The GEO (GEO) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements for The GEO Group, Inc. for the three and six months ended June 30, 2025 and 2024, including statements of operations, comprehensive income (loss), balance sheets, and cash flows. It also includes detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details Consolidated Statements of Operations (Unaudited) This section details the company's unaudited consolidated statements of operations, including revenues, operating income, and net income for the periods presented Consolidated Statements of Operations Summary (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $636,169 | $607,185 | $1,241,513 | $1,212,857 | | Operating income | $71,973 | $80,145 | $132,957 | $159,707 | | Net income (loss) attributable to GEO | $29,108 | $(32,513) | $48,666 | $(9,845) | | Basic EPS | $0.21 | $(0.25) | $0.35 | $(0.08) | | Diluted EPS | $0.21 | $(0.25) | $0.35 | $(0.08) | - Net income attributable to The GEO Group, Inc. significantly improved from a loss of $(32,513) thousand in Q2 2024 to a profit of $29,108 thousand in Q2 2025, and from a loss of $(9,845) thousand in H1 2024 to a profit of $48,666 thousand in H1 2025[9] Consolidated Statements of Comprehensive Income (Loss) (Unaudited) This section presents the company's unaudited consolidated statements of comprehensive income (loss), including net income and other comprehensive income Consolidated Statements of Comprehensive Income (Loss) Summary (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $29,074 | $(32,563) | $48,616 | $(9,904) | | Total other comprehensive income (loss) | $4,382 | $2,830 | $5,318 | $(331) | | Total comprehensive income (loss) | $33,456 | $(29,733) | $53,934 | $(10,235) | | Comprehensive income (loss) attributable to GEO | $33,508 | $(29,668) | $54,014 | $(10,173) | - Total comprehensive income attributable to The GEO Group, Inc. improved significantly, moving from a loss of $(29,668) thousand in Q2 2024 to an income of $33,508 thousand in Q2 2025, and from a loss of $(10,173) thousand in H1 2024 to an income of $54,014 thousand in H1 2025[12] Consolidated Balance Sheets This section provides the company's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity at specific dates Consolidated Balance Sheets Summary (in thousands) | Metric (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :--------------------------------------- | :-------------------------- | :------------------ | | Total Assets | $3,661,419 | $3,632,080 | | Total Current Liabilities | $561,038 | $340,223 | | Long-Term Debt, Net | $1,475,375 | $1,711,197 | | Total Shareholders' Equity | $1,381,420 | $1,333,414 | - Total assets increased by $29.3 million from December 31, 2024, to June 30, 2025[15] - Long-term debt, net, decreased by $235.8 million, while total current liabilities increased by $220.8 million, primarily due to a reclassification of current portion of finance lease liabilities and long-term debt[15] Consolidated Statements of Cash Flows (Unaudited) This section outlines the company's unaudited consolidated statements of cash flows, categorizing cash activities into operating, investing, and financing Consolidated Statements of Cash Flows Summary (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $110,393 | $114,520 | | Net cash used in investing activities | $(81,799) | $(36,996) | | Net cash used in financing activities | $(37,609) | $(113,202) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(5,243) | $(37,189) | - Net cash used in investing activities increased significantly from $(36,996) thousand in H1 2024 to $(81,799) thousand in H1 2025, primarily due to higher capital expenditures and purchases of marketable securities[18] - Net cash used in financing activities decreased from $(113,202) thousand in H1 2024 to $(37,609) thousand in H1 2025, largely due to reduced payments on long-term debt[18] Notes to Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies and specific financial instrument details 1. Basis of Presentation This note describes the company's business operations, including facility management, rehabilitation services, and geographic scope - The GEO Group, Inc. specializes in the ownership, leasing, and management of secure facilities, processing centers, and community reentry centers in the United States, Australia, and South Africa[22] - The company also provides rehabilitation services under its 'GEO Continuum of Care' platform, secure transportation services, and electronic monitoring and supervision services[22] - As of June 30, 2025, GEO's worldwide operations include approximately 77,000 beds at 98 facilities and provide reentry, electronic monitoring, and supervision services for thousands of individuals[22] 2. Goodwill and Other Intangible Assets This note details the company's goodwill and other intangible assets, including facility management contracts and trade names Goodwill by Segment (in thousands) | Goodwill Segment (in thousands) | January 1, 2025 | Foreign Currency Translation | June 30, 2025 | | :-------------------------------- | :-------------- | :--------------------------- | :------------ | | U.S. Secure Services | $316,366 | — | $316,366 | | Electronic Monitoring and Supervision Services | $289,570 | — | $289,570 | | Reentry Services | $148,873 | — | $148,873 | | International Services | $1,192 | $20 | $1,212 | | Total Goodwill | $756,001 | $20 | $756,021 | Intangible Assets Net Carrying Amount (in thousands) | Intangible Assets (in thousands) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :--------------------------------- | :-------------------------------- | :------------------------------------ | | Facility management contracts | $76,755 | $81,376 | | Trade names | $45,200 | $45,200 | | Total acquired intangible assets | $121,955 | $126,576 | - Goodwill increased slightly by $20 thousand due to foreign currency translation in International Services, totaling $756,021 thousand as of June 30, 2025[24][25] - Net carrying amount of facility management contracts decreased by $4,621 thousand, while trade names remained constant[24][25] 3. Financial Instruments This note describes the company's financial instruments, including rabbi trusts, marketable securities, and interest rate swap derivatives Financial Assets Carrying Value and Fair Value Hierarchy (in thousands) | Financial Assets (in thousands) | Carrying Value at June 30, 2025 | Level 1 (Quoted Prices) | Level 2 (Observable Inputs) | | :-------------------------------- | :------------------------------ | :---------------------- | :-------------------------- | | Rabbi Trusts | $61,472 | $12,876 | $48,596 | | Marketable equity and fixed income securities | $75,222 | $6,204 | $69,018 | | Other non-current assets | $19,860 | — | $19,860 | | Interest rate swap derivatives | $3,567 | — | $3,567 | - The company's Level 2 financial instruments include interest rate swap derivatives, investments in equity and fixed income securities in its captive insurance subsidiary, and rabbi trusts for deferred compensation and retirement accounts[28] - Level 1 instruments primarily consist of money market funds[28] 4. Fair Value of Assets and Liabilities This note provides information on the fair value measurements of the company's financial assets and liabilities, including debt instruments Fair Value of Financial Instruments (in thousands) | Financial Instrument (in thousands) | Carrying Value as of June 30, 2025 | Total Fair Value as of June 30, 2025 | | :---------------------------------- | :--------------------------------- | :----------------------------------- | | Cash and cash equivalents | $67,861 | $67,861 | | Restricted cash | $33,680 | $33,680 | | Borrowings under credit agreement | $411,867 | $413,351 | | 8.625% Senior Secured Notes due 2029 | $650,000 | $688,441 | | 10.250% Senior Notes due 2031 | $625,000 | $686,156 | - The fair values of cash, cash equivalents, and restricted cash approximate their carrying values[30][31] - The fair values of the 8.625% Secured Notes due 2029, 10.250% Senior Notes due 2031, and the Credit Agreement are based on Level 2 inputs using market quotations and estimates[30][31] - The remaining principal balance of the 6.50% Exchangeable Senior Notes due 2026 was retired during the first quarter of 2025[32] 5. Restricted Cash and Cash Equivalents This note details the components and purposes of the company's restricted cash and cash equivalents, including contractual requirements Restricted Cash and Cash Equivalents Summary (in thousands) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $67,861 | $46,299 | | Restricted cash and cash equivalents - current | — | $6,240 | | Restricted cash and investments - non-current | $170,374 | $141,312 | | Less Restricted investments - non-current | $(117,614) | $(71,173) | | Total cash, cash equivalents and restricted cash and cash equivalents shown in the statement of cash flows | $120,621 | $122,678 | - Restricted cash and cash equivalents are primarily due to contractual requirements at the Australian subsidiary, asset replacement funds, and cash in the captive insurance subsidiary[33] - Restricted investments include rabbi trusts and equity/fixed income securities[33] 6. Shareholders' Equity This note outlines changes in the company's shareholders' equity, including common shares outstanding, retained earnings, and comprehensive loss Shareholders' Equity Summary (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Common shares outstanding | 141,245 | 140,181 | | Total Shareholders' Equity attributable to GEO | $1,383,022 | $1,334,936 | | Retained earnings | $88,546 | $39,880 | | Accumulated other comprehensive loss | $(16,254) | $(21,602) | - Total shareholders' equity attributable to GEO increased by $48.1 million from December 31, 2024, to June 30, 2025, driven by net income and other comprehensive income[15][34][35] - Retained earnings increased by $48.6 million[15][34][35] - The company filed an automatic shelf registration statement on Form S-3 in October 2023, allowing for the sale of various securities, and a prospectus supplement in December 2023 for up to $300 million of common stock, though no shares were sold under this program in H1 2025[38][39] 7. Equity Incentive Plans This note describes the company's equity incentive plans, including stock option and restricted stock activity and related compensation expense - The Amended 2018 Stock Incentive Plan, approved in May 2024, reserved an additional 12,400,000 shares of common stock for awards[42][43] Stock Option Activity (in thousands) | Stock Option Activity (in thousands) | Shares | Wtd. Avg. Exercise Price | | :----------------------------------- | :----- | :----------------------- | | Options outstanding at January 1, 2025 | 1,632 | $16.64 | | Options granted | 377 | $26.23 | | Options exercised | (274) | $15.21 | | Options forfeited/canceled/expired | (161) | $26.43 | | Options outstanding at June 30, 2025 | 1,574 | $18.14 | Restricted Stock Activity (in thousands) | Restricted Stock Activity (in thousands) | Shares | Wtd. Avg. Grant Date Fair Value | | :--------------------------------------- | :----- | :------------------------------ | | Restricted stock outstanding at January 1, 2025 | 3,714 | $9.77 | | Granted | 1,827 | $26.69 | | Vested | (2,684) | $7.50 | | Forfeited/canceled | (134) | $15.31 | | Restricted stock outstanding at June 30, 2025 | 2,723 | $16.44 | - Stock-based compensation expense for restricted stock awards was $11.1 million for the six months ended June 30, 2025, up from $8.8 million in the prior year[51] - Unrecognized compensation costs for non-vested restricted stock awards totaled $33.1 million as of June 30, 2025[51] 8. Earnings Per Share This note presents the calculation of basic and diluted earnings per share, including weighted average shares outstanding Earnings Per Share Summary | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.21 | $(0.25) | $0.35 | $(0.08) | | Diluted EPS | $0.21 | $(0.25) | $0.35 | $(0.08) | | Weighted average shares outstanding (basic) | 138,539 | 130,518 | 137,844 | 125,631 | | Weighted average shares assuming dilution | 140,470 | 130,518 | 140,710 | 125,631 | - Basic and diluted EPS significantly improved from losses in 2024 to positive earnings in 2025 for both the three and six-month periods[54][55][56][57] - Dilutive effects of equity incentive plans were included in 2025 due to net income, but excluded in 2024 due to net losses[54][55][56][57] 9. Derivative Financial Instruments This note details the company's use of derivative financial instruments, specifically interest rate swap agreements for hedging variable rate debt - The Company uses interest rate swap agreements to fix interest rates on variable rate debt, designating them as effective cash flow hedges[59] - Total unrealized loss related to these hedges was $0.3 million (net of tax) for Q2 2025 and $1.0 million for H1 2025[59] - The total fair value of swap assets was $3.6 million as of June 30, 2025, down from $4.9 million at December 31, 2024[59] 10. Debt This note provides a comprehensive overview of the company's debt structure, including credit agreements, senior notes, and their respective balances Debt Summary (in thousands) | Debt Category (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total Credit Agreement | $405,267 | $422,885 | | Total 8.625% Secured Notes due 2029 | $639,121 | $637,961 | | Total 10.25% Unsecured Notes due 2031 | $614,131 | $613,478 | | Total 6.50% Exchangeable Senior Notes due 2026 | — | $100 | | Total debt | $1,696,176 | $1,713,028 | | Current portion of finance lease liabilities and long-term debt | $(220,801) | $(1,612) | | Long-Term Debt | $1,475,375 | $1,711,197 | - Total debt decreased from $1,713,028 thousand at December 31, 2024, to $1,696,176 thousand at June 30, 2025[60][95] - The remaining balance of the 6.50% Exchangeable Senior Notes due 2026 was retired in Q1 2025[60][95] - The company entered into a new Credit Agreement in April 2024, comprising a $310 million revolving credit facility and a $450 million senior secured term loan facility[61][82][89] - As of June 30, 2025, $115.0 million was borrowed under the revolver, with $147.5 million additional borrowing capacity[61][82][89] - On July 14, 2025, the Credit Agreement was amended to increase revolving credit commitments to $450 million and extend its maturity to July 14, 2030, while also lowering applicable interest rates by 0.50%[90][149] 11. Commitments, Contingencies and Other Matters This note details the company's legal commitments, contingencies, and other significant matters, including litigation and idle facilities - The company is involved in several immigration detainee class action lawsuits in Colorado, Washington, and California, primarily concerning minimum wage and human trafficking claims for participants in Voluntary Work Programs[101][103][104][105][106] - GEO disputes these claims and has not recorded accruals as losses are not considered probable[101][103][104][105][106] - GEO has filed lawsuits challenging state legislation in Washington, New Jersey, and California that conflict with federal contracts for private detention facilities[107][108][109] - Preliminary injunctions have been granted in Washington and New Jersey, while the California case was dismissed with leave to amend[107][108][109] - The company has contractual commitments for active capital projects totaling $54.1 million, with $35.9 million spent through H1 2025 and $18.2 million remaining for the rest of 2025[114] Idle Facility Information (in thousands) | Idle Facility (in thousands) | Year Idled | Secure Services Design Capacity (beds) | Reentry Services Design Capacity (beds) | Net Carrying Value June 30, 2025 | | :--------------------------------------- | :--------- | :------------------------------------- | :-------------------------------------- | :------------------------------- | | Rivers Correctional Facility | 2021 | 1,320 | — | $36,567 | | Big Spring Correctional Facility | 2021 | 924 | — | $27,368 | | Flightline Correctional Facility | 2021 | 1,452 | — | $32,176 | | Lea County Correctional Facility | 2025 | 1,200 | — | $45,714 | | Cheyenne Mountain Recovery Center | 2020 | 700 | — | $17,643 | | Philadelphia Residential | 2024 | — | 400 | $6,252 | | Coleman Hall | 2017 | — | 350 | $5,710 | | Total | | 5,896 | 889 | $186,085 | 12. Business Segments and Geographic Information This note presents financial information by the company's reportable business segments and geographic regions, including revenues and operating income - The company operates through four reportable segments: U.S. Secure Services, Electronic Monitoring and Supervision Services, Reentry Services, and International Services (South Africa and Australia)[120][121] Segment Revenues (in thousands) | Segment Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. Secure Services | $441,665 | $402,097 | $847,381 | $803,037 | | Electronic Monitoring and Supervision Services | $78,925 | $84,745 | $156,638 | $171,529 | | Reentry Services | $71,310 | $68,960 | $141,686 | $136,790 | | International Services | $44,269 | $51,383 | $95,808 | $101,501 | | Total Revenues | $636,169 | $607,185 | $1,241,513 | $1,212,857 | Segment Operating Income (in thousands) | Segment Operating Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. Secure Services | $76,916 | $79,769 | $146,147 | $159,010 | | Electronic Monitoring and Supervision Services | $32,519 | $38,277 | $62,508 | $76,457 | | Reentry Services | $15,641 | $12,155 | $30,743 | $24,897 | | International Services | $3,143 | $2,142 | $7,554 | $4,611 | | Total Operating Income from Segments | $128,219 | $132,343 | $246,952 | $264,975 | - U.S. Secure Services revenue increased by $39.6 million (9.8%) in Q2 2025 and $44.3 million (5.5%) in H1 2025, driven by new contract activations and increased occupancies/rates[187][188][191][214][215][217] - Electronic Monitoring and Supervision Services revenue decreased by $5.8 million (6.9%) in Q2 2025 and $14.9 million (8.7%) in H1 2025 due to lower participant counts in ISAP[187][188][191][214][215][217] 13. Benefit Plans This note describes the company's benefit plans, including pension plan obligations, net periodic benefit costs, and executive retirement agreements Pension Plan Unfunded Status (in thousands) | Pension Plan Metric (in thousands) | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | | :--------------------------------- | :----------------------------- | :--------------------------- | | Projected benefit obligation, end of period | $27,666 | $27,027 | | Unfunded Status of the Plan | $27,666 | $27,027 | Net Periodic Benefit Cost (in thousands) | Net Periodic Benefit Cost (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $133 | $163 | $266 | $326 | | Interest cost | $376 | $341 | $752 | $682 | | Net (gain) loss | $(62) | $15 | $(125) | $30 | | Net periodic benefit cost | $447 | $519 | $893 | $1,038 | - The unfunded status of the pension plan increased to $27,666 thousand as of June 30, 2025, from $27,027 thousand at year-end 2024[139] - Net periodic benefit cost decreased in both the three and six-month periods of 2025 compared to 2024[139] - The balance of the Amended and Restated Executive Retirement Agreement for the Executive Chairman was approximately $13.9 million at June 30, 2025, and is included in Other Non-Current Liabilities[143] 14. Recent Accounting Pronouncements This note outlines recent accounting pronouncements and their potential impact or adoption status for the company's financial reporting - FASB issued ASU No. 2024-03 (Expense Disaggregation Disclosures) effective for annual periods after December 15, 2026, requiring disclosure of inventory purchases, employee compensation, depreciation, and intangible asset amortization[145] - The company is evaluating the adoption of ASU No. 2024-03[145] - FASB issued ASU No. 2023-09 (Income Tax Disclosures) effective for annual periods after December 15, 2024, requiring tabular rate reconciliation and disaggregated income taxes paid[146] - The company will adopt ASU No. 2023-09 prospectively for the period ending December 31, 2025[146] - The company adopted ASU No. 2023-07 (Segment Reporting) effective December 31, 2024, enhancing interim segment disclosures to include significant expenses by segment and the CODM's title[147] 15. Subsequent Events This note discloses significant events that occurred after the reporting period, including asset sales, acquisitions, and debt amendments - On July 14, 2025, the Credit Agreement was amended to increase the Revolving Credit Facility commitments from $310 million to $450 million and extend its maturity to July 14, 2030[149] - Interest rates were also lowered by 0.50%[149] - On July 25, 2025, the company completed the sale of the 2,388-bed Lawton Correctional Facility for $312 million, resulting in a gain of approximately $228 million[150][152][153] - Proceeds from the Lawton sale were used to fund the acquisition of the San Diego Facility and pay off senior secured debt[150][152][153] - On July 31, 2025, the company acquired the 770-bed Western Region Detention Facility in San Diego, California, for approximately $60 million[151][152] - The acquisition was funded as a like-kind real estate exchange with Lawton Facility sale proceeds, saving an estimated $9.3 million in capital gains cash tax[151][152] - The Board authorized a Share Repurchase Program on August 4, 2025, to repurchase up to $300 million of common stock through June 30, 2028[157] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, including a comparison of performance for the three and six months ended June 30, 2025 and 2024. It covers revenues, operating expenses, non-operating items, financial condition, liquidity, capital resources, non-GAAP measures, and future outlook, highlighting key drivers and changes Forward-Looking Information This section discusses forward-looking statements and the various risks and uncertainties that could impact the company's future financial position and operational plans - The report contains forward-looking statements regarding future financial position, business strategy, projected costs, and operational plans, which are subject to various risks and uncertainties[161] - Key risk factors include the ability to manage facilities, government utilization of public-private partnerships, impact of executive actions or legislation, occupancy rates, debt service obligations, and litigation outcomes[161][162][163][166] Introduction This section introduces The GEO Group's core business activities, operational scale, and key financial metrics for the reporting period - The GEO Group specializes in the ownership, leasing, and management of secure facilities, processing centers, and reentry facilities, along with community-based services in the U.S., Australia, and South Africa[167] - As of June 30, 2025, worldwide operations include approximately 77,000 beds at 98 facilities and community supervision services using various technology products[168] Key Financial Metrics (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Consolidated revenues | $1,241.5 million | $1,212.9 million | | Average company-wide facility occupancy rate (active beds) | 89% (69,793 beds) | 88% (69,834 beds) | Contract Developments This section highlights recent contract extensions, new agreements, and court settlements impacting the company's operations - On July 31, 2025, the company extended its 30-day interim agreement with ICE for the Intense Supervision and Appearance Program (ISAP) through August 31, 2025[171] - GEO Transport, Inc. secured a new five-year contract with the U.S. Marshals Service for secure transportation and detention officer services across 26 federal judicial districts[171] - A court settlement in Roman v. Wolf on June 10, 2025, allowed for immediate full intake at the 1,940-bed Adelanto ICE Processing Center, which operates under a 15-year contract with ICE[172] - A contract modification with ICE, effective June 6, 2025, activated a federal immigration processing center at the 1,868-bed D. Ray James Facility in Georgia[173] Asset Sale This section details the sale of the Lawton Correctional Facility, including the sale price and operational transition - On June 3, 2025, the company entered into an agreement to sell the 2,388-bed Lawton Correctional Facility in Oklahoma for $312 million[175] - The sale closed on July 25, 2025, with operations transitioned to the Oklahoma Department of Corrections[175] Asset Purchase This section describes the acquisition of the Western Region Detention Facility, its funding, and associated tax savings - On July 1, 2025, the company announced the purchase of the 770-bed Western Region Detention Facility in San Diego, California, for approximately $60 million[177][178] - The purchase closed on July 31, 2025, and was funded as a like-kind real estate exchange using proceeds from the Lawton Facility sale, resulting in an estimated $9.3 million capital gains cash tax savings[177][178] - Following the asset sale and purchase, the company had approximately $222 million in net proceeds, which were used to pay off senior secured debt, including $300 million in floating rate debt[179] Business Segments This section outlines the company's operational structure across its four reportable business segments - The company conducts business through four reportable segments: U.S. Secure Services, Electronic Monitoring and Supervision Services, Reentry Services, and International Services (Australia and South Africa)[181][182] Idle Facilities This section provides information on the company's idle facilities, including their vacant bed capacity and net book value - The company is marketing 6,785 vacant beds at nine idle facilities to potential customers[183] - The combined net book value of these facilities was $186.1 million as of June 30, 2025[183] Critical Accounting Policies This section confirms the adherence to GAAP in financial statement preparation and the stability of accounting estimates - The unaudited consolidated financial statements are prepared in accordance with GAAP, requiring estimates and assumptions[184][185] - No significant changes in estimates or judgments occurred during the six months ended June 30, 2025[184][185] Results of Operations This section analyzes the company's financial performance, comparing revenues and expenses for the current and prior periods Comparison of Second Quarter 2025 and Second Quarter 2024 This section compares the company's financial results for the second quarter of 2025 against the second quarter of 2024, highlighting key changes in revenue and expenses Revenue by Segment (in thousands) | Revenue Segment (in thousands) | Q2 2025 Revenue | Q2 2024 Revenue | $ Change | % Change | | :--------------------------------------- | :-------------- | :-------------- | :------- | :------- | | U.S. Secure Services | $441,665 | $402,097 | $39,568 | 9.8% | | Electronic Monitoring and Supervision Services | $78,925 | $84,745 | $(5,820) | (6.9)% | | Reentry Services | $71,310 | $68,960 | $2,350 | 3.4% | | International Services | $44,269 | $51,383 | $(7,114) | (13.8)% | | Total | $636,169 | $607,185 | $28,984 | 4.8% | - U.S. Secure Services revenue increased by $39.6 million (9.8%) in Q2 2025 due to new contract activations ($17.5 million) and increases in occupancies, rates, and per diem amounts ($28.4 million), partially offset by contract terminations ($6.3 million)[188][189] - Electronic Monitoring and Supervision Services revenue decreased by $5.8 million (6.9%) in Q2 2025 primarily due to lower average participant counts in the ISAP program[191] - International Services revenue decreased by $7.1 million (13.8%) in Q2 2025, mainly due to the transition of the Junee Correctional Centre contract in Australia to the government, partially offset by foreign exchange rate fluctuations[193] Expense and Other Income (in thousands) | Expense Category (in thousands) | Q2 2025 | Q2 2024 | $ Change | % Change | | :--------------------------------------- | :------ | :------ | :------- | :------- | | Operating Expenses | $475,218 | $443,529 | $31,689 | 7.1% | | Depreciation and Amortization | $32,732 | $31,313 | $1,419 | 4.5% | | General and Administrative Expenses | $56,246 | $52,198 | $4,048 | 7.8% | | Interest Expense | $41,907 | $50,644 | $(8,737) | (17.3)% | | Loss on Extinguishment of Debt | $595 | $82,339 | $(81,744) | (99.3)% | | Other Income | $5,514 | — | $5,514 | 100.0% | | Provision for (Benefit from) Income Taxes | $10,554 | $(20,379) | $30,933 | (151.8)% | | Equity in Earnings of Affiliates, net of Income Tax Provision | $2,177 | $811 | $1,366 | 168.4% | - Operating expenses for U.S. Secure Services increased by $41.2 million in Q2 2025 due to higher labor, medical, transportation costs, increased occupancies, and staffing/training for future growth, as well as new contract activations[195] - Interest expense decreased by $8.7 million (17.3%) in Q2 2025 due to lower interest rates from the Senior Notes Offering and new Term Loan, and lower principal balances after retiring the 6.50% Exchangeable Senior Notes[206] - The company recognized $5.5 million in other income in Q2 2025 from Employee Retention Tax Credit provisions of the CARES Act[209] Comparison of Six Months 2025 and Six Months 2024 This section compares the company's financial results for the six months ended June 30, 2025, against the same period in 2024, detailing changes in revenue and expenses Revenue by Segment (in thousands) | Revenue Segment (in thousands) | H1 2025 Revenue | H1 2024 Revenue | $ Change | % Change | | :--------------------------------------- | :-------------- | :-------------- | :------- | :------- | | U.S. Secure Services | $847,381 | $803,037 | $44,344 | 5.5% | | Electronic Monitoring and Supervision Services | $156,638 | $171,529 | $(14,891) | (8.7)% | | Reentry Services | $141,686 | $136,790 | $4,896 | 3.6% | | International Services | $95,808 | $101,501 | $(5,693) | (5.6)% | | Total | $1,241,513 | $1,212,857 | $28,656 | 2.4% | - U.S. Secure Services revenue increased by $44.3 million (5.5%) in H1 2025, driven by new contract activations ($20.2 million) and increases in occupancies, rates, and per diem amounts ($37.8 million), partially offset by contract terminations ($13.7 million)[215] - Electronic Monitoring and Supervision Services revenue decreased by $14.9 million (8.7%) in H1 2025 due to lower average participant counts in the ISAP program[217] - International Services revenue decreased by $5.7 million (5.6%) in H1 2025, primarily due to the transition of the Junee Correctional Centre contract in Australia, partially offset by foreign exchange rate fluctuations[219] Expense and Other Income (in thousands) | Expense Category (in thousands) | H1 2025 | H1 2024 | $ Change | % Change | | :--------------------------------------- | :------ | :------ | :------- | :------- | | Operating Expenses | $929,693 | $885,204 | $44,489 | 5.0% | | Depreciation and Amortization | $64,868 | $62,678 | $2,190 | 3.5% | | General and Administrative Expenses | $113,995 | $105,268 | $8,727 | 8.3% | | Interest Expense | $84,348 | $101,939 | $(17,591) | (17.3)% | | Loss on Extinguishment of Debt | $595 | $82,378 | $(81,783) | (99.3)% | | Other Income | $5,514 | — | $5,514 | 100.0% | | Provision for (benefit from) Income Taxes | $12,380 | $(12,308) | $24,688 | (200.6)% | | Equity in Earnings of Affiliates, net of Income Tax Provision | $3,005 | $839 | $2,166 | 258.2% | - Operating expenses for U.S. Secure Services increased by $54.2 million in H1 2025 due to higher labor, medical, transportation costs, increased occupancies, and staffing/training for future growth, as well as new contract activations[221] - Interest expense decreased by $17.6 million (17.3%) in H1 2025 due to lower interest rates from the Senior Notes Offering and new Term Loan, and lower principal balances after retiring the 6.50% Exchangeable Senior Notes[232] - The company recognized $5.5 million in other income in H1 2025 from Employee Retention Tax Credit provisions of the CARES Act[234] Financial Condition This section assesses the company's financial health, including capital requirements, liquidity, and capital resources Capital Requirements This section outlines the company's current and projected capital needs for operations, debt service, and facility investments - Current cash requirements include working capital, debt service, supply purchases, R&D for electronic monitoring products, joint venture investments, and capital expenditures for new or existing facilities[240] - Estimated cost for existing active capital projects is $54.1 million, with $35.9 million spent through June 30, 2025, and $18.2 million remaining for the rest of 2025[241] - Capital needs are expected to be funded by cash on hand, cash from operations, and borrowings under the Credit Agreement[242][243] - Management believes these resources are adequate for 2025 and the next twelve months[242][243] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations, including recent refinancing activities - The company closed a private offering of $1.275 billion in senior notes (8.625% secured notes due 2029 and 10.250% unsecured notes due 2031) and entered into a new Credit Agreement in April 2024[244][245] - Net proceeds from the senior notes offering and new term loan, along with cash on hand, were used to refinance approximately $1.5 billion of existing indebtedness, pushing most debt maturities to 2029 and 2031[246][247] - The remaining principal balance of the 6.50% Exchangeable Senior Notes due 2026 was retired in Q1 2025[251] Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $110,393 | $114,520 | | Net cash used in investing activities | $(81,799) | $(36,996) | | Net cash used in financing activities | $(37,609) | $(113,202) | Non-GAAP Measures This section defines and explains the company's use of non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, for performance assessment - EBITDA is defined as net income adjusted for income tax, net interest expense, and depreciation/amortization[266] - Adjusted EBITDA further adjusts for non-controlling interests, stock-based compensation, litigation costs, asset divestitures/impairment, and other non-cash items[266] - Management uses EBITDA and Adjusted EBITDA to assess operational performance, debt servicing ability, and capital expenditure funding[267][268][269][270] - These measures are believed to provide a clearer view of operations by removing certain non-cash and variable charges[267][268][269][270] Non-GAAP Financial Measures (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $29,074 | $(32,563) | $48,616 | $(9,904) | | EBITDA | $112,565 | $109,548 | $206,743 | $220,631 | | Adjusted EBITDA | $118,597 | $119,250 | $218,363 | $236,893 | Outlook This section provides the company's future expectations regarding immigration enforcement, operating expenses, and potential revenue from idle facilities - The company is preparing for expanded immigration enforcement opportunities, investing significantly in capital expenditures for detention capacity, secure transportation, and electronic monitoring services for U.S. Immigration and Customs Enforcement[272] - Operating expenses as a percentage of revenues are expected to be impacted by new facility openings and inflation on personnel, utilities, insurance, medical, and food costs[274][275] - General and administrative expenses are expected to remain consistent or decrease due to cost savings initiatives[274][275] - The company is marketing 6,785 vacant beds at nine idle facilities[276] - If activated at average per diem rates and occupancy, these facilities could generate approximately $240 million in incremental annualized revenue and an annualized increase of $0.20 to $0.25 in EPS[276] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the company's exposure to market risks, specifically interest rate risk and foreign currency exchange rate risk, and how these risks are managed or could impact financial performance Interest Rate Risk This section details the company's exposure to interest rate fluctuations on its variable-rate debt and its hedging strategies - The company is exposed to interest rate risk on its Credit Agreement, which has variable interest rates[277] - As of June 30, 2025, with $411.9 million in borrowings and $47.5 million in letters of credit, a one percent increase in the average interest rate would increase annual interest expense by approximately $4.6 million[277] - Interest rate swap arrangements are used to hedge variable rate debt, fixing interest rates and mitigating the impact of rate changes on financial condition or results of operations[278] Foreign Currency Exchange Rate Risk This section describes the company's exposure to foreign currency exchange rate fluctuations and their potential impact on financial results - The company is exposed to foreign currency exchange rate fluctuations between the U.S. dollar and the Australian dollar, South African Rand, and British Pound[280] - A 10% change in historical currency rates would impact financial position by approximately $9.0 million and results of operations by $0.9 million for the six months ended June 30, 2025[280] ITEM 4. CONTROLS AND PROCEDURES This section details the evaluation of the company's disclosure controls and procedures and any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as assessed by management - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[281] Changes in Internal Control Over Financial Reporting This section addresses any material changes in the company's internal control over financial reporting during the reporting period - Management believes there have been no material changes in internal control over financial reporting during the quarter ended June 30, 2025[283] PART II - OTHER INFORMATION This section provides additional information beyond financial statements, including legal proceedings, risk factors, and other disclosures ITEM 1. LEGAL PROCEEDINGS This section provides an update on various legal proceedings, including immigration detainee litigation, challenges to state legislation conflicting with federal contracts, and other general litigation and tax assessments Immigration Detainee Litigation This section provides updates on class action lawsuits concerning immigration detainee work programs in various states - A class action lawsuit in Colorado alleges CMWA and TVPA violations regarding detainee work programs[285] - The U.S. Supreme Court granted GEO's Petition for Writ of Certiorari on June 2, 2025, staying all trial dates[285] - Two lawsuits in Washington State regarding minimum wage for detainees resulted in a combined $23.2 million judgment against GEO, plus $14.4 million in attorney's fees and interest[286][287] - GEO's appeal to the Ninth Circuit is pending, with the U.S. Department of Justice filing an Amicus Brief supporting GEO's position[286][287] - California class action lawsuits in the Central and Eastern Districts are stayed pending the Ninth Circuit's decision in the Washington State lawsuits[288][289] - GEO maintains it operates the Voluntary Work Program in compliance with contracts and laws, vigorously disputes the claims, and has not recorded accruals as losses are not considered probable[290] Challenges to State Legislation that Conflict with Federal Contracts This section describes legal challenges against state laws that aim to regulate or prohibit private detention facilities with federal contracts - GEO filed lawsuits challenging state laws in Washington (House Bill 1470), New Jersey (Assembly Bill 5207), and California (Senate Bill 1132) that purport to regulate or prohibit private detention facilities contracting with federal agencies[291][292][293] - Preliminary injunctions were granted against enforcement of HB 1470 in Washington and AB 5207 in New Jersey[291][292][293] - The Third Circuit Court of Appeals affirmed AB 5207 as unconstitutional in a similar case[291][292][293] - The California lawsuit challenging SB 1132 was dismissed with leave to amend[291][292][293] Other Litigation This section addresses various other legal claims the company faces, including civil rights, medical malpractice, and employment matters - The company's business exposes it to various other legal claims, including civil rights, sexual misconduct, medical malpractice, employment matters, and personal injury claims[294][295] - These claims are unpredictable and could materially affect financial condition or contracts[294][295] Other Assessment This section details a non-income tax audit assessment in New Mexico and the company's actions regarding it - A New Mexico non-income tax audit resulted in a formal Notice of Assessment of Taxes and Demand for Payment[296] - GEO's appeal was denied by the New Mexico Supreme Court on July 8, 2024[296] - A payment of $18.9 million was made in July 2024, and a managed audit program for the post-audit period is ongoing, resulting in a $6.3 million favorable adjustment for penalties and interest in Q3 2024[296] Accruals for Legal Proceedings This section explains the company's policy for accruing losses related to legal proceedings and the inherent uncertainties - Accruals for legal proceedings are established when a loss is probable and estimable[297] - Outcomes are uncertain, and unfavorable resolutions could materially impact financial condition, results of operations, or cash flows, including contract modifications or loss[297] ITEM 1A. RISK FACTORS This section refers to the detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 - Readers are encouraged to review the comprehensive risk factors outlined in the company's Annual Report on Form 10-K for the year ended December 31, 2024, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, which could materially affect the business, financial condition, or future prospects[298] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This item is not applicable for the reporting period ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is not applicable for the reporting period ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable for the reporting period ITEM 5. OTHER INFORMATION This section provides disclosures on Rule 10b5-1 trading arrangements and compensatory arrangements for certain officers Rule 10b5-1 Trading Arrangements This section details Rule 10b5-1 trading plans entered into by company executives for potential stock sales - Richard K. Long, SVP, Project Development, entered a 10b5-1 trading plan on May 19, 2025, for the potential sale of up to 50,835 shares of common stock, effective until May 18, 2026, or earlier if all shares are sold[302] - Christopher D. Ryan, SVP, Human Resources, entered a 10b5-1 trading plan on May 19, 2025, for the potential sale of up to 12,343 shares of common stock, effective until May 15, 2026, or earlier if all shares are sold[303] Compensatory Arrangements of Certain Officers This section outlines amendments to employment agreements and vesting schedules for the company's Executive Chairman and CEO - On July 7, 2025, George C. Zoley's Executive Chairman employment agreement was amended, extending his term to April 2, 2029, updating his base salary, and increasing his Target Bonus and Target Stock Award from 100% to 150% of his base salary[305] - On July 3, 2025, the Compensation Committee approved an adjustment for CEO J. David Donahue, increasing his Target Bonus and Target Stock Award from 100% to 150% of his base salary, reflected in an amendment on August 4, 2025[306] - On July 15, 2025, the vesting schedule for George C. Zoley's special recognition stock award of 207,862 restricted shares was modified to vest on July 17, 2025, instead of March 3, 2026, in connection with his amended employment agreement[307] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL documents - Key exhibits include the Purchase and Sale Agreement for the Lawton Correctional Facility, amendments to employment agreements for the Executive Chairman and CEO, and the First Amendment to the Credit Agreement[309] - Certifications under Sections 302 and 906 of the Sarbanes-Oxley Act are filed, along with Inline XBRL documents for financial data[309] SIGNATURES This section contains the required signatures for the Form 10-Q filing - The report was signed on behalf of The GEO Group, Inc. by Mark J. Suchinski, Chief Financial Officer, on August 6, 2025[312]