Greetings. And welcome to The GEO Group First Quarter 2018 Earnings Call. At this time, all participants will be in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Pablo Paez, Executive Vice President, Corporate Relations. Mr. Paez, you may now begin.

Thank you, Operator. Good morning, everyone. And thank you for joining us for today’s discussion of The GEO Group’s first quarter 2018 earnings results. With us today are George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; Ann Schlarb, President of GEO Care; and David Donahue, President of GEO Corrections & Detention. This morning, we will discuss our first quarter results and current business development activities. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our 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. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements, regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ 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 and CEO, George Zoley. George?

Thank you, Pablo, and good morning to everyone. We are very pleased with our first quarter results by our diversified business units which achieved several important operational milestones during the first year. In the United States, our GEO Corrections & Detention business unit completed the transfer of 250 inmates from the State of Idaho to our Karnes Correctional Center in Texas under an emergency contract. At the federal level, the utilization rates at our ICE facilities steadily increased during the first quarter. Internationally, our GEO Australia subsidiary completed the successful activation and ramp up of the Ravenhall Correctional Center and in the United Kingdom, our GEOAmey joint venture entered into a 12-year contract for the provision of court escort, custody and secured transportation services in Scotland. Our GEO Care business unit has continued to develop and implement our GEO Continuum of Care programs across not only the United States, but now with the activation of the Ravenhall project in Australia also internationally. We are pleased that our efforts to reduce recidivism through enhanced rehabilitation programming and post-release services as begun to attract national recognition. As we have updated you in our last quarterly call, we are honored to have received the Innovation in Corrections Award from the American Correctional Association during the first quarter. We are extremely proud of this important recognition which was based on the implementation of our GEO Continuum of Care at the Graceville Correctional Facility in Florida. Since the launching of this pilot program in 2015, we have now implemented our GEO Continuum of Care programs at 15 correctional facilities in the U.S., and more recently at the all Ravenhall Center in Australia. We are pleased to have issued our first annual report on the GEO Continuum of Care highlighting our rehabilitation and post-release programmatic achievements…

Thank you, George. Good morning, everyone. Today, we reported first quarter net income attributable to GEO of $0.29 per diluted share and AFFO of $0.57 per diluted share on quarterly revenues of approximately $565 million. Compared to the first quarter of 2017, our first quarter 2018 results reflect several items including a year-over-year increase of approximately $3.7 million in net interest expense attributable to higher interest rates, as well as higher overall outstanding debt balances. Revised pricing terms under the new 10-year contracts for our Big Spring Texas facilities, which as we have previously disclosed began on December 1, 2017. Also the issuance of 10.4 million shares of common stock on a post split basis in March 2017, offset by the repurchase of over 1.8 million shares during the first quarter of 2018. The refinancing of the terminal and under our credit facility in March 2017, the acquisition of community education centers which closed in April 2017, the activation of the Ravenhall Australia project in November of 2017 and the activation of an emergency contract with the State of Idaho for 250 out-of-state beds during the first quarter of 2018. Moving to our outlook for the balance of 2018, we have updated our guidance for the full year and have issued guidance for the second quarter. We expect full year net income attributable to The GEO to be in a range of the $1.27 to $1.35 and adjusted net income to be in a range of $1.30 per diluted share to $1.38 per diluted share on revenue of approximately $2.3 billion. We expect full year AFFO to be in a range of $2.45 per diluted share to $2.53 per diluted share. Our full year guidance for 2018 does not presently assume the reactivation of any of our approximately 7,000 idle…

Thanks, Brian, and good morning, everyone. Our GEO Corrections & Detention business unit had an active first quarter of the year. Looking at our state segment, legislative sessions have largely concluded across the eight state correctional customers and our facilities have been able to provide high-quality services without being impacted by state budgetary constraints. During the first quarter, we activated a new state partnership with the Idaho Department of Correction with the transfer of 250 Idaho inmates to our Orange Correctional Center under an emergency contract for up to 250 out-of-state beds. Several other states continue to face capacity constraints and many of our state customers are facing challenges related to older prison facilities, which need to be replaced with new and more cost efficient facilities. In the states where we currently operate, the average age of state prisons range from approximately 30 years to 60 years. The State of Kansas recently awarded a contract for the development of a new 2,400-bed facility to replace the state’s oldest present facility. The State of Wisconsin has also discussed the potential development of new facilities to replace one or more of the state’s oldest prisons, and more recently the State of Vermont has also discussed a privately developed and financed option for a new 1,000-bed correctional facility. Moving to our federal segment, we are continuing to develop new 1,000 bed ICE processing center in the Houston area under a new 10-year contract we were awarded by ICE last year. The new center is expected to cost approximately $120 million and will be completed at the end of the third quarter of this year with the expected annualized revenues of $44 million. With respect to pending federal procurements, the Bureau of Prisons has two active solicitations for the housing of criminal alien populations.…

Thank you, Dave, and good morning, everyone. I’d like to give you an update on our four GEO Care divisions. Year-over-year, our GEO reentry division’s quarterly results reflect the integration of the facilities and programs acquired from community education centers in April of last year. We are pleased with the integration of our new CEC facilities and remain optimistic about the potential for revenue synergies under our expanded reentry and treatment services platform. We have identified a number of new business opportunities representing significant incremental annual revenue potential. In terms of our Youth Services business, we continue to experience stable utilization rates across our facilities during the first quarter. Our Youth segment has remained stable for several years after our team undertook a number of consolidation and marketing initiatives. Moving to our BI electronic monitoring division, the utilization of our ISAP contract with ICE remains stable during the first quarter of the year. At the state and local level, BI continues to pursue a number of new business opportunities. Finally, we remain very excited about the implementation and expansion of our GEO Continuum of Care program. Our Geo Continuum of Care integrates enhanced in-custody rehabilitation programs, including cognitive behavioral treatment with post-relief support services that address the basic community needs of released individuals. We have launched GEO Continuum of Care program at 14 state correctional facilities operated by GEO and also in our Rivers Correctional Institution, Washington D.C. individuals on behalf of the Federal Bureau of Prisons. We are exploring additional opportunities to expand these programs including in our Geo reentry segment. As George mentioned, we are incredibly proud to have recently received the Innovation and Corrections Award from the American Correctional Association for the implementation of our GEO Continuum of Care at the Graceville, Florida facility. We believe that our focus on improved rehabilitation and recidivism reduction programs is in line with criminal justice and prison reform efforts being undertaken in the U.S. and internationally. And we expect these efforts to generate new revenue synergies and quality growth opportunities across our diversified geo-care divisions. At this time, I will turn the call back to George for his closing remarks.

Thank you, Ann. We are pleased with our financial and operational performance during the first quarter and our improved outlook for the balance of the year. Our management team is focused on capturing new growth and we remain optimistic about the demand for our services. We are pursuing several active procurements, which could result in the reactivation of a number of our idle facilities and could represent upside to our current forecast. We continue to carefully evaluate our capital allocation with the aim of creating sustainable long-term value for our shareholders. We are proud of the continued success of our company as always we’d like to thank our employees worldwide many of whom are listening on this call. We believe that the dedication and professionalism of our employees are unmatched and continue to allow Geo to be recognized by our customers as best-in-class. We are particularly excited about the early success of our GEO Continuum of Care programs and we look forward to furthering our commitment to bettering the lives of those entrusted to us. We believe strongly that we are at our best when helping those in our care, reenters society as productive, employable services. We welcome everyone to review GEO’s website for our first annual report on GEO Continuum of Care. We are now happy to open the call to your questions. Thank you.

Thank you. [Operator Instructions] Our first question is from the line of Mark Strouse with J.P. Morgan. Please proceed with our question.

Hi. Good morning. Thanks for taking my questions. Congrats on the results and the increased outlook for 2018. I just had a couple questions for Brian. It looks like your -- the interest rate on your floating debt ticked up by about 40 basis points from last quarter. Can you just talk about the appetite for maybe switching some of that over to fixed rate?

We have monitored and we will continue to watch it -- we are doing the cash flow analysis on it as to whether or not it makes sense. But we are monitoring that potential for at least some portion of the debt and if it looks like it makes sense from a cash flow perspective we will probably do something like that.

Okay. Okay. Thanks. And then along similar lines, the EPS has been at $0.47 or so for about six quarters now. Just going forward can you kind of rank for us your priorities for cash as far as your buybacks versus dividend increases versus debt repayments?

Sure. I don’t think we are looking at the -- we are not connecting the dividend with the share repurchases as we have said, we believe the stock is undervalued in the share repurchase, we are using some of our credit capacity for that, any free cash flow that we have, we are investing back in the business and then we will look to maintain that payout ratio to 75% to 80% range. So, the adjusted fund from operations grows throughout this year and as we bring on the Montgomery Processing Center in the fourth quarter this year we will reevaluate the dividend as appropriate.

Okay. That makes sense. Thanks again.

Thank you. [Operator Instructions] Thank you. Our next question comes from the line of Tobey Sommer with SunTrust. Please proceed with your question.

Thanks. Could you layout if you would the timing of new business opportunities that you think are most likely to close in the marketplace this year to several of the other ones are some of them are kind of percolating and sound like they are in the works but may take longer?

We are hoping some of these federal procurements that have been gone -- going on now for in some cases over a year will finally be announced during probably the latter part of the second quarter or some part of the third quarter. That’s our expectation.

Other state opportunities that you think will come to a close in ‘18?

Well, there is different states looking for out-of-state beds in particular as those could occur within the year, because those are typically emergency procurements.

And I guess there will be Idaho and Puerto Rico?

And Vermont.

Okay. What does the increase in Southwest border crossings mean for your business and in those the elevated occupancy of detainees within your facilities increase the likelihood of new contracts from ICE?

Well, there has been a steady increase in illegal border crossings and it, I guess, parallels the steady increase up the census in our ICE facilities and probably on tangential basis our Marshals facilities. And we expect that to continue to increase our occupancies and present opportunities for new facility contracts maybe in the next budget cycle, which begins October 1. And so President will be asking for a significant increase in the detention bed capacity for ICE from presently the low 40s to the low 50s.

Great. That segues into my next question. I was wondering if you could tell us what the existing past budget means for your federal customers’ spending in kind of ability to finance growth in the use of your -- in the industry services? And then, secondly, lastly for me, maybe comment on any changes in the enforcement posture that you’ve seen at the federal level and what do you think that means for your federal businesses?

Well, taking the latter question, I think, we have seen a stricter enforcement policy articulated by attorney general sessions throughout the country and it’s being reflected and we believe in our census count in our Marshals facilities in particular. In both, the Marshals Service and the BOP got additional money in their budget. So approximately 100 million each, so we expect the Marshals counts to go up and the additional funding for the BOP is likely to result in more of the, I think, approximately 9,500 beds procurement and involving CAR 19 to be actually awarded.

Thank you very much.

[Operator Instructions] Thank you. At this time, I will turn the floor back to George Zoley for his first closing remarks.

Thanks everybody for joining us today and look forward to addressing you as to our second quarter results in three months time. Thank you.