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GEO GROUP INC (GEO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered revenue of $636.2M (+4.8% YoY), GAAP diluted EPS of $0.21, and adjusted EPS of $0.22; results were above S&P Global consensus with revenue +$15.6M and EPS +$0.06, and ahead of prior Q2 guidance ranges for revenue and Adjusted EBITDA ; Estimates marked with * below are from S&P Global*.
  • FY25 guidance increased materially: GAAP EPS raised to $1.99–$2.09 (includes $228M Lawton gain), adjusted EPS to $0.84–$0.94, revenue to ~$2.56B; Adjusted EBITDA maintained at $465–$490M . This is a step up from Q1’s prior GAAP EPS range of $0.77–$0.89 on ~$2.53B revenue .
  • Capital allocation pivots: $300M share repurchase program authorized through June 2028; revolver upsized to $450M, rate cut by 50 bps; net debt reduced to ~$$1.47B with net leverage ~3.3x post Lawton sale and debt repayment .
  • Execution catalysts: four ICE facility activations (Delaney Hall, North Lake, D. Ray James, Adelanto) represent >$240M combined annualized revenue potential at full occupancy, ramping through H2’25 and normalizing in 2026 .

What Went Well and What Went Wrong

What Went Well

  • Continued contract momentum and facility activations: Delaney Hall (> $60M annualized), North Lake (> $85M), D. Ray James ($66M), Adelanto ($31M incremental) positioning 2026 for full contribution .
  • Balance sheet de‑risking and flexibility: revolver increased to $450M (maturity 2030, -50 bps), term loan B repaid; net leverage improved to ~3.3x post-transactions .
  • Management tone on buybacks and growth: “We believe strongly that our current equity valuation offers an attractive opportunity for investors… our Board… authorized a $300 million share repurchase program” .

What Went Wrong

  • Startup costs weighed on margins: despite 12% YoY revenue increase in owned/leased facilities, segment net operating income was “largely unchanged” due to activation costs; operating expenses +7% YoY; G&A +8% YoY .
  • ISAP/BI softness: electronic monitoring and supervision services revenue down ~7% YoY; ISAP participant counts stable ~183k and expected to remain flat through Q3–Q4 .
  • Near-term state/managed-only softness: reentry -2% YoY; managed-only -3% YoY; some revenue loss from depopulation of Lea County and sale of Lawton, partially offset by accretive San Diego purchase .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$607.7 $604.6 $636.2
GAAP Diluted EPS ($)$0.11 $0.14 $0.21
Adjusted EPS ($)$0.13 $0.14 $0.22
Operating Income ($USD Millions)$67.9 $61.0 $72.0
Adjusted EBITDA ($USD Millions)$108.0 $99.8 $118.6
Adjusted EBITDA Margin (%)17.8% (108.0/607.7) 16.5% (99.8/604.6) 18.6% (118.6/636.2)

Q2 2025 Actual vs S&P Global Consensus

MetricEstimate*ActualSurprise
Revenue ($USD Millions)$620.6*$636.2 +$15.6 (+2.5%)*
Primary EPS ($)$0.162*$0.22*+$0.058*

Disclaimer: *Values retrieved from S&P Global.

Segment/Business Line YoY change (Q2 2025)

SegmentYoY Revenue Change
Owned & Leased Secure Facilities~+12% YoY
Non-residential Contracts~+10% YoY
Electronic Monitoring & Supervision (BI)~-7% YoY
Reentry Centers~-2% YoY
Managed-only Contracts~-3% YoY

Key KPIs and Balance Sheet

KPIQ2 2025Additional Detail
ICE contracted bed utilization~20,000 beds (up from ~15,000 over last 3 months) ~5,000 additional beds in activation; potential to reach ~25,000 when fully occupied
Idle high-security beds available~5,900 beds Could drive up to ~$310M annualized revenue if fully utilized
Transportation growthGTI projected ~$140M 2025 revenue (from $58M in 2022) Incremental $40–$50M possible from removal flights; new USMS contract ~up to $30M
Net Debt~$1.70B at Q2 end; ~$1.47B “as of today” post Lawton sale & repayments Net leverage ~3.8x at Q2 end; ~3.3x pro forma
RevolverCommitments increased to $450M, maturity 2030, -50 bps rate Represents incremental liquidity and lower interest cost
FY25 CAPEX$200–$210M (incl. ~$60M San Diego purchase) Budget includes ~$100M in physical plant/tech improvements

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025~$2.53 ~$2.56 Raised
GAAP EPS (diluted)FY 2025$0.77–$0.89 $1.99–$2.09 (incl. $228M Lawton gain) Raised materially
Adjusted EPS (diluted)FY 2025Not specified (EPS normalized implied)$0.84–$0.94 Introduced/raised
Adjusted EBITDA ($USD Millions)FY 2025$465–$490 $465–$490 Maintained
CAPEX ($USD Millions)FY 2025$120–$135 $200–$210 Raised (includes San Diego)
Revenue ($USD Millions)Q3 2025N/A$650–$660 New
Adjusted EPS ($)Q3 2025N/A$0.20–$0.23 New
Adjusted EBITDA ($USD Millions)Q3 2025N/A$115–$125 New
Revenue ($USD Millions)Q4 2025N/A$658–$673 New
Adjusted EPS ($)Q4 2025N/A$0.28–$0.35 New
Adjusted EBITDA ($USD Millions)Q4 2025N/A$132–$147 New

Q2 2025 Guidance vs Actual (from Q1 update)

MetricQ2 Guidance (from May 7)Q2 ActualResult
Revenue ($USD Millions)$615–$625 $636.2 Beat
GAAP EPS (diluted) ($)$0.15–$0.17 $0.21 Beat
Adjusted EBITDA ($USD Millions)$110–$114 $118.6 Beat

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
ICE detention capacity expansionInitial FY25 guide excluded new awards; Delaney Hall awarded; investment ramp ($70M) Four activations underway; ICE utilization 20k beds, targeting 100k national capacity with incremental funding from reconciliation bill Accelerating
ISAP (electronic monitoring)Stable counts; investment in devices Participant counts ~183k; expected stable Q3–Q4; potential future growth as detention capacity maximizes; ankle monitor mix possible with funding Near-term flat; medium-term optionality
Capital allocation (deleveraging, buybacks)Target $150–$175M net debt reduction in 2025 Net debt ~$1.47B; net leverage ~3.3x; $300M buyback over 3 years ($100M/yr) Strengthened
Transportation servicesGrowth trajectory noted GTI ~240% growth since 2022; incremental $40–$50M potential; new USMS 5-year contract up to ~$30M Expanding
Regulatory/legal (Adelanto)Noted legal processes Court settlement enables full intake at Adelanto; ramping to add up to ~$31M incremental annualized revenue Positive resolution
State contracts/per diemReorg and costs pressured near term Renewals in GA/AZ; competitive RFPs in FL; legislative funding improvements (GA) Constructive but secondary to ICE

Management Commentary

  • “We believe strongly that our current equity valuation offers an attractive opportunity for investors… our Board of Directors has authorized a $300 million share repurchase program.” — Executive Chairman George C. Zoley .
  • “Utilization across our current ICE contracts has increased from approximately 15,000 beds to 20,000 beds at 21 facilities… highest level in our company’s history.” — George C. Zoley .
  • “We expect to conduct our three-year stock buyback program at a rate of approximately $100,000,000 per year, while paying down debt at also approximately $100,000,000 per year.” — George C. Zoley .
  • “Our second quarter revenue, net income and adjusted EBITDA were well ahead of our previously issued guidance.” — CFO Mark Suchinski .

Q&A Highlights

  • Capacity and revenue runway: incremental 5,000 temporary beds could add $250M revenue ($50M per 1,000 beds) beyond existing pricing .
  • ISAP device mix: ankle monitors are more expensive than app-based SmartLink; potential mix shift requires funding; inventory ramped to respond quickly .
  • Debt reduction and buyback cadence: plan to further reduce debt in 2H25 while opportunistically repurchasing shares; excess cash generation expected to exceed $200M over time .
  • State exposure: active competitive RFPs in Florida; legislative funding tailwinds observed in Georgia .
  • Marshals Service opportunities: consolidation of beds into high-security facilities; discussions ongoing; cautiously optimistic on timing pending funding availability .

Estimates Context

  • Q2 2025 actuals beat consensus: revenue $636.2M vs $620.6M*; Primary EPS $0.22* vs $0.162* (beat). Q1 2025 was modestly below revenue consensus ($604.6M vs $611.8M*) but in-line on EPS ($0.14 actual vs $0.174* estimate). Q4 2024 revenue was in-line; EPS below adjusted due to higher G&A .
  • Implications: Expect Street to raise revenue/EBITDA trajectories for H2’25 and 2026 to reflect activations ramp, transportation growth, and lower net interest expense; near-term caution on BI/ISAP until funding reallocation is confirmed .
    Disclaimer: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strong beat vs guidance and consensus on Q2 revenue and Adjusted EBITDA; execution on facility activations is translating to topline momentum .
  • Material upgrade to FY25 GAAP/adjusted EPS alongside ~$2.56B revenue and maintained Adjusted EBITDA range signals confidence despite startup costs .
  • Buyback authorization ($300M) plus deleveraging (net debt ~$1.47B; ~3.3x leverage) creates a balanced capital return and de-risking profile .
  • H2’25–2026 setup: four ICE facilities ramping, potential additional capacity (idle ~5,900 beds; +5,000 expansions), and transportation revenue optionality underpin EBITDA growth next year .
  • Near-term watch items: ISAP stability through Q4 with potential growth post detention maximization; segment softness in BI/reentry/managed-only near term .
  • Macro/regulatory tailwinds: reconciliation funding supports ICE capacity buildout; monitor allocation timing (mid–late August) to gauge pace of reactivations and potential RFPs .
  • Trading lens: buyback plus improving fundamentals can support multiple expansion; catalysts include additional contract wins (ICE/USMS), visible occupancy ramp, and continued interest expense savings .