Group 1 - The GEO Group, Inc. (GEO) has been added to the Zacks Rank 5 (Strong Sell) List due to a 6.5% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - KT Corporation (KT) is also on the Zacks Rank 5 (Strong Sell) List, with a 7.9% downward revision in the consensus estimate for its current year earnings over the last 60 days [1] - Kuehne + Nagel International AG (KHNGY) has seen an 11.8% downward revision in the consensus estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 (Strong Sell) List [2]

Core Insights - Hodges Capital Management Inc. increased its stake in The GEO Group by purchasing 507,012 shares, raising its total position to over 955,000 shares valued at $19.6 million [2][6][8] Company Overview - The GEO Group provides correctional, detention, and community reentry services through secure facilities and supervision programs in the U.S., Australia, and South Africa, primarily generating revenue from long-term government contracts [5] - As of November 6, 2025, GEO's stock price was $15.41, with a market capitalization of $2.14 billion and trailing twelve months (TTM) revenue of $2.53 billion and net income of $237.28 million [4] Financial Performance - GEO reported a 13.1% increase in revenue to $682.3 million for the third quarter, with adjusted earnings per share rising 19% to $0.25 compared to $0.21 in the same period last year [7][10] - Despite revenue and earnings growth, the market reacted negatively to the earnings release, leading to a 10% drop in share price over the following two days, likely due to fourth-quarter guidance concerns [10] Investment Position - The increase in GEO shares by Hodges Capital Management represents 1.7% of its reportable U.S. equity assets under management (AUM) [9] - The fund's top five holdings include significant positions in NASDAQ: WULF, NASDAQ: NVDA, NYSE: UBER, NYSE: TPL, and NYSE: CLF, with GEO being the 15th largest holding [9]

Core Insights - GEO Group reported Q3 CY2025 revenue of $682.3 million, exceeding Wall Street expectations by 2.5% and reflecting a year-on-year growth of 13.1% [1][5] - The company's GAAP profit per share was $1.24, which was 58.8% above analysts' consensus estimates [1][5] - However, the revenue guidance for Q4 CY2025 is $663.5 million, which is 4.7% below analysts' expectations [1][5] Revenue and Profitability - Revenue for Q3 CY2025 was $682.3 million, surpassing analyst estimates of $665.7 million [5] - Adjusted EBITDA was reported at $120.1 million, aligning with analyst expectations, resulting in a 17.6% margin [5] - Operating margin decreased to 6%, down from 13.7% in the same quarter last year [5] Management Commentary - Management attributed revenue growth to new and expanded contracts with U.S. Immigration and Customs Enforcement (ICE) and the U.S. Marshals, which increased facility occupancy and transportation services [3] - CEO George Zoley noted that total ICE capacity has increased to over 26,000 beds, with a current census exceeding 22,000, marking the highest ICE population to date [3] Future Outlook - The company faces uncertainty with guidance reflecting potential delays in new contract awards and challenges from government staffing and shutdowns [4] - CFO Mark Suchinski highlighted reduced contract pricing for the ISAP 5 electronic monitoring program and additional start-up costs as factors that will negatively impact margins in the upcoming quarter [4] - Management is focused on normalizing operations and integrating recent contract wins to support future revenue growth, but anticipates ongoing operating challenges [4]

Revenue and Financial Performance - For the nine months ended September 30, 2025, consolidated revenues were $1,923.9 million, compared to $1,816.0 million for the same period in 2024, reflecting an increase of approximately 5.9%[179] - Revenues for the U.S. Secure Services segment increased by $80.7 million, reaching $481.6 million in Q3 2025, a 20.1% increase compared to Q3 2024[189] - The total revenue for Q3 2025 was $682.3 million, representing a 13.1% increase from $603.1 million in Q3 2024[189] - Revenues for U.S. Secure Services increased by $125.1 million (10.4%) in the nine months ended September 30, 2025, driven by new contracts and increased occupancies[219] - Total revenues for the nine months ended September 30, 2025, were $1,923.8 million, a 5.9% increase from $1,815.9 million in the same period of 2024[218] Occupancy and Capacity - The average company-wide facility occupancy rate was approximately 89% for the nine months ended September 30, 2025, with 68,157 active beds, compared to approximately 88% with 68,004 active beds for the same period in 2024[179] - The average occupancy in U.S. Secure Services facilities was approximately 90% in Q3 2025, up from 88% in Q3 2024[192] - Average occupancy in U.S. Secure Services facilities remained stable at approximately 88% of capacity for both Nine Months 2025 and Nine Months 2024[220] Operating Expenses - Operating expenses for U.S. Secure Services rose by $76.4 million to $376.0 million in Q3 2025, primarily due to labor and medical costs[197] - Operating expenses for U.S. Secure Services increased by $130.6 million (14.5%) in the nine months ended September 30, 2025, primarily due to labor and medical costs[225] - Operating expenses accounted for approximately 75% of consolidated revenues for the nine months ended September 30, 2025, compared to 73% for the same period in 2024[282] General and Administrative Expenses - General and administrative expenses increased by $15.0 million to $62.1 million in Q3 2025, reflecting a 31.9% rise compared to Q3 2024[206] - General and administrative expenses rose by $23.8 million (15.6%) in the nine months ended September 30, 2025, primarily due to senior management reorganization and higher employee-related costs[234] - General and administrative expenses represented about 11% of consolidated revenues for the nine months ended September 30, 2025, up from 8% in 2024[283] Income and Taxation - The provision for income taxes increased to $56.4 million in Q3 2025, with an effective tax rate of 24.6%, compared to $11.7 million (31.4% effective rate) in Q3 2024, a 383.5% increase[215] - The provision for income taxes increased to $68.8 million with an effective tax rate of 23.9% in Nine Months 2025, compared to a tax benefit in the previous year[243][245] Cash Flow and Liquidity - Cash, cash equivalents, and restricted cash increased to $231.6 million as of September 30, 2025, up from $118.4 million a year earlier, representing a growth of approximately 95.5%[269] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $189.9 million, down from $223.8 million in the same period of 2024, indicating a decrease of about 15.1%[270] - Net cash used in financing activities increased to approximately $232.2 million for the nine months ended September 30, 2025, compared to $186.1 million in the same period of 2024, reflecting an increase of about 24.7%[273] Debt and Financing - The company has approximately $262.6 million in borrowings under its Credit Agreement, with a 1% increase in interest rates potentially raising annual interest expenses by $3.1 million[285] - Interest expense decreased by $7.3 million in Q3 2025 compared to Q3 2024, following an amendment to the Credit Agreement that increased borrowing capacity and lowered the interest rate[212] - The company amended its Credit Agreement to increase revolving credit commitments from $310 million to $450 million, extending the maturity to July 14, 2030[253] Legal and Regulatory Risks - The company faces risks related to the federal government shutdown, which could adversely impact financial results[172] - The company is exposed to rising medical costs and must manage ongoing litigation costs, which could affect profitability[172] - The company incurred a non-cash contingent litigation reserve of $37.6 million during Nine Months 2025, representing 5.5% of revenue[235] Strategic Initiatives and Growth - The company is focused on expanding its secure services, reentry, and community-based services, as well as monitoring services and secure transportation services[177] - The company is currently in compliance with its debt covenants as of September 30, 2025, but potential future constraints could adversely impact liquidity and capital resources[264] - The company is preparing for significant growth opportunities related to federal immigration enforcement, with a focus on expanding detention capacity and related services[280] Asset Management - The company has a significant amount of goodwill and intangible assets from acquisitions, which may become impaired in the future[176] - Gain on asset divestitures was approximately $232.4 million in Q3 2025, accounting for 34.1% of revenue, related to the sale of the Lawton Correctional Facility[214] - The company sold the Lawton Correctional Facility for $312 million, resulting in a gain of approximately $228 million, which was used to pay off a Term Loan[252] Foreign Exchange and Interest Rate Exposure - A 10% change in foreign currency exchange rates could affect the company's financial position by approximately $8.6 million and impact results of operations by about $1.2 million for the nine months ended September 30, 2025[288] - Interest rate swap arrangements have been established to hedge against variable rate debt, minimizing the impact of interest rate fluctuations[286]

Financial Data and Key Metrics Changes - For Q3 2025, the company reported net income of approximately $174 million, or $1.24 per diluted share, on revenues of approximately $682 million, compared to net income of approximately $26 million, or $0.19 per diluted share, on revenues of approximately $603 million in Q3 2024 [19][20] - Adjusted net income for Q3 2025 was approximately $35 million, or $0.25 per diluted share, compared to $29 million, or $0.21 per diluted share for the prior year's third quarter [21] - Adjusted EBITDA for Q3 2025 was approximately $120 million, up from approximately $119 million reported for the prior year [21][22] Business Line Data and Key Metrics Changes - Revenues from owned and leased secure service facilities increased by approximately 22% year over year, driven by new ICE contracts [22] - Revenues for non-residential contracts increased by approximately 10% from the prior year, while managed-only contracts saw an increase of approximately 8% [22] - Revenues from electronic monitoring and supervision services remained largely unchanged from the prior year [22] Market Data and Key Metrics Changes - The company has entered into new or expanded contracts representing over $460 million in new incremental annualized revenues, the largest amount in the company's history [4][29] - The current ICE capacity has increased to over 26,000 beds, with a census of over 22,000, the highest ICE population ever recorded [5][6] Company Strategy and Development Direction - The company is focused on expanding its detention capacity and has identified approximately 6,000 idle high-security beds that could generate over $300 million in additional annualized revenues if activated [15][30] - The company is pursuing partnerships with states to increase detention capacity and is exploring opportunities for acquiring or leasing third-party facilities [16][30] - The company aims to strengthen its capital structure by reducing debt and enhancing shareholder value through stock buybacks, having reduced total net debt by approximately $275 million in 2025 [17][28] Management's Comments on Operating Environment and Future Outlook - Management noted that the pace of new detention contracts has been slower than anticipated due to factors such as the government shutdown and the need for ICE to hire additional staff [12][14] - The company expects to capture additional growth opportunities and aims for approximately $3 billion in annual revenues in 2026, supported by new contracts and facility activations [27][29] Other Important Information - The company incurred a non-cash contingent litigation reserve of approximately $38 million related to a legal case involving claims for minimum wage payments for ICE detainees [20][21] - The company has received verbal support from banks for additional liquidity during the government shutdown [27] Q&A Session Summary Question: Impact of government shutdown on ICE population detentions - Management acknowledged that the rate of ICE population detentions has been slower than expected due to the government shutdown and the need for additional ICE staff [32] Question: Expectations for ICE app contract margins - Management indicated that while they do not discuss margins in detail, they have made pricing cuts to remain competitive and expect to manage costs effectively [34][35] Question: Staffing challenges with opening new facilities - Management confirmed that they are targeting the hiring of 1,000 to 1,500 additional staff, which has been costly and time-consuming [38] Question: Clarification on ICE app contract revenue expectations - Management confirmed that the $1 billion estimated value for the ICE app contract is over the two-year term, with participant counts expected to increase significantly [39][40] Question: Future growth opportunities in state partnerships - Management noted that there are several states looking for management services for idle or refurbished beds, with potential opportunities in the hundreds to possibly 1,000 beds per location [41] Question: Margin expectations for the ICE app program - Management stated that margins could exceed previous levels if participant counts materialize as expected, but it will take time to implement cost savings [48]

Core Insights - GEO Group's shares fell 11.1% after reporting strong third-quarter results but providing a disappointing fourth-quarter forecast [1] - The fourth-quarter revenue guidance of $663.5 million is 4.7% below analysts' estimates, and the GAAP earnings per share forecast of $0.25 missed expectations by 17.4% [1] - The third-quarter revenue grew 13.1% year-on-year to $682.3 million, exceeding estimates, while GAAP earnings per share of $1.24 were 58.5% above consensus [1] Market Reaction - The stock market's reaction indicates significant volatility, with GEO Group experiencing 28 moves greater than 5% in the past year, suggesting a strong impact on market perception [3] - The recent price drop is seen as an overreaction, potentially presenting a buying opportunity for high-quality stocks [2] Historical Performance - GEO Group's stock is down 46% year-to-date, trading at $15.27, which is 56.8% below its 52-week high of $35.35 from January 2025 [5] - An investment of $1,000 in GEO Group shares five years ago would now be worth $1,807 [5]

Financial Performance - Total revenues for Q3 2025 were $682341000, compared to $603125000 in Q3 2024[14] - Year-to-date 2025 revenues reached $1923854000, up from $1815982000 in the same period of 2024[14] - Net income attributable to The GEO Group, Inc for Q3 2025 was $173940000, significantly higher than $26320000 in Q3 2024[14] - Adjusted EBITDA for Q3 2025 was $120093000, slightly higher than $118636000 in Q3 2024[15] - Capital expenditures for Q3 2025 totaled $93640000, a substantial increase from $16890000 in Q3 2024[19] Operational Metrics - The company's worldwide operations include 95 facilities totaling approximately 75000 beds[6] - The contract retention rate for owned and leased facilities is 970% year-to-date 2025[26] - The occupancy rate for owned and leased secure services facilities was 88% in Q3 2025[20] Debt and Leverage - Outstanding debt as of September 30, 2025, included $650000000 in 8625% Senior Secured Notes due 2029 and $625000000 in 1025% Senior Unsecured Exchangeable Notes due 2031[35] - The company's total net leverage ratio as of September 30, 2025, was 321x[35] Revenue Distribution - For YTD 2025, owned and leased facilities accounted for 59% of revenue, managed only facilities contributed 24%, and non-residential and other services made up 17%[8]

Core Viewpoint - Geo Group reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and showing an increase from $0.21 per share a year ago, representing an earnings surprise of +13.64% [1][2] Financial Performance - The company posted revenues of $682.34 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.54%, and up from $603.13 million year-over-year [2] - Over the last four quarters, Geo Group has exceeded consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - Geo Group shares have declined approximately 39.9% since the beginning of the year, contrasting with the S&P 500's gain of 15.6% [3] - The current Zacks Rank for Geo Group is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $666.49 million, and for the current fiscal year, it is $0.89 on revenues of $2.56 billion [7] - The trend of estimate revisions for Geo Group was mixed ahead of the earnings release, which may change following the recent report [6] Industry Context - The Government Services industry, to which Geo Group belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]

Financial Performance - For Q3 2025, GEO reported total revenues of $682.3 million, up from $603.1 million in Q3 2024, representing a 13.2% increase[7]. - Net income attributable to GEO for Q3 2025 was $173.9 million, or $1.24 per diluted share, compared to $26.3 million, or $0.19 per diluted share, in Q3 2024[3]. - Adjusted EBITDA for Q3 2025 was $120.1 million, slightly up from $118.6 million in Q3 2024[7]. - Revenues for Q3 2025 reached $682,341, an increase from $603,125 in Q3 2024, representing a growth of approximately 13.1%[54]. - Net income attributable to The GEO Group, Inc. for YTD 2025 was $222,606, compared to $16,475 in YTD 2024, showing a significant increase[54]. - Operating income for Q3 2025 was $40,700, down from $82,371 in Q3 2024, reflecting a decrease of approximately 50.6%[54]. - Net Income for Q3 2025 was $173,922,000, a significant increase from $26,289,000 in Q3 2024, representing a growth of 560%[56]. - Adjusted EBITDA for Q3 2025 reached $120,093,000, slightly up from $118,636,000 in Q3 2024, indicating a 1.2% increase[56]. - The company projects FY 2025 Net Income Attributable to GEO to be between $254,000,000 and $259,000,000[59]. - Adjusted EBITDA for FY 2025 is expected to be between $455,000,000 and $465,000,000[59]. - The projected Net Income Attributable to GEO per diluted share for FY 2025 is estimated to be between $1.81 and $1.85[59]. Debt and Financial Guidance - GEO has reduced its net debt by approximately $275 million, with net debt totaling around $1.4 billion at the end of Q3 2025[26]. - The updated financial guidance for Q4 2025 anticipates GAAP Net Income in the range of $0.23 to $0.27 per diluted share on revenues of $651 million to $676 million[21]. - Total Debt, Net is projected to be $1,500,000,000 for FY 2025[59]. - Interest expense for YTD 2025 was $122,582, down from $147,437 in YTD 2024, reflecting a decrease of approximately 16.8%[54]. - The company anticipates a total leverage ratio of 3.3 for FY 2025[59]. - Net debt is defined as gross principal debt less cash from restricted subsidiaries, with a focus on reducing outstanding debt to strengthen capital structure[39]. Contracts and Revenue Growth - The company entered into new or expanded contracts representing over $460 million in new annualized revenues expected to normalize in 2026, the largest amount in its history[8]. - The company expects to generate over $300 million in incremental annualized revenues from five newly contracted facilities at full occupancy in 2026[12]. - A new two-year contract for electronic monitoring services under the ISAP program was awarded, valued at over $1 billion, with anticipated cost savings of $2 million to $3 million per quarter starting in 2026[20]. Share Repurchase and Capital Expenditures - GEO repurchased approximately 1.97 million shares for $41.6 million during Q3 2025, with a total share repurchase authorization increased to $500 million[27]. - The company has authorized a $500 million share repurchase program to enhance shareholder value[49]. - Capital Expenditures for FY 2025 are expected to be between $200,000,000 and $205,000,000[59]. Assets and Legal Challenges - The total assets as of September 30, 2025, were $3,809,273, up from $3,632,080 as of December 31, 2024, indicating a growth of approximately 4.9%[51]. - The company reported a contingent litigation reserve of $37,600 for Q3 2025, indicating ongoing legal challenges[54]. - The company aims to capture additional growth opportunities and improve company-wide occupancy rates at its facilities[49]. Losses and Adjusted Income - The company reported a loss on asset divestitures of $232,381,000 in Q3 2025[56]. - Adjusted Net Income for Q3 2025 was $34,970,000, compared to $29,052,000 in Q3 2024, reflecting an increase of 20.5%[56].

Core Insights - The Geo Group has entered a joint venture to manage the 1,310-bed North Florida Detention Facility, marking a significant expansion in its southeastern U.S. operations [1][2] - The facility will operate under a contract with the state of Florida, with GEO as the lead manager, enhancing its managed capacity in the region [2] - This announcement precedes GEO's third-quarter earnings report scheduled for November 6, 2025, and is expected to be a key topic during the earnings call [3] Company Overview - The Geo Group is a Florida-based correctional services company that manages prisons, detention centers, and reentry programs both domestically and internationally [4] - The company transitioned from a REIT to a traditional C-corporation in 2022 and continues to contract with various government agencies for secure facility operations [4]