Good day, and welcome to The GEO Group Third Quarter 2019 Earnings Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Pablo Paez, Executive Vice President-Corporate Relations. Please go ahead.

Thank you, operator. Good morning, everyone and thank you for joining us for today's discussion of The Geo Group's third quarter 2019 earnings results. With us today are George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; Ann Schlarb, President of GEO Care; and David Donahue, President of GEO Secure Services. This morning, we will discuss our third quarter results and outlook for the balance of the year. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today including the answers we give in response to your questions may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings including the Form 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, George Zoley. George?

Thank you, Pablo and good morning to everyone. We are very pleased with our strong third quarter financial results, which were driven by continued positive trends across our diversified business units. While we expect continued growth, we are keeping our financial guidance for the fourth quarter unchanged at this time. During the third quarter, we had a significant level of startup activity, which we expect will drive future cash flow growth. Importantly, these startup projects involved the reactivation of previously-idle facilities totaling 4,600 beds. In September, we completed the reactivation of our company-owned 1,000-bed South Louisiana ICE processing center. And October 1, we activated our company-owned 1,800-bed North Lake Michigan correctional facility and the county-owned 1,800-bed Reeves County, Texas detention complex 1 and 2. Both of these facilities are fixed-price for the full 10-year contract term with the Federal Bureau of Prisons. Internationally, we are in the process of completing negotiations and construction respectively on two expansion projects in Australia and at our Ravenhall and Junee correctional centers totaling approximately 800 combined beds. In the UK, we are pleased to have been awarded a 10-year contract for the continued delivery of secure transportation services under our GEOAmey joint venture known as the PECS contract. We have provided secure transportation services under the PECS contract through our GeoAmey joint venture since 2011. We are proud to have been awarded this new 10-year contract to deliver high-quality services involving 1,400 professional staff, 250 specialist vehicles and 10 transportation hubs. With respect to recent procurement activity in the U.S. both ICE and the U.S. Marshals Service have issued solicitations in California. The U.S. Marshals expects to award a management contract for the government-owned 512-bed El Centro, California facility before the end of the year. And under a procurement issued last month ICE expects…

Thank you George. Good morning everyone. Today we reported third-quarter revenues of approximately $632 million and net income attributable to GEO of $0.39 per diluted share. Our third quarter results reflect $6.1 million in startup expenses pre-tax, a $1.2 million loss on real estate assets and a $600,000 gain on the extinguishment of debt related to the repurchase of $34 million of our 2022 senior notes. Excluding these items, we reported third quarter adjusted net income of $0.44 per diluted share ahead of our guidance range of $0.37 to $0.39 per diluted share. We reported third-quarter AFFO of $0.72 per diluted share also ahead of our guidance range of $0.66 to $0.68 per diluted share. Our strong quarterly financial results were driven by better-than-expected performance and favorable trends across our diversified business segments. Turning to our outlook while we expect favorable trends to continue, we have maintained our adjusted net income and AFFO guidance for the fourth quarter. We expect fourth quarter 2019 net income attributable to GEO to be in a range of $0.37 to $0.39 per diluted share and adjusted net income to be in a range of $0.39 to $0.41 per diluted share on quarterly revenues of $629 million to $634 million. We expect fourth quarter 2019 AFFO to be between $0.66 and $0.68 per diluted share. For the full year, we expect net income attributable to GEO to be in a range of $1.45 to $1.47 per diluted share and adjusted net income to be in a range of $1.60 to $1.62 per diluted share on annual revenues of approximately $2.49 billion. We have increased our full year AFFO guidance to a range of $2.75 to $2.77 per diluted share. Moving to our capital structure, during the third quarter, we repurchased approximately $0.34 of our senior…

Thanks, Brian. Good morning everyone. I'd like to provide you an update on our GEO Secure Services business unit. Starting with our federal segment, as has been noted today, we completed the reactivation of several previously-idle facilities during the third quarter. In Louisiana, we activated our company-owned 1,000-bed south Louisiana ICE processing center in Basile, Louisiana under an existing intergovernmental agreement with ICE. The south Louisiana center is expected to generate annualized revenues of approximately $25 million. In Michigan, we commenced operations on October 1st under a 10-year contract with the Bureau of Prisons for the reactivation of our company-owned 1,800-bed North Lake correctional facility. The new contract is projected to generate approximately $37 million in annualized revenues. And in Texas, also under a 10-year contract with the BOP, we worked with Reeves County to reactivate the county-owned 1,800-bed Reeves County detention center 1 and 2. GEO provides management consulting and support services to Reeves County in relation to this facility, while the county holds the contract with the BOP for the operations of the facility. Turning to procurement activity at the federal level, the BOP has canceled the CAR 18 solicitation for the management contract of the government-owned 2,355-bed Taft facility in California. This decision was made as a result of damage sustained by the facility during seismic activity in California earlier this year. While it remains possible that a portion of the Taft facility may remain in operation, the solicitation has been canceled. Also in California both ICE and the U.S. Marshals Service have issued recent procurements for bed space. The U.S. Marshals has issued a solicitation for the management and operation of the 512-bed El Centro facility, which is owned by the government. We expect the decision on this procurement to be made before the end of…

Thank you, Dave, and good morning, everyone. I'd like to provide you an update on our GEO Care business unit, starting with our GEO Reentry Services division. During the third quarter, we were awarded a new 60-bed contract expansion in Alabama for our Alabama therapeutic education facility. Additionally, in Louisiana, we were awarded a new contract for a non-residential day reporting center. We continue to pursue areas where we can assist individuals with successfully reentering the community, including residential, non-residential and in-custody treatment and rehabilitation services. Moving to our youth services division, our programs continue to provide important rehabilitation and treatment alternatives for use across several states and local jurisdictions, with stable utilization rates across our residential facilities. Our BI electronic monitoring division was awarded a contract during the third quarter for the continued delivery of electronic monitoring solutions to the administrative office of the U.S. Courts. Additionally, we are awaiting a contract award decision by the end of the year for the rebid of the alternatives to detention contract with ICE. This program has allowed the federal government to effectively use community alternatives for several tens of thousands of individuals going through the immigration review process. BI has held this important contract since ICE first piloted the program in 2004. Finally, we continue to expand our GEO Continuum of Care programs across the country. Our Continuum of Care programs integrate enhanced in-custody rehabilitation, including cognitive behavioral treatment with post-release support services such as transitional housing, transportation, clothing, food and job placement assistance. The Continuum of Care program is supervised and assisted at the corporate level with a division that has expanded to over 50 staff with subject matter experts in education, cognitive behavioral treatment, substance abuse treatment, post-release services, Continuum of Care training and quality assurance. As was highlighted in our recently-published ESG report, on any typical day there are approximately 30,000 participants enrolled in GEO's offender rehabilitation programs. Our Continuum of Care programs delivered 6.7 million program hours, 9,000 vocational certificates and nearly 3,000 high school equivalency diplomas in 2018 and we are on-pace to surpass these metrics in 2019. At this time, I'll turn the call back to George for his closing remarks.

Thank you, Ann. The fundamentals of our business remain strong and our financial operational results are driven by our company's quality services and continuing growth. We have always been committed to treating everyone in our care with respect and dignity and we acknowledge our unique responsibility to respect and protect their human rights. We are proud to have published our first-ever human rights and ESG report in September of this year. We hope to continue to engage with our diverse stakeholders, as we refine our ESG reporting going forward and work to dispel the political rhetoric and false narratives that have regrettably created volatility in our company and in the capital markets. We are proud of the dedication and professionalism of our diverse workforce, who over the last 30 years have helped establish GEO as a leading professional service provider to federal, state and local government agencies. We remain focused on the effective allocation of capital and believe our growing cash flows will allow us to deleverage while providing support to our annual dividend payments. As we did this quarter, we expect to continue to apply our increasing cash flow on paying down debt in the coming quarters. That completes our presentation and we would be glad to address any questions.

Thank you. We will now begin the question and answer session. [Operator Instructions] The first question today comes from Dane Bowler of 2nd Market Capital. Please go ahead.

Hey guys. Good quarter. I'm hoping you can provide a little bit more color on the $44 million loan you took out. Who is the counterparty and what properties are securing the loan?

Several banks. We haven't disclosed publicly who the banks were and it was on a -- we have a few assets that are not included in the collateral pool on our senior credit facility. So, that's where we were able to do it.

Do you have any additional capacity to do that on other properties?

You know maybe one or two other smaller-sized assets, so we're continuing to look at that or some other alternative financing vehicles. So we'll look at that.

All right. Thank you.

The next question comes from David Napsker [ph] of Ardea Capital Management [ph]. Please go ahead.

Hi. I have a very specific question, I'd like to answer -- you'd answer in a general way. California is obviously a big problem. I just moved from Nevada after 59 years there and it seems to be the most difficult state. The specific question is the two facilities where your contracts run out in April and May of next year. Do you have risk on it or are they just management contracts? Or do you have some of the property? And from that, if you could just expand how much property risk do you have in specifically California, but in general if you have another answer? Thank you.

Well, they are both owned facilities, but have submitted proposals for new contracts for those facilities.

For Desert View and Mesa Verde.

Okay. So for the state to take over the property or…

No. No. As I indicated earlier, there's an ICE procurement asking for new contracts in three basic locations, San Diego, Los Angeles and the San Francisco area. We have two existing facilities that serve the San Francisco and Los Angeles area. They are respectively the Mesa Verde facility and the Adelanto facility. And they -- we have definitely submitted those facilities for new long-term contracts.

Okay. Thank you.

[Operator Instructions] The next question comes from Matthew Larson of National Securities.

Hi, thanks for taking the call. Back to California, you know they passed some resolution that they wouldn't be working with any private internment centers or prisons. But in trying to assess the downside of the political rhetoric if for some reason you know one of these candidates who has tried to diminish the value of private prisons and perhaps put out misleading data. One of the things would be there is overcrowding. To build a new facility is difficult for cash-strapped municipalities and states. But if for some reason they couldn't work with for-profit folks like yourself and you own facilities I mean -- is it a possibility that if in the most draconian sense that they would just buy your facilities at some reasonable value, so that even though you lose the contract, it's not as if you have to write off the facility? Because there's plenty of other states which you outlined whether it's Alabama, Texas and some of these other places that have aging facilities that have kind of a different bent on the whole thing. So is that kind of the Plan B, if the worse comes and you've got to -- your customers just won't work with you, because it's a political season and the wrong people might get elected. Would it be an option just to sell the facility to the state let them manage it but still recover the bulk of your investment?

Well, those are clearly alternatives that we're not contemplating at this time but there are alternatives -- the leasing of a property the sale of a property. But you know, I think we have considerable flexibility at this particular time.

Okay. I mean I tend to agree. I mean stuff said on the campaign trail or what have you often doesn't show up in reality. I think Guantanamo is still open but that's just a comment. All right. Trying -- you know personally as an investor trying to gauge the downside. And the upside is pretty evident. So thanks for that answer.

I referenced the ICE solicitation is in progress as we speak. All proposals have been submitted. They're undergoing a review and according to the solicitation new contracts are contemplated in mid-December of next month.

Can I just touch on that because I've got to admit I haven't drilled down totally on what was passed in California. I think Gavin Newsom's group, basically passed beginning in -- some sort of initiative beginning next year that they just would not renew contracts as a state for private prisons or detention centers. And yet you're now saying that you have a lot of contract bid, request for bids out there by ICE and what-have-you. Do they work outside of maybe the state you know memo? Because they are ICE and it's a federal issue and so they might be domiciled in California but since it's federal it's apart from whatever California wants to do?

You made a lot of complicated statements there. Let me see if I can untangle them. First of all, the statute it's AB 32 and it does not go into effect until January 1 of next year. But it does restrict any state or federal facilities to their contract terms effective January 1 of this year. So if you have a contract that's in place before the end of this year, it can go the full length of its contract term.

Got it. Okay, I mean, that’s a good piece of information. Thank you. Appreciate it.

The next question today comes from Maya Sarda of Wells Fargo Asset Management. Please go ahead.

My question was actually already answered.

Okay. Thank you.

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

Thank you all for listening today. We look forward to addressing you on the next quarterly conference call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.