Sign in
GG

GEO GROUP INC (GEO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 came in soft vs consensus: revenue $604.6M vs $611.8M estimate, EPS $0.14 vs $0.17 estimate, and Adjusted EBITDA $99.8M vs $112.7M estimate, driven by higher G&A from the reorg and front-loaded payroll taxes; management framed 2025 as a “tale of two halves” with growth layering in 2H25 *.
  • GEO won two ICE contracts (Delaney Hall 1,000 beds; North Lake 1,800 beds) representing >$130M annualized revenue; ICE contract activations raise contracted capacity from ~20k to ~23k beds, with revenue contribution ramping in 2H25 .
  • FY25 guidance raised modestly on revenue and EBITDA vs February: revenue ≈$2.53B (prior ≈$2.50B), Adjusted EBITDA $465–$490M (prior $460–$485M), EPS $0.77–$0.89 (prior $0.74–$0.88); capex trimmed to $120–$135M (prior $125–$145M) .
  • Deleveraging remains a key catalyst: net debt ~$1.68B and 3.78x at Q1; management targets $150–$175M reduction to ~ $1.54B by YE25; potential $312M Lawton sale could accelerate capital return discussions by late 2025/2026 .

What Went Well and What Went Wrong

  • What Went Well

    • Secured two ICE awards (Delaney Hall >$60M annualized; North Lake >$70M annualized), expanding contracted ICE capacity to ~23k beds as activations ramp .
    • Balance sheet trajectory and ratings momentum: Q1 net debt ~$1.68B, 77% fixed-rate, Fitch initiated with B+/BB+/BB- and stable outlook; deleveraging plan intact .
    • Management positioning: $70M investment to scale detention, transport, and electronic monitoring capability; “unprecedented opportunity” to assist ICE’s expanded interior enforcement (budget reconciliation a swing factor) .

  • What Went Wrong

    • Electronic Monitoring & Supervision Services revenue -~10% YoY and margin pressure from mix shift (fewer phones, more GPS devices) .
    • Elevated overhead: G&A +$5M YoY tied to reorg and professional fees; +$6M sequential payroll tax headwind (seasonal) weighed on EBITDA and EPS .
    • Q1 misses vs S&P Global consensus across revenue, EPS, and Adjusted EBITDA; guidance implies 1H25 margin compression until 2H25 activations contribute *.

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$603.1 $607.7 $604.6
Diluted EPS (GAAP) ($)$0.19 $0.11 $0.14
Adjusted EBITDA ($USD Millions)$118.6 $108.0 $99.8
Adjusted EBITDA Margin (%)19.7% (calc from $118.6M/$603.1M) 17.8% (calc from $108.0M/$607.7M) 16.5% (calc from $99.8M/$604.6M)
Q1 2025 Consensus (S&P Global)*——Rev $611.8M; EPS $0.17; EBITDA $112.7M*
Vs Consensus (Q1 2025)——Revenue: Miss; EPS: Miss; EBITDA: Miss*

  • Segment trends (YoY, Q1 2025): Owned & leased Secure Services revenue +~3%; Electronic Monitoring & Supervision Services revenue -~10%; reentry/managed-only/non-residential largely unchanged .

  • KPIs and operating context (Q1 2025):

    • ISAP average participants ~186k; currently >185k; prior peak ~370k in late 2022 .
    • ICE detention nationwide ~48k; GEO utilization ~16k; contracted ICE capacity increasing from ~20k to ~23k with Delaney/North Lake .
    • Balance sheet: net debt ~$1.68B; net leverage ~3.78x; cash ~$65M; total available liquidity ~$235M .

Guidance Changes

MetricPeriodPrevious Guidance (Feb 27, 2025)Current Guidance (May 7, 2025)Change
RevenueFY 2025≈$2.50B ≈$2.53B Raised
Net Income per Diluted ShareFY 2025$0.74–$0.88 $0.77–$0.89 Raised
Adjusted EBITDAFY 2025$460–$485M $465–$490M Raised
Capital ExpendituresFY 2025$125–$145M $120–$135M Lowered
Net Debt targetFY 2025 YE~ $1.55B (implies -$150–$175M) ~ $1.54B (−$150–$175M) Slight improvement
EPS (GAAP)Q2 2025—$0.15–$0.17 New
RevenueQ2 2025—$615–$625M New
Adjusted EBITDAQ2 2025—$110–$114M New

Notes: Guidance excludes any not-previously-announced contract awards; management expects additional awards and will update guidance as they materialize .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3’24; Q-1: Q4’24)Current Period (Q1’25)Trend
Federal immigration enforcement fundingQ3’24: ISAP counts fell; upside from available beds; scale capability . Q4’24: Prepared for “unprecedented” growth in 2025 .“Tale of two halves”; budget reconciliation likely to enable 2H ramp; ICE awards (Delaney/North Lake) .Strengthening backdrop; execution ramping in 2H25
ISAP (ATD) utilizationQ3’24: Avg ~177k; recovering post-Q3 .Q1’25 avg ~186k; mix shift hurting margins; expect extension with 1–2 yr bridge .Stabilizing counts; mix headwind; likely contract extension
Capacity & facility pipelineQ3’24: 18k available beds across contracted/idle .ICE contracted beds rising to ~23k; ~3k USMS beds available; ~6.5k idle beds marketed; 60–90 day activation cycles .Activation pipeline building; staged ramp
Transport servicesQ3’24: Can scale air/ground .Incremental $40–$50M annualized potential with more removal flights .Incremental tailwind potential
Capex & investmentsQ4’24: $70M investment plan disclosed .FY25 capex $120–$135M; investment to enable rapid activations .Focused, front-loaded in 1H25
Deleveraging/ratingsQ4’24: Deleveraging emphasized .Q1 net debt ~$1.68B; Fitch initiated B+/BB+/BB- stable; target ~$1.54B YE25 .Continued progress; potential accelerants (asset sale)
Asset optimizationQ4’24: Reorg completed; exploring sales .Lawton $312M potential sale by July; Lea County depopulating, potential repurpose .Portfolio reshaping advancing

Management Commentary

  • “We believe we have an unprecedented opportunity to assist the federal government in meeting its expanded immigration enforcement priorities… [including] a significant investment commitment of $70 million to strengthen our capabilities” — George C. Zoley, Executive Chairman .
  • “Our guidance… reflects a tale of 2 halves… higher overhead and operating expenses… in 1H25… growth beginning to layer in during the second half of 2025” — J. David Donahue, CEO .
  • “The activation of the Delaney Hall and Northlake facilities will increase our total capacity under contract with ICE from approximately 20,000 beds to approximately 23,000 beds” — CEO .
  • “As of the first quarter of 2025, fixed rate debt represents approximately 77% of our total indebtedness… Fitch initiate[d] ratings… with a stable outlook” — Mark Suchinski, CFO .
  • “This is a unique moment in our company’s history… we believe we are well positioned to meet this unprecedented opportunity” — CEO .

Q&A Highlights

  • EMSS margin dynamics: Profitability decline > revenue decline due to mix shift away from phones toward GPS devices within ISAP .
  • Funding mechanics: Budget reconciliation expected to clarify allocation between detention and ATD; management confident ATD/ISAP will be utilized as detention capacity fills .
  • Detainee counts and capacity: ICE quickly used contracted space; new awards (Delaney/North Lake) and additional contracts expected to lift counts as 2H25 unfolds .
  • Capital returns: Share repurchases require lower leverage and clarity on ISAP extension; could become a “serious conversation” in 2026, potentially sooner with Oklahoma proceeds .
  • North Lake economics: Government typically does not fund start-up capex upfront; GEO’s investment is priced into multi-year contract recovery and included in guidance .

Estimates Context

  • Q1 2025 vs S&P Global consensus: Revenue $604.6M vs $611.8M estimate (miss); EPS $0.14 vs $0.17 estimate (miss); Adjusted EBITDA $99.8M vs $112.7M estimate (miss) *.
  • Q2 2025 guidance vs consensus: Revenue $615–$625M vs $620.6M estimate (in line); EPS $0.15–$0.17 vs $0.16 estimate (in line); Adj. EBITDA $110–$114M vs $111.0M estimate (in line) *.
  • FY 2025 guidance vs consensus: Revenue ≈$2.53B vs $2.59B estimate (guide below); Adj. EBITDA $465–$490M vs $462.1M estimate (guide at/above); EPS $0.77–$0.89 vs $1.85 estimate (guide below given conservative 1H/activation timing) *.
ComparisonActual/GuideConsensus (S&P Global)*
Q1 2025 Revenue ($M)$604.6 $611.8*
Q1 2025 EPS ($)$0.14 $0.17*
Q1 2025 Adj. EBITDA ($M)$99.8 $112.7*
Q2 2025 Revenue ($M)$615–$625 (guide) $620.6*
Q2 2025 EPS ($)$0.15–$0.17 (guide) $0.16*
Q2 2025 Adj. EBITDA ($M)$110–$114 (guide) $111.0*
FY 2025 Revenue ($B)≈$2.53 (guide) $2.591*
FY 2025 Adj. EBITDA ($M)$465–$490 (guide) $462.1*
FY 2025 EPS ($)$0.77–$0.89 (guide) $1.85*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: 1H25 earnings burdened by pre-growth costs; 2H25 catalysts include Delaney/North Lake ramp and potential additional ICE/USMS awards .
  • Core driver: Intensifying interior enforcement and budget clarity remain the gating factors for accelerated utilization; watch congressional reconciliation timeline (late Q2 to early Q3) .
  • EMSS watchpoints: ISAP counts stabilized ~185k+, but margin mix is less favorable; an expected ISAP extension (1–2 years) could de-risk the bridge to a larger program .
  • Balance sheet optionality: FY25 net debt target ~$1.54B; Lawton proceeds ($312M) would hasten deleveraging and bring capital returns forward (late 2025/2026) .
  • Execution milestones: Track activation timetables (60–90 days to staff, then ramp), occupancy build, and transport services scale-up ($40–$50M annualized potential) .
  • Estimate revisions: Expect near-term downward adjustments to EPS/EBITDA for Q1 actual miss; medium-term upward revisions likely contingent on the timing/scale of additional awards and 2H ramp *.
  • Stock catalysts: Additional ICE/USMS awards, confirmed budget increases, ISAP extension, and Oklahoma sale closing could be material sentiment and re-rating drivers .

Appendix: Additional Q1 2025 Details

  • Q1 P&L drivers: Operating expenses +~3% YoY; G&A +9% YoY on reorg/pro fees; payroll taxes +$6M sequential seasonal headwind; effective tax rate ~9% due to equity award vesting .
  • Recent press releases relevant to Q1: Earnings date (Apr 23) ; Karnes contract modification (Mar 10; ~+$23M annualized increment) .
  • Financial statements (Q1): See press release tables for condensed balance sheet and income statement .