CoreCivic, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. CoreCivic operates correctional and detention facilities, residential reentry centers, and government-leased properties.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $500.7 million | $458.0 million | +9.3% |
| Operating expenses | $378.1 million | $354.5 million | +6.7% |
| Net income | $9.5 million | $12.4 million | −23.0% |
| Diluted EPS | $0.08 | $0.11 | −$0.03 |
| Cash from operations | $70.4 million | $89.8 million | −$19.5 million |
Facility net operating income was $122.6 million, up from $103.4 million. The facility operating margin per compensated man-day rose to 23.7% from 21.2%; average compensated occupancy increased to 75.2% from 70.1%. Revenue per compensated man-day increased to $100.85 from $96.87, while operating expense per man-day rose to $76.94 from $76.35.
Segment revenue and facility net operating income: Safety, $457.7 million and $107.6 million; Community, $29.9 million and $5.8 million; Properties, $13.0 million and $9.2 million. Normalized FFO, a non-GAAP measure, was $52.6 million versus $38.9 million; FFO was $33.9 million versus $36.6 million.
Balance sheet, debt and liquidity
At March 31, 2024, cash and cash equivalents were $111.4 million; total debt was $1.110 billion, including $110.5 million classified as current; and total stockholders’ equity was $1.444 billion. The company reported $257.0 million available under its revolving credit facility, with no revolver borrowings and $18.0 million of letters of credit outstanding. It was in compliance with its credit-facility covenants.
During March, CoreCivic issued $500 million of 8.25% senior notes due 2029 and used the proceeds, cash, and credit-facility borrowings to repurchase most of its 8.25% notes due 2026. The remaining $98.8 million principal balance was redeemed on April 15, 2024, after quarter-end. Management stated that, following that redemption, the company had no debt maturities until October 2027. Q1 included $27.2 million of debt-repayment and refinancing expenses. The weighted-average effective interest rate was 7.6% at quarter-end.
Material changes and management commentary
- Revenue growth reflected increased compensated population, higher per-diem rates, new state and local contracts, and one additional operating day in the leap year. ICE revenue rose to $153.8 million from $130.7 million.
- Management cited staffing and wage pressures, but reported improved staffing and a $1.9 million reduction in temporary incentives compared with Q1 2023. Salaries and benefits represented approximately 62% of operating expenses.
- Operating cash flow fell year over year; management attributed the comparison partly to $37.6 million of favorable working-capital fluctuations in the prior-year quarter.
- CoreCivic repurchased 2.7 million shares for $39.4 million during Q1. Approximately $73.0 million remained authorized at quarter-end.
- The company sold its Dahlia residential reentry facility and an unused Texas land parcel, generating $8.2 million of net sale proceeds in total and a reported $0.6 million gain.
Outlook, risks and contingencies
No numerical full-year earnings or revenue guidance is provided in the filing. Management expects to meet cash expenditure requirements for the next year and beyond using cash, operating cash flow, and revolver availability. It describes potential demand from government partners, but notes that contract utilization and renewals are uncertain.
- Government policy and contract exposure: USMS represented 20% of Q1 revenue and ICE 31%. The DOJ private-prison executive order applies to DOJ agencies, not ICE. One of CoreCivic’s two direct USMS contracts expires in September 2025; the other was renewed through September 2028.
- Facility utilization: The 2,560-bed California City facility was idled effective April 1, 2024 after the California contract ended. It generated $8.5 million of Q1 rent and $7.2 million of facility net operating income. CoreCivic also reported eight idle correctional facilities with aggregate carrying values of $245.3 million; management said estimated undiscounted cash flows exceeded carrying values at quarter-end.
- Labor, inflation and interest rates: Continued wage, staffing, medical, and other cost pressures could weigh on margins. Variable-rate debt exposes the company to higher rates; a 100-basis-point change would have changed Q1 interest expense by approximately $0.3 million.
- Litigation: A certified class action concerning detainee labor and the ICE Voluntary Work Program remains in discovery. The company said it cannot reasonably predict the outcome or estimate a loss range and has not accrued a liability.
- Other contingencies: The company faces litigation and self-insurance risks generally; management believes additional losses beyond recorded amounts would not be material, while cautioning that adverse rulings could have a material impact.
Investor verification points
- Confirm post-April 15 debt balances, redemption funding, and the effect of the refinancing on interest expense and maturities.
- Track utilization and renewal prospects for the USMS contract expiring in 2025, ICE demand, and new state and local contracts.
- Assess the financial impact of idling California City and the company’s ability to lease or otherwise use idle facilities.
- Monitor staffing costs, vacancy-related contract deductions, and whether per-diem increases continue to offset operating-cost inflation.
- Follow the detainee-labor class action and potential exposure as the case proceeds.
- Distinguish GAAP earnings and cash flow from non-GAAP FFO and Normalized FFO when evaluating performance.