CoreCivic, Inc. (NYSE:CXW) Q1 2026 Earnings Call Transcript

CoreCivic, Inc. (NYSE:CXW) Q1 2026 Earnings Call Transcript May 7, 2026

Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 CoreCivic, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeb Bachmann, Managing Director of Investor Relations. Please go ahead.

Jeb Bachmann: Thank you, operator. Good morning, and welcome to CoreCivic, Inc.’s first quarter 2026 earnings call. Participating on today’s call are Patrick Swindle, CoreCivic, Inc.’s President and Chief Executive Officer, and David M. Garfinkle, our Chief Financial Officer. We are also joined here in the room by our Vice President of Finance, Brian Hammonds. On this call, we will discuss financial results for the first quarter of 2026 as well as updated financial guidance for the 2026 year. We will also discuss developments with our government partners and provide you with other general business updates. During today’s call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act.

Our actual results or trends may differ materially as a result of a variety of factors including those identified in our first quarter 2026 earnings release issued after market yesterday as well as in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q, and 8-K reports. You are cautioned that any forward-looking statements reflect management’s current views only and that the company undertakes no obligation to revise or update such statements in the future. Management will discuss certain non-GAAP metrics. A reconciliation to the most comparable GAAP measurement is provided in the corresponding earnings release and included in the company’s quarterly supplemental financial data report posted on the Investors page of the company’s website at corecivic.com.

With that, it is my pleasure to turn the call over to our CEO, Patrick Swindle. Thank you, Jeb.

Patrick Swindle: Good morning, and thank you for joining us for CoreCivic, Inc.’s first quarter 2026 earnings call. On this morning’s call, we will discuss our latest operational results and update you on the latest developments and opportunities with our government partners. Following my opening remarks, I will hand the call over to our CFO, David M. Garfinkle, who will provide greater detail on our first quarter 2026 financial results, as well as our updated 2026 financial guidance. David will also provide an update on our capital structure, including activity on our share repurchase program and other balance sheet initiatives. Before we discuss this quarter’s financial performance, I want to share some perspective on what I see every day in this role—the work our team does, and why it matters.

Every day, approximately 55,000 individuals are entrusted to our care by our government partners. That means that every day around the country, more than 13,000 CoreCivic, Inc. professionals are responsible for feeding, safeguarding, treating medical and mental health needs, facilitating religious and recreational activities, providing access to legal resources, and delivering programs that help prepare people for whatever comes next in their life’s journey. Our colleagues carry out these responsibilities humanely, treating residents and each other with dignity and respect. This is an incredible responsibility and an essential service for our government partners and the communities where we operate. I am extremely proud of our team and the professionalism and purpose with which they carry out their responsibilities, and I am deeply grateful for the trust our government partners place in CoreCivic, Inc.

Through these tens of thousands of interactions each day, we have an opportunity to help build safer, healthier, and more productive communities one person at a time. Using that as a North Star enables us to achieve success for all of our stakeholders, including our shareholders. I will now move on to a high-level overview of our first quarter operational performance. Total occupancy for our Safety and Community segments for the quarter was 79.6%, up 2.6 points since the year-ago quarter. The average daily population across all of the facilities we manage was 57,243 individuals during the first quarter of 2026, compared with 51,429 in the year-ago quarter. This increase was driven by more demand for our services, new contracting activity, and the FarmVille acquisition that was completed on July 1, 2025.

This is a meaningful increase, and our teams continue to be focused on delivering the highest quality services and environment every day. Federal partners, primarily ICE and the U.S. Marshals Service, comprised 58% of CoreCivic, Inc.’s total revenue in the first quarter. Revenue from our federal partners increased 48% during the first quarter of 2026 compared with the prior-year quarter. Further breaking down our federal mix, revenue from ICE increased $128.1 million, or 96.2%, while revenue from the U.S. Marshals Service decreased by $12.2 million versus the prior-year quarter. Some of this decline is simply a shift in mix where ICE and Marshals share a contract. Populations from ICE in our care increased by approximately 4,500 individuals, or 45%, from the beginning of 2025 through March 31, 2026.

We cared for 14,689 individuals, and our average daily population increased by 6,822 individuals in the first quarter of 2026 from the first quarter of 2025. However, since January 2026, when our ICE populations peaked, through April 30, ICE populations in our care have declined by roughly 3,000 individuals. We believe this decline is temporary and event specific, and David will review our population assumptions at a high level reflected in our financial guidance. A key aspect of our ability to meet the increase in demand we have experienced from ICE has been the activation of five idle facilities. Activating idle facilities is challenging work, and activating numerous facilities simultaneously is particularly challenging, but I could not be more proud of our team’s progress.

Occupancy at our 600-bed West Tennessee Detention Center, where we signed a new contract and began accepting detainees in 2025, has stabilized, and our daily operations are now fairly routine. We continue to receive detainee populations at our 2,560-bed California City Detention Facility where we signed a new contract effective September 1, 2025, and at our 2,160-bed Diamondback Correctional Facility where we signed a new contract effective September 30, 2025. As of March 31, 2026, we cared for 1,817 individuals and 735 individuals, respectively, at these two facilities. We received approval for a special use permit at our 1,033-bed Midwest Regional Reception Center in early March 2026 and immediately began accepting detainees. The facility has been undergoing reactivation since the new contract was awarded in 2025, but there was a temporary delay in the intake process as we worked through legal challenges in the SUP approval process.

I want to reiterate our thanks to the Leavenworth City Commission for their collaboration and trust and look forward to bolstering our longstanding relationship with the Leavenworth community. Because of the uncertain timing of the resolution of the SUP matter, we did not include the financial impact of the activation in our initial guidance for 2026. We currently expect this facility to contribute $0.05 to $0.06 in incremental earnings per share for the remainder of 2026, which is included in our updated financial guidance as David will discuss further. Moving to a discussion of the macro business environment with ICE. In late January 2026, nationwide ICE detention populations were at historic highs around 70,800 individuals, an increase of approximately 1,000 from the end of the fourth quarter.

However, a government shutdown centered around Department of Homeland Security funding, a reorganization of DHS leadership, and a subsequent impact to enforcement activities, including redeployment of ICE agents to TSA checkpoints, led to a 10,500 decrease in detention populations by early April 2026. While we cannot predict how quickly population growth will resume, the administration continues to indicate a strong emphasis on border security and active ICE enforcement. What has potentially changed is how DHS plans to meet its detention bed needs going forward, including through the conversion of vacant warehouse facilities into immigration detention facilities and/or the acquisition of existing turnkey facilities. As the former has garnered a lot of attention for various reasons, we do not know the future of that strategy.

However, as widely reported in the media and in numerous analyst reports, we do believe the potential of turnkey facility acquisitions remains as our government partners look to secure capacity throughout the United States. Nationwide populations from the U.S. Marshals Service, our second largest customer, have declined from the prior year, partially offsetting the increase from ICE as facilities with shared contracts between the two agencies have extended the capacity to ICE due to the higher demand. Marshals populations are also down nationwide due to fewer apprehensions at the southern border. Our average daily Marshals population declined by 1,360 individuals in the first quarter of 2026 from the first quarter of 2025, although we have experienced a steady increase in average daily Marshals populations the past few months.

Revenue from our state partners, which comprises 33% of our total revenue in the first quarter, increased 3.6% from the prior-year quarter. This increase includes per diem increases under a number of our state contracts and population growth from the states of Georgia, Montana, and Colorado. This increase is net of a decline in revenue for the transition of populations at our Trousdale facility in Tennessee, which resulted in a decline in populations that we expect to recover in the coming quarters. Excluding the decline in revenue at Trousdale, revenue from state partners increased 5.2%. We continue to see an increase in opportunities at the state level. In addition to increases in populations in our existing contracts, we are in discussions with several states in need of additional bed capacity.

At the end of the first quarter, we began consolidating and expanding a state customer population into our Tallahatchie County Correctional Facility in order to provide single-location service for this customer while creating more marketable capacity for a potential new state customer in Arizona. We continue to maintain five idle corrections and detention facilities containing approximately 7,000 beds to meet any federal or state increase in demand. We remain confident that the corrections and detention beds that we provide are the most humane, most efficient, logistically most compliant, most secure, readily available, and provide the best value to the government. Moving on to capital deployment, we remain focused on creating value for our shareholders through operational excellence, meaningful organic growth, an active share buyback program, and, at times, accretive acquisitions.

In April 2026, we executed on an agreement to acquire Clinical Solutions Pharmacy, one of the largest providers of mail-order pharmacy services to correctional facilities in the United States. This ancillary business complements our core mission of improving the lives of those in our care, while providing a diversifying revenue stream and meaningful growth opportunities as correctional populations age with more complex and chronic medical needs. CSP’s exclusive focus on the corrections market—serving over 600 correctional facilities, including CoreCivic, Inc., across 28 states—uniquely positions it to support the government agencies seeking reliable, clinically advanced pharmacy solutions. CSP is at the forefront of the correctional pharmacy business, with 50% of shipments being fully automated—which is a key differentiator in the industry—filling approximately 60,000 prescriptions per day with no single customer currently accounting for more than 15% of its annual revenue.

CSP is headquartered and operates a centralized distribution center less than 30 miles from our Facility Support Center here in Greater Nashville and has nearly 300 employees. I want to welcome the CSP employees to the CoreCivic, Inc. team. We are excited about the future with CSP and look forward to reporting on their progress. David will provide more details on the financial impact of the acquisition. Our first quarter results exceeded average analyst estimates for adjusted EPS by $0.12 and adjusted EBITDA by $13.3 million. While we are pleased with the first quarter results, we expect a sequential decline in per-share results in the second quarter as a result of the recent reduction in nationwide ICE detention population. However, for the reasons I mentioned earlier, we believe this reduction is temporary.

Even with this reduction, we are increasing our full-year guidance reflecting our strategic investment in Clinical Solutions and the successful activation of our Midwest Regional Reception Center, which more than offset the decline in our updated forecast for ICE populations. As I noted on our last earnings call, despite full-year 2026 EBITDA guidance near record levels, our stock continues to trade at a discount to our historical trading multiples, which we believe does not reflect the cash flows of our business, particularly considering the ongoing activations of previously idle facilities, giving us visibility into our growth potential in 2026 and beyond. The acquisition of CSP further strengthens that growth outlook. We also believe that our current share price implies a significant discount to the fair value of our real estate assets using just about any valuation methodology.

Accordingly, we plan to continue prioritizing our cash flows towards share repurchase, taking into consideration our stock price and alternative opportunities to deploy capital, among other factors. Additionally, the recently completed $100 million term loan supports balance sheet flexibility as we navigate the partial government shutdown environment, and assessed potential asset sales could further enhance our liquidity, enabling us to continue to deploy capital in ways we believe create shareholder value. With that, I will turn the call over to David to discuss our first quarter financial results in more detail, our capital allocation activities, and the assumptions underlying our updated 2026 financial guidance. David?

David M. Garfinkle: Thank you, Patrick, and good morning, everyone. In the first quarter of 2026, we generated GAAP EPS of $0.38 per share and FFO per share of $0.64. Special items in the first quarter of 2026 included $2.4 million of expenses associated with M&A activities reported in G&A expense for the acquisition of Clinical Solutions completed subsequent to quarter end. Excluding M&A expenses, adjusted EPS was $0.40 compared with $0.23 in the first quarter of 2025, an increase of 74%. And normalized FFO per share was $0.65 per share, compared with $0.45 per share in the prior-year quarter, an increase of 44%. Adjusted EBITDA was $110.1 million compared with $81 million in the first quarter of 2025, an increase of 36%. Adjusted EPS exceeded average analyst estimates by $0.12 per share and adjusted EBITDA exceeded average analyst estimates by $13.3 million.

The increase in adjusted EBITDA from the prior-year quarter of $29.1 million resulted from the activation of four previously idle facilities since 2025 under new management contracts with ICE and the acquisition of the Farmville Detention Center on July 1, 2025. The number of ICE detainees in our care followed national trends, which reached record highs again during the first quarter of 2026, although they dipped at the end of the first quarter for what we believe are transitory reasons. We managed approximately 24% of total ICE populations at quarter end compared with 23% at year end and 25% at March 31, 2025. The increase in adjusted EBITDA also resulted from an increase of $4.6 million in employee retention credits available under the CARES Act during the first quarter of 2026 compared with the first quarter of 2025.

During the first quarter of 2026, we collected the final amount we previously claimed. Higher state populations also contributed to the increase in EBITDA. Revenue from our state partners grew 3.6% and included notable increases from Georgia, Montana, and Colorado. Other factors affecting adjusted EBITDA and per-share results included higher G&A expense for one-time transitional expenses related to executive leadership changes, offset by a 10.1% decrease in weighted average diluted shares outstanding as a result of our share repurchase program. Operating margin in our Safety and Community facilities combined was 24% in the first quarter of 2026 compared with 23.6% in the prior-year quarter.

Jeb Bachmann: Excluding the employee retention credits from each quarter, operating margin was 23% for both quarters.

Patrick Swindle: Revenue during the first quarter of 2026 from the four previously idle facilities we have activated since 2025 totaled $100.8 million, which, when annualized, is approximately 93% of the total annual revenue we expect to generate from these four facilities at stabilized occupancy. As these facilities reach expected occupancy, we anticipate a slight increase in operating margin. Turning next to the balance sheet. During the first quarter, we repurchased 2.3 million shares of our common stock at an aggregate cost of $44.7 million. Although lower than the fourth quarter, this reduction does not reflect a change in our capital allocation strategy. Many factors can affect the magnitude of our share repurchases during any particular quarter, including share price, liquidity, earnings trajectory, alternative opportunities to deploy capital, as well as legal restrictions on trading windows impacted by potential strategic transactions such as acquisitions, dispositions, new contracts, and capital markets transactions.

Since the share repurchase program was authorized in 2022, through March 31, 2026, we have repurchased a total of 28.1 million shares at an aggregate price of $444.2 million, or $15.82 per share. As of March 31, 2026, we had $255.8 million available under our board authorization. After taking into consideration these share repurchases, our leverage, measured by net debt to adjusted EBITDA, was 2.8 times using the trailing twelve months ended March 31, 2026. As of March 31, 2026, we had $209.7 million of cash on hand and an additional $131.3 million of borrowing capacity on a revolving credit facility, which had a balance of $425 million outstanding, providing us with total liquidity of $341 million. Just after quarter end, we completed the acquisition of Clinical Solutions, one of the largest providers of mail-order pharmacy services to correctional facilities in the United States.

The initial purchase price of $148 million, excluding transaction-related expenses, was funded with cash on hand and borrowings under the revolving credit facility. As Patrick mentioned, we believe this was a unique acquisition opportunity of a segment-leading company in a growing market complementary to our existing business at a purchase price generating a return on capital deployed that equals or exceeds the accretion resulting from share repurchases, reflecting a lower multiple than our forward EV-to-EBITDA trading multiple. To replenish the borrowings under the revolving credit facility used to finance the acquisition, on April 10, we amended our bank credit facility to obtain a $100 million incremental term loan. We obtained the incremental term loan, which has a 364-day maturity and is prepayable without penalty, as a short-term solution to maintain our strong liquidity position as we assess the debt capital markets and potential asset sales that could further enhance our liquidity, enabling us to deploy capital in ways that we believe will create shareholder value.

Moving lastly to a discussion of our updated 2026 financial guidance, we expect to generate diluted EPS of $1.51 to $1.61 and adjusted diluted EPS of $1.53 to $1.63, up from $1.49 to $1.59 in our previous guidance. We expect to generate FFO per share of $2.58 to $2.68 and normalized FFO per share of $2.60 to $2.70, up from $2.54 to $2.64. We expect adjusted EBITDA of $453.8 million to $461.8 million, up from $437 million to $445 million. The most notable changes to our guidance reflect Q1 results beating our internal forecast by about $0.05 per share, an increase from our prior guidance of $0.05 to $0.06 per share for the activation of our Midwest Regional Reception Center that we announced on March 11, which was not in our initial guidance, and the acquisition of Clinical Solutions, which we expect to generate $215 million to $230 million of revenue in 2026 and contribute $0.03 to $0.05 per share, net of interest incurred to finance the acquisition, partially offset by a reduction of $0.09 to $0.15 per share from lower ICE populations compared with our previous forecast.

As you may recall, our initial 2026 financial guidance contemplated stable or rising ICE populations at facilities where we have federal contracts.

Jeb Bachmann: Our forecast reflects the reduction in nationwide—

Patrick Swindle: —populations reported by ICE during the second quarter and the related reduction in our ICE populations that I mentioned. We believe the reduction in nationwide ICE populations in the second quarter is transitory, reflecting the short-term redeployment of ICE agents to augment TSA security personnel during the government shutdown, and overall enforcement strategy adjustments within DHS. Therefore, our guidance reflects growth in ICE populations under existing contracts during the second half of the year. Consistent with our past practice, guidance does not include the impact of new contract awards not previously announced because the timing of government actions on new contracts is always difficult to predict.

We still have five remaining idle facilities containing 7,066 beds, and we believe incremental demand for more idle facilities will likely be needed once ICE absorbs the recently contracted beds and nationwide ICE populations grow during the second half of the year, as we expect. Our guidance does not include additional acquisitions or dispositions, including the impact on EBITDA such as pricing adjustments, if any, that could result from dispositions. For modeling our quarterly results, Q2 will reflect a reduction of $0.06 per share for the employee retention credits recognized in Q1, the reduction in ICE populations compared with Q1 (aside from activations) amounting to $0.05 to $0.07 per share, partially offset by a seasonally stronger Q2 than Q1 due to one more day in Q2 and because we incur approximately 75% of our unemployment taxes during the first quarter, resulting in a collective per-share increase from Q1 to Q2 of $0.01 to $0.02.

Our Q2 forecast also includes growth from the CSP acquisition and assumes higher occupancy at our California City, Diamondback, and Midwest Regional facilities. We plan to spend $60 million to $70 million on maintenance capital expenditures during 2026 and $15 million for other capital expenditures, unchanged from our prior guidance. Our 2026 forecast also includes $40 million to $45 million for capital expenditures associated with previously idle facilities we are activating and for additional potential facility activations, up $5 million from our prior guidance. We expect adjusted funds from operations, or AFFO—what we consider a proxy for our cash flow available for capital allocation decisions, such as share repurchases and growth CapEx such as acquisitions and facility activations—to range from $250.4 million to $264.9 million for 2026.

We do not believe the price of our common stock reflects the value of the cash flows of our business. We are trading below historical multiples despite visibility of cash flow growth in 2026 driven by recent contract awards, which is now further enhanced by the acquisition of CSP. Therefore, we expect to prioritize our cash flows to continue executing on our share repurchase program, which has been incorporated into the range of our guidance. The amount of our share repurchases will take into consideration our stock price, liquidity, earnings trajectory, and alternative opportunities to deploy capital as well as legal restrictions on trading windows that I previously mentioned. We expect our annual effective tax rate to be 25% to 30%, unchanged from our prior guidance.

The full-year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2026 to range from $160 million to $165 million, unchanged from our prior guidance. I will now turn the call back to the operator to open up the lines for questions.

Q&A Session

Operator: Thank you. We will now open the call for questions. We kindly request that each participant ask one question and one follow-up question. You may re-queue if you have more questions. As a reminder, please mute your line when not speaking. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Raj Sharma of Texas Capital. Your line is now open.

Raj Sharma: Yes. Thank you for taking my questions. I wanted to try to understand the sale of facilities to ICE and what would be a valuation level that you would consider, and just, you know, some color on would this be a great scenario for you with or without a contract on the facility.

Patrick Swindle: Good morning, Raj. Thank you for the question. I would say, and I will address that in two parts. One of them is we try to be a very good partner for all of our customers. And in trying to be a good partner, we evaluate the way that we can best support their mission and their strategy. And so that may be our providing turnkey services and managing a facility that we operate. It may be managing a facility that they own. It may be leasing a facility to them. It might be selling them a facility. And as we have conversations with each of our partners, we think about what is the optimal way for us to deliver that service. ICE has expressed the desire that they own certain of the assets that are managed on a turnkey basis nationally.

So that has been publicly reported. You have seen it in a number of sources; I have seen it in a number of sources. It is clear that part of their strategy they are considering is whether it does make sense to own some of those assets. Strategically, in thinking about the way that they would approach locations, the way that they would approach individual facilities, they have obviously mapped—you have seen references to warehouses, you have seen references to turnkey operations, what a consolidated ICE operation might look like nationally. And so in thinking about that, we have some of the largest facilities that provide service for ICE nationally, as do some of our competitors. Some of those would be a natural fit for ICE if they were working to build out that network.

They ultimately would have to make that decision. When you think about valuation, that is an interesting question because there really is not a comp for what these facilities are worth. So if you were to look at a more actively traded market for assets, you could look at comparable sales and get a reasonable sense of what that value might be. I would argue in this case, we have special-purpose assets. They are highly improved properties. They have been prepared for utilization by ICE. Many of them are in markets or in areas of the country where the cost of construction is very high. We have seen significant increases in inflation in the cost of building detention facilities. So you really cannot look at what I would call comp sales as a guide for what we believe the value of our assets are worth.

I look at it through the lens of what does it cost to build a facility today and what would that be on a depreciated replacement cost basis. I think that generally gives the guide for how we would think about what those facilities might be worth in a hypothetical conversation. So I would like to be more specific; it is very difficult to do that, obviously. But I guess in the context of the way we would think about value of our facilities, I really cannot point to a public comp that would be an indicator. If you think about depreciated replacement cost, that is something that we certainly would think more appropriate, but I would really hesitate to pinpoint a value range at this point. And then your follow-up question, which was, would we consider an asset sale without a management contract?

We certainly believe it would be the intent of ICE, to the extent they were to purchase assets, to have the private sector continue to manage facilities. But we have to consider the duration of that management contract long term in terms of how we might think about or approach a sale process. So at this moment, we would expect that we would continue to operate. We would expect that we would adjust our pricing based on their ownership of the asset versus our ownership of the asset, in the event there were to be a transaction. But the idea generally that ICE owning an asset would be appropriate strategically for us to consider, I would say our answer to that would be yes, depending on the value that we would derive from selling a potential asset to them or any other customer.

Raj Sharma: Great. Thank you. Thank you for that. It is very helpful. And just one follow-on question: what facility utilization levels would you expect to see at the end of the first half and also the end of the year?

David M. Garfinkle: I will take a stab at that one. Patrick mentioned in his remarks, from the peak in January through late April, we saw a decline in our ICE populations of about 3,000. So we are projecting that to sustain around those levels through the end of the second quarter and then growing back sequentially in Q3 and Q4. So it is hard to put a specific population number on it, but that is the trajectory as we see it.

Raj Sharma: Great. Thank you. I will take it offline. Yeah. Absolutely.

Operator: Thank you. Our next question comes from the line of Gregory Thomas Gibas of Northland Securities. Your line is now open.

Gregory Thomas Gibas: Great. Good morning, Patrick, Dave. Congrats on the quarter. I wanted to follow up on that last one. Actually, it is related to the implied guidance. Maybe if we could get a little bit deeper in terms of what you are implying as kind of the current run rate for Q2, noting that you kind of expect populations to remain somewhat flat with where they are now, and versus kind of the ramp-up you are assuming in the back half? If you could kind of bridge the quarterly expectations implied by guidance, that would be very helpful.

David M. Garfinkle: Yes, thanks, Greg. As I mentioned in my prepared remarks, I bridged Q1 to Q2. Obviously, you have the $0.06 in Q1 for the employee retention credits that would not be present in Q2. And then there was the decline in ICE populations that we are expecting to sustain themselves through Q2. So I would say, rough numbers, there are a lot of puts and takes, but that is around a $0.06 decline from Q1 to Q2—$0.06 to $0.07 somewhere in there—from Q1 to Q2, and then sequentially increasing from there. We do have the acquisition of CSP that will be in for a full quarter beginning April 1. So that will be in for a full quarter in Q2. And then we obviously continue to ramp up our California City, Midwest, and Diamondback facilities.

So those will be tailwinds to the decline in ICE populations. That is the way we are thinking about it. And then, you know, we mentioned in prior calls a $450 million run rate. We certainly see that as possible as we get into the second half of the year.

Gregory Thomas Gibas: Understood. That is helpful. And if I could follow up on CSP, could you discuss any synergies or growth opportunities related to that acquisition and maybe provide a little bit more detail in terms of its financial profile—what that looks like, growth rate, margin profile, etc.?

Patrick Swindle: Yes. Thank you for that question. I will address those two somewhat separately, but also somewhat combined. CSP is going to be a standalone subsidiary of CoreCivic, Inc. So the opportunities for operating synergies are fairly limited. Our goal is to maintain Clinical Solutions as it operates today, to be able to support the platform, provide it with resources, but also for it to be able to grow. This is not a tuck-in acquisition. It is an adjacent expansion of our business. In terms of growth rate, the company has seen exceptional growth historically. I would rather not disclose the rate. The way that I would frame growth rates for Clinical Solutions, at least for the intermediate term, would be: if you were to look at the way we think about the growth that is built into our guidance for 2026 and calculate the five-year compound annual growth rate, it would be just over 10%.

If I were to look at the growth potential for Clinical Solutions, it is probably twice that. So it is a rapidly growing platform that has evidenced stability and sustained growth rates in excess of that for an extended period of time. Our goal is to continue to support that platform, give it the space to be able to grow, but also take advantage of some administrative opportunities for synergies that might be available. For example, consolidation on our ERP platform. There are revenue synergies in terms of our customer relationships versus theirs. They do not presently do business with the federal agencies outside of contracting with us, so that is an opportunity for growth. There are a number of overlapping customers. There are a number of non-overlapping customers.

And so we really, again, want to be able to support them, give them the space to be able to maximize their capability in the way that they have done in the past. We feel good about the pipeline that is in place for them. I have a lot of visibility into growth into 2027. I think they are really well positioned beyond that.

David M. Garfinkle: Nothing to add other than the clarification on the prior comment: the $450 million in the second half of the year excludes Clinical Solutions. So we are still confident, even with the ICE reduction that we are seeing in Q2, the second half of the year will be at a run rate of $450 million, and then CSP would be on top of that.

Gregory Thomas Gibas: Got it. That is helpful, Patrick, and I appreciate the clarification, Dave. Thanks very much, guys.

Operator: Our next question comes from the line of Benjamin Briggs of Stonex Financial Inc. Your line is now open.

Benjamin Briggs: Hey. Good morning, guys. Thank you for taking the question. Congratulations on the quarter. So I just wanted to ask a little bit of a follow-up on your acquisition strategy. Obviously, CSP happened in early April of this year. But just as you are thinking about potential acquisitions going forward—I know you listed, as one of the potential uses of cash of the incremental term loan, that there might be some acquisitions that could happen in the future—any color on the type of additional acquisitions that you might make? Is there any chance that you might build new facilities? Technology platforms for alternative-to-detention programs? Just any clarity on your thinking there would be appreciated. Thanks.

Patrick Swindle: Sure. We have always been opportunistic in looking at opportunities for acquisitions. And if you think about the criteria that I would use at this moment, obviously we believe that our share price is undervalued. I think that is a very attractive use of capital for us. So, for an acquisition, to me, the hurdle for us that would justify buying a business instead of our stock—you would have to be very attractively valued. And I think appropriately valued at equal to or less than the ability to deploy capital via share repurchase. That is necessarily going to impact the scope and volume of acquisitions that we might consider or make. There is not an acquisition that is currently planned or in the pipeline. Although, again, we are going to continue to be very opportunistic and look for acquisitions that might be a good fit for us.

From a business standpoint, strategically, we are looking at transactions that might be adjacent to us that supplement our growth, that can leverage our competencies and their competencies, and that can ultimately give us the ability to grow on a long-term basis in a sustainable way. We go through seasons. This has presently been a season that has seen a lot of ICE growth. We will go through seasons that do not have that volume of growth, and so we are preparing the platform to be able to grow on a sustainable basis long term. CSP fits within that. But in terms of prioritization, I would revert back to David’s comment in his remarks overall, which was that prioritization right now would be toward share repurchases. But again, we will consider other business acquisitions as appropriate, but I do not see anything as imminent that I would point to from a cash flow prioritization perspective.

Benjamin Briggs: That is great color. Thanks very much. I appreciate it.

Operator: Our next question comes from the line of Joseph Anthony Gomes of Noble Capital. Your line is now open.

Joseph Anthony Gomes: Good morning. Thanks for taking my questions.

Patrick Swindle: Good morning, Joe.

Joseph Anthony Gomes: Just to kind of follow up and put a little bow tie on CSP. I think it said they are in 28 states, so either 22 they are not in. Would there be the potential for a similar type of purchase of another operator that may be in those 22 states as opposed to slowly going, you know, organically through those states? Is there others out there like a CSP that might be of interest at some point?

Patrick Swindle: There are other providers in the market, and I can see that as being an attractive way to scale the CSP platform. So I would say to the extent that those opportunities did present, we would consider them. Again, in terms of timelines, I would not look at something as imminent, but I do think there is an opportunity for consolidation within the space.

Joseph Anthony Gomes: Okay. And then, Patrick, we have talked over a number of quarters that you are in discussions with other states, some that are not existing customers. Any more color you can provide as to what timing might be as to whether you might get a new contract from a state that is not an existing customer?

Patrick Swindle: Sure. I appreciate that question. Timelines with any state procurement, and then particularly with new state procurements, can be widely varied. And so you can go through periods of intense discussion and have that ebb and flow based on relative priorities or alternatives, and certainly it also links to individual state budget cycles. So as we have conversations, you are going to see periods where you think that you are close to an agreement and you find out that it lags a bit. In other cases, you are going to see demand accelerate quickly based on an imminent need that presents, and something either being funded or not funded through the legislative cycle. So I do not really have an update today on timing of what some of those might be.

But I would say that we have a very strong state partnership development team that is very quick to accommodate the needs of our customers when they do present, and a number of those organic conversations continue. And certainly, as it warrants, we will provide updates on timing, but historically we have not given a lot of specificity outside of RFPs that are active and underway. So, again, I appreciate the question. I would like to give you more clarity, but I really cannot say more at this time.

Joseph Anthony Gomes: Great. Thanks. I will get back in queue.

Operator: Our next question comes from the line of William Sutherland of Benchmark Stonex. Your line is now open.

William Sutherland: Thanks. Hey, good morning, everybody. Dave, I just want to make sure I am clear on the source of growth in the ICE populations in the second half. That is based simply on the buildouts you are doing, or are you assuming that the national sort of census level will change? Is that correct?

David M. Garfinkle: Yes. Exactly right. So we are ramping the three facilities that I mentioned—California City, Midwest, and Diamondback. But the growth that we are contemplating in the second half of the year would be on top of that. Nationwide ICE detention populations are 10,500 lower from the peak in January. So we would expect that growth to resume in the second half of the year. Part of that could be around reconciliation. We did see the redeployment of ICE agents toward TSA checkpoints and some other factors that contributed to the decline. So we would see nationwide populations growing during the second half of the year. That would include not just the activation facilities that we have, but, you know, the contracts that we have had.

William Sutherland: Glad I clarified that. And then the second thing I have been thinking about is I have been reading about the interest ICE has in owning facilities and just the greater kind of protection they have in terms of the kind of things that facilities can run into. Are there any states where they are particularly focused on trying to acquire?

Patrick Swindle: We would rather not speak specifically to where ICE might be focused. I would revert back to my earlier answer, which is we believe that the broader vision is to develop a nationwide network that consolidates populations in relatively larger facilities but allows them to be able to service the needs of the entire country. And as they map that, they are going to have to make decisions between where they might consider the purchase of a facility outright, where they might choose to continue to contract with the private sector, and where they might consider an alternative like warehouses. Ultimately, they will settle on a strategy that makes sense for them, but I would say that is not necessarily limiting in terms of location.

And so as they look back strategically and try to decide where the optimal locations might be, I certainly have ideas on where optimal locations would be from our perspective, but I also would not want to limit the scope to any particular subset of markets because I think that could be unnecessarily limiting in terms of the broader vision of asset ownership by ICE.

William Sutherland: Is this a process that feels like it will be determined over a long period of time, or do you feel a sense from the agency that they want to get some decisions made in the relatively near term?

Patrick Swindle: I guess the way I would answer that is that the first articles that I saw referencing the strategy broadly were, I believe, around the end of last year. And in that, there was a lot of discussion around 85,000 beds total, some mix of warehouses and turnkey facilities. What has happened since then is they have to consider what has happened in the market and how that would impact various purchases. It has been publicly reported that they have made a number of warehouse purchases, but it has also been reported that they are actively considering those turnkey facilities. And so as you can imagine, if that process was initiated last year, that would be a conversation that is ongoing, and something that, ultimately, they would make a decision on in their own time.

I really hate to speculate on timing because in dealing with government, you do see significant movement in timelines from time to time, sometimes accelerating, sometimes decelerating. But, obviously, they have pointed to, very publicly, the idea that some number of turnkey assets would be a critical part of their strategy going forward.

William Sutherland: Got it. Thanks for all that color. Appreciate it.

Operator: Our next question comes from the line of Marla Marin of Zacks. Your line is now open.

Marla Marin: Thank you. So I have a couple of follow-up questions related to CSP. With this acquisition, you now have several business lines that are adjacent or complementary to the core business. Should we be thinking that there are any potential cross-promotional opportunities you see that could lift some of the other business lines now that you have CSP on board, or are they all extremely distinct and, you know, you do not see any opportunities for that?

Patrick Swindle: On one hand, the individual service delivery aspects are distinct, but there is meaningful overlap. The more interactions that we have with a particular partner, meeting their needs, the better trusted partner we can be for them. And so I think about the opportunity for cross synergies, most importantly, through the lens of expanding customer relationships where we may have a relationship that is very strong that they may not have, or vice versa. And so cross-selling opportunities absolutely will be available between the various businesses. Relationship leveraging between those is important. One of the really attractive things to us about Clinical Solutions is we believe that their values are very aligned with ours; their culture is very aligned with ours.

They have a very strong customer relationship focus and orientation and are very well respected by their customers. So thinking about how we might consider leveraging their capabilities or skill set, it really would be through cross-selling opportunities between the businesses. That said, there is a limited subset of customers in our space, and we all know all of our customers. So, again, for me, it is one of those opportunities you have to prove your value to your customer through delivering great quality service every day through two or three services instead of just one.

Marla Marin: And one follow-up on that. You talked before, I think in response to another question, about potential for consolidation within that particular space. Very, very back of the envelope, it looks like CSP as the largest provider in that segment has only about, or slightly under, a 10% market share, which would suggest that there is a significant opportunity to grow that business and potentially consolidate. Is that roughly the right neighborhood to think about—10%-ish?

Patrick Swindle: It depends on how you define market, but I would answer your question by saying there is significant runway available to Clinical Solutions, whether that be through consolidation or through outsourcing by customers who presently provide that service in-house. Clinical Solutions has a very technically advanced pharmacy. From a service delivery standpoint, we believe they have an approach to delivery that is industry leading and very scalable. And so as you think about the economics and the desirability of self-operating, if you are a particular state or federal customer, versus outsourcing, you certainly would have to consider both the quality aspects as well as the cost aspects of outsourcing. So, in terms of overall market opportunity, you are in the right zip code.

In terms of how that would manifest, that could be both through new outsourcing of currently self-operated facilities or operations as well as through consolidation through potential acquisitions.

David M. Garfinkle: And I would add that is really discussing market share, but I would also say it is a growing industry where we have aging prison populations that have medical needs. And so that is growth for that business as well.

Marla Marin: Okay. Thanks so much.

David M. Garfinkle: Thank you.

Operator: Our next question comes from the line of Analyst from Park West. Your line is now open.

Analyst: Hello. Can you hear me?

Patrick Swindle: Yes. Good morning.

Analyst: Good morning. How are you? Good. Just wanted to understand some of the recent population changes. We understand that there have been declines in the population post Q1 and just want to understand the band of outcomes if it does not ramp. Do we have room to change our expense on either the fixed or variable side of the business? And just wanted to understand, too, what you are hearing that would give us confidence that the ramp will continue post Q2, and how much of a ramp do we need in those census numbers to get to the guide?

David M. Garfinkle: I will take the first part, and maybe we will tag team on this one, Patrick. There is ability to right-size staffing levels when populations decline. Having said that, we always want to be ready and adequately staffed to make sure we can accommodate demand. But certainly, with lower populations, you have less churn within a facility, you have less overtime, you have less variable expenses. And so there is an opportunity to reduce expenses. But I will turn it over to you, Patrick, on the other reasons why we expect growth in the second half.

Patrick Swindle: Absolutely. I am sure, as you have seen, there has been a lot of national disruption in the ICE enforcement approach and a lot of transition occurring within Homeland Security. If I pan back and look at the broader variables: one of them is what is being expressed in terms of national approach. We believe there continues to be a strong commitment to maintaining strong border enforcement and strong interior enforcement. We continue to see them act in ways that indicate that they have an expectation toward increasing need for beds. Those conversations manifest in a variety of ways, including discussions around currently non-contracted facilities. As mentioned on the call, we have 7,000 beds that are available and can meet that need.

When you listen to conversations that have been publicly reported talking about the aggregated bed need, they continue to look toward 85,000 to as many as 100,000 beds nationwide. So we have seen no lessening of intensity. We have seen no change in what the expectation would be for the supply need. We have seen the disruption that occurred in recent months, but I believe that is more anomalous than what we have seen along a broader arc. You also have the dynamic of the significant and meaningful conversations that have occurred around funding for ICE and for CBP. The Homeland Security funding broadly has passed reconciliation, which is currently in process. We have seen the initial language that has come out of the Senate committees around funding for ICE and CBP that would fund ICE through the remainder of the current administration.

I am not going to handicap what happens in Congress. I have never been good at predicting that, but what I would say is it appears that funding is trending toward sufficient funding for ICE operations at enhanced or higher population levels for the remainder of the administration. If that funding is in place, as new leadership is able to establish and implement its priorities, you are likely to see an increase in populations. I do think that is consistent with their desire to add capacity, and I think we are in a great position to do that. So in terms of being able to make adjustments to cost structure, you do see cost structure adjustments on the margin—typically reductions in overtime more than outright staffing reductions. There is a long process for getting staff cleared, for ramping our facilities, for preparing them for growth.

And we absolutely believe that the right stance and position for us right now is to maintain a growth-focused position with full staffing in our facilities to be able to accommodate the growth that we do expect in the second half of the year.

David M. Garfinkle: And then to answer your question on guidance, we feel like the range incorporates a range of population growth during the second half of the year. It is hard to pinpoint what the nationwide population would have to be to hit the midpoint of our guidance, but I would say at a high level, if you get back to—nationwide—they are maybe slightly under 60,000 today; the peak was around 70,000 in January. If we get back to that 70,000 number in the second half of the year, I feel our guidance would probably be right in the middle there. It could depend on timing, too. Do they get to the 70,000 number sooner? Do they go higher than 70,000? Then there would be upside to our guidance. If they do not get to 70,000 until the back half of the year, then you are toward the low end of our guidance. That is how we are looking at it.

Analyst: Got it. That is super helpful. Thanks, guys.

Patrick Swindle: Thank you.

David M. Garfinkle: Thank you. Our next question comes from the line of Kirk Ludtke of Imperial Capital. Your line is now open.

Kirk Ludtke: Hello, Patrick, David? Brian, Jeff. Thank you for the call. I am just curious, is ICE full steam ahead with their plans to convert warehouses to detention centers? Or has that slowed down?

Patrick Swindle: We have seen probably the same things that you have seen in the press around the individual warehouse opportunities. There have been purchases that have been completed. We have not yet seen one of those opportunities be fully built out and ramped. In terms of the feasibility of that, I think that is something that really only ICE is able to assess themselves. I will say that we have looked at those opportunities. If we think about where we have strong capabilities, it would be the traditional type of detention capacity that we have provided. We have a great network of traditional facilities nationwide. We have 7,000 additional beds available to them today. We could scale that up significantly if needed. And so we have the ability to do that with our traditional asset base.

Warehouse conversions are challenging. They are difficult and would have to be done on an expedited timeline. And so, I hate to speak in areas where I would look at what a preference or an expressed option or opportunity might be for ICE. But I would say, certainly, for us it is not an area where we would see as much opportunity as partnering with them for whether it be a turnkey asset sale or activation of a new facility that would meet their needs. But, again, if you were to look at what has actually occurred, at this point we have not seen a great deal of movement in terms of activation of new warehouse facilities.

Kirk Ludtke: And what is the timing on that? Are we talking months, years? Even if they get all the permits and all the local players go along with it, how long does it take to convert something like that?

Patrick Swindle: It is very difficult for me to assess because we always look at it through the lens of what we believe we are good at and what we are capable of, and we can deliver in a way that we think would meet the government’s needs. We would really struggle as a company being able to do that on an expedited timeline. The community relationships are very complex—dealing with water and sewer and utilities. The overall construction buildout to meet the requirements is complex and takes time. But, again, I can only answer that through our lens. I cannot address that through a broader lens, and perhaps there are others that could do that more quickly than we could. But certainly for us, it would be an extended timeline to allow us to complete a conversion like that.

Kirk Ludtke: Got it. I appreciate it. Thank you. And maybe one of the goals was these facilities are much larger than the type of facilities that you manage. How many beds do you think would be in a typical warehouse?

Patrick Swindle: What has been described publicly is somewhat of a hub-and-spoke model, so there would be a mix of large facilities that would be hubs of 7,000 to 8,000 to even 10,000 or more detainees in a single location. Others would be smaller—what I have seen publicly described is something that is 500 or 1,500 beds. So it is a mix of both. We have developed over time a preference in the way that we operate—optimal sizing for a facility is more in the 2,000 to 3,000 bed range as opposed to something larger than that. But, again, ultimately ICE has to make a determination on what is the best fit for them and ultimately decide whether that would be a viable option once they have proposals in place. That is a very large facility.

Kirk Ludtke: Got it. I appreciate it. Thank you. And then if you were to sell a facility to ICE and then operate it, how might we think about the margins on a contract like that? Would they be similar to your managed-only contracts now, or higher because it is a more complicated role?

Patrick Swindle: I would look at that as being more managed-only-like in terms of the components. There are some components of that negotiation that are very straightforward, which is what are your operating costs on a daily basis and what is the reimbursement level. There are other components that are different from a capital perspective, which is who is responsible for a roof replacement or HVAC replacement or other components, FF&E, within the facility. That is something that we will obviously have to manage through. Depending on responsibility, that could mean that the margin profile could be meaningfully different than our traditional managed-only. But that is something that would have to be resolved through the negotiation because, again, the ongoing CapEx that we have for our facility operations is significant.

Understanding responsibility for that would impact what the operating margin would be. Obviously, on a cash flow basis, you would expect that answer to be somewhat neutral because you would be pricing in the additional margin that you need to cover the investments you have to make to maintain appropriate facility operation. But from an operating margin basis, you would be looking at higher margins to the extent that we are responsible for ongoing capital.

Operator: Thank you. Our next question comes from the line of Gregory Thomas Gibas of Northland Securities. Your line is now open.

Gregory Thomas Gibas: Great. Thanks for taking the follow-up. And first of all, sorry, Patrick, I was not thinking when I addressed you earlier. I wanted to just follow up on how your discussions or interest levels have trended with idle facilities, and as it relates to that, do you expect any additional contracting would likely occur after appropriations are in place or made available?

Patrick Swindle: That is a great question. We continually market all of our available bed capacity to both federal and state partners. So we are in constant dialogue in some form around use of those beds. I would say that funding being in place is obviously helpful. I think having visibility that the department is funded through the end of the administration is particularly helpful to the extent that that is ultimately what occurs. I think the recent decline in populations that we have seen could certainly impact timing of any new awards. But I would also say to the extent that there is additional space needed, the entire network has not been built out at this point, and we do believe there are opportunities for additional awards. I would hate to get more specific than that on timing because I do think it is somewhat variable, but I would be surprised if there are not awards within the sector during the balance of this year.

Gregory Thomas Gibas: Got it. Very helpful. Thanks again.

Patrick Swindle: Thank you.

Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Patrick Swindle for closing remarks.

Patrick Swindle: Thank you, operator, and thank you all for joining our call today. In closing, as we, along with our public sector government partners and private sector peers, celebrate National Correctional Officers and Employees Week, I would like to again express my appreciation to our over 13,000 employees. Their focus and commitment help ensure that everyone in our care is provided with a safe, secure, and humane environment, and that we deliver the highest quality services to every individual for whom we are responsible. We are proud of our team, and we want to celebrate them today with all of you as they make what we do possible. Thank you all for joining the call today, and have a great day.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.