CoreCivic outlines $2.5B revenue and $450M EBITDA run rate for 2026 as new contracts ramp up

Earnings Call Insights: CoreCivic (CXW) Q3 2025

MANAGEMENT VIEW

* CEO Damon T. Hininger announced substantial progress on contracting several idle facilities, stating, "Since our last earnings call, we announced new awards at the 600-bed West Tennessee Detention Facility, the 2,560-bed California City Immigration Processing Center, the 1,033-bed Midwest Regional Reception Center and the 2,160-bed Diamondback Correctional Facility. In aggregate, these 4 new contract awards are expected to generate annual revenue of approximately $320 million once we reach stabilized occupancy."
* Hininger added that these new awards set up CoreCivic for a stronger 2026, noting expectations of "annual run rate revenue to be approximately $2.5 billion and annual run rate EBITDA to increase by $100 million to over $450 million."
* Hininger also revealed an aggressive buyback plan: "We expect to be executing an aggressive buyback plan this quarter, likely to be more than double the amount we have done in previous quarters."
* President & COO Patrick Swindle highlighted that federal partners comprised 55% of total revenue in Q3, with ICE revenue up $76.2 million or 54.6%, and U.S. Marshals Service revenue down 5% year-over-year, reflecting a shift in contract mix. He stated, "Our third quarter results exceeded our internal projections for adjusted EPS and normalized FFO per share by $0.03 and $0.04, respectively, and adjusted EBITDA by $4.8 million."
* CFO David Garfinkle stated, "In the third quarter of 2025, we generated GAAP EPS of $0.24 per share and FFO per share of $0.48... Adjusted EBITDA was $88.8 million compared with $83.3 million in the third quarter of 2024, an increase of 6.6%."

OUTLOOK

* CoreCivic expects to generate adjusted diluted EPS of $1 to $1.06 for 2025 compared with previous guidance of $1.07 to $1.14, and normalized FFO per share of $1.94 to $2 compared with $1.99 to $2.07 previously. Adjusted EBITDA is forecast at $355 million to $359 million, down from previous guidance of $365 million to $371 million.
* Management explained the updated guidance reflects start-up activities at four newly contracted facilities, which "negatively impact Q4 margins."
* Garfinkle indicated, "We currently expect our run rate EBITDA to be no less than $450 million. We currently expect to reach stabilized occupancy of the last activation of these 4 facilities in the second quarter of 2026."

FINANCIAL RESULTS

* The company reported adjusted EPS of $0.24 and normalized FFO per share of $0.48 for Q3 2025, up from $0.20 and $0.43, respectively, in Q3 2024.
* Adjusted EBITDA for the quarter was $88.8 million, an increase from $83.3 million in the prior year period.
* Operating margin on Safety and Community facilities was 22.7% in Q3 2025, with margin excluding operating losses at ramping facilities at 24%.
* The company repurchased 1.9 million shares in Q3 at an aggregate cost of $40 million.
* Cash on hand at quarter-end was $56.6 million, with $191.4 million in available credit facility borrowing.

Q&A

* Joseph Gomes, NOBLE Capital, asked about the pace of ICE detentions. CEO Hininger responded, "We're seeing the pace, admissions, discharges and activity in our facilities pretty much status quo, I mean, pretty much what we expected... it's increased a little bit not just on the detention side, but we're also being asked to do a lot more transportation."
* Gomes inquired about guidance and occupancy projections. CFO Garfinkle noted, "Our updated guidance really reflects the start-up activities in Q4 relative to our last guidance... incorporating those new contracts into our guidance does result in some operating losses at those facilities as we hire staff, continue to ramp up staff before we start receiving detainees."
* Marla Marin, Zacks, asked about government shutdown payment delays. CFO Garfinkle explained, "We expect when the government resumes operations that we will get paid in full for all the services that we've provided in the past... they do pay with interest."
* Kirk Ludtke, Imperial Capital, asked about competition from alternative sites. Hininger responded, "I think to get to 100,000, as I said earlier, I think it's going to be a little bit of all of the above approach."
* Raj Sharma, Texas Capital, questioned the contribution of reactivated facilities to 2026 revenue. Garfinkle replied, "If you look at '26 versus '25, that's probably about $250 million of incremental revenue..."
* Multiple analysts probed on start-up costs, share buybacks, occupancy targets, labor costs, and state versus ICE demand for idle facilities, with management providing detailed operational and financial insights.

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism but pressed management for more clarity on guidance, start-up costs, and activation timelines, with some skepticism about short-term impacts on margins and cash flows.
* Management maintained a confident and upbeat tone in prepared remarks, using phrases like "we are optimistic" and highlighting the "aggressive buyback plan." During Q&A, executives remained constructive, occasionally reiterating prior points but acknowledging operational complexities and legal uncertainties.
* Compared to the previous quarter, the analyst tone was more focused on short-term margin headwinds and payment risks, while management's confidence in long-term growth remained undiminished.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a notable reduction in 2025 guidance due to anticipated start-up losses at newly activated facilities, whereas the previous quarter raised guidance on the back of strong financial results and new contracts.
* Strategic focus shifted from contract negotiations and initial activations in Q2 to executing multiple large facility ramp-ups and emphasizing aggressive share repurchases in Q3.
* Analysts increasingly asked about short-term risks, government shutdown effects, and capital allocation, whereas prior questions focused more on structural growth and contract wins.
* Management's tone remained confident, but there was greater acknowledgment of near-term operational hurdles in Q3.

RISKS AND CONCERNS

* Management cited legal delays affecting intake at the Midwest Regional Reception Center as a challenge, with Hininger stating, "the intake process at our Midwest facility has been delayed by a lawsuit filed by the City of Leavenworth."
* Start-up activities at four newly contracted facilities are expected to negatively impact Q4 margins and EBITDA guidance.
* Analysts highlighted concerns about government shutdown payment delays, labor cost escalation, and the possibility of exceeding leverage targets due to share buybacks. Garfinkle addressed payment timing, and Swindle noted, "the wage environment is very much moderating across our markets."

FINAL TAKEAWAY

CoreCivic’s third quarter marked a transition to large-scale facility activations and the commencement of major new contracts, setting the stage for a significant step-up in revenue and EBITDA in 2026. Management reiterated its confidence in reaching a $2.5 billion revenue run rate and over $450 million in EBITDA once new facilities are fully ramped, despite near-term margin pressures from start-up costs. The company plans to accelerate share repurchases, viewing current stock valuation as misaligned with projected cash flows, and remains active in both federal and state contracting discussions as capacity demand rises. The leadership transition, with Patrick Swindle set to become CEO, was highlighted as a seamless continuation of strategic direction.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cxw/earnings/transcripts]

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