on locationally where that demand is manifesting, you could see traditional capacity used or you could see other alternatives use. I think there's certainly a lot of exploration in terms of different ways that the goal and mission can be accomplished. And we believe we could be part of some of those. And some of those are probably not best suited for our business model. But certainly, I think that will be an ongoing conversation as the administration thinks about how they can best innovate service delivery and make sure that they have the right bets in the right location they need to support their mission.

Interesting. So it's not that the populations are different. It's more of a geography -- geographical consideration?

We don't see meaningful differences in populations across the facilities that we operate. So obviously, there are classification differences within each facility, but -- and facility type is really -- it's less about having a dedicated specific type of facility for a particular population than it is about being appropriately located geographically based on where demand is presenting. Again, some demand is national. So it doesn't matter the location as long as you have a transportation infrastructure that's in place to be able to support that mission. In other cases, there's a preference that it would be in specific areas where incremental need may be higher which may make a distant facility not as viable.

Got it. Okay. That's very helpful. I appreciate it. And I don't know of anywhere that ICE actually discloses the level of actual deportations or detentions. But did you -- if that's available, I'd be -- I'd love to know, or any way to back into that. But do you see anything on the horizon that would allow detentions to step up other than just building out the network incrementally? Do you see any big events that facilitate a ramp in detentions?

I believe it's really the build-out of the enforcement infrastructure and the completion of training of those individuals who are being hired and then those folks being deployed to go out and enforce the mission. So I don't view it as much sort of a singular event as I do a progressive build of infrastructure that results in higher levels of enforcement, assuming that the policy remains static.

Thank you. And this does conclude today's Q&A session. I would like to turn the call back over to Patrick Swindle for closing remarks. Please go ahead.

Thank you, operator. Since there are no further questions, I'd like to thank you all for joining our call today. We take very seriously the responsibility that we have in managing care of more than 55,000 individuals each day. We're grateful for the confidence our partners place in us as our 13,000 employees strive to deliver the highest quality services and programming for those in our care. Just this last weekend, we were able to celebrate the exemplary service of 3 of our correctional facilities and 3 of our residential reentry facilities at the triennial ACA reaccreditation hearings with near perfect scores. This is just a small example of the work our team does but is indicative of the excellence that we aspire to every day. Our team has also done an exceptional job delivering positive results in our core portfolio and successfully ramping our activating facilities. Our guidance with assumed EBITDA and EPS growth of 21% and 40%, respectively, both at the midpoint is the most significant annual growth of our organization as forecast in many years. As a reminder, this growth assumes only already awarded contracts, excluding Midwest Regional, which is successfully activated would be additive to this initial guidance as would any additional opportunities that present to provide additional services to our federal state or local partners. Lastly, we believe that our shares remain significantly undervalued. Using the midpoint of EBITDA guidance, our shares are currently trading at roughly 6x forward EBITDA, well below our historical trading ranges. We're obviously evidencing our view of value with an active share repurchase program that increased in intensity during the fourth quarter while maintaining our consistent balanced leverage position. We're optimistic that as we successfully deliver on our outlook for this year, we'll see this value recognized in our shares. With that, operator, we'll close out our call for today. Have a great day, everyone.

Thank you. This concludes today's conference call. You may now disconnect.