New Contract and Contract Renewal Momentum Continues
BRENTWOOD, Tenn., Nov. 14, 2023 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (“CoreCivic”) announced today it signed a new management contract with the state of Montana for the housing of up to 120 inmates at the Company’s 1,896-bed Saguaro Correctional Facility in Eloy, Arizona.
The new management contract commences immediately and ends October 31, 2025. The contract may be extended by mutual agreement. The total term, including renewals, may not exceed seven years. We anticipate completing the receipt of the inmates from Montana at the Saguaro facility by December 31, 2023.
Damon T. Hininger, President and Chief Executive Officer commented, “We are grateful for our longstanding partnership with the Montana Department of Corrections and honored by the opportunity to meet their evolving needs at both our Crossroads Correctional Facility in Shelby, Montana as well as at our Saguaro Correctional Facility in Eloy, Arizona. Our modern Saguaro facility, built in 2007, will now care for incarcerated individuals for three different state partners.”
Hininger continued, “This new contract further reflects the attractiveness of our available bed capacity as well as the high level of service and trust for which CoreCivic is recognized. We continue to anticipate heightened need for our modern and flexible capacity from states and local agencies, as well as from Federal partners.”
About CoreCivic
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and one of the largest prison operators in the United States. We have been a flexible and dependable partner for government for 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Forward-Looking Statements
This press release contains statements as to our beliefs and expectations of the outcome of future events that are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) changes in government policy, legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, including as a consequence of the United States Department of Justice, or DOJ, not renewing contracts as a result of President Biden’s Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, impacting utilization primarily by the Federal Bureau of Prisons and the United States Marshals Service, and the impact of any changes to immigration reform and sentencing laws (we do not, under longstanding policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an individual’s incarceration or detention); (ii) our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances; (iii) changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds; (iv) general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy; (v) fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations; (vi) the impact resulting from the termination of Title 42, the federal government’s policy to deny entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of the coronavirus and related variants, or COVID-19; (vii) government budget uncertainty, the impact of the debt ceiling and the potential for government shutdowns and changing funding priorities; (viii) our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom; (ix) our ability to have met and maintained qualification for taxation as a real estate investment trust, or REIT, for the years we elected REIT status; and (x) the availability of debt and equity financing on terms that are favorable to us, or at all. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time with the Securities and Exchange Commission.
We take no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services.
Contact:
Investors: Michael Grant – Managing Director, Investor Relations – (615) 263-6957
Financial Media: David Gutierrez, Dresner Corporate Services – (312) 780-7204
BOCA RATON, Fla., Nov. 09, 2023 (GLOBE NEWSWIRE) — via InvestorWire — Noble Capital Markets, Inc. (“Noble”) today announces that Seeking Alpha (https://seekingalpha.com/), the world’s leading investing community, will be a prominent sponsor at NobleCon19 (NobleCon19.com), Noble’s 19th Annual Emerging Growth Equity Conference, to be held at Florida Atlantic University, College of Business, Executive Education, Dec. 3-5, 2023, in Boca Raton, Florida. NobleCon19 will feature 200 public company executives, corporate presentations, breakouts, 1×1 meetings with qualified attendees, provocative panels, and a keynote fireside chat featuring the 43rd President of the United States, George W. Bush, moderated by Noble’s Director of Research, Michael Kupinski.
As a sponsor, Seeking Alpha will play a significant role in enhancing the conference experience for attendees. Participants can look forward to engaging discussions, expert insights, and valuable networking opportunities facilitated by Seeking Alpha’s presence. The company’s participation underscores its dedication to empowering investors with high-quality, actionable research and analysis. As part of the sponsorship, Steven Cress, Seeking Alpha’s Head of Quantitative Strategies, will dive deeper into Seeking Alpha’s Quant System and its top picks for 2024, in a presentation preceding the George W. Bush keynote.
“We are thrilled to have Seeking Alpha on board as a sponsor for NobleCon19,” said Nico P. Pronk, CEO of Noble Capital Markets, the host of NobleCon19. “Their research and analysis tools and resources for the investment community align perfectly with the objectives of our conference. We believe their involvement will enhance the overall event, providing attendees with valuable perspectives and knowledge.”
During the conference, Seeking Alpha representatives will be available at their booth, which will also be the official NobleCon19 coffee station, to interact with attendees, demonstrate their platform’s capabilities, and discuss the latest trends in investment research. Attendees are encouraged to visit the Seeking Alpha booth to learn more about their innovative solutions and how they can benefit individual investors, financial professionals and institutions alike.
“We are excited to sponsor NobleCon19 and engage with industry experts, investors and thought leaders,” said Mayer Reich, Vice President of Marketing at Seeking Alpha. “This conference represents an excellent opportunity for us to connect with our community and share insights. We look forward to productive discussions and meaningful interactions throughout the event.”
To register to attend NobleCon19: NobleCon19.com. To receive NobleCon agenda updates and registration opportunities, join Channelchek.com, Noble’s online investment community, listing more than 6,000 public emerging growth companies. This is an open-access site with no cost (ever) to join. Companies with market capitalization of $3 billion or less wishing to learn more about presenting at NobleCon19 can Inquire Here.
About Seeking Alpha: Seeking Alpha is the world’s leading investing community, where investors connect daily to discover and share new investing ideas, discuss the latest news, debate the merits of stocks, and make informed investment decisions. Seeking Alpha’s content has unparalleled breadth and depth: from stocks, ETFs and mutual funds to commodities and cryptocurrency. Seeking Alpha gives investors access to professional-caliber research tools – including factor grades and quant ratings that summarize each stock’s characteristics. Seeking Alpha empowers investors to make the absolute best investing decisions by leveraging independent and balanced stock research, fundamental analysis tools, crowdsourced debate, news and actionable market data. Seeking Alpha is not a licensed securities dealer, broker or U.S. investment adviser or investment bank.
About Noble Capital Markets: Noble Capital Markets, Inc. was incorporated in 1984 as a full-service SEC / FINRA registered broker-dealer, dedicated exclusively to serving underfollowed emerging growth companies through investment banking, wealth management, trading & execution, and equity research activities. Over the past 39 years, Noble has raised billions of dollars for companies and published more than 45,000 equity research reports. www.noblecapitalmarkets.com contact@noblecapitalmarkets.com.
Q3 operating earnings were break-even, or up 60% to $15.5 million on an adjusted basis
Q3 revenue down 4.3%; down 5.8% in constant currency
Q3 adjusted EBITDA margin increased to 2.3% compared to 1.6% in the prior year driven by meaningful reduction in operating expenses resulting from business transformation initiative
Company expects sale of European staffing operations and near-term outcome from growth initiatives to drive further expansion of adjusted EBITDA margin
TROY, Mich., Nov. 9, 2023 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading global specialty talent solutions provider, today announced results for the third quarter of 2023.
Peter Quigley, president and chief executive officer, announced revenue for the third quarter of 2023 totaled $1.1 billion, a 4.3% decrease, or 5.8% decrease in constant currency, compared to the corresponding quarter of 2022. Year-over-year revenue trends were impacted by customers’ more guarded approach to hiring and initiating new projects or capital spending, partially offset by favorable currency impacts.
“In the third quarter, persistent macroeconomic uncertainty continued to temper demand for temporary and permanent staffing services,” said Quigley. “As expected, results in SET and P&I reflected these challenges, while our Education segment and more resilient outcome-based solutions in P&I once again delivered year-over-year growth. We continued to focus on what we can control in this challenging operating environment, driving significant progress in the execution of our transformation initiatives – the benefits of which are evident in our operating results.”
Kelly reported break-even operating earnings in the third quarter of 2023 compared to a loss of $21.4 million reported in the third quarter of 2022. Earnings in the third quarter of 2023 include $15.4 million of transformation-related charges. Excluding the transformation-related charges, adjusted earnings from operations were $15.5 million. Loss from operations in the third quarter of 2022 included a $30.7 million goodwill impairment charge and adjusted earnings were $9.5 million. Adjusted earnings improved 60% year-over-year primarily as a result of lower operating expenses due to our ongoing transformation initiatives.
Earnings per share in the third quarter of 2023 were $0.18 compared to a loss per share of $0.43 in the third quarter of 2022. Included in the earnings per share in the third quarter of 2023 is a $0.32 loss per share related to transformation-related charges, net of tax. Included in the third quarter of 2022 was a $0.67 loss per share, net of tax, from a goodwill impairment charge. On an adjusted basis, earnings per share were $0.50 in the third quarter of 2023, double the $0.25 earnings per share in the corresponding quarter of 2022.
Quigley went on to provide an update on the company’s business transformation initiative.
“Following the implementation of strategic restructuring activities at the outset of the third quarter, we remained focused on sustaining these structural improvements across the enterprise. We also made progress on several initiatives that are positioning Kelly to accelerate profitable growth over the long term. With the efficiency phase of our transformation on-track, our growth initiatives delivering encouraging early results, and the sale of our European staffing business poised to benefit both of these efforts, we remain committed to driving continued improvement of our adjusted EBITDA margin and maximizing value creation.”
In the fourth quarter of 2023, Kelly expects to achieve an adjusted EBITDA margin in the range of 2.8% to 3.0%, reflecting the impact of market conditions that are more challenging than anticipated. Assuming the benefit of a full year of its transformation-related savings, the sale of its European staffing business and current top-line trends, the company would expect to reach a normalized, adjusted EBITDA margin in the range of 3.3 to 3.5%.
Kelly also reported that on November 7, its board of directors declared a dividend of $0.075 per share. The dividend is payable on December 6, 2023, to shareholders of record as of the close of business on November 22, 2023.
In conjunction with its third-quarter earnings release, Kelly has published a financial presentation on the Investor Relations page of its public website and will host a conference call at 9 a.m. ET on November 9 to review the results and answer questions. The call may be accessed in one of the following ways:
Via the Telephone (877) 692-8955 (toll free) or (234) 720-6979 (caller paid) Enter access code 5728672 After the prompt, please enter ”#”
A recording of the conference call will be available after 2:30 p.m. ET on November 9, 2023, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 7027637#. The recording will also be available at kellyservices.com during this period.
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Kelly’s financial expectations, are forward-looking statements. Factors that could cause actual results to differ materially from those contained in this release include, but are not limited to, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business’s anticipated growth strategies, (vii) our future business development, results of operations and financial condition, (viii) damage to our brands, (ix) dependency on third parties for the execution of critical functions, (x) conducting business in foreign countries, including foreign currency fluctuations, (xi) availability of temporary workers with appropriate skills required by customers, (xii) cyberattacks or other breaches of network or information technology security, and (xiii) other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. All information provided in this press release is as of the date of this press release and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
About Kelly®
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 450,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2022 was $5.0 billion. Learn more at kellyservices.com.
FOR THE 13 WEEKS ENDED OCTOBER 1, 2023 AND OCTOBER 2, 2022
(UNAUDITED)
(In millions of dollars except per share data)
%
CC %
2023
2022
Change
Change
Change
Revenue from services
$
1,118.0
$
1,167.9
$
(49.9)
(4.3)
%
(5.8)
%
Cost of services
889.5
927.3
(37.8)
(4.1)
Gross profit
228.5
240.6
(12.1)
(5.1)
(6.3)
Selling, general and administrative expenses
228.4
231.1
(2.7)
(1.2)
(2.4)
Goodwill impairment charge
—
30.7
(30.7)
NM
Loss on disposal
—
0.2
(0.2)
NM
Earnings (loss) from operations
0.1
(21.4)
21.5
NM
Other income (expense), net
1.6
0.2
1.4
NM
Earnings (loss) before taxes
1.7
(21.2)
22.9
NM
Income tax expense (benefit)
(4.9)
(5.0)
0.1
0.1
Net earnings (loss)
$
6.6
$
(16.2)
$
22.8
NM
Basic earnings (loss) per share
$
0.18
$
(0.43)
$
0.61
NM
Diluted earnings (loss) per share
$
0.18
$
(0.43)
$
0.61
NM
STATISTICS:
Permanent placement revenue (included in revenue from services)
$
14.6
$
19.8
$
(5.2)
(26.3)
%
(28.5)
%
Gross profit rate
20.4
%
20.6
%
(0.2)
pts.
Conversion rate
0.0
%
(8.9)
%
8.9
pts.
Adjusted EBITDA
$
25.5
$
19.1
$
6.4
Adjusted EBITDA margin
2.3
%
1.6
%
0.7
pts.
Effective income tax rate
(299.3)
%
23.4
%
(322.7)
pts.
Average number of shares outstanding (millions):
Basic
35.4
37.9
Diluted
35.8
37.9
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE 39 WEEKS ENDED OCTOBER 1, 2023 AND OCTOBER 2, 2022
(UNAUDITED)
(In millions of dollars except per share data)
%
CC %
2023
2022
Change
Change
Change
Revenue from services
$
3,603.5
$
3,731.6
$
(128.1)
(3.4)
%
(3.8)
%
Cost of services
2,880.3
2,970.0
(89.7)
(3.0)
Gross profit
723.2
761.6
(38.4)
(5.0)
(5.2)
Selling, general and administrative expenses
703.8
707.3
(3.5)
(0.5)
(0.8)
Asset impairment charge
2.4
—
2.4
NM
Goodwill impairment charge
—
30.7
(30.7)
NM
Loss on disposal
—
18.7
(18.7)
NM
Gain on sale of assets
—
(5.3)
5.3
NM
Earnings from operations
17.0
10.2
6.8
67.0
Loss on investment in Persol Holdings
—
(67.2)
67.2
NM
Loss on currency translation from liquidation of subsidiary(1)
—
(20.4)
20.4
NM
Other income (expense), net
3.0
1.9
1.1
55.9
Earnings (loss) before taxes and equity in net earnings of affiliate
20.0
(75.5)
95.5
NM
Income tax expense (benefit)
(5.0)
(13.1)
8.1
61.8
Net earnings (loss) before equity in net earnings of affiliate
25.0
(62.4)
87.4
NM
Equity in net earnings of affiliate
—
0.8
(0.8)
NM
Net earnings (loss)
$
25.0
$
(61.6)
$
86.6
NM
Basic earnings (loss) per share
$
0.68
$
(1.62)
$
2.30
NM
Diluted earnings (loss) per share
$
0.67
$
(1.62)
$
2.29
NM
STATISTICS:
Permanent placement revenue (included in revenue from services)
$
47.8
$
71.2
$
(23.4)
(32.9)
%
(33.3)
%
Gross profit rate
20.1
%
20.4
%
(0.3)
pts.
Conversion rate
2.4
%
1.3
%
1.1
pts.
Adjusted EBITDA
$
76.9
$
81.5
$
(4.6)
Adjusted EBITDA margin
2.1
%
2.2
%
(0.1)
pts.
Effective income tax rate
(25.1)
%
17.4
%
(42.5)
pts.
Average number of shares outstanding (millions):
Basic
36.2
38.2
Diluted
36.5
38.2
(1) Subsequent to the sale of the Persol Holdings investment, the Company commenced the dissolution process of the Kelly Services Japan subsidiary, which was considered substantially liquidated as of the first quarter-end 2022, resulting in the recognition of the $20.4 million loss on currency translation from liquidation of this subsidiary in the first quarter of 2022.
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
Third Quarter
%
CC %
2023
2022
Change
Change
Professional & Industrial
Revenue from services
$
364.5
$
408.6
(10.8)
%
(10.5)
%
Gross profit
65.5
70.3
(6.9)
(6.5)
SG&A expenses excluding restructuring charges
53.7
65.3
(17.7)
(17.6)
Restructuring charges
4.0
—
NM
NM
Total SG&A expenses
57.7
65.3
(11.6)
(11.4)
Earnings from operations
7.8
5.0
54.2
Earnings from operations excluding restructuring charges
11.8
5.0
133.7
Gross profit rate
17.9
%
17.2
%
0.7
pts.
Science, Engineering & Technology
Revenue from services
$
295.7
$
321.3
(8.0)
%
(8.0)
%
Gross profit
68.0
76.3
(10.8)
(10.9)
Total SG&A expenses
47.8
53.4
(10.4)
(10.5)
Earnings from operations
20.2
22.9
(11.7)
Gross profit rate
23.0
%
23.7
%
(0.7)
pts.
Education
Revenue from services
$
128.1
$
104.3
22.9
%
22.9
%
Gross profit
19.8
16.6
19.2
19.2
Total SG&A expenses
22.4
21.4
5.0
5.0
Earnings (loss) from operations
(2.6)
(4.8)
44.8
Gross profit rate
15.5
%
15.9
%
(0.4)
pts.
Outsourcing & Consulting
Revenue from services
$
114.1
$
118.5
(3.8)
%
(4.0)
%
Gross profit
41.5
44.1
(6.0)
(6.7)
SG&A expenses excluding restructuring charges
37.2
37.7
(1.5)
(2.4)
Restructuring charges
1.8
—
NM
NM
Total SG&A expenses
39.0
37.7
3.3
2.2
Goodwill impairment charge
—
30.7
NM
Earnings (loss) from operations
2.5
(24.3)
NM
Earnings (loss) from operations excluding restructuring charges
4.3
(24.3)
NM
Gross profit rate
36.4
%
37.2
%
(0.8)
pts.
International
Revenue from services
$
220.6
$
215.5
2.4
%
(6.2)
%
Gross profit
33.7
33.3
1.0
(7.6)
Total SG&A expenses
31.2
31.4
(0.7)
(8.7)
Earnings from operations
2.5
1.9
27.5
Gross profit rate
15.3
%
15.5
%
(0.2)
pts.
KELLY SERVICES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS BY SEGMENT
(UNAUDITED)
(In millions of dollars)
September Year to Date
%
CC %
2023
2022
Change
Change
Professional & Industrial
Revenue from services
$
1,131.3
$
1,268.7
(10.8)
%
(10.4)
%
Gross profit
200.4
231.2
(13.3)
(12.8)
SG&A expenses excluding restructuring charges
176.5
203.8
(13.4)
(13.1)
Restructuring charges
7.3
0.3
NM
NM
Total SG&A expenses
183.8
204.1
(9.9)
(9.6)
Asset impairment charge
0.3
—
NM
Earnings from operations
16.3
27.1
(40.4)
Earnings from operations excluding restructuring charges
23.6
27.4
(14.4)
Gross profit rate
17.7
%
18.2
%
(0.5)
pts.
Science, Engineering & Technology
Revenue from services
$
903.5
$
962.7
(6.2)
%
(6.1)
%
Gross profit
207.4
225.3
(7.9)
(7.9)
Total SG&A expenses
150.6
161.4
(6.7)
(6.7)
Asset impairment charge
0.1
—
NM
Earnings from operations
56.7
63.9
(11.2)
Gross profit rate
23.0
%
23.4
%
(0.4)
pts.
Education
Revenue from services
$
583.9
$
433.2
34.8
%
34.8
%
Gross profit
91.6
69.2
32.4
32.4
Total SG&A expenses
69.3
60.4
14.8
14.8
Earnings from operations
22.3
8.8
152.7
Gross profit rate
15.7
%
16.0
%
(0.3)
pts.
Outsourcing & Consulting
Revenue from services
$
342.4
$
352.0
(2.7)
%
(2.3)
%
Gross profit
124.4
127.6
(2.5)
(2.0)
SG&A expenses excluding restructuring charges
114.9
111.7
2.8
2.7
Restructuring charges
2.3
0.1
NM
NM
Total SG&A expenses
117.2
111.8
4.7
4.6
Asset impairment charge
2.0
—
NM
Goodwill impairment charge
—
30.7
NM
Earnings from operations
5.2
(14.9)
NM
Earnings from operations excluding restructuring charges
7.5
(14.8)
NM
Gross profit rate
36.3
%
36.3
%
—
pts.
International
Revenue from services
$
657.5
$
715.9
(8.2)
%
(11.2)
%
Gross profit
99.4
108.3
(8.2)
(11.1)
Total SG&A expenses
96.2
99.2
(3.0)
(5.8)
Earnings from operations
3.2
9.1
(64.9)
Gross profit rate
15.1
%
15.1
%
—
pts.
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In millions of dollars)
October 1, 2023
January 1, 2023
October 2, 2022
Current Assets
Cash and equivalents
$
117.2
$
153.7
$
122.4
Trade accounts receivable, less allowances of
$11.1, $11.2, and $12.1, respectively
1,388.2
1,491.6
1,519.9
Prepaid expenses and other current assets
86.1
69.9
83.1
Assets held for sale
—
—
4.7
Total current assets
1,591.5
1,715.2
1,730.1
Noncurrent Assets
Property and equipment, net
28.8
27.8
24.9
Operating lease right-of-use assets
59.9
66.8
67.3
Deferred taxes
315.3
299.7
300.7
Goodwill, net
151.1
151.1
161.4
Other assets
403.4
403.2
397.5
Total noncurrent assets
958.5
948.6
951.8
Total Assets
$
2,550.0
$
2,663.8
$
2,681.9
Current Liabilities
Short-term borrowings
$
—
$
0.7
$
0.1
Accounts payable and accrued liabilities
647.5
723.3
735.2
Operating lease liabilities
13.2
14.7
14.4
Accrued payroll and related taxes
287.8
315.8
321.4
Accrued workers’ compensation and other claims
22.8
22.9
24.4
Income and other taxes
54.0
51.4
47.5
Total current liabilities
1,025.3
1,128.8
1,143.0
Noncurrent Liabilities
Operating lease liabilities
51.5
55.0
55.6
Accrued workers’ compensation and other claims
40.5
40.7
43.4
Accrued retirement benefits
185.6
174.1
172.7
Other long-term liabilities
11.4
11.0
14.5
Total noncurrent liabilities
289.0
280.8
286.2
Stockholders’ Equity
Common stock
38.5
38.5
38.5
Treasury stock
(57.4)
(20.1)
(12.4)
Paid-in capital
29.3
28.0
26.6
Earnings invested in the business
1,233.0
1,216.3
1,220.1
Accumulated other comprehensive income (loss)
(7.7)
(8.5)
(20.1)
Total stockholders’ equity
1,235.7
1,254.2
1,252.7
Total Liabilities and Stockholders’ Equity
$
2,550.0
$
2,663.8
$
2,681.9
STATISTICS:
Working Capital
$
566.2
$
586.4
$
587.1
Current Ratio
1.6
1.5
1.5
Debt-to-capital %
0.0
%
0.1
%
0.0
%
Global Days Sales Outstanding
63
61
64
Year-to-Date Free Cash Flow
$
21.0
$
(88.3)
$
(117.3)
KELLY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WEEKS ENDED OCTOBER 1, 2023 AND OCTOBER 2, 2022
(UNAUDITED)
(In millions of dollars)
2023
2022
Cash flows from operating activities:
Net earnings (loss)
$
25.0
$
(61.6)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Asset impairment charge
2.4
—
Goodwill impairment charge
—
30.7
Deferred income taxes on goodwill impairment charge
—
(5.3)
Loss on disposal
—
18.7
Depreciation and amortization
25.6
24.7
Operating lease asset amortization
12.4
14.2
Provision for credit losses and sales allowances
1.4
1.7
Stock-based compensation
7.9
5.9
Gain on sale of equity securities
(2.0)
—
Loss on investment in Persol Holdings
—
67.2
Loss on currency translation from liquidation of subsidiary
—
20.4
Gain on foreign currency remeasurement
—
(5.5)
Gain on sale of assets
—
(5.3)
Equity in net earnings of PersolKelly Asia Pacific
—
(0.8)
Other, net
0.5
3.5
Changes in operating assets and liabilities, net of acquisition
(39.8)
(220.2)
Net cash from (used in) operating activities
33.4
(111.7)
Cash flows from investing activities:
Capital expenditures
(12.4)
(5.6)
Proceeds from sale of assets
—
4.5
Acquisition of company, net of cash received
—
(143.1)
Cash disposed from sale of Russia, net of proceeds
—
(6.0)
Proceeds from company-owned life insurance
—
1.5
Proceeds from sale of Persol Holdings investment
—
196.9
Proceeds from sale of equity method investment
—
119.5
Proceeds from equity securities
2.0
—
Other investing activities
(0.4)
—
Net cash (used in) from investing activities
(10.8)
167.7
Cash flows from financing activities:
Net change in short-term borrowings
(0.7)
0.2
Financing lease payments
(1.0)
(1.2)
Dividend payments
(8.3)
(7.7)
Payments of tax withholding for stock awards
(1.7)
(0.9)
Buyback of common shares
(42.2)
(27.2)
Contingent consideration payments
(2.5)
(0.7)
Other financing activities
(0.2)
0.1
Net cash used in financing activities
(56.6)
(37.4)
Effect of exchange rates on cash, cash equivalents and restricted cash
(1.9)
(7.4)
Net change in cash, cash equivalents and restricted cash
(35.9)
11.2
Cash, cash equivalents and restricted cash at beginning of period
162.4
119.5
Cash, cash equivalents and restricted cash at end of period
$
126.5
$
130.7
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES BY GEOGRAPHY
(UNAUDITED)
(In millions of dollars)
Third Quarter
%
CC %
2023
2022
Change
Change
Americas
United States
$
795.5
$
861.0
(7.6)
%
(7.6)
%
Canada
50.9
43.3
17.5
20.7
Puerto Rico
26.5
28.3
(6.2)
(6.2)
Mexico
18.4
10.9
68.4
41.9
Total Americas Region
891.3
943.5
(5.5)
(5.7)
Europe
Switzerland
57.0
55.2
3.3
(5.6)
Portugal
48.6
41.9
15.9
7.2
France
47.0
45.8
2.8
(5.0)
Italy
16.1
16.4
(2.3)
(9.6)
Russia
—
5.0
(100.0)
(100.0)
Other
47.1
49.8
(5.5)
(12.3)
Total Europe Region
215.8
214.1
0.8
(7.0)
Total Asia-Pacific Region
10.9
10.3
5.8
9.7
Total Kelly Services, Inc.
$
1,118.0
$
1,167.9
(4.3)
%
(5.8)
%
KELLY SERVICES, INC. AND SUBSIDIARIES
REVENUE FROM SERVICES BY GEOGRAPHY
(UNAUDITED)
(In millions of dollars)
September Year to Date
%
CC %
2023
2022
Change
Change
Americas
United States
$
2,647.1
$
2,746.5
(3.6)
%
(3.6)
%
Canada
142.2
122.7
15.9
21.4
Puerto Rico
81.1
84.8
(4.3)
(4.3)
Mexico
55.1
32.4
70.0
49.1
Total Americas Region
2,925.5
2,986.4
(2.0)
(2.0)
Europe
Switzerland
165.9
165.5
0.3
(5.0)
France
145.0
150.8
(3.8)
(5.5)
Portugal
142.3
125.8
13.2
10.9
Italy
49.5
54.3
(8.8)
(10.4)
Russia
—
63.4
(100.0)
(100.0)
Other
142.4
152.8
(6.8)
(7.2)
Total Europe Region
645.1
712.6
(9.5)
(11.6)
Total Asia-Pacific Region
32.9
32.6
1.0
5.8
Total Kelly Services, Inc.
$
3,603.5
$
3,731.6
(3.4)
%
(3.8)
%
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
THIRD QUARTER
(UNAUDITED)
(In millions of dollars)
2023
2022
SG&A Expenses:
As Reported
Restructuring(7)
Adjusted
As Reported
Professional & Industrial
$ 57.7
$ (4.0)
$ 53.7
$ 65.3
Science, Engineering & Technology
47.8
(0.7)
47.1
53.4
Education
22.4
(0.6)
21.8
21.4
Outsourcing & Consulting
39.0
(1.8)
37.2
37.7
International
31.2
—
31.2
31.4
Corporate
30.3
(8.3)
22.0
21.9
Total Company
$ 228.4
$ (15.4)
$ 213.0
$ 231.1
2023
2022
Earnings from Operations:
As Reported
Restructuring(7)
Adjusted
Adjusted
Professional & Industrial
$ 7.8
$ 4.0
$ 11.8
$ 5.0
Science, Engineering & Technology
20.2
0.7
20.9
22.9
Education
(2.6)
0.6
(2.0)
(4.8)
Outsourcing & Consulting
2.5
1.8
4.3
6.4
International
2.5
—
2.5
1.9
Corporate
(30.3)
8.3
(22.0)
(21.9)
Total Company
$ 0.1
$ 15.4
$ 15.5
$ 9.5
KELLY SERVICES, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURESTHIRD QUARTER(UNAUDITED)(In millions of dollars)
2022
Earnings from Operations:
As Reported
Loss on disposal(4)
Goodwill impairment charge(6)
Adjusted
Professional & Industrial
$ 5.0
$ —
$ —
$ 5.0
Science, Engineering & Technology
22.9
—
—
22.9
Education
(4.8)
—
—
(4.8)
Outsourcing & Consulting
(24.3)
—
30.7
6.4
International
1.9
—
—
1.9
Corporate
(21.9)
—
—
(21.9)
Loss on disposal
(0.2)
0.2
—
—
Total Company
$ (21.4)
$ 0.2
$ 30.7
$ 9.5
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
SEPTEMBER YEAR TO DATE
(UNAUDITED)
(In millions of dollars)
2023
2022
SG&A Expenses:
As Reported
Restructuring(7)
Adjusted
As Reported
Professional & Industrial
$ 183.8
$ (7.3)
$ 176.5
$ 204.1
Science, Engineering & Technology
150.6
(1.2)
149.4
161.4
Education
69.3
(1.0)
68.3
60.4
Outsourcing & Consulting
117.2
(2.3)
114.9
111.8
International
96.2
(0.6)
95.6
99.2
Corporate
86.7
(15.2)
71.5
70.4
Total Company
$ 703.8
$ (27.6)
$ 676.2
$ 707.3
2023
2022
Earnings from Operations:
As Reported
Asset impairment(5)
Restructuring(7)
Adjusted
Adjusted
Professional & Industrial
$ 16.3
$ 0.3
$ 7.3
$ 23.9
$ 27.1
Science, Engineering & Technology
56.7
0.1
1.2
58.0
63.9
Education
22.3
—
1.0
23.3
8.8
Outsourcing & Consulting
5.2
2.0
2.3
9.5
15.8
International
3.2
—
0.6
3.8
9.1
Corporate
(86.7)
—
15.2
(71.5)
(70.4)
Total Company
$ 17.0
$ 2.4
$ 27.6
$ 47.0
$ 54.3
KELLY SERVICES, INC. AND SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURESSEPTEMBER YEAR TO DATE(UNAUDITED)(In millions of dollars)
2022
Earnings from Operations:
As Reported
Gain on sale of assets(3)
Loss on disposal(4)
Goodwill impairment charge(6)
Adjusted
Professional & Industrial
$ 27.1
$ —
$ —
$ —
$ 27.1
Science, Engineering & Technology
63.9
—
—
—
63.9
Education
8.8
—
—
—
8.8
Outsourcing & Consulting
(14.9)
—
—
30.7
15.8
International
9.1
—
—
—
9.1
Corporate
(70.4)
—
—
—
(70.4)
Loss on disposal
(18.7)
18.7
—
—
Gain on sale of assets
5.3
(5.3)
—
—
—
Total Company
$ 10.2
$ (5.3)
$ 18.7
$ 30.7
$ 54.3
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars except per share data)
Third Quarter
September Year to Date
2023
2022
2023
2022
Income tax expense (benefit)
$ (4.9)
$ (5.0)
$ (5.0)
$ (13.1)
Taxes on investment in Persol Holdings(1)
—
—
—
18.4
Taxes on foreign currency matters(2)
—
—
—
(1.5)
Taxes on gain on sale of assets(3)
—
—
—
(1.3)
Taxes on loss on disposal(4)
—
—
—
—
Taxes on asset impairment charge(5)
—
—
0.6
—
Taxes on goodwill impairment charge(6)
—
5.3
—
5.3
Taxes on restructuring charges(7)
3.9
—
6.9
—
Adjusted income tax expense
$ (1.0)
$ 0.3
$ 2.5
$ 7.8
Third Quarter
September Year to Date
2023
2022
2023
2022
Net earnings (loss)
$ 6.6
$ (16.2)
$ 25.0
$ (61.6)
Loss on investment in Persol Holdings, net of taxes(1)
—
—
—
48.8
Loss on foreign currency matters, net of taxes(2)
—
—
—
16.4
Gain on sale of assets, net of taxes(3)
—
—
—
(4.0)
Loss on disposal, net of taxes(4)
—
0.2
—
18.7
Asset impairment charge, net of taxes(5)
—
—
1.8
—
Goodwill impairment charge, net of taxes(6)
—
25.4
—
25.4
Restructuring charges, net of taxes(7)
11.5
—
20.7
—
Adjusted net earnings
$ 18.1
$ 9.4
$ 47.5
$ 43.7
Third Quarter
September Year to Date
2023
2022
2023
2022
Per Share
Per Share
Net earnings (loss)
$ 0.18
$ (0.43)
$ 0.67
$ (1.62)
Loss on investment in Persol Holdings, net of taxes(1)
—
—
—
1.28
Loss on foreign currency matters, net of taxes(2)
—
—
—
0.43
Gain on sale of assets, net of taxes(3)
—
—
—
(0.10)
Loss on disposal, net of taxes(4)
—
0.01
—
0.49
Asset impairment charge, net of taxes(5)
—
—
0.05
—
Goodwill impairment charge, net of taxes(6)
—
0.67
—
0.67
Restructuring charges, net of taxes(7)
0.32
—
0.56
—
Adjusted net earnings
$ 0.50
$ 0.25
$ 1.28
$ 1.15
Note: Earnings per share amounts for each quarter are required to be computed independently and may not equal the amounts computed for the total year.
KELLY SERVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(UNAUDITED)
(In millions of dollars)
Third Quarter
September Year to Date
2023
2022
2023
2022
Net earnings (loss)
$ 6.6
$ (16.2)
$ 25.0
$ (61.6)
Other (income) expense, net(2)
(1.6)
(0.2)
(3.0)
(1.9)
Income tax expense (benefit)
(4.9)
(5.0)
(5.0)
(13.1)
Depreciation and amortization
8.4
8.6
25.6
24.7
EBITDA
8.5
(12.8)
42.6
(51.9)
Equity in net earnings of affiliate
—
—
—
(0.8)
Loss on investment in Persol Holdings(1)
—
—
—
67.2
Loss on foreign currency matters(2)
—
—
—
20.4
Gain on sale of assets(3)
—
—
—
(5.3)
Loss on disposal(4)
—
0.2
—
18.7
Asset impairment charge(5)
—
—
2.4
—
Goodwill impairment charge(6)
—
30.7
—
30.7
Restructuring(7)
15.4
—
27.6
—
Other, net(8)
1.6
1.0
4.3
2.5
Adjusted EBITDA
$ 25.5
$ 19.1
$ 76.9
$ 81.5
Adjusted EBITDA margin
2.3 %
1.6 %
2.1 %
2.2 %
KELLY SERVICES, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)
Management believes that the non-GAAP (Generally Accepted Accounting Principles) information excluding the 2023 restructuring charges, the 2023 impairment charge, the 2022 sale of the Persol Holdings investment, the 2022 losses on the fair value changes of the investment in Persol Holdings, the 2022 losses on foreign currency matters, the 2022 gain on sale of assets, the 2022 loss on disposal, and the 2022 goodwill impairment charge, are useful to understand the Company’s fiscal 2023 financial performance and increases comparability. Specifically, Management believes that removing the impact of these items allows for a meaningful comparison of current period operating performance with the operating results of prior periods. Management also believes that such measures are used by those analyzing performance of companies in the staffing industry to compare current performance to prior periods and to assess future performance.
Management uses Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA Margin (percent of total GAAP revenue) which Management believes is useful to compare operating performance compared to prior periods and uses it in conjunction with GAAP measures to assess performance. Our calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies and should be used in conjunction with GAAP measurements. Management also uses year-to-date free cash flow (operating cash flows less capital expenditures) to indicate the change in cash balances arising from operating activities, net of working capital needs and expenditures on fixed assets.
These non-GAAP measures may have limitations as analytical tools because they exclude items which can have a material impact on cash flow and earnings per share. As a result, Management considers these measures, along with reported results, when it reviews and evaluates the Company’s financial performance. Management believes that these measures provide greater transparency to investors and provide insight into how Management is evaluating the Company’s financial performance. Non-GAAP measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
(1) In 2022, the loss on the investment in Persol Holdings represents the change in fair value up until the date of the sale of the investment on February 15, 2022 as well as the loss on the sale of the investment during the period presented and the related tax benefit.
(2) In 2022, the loss on foreign currency matters includes a $20.4 million loss on currency translation resulting from the substantially complete liquidation of the Company’s Japan entity, partially offset by a $5.5 million foreign exchange gain on the Japan entity’s USD-denominated cash balance. The foreign exchange gain is included in other (income) expense, net in the EBITDA calculation.
(3) Gain on sale of assets in 2022 is related to the sale of under-utilized real property in the second quarter of 2022 and other real property sold in the first quarter of 2022.
(4) Loss on disposal in 2022 represents the write-off of the net assets of our Russian operations that were sold in the third quarter of 2022.
(5) Asset impairment charge in the second quarter of 2023 represents the impairment of right-of-use assets related to an unoccupied existing office space lease.
(6) Goodwill impairment charge in 2022 is the result of an interim impairment test the Company performed related to RocketPower due to a triggering event caused by changes in market conditions.
(7) Restructuring charges in the second and third quarters of 2023 relate to a comprehensive transformation initiative that includes actions that will further streamline the Company’s operating model to enhance organizational efficiency and effectiveness. These restructuring charges include $10.4 million of severance, $4.5 million of costs to execute the transformation, and $0.5 million of lease termination expenses in the third quarter of 2023 and $4.5 million of costs to execute the transformation and $1.1 million of severance in the second quarter of 2023. Restructuring charges in the first quarter of 2023 represent severance costs and lease and other terminations as a result of management undertaking actions to further our cost management efforts in response to the current demand levels and reflects a repositioning of our P&I staffing business to better capitalize on opportunities in local markets.
(8) Other, net primarily represents amortization of capitalized hosted software implementation costs.
BOCA RATON, Fla.–(BUSINESS WIRE)–Nov. 7, 2023– The GEO Group, Inc. (NYSE: GEO) (“GEO”), a leading provider of support services for secure facilities, processing centers, and reentry centers, as well as enhanced in-custody rehabilitation, post-release support, and electronic monitoring programs, reported today its financial results for the third quarter and first nine months of 2023.
Third Quarter 2023 Highlights
Total revenues of $602.8 million
Net Income of $24.5 million
Net Income Attributable to GEO of $0.16 per diluted share
Adjusted Net Income of $0.19 per diluted share
Adjusted EBITDA of $118.7 million
Reduced Total Net Debt by $109 million to approximately $1.8 billion
For the third quarter 2023, we reported net income of $24.5 million, compared to net income of $38.3 million for the third quarter 2022. We reported total revenues for the third quarter 2023 of $602.8 million compared to $616.7 million for the third quarter 2022. Third quarter 2023 results reflect a year-over-year increase of $13.0 million in net interest expense as a result of the completed transactions to address the substantial majority of our outstanding debt, which closed on August 19, 2022, as well as the impact of higher interest rates. We reported third quarter 2023 Adjusted EBITDA of $118.7 million, compared to $136.2 million for the third quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “Our diversified business units continued to deliver steady operational and financial performance. We have also made further progress towards our objective of reducing our net debt, which remains a strategic priority for our company. During the third quarter of 2023, we reduced our total net debt by $109 million, ending the period with approximately $1.8 billion in total net debt. We believe that our ongoing efforts to reduce debt and deleverage our balance sheet will enhance value for our shareholders over time.”
First Nine Months 2023 Highlights
Total revenues of $1.80 billion
Net Income of $82.0 million
Net Income Attributable to GEO of $0.55 per diluted share
Adjusted Net Income of $0.66 per diluted share
Adjusted EBITDA of $378.6 million
For the first nine months of 2023, we reported net income of $82.0 million, compared to net income of $130.2 million for the first nine months of 2022. We reported total revenues for the first nine months of 2023 of $1.80 billion compared to $1.76 billion for the first nine months of 2022.
Results for the first nine months of 2023 reflect a year-over-year increase of $66.2 million in net interest expense as a result of the completed transactions to address the substantial majority of our outstanding debt, which closed on August 19, 2022, as well as the impact of higher interest rates. For the first nine months of 2023, we reported Adjusted EBITDA of $378.6 million, compared to $393.7 million for the first nine months of 2022.
2023 Financial Guidance
Today, we updated our guidance for the full-year and fourth quarter of 2023 to reflect our updated expectations regarding the U.S. Department of Homeland Security’s Intensive Supervision and Appearance Program (“ISAP”).
Our previous guidance for the fourth quarter of 2023 assumed a moderate increase in ISAP participants during the quarter. While the ISAP participant count has remained relatively stable over the last three months, we have not experienced the moderate increase that was contemplated in our previous guidance. We believe that U.S. Immigration and Customs Enforcement (“ICE”) continues to face budgetary pressures, and the timing of the passage of federal appropriations bills for the fiscal year 2024 remains uncertain. As a result of these factors, we have updated our guidance assumptions and now assume for budget purposes that the ISAP participant count will be flat to slightly down for the balance of the year.
For the fourth quarter 2023, we expect GAAP Net Income to be in a range of $19 million to $24 million and quarterly revenues to be in a range of $590 million to $600 million. We expect fourth quarter 2023 Adjusted EBITDA to be in a range of $117 million to $122 million.
For the full-year 2023, we expect GAAP Net Income to be in a range of $100 million to $105 million on annual revenues of approximately $2.4 billion. We expect our full-year 2023 Adjusted EBITDA to be between $495 million and $500 million dollars. We expect our effective tax rate for the full-year 2023 to be approximately 29 percent, exclusive of any discrete items.
Our guidance does not include the potential reactivation of any of our remaining idle Secure Services facilities, which total approximately 9,000 beds.
Conference Call Information
We have scheduled a conference call and webcast for today at 11:00 AM (Eastern Time) to discuss our third quarter 2023 financial results as well as our outlook. The call-in number for the U.S. is 1-877-250-1553 and the international call-in number is 1-412-542-4145. In addition, a live audio webcast of the conference call may be accessed on the Webcasts section under the News, Events and Reports tab of GEO’s investor relations webpage at investors.geogroup.com. A replay of the webcast will be available on the website for one year. A telephonic replay of the conference call will be available through November 14, 2023, at 1-877-344-7529 (U.S.) and 1-412-317-0088 (International). The participant passcode for the telephonic replay is 4528594.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 100 facilities totaling approximately 81,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains reconciliation tables of Net Income Attributable to GEO to Adjusted Net Income, and Net Income to EBITDA and Adjusted EBITDA, along with supplemental financial and operational information on GEO’s business and other important operating metrics. The reconciliation tables are also presented herein. Please see the section below titled “Note to Reconciliation Tables and Supplemental Disclosure – Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines these supplemental Non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures. GEO’s Reconciliation Tables can be found herein and in GEO’s Supplemental Information available on GEO’s investor webpage at investors.geogroup.com.
Note to Reconciliation Tables and Supplemental Disclosure – Important Information on GEO’s Non-GAAP Financial Measures
Adjusted Net Income, EBITDA, and Adjusted EBITDA are non-GAAP financial measures that are presented as supplemental disclosures. GEO has presented herein certain forward-looking statements about GEO’s future financial performance that include non-GAAP financial measures, including Net Debt, Net Leverage, and Adjusted EBITDA. The determination of the amounts that are included or excluded from these non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period.
While we have provided a high level reconciliation for the guidance ranges for full year 2023, we are unable to present a more detailed quantitative reconciliation of the forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because management cannot reliably predict all of the necessary components of such GAAP measures. The quantitative reconciliation of the forward-looking non-GAAP financial measures will be provided for completed annual and quarterly periods, as applicable, calculated in a consistent manner with the quantitative reconciliation of non-GAAP financial measures previously reported for completed annual and quarterly periods.
Net Debt is defined as gross principal debt less cash from restricted subsidiaries. Net Leverage is defined as Net Debt divided by Adjusted EBITDA.
EBITDA is defined as net income adjusted by adding provisions for income tax, interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (gain)/loss on asset divestitures, pre-tax, net loss attributable to non-controlling interests, stock-based compensation expenses, pre-tax, transaction related expenses, pre-tax, other non-cash revenue 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 operator, 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.
Adjusted Net Income is defined as net income attributable to GEO adjusted for certain items which by their nature are not comparable from period to period or that tend to obscure GEO’s actual operating performance, including for the periods presented (gain)/loss on asset divestitures, pre-tax, (gain)/loss on the extinguishment of debt, pre-tax, transaction related expenses, pre-tax, and tax effect of adjustments to net income attributable to GEO.
Safe-Harbor Statement
This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially and adversely affect actual results, including statements regarding GEO’s financial guidance for the full-year and fourth quarter of 2023, statements regarding GEO’s efforts to market its current idle facilities, GEO’s focus on reducing net debt, and GEO’s assumptions regarding the number of ISAP participants during the fourth quarter of 2023. 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 and similar expressions. Risks and uncertainties that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to: (1) GEO’s ability to meet its financial guidance for 2023 given the various risks to which its business is exposed; (2) GEO’s ability to deleverage and repay, refinance or otherwise address its debt maturities in an amount and on terms commercially acceptable to GEO, and on the timeline it expects or at all; (3) GEO’s ability to identify and successfully complete any potential sales of company-owned assets and businesses on commercially advantageous terms on a timely basis, or at all; (4) changes in federal and state government policy, orders, directives, legislation and regulations that affect public-private partnerships with respect to secure, correctional and detention facilities, processing centers and reentry centers, including the timing and scope of implementation of President Biden’s Executive Order directing the U.S. Attorney General not to renew the U.S. Department of Justice contracts with privately operated criminal detention facilities; (5) changes in federal immigration policy; (6) public and political opposition to the use of public-private partnerships with respect to secure correctional and detention facilities, processing centers and reentry centers; (7) the magnitude, severity, and duration of the COVID-19 global pandemic, its impact on GEO, GEO’s ability to mitigate the risks associated with COVID-19, and the efficacy and distribution of COVID-19 vaccines; (8) GEO’s ability to sustain or improve company-wide occupancy rates at its facilities in light of the COVID-19 global pandemic and policy and contract announcements impacting GEO’s federal facilities in the United States; (9) fluctuations in GEO’s operating results, including as a result of contract terminations, contract renegotiations, changes in occupancy levels and increases in GEO’s operating costs; (10) general economic and market conditions, including changes to governmental budgets and its impact on new contract terms, contract renewals, renegotiations, per diem rates, fixed payment provisions, and occupancy levels; (11) GEO’s ability to address inflationary pressures related to labor related expenses and other operating costs; (12) GEO’s ability to timely open facilities as planned, profitably manage such facilities and successfully integrate such facilities into GEO’s operations without substantial costs; (13) GEO’s ability to win management contracts for which it has submitted proposals and to retain existing management contracts; (14) risks associated with GEO’s ability to control operating costs associated with contract start-ups; (15) GEO’s ability to successfully pursue growth and continue to create shareholder value; (16) GEO’s ability to obtain financing or access the capital markets in the future on acceptable terms or at all; and (17) other factors contained in GEO’s Securities and Exchange Commission periodic filings, including its Form 10-K, 10-Q and 8-K reports, many of which are difficult to predict and outside of GEO’s control.
Third quarter and first nine months of 2023 financial tables to follow:
Condensed Consolidated Balance Sheets*(Unaudited)
As of
As of
September 30, 2023
December 31, 2022
(unaudited)
(unaudited)
ASSETS
Cash and cash equivalents
$
141,020
$
95,073
Accounts receivable, less allowance for doubtful accounts
356,501
416,399
Prepaid expenses and other current assets
41,138
43,536
Total current assets
$
538,659
$
555,008
Restricted Cash and Investments
130,729
111,691
Property and Equipment, Net
1,951,524
2,002,021
Operating Lease Right-of-Use Assets, Net
106,552
90,950
Assets Held for Sale
5,130
480
Deferred Income Tax Assets
8,005
8,005
Intangible Assets, Net (including goodwill)
893,449
902,887
Other Non-Current Assets
90,335
89,341
Total Assets
$
3,724,383
$
3,760,383
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
$
66,758
$
79,312
Accrued payroll and related taxes
78,568
53,225
Accrued expenses and other current liabilities
200,187
237,369
Operating lease liabilities, current portion
24,506
22,584
Current portion of finance lease obligations, and long-term debt
63,307
44,722
Total current liabilities
$
433,326
$
437,212
Deferred Income Tax Liabilities
75,849
75,849
Other Non-Current Liabilities
79,797
74,008
Operating Lease Liabilities
86,849
73,801
Finance Lease Liabilities
740
1,280
Long-Term Debt
1,789,273
1,933,145
Total Shareholders’ Equity
1,258,549
1,165,088
Total Liabilities and Shareholders’ Equity
$
3,724,383
$
3,760,383
* all figures in ‘000s
Condensed Consolidated Statements of Operations*(Unaudited)
Q3 2023
Q3 2022
YTD 2023
YTD 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenues
$
602,785
$
616,683
$
1,804,885
$
1,756,045
Operating expenses
440,667
436,210
1,302,287
1,233,162
Depreciation and amortization
31,173
32,330
94,787
100,284
General and administrative expenses
47,356
50,022
139,182
147,878
Operating income
83,589
98,121
268,629
274,721
Interest income
1,320
5,111
3,785
16,301
Interest expense
(55,777
)
(46,537
)
(165,081
)
(111,383
)
Loss on extinguishment of debt
(91
)
(37,487
)
(1,845
)
(37,487
)
Gain on asset divestitures
1,274
29,279
3,449
32,332
Income before income taxes and equity in earnings of affiliates
30,315
48,487
108,937
174,484
Provision for income taxes
6,521
11,246
30,036
48,106
Equity in earnings of affiliates, net of income tax provision
709
1,071
3,121
3,786
Net income
24,503
38,312
82,022
130,164
Less: Net loss attributable to noncontrolling interests
16
25
71
119
Net income attributable to The GEO Group, Inc.
$
24,519
$
38,337
$
82,093
$
130,283
Weighted Average Common Shares Outstanding:
Basic
122,066
121,154
121,850
120,998
Diluted
123,433
122,426
123,479
121,907
Net income per Common Share Attributable to The GEO Group, Inc.** :
Basic:
Net income per share — basic
$
0.17
$
0.26
$
0.56
$
0.89
Diluted:
Net income per share — diluted
$
0.16
$
0.26
$
0.55
$
0.89
* All figures in ‘000s, except per share data
** In accordance with U.S. GAAP, diluted earnings per share attributable to GEO available to common stockholders is calculated under the if-converted method or the two-class method, whichever calculation results in the lowest diluted earnings per share amount, which may be lower than Adjusted Net Income Per Diluted Share.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA,and Net Income Attributable to GEO to Adjusted Net Income*(Unaudited)
Q3 2023
Q3 2022
YTD 2023
YTD 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net Income
$
24,503
$
38,312
$
82,022
$
130,164
Add:
Income tax provision **
6,588
11,435
30,617
48,570
Interest expense, net of interest income ***
54,548
78,913
163,141
132,569
Depreciation and amortization
31,173
32,330
94,787
100,284
EBITDA
$
116,812
$
160,990
$
370,567
$
411,587
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,332
)
Net loss attributable to noncontrolling interests
16
25
71
119
Stock based compensation expenses, pre-tax
3,116
3,141
12,052
13,010
Transaction related expenses, pre-tax
–
1,322
–
1,322
Other non-cash revenue & expenses, pre-tax
–
–
(687
)
–
Adjusted EBITDA
$
118,670
$
136,199
$
378,554
$
393,706
Net Income attributable to GEO
$
24,519
$
38,337
$
82,093
$
130,283
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,958
)
Loss on extinguishment of debt, pre-tax
91
37,487
1,845
37,487
Transaction related expenses, pre-tax
–
1,322
–
1,322
Tax effect of adjustment to net income attributable to GEO (1)
297
(7,697
)
403
(6,772
)
Adjusted Net Income
$
23,633
$
40,170
$
80,892
$
129,362
Weighted average common shares outstanding – Diluted
123,433
122,426
123,479
121,907
Adjusted Net Income per Diluted share
0.19
0.33
0.66
1.06
* all figures in ‘000s, except per share data
** including income tax provision on equity in earnings of affiliates
*** includes loss on extinguishment of debt
(1) Tax adjustment related to gain on asset divestitures and loss on extinguishment of debt.
2023 Outlook/Reconciliation (1)(In thousands, except per share data)(Unaudited)
FY 2023
Net Income
$
100,000
to
$
105,000
Net Interest Expense
217,000
217,000
Income Taxes (including income tax provision on equity in earnings of affiliates)
40,000
40,000
Depreciation and Amortization
127,000
127,000
Non-Cash Stock Based Compensation
15,700
15,700
Other Non-Cash
(4,700
)
(4,700
)
Adjusted EBITDA
$
495,000
to
$
500,000
Net Income Attributable to GEO Per Diluted Share
$
0.80
to
$
0.85
Weighted Average Common Shares Outstanding-Diluted
123,500
to
123,500
CAPEX
Growth
9,000
to
10,000
Technology
16,000
to
20,000
Facility Maintenance
45,000
to
50,000
Capital Expenditures
70,000
to
80,000
Total Debt, Net
$
1,820,000
$
1,780,000
Total Leverage, Net
3.66
3.58
(1) Total Net Leverage is calculated using the midpoint of Adjusted EBITDA guidance range.
BOCA RATON, Fla.–(BUSINESS WIRE)–Nov. 7, 2023– The GEO Group, Inc. (NYSE: GEO) (“GEO”), a leading provider of support services for secure facilities, processing centers, and reentry centers, as well as enhanced in-custody rehabilitation, post-release support, and electronic monitoring programs, reported today its financial results for the third quarter and first nine months of 2023.
Third Quarter 2023 Highlights
Total revenues of $602.8 million
Net Income of $24.5 million
Net Income Attributable to GEO of $0.16 per diluted share
Adjusted Net Income of $0.19 per diluted share
Adjusted EBITDA of $118.7 million
Reduced Total Net Debt by $109 million to approximately $1.8 billion
For the third quarter 2023, we reported net income of $24.5 million, compared to net income of $38.3 million for the third quarter 2022. We reported total revenues for the third quarter 2023 of $602.8 million compared to $616.7 million for the third quarter 2022. Third quarter 2023 results reflect a year-over-year increase of $13.0 million in net interest expense as a result of the completed transactions to address the substantial majority of our outstanding debt, which closed on August 19, 2022, as well as the impact of higher interest rates. We reported third quarter 2023 Adjusted EBITDA of $118.7 million, compared to $136.2 million for the third quarter 2022.
George C. Zoley, Executive Chairman of GEO, said, “Our diversified business units continued to deliver steady operational and financial performance. We have also made further progress towards our objective of reducing our net debt, which remains a strategic priority for our company. During the third quarter of 2023, we reduced our total net debt by $109 million, ending the period with approximately $1.8 billion in total net debt. We believe that our ongoing efforts to reduce debt and deleverage our balance sheet will enhance value for our shareholders over time.”
First Nine Months 2023 Highlights
Total revenues of $1.80 billion
Net Income of $82.0 million
Net Income Attributable to GEO of $0.55 per diluted share
Adjusted Net Income of $0.66 per diluted share
Adjusted EBITDA of $378.6 million
For the first nine months of 2023, we reported net income of $82.0 million, compared to net income of $130.2 million for the first nine months of 2022. We reported total revenues for the first nine months of 2023 of $1.80 billion compared to $1.76 billion for the first nine months of 2022.
Results for the first nine months of 2023 reflect a year-over-year increase of $66.2 million in net interest expense as a result of the completed transactions to address the substantial majority of our outstanding debt, which closed on August 19, 2022, as well as the impact of higher interest rates. For the first nine months of 2023, we reported Adjusted EBITDA of $378.6 million, compared to $393.7 million for the first nine months of 2022.
2023 Financial Guidance
Today, we updated our guidance for the full-year and fourth quarter of 2023 to reflect our updated expectations regarding the U.S. Department of Homeland Security’s Intensive Supervision and Appearance Program (“ISAP”).
Our previous guidance for the fourth quarter of 2023 assumed a moderate increase in ISAP participants during the quarter. While the ISAP participant count has remained relatively stable over the last three months, we have not experienced the moderate increase that was contemplated in our previous guidance. We believe that U.S. Immigration and Customs Enforcement (“ICE”) continues to face budgetary pressures, and the timing of the passage of federal appropriations bills for the fiscal year 2024 remains uncertain. As a result of these factors, we have updated our guidance assumptions and now assume for budget purposes that the ISAP participant count will be flat to slightly down for the balance of the year.
For the fourth quarter 2023, we expect GAAP Net Income to be in a range of $19 million to $24 million and quarterly revenues to be in a range of $590 million to $600 million. We expect fourth quarter 2023 Adjusted EBITDA to be in a range of $117 million to $122 million.
For the full-year 2023, we expect GAAP Net Income to be in a range of $100 million to $105 million on annual revenues of approximately $2.4 billion. We expect our full-year 2023 Adjusted EBITDA to be between $495 million and $500 million dollars. We expect our effective tax rate for the full-year 2023 to be approximately 29 percent, exclusive of any discrete items.
Our guidance does not include the potential reactivation of any of our remaining idle Secure Services facilities, which total approximately 9,000 beds.
Conference Call Information
We have scheduled a conference call and webcast for today at 11:00 AM (Eastern Time) to discuss our third quarter 2023 financial results as well as our outlook. The call-in number for the U.S. is 1-877-250-1553 and the international call-in number is 1-412-542-4145. In addition, a live audio webcast of the conference call may be accessed on the Webcasts section under the News, Events and Reports tab of GEO’s investor relations webpage at investors.geogroup.com. A replay of the webcast will be available on the website for one year. A telephonic replay of the conference call will be available through November 14, 2023, at 1-877-344-7529 (U.S.) and 1-412-317-0088 (International). The participant passcode for the telephonic replay is 4528594.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 100 facilities totaling approximately 81,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains reconciliation tables of Net Income Attributable to GEO to Adjusted Net Income, and Net Income to EBITDA and Adjusted EBITDA, along with supplemental financial and operational information on GEO’s business and other important operating metrics. The reconciliation tables are also presented herein. Please see the section below titled “Note to Reconciliation Tables and Supplemental Disclosure – Important Information on GEO’s Non-GAAP Financial Measures” for information on how GEO defines these supplemental Non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures. GEO’s Reconciliation Tables can be found herein and in GEO’s Supplemental Information available on GEO’s investor webpage at investors.geogroup.com.
Note to Reconciliation Tables and Supplemental Disclosure – Important Information on GEO’s Non-GAAP Financial Measures
Adjusted Net Income, EBITDA, and Adjusted EBITDA are non-GAAP financial measures that are presented as supplemental disclosures. GEO has presented herein certain forward-looking statements about GEO’s future financial performance that include non-GAAP financial measures, including Net Debt, Net Leverage, and Adjusted EBITDA. The determination of the amounts that are included or excluded from these non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period.
While we have provided a high level reconciliation for the guidance ranges for full year 2023, we are unable to present a more detailed quantitative reconciliation of the forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because management cannot reliably predict all of the necessary components of such GAAP measures. The quantitative reconciliation of the forward-looking non-GAAP financial measures will be provided for completed annual and quarterly periods, as applicable, calculated in a consistent manner with the quantitative reconciliation of non-GAAP financial measures previously reported for completed annual and quarterly periods.
Net Debt is defined as gross principal debt less cash from restricted subsidiaries. Net Leverage is defined as Net Debt divided by Adjusted EBITDA.
EBITDA is defined as net income adjusted by adding provisions for income tax, interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for (gain)/loss on asset divestitures, pre-tax, net loss attributable to non-controlling interests, stock-based compensation expenses, pre-tax, transaction related expenses, pre-tax, other non-cash revenue 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 operator, 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.
Adjusted Net Income is defined as net income attributable to GEO adjusted for certain items which by their nature are not comparable from period to period or that tend to obscure GEO’s actual operating performance, including for the periods presented (gain)/loss on asset divestitures, pre-tax, (gain)/loss on the extinguishment of debt, pre-tax, transaction related expenses, pre-tax, and tax effect of adjustments to net income attributable to GEO.
Safe-Harbor Statement
This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially and adversely affect actual results, including statements regarding GEO’s financial guidance for the full-year and fourth quarter of 2023, statements regarding GEO’s efforts to market its current idle facilities, GEO’s focus on reducing net debt, and GEO’s assumptions regarding the number of ISAP participants during the fourth quarter of 2023. 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 and similar expressions. Risks and uncertainties that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to: (1) GEO’s ability to meet its financial guidance for 2023 given the various risks to which its business is exposed; (2) GEO’s ability to deleverage and repay, refinance or otherwise address its debt maturities in an amount and on terms commercially acceptable to GEO, and on the timeline it expects or at all; (3) GEO’s ability to identify and successfully complete any potential sales of company-owned assets and businesses on commercially advantageous terms on a timely basis, or at all; (4) changes in federal and state government policy, orders, directives, legislation and regulations that affect public-private partnerships with respect to secure, correctional and detention facilities, processing centers and reentry centers, including the timing and scope of implementation of President Biden’s Executive Order directing the U.S. Attorney General not to renew the U.S. Department of Justice contracts with privately operated criminal detention facilities; (5) changes in federal immigration policy; (6) public and political opposition to the use of public-private partnerships with respect to secure correctional and detention facilities, processing centers and reentry centers; (7) the magnitude, severity, and duration of the COVID-19 global pandemic, its impact on GEO, GEO’s ability to mitigate the risks associated with COVID-19, and the efficacy and distribution of COVID-19 vaccines; (8) GEO’s ability to sustain or improve company-wide occupancy rates at its facilities in light of the COVID-19 global pandemic and policy and contract announcements impacting GEO’s federal facilities in the United States; (9) fluctuations in GEO’s operating results, including as a result of contract terminations, contract renegotiations, changes in occupancy levels and increases in GEO’s operating costs; (10) general economic and market conditions, including changes to governmental budgets and its impact on new contract terms, contract renewals, renegotiations, per diem rates, fixed payment provisions, and occupancy levels; (11) GEO’s ability to address inflationary pressures related to labor related expenses and other operating costs; (12) GEO’s ability to timely open facilities as planned, profitably manage such facilities and successfully integrate such facilities into GEO’s operations without substantial costs; (13) GEO’s ability to win management contracts for which it has submitted proposals and to retain existing management contracts; (14) risks associated with GEO’s ability to control operating costs associated with contract start-ups; (15) GEO’s ability to successfully pursue growth and continue to create shareholder value; (16) GEO’s ability to obtain financing or access the capital markets in the future on acceptable terms or at all; and (17) other factors contained in GEO’s Securities and Exchange Commission periodic filings, including its Form 10-K, 10-Q and 8-K reports, many of which are difficult to predict and outside of GEO’s control.
Third quarter and first nine months of 2023 financial tables to follow:
Condensed Consolidated Balance Sheets*(Unaudited)
As of
As of
September 30, 2023
December 31, 2022
(unaudited)
(unaudited)
ASSETS
Cash and cash equivalents
$
141,020
$
95,073
Accounts receivable, less allowance for doubtful accounts
356,501
416,399
Prepaid expenses and other current assets
41,138
43,536
Total current assets
$
538,659
$
555,008
Restricted Cash and Investments
130,729
111,691
Property and Equipment, Net
1,951,524
2,002,021
Operating Lease Right-of-Use Assets, Net
106,552
90,950
Assets Held for Sale
5,130
480
Deferred Income Tax Assets
8,005
8,005
Intangible Assets, Net (including goodwill)
893,449
902,887
Other Non-Current Assets
90,335
89,341
Total Assets
$
3,724,383
$
3,760,383
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
$
66,758
$
79,312
Accrued payroll and related taxes
78,568
53,225
Accrued expenses and other current liabilities
200,187
237,369
Operating lease liabilities, current portion
24,506
22,584
Current portion of finance lease obligations, and long-term debt
63,307
44,722
Total current liabilities
$
433,326
$
437,212
Deferred Income Tax Liabilities
75,849
75,849
Other Non-Current Liabilities
79,797
74,008
Operating Lease Liabilities
86,849
73,801
Finance Lease Liabilities
740
1,280
Long-Term Debt
1,789,273
1,933,145
Total Shareholders’ Equity
1,258,549
1,165,088
Total Liabilities and Shareholders’ Equity
$
3,724,383
$
3,760,383
* all figures in ‘000s
Condensed Consolidated Statements of Operations*(Unaudited)
Q3 2023
Q3 2022
YTD 2023
YTD 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenues
$
602,785
$
616,683
$
1,804,885
$
1,756,045
Operating expenses
440,667
436,210
1,302,287
1,233,162
Depreciation and amortization
31,173
32,330
94,787
100,284
General and administrative expenses
47,356
50,022
139,182
147,878
Operating income
83,589
98,121
268,629
274,721
Interest income
1,320
5,111
3,785
16,301
Interest expense
(55,777
)
(46,537
)
(165,081
)
(111,383
)
Loss on extinguishment of debt
(91
)
(37,487
)
(1,845
)
(37,487
)
Gain on asset divestitures
1,274
29,279
3,449
32,332
Income before income taxes and equity in earnings of affiliates
30,315
48,487
108,937
174,484
Provision for income taxes
6,521
11,246
30,036
48,106
Equity in earnings of affiliates, net of income tax provision
709
1,071
3,121
3,786
Net income
24,503
38,312
82,022
130,164
Less: Net loss attributable to noncontrolling interests
16
25
71
119
Net income attributable to The GEO Group, Inc.
$
24,519
$
38,337
$
82,093
$
130,283
Weighted Average Common Shares Outstanding:
Basic
122,066
121,154
121,850
120,998
Diluted
123,433
122,426
123,479
121,907
Net income per Common Share Attributable to The GEO Group, Inc.** :
Basic:
Net income per share — basic
$
0.17
$
0.26
$
0.56
$
0.89
Diluted:
Net income per share — diluted
$
0.16
$
0.26
$
0.55
$
0.89
* All figures in ‘000s, except per share data
** In accordance with U.S. GAAP, diluted earnings per share attributable to GEO available to common stockholders is calculated under the if-converted method or the two-class method, whichever calculation results in the lowest diluted earnings per share amount, which may be lower than Adjusted Net Income Per Diluted Share.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA,and Net Income Attributable to GEO to Adjusted Net Income*(Unaudited)
Q3 2023
Q3 2022
YTD 2023
YTD 2022
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net Income
$
24,503
$
38,312
$
82,022
$
130,164
Add:
Income tax provision **
6,588
11,435
30,617
48,570
Interest expense, net of interest income ***
54,548
78,913
163,141
132,569
Depreciation and amortization
31,173
32,330
94,787
100,284
EBITDA
$
116,812
$
160,990
$
370,567
$
411,587
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,332
)
Net loss attributable to noncontrolling interests
16
25
71
119
Stock based compensation expenses, pre-tax
3,116
3,141
12,052
13,010
Transaction related expenses, pre-tax
–
1,322
–
1,322
Other non-cash revenue & expenses, pre-tax
–
–
(687
)
–
Adjusted EBITDA
$
118,670
$
136,199
$
378,554
$
393,706
Net Income attributable to GEO
$
24,519
$
38,337
$
82,093
$
130,283
Add (Subtract):
Gain on asset divestitures, pre-tax
(1,274
)
(29,279
)
(3,449
)
(32,958
)
Loss on extinguishment of debt, pre-tax
91
37,487
1,845
37,487
Transaction related expenses, pre-tax
–
1,322
–
1,322
Tax effect of adjustment to net income attributable to GEO (1)
297
(7,697
)
403
(6,772
)
Adjusted Net Income
$
23,633
$
40,170
$
80,892
$
129,362
Weighted average common shares outstanding – Diluted
123,433
122,426
123,479
121,907
Adjusted Net Income per Diluted share
0.19
0.33
0.66
1.06
* all figures in ‘000s, except per share data
** including income tax provision on equity in earnings of affiliates
*** includes loss on extinguishment of debt
(1) Tax adjustment related to gain on asset divestitures and loss on extinguishment of debt.
2023 Outlook/Reconciliation (1)(In thousands, except per share data)(Unaudited)
FY 2023
Net Income
$
100,000
to
$
105,000
Net Interest Expense
217,000
217,000
Income Taxes (including income tax provision on equity in earnings of affiliates)
40,000
40,000
Depreciation and Amortization
127,000
127,000
Non-Cash Stock Based Compensation
15,700
15,700
Other Non-Cash
(4,700
)
(4,700
)
Adjusted EBITDA
$
495,000
to
$
500,000
Net Income Attributable to GEO Per Diluted Share
$
0.80
to
$
0.85
Weighted Average Common Shares Outstanding-Diluted
123,500
to
123,500
CAPEX
Growth
9,000
to
10,000
Technology
16,000
to
20,000
Facility Maintenance
45,000
to
50,000
Capital Expenditures
70,000
to
80,000
Total Debt, Net
$
1,820,000
$
1,780,000
Total Leverage, Net
3.66
3.58
(1) Total Net Leverage is calculated using the midpoint of Adjusted EBITDA guidance range.
BRENTWOOD, Tenn., Nov. 06, 2023 (GLOBE NEWSWIRE) — CoreCivic, Inc. (NYSE: CXW) (the Company) announced today its financial results for the third quarter of 2023.
Damon T. Hininger, CoreCivic’s President and Chief Executive Officer, said, “We are pleased with our third quarter results, and are optimistic that the post-pandemic environment will continue to result in increasing opportunities to serve our government partners. Federal, state, and local government agencies are experiencing an increase in the need for the solutions that we provide.”
Hininger continued, “We also continue to execute on our capital allocation strategy, repaying nearly $140 million of debt net of the change in cash so far this year, and reducing leverage, measured by net debt to EBITDA, to 2.8x using the trailing twelve months. Our debt reduction strategy has contributed to a meaningful reduction to interest expense from the prior year, despite an increasing interest rate environment. The amendment and extension of our bank credit facility obtained subsequent to quarter-end, which included an increase in size and an extension of the maturity to 2028, provides us with additional flexibility to execute on our long-term capital allocation strategy, including share repurchases.”
Financial Highlights – Third Quarter 2023
Total revenue of $483.7 million
CoreCivic Safety revenue of $443.3 million
CoreCivic Community revenue of $29.8 million
CoreCivic Properties revenue of $10.5 million
Net Income of $13.9 million
Diluted earnings per share of $0.12
Adjusted Diluted EPS of $0.14
Normalized Funds From Operations per diluted share of $0.35
Adjusted EBITDA of $75.2 million
Third Quarter 2023 Financial Results Compared With Third Quarter 2022
Net income in the third quarter of 2023 totaled $13.9 million, or $0.12 per diluted share, compared with net income in the third quarter of 2022 of $68.3 million, or $0.58 per diluted share. Among other special items, net income in the prior year quarter included gains on sales of real estate assets of $83.8 million, or $0.53 per share, including a $77.5 million gain on the sale of our McRae Correctional Facility. Adjusted for special items, adjusted net income in the third quarter of 2023 was $15.6 million, or $0.14 per diluted share (Adjusted Diluted EPS), compared with adjusted net income in the third quarter of 2022 of $9.7 million, or $0.08 per diluted share, representing a per share increase of 75%. Special items for each period are presented in detail in the calculation of Adjusted Net Income and Adjusted Diluted EPS in the Supplemental Financial Information following the financial statements presented herein.
The $0.06 per share increase in Adjusted Diluted EPS primarily resulted from higher federal and state populations, combined with lower interest expense resulting from our debt reduction strategy. These earnings increases were partially offset by the expiration of our contract with the Federal Bureau of Prisons (BOP) at the McRae Correctional Facility on November 30, 2022, and the lease with the Oklahoma Department of Corrections (ODC) at our North Fork Correctional Facility on June 30, 2023. We sold the McRae facility to the state of Georgia in August 2022, but continued to lease the facility so that we could fulfill our obligations to the BOP through the expiration date of the contract.
While we continue to experience ongoing labor market pressures and continue to incur temporary incentives and related incremental operating expenses at certain facilities, we have achieved notable improvements in our attraction and retention rates as a result of our staffing strategies and due to an overall improvement in the hiring environment. We believe the investments in our staffing have positioned us to manage the increased number of residents we have begun to experience now that the remaining occupancy restrictions caused by the COVID-19 pandemic have been removed, most notably Title 42, which ended May 11, 2023. Under Title 42, asylum-seekers and anyone crossing the border without proper documentation or authority were denied entry at the United States border in an effort to contain the spread of COVID-19. Since May 11, 2023 through September 25, 2023, the number of individuals in the custody of U.S. Immigration and Customs Enforcement (ICE) has increased 66%. Since May 11, 2023 through September 30, 2023, ICE detention populations within our facilities have increased by 4,729, or 84%, which we believe was possible, in part, because of our investments in staffing.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $72.8 million in the third quarter of 2023, compared with $147.9 million in the third quarter of 2022. Adjusted EBITDA, which excludes special items, was $75.2 million in the third quarter of 2023, compared with $68.4 million in the third quarter of 2022, an increase of 10.0%. The increase in Adjusted EBITDA was attributable to an increase in occupancy, combined with a general reduction in temporary staffing incentives, partially offset by the expiration of the contract with the BOP at the McRae facility and the lease with the ODC at the North Fork facility. The contract expirations at the McRae and North Fork facilities resulted in an aggregate reduction to EBITDA of $4.8 million from the third quarter of 2022.
Funds From Operations (FFO) was $38.5 million, or $0.34 per diluted share, in the third quarter of 2023, compared to $33.3 million, or $0.28 per diluted share, in the third quarter of 2022. Normalized FFO, which excludes special items, was $40.5 million, or $0.35 per diluted share, in the third quarter of 2023, compared with $33.9 million, or $0.29 per diluted share, in the third quarter of 2022, representing an increase in Normalized FFO per share of 21%. Normalized FFO was impacted by the same factors that affected Adjusted EBITDA, further improved by a reduction in interest expense as a result of our debt reduction strategy that isn’t reflected in Adjusted EBITDA.
Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share amounts, are measures calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles (GAAP). Please refer to the Supplemental Financial Information and the note following the financial statements herein for further discussion and reconciliations of these measures to net income, the most directly comparable GAAP measure.
Business Updates
Capital Strategy
Debt Repayments. We continued to make progress on our debt reduction strategy, increasing our total debt repaid for the nine months ended September 30, 2023, to $137.7 million, net of the change in cash, including $65.0 million during the third quarter of 2023. We have no debt maturities until April 2026 when our 8.25% Senior Notes, which have an outstanding principal balance of $593.1 million, are scheduled to mature.
Amendment and Extension of Bank Credit Facility. On October 11, 2023, we entered into a Fourth Amended and Restated Credit Agreement (New Bank Credit Facility) in an aggregate amount of $400.0 million, effectively replacing our Third Amended and Restated Credit Agreement dated May 12, 2022, which was an aggregate amount of $350.0 million. The New Bank Credit Facility, among other things, increases the available borrowings under the revolving credit facility from $250.0 million to $275.0 million and increases the size of the term loan from an initial balance of $100.0 million to $125.0 million, extends the maturity date to October 11, 2028 from May 12, 2026, and makes conforming changes to replace the Bloomberg Short-Term Bank Yield Index to the Secured Overnight Financing Rate. Further, financial covenants were modified to remove the $100.0 million limit of netting unrestricted cash and cash equivalents when calculating the consolidated total leverage ratio and the consolidated secured leverage ratio. At the closing of the New Bank Credit Facility, we received $33.8 million of net borrowings before transaction costs as a result of the increased size of the term loan, and the revolving credit facility remains undrawn, except for $17.4 million in outstanding letters of credit.
Share Repurchases. On May 12, 2022, our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $150.0 million of our common stock. On August 2, 2022, our Board of Directors authorized an increase in our share repurchase program of up to an additional $75.0 million in shares of our common stock, or a total of up to $225.0 million. During the nine months ended September 30, 2023, we repurchased 2.6 million shares of our common stock, at an aggregate purchase price of $25.6 million, excluding fees, commissions and other costs related to the repurchases. Since the share repurchase program was authorized, through September 30, 2023, we have repurchased a total of 9.2 million shares at an aggregate price of $100.1 million, excluding fees, commissions and other costs related to the repurchases. We did not repurchase any shares of our common stock during the third quarter of 2023.
As of September 30, 2023, we had $124.9 million remaining under the share repurchase program authorized by the Board of Directors. Additional repurchases of common stock will be made in accordance with applicable securities laws and may be made at management’s discretion within parameters set by the Board of Directors from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate us to purchase any particular amount of our common stock. The authorization for the share repurchase program may be terminated, suspended, increased or decreased by our Board of Directors in its discretion at any time.
New Management Contracts
New Management Contract With Hinds County, Mississippi. On September 25, 2023, we announced that we signed a new management contract with Hinds County, Mississippi for up to 250 adult male pre-trial detainees at our 2,672-bed Tallahatchie County Correctional Facility in Tutwiler, Mississippi. The initial contract term is for two years, which may be extended for an additional year upon mutual agreement. We currently care for approximately 200 residents from Hinds County at the Tallahatchie facility, in addition to over 400 residents from the U.S. Marshals Service, Vermont, South Carolina, the U.S. Virgin Islands, and Tallahatchie County.
Intent to Award New Management Contract From State of Montana. On October 11, 2023, we were notified by the state of Montana of its intent to award us a new management contract for up to 120 inmates at our 1,896-bed Saguaro Correctional Facility in Eloy, Arizona. We expect to execute the contract in the short-term and begin accepting residents from Montana later in the fourth quarter of 2023. We currently care for approximately 875 residents from Hawaii and nearly 600 residents from the state of Idaho at the Saguaro Correctional Facility. We also manage the fully occupied company-owned Crossroads Correctional Center in Shelby, Montana for the State pursuant to a separate management contract.
2023 Financial Guidance
Based on current business conditions, we are providing the following update to our financial guidance for the full year 2023:
Guidance Full Year 2023
Prior Guidance Full Year 2023
• Net income
$58.7 million to $64.9 million
$58.4 million to $66.4 million
• Adjusted net income
$62.3 million to $68.5 million
$59.5 million to $67.5 million
• Diluted EPS
$0.51 to $0.57
$0.51 to $0.58
• Adjusted Diluted EPS
$0.54 to $0.60
$0.52 to $0.59
• FFO per diluted share
$1.37 to $1.43
$1.36 to $1.44
• Normalized FFO per diluted share
$1.40 to $1.46
$1.37 to $1.45
• EBITDA
$298.8 million to $303.0 million
$297.0 million to $303.0 million
• Adjusted EBITDA
$302.5 million to $306.8 million
$297.3 million to $303.3 million
During 2023, we expect to invest $66.0 million to $69.0 million in capital expenditures, consisting of $36.0 million to $37.0 million in maintenance capital expenditures on real estate assets, $25.0 million to $26.0 million for maintenance capital expenditures on other assets and information technology, and $5.0 million to $6.0 million for other capital investments.
Supplemental Financial Information and Investor Presentations
We have made available on our website supplemental financial information and other data for the third quarter of 2023. Interested parties may access this information through our website at http://ir.corecivic.com/ under “Financial Information” of the Investors section. We do not undertake any obligation and disclaim any duties to update any of the information disclosed in this report.
Management may meet with investors from time to time during the fourth quarter of 2023. Written materials used in the investor presentations will also be available on our website beginning on or about November 29, 2023. Interested parties may access this information through our website at http://ir.corecivic.com/ under “Events & Presentations” of the Investors section.
Conference Call, Webcast and Replay Information
We will host a webcast conference call at 11:00 a.m. central time (12:00 p.m. eastern time) on Tuesday, November 7, 2023, which will be accessible through the Company’s website at www.corecivic.com under the “Events & Presentations” section of the “Investors” page. To participate via telephone and join the call live, please register in advance here https://register.vevent.com/register/BI3e522c1e25f444ec98977db80437da4f. Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and a unique passcode.
About CoreCivic
CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and one of the largest prison operators in the United States. We have been a flexible and dependable partner for government for 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.
Forward-Looking Statements
This press release contains statements as to our beliefs and expectations of the outcome of future events that are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include, but are not limited to, the risks and uncertainties associated with: (i) changes in government policy, legislation and regulations that affect utilization of the private sector for corrections, detention, and residential reentry services, in general, or our business, in particular, including, but not limited to, the continued utilization of our correctional and detention facilities by the federal government, including as a consequence of the United States Department of Justice not renewing contracts as a result of President Biden’s Executive Order on Reforming Our Incarceration System to Eliminate the Use of Privately Operated Criminal Detention Facilities, impacting utilization primarily by the BOP and the United States Marshals Service, and the impact of any changes to immigration reform and sentencing laws (we do not, under longstanding policy, lobby for or against policies or legislation that would determine the basis for, or duration of, an individual’s incarceration or detention); (ii) our ability to obtain and maintain correctional, detention, and residential reentry facility management contracts because of reasons including, but not limited to, sufficient governmental appropriations, contract compliance, negative publicity and effects of inmate disturbances; (iii) changes in the privatization of the corrections and detention industry, the acceptance of our services, the timing of the opening of new facilities and the commencement of new management contracts (including the extent and pace at which new contracts are utilized), as well as our ability to utilize available beds; (iv) general economic and market conditions, including, but not limited to, the impact governmental budgets can have on our contract renewals and renegotiations, per diem rates, and occupancy; (v) fluctuations in our operating results because of, among other things, changes in occupancy levels; competition; contract renegotiations or terminations; inflation and other increases in costs of operations, including a continuing rise in labor costs; fluctuations in interest rates and risks of operations; (vi) the impact resulting from the termination of Title 42, the federal government’s policy to deny entry at the United States southern border to asylum-seekers and anyone crossing the southern border without proper documentation or authority in an effort to contain the spread of the coronavirus and related variants, or COVID-19; (vii) government budget uncertainty, the impact of the debt ceiling and the potential for government shutdowns and changing funding priorities; (viii) our ability to successfully identify and consummate future development and acquisition opportunities and realize projected returns resulting therefrom; (ix) our ability to have met and maintained qualification for taxation as a real estate investment trust, or REIT, for the years we elected REIT status; and (x) the availability of debt and equity financing on terms that are favorable to us, or at all. Other factors that could cause operating and financial results to differ are described in the filings we make from time to time with the Securities and Exchange Commission.
We take no responsibility for updating the information contained in this press release following the date hereof to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events or for any changes or modifications made to this press release or the information contained herein by any third-parties, including, but not limited to, any wire or internet services, except as may be required by law.
CORECIVIC, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
September 30, 2023
December 31, 2022
Cash and cash equivalents
$
103,697
$
149,401
Restricted cash
14,214
12,764
Accounts receivable, net of credit loss reserve of $7,358 and $8,008, respectively
269,416
312,435
Prepaid expenses and other current assets
32,638
32,134
Assets held for sale
–
6,936
Total current assets
419,965
513,670
Real estate and related assets:
Property and equipment, net of accumulated depreciation of $1,798,675 and $1,716,283, respectively
2,127,800
2,176,098
Other real estate assets
204,096
208,181
Goodwill
4,844
4,844
Other assets
311,903
341,976
Total assets
$
3,068,608
$
3,244,769
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses
$
290,385
$
285,226
Current portion of long-term debt
13,982
165,525
Total current liabilities
304,367
450,751
Long-term debt, net
1,055,588
1,084,858
Deferred revenue
18,869
22,590
Non-current deferred tax liabilities
98,124
99,618
Other liabilities
133,358
154,544
Total liabilities
1,610,306
1,812,361
Commitments and contingencies
Preferred stock ― $0.01 par value; 50,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022, respectively
–
–
Common stock ― $0.01 par value; 300,000 shares authorized; 113,605 and 114,988 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
1,136
1,150
Additional paid-in capital
1,792,481
1,807,689
Accumulated deficit
(335,315
)
(376,431
)
Total stockholders’ equity
1,458,302
1,432,408
Total liabilities and stockholders’ equity
$
3,068,608
$
3,244,769
CORECIVIC, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
REVENUE:
Safety
$
443,324
$
423,186
$
1,282,717
$
1,253,788
Community
29,791
26,379
84,569
76,269
Properties
10,477
14,587
37,888
43,704
Other
113
59
215
135
483,705
464,211
1,405,389
1,373,896
EXPENSES:
Operating
Safety
350,946
342,190
1,015,070
987,472
Community
23,268
22,022
68,888
63,531
Properties
3,067
3,902
9,752
10,561
Other
42
80
158
259
Total operating expenses
377,323
368,194
1,093,868
1,061,823
General and administrative
33,927
30,194
99,218
92,808
Depreciation and amortization
32,526
31,931
95,183
96,218
Shareholder litigation expense
–
–
–
1,900
Asset impairments
2,710
3,513
2,710
3,513
446,486
433,832
1,290,979
1,256,262
OTHER INCOME (EXPENSE):
Interest expense, net
(17,886
)
(20,793
)
(55,305
)
(65,381
)
Expenses associated with debt repayments and refinancing transactions
(100
)
(783
)
(326
)
(7,588
)
Gain on sale of real estate assets, net
368
83,828
343
87,149
Other income (expense)
(74
)
(71
)
(43
)
934
INCOME BEFORE INCOME TAXES
19,527
92,560
59,079
132,748
Income tax expense
(5,635
)
(24,242
)
(17,957
)
(34,865
)
NET INCOME
$
13,892
$
68,318
$
41,122
$
97,883
BASIC EARNINGS PER SHARE
$
0.12
$
0.59
$
0.36
$
0.82
DILUTED EARNINGS PERSHARE
$
0.12
$
0.58
$
0.36
$
0.82
CORECIVIC, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Net income
$
13,892
$
68,318
$
41,122
$
97,883
Special items:
Expenses associated with debt repayments and refinancing transactions
100
783
326
7,588
Income tax expense associated with change in corporate tax structure
–
–
930
–
Gain on sale of real estate assets, net
(368
)
(83,828
)
(343
)
(87,149
)
Shareholder litigation expense
–
–
–
1,900
Asset impairments
2,710
3,513
2,710
3,513
Income tax expense (benefit) for special items
(709
)
20,959
(784
)
19,543
Adjusted net income
$
15,625
$
9,745
$
43,961
$
43,278
Weighted average common shares outstanding – basic
113,605
116,569
113,919
119,282
Effect of dilutive securities:
Restricted stock-based awards
802
881
686
774
Weighted average shares and assumed conversions – diluted
114,407
117,450
114,605
120,056
Adjusted Diluted EPS
$
0.14
$
0.08
$
0.38
$
0.36
CORECIVIC, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CALCULATION OF FUNDS FROM OPERATIONS AND NORMALIZED FUNDS FROM OPERATIONS
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Net income
$
13,892
$
68,318
$
41,122
$
97,883
Depreciation and amortization of real estate assets
24,837
24,158
73,206
72,825
Impairment of real estate assets
–
3,513
–
3,513
Gain on sale of real estate assets, net
(368
)
(83,828
)
(343
)
(87,149
)
Income tax expense for special items
107
21,165
100
22,073
Funds From Operations
$
38,468
$
33,326
$
114,085
$
109,145
Expenses associated with debt repayments and refinancing transactions
100
783
326
7,588
Income tax expense associated with change in corporate tax structure
–
–
930
–
Shareholder litigation expense
–
–
–
1,900
Other asset impairments
2,710
–
2,710
–
Income tax benefit for special items
(816
)
(206
)
(884
)
(2,530
)
Normalized Funds From Operations
$
40,462
$
33,903
$
117,167
$
116,103
Funds From Operations Per Diluted Share
$
0.34
$
0.28
$
1.00
$
0.91
Normalized Funds From Operations Per Diluted Share
$
0.35
$
0.29
$
1.02
$
0.97
CALCULATION OF EBITDA AND ADJUSTED EBITDA
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Net income
$
13,892
$
68,318
$
41,122
$
97,883
Interest expense
20,734
23,455
64,037
73,139
Depreciation and amortization
32,526
31,931
95,183
96,218
Income tax expense
5,635
24,242
17,957
34,865
EBITDA
$
72,787
$
147,946
$
218,299
$
302,105
Expenses associated with debt repayments and refinancing transactions
100
783
326
7,588
Gain on sale of real estate assets, net
(368
)
(83,828
)
(343
)
(87,149
)
Shareholder litigation expense
–
–
–
1,900
Asset impairments
2,710
3,513
2,710
3,513
Adjusted EBITDA
$
75,229
$
68,414
$
220,992
$
227,957
CORECIVIC, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
GUIDANCE — CALCULATION OF ADJUSTED NET INCOME, FUNDS FROM OPERATIONS, EBITDA & ADJUSTED EBITDA
For the Year Ending December 31, 2023
Low End of Guidance
High End of Guidance
Net income
$
58,672
$
64,922
Expenses associated with debt repayments and refinancing transactions
1,363
1,363
Income tax expense associated with change in corporate tax structure
930
930
Gain on sale of real estate assets, net
(343
)
(343
)
Asset impairments
2,710
2,710
Income tax benefit for special items
(1,082
)
(1,082
)
Adjusted net income
$
62,250
$
68,500
Net income
$
58,672
$
64,922
Depreciation and amortization of real estate assets
98,000
98,500
Gain on sale of real estate assets, net
(343
)
(343
)
Income tax expense for special items
100
100
Funds From Operations
$
156,429
$
163,179
Expenses associated with debt repayments and refinancing transactions
1,363
1,363
Income tax expense associated with change in corporate tax structure
930
930
Other asset impairments
2,710
2,710
Income tax benefit for special items
(1,182
)
(1,182
)
Normalized Funds From Operations
$
160,250
$
167,000
Diluted EPS
$
0.51
$
0.57
Adjusted Diluted EPS
$
0.54
$
0.60
FFO per diluted share
$
1.37
$
1.43
Normalized FFO per diluted share
$
1.40
$
1.46
Net income
$
58,672
$
64,922
Interest expense
85,500
84,500
Depreciation and amortization
128,000
128,000
Income tax expense
26,598
25,598
EBITDA
$
298,770
$
303,020
Expenses associated with debt repayments and refinancing transactions
1,363
1,363
Gain on sale of real estate assets, net
(343
)
(343
)
Asset impairments
2,710
2,710
Adjusted EBITDA
$
302,500
$
306,750
NOTE TO SUPPLEMENTAL FINANCIAL INFORMATION
Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO, and, where appropriate, their corresponding per share metrics are non-GAAP financial measures. The Company believes that these measures are important operating measures that supplement discussion and analysis of the Company’s results of operations and are used to review and assess operating performance of the Company and its properties and their management teams. The Company believes that it is useful to provide investors, lenders and securities analysts disclosures of its results of operations on the same basis that is used by management.
FFO, in particular, is a widely accepted non-GAAP supplemental measure of performance of real estate companies, grounded in the standards for FFO established by the National Association of Real Estate Investment Trusts (NAREIT). NAREIT defines FFO as net income computed in accordance with GAAP, excluding gains (or losses) from sales of property and extraordinary items, plus depreciation and amortization of real estate and impairment of depreciable real estate and after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis. As a company with extensive real estate holdings, we believe FFO and FFO per share are important supplemental measures of our operating performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs and other real estate operating companies, many of which present FFO and FFO per share when reporting results. EBITDA, Adjusted EBITDA, and FFO are useful as supplemental measures of performance of the Company’s properties because such measures do not take into account depreciation and amortization, or with respect to EBITDA, the impact of the Company’s tax provision and financing strategies. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), this accounting presentation assumes that the value of real estate assets diminishes at a level rate over time. Because of the unique structure, design and use of the Company’s properties, management believes that assessing performance of the Company’s properties without the impact of depreciation or amortization is useful. The Company may make adjustments to FFO from time to time for certain other income and expenses that it considers non-recurring, infrequent or unusual, even though such items may require cash settlement, because such items do not reflect a necessary or ordinary component of the ongoing operations of the Company. Normalized FFO excludes the effects of such items. The Company calculates Adjusted Net Income by adding to GAAP Net Income expenses associated with the Company’s debt repayments and refinancing transactions, and certain impairments and other charges that the Company believes are unusual or non-recurring to provide an alternative measure of comparing operating performance for the periods presented.
Other companies may calculate Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO differently than the Company does, or adjust for other items, and therefore comparability may be limited. Adjusted Net Income, EBITDA, Adjusted EBITDA, FFO, and Normalized FFO and, where appropriate, their corresponding per share measures are not measures of performance under GAAP, and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of the Company’s operating performance or any other measure of performance derived in accordance with GAAP. This data should be read in conjunction with the Company’s consolidated financial statements and related notes included in its filings with the Securities and Exchange Commission.
Contact:
Investors: David Garfinkle – Chief Financial Officer – (615) 263-3008 Financial Media: David Gutierrez, Dresner Corporate Services – (312) 780-7204
WeWork, once the most valuable startup in the United States with a peak valuation of $47 billion, filed for bankruptcy protection this week – a stunning collapse for a company that was the posterchild of the shared workspace industry.
Founded in 2010 by Adam Neumann and Miguel McKelvey, WeWork grew at breakneck speed by offering flexible office spaces for freelancers, startups and enterprises. At its peak in 2019, WeWork had 528 locations in 111 cities across 29 countries with 527,000 members.
The company was initially successful at attracting both customers and investors with its vision of creating communal workspaces. SoftBank, its biggest backer, poured in billions having bought into Neumann’s grand ambitions to revolutionize commercial real estate. WeWork was the cornerstone of SoftBank’s $100 billion Vision Fund aimed at taking big bets on tech companies that could be mold-breakers.
However, WeWork’s model of taking long-term leases and renting out spaces short-term led to persistent losses. The company lost $219,000 an hour in the 12 months prior to June 2023. Occupancy rates are down to 67% from 90% in late 2020. Yet WeWork had $4.1 billion in future lease payment obligations as of June.
Problematic corporate governance and mismanagement under Neumann also came under fire. Eyebrow-raising revelations around Neumann such as infusing the company with a hard-partying culture and cashing out over $700 million ahead of the planned IPO while retaining majority control further eroded confidence.
The lack of a path to profitability finally derailed the company’s prospects when it failed to launch its Initial Public Offering in 2019. The IPO was expected to raise $3 billion at a $47 billion valuation but got postponed after investors balked at buying shares. Neumann was forced to step down as CEO.
Since the failed IPO, WeWork has tried multiple strategies to right the ship. It has attempted to renegotiate leases, cut thousands of jobs, sold off non-core businesses, and reduced operating expenses significantly. For example, it got $1.5 billion in financing in exchange for control of its China unit in 2022.
WeWork also tried changing leadership to infuse more financial discipline. It brought in real estate veteran Sandeep Mathrani as CEO in 2020. Mathrani helped cut costs but could not fix the underlying business model. He was replaced in 2022 by David Tolley, an investment banker and private equity executive.
Additionally, WeWork tried merging with a special purpose acquisition company (SPAC) in 2021 that valued the company at $9 billion. But the co-working space leader continued struggling with low demand and high costs.
Commercial real estate landlords also pose an existential threat by offering their own flexible workspaces. Large property owners like CBRE and JLL now provide custom office spaces. With recession looming, demand for flexible office space has waned further.
As part of the Chapter 11 bankruptcy filing, WeWork aims to restructure its debt and shed expensive leases. However, it faces an uphill battle to rebuild its brand and regain customers’ trust. The flexible workspace model also faces an uncertain future given hybrid work arrangements are becoming permanent for many companies.
WeWork upended the commercial real estate industry and had a meteoric rise fueled by stellar growth and lofty ambitions. But poor management and lack of profitability finally brought down a quintessential startup unicorn valued at $47 billion at its peak. The dramatic saga serves as a cautionary tale for unproven, cash-burning companies and overzealous investors fueling their growth.
Shein, the Chinese fast fashion juggernaut, is aiming to achieve a massive $80-90 billion valuation in its eventual US stock market debut according to sources familiar with the company’s IPO plans.
The online fashion retailer has quickly become one of the largest in the world on the back of its ultra-fast production cycles and rock bottom pricing. Shein boasts a selection of over 5,000 fashion items with over 1,000 new products added daily. This rapid launch cadence along with AI-driven fashion designs and targeted social media marketing have supercharged Shein’s popularity among Gen Z consumers.
Shein’s meteoric rise has made it one of the most valuable private companies in the world. The company hit a $100 billion valuation in its last funding round in 2021. However, subsequent secondary market trades of Shein shares revealed erosion in its value, with estimates between $50-60 billion earlier this year.
The firm is looking to capitalize on the growth in online shopping with its planned US stock exchange listing. Shein is aiming to raise around $2 billion from public market investors as it continues its quest for global fashion industry dominance.
Shein has not officially confirmed its IPO plans yet, but is said to be targeting the second half of 2023 for its market debut. The timing remains in flux given the recent stock market volatility and economic uncertainty.
Unlike most ecommerce firms, Shein has claimed profitability since its inception. The company boasts strong margins partly derived from minimal advertising spend. Shein instead relies extensively on social media influencers and word-of-mouth among its primarily Gen Z fanbase.
The Chinese company does not disclose its financials publicly, but reportedly generated over $16 billion in sales in 2021. It has also expanded aggressively in Europe, the US and other international markets. Shein’s app was the second most downloaded shopping app globally on iOS last year after Amazon.
However, Shein faces controversies around alleged labor rights violations, plagiarized designs, and environmental concerns related to its fast fashion model. Critics also argue the opacity around its operations and finances warrant closer regulatory scrutiny especially as it plans to go public.
Shein’s US IPO will be a key test of investor appetite for cash-burning technology unicorns in the current market. Chinese companies listing in the US also face tighter regulations now. A number of them have opted instead for Hong Kong and domestic China exchanges more recently.
Nonetheless, the online fashion giant has its sights set firmly on tapping into public markets to fuel its next wave of worldwide expansion. Shein aims to leverage its digital-first model and supply chain agility to continue eating market share from struggling traditional retailers.
If Shein manages to pull off a $90 billion IPO, it would rank as one of the largest US listings ever for a foreign company. The blockbuster offering could set the stage for Shein to disrupt the global fashion hierarchy dominated by H&M, Zara and other legacy incumbents.
Acquisition expands ISG Research coverage of the $800 billion software sector
STAMFORD, Conn. — Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced it has acquired Ventana Research, a leading technology research firm specializing in coverage of the $800 billion software industry.
The move expands the capabilities of ISG Research, an important and fast-growing recurring-revenue-stream business for ISG, at a time when enterprises increasingly are leveraging software and services in combination to improve operating performance, deliver better customer and employee experiences, and drive growth.
“With the addition of Ventana Research, ISG becomes a stronger global powerhouse in technology research,” said Michael P. Connors, chairman and CEO of ISG. “We are famously known for our industry-leading coverage of the managed services sector, and now we are expanding and deepening our coverage of the all-important software industry. No other firm can compete with us when it comes to our comprehensive sourcing data, market coverage, analyst insights and market-making advisor perspectives – a combination that delivers unmatched value to both buyers and sellers of technology services and software.”
Ventana Research, founded in 2002 and based in Bend, Ore., tracks more than 2,000 software vendors – including covering more than 250 in-depth – to provide the industry’s most comprehensive analyst and research coverage of the global software sector. Its team of experienced professionals provides insights and expert guidance on mainstream and disruptive technologies through a unique set of research-based products, including an online community for business and IT professionals.
“Enterprises are relying more and more on independent market research and analyst insights to guide their technology buying decisions and manage their technology ecosystems, while providers seek the same advice to improve their products and hone their go-to-market strategies,” said Mark Smith, founder and CEO of Ventana Research. “We are delighted to be joining ISG and adding our industry-leading capabilities, people, credibility, client relationships and software industry coverage to the ISG Research portfolio.”
Smith will continue to lead Ventana Research in his new role as ISG partner, Software Research.
“Ventana Research will maintain its well-known and trusted portfolio of research products and services, which are a perfect complement to the existing ISG Research portfolio,” said Paul Gottsegen, president of ISG Research and Client Experience. “As we move past the initial integration period, there will be many opportunities to create synergy as we naturally and smoothly integrate Ventana offerings fully into ISG Research and create new offerings that will deliver even more value to our clients.”
Ventana Research becomes one of five service lines of ISG Research. The others are ISG Provider Lens™ (service provider evaluation research), ISG Provider Services (go-to-market research and support for service providers), ISG ProBenchmark® (SaaS-based pricing intelligence platform) and ISG Events (producer of industry conferences and webinars).
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
Reports GAAP revenues of $72 million, a third-quarter record
Reports net income of $3.2 million, GAAP EPS of $0.06 and adjusted EPS of $0.11
Reports third-quarter adjusted EBITDA of $11 million
Declares fourth-quarter dividend of $0.045 per share, payable December 20 to record holders as of December 5
Acquires Ventana Research; expands ISG Research coverage into $800 billion software sector
Sets fourth-quarter guidance: revenues between $68 million and $71 million and adjusted EBITDA between $9.0 million and $10.5 million
STAMFORD, Conn.–(BUSINESS WIRE)– Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced financial results, including record third-quarter revenues, for the quarter ended September 30, 2023.
“ISG delivered strong results in the third quarter, with record revenues of $72 million, our best topline performance ever in a third quarter,” said Michael P. Connors, chairman and CEO. “Our recurring revenues were up 19 percent, revenues in Europe were up 14 percent and firm-wide adjusted EBITDA margin improved 120 basis points from last quarter despite a more difficult macro environment. These results were powered by a relentless focus on execution and our proactive management of the current demand environment.”
Commenting on the macro environment, Connors said: “Our enterprise clients continue to leverage our capabilities with a dual focus on all things digital and cost optimization, a traditional sweet spot for ISG. Overall, clients are slower in their decision-making and spending is being stretched over longer periods of time, amid concerns about continued economic uncertainty and rising geopolitical tensions. With that said, our pipeline remains strong, and the pace of execution will be driven by clients’ need for speed as they position themselves for 2024 when conditions are expected to improve.”
Ventana Research Acquisition
ISG said today it has acquired the business of Ventana Research, a leading technology research firm specializing in coverage of the $800 billion software industry.
The move expands the capabilities of ISG Research, an important and fast-growing recurring-revenue-stream business for ISG, at a time when enterprises increasingly are leveraging software and services in combination to improve operating performance, deliver better customer and employee experiences, and drive growth.
“With the addition of Ventana Research, ISG becomes a stronger global powerhouse in technology research,” said Connors. “We are famously known for our industry-leading coverage of the managed services sector, and now we are expanding and deepening our coverage of the all-important software industry. In addition to increasing our market research coverage, we see synergies to accelerate the growth of our Software Advisory business with enterprises.”
Citing ISG Index™ research, Connors noted that software-based XaaS solutions – both infrastructure-as-a service and software-as-a-service – account for more than 60 percent of global spending on IT and business services, up from 48 percent five years ago. “We expect spending on cloud-based, software-driven services to continue expanding in the coming years,” he said, “and with it, client demand for in-depth research and advice to guide software investment decisions.”
Ventana Research, founded in 2002 and based in Bend, Ore., tracks more than 2,000 software vendors and covers more than 250 of them in-depth to provide the industry’s most comprehensive analyst and research coverage of the global software sector. Its team of experienced professionals provides insights and expert guidance on mainstream and disruptive technologies through a unique set of research-based products, including an online community for business and IT professionals.
Third-Quarter 2023 Results
Reported revenues for the third quarter were a record $71.8 million, up 4.3 percent from $68.8 million in the prior year. Currency translation positively impacted reported revenues by $1.4 million versus the prior year. Reported revenues were $42.5 million in the Americas, up 1 percent; $22.1 million in Europe, up 14 percent; and $7.2 million in Asia Pacific, down 2 percent versus the prior year.
ISG reported third-quarter operating income of $6.2 million, down 16 percent from $7.4 million in the third quarter of 2022. Reported third-quarter net income was $3.2 million, down 42 percent from net income of $5.6 million in the prior year. Fully diluted earnings per share was $0.06, compared with $0.11 per fully diluted share in the prior year.
Adjusted net income (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) for the third quarter was $5.7 million, or $0.11 per share on a fully diluted basis, compared with adjusted net income of $7.2 million, or $0.14 per share on a fully diluted basis, in the prior year’s third quarter.
Third-quarter adjusted EBITDA (a non-GAAP measure defined below under “Non-GAAP Financial Measures”) was $10.6 million, essentially flat with the prior year.
Other Financial and Operating Highlights
ISG generated $3.2 million of cash from operations in the third quarter, compared with $0.3 million used from operations in the third quarter last year. The firm’s cash balance totaled $18.7 million at September 30, 2023, down from $19.6 million at June 30, 2023.
During the third quarter, ISG paid dividends of $2.3 million and repurchased $0.9 million of shares. As of September 30, 2023, ISG had $79.2 million in debt outstanding, unchanged from December 31, 2022. The firm’s gross-debt-to-adjusted-EBITDA ratio (a non-GAAP measure calculated by dividing outstanding debt by adjusted EBITDA) was 1.8 times.
2023 Fourth-Quarter Revenue and Adjusted EBITDA Guidance
“For the fourth quarter, ISG is targeting revenues of between $68 million and $71 million and adjusted EBITDA of between $9.0 million and $10.5 million,” Connors said. “We will continue to monitor the macroeconomic and geopolitical environment, and other factors, and adjust our business plans accordingly.”
Quarterly Dividend
The ISG Board of Directors declared a fourth-quarter dividend of $0.045 per share payable on December 20, 2023, to shareholders of record on December 5, 2023.
Conference Call
ISG has scheduled a call for 9 a.m., U.S. Eastern Time, Friday, November 3, 2023, to discuss the company’s third-quarter results. The call can be accessed by dialing +1 (888) 330-2057; or, for international callers, by dialing +1 (646) 960-0203. The access code is 1482106. A recording of the conference call will be accessible on ISG’s website (www.isg-one.com) for approximately four weeks following the call.
Forward-Looking Statements
This communication contains “forward-looking statements” which represent the current expectations and beliefs of management of ISG concerning future events and their potential effects. Statements contained herein including words such as “anticipate,” “believe,” “contemplate,” “plan,” “estimate,” “target,” “expect,” “intend,” “will,” “continue,” “should,” “may,” and other similar expressions, are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future results and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. Those risks relate to inherent business, economic and competitive uncertainties and contingencies relating to the businesses of ISG and its subsidiaries including without limitation: (1) failure to secure new engagements or loss of important clients; (2) ability to hire and retain enough qualified employees to support operations; (3) ability to maintain or increase billing and utilization rates; (4) management of growth; (5) success of expansion internationally; (6) competition; (7) ability to move the product mix into higher margin businesses; (8) general political and social conditions such as war, political unrest and terrorism; (9) healthcare and benefit cost management; (10) ability to protect ISG and its subsidiaries’ intellectual property or data and the intellectual property or data of others; (11) currency fluctuations and exchange rate adjustments; (12) ability to successfully consummate or integrate strategic acquisitions; (13) outbreaks of diseases, including coronavirus, or similar public health threats or fear of such an event; and (14) engagements may be terminated, delayed or reduced in scope by clients. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from ISG’s forward-looking statements are included in ISG’s filings with the U.S. Securities and Exchange Commission. ISG undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.
Non-GAAP Financial Measures
ISG reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP). In this release, ISG has presented both GAAP financial results as well as non-GAAP information for the three and nine months ended September 30, 2023 and September 30, 2022. ISG believes that evaluating its ongoing operating results will be enhanced if it discloses certain non-GAAP information. These non-GAAP financial measures exclude non-cash and certain other special charges that many investors believe may obscure the user’s overall understanding of ISG’s current financial performance and the Company’s prospects for the future. ISG believes that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency of key measures used to evaluate the Company’s performance.
ISG provides adjusted EBITDA (defined as net income plus interest, taxes, depreciation and amortization, foreign currency transaction gains/losses, non-cash stock compensation, interest accretion associated with contingent consideration, acquisition-related costs, and severance, integration and other expense), adjusted net income (defined as net income plus amortization of intangible assets, non-cash stock compensation, foreign currency transaction gains/losses, interest accretion associated with contingent consideration, acquisition-related costs, write-off of deferred financing costs, and severance, integration and other expense, on a tax-adjusted basis), adjusted net income per diluted share, adjusted EBITDA margin, gross-debt-to-adjusted-EBITDA ratio and selected financial data on a constant currency basis which are non-GAAP measures that the Company believes provide useful information to both management and investors by excluding certain expenses and financial implications of foreign currency translations, which management believes are not indicative of ISG’s core operations. These non-GAAP measures are used by ISG to evaluate the Company’s business strategies and management’s performance.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our current and prior-periods local currency financial results using the same point in time exchange rates and then compare the adjusted current and prior period results. This calculation may differ from similarly titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP, nor should such amounts be considered in isolation.
Management believes this information facilitates comparison of underlying results over time. Non-GAAP financial measures, when presented, are reconciled to the most closely applicable GAAP measure. Non-GAAP measures are provided as additional information and should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the forward-looking non-GAAP estimates contained herein to the corresponding GAAP measures is not being provided, due to the unreasonable efforts required to prepare it.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
Information Services Group, Inc.
Condensed Consolidated Statement of Income and Comprehensive Income
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Revenues
$
71,773
$
68,836
$
224,868
$
212,100
Operating expenses
Direct costs and expenses for advisors
43,032
39,786
138,048
125,111
Selling, general and administrative
20,992
20,334
63,992
60,806
Depreciation and amortization
1,526
1,286
4,692
3,872
Operating income
6,223
7,430
18,136
22,311
Interest income
104
37
285
126
Interest expense
(1,533
)
(824
)
(4,676
)
(1,997
)
Foreign currency transaction (loss) gain
(2
)
131
(40
)
248
Income before taxes
4,792
6,774
13,705
20,688
Income tax provision
1,591
1,218
4,680
5,245
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Weighted average shares outstanding:
Basic
48,711
47,888
48,542
48,191
Diluted
50,257
49,844
50,287
50,637
Earnings per share:
Basic
$
0.07
$
0.12
$
0.19
$
0.32
Diluted
$
0.06
$
0.11
$
0.18
$
0.30
Information Services Group, Inc.
Reconciliation from GAAP to Non-GAAP
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2023
2022
2023
2022
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Plus:
Interest expense (net of interest income)
1,429
787
4,391
1,871
Income taxes
1,591
1,218
4,680
5,245
Depreciation and amortization
1,526
1,286
4,692
3,872
Interest accretion associated with contingent consideration
26
–
77
8
Acquisition-related costs (1)
99
25
99
41
Severance, integration and other expense
674
8
2,016
458
Foreign currency transaction loss (gain)
2
(131
)
40
(248
)
Non-cash stock compensation
2,098
1,987
6,752
5,432
Adjusted EBITDA
$
10,646
$
10,736
$
31,772
$
32,122
Net income
$
3,201
$
5,556
$
9,025
$
15,443
Plus:
Non-cash stock compensation
2,098
1,987
6,752
5,432
Intangible amortization
769
525
2,352
1,580
Interest accretion associated with contingent consideration
26
–
77
8
Acquisition-related costs (1)
99
25
99
41
Severance, integration and other expense
674
8
2,016
458
Write-off of deferred financing costs
–
–
379
–
Foreign currency transaction loss (gain)
2
(131
)
40
(248
)
Tax effect (2)
(1,174
)
(772
)
(3,749
)
(2,327
)
Adjusted net income
$
5,695
$
7,198
$
16,991
$
20,387
Weighted average shares outstanding:
Basic
48,711
47,888
48,542
48,191
Diluted
50,257
49,844
50,287
50,637
Adjusted earnings per share:
Basic
$
0.12
$
0.15
$
0.35
$
0.42
Diluted
$
0.11
$
0.14
$
0.34
$
0.40
(1)
Consists of expenses from acquisition-related costs and non-cash fair value adjustments on pre-acquisition contract liabilities.
(2)
Marginal tax rate of 32%, reflecting U.S. federal income tax rate of 21% plus 11% attributable to U.S. states and foreign jurisdictions.
Enables greater focus on higher margin, higher growth global managed service provider (MSP) solutions, global recruitment process outsourcing (RPO) solutions, and specialty outcome-based and staffing services in North America
Transaction expected to close in the first quarter of 2024; cash consideration of €100 million with additional earnout potential of up to €30 million
Unlocks significant capital to invest in organic and inorganic growth
TROY, Mich., Nov. 2, 2023 /PRNewswire/ — Kelly (Nasdaq: KELYA, KELYB), a leading global specialty talent solutions provider, today announced that it has entered into a definitive agreement to sell its European staffing business to Gi Group Holdings S.P.A. (“Gi”), one of the largest staffing companies in Europe, for cash consideration of up to €130 million. The transaction is expected to close in the first quarter of 2024, subject to receipt of required regulatory approvals and other customary closing conditions.
Under the terms of the agreement, Kelly will transfer its European staffing business within its International operating segment to Gi. Kelly provides staffing services to customers in 14 countries across Europe. The company will retain its managed service provider, recruitment process outsourcing, and functional service provider (FSP) business with customers in the Europe, Middle East, and Africa (EMEA) region.
Following the close of the transaction, Kelly will maintain its global footprint and continue to provide MSP, RPO, and FSP solutions to customers in the EMEA region through KellyOCG, Kelly’s outsourcing and consulting group. As a leading global vendor-neutral provider of talent supply chain strategies and workforce solutions, KellyOCG leverages a network of 3,000 suppliers spanning 140 countries – including Gi – to connect customers across North America, Asia Pacific, and EMEA with top talent to grow their businesses. In Everest Group’s 2023 PEAK Matrix®, KellyOCG was recognized as a leader and major contender for its MSP and RPO solutions, respectively, with the latter earning KellyOCG star performer status. Everest Group also recognized KellyOCG as a leader and star performer in statement-of-work (SOW) management.
“The sale of Kelly’s European staffing business demonstrates our commitment to taking bold, transformative action to optimize our portfolio and maximize value creation,” said Peter Quigley, president and chief executive officer. “This transaction unlocks significant capital to pursue organic and inorganic investments in our chosen specialties. Furthermore, it sharpens our focus on our higher margin, higher growth global MSP solutions, global RPO solutions, and specialty outcome-based and staffing services in North America. Together, we expect these outcomes will accelerate Kelly’s progress toward achieving a normalized, adjusted EBITDA margin in the range of 3.3% to 3.5% as we shared in August and drive profitable growth over the long term.”
The transaction is the latest in a series of strategic actions Kelly has executed to unlock capital in pursuit of its specialty strategy and further optimize its operating model, which includes monetizing non-core real estate holdings and businesses; unwinding Kelly’s cross-shareholding arrangement with Persol and reducing the company’s ownership interest in PersolKelly, its Asia-Pacific staffing joint venture; selling its operations in Brazil and Russia; and most recently, implementing strategic restructuring actions which enhance organizational efficiency and effectiveness.
Quigley and Olivier Thirot, executive vice president and chief financial officer, will provide additional details about this transaction as it relates to the company’s specialty strategy during its upcoming third-quarter earnings conference call on November 9, 2023.
DLA Piper is serving as legal counsel to Kelly.
About Kelly®
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 450,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2022 was $5.0 billion. Learn more at kellyservices.com.
Forward-Looking Statements
This release contains statements that are forward looking in nature and, accordingly, are subject to risks and uncertainties. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Kelly’s financial expectations, are forward-looking statements. Factors that could cause actual results to differ materially from those contained in this release include, but are not limited to, (i) changing market and economic conditions, (ii) disruption in the labor market and weakened demand for human capital resulting from technological advances, loss of large corporate customers and government contractor requirements, (iii) the impact of laws and regulations (including federal, state and international tax laws), (iv) unexpected changes in claim trends on workers’ compensation, unemployment, disability and medical benefit plans, (v) litigation and other legal liabilities (including tax liabilities) in excess of our estimates, (vi) our ability to achieve our business’s anticipated growth strategies, (vi) our future business development, results of operations and financial condition, (vii) damage to our brands, (viii) dependency on third parties for the execution of critical functions, (ix) conducting business in foreign countries, including foreign currency fluctuations, (x) availability of temporary workers with appropriate skills required by customers, (xi) cyberattacks or other breaches of network or information technology security, and (xii) other risks, uncertainties and factors discussed in this release and in the Company’s filings with the Securities and Exchange Commission. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. All information provided in this press release is as of the date of this press release and we undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
Program recognizes innovative approaches to leveraging technology and new operating models for business success
STAMFORD, Conn.–(BUSINESS WIRE)– Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, today announced the finalists for the 2023 ISG Paragon Awards™ South America, which celebrate the ongoing transformation of sourcing industry partnerships through new approaches and technologies.
Winners in each category will be selected by a panel of independent industry experts and announced at the ISG Sourcing Industry Awards Gala Dinner on Thursday, November 9, at the Grand Hyatt Hotel in São Paulo, Brazil.
Here are the South America finalists for the 2023 awards:
Excellence: Recognizing outstanding delivery by a technology or service provider
Kyndryl with a renowned motor vehicle manufacturer
Megawork Consultoria with a major retailer in Brazil
MIGNOW with a top financial firm offering banking services and solutions
T-Systems do Brasil with a renowned motor vehicle manufacturer
senhasegura with a leading pharmaceutical company
Innovation: Recognizing the importance of imagination and entrepreneurial spirit in helping organizations future-proof their businesses and better serve clients
Monitora Soluções Tecnológicas with a major hotel and apartment chain
Prime Control with a fashion and technology-focused company
Teleperformance with a prominent retail group
Vericode with Brazil’s financial market infrastructure firm
Teltec Solutions with a dynamic food solutions provider
Transformation: Recognizing the successful transformation of an organization or key business function
Enkel with a major player in the food industry
Fcamara with a distributor and wholesaler of food products
Spassu Tecnologia with Brazil’s state-owned oil and gas company
Logicalis with a data intelligence company
Dedalus with a healthcare technology and services provider
Environmental Sustainability: Recognizing outstanding positive impacts in one or more environmental sustainability fields for clients, consumers, communities and/or employees
ST IT Cloud with a global pharmaceutical and life sciences company
TIVIT with a leading agribusiness and food company
Yaman with a comprehensive benefits and rewards provider
Darede Serviços de TI with an energy solutions company
The ISG Paragon Awards™ South America, produced by ISG Events, recognize the innovative ways enterprises and providers are driving business success by leveraging digital technology and new operating models.
“Enterprises in South America seek partners to help them create hybrid, connected, autonomous, intelligent and effective organizations,” said Todd Lavieri, partner and president, ISG Americas and Asia Pacific. “ISG research finds regional providers in South America are outpacing many larger global firms in helping clients adopt the technologies that can deliver transformative business outcomes. It is an honor to recognize the partnerships that are driving agility and productivity in the region.”
Winners of the ISG Provider Lens™ Awards, recognizing outstanding performances by providers featured in ISG Provider Lens™ studies, will also be honored at the November 9 ISG Sourcing Industry Awards gala.
Full details of the ISG Paragon Awards program are available on the award website.
About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
JPMorgan Chase CEO Jamie Dimon is cashing out for the first time in his 17 years leading the banking giant. Dimon and his family are planning to unload $141 million worth of JPMorgan stock starting next year. The sale of one million shares marks the first time Dimon has trimmed his stake since taking the helm in 2006.
While surprising, the stock sale doesn’t represent a loss of faith by Dimon in JPMorgan’s future. According to a securities filing, Dimon “continues to believe the company’s prospects are very strong.” Even after shedding $141 million in stock, Dimon will still own around 7.6 million shares in the bank, worth over $1 billion at current prices.
Dimon timed the sale to take advantage of a rebound in JPMorgan’s stock, which is up 5% year-to-date despite headwinds facing the banking sector. With the Fed boosting interest rates aggressively to combat inflation, demand for loans has slowed. Banks are also earning less on their bond holdings as rates rise.
Yet JPMorgan has managed to deliver solid earnings this year, with profit jumping 35% last quarter. The acquisition of assets from failed West Coast lender First Republic enhanced results. Dimon has praised JPMorgan’s “fortress balance sheet” that has it positioned to weather economic storms.
While JPMorgan has excelled recently, Dimon has sounded the alarm on gathering risks. He warned the Fed’s inflation fight may tip the remarkably resilient U.S. economy into recession. Geopolitical tensions around the world are also a rising threat. “Now may be the most dangerous time the world has seen in decades,” Dimon said earlier this month.
With risks rising, Dimon seems to be taking money off the table while JPMorgan’s stock still hovers near 52-week highs. The sale allows him to lock in returns after a tremendous 17-year run as CEO. Since taking the helm, Dimon has led JPMorgan to become the nation’s most profitable bank, raking in $48 billion last year alone.
Yet even after the stock sale, Dimon maintains immense exposure to JPMorgan’s fortunes. His remaining 7.6 million shares give him a built-in incentive to keep delivering results and driving the stock higher. While handing some risk off to the market, Dimon remains invested in JPMorgan’s success.
Dimon’s high-profile stock sale could potentially have ripple effects across the stock market. Some may view the move as Dimon lacking confidence in the markets and economy, sparking wider selling. JPMorgan’s share price often acts as a bellwether for overall market sentiment. If investors interpret Dimon’s sale as a warning sign, it could drag down indices and lead to a pullback in stocks. However, most analysts believe the sale is simply prudent financial planning by Dimon rather than a market call. With risks rising, Dimon is wisely diversifying his holdings after a long run-up in JPMorgan’s shares. Therefore, while the sale makes waves in the news, it likely won’t dramatically sway broader market direction. But in jittery times, even a whiff of pessimism from an influential CEO like Dimon can impact overall investor psychology.
Some view the stock sale as a shot across the bow at the Federal Reserve. Dimon may be signaling that excessive rate hikes could stifle the economy and hurt the banking sector. By cashing out now, Dimon is suggesting trouble may lie ahead.
Nonetheless, JPMorgan insists Dimon has confidence in the bank’s “very strong” prospects. The stock sale appears to be prudent risk management rather than a warning. As a savvy leader, Dimon knows the value of diversification.
With markets on edge, Dimon’s stock sale provides a dose of foreboding. Yet JPMorgan remains well-positioned to weather any storm. As long as Dimon is at the helm, don’t expect one stock sale to derail JPMorgan’s trajectory anytime soon.
TROY, Mich., Oct. 26, 2023 /PRNewswire/ — Kelly, a leading global specialty talent solutions provider, will release its third-quarter earnings before the market opens on Thursday, November 9, 2023. In conjunction with its third-quarter earnings release, Kelly will publish a financial presentation on the Investor Relations page of its public website and will host a conference call at 9 a.m. ET.
The call may be accessed in one of the following ways:
Via the Telephone (877) 692-8955 (toll free) or (234) 720-6979 (caller paid) Enter access code 5728672 After the prompt, please enter ”#”
A recording of the conference call will be available after 2:30 p.m. ET on November 9, 2023, at (866) 207-1041 (toll-free) and (402) 970-0847 (caller-paid). The access code is 7027637#. The recording will also be available at kellyservices.com during this period.
About Kelly
Kelly Services, Inc. (Nasdaq: KELYA, KELYB) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 450,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2022 was $5.0 billion. Learn more at kellyservices.com.
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