Geo Group (GEO) Q4 2024 Earnings Call Transcript

Geo Group (GEO 6.05%)
Q4 2024 Earnings Call
Feb 27, 2025, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to The GEO Group fourth quarter 2024 earnings conference call. All participants will be in a listen-only mode. [Operator instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Pablo Paez, executive vice president of corporate relations. Please go ahead.

Pablo E. Paez — Executive Vice President, Corporate Relations

Thank you, operator. Good morning, everyone, and thank you for joining us for today’s discussion of The GEO Group’s fourth quarter and full year 2024 earnings results. With us today are George Zoley, executive chairman of the board; David Donahue, chief executive officer; Wayne Calabrese, president and chief operating officer, and Mark Suchinski, chief financial officer. This morning, we will discuss our fourth quarter and full year results, as well as our outlook.

We will conclude the call with a question and answer session. This conference call is also being webcast live or on investor website at investors.geogroup.com. Today we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and the supplemental disclosure we issued this morning.

Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q, and 8-K reports. With that, please allow me to turn this call over to our executive chairman, George Zoley.

George?

George Zoley — Executive Chairman

Thank you, Pablo, and good morning to everyone. Thank you for joining us on our fourth quarter 2024 earnings call. And I apologize for my hoarse voice this morning. I would like to welcome our new CEO, Dave Donahue, who is joining our call today along with our president and COO, Wayne Calabrese, and our CFO, Mark Suchinski.

Dave has 42 years of operational experience in our industry, having previously served for 10 years as GEO’s senior vice president for Secure Services after a distinguished career with the Federal Bureau of Prisons and the Department of Corrections in the States of Kentucky and Indiana. We are pleased to have Dave join our senior management team as we embark on what we expect to be an unprecedented level of operational activity. During today’s call, we will review our fourth quarter and full year 2024 financial results and operational highlights for our business segments. We will also discuss our initial financial guidance for ’25, which is consistent with our long-standing practice and does not include any new contract awards that have not been previously announced.

And we will provide an update on the latest developments across our diversified business segments, including the opportunities to expand our services for ICE and the Federal Government. Our financial performance during the fourth quarter of 2024 reflects higher overhead expenses and were partially the result of previously announced reorganization of our management team and additional professional fees we incurred in anticipation of what we expect to be an unprecedented future growth projects and related operational activity during ’25. Our top-line revenue for the fourth quarter of ’24 increased from our ’24 third quarter results in line with our guidance. However, our earnings and adjusted EBITDA were below our previous expectations due to higher overhead expenses.

In ’24, we already incurred approximately $9 million of the $70 million investment we announced in December to strengthen our capabilities to deliver expanded detention capacity, secure transportation and electronic monitoring services to ICE. In 2025, we expect to invest an incremental $38 million to renovate existing facilities, $16 million to ramp up production of additional GPS tracking devices during in the ISEP program and $7 million to expand our secure transportation fleet. We believe these investments will prepare us to be able to provide approximately 17,000 incremental detention beds to ICE and the federal government and greatly increased our capacity to monitor undocumented aliens who are currently on the so-called non-detained docket and increased our secure transportation capabilities. The additional 17,000 beds would increase the total available capacity for ICE detention requirements at GEO-related services from approximately 15,000 beds today to 32,000.

The current population is approximately 15,000 represents an increase of a thousand beds utilized by ICE at GEO-service facilities since our last earnings call. The incremental 17,000 beds includes approximately 9,400 beds in our current idle facilities that will be reconfigured for detention use and approximately 7,700 incremental beds available at existing geo-serviced ICE and marshals facilities under contract. We expect the utilization of these additional 17,000 beds could generate between $500 million and $600 million in incremental annualized revenues with margins consistent with our secure services own facilities which average 25% to 30%. These additional 17,000 beds include our company-owned 1,000 bed Delaney Hall facility in Newark, New Jersey.

We announced this morning we have been awarded a 15-year fixed price contract by ICE to provide support services for the establishment of a federal immigration processing center at Delaney Hall. GEO-support services include the exclusive use of the facility by ICE along with security maintenance, food services, access to recreational amenities, medical care, and legal counsel. These new support services contract is expected to generate in excess of $60 million in annualized revenues in the first full year of operations with margins consistent with our company-owned secure services facilities. We estimate the 15-year value of the contract with normal cost of living adjustments to be approximately $1 billion.

We expect to reactivate the facility in the second quarter of 2025 with revenues and earnings from the new contract normalizing during the second half of 2025. We are in active discussions with ICE and the Marshals Service regarding their interest in GEO’s remaining six idle facilities. Additionally, we have two state correctional facilities totaling more than 3,000 combined beds which could be repurposed for the use by the federal government. However, we are currently pursuing the potential sale of one or both of these facilities with the objective of generating up to $550 million in proceeds that could be used to reduce debt and or otherwise enhance shareholder value.

Based on the latest public data, ICE is currently utilizing over 41,000 detention beds nationwide which is largely consistent with the current level of funding of 41,500 detention beds under the continued resolution which is set to expire March 14th. Before the recent passage of The Laken Riley Act, the Trump administration had indicated a need to ramp up to 100,000 total ICE detention beds for increased interior enforcement operations. Based on public statements from ICE, the implementation of The Laken Riley Act could require an additional 60,000 detention beds or more. We believe that an increase of between 100,000 and 160,000 beds will require a wide range of solutions.

The administration has taken steps to house some migrants with serious criminal backgrounds in Guantanamo Bay and there’s been some discussions about utilizing facilities in foreign countries for similar purposes. However, we believe that the detention and processing of migrants as a result of increased interior enforcement will require additional facilities to be activated in the United States. We have a 40-year record of providing special purpose facilities that meet the unique operational needs and requirements set by ICE at cost savings to taxpayers when compared to publicly operated facilities and to alternative solutions like self-studied facilities and we are preparing to extend and build upon that strong and successful record of public-private partnership. We are also making a significant investment in our electronic monitoring and supervision services segment to ramp up the production of GPS tracking devices for use under the Federal Government’s Intensive Supervision Appearance Program or ISAP.

ISAP participant counts averaged between 183,000 during the fourth quarter of 2024 and are currently standing at approximately 186,000. A little over two years ago, the ISAP contract utilization peaked at approximately 370,000, almost twice the number of the participants currently in the program. Returning to that utilization level would generate an incremental income of revenues of $250 million and even more if the contract exceeds the prior peak of utilization. We have a long track record of delivering quality services under ISAP with bipartisan support for approximately 20 years.

These services entail diversified electronic monitoring technologies, as well as compliance management services which are delivered through a nationwide network of approximately 100 offices and close to 1,000 employees. Over our 20-year tenure, ISAP has achieved high compliance rates with our immigration court requirements while monitoring what amounts to a relatively small portion of the undocumented aliens who are on the non-detained docket. The non-detained docket is made up of persons who have entered the country without proper authorization, who have been processed by federal immigration officers, and who have been released into the interior of the company pending their appearance before an immigration court. There are currently an estimated 7 million to 8 million undocumented aliens on the non-detained docket in addition to another 9.5 million to 10 million people who are estimated to be in the United States without legal status.

Given the size of this population, our view is that in addition to increased detention capacity, the requirements of the Federal Immigration Law and The Laken Riley Act will require significant ramp-up in the electronic monitoring to ensure proper trafficking of persons on the non-detained docket and their compliance with the requirements of their immigration court proceedings. At this time, we have not received any update from ICE regarding the timing of a procurement or a rebid of the ISEP contract. And we believe the agency’s focus has shifted to increasing the size of the population that is currently monitored under ISEP. With the investment commitment we have made and the technical and personnel enhancements we have already completed, we believe we have the necessary resources to scale up the current utilization of the ISEP contract by several hundreds of thousands and upward to several millions of participants as required.

We are investing in the expansion of our secure services transportation fleet as well. We expect an increase in the number of removal flights which could generate an increase incremental of $40 million to $50 million in annualized revenues under our existing ICE air support services subcontract. While our initial guidance for 2025 is based on our current business baseline and does not reflect the impact of any new contract awards that have not been previously announced, we expect the upside potential from all these opportunities could represent as much as $800 million to $1 billion in incremental annualized revenues. Based on the average margins for our respective segments, we expect that the opportunities could add as much as $250 million to $300 million in incremental annualized adjusted EBITDA.

We expect interior enforcement by ICE to continue to ramp up throughout the year, contingent upon funding availability. We believe under the Trump administration, ICE began with a significant funding deficit. While we understand that DHS has recently reprogrammed approximately $485 million in funding to shore up this deficit, the continued ramp up in enforcement and detention activities is likely contingent on additional funding being appropriated by Congress or reprogrammed by DHS. Currently, the U.S.

Senate and the U.S. House of Representatives are moving forward on two separate drafts under the budget reconciliation process, either of which could provide additional funding for border security of between $175 billion and $200 billion over several years. Depending on which track the Senate and the House agree on, it may take several months for the budget reconciliation process to be completed. Based on our understanding of the current status of the budget discussions, we expect additional new contract awards to continue to be announced in the near term and into the second quarter 2025 with likely activation of additional new facilities in the second half of 2025.

Once a contract has been awarded, our typical facility activation period is 60 to 90 days to hire, train, and clear staff and get the facility ready for occupancy followed by a gradual ramp up in utilization. Finally, despite the increase in our capital requirements, we have continued to make significant progress in our efforts to reduce debt, deleverage our balance sheet, and evaluate potential capital returns in the future. We ended 2024 with approximately $1.7 billion in total net debt. Based on our initial guidance for 2025, we would expect to reduce net debt by an additional $150 million to $175 million this year before any asset sales or further upside to our guidance, bringing the total net debt to approximately $1.5 billion and a total net leverage of approximately 3.2 times adjusted EBITDA.

I will now turn the call over to our CFO, Mark Suchinski.

Mark Suchinski — Chief Financial Officer

Thank you, George. And good morning, everyone. For the fourth quarter of 2024, we reported net income attributable to GEO of approximately $15.5 million or $0.11 per diluted share on quarterly revenues of approximately $608 million dollars. This compares the net income attributed with the GEO of approximately $25 million dollars or $0.17 per diluted share in the fourth quarter of 2023 on revenues of approximately $608 million.

Fourth quarter 2024 results reflect higher G&A overhead expenses in part due to the recent reorganization of our senior management team and additional associated professional fees incurred during the quarter. Fourth quarter 2024 results also reflect pre-tax costs associated with the extinguishment of debt of approximately $1.3 million and approximately $2.1 million in pre-tax employee restructuring expenses. Excluding these unusual items, we reported fourth quarter 2024 adjusted net income of approximately $18 million or $0.13 per diluted share compared to the results of the fourth quarter of 2023 when we reported adjusted net income of roughly $37 million or $0.29 per diluted share. We also reported fourth quarter 2024 adjusted EBITDA of approximately $108 million compared to approximately $129 million for the prior year’s fourth quarter.

Beginning with revenues, quarterly revenues in our owned and leased secure service facilities increased by approximately 3% year over year. This revenue increase was offset by lower quarterly revenue from our electronic monitoring and supervision services segment which declined by approximately 10% compared to the prior year’s fourth quarter. Quarterly revenue for our reentry centers managed only and non-residential service contracts were largely unchanged compared to the prior year fourth quarter. Turning to expenses, during the fourth quarter of 2024 our operating expenses increased by approximately 1% compared to the prior year’s fourth quarter.

Our operating expenses for the fourth quarter of 2024 reflect higher labor costs in our secure services segment of approximately $10 million in part due to revenue increases tied to contractual cost of living adjustments and in part due to additional staffing and training costs we incurred during the fourth quarter of 2024 in preparation for expected future growth. And our general and administrative expenses for the fourth quarter of 2024 increased by approximately 18% from the prior year’s fourth quarter in part due to recent reorganization of our senior management team and additional associated professional fees which we incurred during the fourth quarter of 2024 in preparation for expected future growth. While our fourth quarter 2024 revenues were in line with our guidance our quarterly earnings and adjusted EBITDA were below our previous expectations as a result of the higher G&A expenses I just explained. Our fourth quarter 2024 results reflect the year-over-year decrease in net interest expense of approximately $7 million as a result of our debt reduction and refinancing efforts over the past 12 months.

Our effective tax rate for the fourth quarter of 2024 was approximately 40%. For the full year 2024 we reported net income attributable to GEO of approximately $32 million on annual revenues of approximately $2.42 billion. Our full year 2024 results reflect approximately $86.6 million in pre-tax costs associated with the extinguishment of debt in relation to our refinancing transactions. Excluding the debt extinguishment costs and other unusual items we reported full year 2024 adjusted net income of approximately $101 million or $0.75 per diluted share.

We reported full year 2024 adjusted EBITDA of approximately $463.5 million. Now, let’s move to our initial financial guidance for 2025. Consistent with our long-standing practice our initial guidance does not include the impact of any new contract awards that have not been previously announced. Therefore, our initial guidance for 2025 reflects only the baseline of our current business.

For the full year 2025 we expect net income attributable to GEO to be in a range of $0.74 to $0.88 per diluted share on revenues of approximately $2.5 billion and based on an effective tax rate of approximately 28% inclusive of known discrete items. We expect our full year 2025 adjusted EBITDA to be between $460 million and $485 million. While our guidance does not include any assumption for new contract awards that have not been previously announced. As George mentioned, we anticipate several opportunities could materialize during the year, which we believe would provide significant upside to our current forecast.

On a combined basis, we believe that these opportunities could generate as much as $800 million to $1 billion in incremental annualized revenues and as much as $250 million to $300 million in incremental annualized adjusted EBITDA. As we progress throughout the year and the likelihood and timing of these opportunities become clearer, we will adjust our 2025 guidance accordingly. As contract awards are announced and we begin to reactivate idle facilities, we would expect to incur start-up expenses during the initial 60 to 90-day activation period. Startup expenses for any facility activation not previously announced are also not currently included in our guidance.

We expect total capital expenditures for full year 2025 to be between $125 million and $145 million, including the impact of the $70 million investment we announced in December to expand our ICE services capability. This incremental $70 million investment is comprised of the following: $47 million to renovate existing secure service facilities, $9 million of which was spent in 2024, with the remaining $38 million expected to be spent over the first three quarters of 2025, $16 million to be spent evenly throughout 2025 to ramp up production of additional GPS tracking devices, and $7 million to be spent primarily in the first half of 2025 to expand our secure transportation fleet. Now, let’s move to our capital structure. We ended the fourth quarter of 2024 with total net debt of approximately $1.7 billion.

We closed the year with approximately $77 million in cash on hand and approximately $214 million in total available liquidity. As of the end of the fourth quarter of 2024, fixed rate debt represents approximately 75% of our total indebtedness, which meaningfully insulates GEO for potential interest rate volatility. As we have previously noted, we have no substantial debt maturities due before April of 2029. We continue to give our company a significant runway to grow our business and focus on reducing our debt.

Based on the initial guidance for 2025, we expect to reduce our net debt by between $150 million and $175 million this year, bringing our total net debt to approximately $1.55 billion by the end of the year. Our debt reduction could also be augmented with proceeds from the potential sale of some of our state correctional facility assets and or from the potential upside to our guidance. In addition to allocating capital toward debt reduction and to support our growth capital needs, our goal remains to explore options for returning capital to shareholders in the future. At this time, I will turn the call over to our CEO, Dave Donahue, for a review of our GEO Secure Services business unit.

Dave?

David Donahue — Chief Executive Officer

Thanks, Mark, and good morning, everybody. It’s my pleasure to have returned to the GEO Group to join George and the rest of our management team at an unprecedented time in our company’s history. We believe the scale of the opportunity before our company is unlike any we’ve previously experienced and will therefore require a significant operational undertaking. My focus as the new CEO of the GEO Group will be to work with our management team and our board to ensure that we have the necessary resources to operationalize the growth opportunities we are pursuing and to support our employees as they help us achieve operational excellence across all of our service lines.

Moving to our annual milestones for GEO Secure Services. During 2024, we renewed 13 secure service contracts, including nine contracts at the federal level with Immigration Customs Enforcement and the U.S. Marshals Service. During the year, our secure services facilities successfully underwent a total of 197 audits, including internal audits, government reviews, third-party accreditations, and Prison Rape Elimination Act, or PREA, certifications.

11 of our secure services facilities received accreditation from the American Correctional Association, with an average score of 99.1%, and another four facilities received PREA certifications. Our GTI Transportation Division and our GEOAmey UK Joint Venture completed approximately 18.5 million miles driven in the United States and the UK during the year. Moving to the current trends for our government agency partners, during the fourth quarter of 2024, utilization at our U.S. Marshals Detention Facilities was largely consistent with utilization during the fourth quarter one year ago.

Our U.S. Marshals facilities support the agency as it carries out its mission of providing secure custodial services for pretrial detainees facing federal criminal proceedings. Our U.S. Marshals facilities provide needed bed space near federal courthouses, where there’s generally a lack of suitable alternative detention capacity.

In the first weeks of the administration, President Trump issued an executive order reversing the prior administration’s executive order that had directed the U.S. Attorney General to not renew U.S. Department of Justice contracts with privately contracted criminal detention facilities. We’ve enjoyed a long-standing public-private partnership with the U.S.

Marshals Service and the Federal Bureau of Prisons, which are both agencies under the U.S. Department of Justice, and we stand ready to continue to support their capacity and secure residential care services needs going into the future. Moving to our contracted ICE processing centers, utilization across our facilities is currently at approximately 15,000 beds. This census level represents an increase of 1,000 beds in the last three months and marks the highest utilization rate for our contracted ICE facilities in approximately five years.

GEO has a long-standing track record of delivering professional support services on behalf of ICE at GEO contracted federal immigration processing centers, and we stand ready to support ICE with any additional needs. GEO contracted ICE processing centers offer around-the-clock access to quality healthcare services. Our healthcare staffing at the ICE processing centers where we provide resident healthcare is generally more than double the number of healthcare staff in a typical state correctional facility. GEO contracted ICE processing centers offer full access to legal counsel, legal libraries, and resources, and we have dedicated space at each ICE center to provide residents with confidential meeting rooms with their legal counsel.

GEO contracted ICE processing centers provide residents with three daily meals that are culturally sensitive, special diet appropriate, and approved by registered dietitians. We also provide access to faith-based and religious opportunities at each GEO contracted ICE processing center. And we partner with community volunteers as needed to ensure fair representation of various faiths and denominations. GEO contracted ICE processing centers also offer access to enhanced amenities, including artificial turf soccer fields, covered pavilions, exercise equipment, and multipurpose rooms.

During the fourth quarter of 2024, we’ve renewed several important contracts for our company-owned and contracted ICE processing centers. Contracts for our 1,940-bed Adelanto ICE processing center, the 400-bed Mesa Verde ICE processing center, the 750-bed Desert View Annex, and the 700-bed Golden State Annex were renewed for five-year terms through December of 2029. Additionally, in January of 2025, the United States District Court for the Central District of California lifted the long-standing intake restrictions at the Adelanto ICE processing center, which dated back to the early days of the COVID pandemic. We are proud of our approximately 350 employees at the Adelanto center who have helped us establish a long-standing record of providing high-quality contracted support services on behalf of ICE in the state of California.

As we announced this morning, we’ve been awarded a 15-year fixed-price contract by ICE for our company-owned 1,000-bed Delaney Hall facility in Newark, New Jersey, with a total value of approximately $1 billion over the 15-year contract period. Moving to our ancillary support services, we currently provide secure ground transportation for ICE primarily at 12 of the GEO-contracted ICE processing centers. Our GTI transport division also provides secure air operations support for ICE as a subcontractor under a five-year prime contract held by CSI Aviation. We have a long-standing record of providing safe and secure transportation services on behalf of ICE, which we expect will continue to play an important role in helping the agency carry out its mission.

I could not be more excited to rejoin the GEO Group as its new CEO and to assist George and the entire GEO team as we prepare to fully meet the challenges of the unprecedented opportunities that lie ahead. At this time, I’ll turn the call over to Wayne Calabrese for a review of our GEO Care Business Unit. Wayne?

Wayne Calabrese — Chief Operating Officer

Thank you, Dave. I’m pleased to provide an overview of the key operational milestones for this past year for GEO Care Division. In 2024, we renewed 31 residential reentry center contracts, including 15 contracts with the Federal Bureau of Prisons. Additionally, we renewed 44 non-residential day reporting center contracts.

During the year, our residential reentry centers, non-residential day reporting centers, and ISAP offices successfully underwent a combined total of 311 audits, including internal audits, government reviews, third-party accreditations, and Prison Rape Elimination Act, or PREA, certifications. Eight of our residential reentry centers received accreditation in the last year from the American Correctional Association with an average accreditation score of 100%, and 13 of our residential reentry centers received PREA certifications. Our 35 residential reentry centers, including 14 centers under contract with the Federal Bureau of Prisons, provide transitional housing and rehabilitation programs for individuals reentering their communities across 14 states. Average daily census levels at these centers remain stable at approximately 5,000 individuals during the fourth quarter of 2024.

Our non-residential and day reporting centers provide high-quality community-based services, including cognitive behavioral treatment for up to 9,200 parolees and probationers at approximately 98 locations across 10 different states. We expect that the implementation of the First Step Act, which was enacted under President Trump’s first term, will be an area of focus for the Federal Bureau of Prisons under his second term, and we stand ready to help the agency expand the delivery of residential and non-residential reentry programs that have been proven to reduce recidivism and to improve the lives of those who have taken that first step back into our nation’s communities. Moving to our enhanced rehabilitation programs, we currently deliver in-custody rehabilitation to an average daily population of approximately 2,700 individuals at 38 in-prison program sites located in seven different states, and engage over 36,000 program participants at 11 GEO-continuum of care sites in seven states. Our in-custody rehabilitation services include academic programs focused on the attainment of high school equivalency diplomas.

We’ve made a significant investment to equip all of our classrooms with smart boards to aid in the delivery of academic instruction. We’ve also focused on developing vocational programs that lead to certification for good jobs in the markets where our graduates will live upon release. Our substance abuse treatment programs are an important part of our rehabilitation services because many of the individuals in our care suffer from addiction and substance use disorder. Our facilities also provide extensive faith-based and character-based programs with designated housing units across our facilities dedicated to enhancing the delivery of these important programs.

During 2024, we completed approximately 6.8 million hours of enhanced in-custody rehabilitation programming. Our academic programs awarded more than 3,000 high school equivalency diplomas. Our vocational courses awarded close to 9,700 vocational training certifications. Our substance abuse treatment programs awarded approximately 9,300 program completions.

Those in our care achieved approximately 60,000 behavioral treatment program completions and more than 43,000 individual cognitive behavioral treatment sessions during the past year. We also allocated approximately $1.5 million toward post-release services last year. This funding supported more than 3,300 individuals released from GEO service facilities as they returned to their communities. Our GEO Continuum of Care program integrates enhanced in-custody rehabilitation, including cognitive behavioral treatment, with post-release support services that address the critical community needs of released individuals.

We believe our award-winning program provides a proven model for how the 2 million-plus people in the United States criminal justice system can be better served in changing their lives. Our GEO Continuum of Care has had a positive impact in the reduction of criminal recidivism rates, with our programs achieving a reduction of between 42% and 47% in recidivism over three- and five-year periods when compared to the national average. Finally, turning to our electronic monitoring and supervision services segment, our BI subsidiary provides a full suite of monitoring and supervision solutions, products, and technologies. In the fourth quarter of 2024, participant counts under the ICE Intensive Supervision Appearance Program, or ISAP, averaged approximately 183,000, and the current ISAP participant count is approximately 186,000.

BI has provided technology solutions, holistic case management, supervision, monitoring, and compliance services under the ISAP contract for nearly 20 years, winning every competitive rebid of the contract since ISAP was first established. Under BI’s tenure, ISAP has received bipartisan support and has achieved high levels of compliance using a variety of new technologies and case management services over that time. As previously noted, we believe that in addition to increased attention capacity, a ramp-up in electronic monitoring will be necessary to ensure proper tracking and compliance rates for the millions of people currently on that non-detained docket or who are otherwise in the United States without legal status. At this time, we have not received any update from ICE regarding the timing of a procurement for the rebid of the ISAP contract.

We believe the agency focus has shifted to increasing the size of the population that is currently being monitored under ISAP. We are making a significant investment toward the increased production of GPS tracking devices to be in a position to scale up the federal government’s current utilization of the ISAP program by several hundreds of thousands and upward to several millions of participants if necessary. At this time, I’d like to turn the call back to George for closing remarks.

George Zoley — Executive Chairman

Thank you, Wayne, and we wish you the best as you transition from a full-time employee to consultant effective April 1. Your unique talents will be missed by all, but we look forward to your continued involvement on a consulting basis. We believe our company faces an unprecedented opportunity at this time to play a role in supporting President Trump’s new administration policy. We’ve taken several important steps to be prepared to meet that opportunity.

We’ve made significant investments, commitments of $70 million and possibly more to strengthen our capabilities to deliver expanded detention capacity, secure transportation, and electronic monitoring services to ICE and the federal government. We’ve also completed a reorganization of our senior management team to oversee the operation execution of this expected future growth. GEO is the largest single contractor to ICE with four decades of partnership and currently provides for approximately 40% of the detention beds for ICE. We believe we are well positioned to scale up our secure residential care housing from the current 15,000 beds to over 32,000.

And GEO’s 100% management of the ISEP staff program, we believe we can scale up from the present 186,000 participants to several hundreds of thousands or millions of participants if called upon. GEO’s contractual relationship with CFI Aviation has allowed us to become the largest provider of secure transportation services for ICE. During 2024, we assisted in the transport and relocation travel of 160,000 persons. We believe we can scale up materially for domestic and international travel for up to 500,000 individuals or more if called upon.

This is a unique moment in our company’s history and we believe we are well positioned to scale up our diversified segments in secure housing, transportation, electronic monitoring to meet the changing needs of this new administration and to continue to enhance value for our shareholders. I would now like to make a final closing statement. With the unprecedented volume of new business opportunities confronting GEO, I am inclined to stay beyond the end of my present employment agreement that expires July 1, 2026 and have so notified the board. I will offer the continuation of my services to the board under a new mutually agreeable employment agreement.

That completes our remarks and we would be glad to take any questions. Thank you.

Questions & Answers:

Operator

[Operator instructions] The first question today comes from Jason Weaver with Jones Trading. Please go ahead.

Matthew Erdner — JonesTrading — Analyst

Hey, good morning guys. This is Matthew Erdner on for Jason today. Thanks for taking the question. I kind of want to touch on the monitoring and the impact of The Laken Riley Act.

What all does that include in terms of monitoring there? The role it is going to take and kind of looking forward to the new contract. Are you guys assuming any changes in economics there?

George Zoley — Executive Chairman

I think our reading of the act is that those individuals need to be placed in detention and if there isn’t capacity for that, they need to be continued in the ISEP monitoring program indefinitely.

Matthew Erdner — JonesTrading — Analyst

That’s helpful there. And then, turning to the subsidiary BI Inc., are you guys prioritizing ankle or wrist monitors over the SmartLink app? And have you guys experienced any supply chain issues there as you guys have been expanding the footprint?

George Zoley — Executive Chairman

I think there’s going to be a preference in the beginning for the ankle monitors which represents the high security level of monitoring which people can progress or degraph into medium level security and low level security depending with different devices contributing to the monitoring.

Matthew Erdner — JonesTrading — Analyst

Got it. And then, the research report — sorry about that, go ahead.

George Zoley — Executive Chairman

No, we haven’t really identified any supply chain difficulties. We are ramping up our inventory of ankle monitors at our Boulder, Colorado facility.

Matthew Erdner — JonesTrading — Analyst

OK, that’s helpful there. And then, the research report that came out of the current administration about migrants being forced to register, do you think that that has an outsized demand on a potential increase for monitoring? And then, as a follow-up to that, kind of the guidance for $800 million to an incremental $1 billion in revenue there, what percentage of that is the monitoring segment?

Mark Suchinski — Chief Financial Officer

Yeah, so let me jump in on the $850 to $1 billion. About $250 million, that’s correct, about $250 million. But that’s based on a participant count of approximately $450,000. So if it goes beyond that, which we think it will sometime next year, it’ll be more.

Matthew Erdner — JonesTrading — Analyst

Got it. That’s helpful. Thank you, guys.

Operator

The next question comes from Jay McCanless with Wedbush. Please go ahead.

Jay McCanless — Analyst

Hey. Good morning. Thanks for taking my questions. So just wanted to clarify that.

So you’re saying of the $800 million to $850 million to $1 billion in incremental revenue, roughly $250 million of that is going to come from ATD with a participant count of 450,000? Did I get all that correctly?

Mark Suchinski — Chief Financial Officer

Yeah. So just a point of clarification, what we’ve said is if we look back to two years ago, we had participant counts of approximately 370,000. If we would grow our current participant counts to 370,000, that would generate an incremental $250 million of incremental revenue. And as George just described, if the counts go higher than our previous highs, then we’re looking at opportunities for that to surpass $250 million.

Jay McCanless — Analyst

OK. Great. Thank you for clarifying that. And then, if I think about the $60 million that you’re spending, I guess 450,000 I guess is what you think you could monitor with the current that you have.

I guess how much more does that $60 million take you to? Is it 550, 650? What should we think about the outcome of that spend is going to be?

Mark Suchinski — Chief Financial Officer

Well, the $60 million that we’re investing as George described, what we’re doing is we’re investing in building additional inventory of GPS devices to monitor in preparation of monitoring higher counts. And a lot of that has to do with ankle monitoring. We’re vertically integrated there. We’ve designed the ankle monitor.

We purchase it and we manufacture it in our facility. So what we’ve done, and that started in the fourth quarter, we’ve started to build the inventory and procure additional materials in anticipation of that. And that $60 million that we mentioned is part of our $70 million investment plan is to get ahead and start building larger quantities of inventory in support of expected higher GPS monitoring that will be required under the ISAF contract. And there are three security levels that we propose now in this program.

The highest is high security, followed by medium security, and then low security. We don’t know exactly how those three buckets will be filled by the new administration as they review their congressional directives and responsibilities balanced by the funding to achieve those contractual responsibilities. So we haven’t done an inventory for all 450,000, not yet. We’re building a big initial inventory because ICE is kind of it’s a big organization and it’s trying to realign itself to these huge new law enforcement responsibilities that it hasn’t had for four years under the previous administration.

So people are just coming back to the office, they’re starting to regroup, thinking through how are they going to achieve these new objectives, these new congressional directives and responsibilities. As we talked earlier, the Senate version of the budget is providing $170 billion. Quite a bit of money. And the House version I think is approximately $100 billion.

So as those two bills that are competing between the House and the Senate merge, it could be a number somewhere in between those two. But it’s a big leap and it can’t happen overnight. People have to be assigned within the ICE organization to identify the possible participants in the ICE program. We would need contract adjustments to, you know, pay for the additional costs, which we will be reimbursed.

But all of that is kind of a fluid situation, which is picking up pace, if I may say. We’ve gone from conceptual proposals by major service providers like ourselves and CoreCivic to now substantive pricing and operational discussions as to who’s going to go into this particular facility, how much is it going to cost. But there is interest in every one of our idle facilities by either ICE or the Marshals Service. And I would think that CoreCivic’s idle facilities would get the same level of attention.

But the procurement process is moving at a speed that’s unprecedented. We’ve never seen anything like this before.

Jay McCanless — Analyst

That’s good to hear. I guess to follow on that point, have you all been surprised at how slowly the ISEP numbers have moved up since the new administration took over?

Mark Suchinski — Chief Financial Officer

Well, I think there’s probably a couple answers to that, one of which is the focus on detention and the identification of alternative detention venues like Guantanamo, which seems to have some difficulties. But the focus, I think, will return back to the historical service providers like ourselves, like CoreCivic, utilizing their idle bed capacity that can be stood up within 60 or 90 days. That’s the fastest approach to increasing detention capacity. I don’t think anything else comes close to that.

It’s probably double the time. And I think we’re very cost competitive with any kind of alternative service.

Jay McCanless — Analyst

And I guess if you think about the different opportunities you have for revenue growth, you called out a little bit on the halfway homes with the First Step program. Are you thinking that you’re going to get growth faster through some of those, or is it mostly going to be focused on increasing bed count and increasing monitoring this year? Is that where you feel like most of the upside is going to come?

Mark Suchinski — Chief Financial Officer

As we know it and see it today. But we believe that the Department of Justice, under the administration of Pam Bondi, is very much interested in increasing the number of reentry bed capacity around the country and is interested in improving the rehabilitation programming at those facilities. So we think there will be a lot of activity in the reentry program. We are the largest provider in that space.

But a final candidate has not been proposed for the Bureau of Prisons as yet. So they’re still reviewing potential candidates.

Jay McCanless — Analyst

Understood. And then, just one more question back to monitoring for a sec. If you did start to see a rapid increase in people going through monitoring, what do you think the upside case is in terms of how many people you could monitor with your current infrastructure? Have you tried to stress out what the upper bound looks like?

Mark Suchinski — Chief Financial Officer

Well, we know we can do several hundreds of thousands, and we are trying to position ourselves for millions. And that will be permitted by contracting with other technical service providers that can help us reach those goals.

Jay McCanless — Analyst

OK. Great. Thank you for taking my questions.

Mark Suchinski — Chief Financial Officer

Thank you.

Operator

The next question comes from Greg Gibas with Northland Security. Please go ahead.

Greg Gibas — Northland Securities — Analyst

Hey. Thanks for taking the questions. I wanted to ask what your expectations are for ICE’s use of the Atlanta facility now that that court order limiting utilization before was lifted.

Mark Suchinski — Chief Financial Officer

Well, the court order is in two parts. I think under the first ruling, we have the authorization to utilize, I think, 460 or 470 beds, something like that. And there’s a hearing next month, the middle of next month, that will presumably authorize the complete utilization of the facility under the new COVID standards. So that’s almost a 2,000-bed facility.

It’s the largest facility on the West Coast. Our Delaney Hall facility will be the largest facility on the East Coast for ICE.

Greg Gibas — Northland Securities — Analyst

Got it. That’s helpful. And I guess as it relates to Delaney Hall, what level of start-up costs will be associated with it, and how should we maybe think about the opex versus capex split? And maybe regarding just future facility ramp-up costs, is there a rough per-bed expense we can expect to maybe estimate for future facilities that you reactivate?

George Zoley — Executive Chairman

Well, the Delaney Hall may be an exception because we will receive partial payments during our 60-day start-up process. But the other facilities will require the employment, including Delaney, of about 3,000 people. So you’ve got to pay for at least their training time, which is about four weeks. So that’s going to be several millions of dollars.

We haven’t put that in our budget yet because we really don’t know the timing of it. We haven’t put the revenue in the budget because the contracts are not signed yet. We haven’t put the start-up costs because we don’t know the timing of those start-up costs. But I think here we are at the end of the first quarter.

I think we’re anticipating a very fast ramp-up in procurement activity where I think there will be several contract awards very possibly next month by the end of the first quarter. But if that slips a little bit because of the funding competition between the Senate and the House, which may take until May for the money to come, the realistic activation of these facilities, ours and CoreCivics, will probably be the second half of the year. And it will be on a ramp-up basis and there will be significant costs for our 3,000 employees and CoreCivics approximate 3,000. So that’s 6,000 employees that have to be recruited, screened for criminal history, job history and then put into a four-week training program.

Wayne Calabrese — Chief Operating Officer

And I would just add, we haven’t been specific around what’s the cost per bed of reactivating a facility. But what I can tell you is when we activate those facilities in the back half of the year and we start to generate revenue and fill the populations there, there’s no doubt it will be significantly accretive from a profitability standpoint. So as George said, 30 to 60, 90 days, we’ve got to hire people, we’ve got to train people. It’s a cost, but the benefit from the reactivation well exceeds any of those reactivation costs.

Delaney Hall is a bit unusual because it’s done. It’s complete. Everything is brand new inside the facility and it’s ready to go. All we need to do is the recruitment, the hiring, the background screening and the training.

Other facilities may be in different conditions. They are in different conditions. Some have been idle longer than others. Adelanto has no capital requirements.

It’s in perfect shape so we can open up the rest of the facilities up to I think approximately 1,900 beds without any capital investment there. But we have other facilities like Northlake in Michigan. We have Big Springs in Texas. We have James in Georgia, Rivers in North Carolina.

It’s interesting that all of those facilities are former BOP facilities that became idle because of Biden’s restriction on the BOP contracting with us. But they’re all high security facilities which is very much of an interest to ICE and both marshals because they’re primarily cell facilities and I think they’re in high demand at this time.

Greg Gibas — Northland Securities — Analyst

Right. That makes sense and very helpful. I guess lastly as it relates to your commentary on the $250 million to $300 million incrementally off of the $800 million to $1 billion in revenue, kind of over what period would we expect to see this? Would we see these rolling in post-funding like 2025 or more 2026?

Wayne Calabrese — Chief Operating Officer

Let me just jump in here and George can provide some commentary. I think we’ve been pretty consistent in stating that we expect the first half of 2025 to be relatively consistent with ’24 and start to see the benefits of these contracting awards taking into effect in the back half of 2025. And as we stated before, the full benefits of reaching the full potential, we expect to see in 2026. And so, the benefits will start to bear fruit in the back half of ’25 and then we should be with the timelines of activating facilities within 90 days and the contracting that we talked about, we think the full operational benefits from a financial standpoint will take place in 2026.

Greg Gibas — Northland Securities — Analyst

Got it. Very helpful. Thanks.

Operator

The next question comes from Brendan McCarthy with Sidoti. Please go ahead.

Brendan McCarthy — Sidoti and Company — Analyst

Great. Good morning, everyone. Thanks for taking my questions. Just wanted to start off on the detention side.

I know last earnings call, there was a discussion around I think it was $400 million in incremental annualized revenue opportunity from the reactivation of 18,000 beds. But now this quarter, it sounds like that shifted up to the $500 million, $600 million revenue opportunity from roughly 17,000 incremental beds. Just curious as to what will kind of change that expectation and could we maybe see that range move higher?

Wayne Calabrese — Chief Operating Officer

I would say that we continue to look at our facilities and the capacity of those facilities in our conversations with our clients and it’s just a revision of our previous statements. I would say I wouldn’t expect there to be significant upside from what we’ve just laid out as it relates specifically to the idle facilities that we have here. So I just think it’s more clarity as we’ve spent more time modeling the business case opportunities.

George Zoley — Executive Chairman

I would just add that the numbers we’re talking about are numbers related to our own facilities. We are looking at other facilities that are owned by third party individuals and there’s a few of them. So none of our present numbers include those potential additional facilities.

Brendan McCarthy — Sidoti and Company — Analyst

Got it. OK, that’s helpful. And then, more of a broad question here, but on detention versus alternatives to detention, do you kind of see the administration maxing out detention utilization and population levels and then ramping up ATD population levels or do you think that process will be more I guess simultaneous?

George Zoley — Executive Chairman

As far as brick and mortar facilities in the U.S., that can be usable. I think it’s presently about 75,000 to 80,000 beds before you possibly consider repurposing some of the idle Bureau of Prisons facilities. So if you’re trying to get to 100,000, just the organic market place is only capable of 75,000 or 80,000 beds I think at this time before you consider soft-sided facilities, as well as possibly repurposing and managing presently idle BOP facilities, which can get you to the 100,000.

Brendan McCarthy — Sidoti and Company — Analyst

Great, thanks. I guess just to clarify, I guess with the alternative to detention program, the ISEP contract, I guess do you ultimately see maybe a lag there with population increases while detention ultimately takes the priority?

George Zoley — Executive Chairman

No, we think the ISEP program has a separate team of individuals. They’re not part of the detention team. But I think they’ve heard the message and they’re ready to respond appropriately in a fairly significant ramp-up individuals on ISEP. And I think the initial preference will be on ankle monitors for high security and allowing them to step down to lower security levels in the future.

But remain on ISEP as long as it takes for them to have their hearing and be cleared or allowed to stay in the U.S. If they’re not approved to stay in the U.S., they would be scheduled for deportation. So one of the criticisms of the ISEP program is that people have stayed on it a few months and then they don’t show up for their hearing. Well, the solution to that is continue their participation and monitoring under the ISEP program until they do go to their hearing and there is a decision on their case.

One way or the other, either they get to stay or they have to go. That’s the solution. Continue the individual’s participation in the ISEP program until their deportation decision is made in the positive more than the negative.

Brendan McCarthy — Sidoti and Company — Analyst

Got it. That’s helpful. That’s all from me. Thanks.

George Zoley — Executive Chairman

Thank you.

Operator

The next question comes from Joshua Zoepfel with Noble Capital Markets. Please go ahead.

Joshua Zoepfel — Noble Capital Markets — Analyst

Hey. Good morning. I’m filling in for Joe.

George Zoley — Executive Chairman

Good morning.

Joshua Zoepfel — Noble Capital Markets — Analyst

Hey, so, obviously in your remarks you just kind of touched on the idle facilities having some interest. Are those kind of discussions really gaining any traction? Maybe could we see idle facilities being activated in early 2025, maybe just early ’26?

George Zoley — Executive Chairman

Hey, Joshua, can you repeat that again? You broke in and out.

Joshua Zoepfel — Noble Capital Markets — Analyst

Sure. Yeah, no, you guys touched kind of on the prepared remarks. You guys were having some conversations with ICE and the marshals. And are those kind of discussions really gaining any traction? Could we kind of see those idle facilities being reactivated in maybe ’25, early 26?

George Zoley — Executive Chairman

I think the likelihood is that all of our idle facilities will be activated in 2025.

Wayne Calabrese — Chief Operating Officer

Yeah, to be a little bit more specific, we think that the contracting of the additional detention vents will all take place in 2025. It doesn’t mean that they’ll be all fully populated by the end of 2025, but all of that contracting should be done, and as we said before, so that we reap the full benefits in ’26 and get some of the benefits in the back half of this year.

George Zoley — Executive Chairman

Even a longer view of the funding battle would allow, I think, the department to issue contracts by the end of the second quarter. Now, if it takes that long to the end of the second quarter, then you need the third quarter for activating the facilities. But I think we’re hopeful and I think the administration’s hopeful that the sense of awareness of how much money is available will occur early in the second quarter to allow actual contracting to take place early or mid-second quarter.

Joshua Zoepfel — Noble Capital Markets — Analyst

OK, that’s helpful. And obviously with the ICE investment, you guys kind of broke out, the capital expenditures over 2025 and everything else like that. Just in terms of like the sale of the facilities first off how close are you on any of those sales? And furthermore looking at that investment, when it’s broken out, it kind of seems like it’s about roughly around $21 million in the first three quarters of 2025. Is that kind of a fair assessment?

George Zoley — Executive Chairman

Well, his first question is, can we provide more detailed updates on the sale process?

Wayne Calabrese — Chief Operating Officer

Well, one of the facilities which is in the public domain is our Lawton, Oklahoma facility. It’s a very large facility. Our facilities are generally the largest facilities in any state we operate in, as is the case with the Lawton facility in the state of Oklahoma. So it’s a very high security facility.

We’ve made a public request as to the purchase of the facility. An appraiser has been assigned, and I think they’ve made a lot of progress in their appraisal work, and we expect their assessment by next month.

Joshua Zoepfel — Noble Capital Markets — Analyst

OK. That’s helpful. And yeah, obviously that investment over 2025, yeah, it seems like it calculated about $21 million over the first three quarters. I don’t know if that sounds about right to you guys.

Wayne Calabrese — Chief Operating Officer

That does.

Joshua Zoepfel — Noble Capital Markets — Analyst

OK. Perfect. And then, lastly, you guys might have gone over this in the prepared remarks, and I apologize if I missed it. But it seems like you had a pretty substantial NOI increase really for the managed-only segment, while you guys had pretty kind of steady revenue.

Can I get a bit more color just kind of on the large jump?

George Zoley — Executive Chairman

On the managed-only, I think we’ve had to make some wage increases out of our own concern for staffing levels and security of the facility in advance of actual reimbursement and additional funding from our state clients. Most of the state clients are in the middle of their legislative sessions right now. We’ve made a request to them for additional funding, but we haven’t waited for that. We’ve done what we think is the right operational thing to do and increase wages to higher levels to handle what is increasingly a higher security level of people in state facilities.

I think to the extent they could, they’ve released minimum security prisoners as much as they could. That really left medium and high security individuals that we’re dealing with now, and you have to be very careful that you have enough staffing to take care of that kind of situation. So we’ve moved forward in increasing staff wages given the operational challenges, but we are asking for reimbursement for additional funding from our state clients in several states.

Joshua Zoepfel — Noble Capital Markets — Analyst

OK. That’s helpful. Thank you, guys, for taking my questions.

George Zoley — Executive Chairman

Thank you.

Operator

The next question comes from Jordan Hymowitz with Philadelphia Financial. Please go ahead.

Jordan Hymowitz — Philadelphia Financial — Analyst

Hey guys. Thanks for your questions. First of all, has there been any Bureau of Prisons populations shifted over and or do your numbers include any shift? And if I remember correctly, the peak was like 7% to 10% of the population was Bureau of Prisons in like 1914, 1915?

George Zoley — Executive Chairman

Well, we are not in communications with the Bureau of Prisons because a new director has not been appointed. We are awaiting that final decision and then we would be approaching them on what opportunities exist within the BOP given the probability that most if not all of our idle facilities will have been contracted to other agencies. Where we think we can be helpful is if they do a consolidation play in some of their facilities, we can take over one of their facilities that they decide to empty, as well as looking at their idle facilities to see if we can make a financially viable offer to rehabilitate the facility and take over the management. So there are some opportunities that we are looking at, but the timing on that is a little bit further out, with the appointment of a new BOP director.

Jordan Hymowitz — Philadelphia Financial — Analyst

But what you are saying is if for some reason there is a delay in ICE or marshals, BOP is another option that we haven’t factored into the equation at this point.

George Zoley — Executive Chairman

Yes, but I think all of our remaining six idle facilities will be contracted as I am hopeful by the end of the second quarter.

Jordan Hymowitz — Philadelphia Financial — Analyst

And my second question is, I mean, everybody, I mean, no one wants to be in jail anywhere, but at least if you are in jail in the U.S., you have three meals a day, you have access to legal representation. As you mentioned, you have some amenities. I mean, if God forbid you are thrown to El Salvador or some other place, I mean, you have no representation or rights or anything and I can’t believe it is cheap to get legal representation to those places. Have you pointed that out when you think about the actual total cost per bed? It may not just be the amount charged per bed, but all the other services that are included in that package, so to speak.

And it may make the cost effectiveness of your facilities much better than an international option.

George Zoley — Executive Chairman

We have four decades of experience with ICE and marshals. So they know our capabilities, they know the quality of our services. And when I think about international sites, I think maybe they will be purposed for the ultimate detention of people in those or deportation venue for those people that are deported rather than where they are going to be processed. I think logically speaking that most if not all of the individuals will be processed within the U.S., but they may be deported to some other cooperative foreign country that may want to detain them rather than just releasing them within their own country.

It depends on the security level of the individuals that are deported to these cooperating countries.

Jordan Hymowitz — Philadelphia Financial — Analyst

And I’m sure there’s got to be a fair amount of lawsuits springing up to prevent that option from even occurring because if you’re deported you don’t have that legal representation or rights to repeal that or it becomes much tougher. So I mean, that may not even become an option, so to speak.

George Zoley — Executive Chairman

We don’t know if that’s a policy decision by the White House, as well as DHS and ICE.

Jordan Hymowitz — Philadelphia Financial — Analyst

OK. Thank you.

George Zoley — Executive Chairman

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to George Zoley for any closing remarks.

George Zoley — Executive Chairman

Well, thank you all for joining us on this call. As you can tell by the length of the call, we’ve got a lot of questions because there’s quite a bit going on in our company and the opportunities that we’re looking at which are completely unprecedented. And we’re proud to be in partnership with ICE and the Marshal Services and hopefully with the BOP as well and play a significant role in the new immigration policies under this new administration. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Pablo E. Paez — Executive Vice President, Corporate Relations

George Zoley — Executive Chairman

Mark Suchinski — Chief Financial Officer

David Donahue — Chief Executive Officer

Wayne Calabrese — Chief Operating Officer

Matthew Erdner — JonesTrading — Analyst

Jay McCanless — Analyst

Greg Gibas — Northland Securities — Analyst

Brendan McCarthy — Sidoti and Company — Analyst

Joshua Zoepfel — Noble Capital Markets — Analyst

Jordan Hymowitz — Philadelphia Financial — Analyst

More GEO analysis

All earnings call transcripts