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Good day, and welcome to The GEO Group's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Pablo Paez, Executive Vice President of 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 2025 Earnings Results. With us today are George

Thank you, Pablo, and good morning to everyone. Thank you for joining us on our third quarter earnings call. During the first 3 quarters of the year, we believe we've made significant progress towards meeting our financial and strategic objectives. Since the beginning of 2025, we've entered into new or expanded contracts that represent over $460 million in new incremental annualized revenues that are already under contract and are expected to normalize next year. This represents the largest amount of new business that we have won in a single year in our company's history. We've entered into new contracts to house ICE detainees at four facilities totaling approximately 6,000 beds, which include three company-owned facilities where we announced in the first half of 2025, the 1,000-bed Delaney Hall, New Jersey facility, the 1,800-bed North Lake Facility in Michigan, and the 1,868-bed D. Ray James Facility in Georgia. And more recently, the 1,310-bed North Florida Detention Facility, which is a state-owned facility where we are providing management services under a joint venture agreement that we announced in early October. The Florida contract arrangement demonstrates GEO's ability to provide management services through alternative solutions like the State of Florida's partnership with the federal government. Additionally, during the third quarter, we reactivated our 1,940-bed Adelanto ICE Facility in California, which was previously underutilized due to COVID-related court cases. On a combined basis, these five facilities are expected to generate more than $300 million in incremental annualized revenues at full occupancy as they normalize their financial contributions next year. These facility activations have increased our total ICE capacity to over 26,000 beds, and our current census is over 22,000, which is the highest ICE population we've ever had. In addition to these facility activations, we are reviewing the physical plant at 20 of our ICE facilities to determine our capacity to expand the office space for additional ICE staff and their expanding mission. Our Delaney Hall and D. Ray James facilities will have added ICE office space as part of our new contracts, and we have submitted similar proposal for Moshannon Valley in response to a request from the agency. This effort is representative of our long-standing partnership with ICE and our company's flexibility in adjusting to and addressing the ever-changing needs of ICE. With respect to our secure transportation, we have significantly expanded our footprint for ICE and the U.S. Marshals over the course of 2025. Earlier this year, we signed a 5 -- new 5-year contract with the U.S. Marshals for the provision of secure transportation services covering 26 federal judicial districts spanning 14 states. Throughout the year, we've executed new or amended contracts to expand secure ground transportation services at four existing ICE facilities and at our three new recently activated ICE facilities. Additionally, the services we provide under our ICE air support contract have steadily increased throughout this year. On a combined basis, this new transportation business represents approximately $60 million in expected incremental annualized revenues. We are encouraged by the growth opportunities at the state level as evidenced by the three recently managed-only contract awards from the Florida Department of Corrections, including two facilities we do not currently manage, which are expected to generate approximately $100 million in incremental annualized revenues beginning in July of 2026. Of particular importance, we are very honored to have been awarded a new 2-year contract for the ISAP 5 program at the end of September. We believe this significant contract award is a testament to the high-quality electronic monitoring and case management services, our wholly-owned subsidiary, BI has consistently delivered for over 20 years. There are presently approximately 7.6 million immigrants on the non-detained docket with approximately 182,000 enrolled in the ISAP program at this time. As part of the ICE's alternative to detention or ATD system, many immigrants are placed in the Intensive Supervision Appearance Program, ISAP, as a subprogram within ATD. It's mainly used for people ICE considers a higher flight risk or who have been pending a silent or removal cases but are still allowed to live in the community. The program relies on several forms of surveillance. Some are required to wear GPS ankle or risk monitors that track their movements in real time. Others are enrolled in SmartLINK Mobile App, which relies on facial recognition, voice ID and GPS to confirm a person's location during check-ins. Under the previous 5-year ISAP contract, the participant count started at 91,000 individuals and thereafter doubled ending at 183,000 individuals. The present ISAP 5 participant count is more than 182,000, but the new contract includes pricing for 361,000 participants in year 1 and 465,000 participants in year 2. In order to further assure our success in the rebid competition and provide lower unit cost for further ISAP growth, we've reduced our pricing as in the past on a variety of services, which has resulted in a new financial baseline, which will later be discussed by Mark. We are able to implement this strategy by identifying staffing efficiencies through the program services, along with the continued development of less costly new generation monitoring devices, which also required margin compression. We are optimistic that ISAP ramp-up could begin early next year. GEO has the capability in monitoring devices and case management services to achieve those significantly increased participation levels and far beyond if desired by ICE. But of course, we cannot provide definitive assurance of future ISAP participation levels, which are determined by ICE management. And as I said on our previous call, the focus of ICE at this time has been toward the increase in detention capacity in which we are participating. But what we have seen is a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors and a steady decrease in the less intensive and lower-priced use of phones or phone apps. This new policy seems to be consistent with the objective of more aggressive supervision of the 7.6 million immigrants on the non-detained docket. As the world's largest service provider of electronic monitoring devices, we remain optimistic in the importance and growth potential of the ISAP 5 contract. Going forward, we expect to be able to capture additional growth opportunities. We believe the federal government's objective continues to be to scale up immigration detention to approximately 100,000 beds or more from the approximately 60,000 beds ICE is currently utilizing. This objective of scaling up to 100,000 detention beds is a 270% increase from the 2024 average of 37,000 beds. However, the pace of new detention contracts has been slower than anticipated, which we believe is possibly due to three factors. First, as has been reported in the media, the Department of Homeland Security has implemented a policy that requires Homeland Security Services Secretary to review and approve all contracts above $100,000, which is time and staff intensive. We have been intensely cooperating in this financial and staffing review process toward providing assurance that the government is receiving best value at GEO facilities and services. Second and more recently, the government shutdown has likely delayed the award of new contracts. During the government shutdown triggered by a lapse in appropriations, federal agencies are generally careful about making new contract awards unless the award is related to an accepted activity or is funded by a source other than the regular appropriations. Third is the need for ICE to have more staff to carry out its enforcement efforts, which is indicated by ICE's new recruitment program to double its employees from approximately 10,000 to 20,000, which is also time and staff intensive. Following the resolution of the current government shutdown, we believe ICE will have ample funding to support its priorities. Not only will ICE receive annual appropriations baseline of approximately $8.7 billion, but the agency also has access to $45 billion in incremental funding for detention services, which is available through September 30, 2029. While the exact timing of government actions, including our new contract awards is difficult to estimate, we believe that our remaining idle facilities are likely to play an important role in supporting the objective of increasing overall detention capacity. We have approximately 6,000 idle beds at six company-owned facilities, which remain available. Most of these facilities are formally contracted -- were formally contracted to the U.S. Bureau of Prisons and are of high security, which makes them ideally suited for the current needs of the federal government. On a combined basis, these 6,000 beds could generate more than $300 million in additional incremental annualized revenues. We also believe that increasing detention capacity to 100,000 beds or more will likely require ICE to seek alternative solutions in addition to traditional hard-sided facilities. Based on our best estimate, the current beds available by the private sector at traditional hard-sided facilities would likely provide ICE capacity for approximately 80,000 beds. Thus scaling up to 100,000 detention beds or more will likely require additional partnerships with states or additional temporary soft-sided facilities on a military basis or other sites. We will be exploring opportunities to participate in these new government sites, whether state-sponsored or procured by the military. Meanwhile, our focus is also on the activation on our remaining idle facilities. As evidenced by our recent joint venture agreement in Florida, we believe GEO is well positioned to pursue other state partnership opportunities that increase detention capacity for ICE. Finally, we have and will continue to evaluate the potential acquisition or leasing of third-party-owned facilities, and we have identified approximately 5,000 combined beds that could be added using several options of temporary and permanent facilities at several of our existing ICE sites. We are also pursuing additional diversified opportunities in the field of mental health services, which we exited approximately 13 years ago when we became a REIT and subsequently de-REITed. We are currently participating in a procurement in the state of Florida for the management contract at the South Florida Evaluation & Treatment Center, which we expect to be awarded in Q1 of next year. Our goal with all these efforts is to place GEO in the best competitive position to pursue available growth opportunities. In addition to the steps we have taken to capture quality growth opportunities, we have made significant progress towards strengthening our capital structure by reducing outstanding debt, deleveraging our balance sheet and enhancing shareholder value through capital returns. In 2025, we reduced our total net debt by approximately $275 million, closing the third quarter with approximately $1.4 billion in total net debt with a total net leverage of approximately 3.2x adjusted EBITDA at this time. Our debt reduction efforts were boosted by the successful sale of the Lawton, Oklahoma facility for $312 million or $130,000 per bed, which was a transformative event for our company, allowing us to significantly deleverage our balance sheet and launch a stock buyback program ahead of our prior expectations. Approximately $60 million of the Lawton Facility sale gain was used to purchase the 770-bed downtown San Diego, California facility that we've been operating for 25 years for the U.S. Marshals Service. During the third quarter, we repurchased approximately 2 million shares for approximately $42 million under our newly launched buyback program, bringing our total shares outstanding to approximately 140 million at the end of the third quarter. Given the intrinsic value of our assets and already captured, expected future growth, we believe that our current equity valuation offers a very attractive opportunity. To this end, our Board of Directors has increased our stock buyback program authorization by $200 million, increasing the total authorization to $500 million and extending expiration date to December 31, 2029. We plan to execute our stock buyback program opportunistically, balancing it with our growth, capital needs and our objective to reduce debt and deleverage our balance sheet. At this time, I will turn the call over to our CFO, Mark Suchinski, to review our financial highlights and guidance.

Thank you, George. Good morning, everyone. I am happy to report that we had a very solid third quarter. For the third quarter of 2025, we reported net income attributable to GEO of approximately $174 million or $1.24 per diluted share on quarterly revenues of approximately $682 million. This compares to net income attributable to GEO of approximately $26 million or $0.19 per diluted share in the third quarter of 2024 on revenues of approximately $603 million. During the third quarter of 2025, we completed the sale of the Lawton, Oklahoma facility for $312 million and the Hector Garza, Texas facility for $10 million. These two transactions resulted in a $232 million gain on asset sales during the third quarter. Approximately $60 million of the Lawton Facility sale was used to purchase the 770-bed Downtown San Diego, California facility that we have been operating for 25 years for the U.S. Marshals Service. Additionally, during the third quarter of 2025, we incurred a noncash contingent litigation reserve of approximately $38 million in connection with a legal case in the State of Washington involving claims of individuals who participate in the voluntary work program while in ICE detention. The Ninth Circuit Court of Appeals has ruled that the ICE volunteer detainees are entitled to state minimum wage payments, but stayed their ruling pending GEO's appeal to the U.S. Supreme Court. The Ninth Circuit of Appeals ruling is in stark conflict with other federal court rulings on individuals providing work while in confinement. No company has ever paid state minimum wages to individuals working in confinement facilities. While we are appealing the case to the U.S. Supreme Court, due to accounting rules, we recorded this noncash contingent litigation reserve during the recent -- our most recent third quarter. Excluding this noncash contingent litigation reserve, the gain on asset sales and other items, adjusted net income for the third quarter of 2025 was approximately $35 million or $0.25 per diluted share compared to $29 million or $0.21 per diluted share for the prior year's third quarter. Adjusted EBITDA for the third quarter of 2025 was approximately $120 million, up from the approximately $119 million reported for the prior year third quarter. Beginning with revenues. Quarterly revenues in our owned and leased secure service facilities increased by approximately 22% year-over-year, driven by the activation of our new ICE contracts, which drove the census across our contracted ICE processing centers to an all-time high. Revenues for our nonresidential contracts increased by approximately 10% from the prior year third quarter. Revenues for our managed-only contracts increased by approximately 8% from the prior third quarter. Revenues of our electronic monitoring and supervision services and for our reentry centers were largely unchanged from the prior year third quarter. Now let's turn to our expenses. During the third quarter of 2025, our operating expenses increased by approximately 15% due to the start-up of new contract awards and increased occupancies compared to the prior year quarter. Our G&A expense for the third quarter of 2025 increased from the prior third quarter, in part due to the reorganization of the senior management team at the end of last year, higher employee-related benefit costs and support for the revenue growth from our new contract awards. Our third quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $7 million as a result of the reduction in our net debt. Our effective tax rate for the third quarter of 2025 was approximately 25%. Now let's move to our outlook. We have updated our financial guidance for the fourth quarter and full year 2025. Our updated guidance for the fourth quarter incorporates a new reduced contract pricing for ISAP 5, which, as George mentioned, is being favorably impacted by a steady shift in technology mix as well as higher intensity of case management services and the potential for higher volumes, all of which should improve the economics of the new contract. Based on these variables, the federal government assigned an estimated value to the 2-year contract of over $1 billion. Because the exact scope and timing of the government actions are difficult to estimate and are outside of our control, we have not included any assumptions with respect to favorable mix shift or census growth in the ISAP contracts in our 2025 guidance. Additionally, we are in the process of implementing several cost mitigation measures for the ISAP contract by the end of this year, which we expect to result in cost savings of approximately $2 million to $3 million per quarter beginning in 2026. The fourth quarter was also impacted by additional start-up costs at the Adelanto, California facility, which has required the hiring of 179 additional staff due to its reopening and the increase of overtime costs due to new staff awaiting their final ICE clearance before being allowed to perform their responsibilities. We expect both issues to normalize in 2026. As a result, we expect fourth quarter 2025 GAAP net income to be in the range of $0.23 to $0.27 per diluted share on quarterly revenues of $651 million to $676 million. We expect fourth quarter '25 adjusted EBITDA to be between $117 million and $127 million. Taking into account our updated fourth quarter guidance, we expect full year 2025 GAAP net income to be in the range of $1.81 to $1.85 per diluted share, including the $232 million gain on the sale of the Lawton, Oklahoma and Hector Garza, Texas facilities. We expect full year 2025 adjusted net income to be in the range of $0.84 to $0.87 per diluted share on increased annual revenues of approximately $2.6 billion and based on an effective tax rate of approximately 25%, inclusive of known discrete items. We expect full year 2025 adjusted EBITDA to be in the range of $455 million to $465 million. We expect total capital expenditures for the full year of 2025 to be between $200 million and $205 million, which includes our previous announced $100 million investment to enhance our ICE facilities and services and the approximate $60 million for the purchase of the Western Region Detention Facility. With the already announced contracts that are expected to normalize next year and new opportunities that are in discussions, we could see a path to approximately $3 billion in annual revenues in 2026. Now let's move to our balance sheet. We closed the third quarter of 2025 with approximately $184 million in cash on hand and approximately $143 million in available capacity under our revolving credit facility. We believe we have ample liquidity to support our working capital needs during the current government shutdown. We have received verbal support from several of our banks to provide additional liquidity should the government shutdown continue for a prolonged period of time. We also believe we've made significant progress towards deleveraging our balance sheet. Year-to-date, we've reduced our net debt by approximately $275 million, closing the third quarter with total net debt of approximately $1.4 billion and total net leverage of 3.2x adjusted EBITDA. As a result, we've achieved an annualized reduction in interest expense of over $25 million. Our debt reduction efforts were bolstered by the successful sale of the Lawton, Oklahoma facility for $312 million during the third quarter. We believe this important transaction is representative of the intrinsic value of our real estate assets, totaling 50,000 owned beds, and it allowed us to significantly deleverage our balance sheet and begin to return capital to our shareholders. During the third quarter, we repurchased approximately 2 million shares for approximately $42 million under our recently launched stock buyback program, which our Board has increased by $200 million, bringing the total authorization to $500 million. We expect to continue to execute our buyback program opportunistically within the covenant requirements of our debt agreements. We remain focused on disciplined allocation of capital to enhance long-term value for our shareholders, and we believe that our strong cash flows will allow us to support all of our capital allocation priorities. At this time, I will return the call back to George for some closing comments.

Thank you, Mark. In closing, we believe we've made significant progress towards meeting our strategic objectives. So far in 2025, we've announced new or expanded contracts that are expected to generate more than $460 million in new incremental annualized revenues, which will normalize next year and likely achieve approximately $3 billion in total company revenues for 2026. The amount of new contracted revenues is the largest in our history of our company. Going forward, we expect to be able to capture additional growth opportunities. We have approximately 6,000 idle high-security beds that remain available, which could generate in excess of $300 million in annualized revenues if fully activated. With the award of the new 2-year ISAP contract and the investments we've made to stock up on the inventory of GPS tracking devices and development of new generation devices, BI is well positioned to respond to the future demands under the ISAP 5 contract. We are also well positioned to continue to expand our delivery of secure transportation services for ICE and the U.S. Marshals. While the exact timing of government actions, including new contract awards is difficult to estimate, as a management team, we are focused on maintaining a level of readiness to successfully pursue and capture future growth and continuing to allocate capital to enhance value for our shareholders. That completes our remarks, and we would be glad to take questions. Thank you.

[Operator Instructions] Our first question comes from Joe Gomes with NOBLE Capital.

I wanted to start off here. I think there's a big question hanging out there with the government shutdown, with the ICE focus on hiring the extra 10,000 people that the rate of ICE population detentions has not been as robust here as originally anticipated. Just was wondering what you guys are seeing out there. Is it flowing at what your expectations were? Or has it come in a little less than what you may have been previously expecting given the current status there with the federal government?

No. It's obviously gone slower than we previously expected. And our existing facilities are at almost full capacity, and they're churning out deportations almost at the rate of approximately 100% of their capacity per month. So we've never seen anything like this before. So our existing facilities are on full throttle. We were expecting additional contract awards, but there is a need for additional ICE staff to support additional facilities. That's why they're trying to recruit 10,000 staff. Well, as I said in my remarks, it takes a lot of time and staff-intensive activities to recruit, hire, train and bring on board that ICE staff to support new facilities around the country. We think our idle facilities totaling 6,000 beds are ideal high-security facilities that are available. But just looking at a combination of factors of the government shutdown, the need for additional ICE staff, there have -- those factors have caused the delays that we hope will be concluded by the end of the year, if not the end of this month.

Okay. Really appreciate the color there. On the ISAP, congrats on the contract win. I understand there's going to be some puts and takes there, some changes. But historically, if you look at that contract, it's run roughly about a 50% NOI margin. Do you think even with all these puts and takes that stays at least at that level? Or do you think there'll be contraction in that NOI margin?

Well, we really don't discuss our margins by business unit to that level of granularity. We made a pricing cut to be competitive in this last rebid as we have done, I think, in two or three times previously. So every time there's a rebid of the ICE contract, there's a lot of competition, and we've reduced our unit pricing, and there's 40 different units in that pricing. So we took a hard look and we identified cost savings opportunities at the corporate level, regarding staffing field level, cost savings on devices, the identification of new generation devices on a less costly basis. So all of that was combined to present the government with the best value in winning the contract. Now the count, as I've said, has been fairly stable which is a little disappointing, obviously. But the mix of monitoring devices is leading towards more intensive devices that cost a bit more and more intensive supervision of case management services with regarding the existing population that will be applied to the increasing population as priced in years 1 and year 2. Remember, year 1 is priced to double the existing capacity and year 2 is almost tripling. So that remains to be seen. It's up to the government as to how do they get to those levels. But right now, I think we've been fairly consistent in saying the focus has been on increasing detention capacity. And that's where the activity has been and the actual participation levels increase.

Joe, it's Mark. I would just add that our electronic monitoring business has been and will continue to be our highest margin business. We publish that quarterly. It's -- we're fully transparent about that. And we -- as George indicated, we've made some adjustments, but we're working on the cost side of things, and we expect those actions to be complete by the end of the year and reap those benefits in 2026.

Okay. And then one more, if I may. Staffing has always been challenged especially when you're opening so many idle facilities at one time. I'm just wondering how are you guys looking at or seeing the ability to staff up the facilities that you're opening?

Great question. I think we've been targeting hiring 1,000 or 1,500 additional staff this year, which is an enormous amount comparatively speaking. And that's been a very costly feature that has impacted our earnings this year, which I don't think a lot of new shareholders are aware of the impact. When you hire people, you have to put them into -- you have to recruit them, you have to do background checks, you have to put them in training. All of that is a cost that's predominantly borne by us and not the client until the facility opens and normalizes. So almost all of that -- those staff are paid according to Department of Labor determined wages. And so I think we're having a good shot at finding the people, but it takes a long time to get them through the ICE clearance process. And that's a costly wait for us.

The next question comes from Jason Weaver with JonesTrading.

This is Matthew Erdner on for Jason. So going back to the ISAP, I just kind of want two clarification questions. First, the $1 billion, that is over the 2-year term period. And then I just want to make sure I get the numbers right on the scale up. It was, I believe, $361 million you said in the first year and then $465 million for year 2?

Yes.

Okay. And then as it relates to that, should we kind of expect that 1/3 of that revenue trickles through over '27 with the remainder kind of coming through in 2027 as that program continues to scale?

Well, as we indicated, that's -- we responded to the government's request. And the government had in the RFP, identified those counts for us to respond to. And so we -- today, the counts are at 182,000. We really -- we don't know exactly the exact timing of the change in ISAP participants over time. But I think as George has articulated, their focus right now is on detention. And once we get to 100,000 beds, the pivot will be to ATD. So I think it's hard for us to predict the exact timing of that. But what we do know is that the RFP had allocated significantly higher funding and participant counts than -- as compared to where we are today. And so I think that's what we know.

The contract term will go into 2027, obviously. That's part of the answer to your question. The exact counts, we are beyond our control. They are identified in the pricing procurement document that everybody had to bid on. So the counts are as we've discussed, and it remains to be seen if we achieve or exceed those counts. Because as I said in my comments previously, that the count on the previous ISAP 4 awards started at 91,000 and ended at 183,000. If that's any indication of the future, then I think we're going to be on solid ground.

Got it. That's helpful. And then touching on the additional growth opportunities and alternative solutions that you guys are still on the table. It's nice to see you guys working with the state of Florida. How big is that opportunity set? And how many states are looking for these kind of management services as ICE continues to try to look for additional beds?

There are several, which we can't name at this time. But they're generally beds that would be part of their correctional system, idle beds or refurbished beds and that number typically in the hundreds, possibly getting up to 1,000 beds per location that we're aware of. But we're not fully privy to what DHS is doing or who they're talking to, obviously.

Got it. And then looking at that from kind of a margin perspective, would that kind of fit in with the historical managed services margins?

It's actually a bit better than that because the staffing levels for this kind of population is different than what we typically seen at our state facilities that were managed only. This is a higher security population requiring more staffing, and we make a margin on the staffing.

The next question comes from Greg Gibas with Northland Securities.

I wanted to ask, I guess, regarding your commentary on the mix shift within the ISAP program. Can you confirm that, that mix shift toward more intensive uses is currently happening, but not included in your Q4 guidance? I guess what assumptions with mix are implied by guidance?

It's Mark. Let me address that. As George said, we are seeing a shift of a movement towards less usage of an app or a phone and higher participant counts using our ankle bracelets. And so what we've seen to date has been a slow and steady growth on the ankle bracelets, which are higher cost and more intensive as it relates to the case management services. And to a certain degree, we've built that in. What we're saying is we only have a couple of months left in the year. We've factored that into our overall assumptions. But over the coming next 2 years, we're expecting the continued shift towards the higher intensive supervision, which is the higher cost services from a technology device standpoint as well as a case management. So the point we're making is we think there's some opportunities as we've rebid that contract, both on the mix shift and some of the cost actions that we're taking to mitigate things. Obviously, the new pricing went into effect on October 1. It's going to take us a little while to implement the actions that we have, and that had an impact on the fourth quarter. But we're working hard to push through that and potentially take advantage of the shift towards the more intense services. And we think that would continue into 2026, and we'll know better when we provide guidance in February of next year.

Got it. That's helpful. And nice to see the increased share repurchase authorization. With where the stock is trading now, could you maybe discuss your thoughts on leaning into it more or considerations of an acceleration of repurchase activity?

Well, we're aligned. We think our share price is way undervalued, right? George talked about our business. When we look at our profitability and our cash flows and the growth that we've achieved here, we think our stock price is significantly undervalued. That's why we launched our share purchase program with George's support and the Board's. With where the stock price is, we had another dialogue with our Board at our Board meeting, and we increased the size of that. And we're confident about our cash flows over time here, and we're leaning into this. I think earlier in the year, we talked about shareholder returns. We talked about doing that once we got less than 3x levered. We're over 3x levered, but we're leaning into it, and our banks are supportive of that. So we're going to lean into it. We're going to, as George said, be opportunistic about it and balanced. But where our stock price is, we're going to continue to pursue the buybacks and take advantage of the lower stock price and our cash flows and our ability to go do that.

Got it. Makes sense. And I know timing, like you said, is difficult to predict. Just I guess, referring to your prepared remarks, you mentioned being optimistic on ISAP ramping up early next year. I guess I would just ask like what leads you to expect that or support that expectation? Is there anything new you've heard since maybe last quarter?

Well, there's millions of people that are on the non-detained docket. And there's going to be a desire to provide more clarity as to where they are, what stage they are in with respect to their hearing process, and making sure they get to their hearing and if they're not qualified to be in the country to deport them. So I think those are all publicly identified objectives of this administration. And I think the ISAP contract will be an important tool toward that -- towards those objectives.

And as we've mentioned in the past, once the detention continues to grow, the government has talked about targeting 100,000 beds at that point in time. Once they max out that capacity, and they continue the enforcement efforts that they have, the next logical tool to use is the ISAP program.

The next question comes from Raj Sharma with Texas Capital.

Quite a few of my questions have been answered. But can I go back to the question on margin and the ISAP program. I guess -- and I know you're not providing that much detail, but could the margins match or exceed your existing or earlier margins at a certain volume of monitored and supervised accounts? How do we sort of model that out?

Well, I think it will have to be over time as both Mark and I have said that we have to implement some cost savings with regard to staffing efficiencies and service efficiencies as well as cost of devices. That will -- all of that will take place over the next succeeding months. And if the numbers materialize as they're identified in the pricing that was required of all the bidders, our margins and revenues will exceed what we had previously, I believe.

Got it. And then on the guide, the fiscal '25 guide, the margins of about 23%, 24%, historical had been 26%. Is this -- should we consider this to be sort of a new base of EBITDA margins?

Are you speaking regarding ISAP or?

No, I'm talking about the overall -- sorry. Yes, talking about the overall margins. This quarter was flat to last year on higher revenues. Anything that explains the EBITDA margins not picking up as much, and should we consider that as the base EBITDA margin going forward?

No, I think we tried to articulate it. We talked about the fact that as we're starting up these contracts, there's a cost investment that takes place. We talked about the Adelanto Facility and the rapid increase in the participants and us working hard to hire those folks. So both in the third quarter and the fourth quarter are going to have -- are going to be impacted to a certain degree by those costs, and we're working hard to get those normalized, those operations normalized like our existing facility. So I wouldn't necessarily say that the third quarter is the new baseline. It has been impacted by some puts and takes. And so I would just say you're just going to -- we're going to continue to work hard to satisfy our clients and work hard to manage our business and continue to do the best job that we can here, but there was some -- a few anomalies that took place in the quarter.

Great. That's really helpful. And then just lastly, on the activated facilities normalizing in 2026. What revenue and EBITDA step-up should we expect for '26?

I don't think we've given guidance for '26 as yet.

No. We'll -- we want to wrap up the quarter, and I think we'll be able to provide you further details when we see you guys or when we chat with you guys early next year.

Got it. I guess the activated facilities would have normalized by Q1 or by Q2 next year?

Well, the ones that have been activated this year, that would be correct, but we assume that will be activated the middle of next year.

The next question comes from Brendan McCarthy with Sidoti.

I wanted to start off in electronic monitoring. I think you mentioned you're continuing to invest to stock up on some of the higher-intensity wearables. Can you quantify what your ultimate capacity is for some of the higher-intensity wearables? Perhaps what number of population counts could you monitor under that kind of segment of your products?

I don't know how high is high. We are capable of monitoring, obviously, several hundreds of thousands in concurrence with our pricing model, but we can go far beyond that and have -- we're the largest monitoring company in the world, and we've streamlined our operations over the course of this year, and we are developing new generation products for every one of our products that will be rolling out sometime next year. And we have the largest capacity of any monitoring company in the world to roll out new devices each and every week.

Great. That makes sense. And then last question for me, just amid the government shutdown, are you still having active negotiations for the remaining idle beds that you have available? Or have those negotiations paused? I'm just curious if anything has really changed as it relates to your discussions with reactivations.

I would characterize them as discussions. I don't think they fall in the formal negotiation stage. But our discussions with ICE really take place almost on a continuous basis.

The next question comes from Kirk Ludtke with Imperial Capital.

With respect to ISAP, if I remember correctly, ISAP 4 was a 5-year deal. And I'm -- this is now a 2-year inclusive of the option period. What is the -- what is it exclusive of the option periods?

The option period, it would be a 1-year contract.

It's a 1-year deal with a 1-year option.

A lot of our contracts are 1 year with four 1-year extensions, and we call them 5-year contracts because they almost always take all options of the contract.

Okay. Got it. And so it's a shorter deal. What do you -- what is the -- what's the takeaway there?

There's been no formal policy announcement of the change that I'm aware of, but it is a technology-driven kind of service and technology changes fairly rapidly. So it may make sense to make it a 2-year contract. And that's one of the reasons that we are doing new generation devices.

So just given the, I guess, uncertainty about how they want to proceed, they decided to pursue a shorter deal?

It's the large population base that you're grappling with. It's almost 7 million people. And it's -- the service is in two forms, as I said, technology and case management services. And there may be a better way of doing that 2 years from now. That's possible. And we have the flexibility to respond to whatever the policy change may or may not be 2 years from now.

Got it. Okay. And you've committed to be prepared to monitor 361,000 people next year at some point?

For next year, and we could monitor far beyond that.

Yes. Is there a -- will that mean significant CapEx next year?

It will be some CapEx, yes, but we've been stocking up on our devices this year, as we've said. We've made significant investments. And I think we have more devices than any other company in the world.

Got it. Okay. I appreciate it. And how much -- you mentioned increasing the authorization to $500 million, and you've got some limitations under the credit documents. How much stock could you buy back under your covenants today?

I think we've said that we would be buying back approximately $100 million of stock per year. And I think we're -- at this present time, we're sticking to that. We've done $42 million so far this year. That would leave the balance for the balance of the year.

This concludes our question-and-answer session. I would like to turn the conference back over to George

Well, thank you for listening and giving us your questions, and we hope to address you at the next conference call. Thank you.