CoreCivic(US:CXW)2020-11-05 20:24Financial Performance - In Q3 2020, the company's revenue was $468 million, a decline of 7.9% compared to the same quarter last year, primarily due to impacts from COVID-19 [6][7] - Normalized funds from operations (FFO) decreased to $0.52 per share from $0.70 per share in the prior year quarter, largely affected by lower utilization levels from Immigration and Customs Enforcement (ICE) [7][8] - The company generated $0.22 of EPS and $0.28 of adjusted EPS for the quarter, with adjusted EBITDA at $94.6 million [36] Business Segment Performance - The CoreCivic Safety segment experienced the majority of the revenue decline, while the CoreCivic Community segment was also impacted as government partners released lower-risk residents [6][7] - Occupancy in the Safety and Community facilities declined from 75% in Q2 to 71% in Q3, resulting in a decrease of 3,178 average daily resident populations [46] - The Property segment saw occupancy increase to 99% from 97% in the previous quarter, with 100% of rent collected [47] Market Opportunities - The company was awarded multiple new contracts during Q3, including one with the U.S. Marshals Service for the Cimarron facility, which is expected to improve earnings with annual revenues projected at approximately $30 million [10][12] - New contracts with the Idaho Department of Correction and the Federal Bureau of Prisons for reentry services were also highlighted, representing potential incremental utilization of approximately 3,000 beds [13][14][15] - The company is engaged in negotiations to build and lease new correctional facilities in Alabama, which could represent approximately 7,000 beds [17] Strategic Direction - The company plans to prioritize debt reduction as part of its capital-allocation strategy, having repaid over $100 million of net debt in Q3 [25][26] - The decision to revoke its REIT status and convert to a taxable C corporation is aimed at providing more flexibility in capital allocation [25][29] - The company is exploring the sale of non-core real estate assets, which could generate up to $150 million in net proceeds to accelerate its capital-allocation strategy [28][50] Management Commentary - Management acknowledged the ongoing challenges posed by COVID-19 but emphasized the company's strong underlying financial performance and continued execution of its strategy [24][51] - The company remains optimistic about future opportunities in the market, particularly in modernizing correctional facilities post-pandemic [20][21] - Management expressed confidence in the stability of its federal contracts, despite potential changes in the political landscape following the recent elections [30][64] Other Important Information - The company has maintained strong cash flow, generating $107.2 million from operating activities in Q3, allowing for significant debt repayment [43][44] - The company has no material capital commitments and expects to achieve a 10% reduction in maintenance capital expenditures [48][49] - The management team is aligned with shareholders and is considering share repurchases as part of its capital allocation strategy [29][72] Q&A Session Summary Question: Population levels stabilization - Management noted that while ICE populations have continued to decline, the rate of decline has slowed, and some state populations have shown slight increases [58][59] Question: Contracts up for renewal in Q4 - Management indicated that there are no significant contracts up for renewal in Q4, with a strong retention rate observed in Q3 [60][61] Question: Dividend suspension and REIT status - Management confirmed that they do not anticipate any additional distributions required this year, maintaining their position regarding REIT status [62][63] Question: Impact of election results on business - Management provided insights on how potential changes in administration could affect federal contracts, emphasizing the continued need for private sector capacity [64][66][69] Question: Consideration for stock buybacks - Management acknowledged the potential for share repurchases if non-core assets are sold, but emphasized the current focus on debt reduction [72]