Agreement. Subsequently, as a result of an asset sale of one of the Company's owned facilities, the Company repaid the remaining balance of the Term Loans under the Credit Agreement.
On November 13, 2025, the Company entered into a Second Amendment to Credit Agreement (the “Second Amendment”), by and among each of GEO and GEO Corrections Holdings, Inc., as the Borrowers, the guarantors named therein, Citizens Bank, N.A., as administrative agent, and the lenders party thereto. The Second Amendment effectively removes the 3.00 to 1.00 total leverage ratio hurdle from one-half of the $150.0 million general carve-out to the Credit Agreement’s restricted payments negative covenant.
On January 20, 2026, the Company entered into a Third Amendment to Credit Agreement (the “Third Amendment”), by and among each of GEO and GEO Corrections Holdings, Inc., as the Borrowers, the other loan parties named therein, Citizens Bank, N.A., as administrative agent, and the lenders party thereto. The Third Amendment increased the revolving credit facility commitments from $450 million to $550 million. The Third Amendment decreased the Incremental Amount (as defined in the Third Amendment) from $250 million to $150 million that the Company may request in the future in additional term loans, incremental equivalent debt or an increase to the revolving credit facility commitments, subject to the satisfaction of the applicable conditions in the Third Amendment and the Credit Agreement.
The Credit Agreement contains certain customary representations and warranties, affirmative covenants and negative covenants, including restrictions on the ability of GEO and its restricted subsidiaries to, among other things, (i) create, incur or assume any indebtedness, (ii) create, incur, assume or permit liens, (iii) make loans and investments, (iv) engage in mergers, acquisitions and asset sales, (v) make certain restricted payments, (vi) engage in transactions with affiliates, (vii) cancel, forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value any subordinated indebtedness, except as permitted under applicable subordination terms, (viii) engage in other businesses, except as permitted, and (ix) materially impair the security interests securing the obligations under the Credit Agreement. The Credit Agreement also contains certain financial covenants, including a maximum total leverage ratio covenant, a maximum first lien leverage ratio covenant and a minimum interest coverage ratio covenant. In addition, the Credit Agreement restricts GEO from electing to be taxed as a real estate investment trust under the Internal Revenue Code. The Credit Agreement also contains certain customary events of default.
The Credit Facility guarantors will guarantee the obligations in respect of the commitments and loans under the Credit Agreement. The obligations of the Credit Facility Borrowers and the Credit Facility guarantors in respect of the Credit Agreement will be secured by first-priority liens on substantially all of their assets, including real property interests with respect to which the Credit Agreement requires the execution and delivery of a mortgage. The rights of the holders of the Secured Notes in the Collateral (including the right to exercise remedies) are subject to the First Lien Intercreditor Agreement.
As of June 30, 2026, the Company had $248.9 million in borrowings under its revolver, and approximately $56.9 million in letters of credit which left approximately $244.1 million in additional borrowing capacity under the revolver. The weighted average interest rate on outstanding borrowings under the Credit Agreement as of June 30, 2026 was 6.20%.
Secured Notes
Certain terms and conditions of the 2029 Indenture and the Secured Notes are as follows:
Maturity. The Secured Notes mature on April 15, 2029.
Interest. The Secured Notes accrue interest at a rate of 8.625% per year. Interest on the Secured Notes is payable semi-annually on each April 15 and October 15, which commenced on October 15, 2024.
Issue Price. The Secured Notes were issued at par.
Guarantees. The Secured Notes are fully and unconditionally guaranteed by each of the Initial Guarantors (as defined in the 2029 Indenture) and may be guaranteed by additional subsidiaries of the Company when a subsidiary guarantees debt under the credit facilities (other than debt securities) and debt securities in an aggregate principal amount of at least $100.0 million.
Ranking. The Secured Notes and the Secured Note Guarantees are GEO and the Guarantors’ respective senior, secured obligations, and the indebtedness evidenced by the Secured Notes and the Secured Note Guarantees will rank equal in right of payment to all of GEO’s and the Guarantors’ other existing and future senior obligations, including the indebtedness under the Credit Agreement and the guarantees thereof; effectively senior in right of payment to all of GEO’s and the Guarantors’ existing and future unsecured indebtedness, including the Unsecured Notes, and the guarantees thereof, to the extent of the value of the Collateral (as defined below); senior in right of payment to any of GEO’s and the Guarantors’ future subordinated indebtedness; effectively junior in right of payment to any of GEO’s and the Guarantors’ future secured indebtedness that is secured by a lien on any assets not constituting Collateral, to the extent of the value of such assets; and structurally subordinated to all existing and future indebtedness and other liabilities of Subsidiaries that do not guarantee the Secured Notes and joint ventures, including trade payables.
Security. The Secured Notes and the Secured Note Guarantees are secured on a first-priority basis by the same collateral (the “Collateral”) that secures the obligations under the Credit Agreement in accordance with the terms of the 2029 Indenture and security agreements relating to the Collateral and instruments filed and recorded in appropriate jurisdictions to preserve and protect the liens on the Collateral (including, without limitation, mortgages, deeds of trust or deed to secure debt and financing statements under the Uniform Commercial Code of the relevant states applicable to the Collateral), each for the benefit of the Trustee, Collateral Agent and the holders of the Secured Notes.
Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Secured Notes.
Optional Redemption. On or after April 15, 2026, the Company may redeem all or a part of the Secured Notes (which includes Additional Notes (as defined in the 2029 Indenture), if any), upon not less than 10 nor more than 60 days’ notice, at the fixed redemption prices expressed as percentages of the principal amount set forth in the 2029 Indenture, plus accrued and unpaid interest, if any, on the Secured Notes redeemed, to, but excluding, the applicable redemption date, subject to the rights of holders of Secured Notes on the relevant record date to receive interest due on the relevant interest payment date if the Secured Notes have not been redeemed prior to such date. In addition, the Company was able to redeem up to 35% of the aggregate principal amount of the Secured Notes at any time and from time to time before April 15, 2026, with an amount up to the net proceeds of certain equity offerings at a redemption price of 108.625% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the redemption date provided, that (1) at least 65% of the aggregate principal amount of Secured Notes remains outstanding immediately after the occurrence of that redemption and (2) the redemption occurs within 90 days of the date of the closing of the equity offering. The Company was able to redeem the Secured Notes, in whole or in part, at any time and from time to time before April 15, 2026, at a redemption price equal to 100% of the principal amount of the Secured Notes (which includes Additional Notes, if any), plus the Applicable Premium (as defined in the 2029 Indenture) as of the applicable redemption date, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, subject to the rights of holders of Secured Notes on the relevant record date to receive interest due on the relevant interest payment date if the Secured Notes have not been redeemed prior to such date. Additionally, during any twelve-month period prior to April 15, 2026, the Company was entitled at its option on one or more occasions to redeem the Secured Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 10% of the aggregate principal amount of the outstanding Secured Notes (which includes Additional Notes, if any) at a redemption price (calculated by the Company and expressed as a percentage of principal amount) of 103.000%, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Change of Control. If a Change of Control (as defined in the 2029 Indenture) occurs, the Company will offer a payment in cash equal to 101% of the aggregate principal amount of Secured Notes repurchased, plus accrued and unpaid interest, if any, on the Secured Notes repurchased, to (but not including) the date of purchase, subject to the right of holders on the relevant record date to receive interest due on the relevant interest payment date if the Secured Notes have not been redeemed or repurchased prior to such date.
Certain Covenants. The 2029 Indenture contains certain covenants that will limit, among other things, the Company’s and its Restricted Subsidiaries’ (as defined in the 2029 Indenture) ability to: incur additional indebtedness (including guarantees thereof); incur or create liens, other than Permitted Liens (as defined in the 2029 Indenture); make certain Restricted Payments (as defined in the 2029 Indenture); make certain investments; dispose of certain assets; allow to exist certain restrictions on the ability of the Company’s Restricted Subsidiaries to pay any dividend or make any other payment or distribution on account of the Company’s or any Restricted Subsidiary’s Equity Interests (as defined in the 2029 Indenture); engage in certain transactions with affiliates; and engage in any business other than Permitted Businesses (as defined in the 2029 Indenture). These covenants are subject to a number of important limitations and exceptions.
Events of Default. The 2029 Indenture contains customary events of default which could, subject to certain conditions, cause the Secured Notes to become immediately due and payable.
The Secured Notes are also subject to the terms of the First Lien Intercreditor Agreement (the “First Lien Intercreditor Agreement”), dated April 18, 2024, among GEO, GEOCH, the other grantors from time to time party thereto, Citizens Bank, N.A., as Credit Agreement Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, and Ankura Trust Company, LLC as Initial Additional Collateral Agent and Initial Additional Authorized Representative. The First Lien Intercreditor Agreement sets forth the relative rights and obligations of the holders of First Lien Secured Obligations (which means (i) all obligations as defined in the Credit Agreement, (ii) all obligations under the Secured Notes, the 2029 Indenture, the Secured Note Guarantees and the Security Documents (as defined in the 2029 Indenture), and (iii) any other indebtedness secured on a first lien pari passu basis with such obligations), in each case, with respect to shared Collateral.
Unsecured Notes
Certain terms and conditions of the 2031 Indenture and the Unsecured Notes are as follows:
Maturity. The Unsecured Notes mature on April 15, 2031.
Interest. The Unsecured Notes accrue interest at a rate of 10.250% per year. Interest on the Unsecured Notes is payable semi-annually on each April 15 and October 15, which commenced on October 15, 2024.
Issue Price. The Unsecured Notes were issued at par.
Guarantees. The Unsecured Notes are fully and unconditionally guaranteed by each of the Initial Guarantors (as defined in the 2031 Indenture) and may be guaranteed by additional subsidiaries of the Company when a subsidiary guarantees debt under the credit facilities (other than debt securities) and debt securities in an aggregate principal amount of at least $100.0 million.
Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Unsecured Notes.
Optional Redemption. On or after April 15, 2027, the Company may redeem all or a part of the Unsecured Notes (which includes Additional Notes (as defined in the 2031 Indenture), if any), upon not less than 10 nor more than 60 days’ notice, at the fixed redemption prices expressed as percentages of the principal amount set forth in the 2031 Indenture, plus accrued and unpaid interest, if any, on the Unsecured Notes redeemed, to, but excluding, the applicable redemption date, subject to the rights of holders of Unsecured Notes on the relevant record date to receive interest due on the relevant interest payment date if the Unsecured Notes have not been redeemed prior to such date. In addition, the Company may redeem up to 35% of the aggregate principal amount of the Unsecured Notes at any time and from time to time before April 15, 2027, with an amount up to the net proceeds of certain equity offerings at a redemption price of 110.250% of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the redemption date provided, that (1) at least 65% of the aggregate principal amount of Unsecured Notes remains outstanding immediately after the occurrence of that redemption and (2) the redemption occurs within 90 days of the date of the closing of the equity offering. The Company may also redeem the Unsecured Notes, in whole or in part, at any time and from time to time before April 15, 2027, at a redemption price equal to 100% of the principal amount of the Unsecured Notes (which includes Additional Notes, if any), plus the Applicable Premium (as defined in the 2031 Indenture) as of the applicable redemption date, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, subject to the rights of holders of Unsecured Notes on the relevant record date to receive interest due on the relevant interest payment date if the Unsecured Notes have not been redeemed prior to such date.
Change of Control. If a Change of Control (as defined in the 2031 Indenture) occurs, the Company will offer a payment in cash equal to 101% of the aggregate principal amount of Unsecured Notes repurchased, plus accrued and unpaid interest, if any, on the Unsecured Notes repurchased, to (but not including) the date of purchase, subject to the right of holders on the relevant record date to receive interest due on the relevant interest payment date if the Unsecured Notes have not been redeemed or repurchased prior to such date.
Certain Covenants. The 2031 Indenture contains certain covenants that will limit, among other things, the Company’s and its Restricted Subsidiaries’ (as defined in the 2031 Indenture) ability to: incur additional indebtedness (including guarantees thereof); incur or create liens, other than Permitted Liens (as defined in the 2031 Indenture); make certain Restricted Payments (as defined in the 2031 Indenture); make certain investments; dispose of certain assets; allow to exist certain restrictions on the ability of the Company’s Restricted Subsidiaries to pay any dividend or make any other payment or distribution on account of the Company’s or any Restricted Subsidiary’s Equity Interests (as defined in the 2031 Indenture); engage in certain transactions with affiliates; and engage in any business other than Permitted Businesses (as defined in the 2031 Indenture). These covenants are subject to a number of important limitations and exceptions.
Events of Default. The 2031 Indenture contains customary events of default which could, subject to certain conditions, cause the Unsecured Notes to become immediately due and payable.
Other
In August of 2019, the Company entered into two identical notes in the aggregate amount of $44.3 million which are secured by loan agreements and mortgage and security agreements on certain real property and improvements. The terms of the notes are through September 1, 2034 and bear interest at LIBOR plus 200 basis points and are payable in monthly installments plus interest. The Company has entered into interest rate swap agreements to fix the interest rate to 4.22%. Included in the balance at June 30, 2026 is $0.4 million of deferred loan costs incurred in the transaction. Refer to Note 9 - Derivative Financial Instruments for further information.
The Company was in compliance with its debt covenants at June 30, 2026.
Guarantees
Australia
The Company has entered into a guarantee in the form of a letter of credit in connection with the operating performance of a facility in Australia. The obligation amounted to approximately AUD59.8 million, or $41.2 million, based on exchange rates as of June 30, 2026.
As of June 30, 2026, the Company also had seven other letters of credit outstanding under separate international facilities relating to performance guarantees of its Australian subsidiary totaling AUD11.4 million, or $7.8 million, based on exchange rates as of June 30, 2026.
Except as discussed above, the Company does not have any off-balance sheet arrangements.
11. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Litigation, Claims and Assessments
Immigration Detainee Litigation
Civil immigration detainees at the Aurora ICE Processing Center filed a class action lawsuit on October 22, 2014, against the Company in the U.S. District Court for the District of Colorado. The complaint alleges that the Company was in violation of the Colorado Minimum Wage Act ("CMWA") and the Federal Trafficking Victims Protection Act (“TVPA”). The complaint also claims that the Company was unjustly enriched based on the level of payment the detainees received for work performed in a Voluntary Work Program ("VWP") the Company is required to implement at the facility under the terms of its contract with the federal government. On July 6, 2015, the court found that detainees were not employees under the CMWA and dismissed this claim. On February 27, 2017, the court granted the plaintiffs' motion for class certification on the TVPA and unjust enrichment claims. The plaintiffs' class seeks actual damages, compensatory damages, exemplary damages, punitive damages, restitution, attorneys’ fees and costs, and such other relief as the court may deem proper. On October 18, 2022, the court issued an order granting plaintiffs’ motion for summary judgment on the Company’s affirmative defenses, denying the Company’s motion for summary judgment, motion to dismiss, and motion for decertification of the class, narrowing the class period for plaintiffs’ TVPA claims, and otherwise ruling against the Company’s motions for relief. All trial dates were stayed by court order pending appeal of certain of GEO's defenses to the Tenth Circuit Court of Appeals. Oral argument before the Tenth Circuit was held on September 18, 2023. On October 22, 2024, the Tenth Circuit issued an Order finding appellate review of GEO’s claim of immunity was premature and, therefore, the Tenth Circuit was currently without jurisdiction to consider the merits of GEO’s claimed immunity. On January 13, 2025, GEO filed a Petition for Writ of Certiorari with the United States Supreme Court seeking review of the Tenth Circuit's decision. On June 2, 2025, the United States Supreme Court granted GEO’s Petition for Writ of Certiorari. Oral argument before the Supreme Court was held on November 10, 2025. On February 25, 2026, the Supreme Court issued a decision affirming the decision of the Tenth Circuit and finding that there is no immediate right to appellate review of a ruling on GEO’s Yearsley defense. The Supreme Court further stated that the holding still allows immediate appellate review of a ruling on a Yearsley defense via a separate appellate certification process. On April 6, 2026, GEO filed a motion seeking certification of the appeal of its Yearsley defense, a motion to stay any further proceedings pending resolution of GEO’s Petition for Writ of Certiorari to the Supreme Court in Nwauzor v. GEO (discussed below), and a separate motion for summary judgment under qualified immunity. Briefing on those motions was completed on May 25, 2026.
The first of two State of Washington lawsuits, Nwauzor v. GEO Group, was filed on September 26, 2017, by immigration detainees against the Company in the U.S. District Court for the Western District of Washington. The second lawsuit was filed on September 20, 2017, by the State Attorney General against the Company in the Superior Court of the State of Washington for Pierce County, which the Company removed to the U.S. District Court for the Western District of Washington on October 9, 2017. The plaintiffs claimed that State of Washington minimum wage laws should be enforced with respect to detainees who volunteer to participate in a VWP administered by GEO at the Northwest ICE Processing Center (the "Center") as required by the U.S. Department of Homeland Security under the terms of GEO’s contract. The Center houses people in the custody of federal immigration authorities while the federal government is determining their immigration status. In October 2021, an unfavorable jury verdict and court judgment resulting in a combined $23.2 million judgment entered against the Company in the retrial of the two cases, which judgment amounts were subsequently increased by a further award against the Company of attorney’s fees, costs, and pre-judgment interest in the amount of $14.4 million. Post-judgment interest is accruing on these judgments in accordance with Washington law. The trial court waived the necessity to post a supersedeas bond for the combined judgments and has stayed enforcement of the verdict and judgments while GEO’s appeal to the U.S. Court of Appeals for the Ninth Circuit is pending. Oral argument before the Ninth Circuit was held on October 6, 2022.
On March 7, 2023, the Ninth Circuit certified certain state law questions to the Washington Supreme Court. Oral argument before the Washington Supreme Court was held on October 17, 2023. On December 21, 2023, the Washington Supreme Court issued an opinion answering the questions certified by the Ninth Circuit. Under the Ninth Circuit’s March 7, 2023, order certifying the above questions to the Washington Supreme Court, the Ninth Circuit resumed control and jurisdiction over the State of Washington lawsuits. On February 21, 2024, the United States Department of Justice filed its Brief for the United States as Amicus Curiae in Support of GEO, arguing that the State of Washington judgments should be reversed because the Supremacy Clause precludes application of the Washington Minimum Wage Statute to work programs for federal detainees. In its Brief, the Department of Justice asserted that application of the Washington law independently contravened intergovernmental immunity because it would make federal detainees subject to provisions that do not apply, and never have applied, to persons in state custody, singling out a contractor with the federal government for obligations Washington does not itself bear. The Department of Justice also contended that the immigration statutory structure approved by Congress does not contemplate a role for states or state law in governing the VWP for federal detainees. On January 16, 2025, the Ninth Circuit issued an Opinion by a 2-1 vote affirming the lower court’s decision. That Opinion includes a 24-page dissenting opinion.
On February 6, 2025, GEO timely filed its Petition for Rehearing En Banc. On March 20, 2025, the United States filed an Amicus Brief with the Ninth Circuit in which it argued that the January 16, 2025 decision of the Ninth Circuit is incorrect in multiple respects, runs contrary to Circuit precedent, and creates significant tension with the case law of other circuits. The United States argued that the application of the state minimum-wage law to federal immigration detainees in the voluntary work program is preempted by a federal appropriation statute that sets the minimum allowance for detainee participants at $1 per day. Additionally, the United States argued that the application of the state minimum-wage law to federal immigration detainees likewise impermissibly discriminates against the federal government in violation of intergovernmental-immunity principles.
On August 13, 2025, the Ninth Circuit issued an order denying GEO’s Petition for Rehearing En Banc. That order included six dissenting opinions. On September 2, 2025, the Ninth Circuit granted GEO’s motion to stay the issuance of the Court’s mandate pending GEO’s Petition for Writ of Certiorari to the Supreme Court.
A final mandate has not been issued by the Ninth Circuit, and the appeal remains pending until resolution of GEO's Petition for Writ of Certiorari to the Supreme Court. On January 9, 2026, GEO filed its Petition for Writ of Certiorari to the Supreme Court. Briefing on GEO’s Petition was completed on April 24, 2026. On May 18, 2026, the Supreme Court requested the views of the United States Solicitor General. Although the Company strongly disputes this claim and continues to vigorously defend itself, the Company accrued a reserve of approximately $37.6 million, which is included in Other Non-Current Liabilities in the accompanying consolidated balance sheets, in accordance with Accounting Standards Codification No. 450 - Contingencies during the third quarter of 2025.
In California, a class action lawsuit was filed on December 19, 2017, by immigration detainees against the Company in the U.S. District Court, Eastern Division of the Central District of California. The California lawsuit alleges violations of the state’s minimum wage laws, violations of the TVPA and California's equivalent state statute, unjust enrichment, unfair competition and retaliation. The California court has certified a class of individuals who have been civilly detained at the Company's Adelanto Facility from December 19, 2014, until the date of final judgment. On March 31, 2022, the court entered a stay until the Ninth Circuit rules on the State of Washington lawsuits, which is stayed pending resolution of GEO’s Petition in Nwauzor v. GEO Group for Writ of Certiorari to the United States Supreme Court.
Current and former detainees of the Mesa Verde ICE Processing Center and the Golden State Annex ICE Processing Center filed a class action lawsuit on July 13, 2022, against the Company in the U.S. District Court for the Eastern District of California, Fresno Division. The complaint alleges that federal detainees who volunteer to participate in the VWP at GEO’s Mesa Verde and Golden State Annex ICE facilities are employees of GEO and entitled to the state’s minimum wage. Plaintiffs also make claims for unfair competition, unjust enrichment, human trafficking, forced labor, California's Private Attorneys General Act, and retaliation. GEO filed both a motion to stay the action pending the Ninth Circuit's decision in Nwauzor and a motion to dismiss the action in its entirety. On July 10, 2023, the court entered a stay until the Ninth Circuit rules on Nwauzor. On February 10, 2025, the Court denied plaintiffs’ request to lift the stay. On September 2, 2025, the Ninth Circuit granted GEO's Unopposed Motion to Stay the Nwauzor Mandate Pending Disposition of a Petition for Certiorari. The Ninth Circuit ordered that "the mandate is stayed for a period not to exceed 90 days pending the filing of the petition for writ of certiorari in the Supreme Court. Should Appellants file for a writ of certiorari, the stay shall continue until final disposition by the Supreme Court." On January 9, 2026, GEO filed its Petition for Writ of Certiorari to the Supreme Court. Briefing on GEO’s Petition was completed on April 24, 2026. On May 18, 2026, the Supreme Court requested the views of the United States Solicitor General. GEO’s Petition in the Nwauzor lawsuits remains pending, and this case remains stayed pending resolution of that Petition.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Information
This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking” statements are any statements that are not based on historical information. Statements other than statements of historical facts included in this report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, legal proceedings and potential steps to address our future debt maturities are “forward-looking” statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to:
•any adverse impact on our financial results caused by the most recent and any future federal government shutdown;
•our ability to timely build and/or open facilities as planned, successfully manage such facilities and successfully integrate such facilities into our operations without substantial additional costs;
•our ability to estimate the government’s level of utilization of public-private partnerships for secure services and the impact of any modifications or reductions by our government customers of their utilization of public-private partnerships;
•our ability to accurately project the size and growth of public-private partnerships for secure services in the U.S. and internationally and our ability to capitalize on opportunities for public-private partnerships;
•our ability to successfully respond to any challenges or concerns that our government customers may raise regarding their use of public-private partnerships for secure services, including finding other government customers or alternative uses for facilities where a government customer has discontinued or announced that a contract with us will be discontinued;
•the impact of adopted or proposed executive action or legislation aimed at limiting public-private partnerships for secure facilities, processing centers and community reentry centers or limiting or restricting the business and operations of financial institutions or others who do business with us;
•our ability to successfully respond to delays encountered by states pursuing public-private partnerships for secure services and cost savings initiatives implemented by a number of states;
•our ability to activate the inactive beds at our idle facilities;
•our ability to maintain or increase occupancy rates at our facilities and the impact of fluctuations in occupancy levels or participants in ISAP on our revenues and profitability;
•our ability to expand, diversify and grow our secure services, reentry, community-based services, monitoring services, evidence-based supervision and treatment programs and secure transportation services businesses;
•our ability to win management contracts for which we have submitted proposals, retain existing management contracts, prevail in any challenge or protest involving the award of a management contract and meet any performance standards required by such management contracts;
•our ability to raise new project development capital given the often short-term nature of the customers’ commitment to use newly developed facilities;
•our ability to develop long-term earnings visibility;
•our ability to successfully conduct our operations in the United Kingdom and South Africa through joint ventures;
•the instability of foreign exchange rates, exposing us to currency risks in Australia, the United Kingdom, and South Africa, or other countries in which we may choose to conduct our business;
•an increase in unreimbursed labor rates;
•our exposure to rising medical costs;
•our ability to manage costs and expenses relating to ongoing litigation arising from our operations;
•the risks associated with the U.S. Supreme Court agreeing to hear our appeal in the Nwauzor case and our ability to prevail on the merits, our company being required to record an additional accrual for the judgments in the future, and our ability to defend similar other pending litigation and the effect such litigation may have on our company;
•our ability to accurately estimate on an annual basis, loss reserves related to general liability, workers’ compensation and automobile liability claims;
•our ability to fulfill our debt service obligations and its impact on our liquidity;
•our ability to deleverage and repay, refinance or otherwise address our debt maturities in an amount or on the timeline we expect, or at all;
•despite current indebtedness levels, we may still incur more indebtedness, which could further exacerbate the risks relating to our indebtedness;
•the covenants in the indentures governing the Secured Notes and the Unsecured Notes and the Credit Agreement impose significant operating and financial restrictions which may adversely affect our ability to operate our business;
•servicing our indebtedness will require a significant amount of cash and our ability to generate cash depends on many factors beyond our control and we may not be able to generate the cash required to service our indebtedness;
•because portions of our senior indebtedness have floating interest rates, an increase in interest rates would adversely affect cash flows;
•we depend on distributions from our subsidiaries to make payments on our indebtedness and these distributions may not be made;
•we may not be able to satisfy our repurchase obligations in the event of a change of control because the terms of our indebtedness or lack of funds may prevent us from doing so;
•the Unsecured Notes and the guarantees on the Unsecured Notes will be effectively subordinated to our and the guarantors' senior secured indebtedness and structurally subordinated to the indebtedness of our subsidiaries that do not guarantee the Unsecured Notes;
•the value of the collateral may not be sufficient to satisfy our obligations under the Secured Notes;
•our ability to identify and successfully complete any potential acquisitions of assets and businesses or sales of Company-owned assets and businesses, including the potential sale of multiple facilities to ICE, on commercially advantageous terms on a timely basis, or at all;
•from time to time, we may not have a management contract with a client to operate existing beds at a facility or new beds at a facility that we are expanding, and we cannot assure you that such a contract will be obtained. Failure to obtain a management contract for these beds will subject us to carrying costs with no corresponding management revenue;
•negative conditions in the capital markets could prevent us from obtaining future financing on desirable terms, which could materially harm our business;
•we are subject to the loss of our facility management contracts, due to executive orders, terminations, non-renewals or competitive re-bids, which could adversely affect our results of operations and liquidity, including our ability to secure new facility management contracts from other government customers;
•our growth depends on our ability to secure contracts to develop and manage new secure facilities, processing centers and community-based facilities and to secure contracts to provide electronic monitoring services, community-based reentry services and monitoring and supervision services, the demand for which is outside our control;
•we may not be able to meet state requirements for capital investment or locate land for the development of new facilities, which could adversely affect our results of operations and future growth;
•we partner with a limited number of governmental customers who account for a significant portion of our revenues. The loss of, or a significant decrease in revenues from, these customers could seriously harm our financial condition and results of operations;
•efforts to reduce the U.S. federal deficit could adversely affect our liquidity, results of operations and financial condition;
•State budgetary constraints may have a material adverse impact on us;
•competition for contracts may adversely affect the profitability of our business;
•we are dependent on government appropriations, which may not be made on a timely basis or at all and may be adversely impacted by budgetary constraints at the federal, state, local and foreign government levels;
•public and political resistance to the use of public-private partnerships for secure facilities, electronic monitoring and supervision as alternatives to detention, processing centers and community reentry centers could result in our inability to obtain new contracts or the loss of existing contracts, impact our ability to obtain or refinance debt financing or enter into commercial arrangements, which could have a material adverse effect on our business, financial condition, results of operations and the market price of our securities;
•adverse publicity may negatively impact our ability to retain existing contracts and obtain new contracts;
•we may incur significant start-up and operating costs on new contracts before receiving related revenues, which may impact our cash flows and may not be recouped;
•failure to comply with extensive government regulation and applicable contractual requirements could have a material adverse effect on our business, financial condition or results of operations;
•we may face community opposition to facility locations, which may adversely affect our ability to obtain new contracts;
•our business operations expose us to various liabilities for which we may not have adequate insurance, including legal claims and proceedings, and may have a material adverse effect on our business, financial condition or results of operations;
•we may not be able to obtain or maintain the insurance levels required by our government contracts;
•our exposure to rising general insurance costs;
•natural disasters, pandemic outbreaks, global political events and other serious catastrophic events could disrupt operations and otherwise materially adversely affect our business and financial condition;
•our international operations expose us to risks that could materially adversely affect our financial condition and results of operations;
•we conduct certain of our operations through joint ventures or consortiums, which may lead to disagreements with our joint venture partners or business partners and adversely affect our interest in the joint ventures or consortiums;
•we are dependent upon our senior management and our ability to attract and retain sufficient qualified personnel;
•our profitability may be materially adversely affected by inflation;
•various risks associated with the ownership of real estate may increase costs, expose us to uninsured losses and adversely affect our financial condition and results of operations;
•risks related to facility construction and development activities may increase our costs related to such activities;
•the rising cost and increasing difficulty of obtaining adequate levels of surety credit on favorable terms could adversely affect our operating results;
•adverse developments in our relationship with our employees could adversely affect our business, financial condition or results of operations;
•the interruption, delay or failure of the provision of our services or information systems could adversely affect our business;
•the failure to comply with data privacy, security and exchange legal requirements could have a material adverse impact on our business, financial position, results of operations, cash flows and reputation;
•technological changes could cause our electronic monitoring products and technology, including our BI VeriWatch™ wrist-worn device, to become obsolete or require the redesign of our electronic monitoring products, which could have a material adverse effect on our business;
•any negative changes in the level of acceptance of or resistance to the use of electronic monitoring products, including our BI VeriWatch™ wrist-worn device, and services by governmental customers could have a material adverse effect on our business, financial condition and results of operations;
•we depend on a limited number of third parties to manufacture and supply quality infrastructure components for our electronic monitoring products. If our suppliers cannot provide the components or services we require and with such quality and at such cost as we expect, our ability to market and sell our electronic monitoring products and services could be harmed;
•an inability to acquire, protect or maintain our intellectual property and patents in the electronic monitoring space could harm our ability to compete or grow;
•our electronic monitoring products could infringe on the intellectual property rights of others, which may lead to litigation that could itself be costly, could result in the payment of substantial damages or royalties, and/or prevent us from using technology that is essential to our products;
•we license intellectual property rights in the electronic monitoring space, including patents, from third party owners. If such owners do not properly maintain or enforce the intellectual property underlying such licenses, our competitive position and business prospects could be harmed. Our licensors may also seek to terminate our license;
•we may be subject to costly product liability claims from the use of our electronic monitoring products, which could damage our reputation, impair the marketability of our products and services and force us to pay costs and damages that may not be covered by adequate insurance;
•as a result of our acquisitions, we have recorded and will continue to record a significant amount of goodwill and other intangible assets. In the future, our goodwill or other intangible assets may become impaired, which could result in material non-cash charges to our results of operations;
•federal, state and local tax rules can adversely affect our results of operations and financial position;
•we are subject to risks related to corporate social responsibility;
•the market price of our common stock may vary substantially;
•expectations about growth in the utilization of detention beds by the federal government may not be realized, which could negatively impact our stock price;
•future sales of shares of our common stock or securities convertible into common stock could adversely affect the market price of our common stock and may be dilutive to current shareholders;
•our ability to execute on the Share Repurchase Program on the anticipated timeline;
•various anti-takeover protections applicable to us may make an acquisition of us more difficult and reduce the market value of our common stock;
•failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our business and the trading price of our common stock;
•we may issue additional debt securities that could limit our operating flexibility and negatively affect the value of our common stock;
•a “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply has led to, and may continue to lead to, extreme price volatility in shares of our common stock;
•failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences; and
•other factors contained in our filings with the SEC, including, but not limited to, those detailed in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K filed with the SEC.
We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q.
Introduction
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of numerous factors including, but not limited to, those described above under “Forward-Looking Information”, and under “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
We specialize in the ownership, leasing and management of secure facilities, processing centers and reentry facilities and the provision of community-based services in the United States, Australia and South Africa. We own, lease and operate a broad range of secure facilities including maximum, medium and minimum-security facilities, processing centers, as well as community-based reentry
facilities. We develop new facilities based on contract awards, using our project development expertise and experience to design, construct and finance what we believe are state-of-the-art facilities. We provide innovative technologies, industry-leading monitoring services, and evidence-based supervision and treatment programs for community based programs. We also provide secure transportation services domestically and in the United Kingdom through our joint venture GEOAmey.
At June 30, 2026, our worldwide operations include the management and/or ownership of approximately 75,000 beds at 96 secure services and community based facilities, including idle facilities, and also include the provision of community supervision services for individuals through an array of technology products including radio frequency, GPS, and alcohol monitoring devices.
We provide a diversified scope of services on behalf of our government agency partners:
•our secure facility management services involve the provision of security, administrative, rehabilitation, education, and food services at secure services facilities;
•our reentry services involve supervision of individuals in community-based programs and re-entry centers and the provision of temporary housing, programming, employment assistance and other services with the intention of the successful reintegration of residents into the community;
•we provide comprehensive electronic monitoring and supervision services;
•we develop new facilities, using our project development experience to design, construct and finance what we believe are state-of-the-art facilities;
•we provide secure transportation services; and
•our services are provided at facilities which we either own, lease or are owned by our government agency partners.
For the six months ended June 30, 2026 and 2025, we had consolidated revenues of $1,437.3 million and $1,241.5 million, respectively. We maintained an average company-wide facility occupancy rate of approximately 91% including 68,245 active beds and excluding 6,646 idle beds, which includes those being marketed to potential customers, for the six months ended June 30, 2026, and approximately 89% including 69,793 active beds and excluding 6,785 idle beds, which includes those being marketed to potential customers, for the six months ended June 30, 2025.
Reference is made to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 25, 2026, for further discussion and analysis of information pertaining to our financial condition and results of operations as of and for the year ended December 31, 2025.
Contract Developments
On July 29, 2026, we announced that we have entered into a five-year support services contract with U.S. Immigration and Customs Enforcement (“ICE”) for the activation of a federal immigration processing center at the company-owned 1,320-bed Rivers Facility (the “Rivers Facility”) in Winton, North Carolina. Our support services are expected to include the exclusive use of the Rivers Facility by ICE, along with security, maintenance, and food services, as well as access to recreational amenities, medical care, and legal counsel.
On July 13, 2026, we announced that we have entered into a five-year support services contract with ICE for the activation of a federal immigration processing center at the 1,188-bed Big Horn Facility (the “Big Horn Facility”) in Hudson, Colorado. We have entered into a lease agreement with the Big Horn Facility owner. Our support services are expected to include the exclusive use of the Big Horn Facility by ICE, along with security, maintenance, and food services, as well as access to recreational amenities, medical care, and legal counsel.
Business Segments
We conduct our business through four reportable business segments: our U.S. Secure Services segment; our Electronic Monitoring and Supervision Services segment; our Reentry Services segment and our International Services segment. We have identified these four reportable segments to reflect our current view that we operate four distinct business lines, each of which constitutes a material part of our overall business.
Our U.S. Secure Services segment primarily encompasses our U.S.-based public-private partnership secure services business. Our Electronic Monitoring and Supervision Services segment, which conducts its services in the U.S., consists of our electronic monitoring and supervision services. Our Reentry Services segment consists of various community-based and reentry services. Our
International Services segment primarily consists of our public-private partnership secure services operations in Australia and South Africa.
Idle Facilities
We are currently marketing (or awaiting activation) 6,646 vacant beds at eight idle facilities to potential customers. The carrying values of these idle facilities totaled $188.1 million as of June 30, 2026, excluding equipment and other assets that can be easily transferred for use at other facilities. Refer to Note 11 - Commitments, Contingencies and Other Matters of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.
Critical Accounting Estimates
The accompanying unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We routinely evaluate our estimates based on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. During the six months ended June 30, 2026, we did not experience any significant changes in estimates or judgments inherent in the preparation of our consolidated financial statements. A summary of our significant accounting policies is contained in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the notes to our unaudited consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Comparison of Second Quarter 2026 and Second Quarter 2025
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
520,472 |
|
|
|
71.1 |
% |
|
$ |
441,665 |
|
|
|
69.4 |
% |
|
$ |
78,807 |
|
|
|
17.8 |
% |
Electronic Monitoring and Supervision Services |
|
|
76,160 |
|
|
|
10.4 |
% |
|
|
78,925 |
|
|
|
12.4 |
% |
|
|
(2,765 |
) |
|
|
(3.5 |
)% |
Reentry Services |
|
|
72,433 |
|
|
|
9.9 |
% |
|
|
71,310 |
|
|
|
11.2 |
% |
|
|
1,123 |
|
|
|
1.6 |
% |
International Services |
|
|
63,007 |
|
|
|
8.6 |
% |
|
|
44,269 |
|
|
|
7.0 |
% |
|
|
18,738 |
|
|
|
42.3 |
% |
Total |
|
$ |
732,072 |
|
|
|
100.0 |
% |
|
$ |
636,169 |
|
|
|
100.0 |
% |
|
$ |
95,903 |
|
|
|
15.1 |
% |
U.S. Secure Services
Revenues for U.S. Secure Services increased by $78.8 million in the second quarter ended June 30, 2026 (the "Second Quarter 2026") compared to the second quarter ended June 30, 2025 (the "Second Quarter 2025") due to increases of $60.6 million related to the activations of our new contracts at our company-owned Delaney Hall, North Lake and D. Ray James facilities as well as our managed-only contract at the North Florida Detention Center and new transportation contracts. There were also aggregate net increases of $35.0 million due to increases in occupancies, transportation, rates and/or per diem amounts in connection with contract modifications. Partially offsetting these increases were decreases of approximately $16.8 million related to contract terminations.
The number of compensated mandays in U.S. Secure Services facilities was approximately 4.4 million in Second Quarter 2026 compared to approximately 4.2 million in Second Quarter 2025. We look at the average occupancy in our facilities to determine how we are managing our available beds. The average occupancy is calculated by taking compensated mandays as a percentage of capacity. The average occupancy in our U.S. Secure Services facilities was approximately 91% and 88% of capacity in Second Quarter 2026 and Second Quarter 2025, respectively, excluding idle facilities.
Electronic Monitoring and Supervision Services
Revenues for Electronic Monitoring and Supervision Services decreased in Second Quarter 2026 compared to Second Quarter 2025 primarily due to a decrease in average participant counts under the Intensive Supervision and Appearance Program ("ISAP").
Reentry Services
Revenues for Reentry Services increased by $1.1 million in Second Quarter 2026 compared to Second Quarter 2025 primarily due to aggregate net increases of $3.5 million related to increased census levels at certain of our community-based and reentry centers due to increased programming needs and referrals due to new day reporting center contracts. These increases were partially offset by decreases due to contract terminations of $2.4 million.
International Services
Revenues for International Services increased by $18.7 million in Second Quarter 2026 compared to Second Quarter 2025. We experienced a net increase of $12.6 million primarily due to new health care contracts and increased populations at our Australian subsidiary. We also experienced an increase due to foreign exchange rate fluctuations of $6.1 million.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Segment
Revenues |
|
|
2025 |
|
|
% of Segment
Revenues |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
382,629 |
|
|
|
73.5 |
% |
|
$ |
342,305 |
|
|
|
77.5 |
% |
|
$ |
40,324 |
|
|
|
11.8 |
% |
Electronic Monitoring and Supervision Services |
|
|
39,034 |
|
|
|
51.3 |
% |
|
|
40,123 |
|
|
|
50.8 |
% |
|
|
(1,089 |
) |
|
|
(2.7 |
)% |
Reentry Services |
|
|
53,399 |
|
|
|
73.7 |
% |
|
|
52,242 |
|
|
|
73.3 |
% |
|
|
1,157 |
|
|
|
2.2 |
% |
International Services |
|
|
55,641 |
|
|
|
88.3 |
% |
|
|
40,548 |
|
|
|
91.6 |
% |
|
|
15,093 |
|
|
|
37.2 |
% |
Total |
|
$ |
530,703 |
|
|
|
72.5 |
% |
|
$ |
475,218 |
|
|
|
74.7 |
% |
|
$ |
55,485 |
|
|
|
11.7 |
% |
U.S. Secure Services
Operating expenses for U.S. Secure Services increased by $40.3 million in Second Quarter 2026 compared to Second Quarter 2025 primarily due to aggregate net increases in connection with labor and medical costs, transportation services, increased occupancies and additional staffing and training costs of $24.2 million. We also experienced an increase of approximately $29.6 million related to the activations of our new contracts at our company-owned Delaney Hall, North Lake and D. Ray James facilities as well as our managed-only contract at the North Florida Detention Center and new transportation contracts. Partially offsetting these increases were decreases of approximately $13.5 million related to contract terminations.
Electronic Monitoring and Supervision Services
Operating expenses for Electronic Monitoring and Supervision Services decreased in Second Quarter 2026 compared to Second Quarter 2025 primarily due to a decrease in average participant counts under the Intensive Supervision and Appearance Program ("ISAP").
Reentry Services
Operating expenses for Reentry Services increased by $1.2 million during Second Quarter 2026 compared to Second Quarter 2025. We experienced an aggregate net increase of $3.0 million due to increased programming needs and referrals due to new day reporting center contracts which was partially offset by a decrease of $1.8 million due to contract terminations.
International Services
Operating expenses for International Services increased in Second Quarter 2026 compared to Second Quarter 2025 by $15.1 million. We experienced an increase of $9.7 million primarily due to new health care contracts and increased populations at our Australian subsidiary. We also experienced an increase of $5.4 million related to foreign exchange rate fluctuations.
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Segment
Revenue |
|
|
2025 |
|
|
% of Segment
Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
24,430 |
|
|
|
4.7 |
% |
|
$ |
22,444 |
|
|
|
5.1 |
% |
|
$ |
1,986 |
|
|
|
8.8 |
% |
Electronic Monitoring and Supervision Services |
|
|
6,029 |
|
|
|
7.9 |
% |
|
|
6,283 |
|
|
|
8.0 |
% |
|
|
(254 |
) |
|
|
(4.0 |
)% |
Reentry Services |
|
|
3,042 |
|
|
|
4.2 |
% |
|
|
3,427 |
|
|
|
4.8 |
% |
|
|
(385 |
) |
|
|
(11.2 |
)% |
International Services |
|
|
695 |
|
|
|
1.1 |
% |
|
|
578 |
|
|
|
1.3 |
% |
|
|
117 |
|
|
|
20.2 |
% |
Total |
|
$ |
34,196 |
|
|
|
4.7 |
% |
|
$ |
32,732 |
|
|
|
5.1 |
% |
|
$ |
1,464 |
|
|
|
4.5 |
% |
U.S. Secure Services
U.S. Secure Services depreciation and amortization expense increased in Second Quarter 2026 compared to Second Quarter 2025 primarily due to renovations at certain of our company-owned and leased facilities.
Electronic Monitoring and Supervision Services
Electronic Monitoring and Supervision Services depreciation and amortization expense decreased slightly in Second Quarter 2026 compared to Second Quarter 2025 primarily due to certain assets becoming fully depreciated.
Reentry Services
Reentry Services depreciation and amortization expense decreased slightly in Second Quarter 2026 compared to Second Quarter 2025 primarily due to certain assets becoming fully depreciated.
International Services
International Services depreciation and amortization expense increased slightly in Second Quarter 2026 compared to Second Quarter 2025 primarily due to certain asset additions.
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
General and Administrative Expenses |
|
$ |
65,470 |
|
|
|
8.9 |
% |
|
$ |
56,246 |
|
|
|
8.8 |
% |
|
$ |
9,224 |
|
|
|
16.4 |
% |
General and administrative expenses comprise substantially all of our other unallocated operating expenses which primarily includes, corporate management salaries and benefits, professional fees and other administrative expenses. General and administrative expenses increased by $9.2 million in Second Quarter 2026 compared to Second Quarter 2025 primarily due to higher employee related benefit costs and support for the revenue growth from our new contract awards.
Non-Operating Expenses
Interest Income and Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Interest Income |
|
$ |
3,228 |
|
|
|
0.4 |
% |
|
$ |
2,466 |
|
|
|
0.4 |
% |
|
$ |
762 |
|
|
|
30.9 |
% |
Interest Expense |
|
$ |
38,556 |
|
|
|
5.3 |
% |
|
$ |
41,907 |
|
|
|
6.6 |
% |
|
$ |
(3,351 |
) |
|
|
(8.0 |
)% |
Interest income increased by $0.8 million in Second Quarter 2026 compared to Second Quarter 2025 primarily due to higher cash balances on hand internationally and the effect of foreign exchange rates.
Interest expense decreased by $3.4 million in Second Quarter 2026 compared to Second Quarter 2025 primarily due to lower overall principal balances and lower interest rates. On July 14, 2025, we amended our Credit Agreement which increased our borrowing capacity and lowered the applicable interest rate. We also paid off our Term Loan under the credit agreement in July 2025. Refer to
Note 10 - Debt of the Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.
Loss on Extinguishment of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Loss on Extinguishment of Debt |
|
$ |
— |
|
|
|
(— |
)% |
|
$ |
595 |
|
|
|
0.1 |
% |
|
$ |
(595 |
) |
|
|
(100.0 |
)% |
During Second Quarter 2025, we made a mandatory quarterly payment on our Term Loan. In connection with the repayment, we wrote off the related deferred loan costs.
Loss on Asset Divestitures/Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Loss on Asset Divestitures/Impairment |
|
$ |
673 |
|
|
|
0.1 |
% |
|
$ |
— |
|
|
|
(— |
)% |
|
$ |
673 |
|
|
|
100.0 |
% |
In Second Quarter 2026, we received a sale contract for two buildings in Pennsylvania and a sale contract for a parcel of land located in Illinois that were less than their carrying values which resulted in an impairment charge. We also experienced a loss on assets divested in connection with certain closed day reporting centers.
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Other Income |
|
$ |
— |
|
|
|
(— |
)% |
|
$ |
5,514 |
|
|
|
0.9 |
% |
|
$ |
(5,514 |
) |
|
|
(100.0 |
)% |
In Second Quarter 2025, we received an aggregate of $5.5 million under the Employee Retention Tax Credit provisions of the CARES Act. This amount was recognized as other income in the consolidated financial statements.
Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
Effective Rate |
|
|
2025 |
|
|
Effective Rate |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Provision for Income Taxes |
|
$ |
18,878 |
|
|
|
28.7 |
% |
|
$ |
10,554 |
|
|
|
28.2 |
% |
|
$ |
8,324 |
|
|
|
78.9 |
% |
The provision for income taxes increased in Second Quarter 2026 compared to Second Quarter 2025 principally due to an increase in pre-tax income. In Second Quarter 2026, there was a $0.5 million as compared to a $0.3 million net discrete tax benefit in Second Quarter 2025. Included in the discrete tax benefit in Second Quarter 2026 was $0.4 million as compared to a $0.3 million discrete tax benefit in Second Quarter 2025. We estimate our 2026 annual effective tax rate to be in the range of approximately 29% to 31%, exclusive of any discrete items.
Equity in Earnings of Affiliates, net of Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Equity in Earnings of Affiliates, net of Income Tax Provision |
|
$ |
636 |
|
|
|
0.1 |
% |
|
$ |
2,177 |
|
|
|
0.3 |
% |
|
$ |
(1,541 |
) |
|
|
(70.8 |
)% |
Equity in earnings of affiliates, presented net of income tax provision, represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings of affiliates decreased slightly during Second Quarter 2026 compared to Second Quarter 2025 primarily due to less favorable performance at SACS.
Comparison of Six Months 2026 and Six Months 2025
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
1,023,130 |
|
|
|
71.2 |
% |
|
$ |
847,381 |
|
|
|
68.3 |
% |
|
$ |
175,749 |
|
|
|
20.7 |
% |
Electronic Monitoring and Supervision Services |
|
|
150,404 |
|
|
|
10.5 |
% |
|
|
156,638 |
|
|
|
12.6 |
% |
|
|
(6,234 |
) |
|
|
(4.0 |
)% |
Reentry Services |
|
|
143,671 |
|
|
|
10.0 |
% |
|
|
141,686 |
|
|
|
11.4 |
% |
|
|
1,985 |
|
|
|
1.4 |
% |
International Services |
|
|
120,080 |
|
|
|
8.3 |
% |
|
|
95,808 |
|
|
|
7.7 |
% |
|
|
24,272 |
|
|
|
25.3 |
% |
Total |
|
$ |
1,437,285 |
|
|
|
100.0 |
% |
|
$ |
1,241,513 |
|
|
|
100.0 |
% |
|
$ |
195,772 |
|
|
|
15.8 |
% |
U.S. Secure Services
Revenues for U.S. Secure Services increased by $175.7 million in the six months ended June 30, 2026 (the "Six Months 2026") compared to the six months ended June 30, 2025 (the "Six Months 2025") due to increases of $144.0 million related to the activations of our new contracts at our company-owned Delaney Hall, North Lake and D. Ray James facilities as well as our managed-only contract at the North Florida Detention Center and new transportation contracts. There were also aggregate net increases of $70.3 million due to increases in occupancies, transportation, rates and/or per diem amounts in connection with contract modifications. Partially offsetting these increases were decreases of approximately $38.6 million related to contract terminations.
The number of compensated mandays in U.S. Secure Services facilities was approximately 8.9 million in Six Months 2026 compared to approximately 8.3 million in Six Months 2025. We look at the average occupancy in our facilities to determine how we are managing our available beds. The average occupancy is calculated by taking compensated mandays as a percentage of capacity. The average occupancy in our U.S. Secure Services facilities was approximately 91% and 88% of capacity in Six Months 2026 and Six Months 2025, respectively, excluding idle facilities.
Electronic Monitoring and Supervision Services
Revenues for Electronic Monitoring and Supervision Services decreased in Six Months 2026 compared to Six Months 2025 primarily due to a decrease in average participant counts under the Intensive Supervision and Appearance Program ("ISAP").
Reentry Services
Revenues for Reentry Services increased by $2.0 million in Six Months 2026 compared to Six Months 2025 primarily due to aggregate net increases of $6.0 million related to increased census levels at certain of our community-based and reentry centers due to increased programming needs and referrals due to new day reporting center contracts. These increases were partially offset by decreases due to contract terminations of $4.0 million.
International Services
Revenues for International Services increased by $24.3 million in Six Months 2026 compared to Six Months 2025. We experienced a net increase of $12.5 million primarily due to new health care contracts and increased populations at our Australian subsidiary. We also experienced an increase due to foreign exchange rate fluctuations of $11.8 million.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Segment
Revenues |
|
|
2025 |
|
|
% of Segment
Revenues |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
760,514 |
|
|
|
74.3 |
% |
|
$ |
656,515 |
|
|
|
77.5 |
% |
|
$ |
103,999 |
|
|
|
15.8 |
% |
Electronic Monitoring and Supervision Services |
|
|
80,958 |
|
|
|
53.8 |
% |
|
|
81,985 |
|
|
|
52.3 |
% |
|
|
(1,027 |
) |
|
|
(1.3 |
)% |
Reentry Services |
|
|
106,840 |
|
|
|
74.4 |
% |
|
|
104,074 |
|
|
|
73.5 |
% |
|
|
2,766 |
|
|
|
2.7 |
% |
International Services |
|
|
103,900 |
|
|
|
86.5 |
% |
|
|
87,119 |
|
|
|
90.9 |
% |
|
|
16,781 |
|
|
|
19.3 |
% |
Total |
|
$ |
1,052,212 |
|
|
|
73.2 |
% |
|
$ |
929,693 |
|
|
|
74.9 |
% |
|
$ |
122,519 |
|
|
|
13.2 |
% |
U.S. Secure Services
Operating expenses for U.S. Secure Services increased by $104.0 million in Six Months 2026 compared to Six Months 2025 primarily due to aggregate net increases in connection with labor and medical costs, transportation services, increased occupancies and additional staffing and training costs of $78.1 million. We also experienced an increase of approximately $59.6 million related to the
activations of our new contracts at our company-owned Delaney Hall, North Lake and D. Ray James facilities as well as our managed-only contract at the North Florida Detention Center and new transportation contracts. Partially offsetting these increases were decreases of approximately $33.7 million related to contract terminations.
Electronic Monitoring and Supervision Services
Operating expenses for Electronic Monitoring and Supervision Services decreased in Six Months 2026 compared to Six Months 2025 primarily due to a decrease in average participant counts under the Intensive Supervision and Appearance Program ("ISAP").
Reentry Services
Operating expenses for Reentry Services increased by $2.8 million during Six Months 2026 compared to Six Months 2025. We experienced an aggregate net increase of $5.9 million due to increased programming needs and referrals due to new day reporting center contracts which was partially offset by a decrease of $3.1 million due to contract terminations.
International Services
Operating expenses for International Services increased in Six Months 2026 compared to Six Months 2025 by $16.8 million. We experienced an increase of $6.6 million primarily due to new health care contracts and increased populations at our Australian subsidiary. We also experienced an increase of $10.2 million related to foreign exchange rate fluctuations.
Depreciation and Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Segment
Revenue |
|
|
2025 |
|
|
% of Segment
Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
U.S. Secure Services |
|
$ |
47,992 |
|
|
|
4.7 |
% |
|
$ |
44,719 |
|
|
|
5.3 |
% |
|
$ |
3,273 |
|
|
|
7.3 |
% |
Electronic Monitoring and Supervision Services |
|
|
12,585 |
|
|
|
8.4 |
% |
|
|
12,145 |
|
|
|
7.8 |
% |
|
|
440 |
|
|
|
3.6 |
% |
Reentry Services |
|
|
6,098 |
|
|
|
4.2 |
% |
|
|
6,869 |
|
|
|
4.8 |
% |
|
|
(771 |
) |
|
|
(11.2 |
)% |
International Services |
|
|
1,351 |
|
|
|
1.1 |
% |
|
|
1,135 |
|
|
|
1.2 |
% |
|
|
216 |
|
|
|
19.0 |
% |
Total |
|
$ |
68,026 |
|
|
|
4.7 |
% |
|
$ |
64,868 |
|
|
|
5.2 |
% |
|
$ |
3,158 |
|
|
|
4.9 |
% |
U.S. Secure Services
U.S. Secure Services depreciation and amortization expense increased in Six Months 2026 compared to Six Months 2025 primarily due to renovations at certain of our company-owned and leased facilities.
Electronic Monitoring and Supervision Services
Electronic Monitoring and Supervision Services depreciation and amortization expense increased slightly in Six Months 2026 compared to Six Months 2025 primarily due to equipment additions.
Reentry Services
Reentry Services depreciation and amortization expense decreased in Six Months 2026 compared to Six Months 2025 primarily due to certain assets becoming fully depreciated.
International Services
International Services depreciation and amortization expense increased slightly in Six Months 2026 compared to Six Months 2025 primarily due to certain asset additions.
General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
General and Administrative Expenses |
|
$ |
126,045 |
|
|
|
8.8 |
% |
|
$ |
113,995 |
|
|
|
9.2 |
% |
|
$ |
12,050 |
|
|
|
10.6 |
% |
General and administrative expenses comprise substantially all of our other unallocated operating expenses which primarily includes, corporate management salaries and benefits, professional fees and other administrative expenses. General and administrative expenses increased by $12.1 million in Six Months 2026 compared to Six Months 2025 primarily due to higher employee related benefit costs and support for the revenue growth from our new contract awards.
Non-Operating Expenses
Interest Income and Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Interest Income |
|
$ |
4,900 |
|
|
|
0.3 |
% |
|
$ |
4,463 |
|
|
|
0.4 |
% |
|
$ |
437 |
|
|
|
9.8 |
% |
Interest Expense |
|
$ |
76,857 |
|
|
|
5.3 |
% |
|
$ |
84,348 |
|
|
|
6.8 |
% |
|
$ |
(7,491 |
) |
|
|
(8.9 |
)% |
Interest income increased by $0.4 million in Six Months 2026 compared to Six Months 2025 primarily due to higher cash balances on hand internationally and the effect of foreign exchange rates.
Interest expense decreased by $7.5 million in Six Months 2026 compared to Six Months 2025 primarily due to lower overall principal balances and lower interest rates. On July 14, 2025, we amended our Credit Agreement which increased our borrowing capacity and lowered the applicable interest rate. We also paid off our Term Loan under the credit agreement in July 2025. Refer to Note 10 - Debt of the Notes to Unaudited Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.
Loss on Extinguishment of Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Loss on Extinguishment of Debt |
|
$ |
— |
|
|
|
0.0 |
% |
|
$ |
595 |
|
|
|
0.0 |
% |
|
$ |
(595 |
) |
|
|
(100.0 |
)% |
During Six Months 2025, we made a mandatory quarterly payment on our Term Loan. In connection with the repayment, we wrote off the related deferred loan costs.
Loss on Asset Divestitures/Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Loss on Asset Divestitures/Impairment |
|
$ |
673 |
|
|
|
0.0 |
% |
|
$ |
— |
|
|
|
(— |
)% |
|
$ |
673 |
|
|
|
100.0 |
% |
In Six Months 2026, we received a sale contract for two buildings in Pennsylvania and a sale contract for a parcel of land located in Illinois that were less than their carrying values which resulted in an impairment charge. We also experienced a loss on assets divested in connection with certain closed day reporting centers.
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Other Income |
|
$ |
— |
|
|
|
(— |
)% |
|
$ |
5,514 |
|
|
|
0.4 |
% |
|
$ |
(5,514 |
) |
|
|
(100.0 |
)% |
In Six Months 2025, we received an aggregate of $5.5 million under the Employee Retention Tax Credit provisions of the CARES Act. This amount was recognized as other income in the consolidated financial statements.
Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
Effective Rate |
|
|
2025 |
|
|
Effective Rate |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Provision for Income Taxes |
|
$ |
33,904 |
|
|
|
28.6 |
% |
|
$ |
12,380 |
|
|
|
21.3 |
% |
|
$ |
21,524 |
|
|
|
173.9 |
% |
The provision for income taxes and the effective tax rate increased in Six Months 2026 compared to Six Months 2025 principally due to an increase in pre-tax income and a decrease in discrete tax benefits. In Six Months 2026, there was a $1.3 million as compared to a $4.5 million net discrete tax benefit in Six Months 2025. Included in the discrete tax benefit in Six Months 2026 was a $1.3 million as
compared to a $4.5 million discrete tax benefit in Six Months 2025. We estimate our 2026 annual effective tax rate to be in the range of approximately 29% to 31%, exclusive of any discrete items.
Equity in Earnings of Affiliates, net of Income Tax Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
|
% of Revenue |
|
|
2025 |
|
|
% of Revenue |
|
|
$ Change |
|
|
% Change |
|
|
|
(Dollars in thousands) |
|
Equity in Earnings of Affiliates, net of Income Tax Provision |
|
$ |
1,298 |
|
|
|
0.1 |
% |
|
$ |
3,005 |
|
|
|
0.2 |
% |
|
$ |
(1,707 |
) |
|
|
(56.8 |
)% |
Equity in earnings of affiliates, presented net of income tax provision, represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings of affiliates decreased slightly during Six Months 2026 compared to Six Months 2025 primarily due to less favorable performance at SACS.
Financial Condition
Capital Requirements
Our current cash requirements consist of amounts needed for working capital, debt service, supply purchases, research and development costs related to new electronic monitoring products, investments in joint ventures, and capital expenditures related to either the development of new secure, processing and reentry facilities, or the maintenance of existing facilities. In addition, some of our management contracts require us to make substantial initial expenditures of cash in connection with opening or renovating a facility. Generally, these initial expenditures are subsequently fully or partially recoverable as pass-through costs or are billable as a component of the per diem rates or monthly fixed fees to the contracting agency over the original term of the contract. Additional capital needs may also arise in the future with respect to possible acquisitions, other corporate transactions or other corporate purposes.
We currently have contractual commitments for a number of projects using Company financing. We estimate that the cost of these existing active capital projects will be approximately $52.9 million of which $32.9 million was spent through June 30, 2026. We estimate that the remaining capital requirements related to these capital projects will be $20.0 million which will be spent through the remainder of 2026.
We plan to fund all of our capital needs, including capital expenditures, from cash on hand, cash from operations, borrowings under our Credit Agreement (as defined below) and any other financings which our management and Board, in their discretion, may consummate. Currently, our primary source of liquidity to meet these requirements is cash flow from operations and borrowings under our Credit Agreement. Our management believes that our financial resources and sources of liquidity will allow us to manage our business, financial condition, results of operations and cash flows. We completed our annual budgeting process, and for 2026, we will continue to strategically manage our capital expenditures to maintain both short and long term financial objectives. Additionally, we may from time to time pursue transactions for the potential sale or acquisition of assets and businesses and/or other strategic transactions. Taking into account the impact of the federal government shutdown, that ended on April 30, 2026, our management believes that cash on hand, cash flows from operations and availability under our Credit Agreement will be adequate to support our capital requirements for 2026 as disclosed under “Capital Requirements” above and the next twelve months.
Liquidity and Capital Resources
Indebtedness
Refer to Note 10 - Debt of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
We consider opportunities for future business and/or asset acquisitions or dispositions as we deem appropriate when market conditions present opportunities. If we are successful in our pursuit of any new projects, our cash on hand, cash flows from operations and borrowings under the new Credit Agreement may not provide sufficient liquidity to meet our capital needs and we could be forced to seek additional financing or refinance our existing indebtedness. There can be no assurance that any such financing or refinancing would be available to us on terms equal to or more favorable than our current financing terms, or at all. In the future, our access to capital and ability to compete for future capital-intensive projects will also be dependent upon, among other things, our ability to meet certain financial covenants in the indenture governing the Secured Notes, the indenture governing the Unsecured Notes and our Credit
Agreement. A substantial decline in our financial performance could limit our access to capital pursuant to these covenants and have a material adverse effect on our liquidity and capital resources and, as a result, on our financial condition and results of operations. In addition to these foregoing potential constraints on our capital, and including the impact of the federal government shutdown, that ended on April 30, 2026, a number of state government agencies have been suffering from budget deficits and liquidity issues. While we were in compliance with our debt covenants as of June 30, 2026 and we expect to continue to be in compliance with our debt covenants, if these constraints were to intensify, our liquidity could be materially adversely impacted as could our ability to remain in compliance with these debt covenants.
Guarantor Financial Information
GEO’s Secured Notes and Unsecured Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis (except on a senior secured basis in the case of the Secured Notes) by certain of our wholly owned domestic subsidiaries (the “Subsidiary Guarantors”).
Summarized financial information is provided for GEO and the Subsidiary Guarantors on a combined basis in accordance with SEC Regulation S-X Rules 3-10 and 13-01. The accounting policies used in the preparation of this summarized financial information are consistent with those elsewhere in the consolidated financial statements of the Company, except that intercompany transactions and balances of GEO and the Subsidiary Guarantor entities with non-guarantor entities have not been eliminated. Intercompany transactions between GEO and the Subsidiary Guarantors have been eliminated and equity in earnings from and investments in non-guarantor subsidiaries have not been presented.
Summarized statement of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2026 |
|
|
Six Months Ended
June 30, 2025 |
|
Net operating revenues |
|
$ |
1,310,809 |
|
|
$ |
1,139,342 |
|
Income from operations |
|
|
168,606 |
|
|
|
115,028 |
|
Net income |
|
|
66,406 |
|
|
|
24,578 |
|
Net income attributable to The GEO Group, Inc. |
|
|
66,406 |
|
|
|
24,578 |
|
Summarized balance sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
Current assets |
|
$ |
556,776 |
|
|
$ |
645,982 |
|
Noncurrent assets (a) |
|
|
2,944,747 |
|
|
|
2,971,002 |
|
Current liabilities |
|
|
247,423 |
|
|
|
257,936 |
|
Noncurrent liabilities (b) |
|
|
1,910,974 |
|
|
|
2,021,019 |
|
(a) Includes amounts due from non-guarantor subsidiaries of $54.2 million and $52.8 million as of June 30, 2026 and December 31, 2025, respectively.
(b) Includes amounts due to non-guarantor subsidiaries of $41.8 million and $42.1 million as of June 30, 2026 and December 31, 2025, respectively.
Off-Balance Sheet Arrangements
Except as discussed in the notes to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we do not have any off-balance sheet arrangements.
Cash Flow
Cash, cash equivalents and restricted cash and cash equivalents as of June 30, 2026 was $111.2 million compared to $120.6 million as of June 30, 2025.
Operating Activities
Net cash provided by operating activities amounted to $236.5 million for the six months ended June 30, 2026 versus net cash provided by operating activities of $110.4 million for the six months ended June 30, 2025. Cash provided by operating activities during the six months ended June 30, 2026 was positively impacted by non-cash expenses such as depreciation and amortization, amortization of debt issuance costs, discount and/or premium and other non-cash interest, dividends received from unconsolidated joint ventures, loss on disposal of property and equipment, net and stock-based compensation expense. Equity in earnings of affiliates and realized/unrealized gain on investments negatively impacted cash. Accounts receivable, prepaid expenses and other assets decreased in total by $68.9 million, representing a positive impact on cash. The decrease was primarily driven by the timing of billings and collections. Accounts payable, accrued expenses and other liabilities decreased by $4.9 million which negatively impacted cash. The decrease was primarily driven by the timing of payments.
Net cash provided by operating activities during the six months ended June 30, 2025 was positively impacted by non-cash expenses such as depreciation and amortization, amortization of debt issuance costs, discount and/or premium and other non-cash interest, dividends received from unconsolidated joint ventures and stock-based compensation expense. Equity in earnings of affiliates, net of tax, gain on sale/disposal of property and equipment, net, and realized/unrealized gain on investments negatively impacted cash. Accounts receivable, prepaid expenses and other assets increased in total by $4.5 million, representing a negative impact on cash. The increase was primarily driven by the timing of billings and collections. Accounts payable, accrued expenses and other liabilities decreased by $6.8 million which negatively impacted cash. The decrease was primarily driven by the timing of payments.
Investing Activities
Net cash used in investing activities of $50.4 million during the six months ended June 30, 2026 was primarily the result of capital expenditures of $42.3 million, purchases of marketable securities of $40.7 million and proceeds from sales of marketable securities of $32.1 million. Net cash used in investing activities of $81.8 million during the six months ended June 30, 2025 was primarily the result of capital expenditures of $67.6 million, purchases of marketable securities of $16.9 million and proceeds from sales of marketable securities of $2.7 million.
Financing Activities
Net cash used in financing activities during the six months ended June 30, 2026 was approximately $200.2 million compared to net cash used in financing activities of $37.6 million during the six months ended June 30, 2025. Net cash used in financing activities during the six months ended June 30, 2026 was primarily the result of proceeds from the revolver of $117.0 million, payments on the revolver of $226.6 million, payments on long-term debt of $0.7 million, proceeds from the exercise of stock options of $3.0 million, payment for the repurchase of common stock of $86.7 million and taxes paid related to net share settlement of equity awards of $6.2 million. Net cash used in financing activities during the six months ended June 30, 2025 was primarily the result of payments on the revolver of $30.0 million, proceeds from the revolver of $35 million, payments on long-term debt of $24.7 million, proceeds from the exercise of stock options of $4.2 million and taxes paid related to net share settlement of equity awards of $22.2 million.
Non-GAAP Measures
EBITDA is defined as net income adjusted by adding provision for income tax, interest expense, net of interest income and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for net loss attributable to non-controlling interests, stock-based compensation expenses, pre-tax, transaction fees, pre-tax, start-up costs, pre-tax, litigation costs and settlements, pre-tax, employee restructuring expenses, pre-tax, close-out expenses, pre-tax, loss on asset divestitures/impairment, pre-tax and other non-cash revenues and expenses, pre-tax, and certain other adjustments as defined from time to time.
Given the nature of our business as a real estate owner and support services provider, we believe that EBITDA and Adjusted EBITDA are helpful to investors as measures of our operational performance because they provide an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures, and to fund other cash needs or reinvest cash into our business.
We believe that by removing the impact of our asset base (primarily depreciation and amortization) and excluding certain non-cash charges, amounts spent on interest and taxes, and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide our investors with performance measures that reflect the impact to operations from trends in occupancy rates, per diem rates and operating costs, providing a perspective not immediately apparent from net income.
The adjustments we make to derive the non-GAAP measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in income from continuing operations and which we do not consider to be the fundamental attributes or primary drivers of our business plan and they do not affect our overall long-term operating performance.
EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by our management and provide consistency in our financial reporting, facilitate internal and external comparisons of our historical operating performance and our business units and provide continuity to investors for comparability purposes.
Our reconciliation of net income to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 is as follows (in thousands):
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Three Months Ended |
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Six Months Ended |
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|
|
June 30, 2026 |
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June 30, 2025 |
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|
June 30, 2026 |
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|
June 30, 2025 |
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Net Income |
|
$ |
47,460 |
|
|
$ |
29,074 |
|
|
$ |
85,766 |
|
|
$ |
48,616 |
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Add: |
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|
|
|
|
|
|
|
|
Income tax provision * |
|
|
19,107 |
|
|
|
10,723 |
|
|
|
34,349 |
|
|
|
12,779 |
|
Interest expense, net of interest income ** |
|
|
35,328 |
|
|
|
40,036 |
|
|
|
71,957 |
|
|
|
80,480 |
|
Depreciation and amortization |
|
|
34,196 |
|
|
|
32,732 |
|
|
|
68,026 |
|
|
|
64,868 |
|
EBITDA |
|
$ |
136,091 |
|
|
$ |
112,565 |
|
|
$ |
260,098 |
|
|
$ |
206,743 |
|
Add (Subtract): |
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|
|
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|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests |
|
|
43 |
|
|
|
34 |
|
|
|
71 |
|
|
|
50 |
|
Stock-based compensation expenses, pre-tax |
|
|
4,923 |
|
|
|
5,506 |
|
|
|
12,689 |
|
|
|
11,994 |
|
Litigation costs and settlements, pre-tax |
|
|
— |
|
|
|
532 |
|
|
|
— |
|
|
|
532 |
|
Loss on asset divestitures/impairment, pre-tax |
|
|
673 |
|
|
|
— |
|
|
|
673 |
|
|
|
— |
|
Transaction fees, pre-tax |
|
|
156 |
|
|
|
— |
|
|
|
322 |
|
|
|
55 |
|
Employee restructuring expenses, pre-tax |
|
|
392 |
|
|
|
332 |
|
|
|
592 |
|
|
|
332 |
|
Start-up expenses, pre-tax |
|
|
509 |
|
|
|
— |
|
|
|
509 |
|
|
|
— |
|
Close-out expenses, pre-tax |
|
|
— |
|
|
|
676 |
|
|
|
20 |
|
|
|
676 |
|
Other non-cash revenues and expenses, pre-tax |
|
|
(788 |
) |
|
|
(1,048 |
) |
|
|
(1,563 |
) |
|
|
(2,019 |
) |
Adjusted EBITDA |
|
$ |
141,999 |
|
|
$ |
118,597 |
|
|
$ |
273,411 |
|
|
$ |
218,363 |
|
* includes income tax provision on equity in earnings of affiliate |
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|
** includes loss on extinguishment of debt |
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Outlook
The following discussion contains statements that are not limited to historical statements and, therefore, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those stated or implied in the forward-looking statements. Please refer to “Part I - Item 1A. Risk Factors” and the "Forward-Looking Statements - Safe Harbor" sections in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for further discussion on forward-looking statements and the risks and other factors that could prevent us from achieving our goals and cause the assumptions underlying the forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements.
We continue to be encouraged by the current landscape of growth opportunities. We are preparing for what we believe is an unprecedented opportunity to help the federal government meet its expanded immigration enforcement priorities. We are taking several important steps to meet this opportunity, including making a previously announced significant investment in capital expenditures to strengthen our capabilities to deliver expanded detention capacity, secure transportation, and electronic monitoring and related services to U.S. Immigration and Customs Enforcement and the federal government. We have also been in discussions with ICE regarding the potential sale of multiple facilities, subject to mutual agreement on price and our continued management of those facilities under long-term support services contracts. At this time, there is no definitive agreement in place with ICE and no precise timeline for the closing of any such transactions. Also, we can give no assurance that these transactions will take place at all.
Any positive trends in the industry may be offset by several factors, including the impact of the federal government shutdown that ended on April 30, 2026 and any future federal government shutdown, budgetary constraints, contract modifications, contract terminations, contract non-renewals, contract re-bids and/or the decision to not re-bid a contract after expiration of the contract term and the impact of any other potential changes to the willingness or ability to maintain or grow public-private partnerships on the part of other government agencies.
Operating Expenses
Operating expenses consist of those expenses incurred in the operation and management of our contracts to provide services to our governmental clients. Labor and related costs represented approximately 72% and 70% of our operating expenses during the six months ended June 30, 2026 and 2025, respectively. Additional operating expenses include food, utilities and medical costs. During the six months ended June 30, 2026 and 2025, operating expenses totaled approximately 73% and 75%, respectively, of our consolidated revenues. We expect our operating expenses as a percentage of revenues in 2026 will be impacted by the opening of any new or existing idle facilities as a result of the cost of transitioning and/or start-up operations related to a facility opening. We also expect that our operating expenses will be impacted by the effect of inflation on costs related to personnel, utilities, insurance, and medical and food, among other operational costs. During 2026, we will incur carrying costs for facilities that are currently vacant.
General and Administrative Expenses
General and administrative expenses consist primarily of corporate management salaries and benefits, professional fees and other administrative expenses. During each of the six months ended June 30, 2026 and 2025, general and administrative expenses totaled approximately 9% of our consolidated revenues. We expect general and administrative expenses as a percentage of revenues in 2026 to remain consistent or decrease as a result of cost savings initiatives.
Idle Facilities
We are currently marketing (or awaiting activation) 6,646 vacant beds at six U.S. Secure Services and at two of our Reentry Services idle facilities to potential customers. One of our U.S. Secure Services idle facilities, the 700-bed Cheyenne Mountain Recovery Center, is currently under a contract that has not yet been activated. The annual net carrying cost of our idle facilities in 2026 is estimated to be $26.7 million, including depreciation expense of $15.2 million. As of June 30, 2026, these eight facilities had a combined net book value of $188.1 million. We currently do not have any firm commitment or agreement in place to activate the idle facilities (except for the Cheyenne Mountain Recovery Center). Historically, some facilities have been idle for multiple years before they received a new contract award. These idle facilities are included in the U.S. Secure Services and Reentry Services segments. The per diem rates that we charge our clients often vary by contract across our portfolio. However, if the remaining idle facilities were to be activated using our U.S. Secure Services and Reentry Services average per diem rates in 2026 (calculated as the U.S. Secure Services and Reentry Services revenue divided by the number of U.S. Secure Services and Reentry Services mandays) and based on the average occupancy rate in our facilities through June 30, 2026, we would expect to receive incremental annualized revenue of approximately $264 million and an annualized increase in earnings per share of approximately $0.25 to $0.30 per share based on our average operating margins.