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Good day, and welcome to The GEO Group Fourth Quarter 2025 Earnings Conference 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, Corporate Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for today's discussion of The GEO Group's Fourth Quarter 2025 earnings results. With us today are George

Thank you, Pablo, and good afternoon to everyone. During the past year, we believe we've made significant progress towards meeting our financial and strategic objectives. Since the beginning of 2025, we've been awarded new or expanded contracts that represent up to approximately $520 million in new incremental annualized revenues that have staggered activation dates and are expected to primarily normalize by the end of this year. This represents the largest amount of new business we have won in a single year in our company's history. We've entered into new contracts to house ISD Panes at 4 facilities totaling approximately 6,000 beds, which include 3 company-owned facilities we announced in the first half of '25, 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. During the third quarter, we also reactivated our 1,940-bed Adelanto ICE Processing Center in California, which was already under contract, but had been underutilized due to a long-standing COVID-related court case. The activation of these 5 facilities represent the largest start-up activity in our company's history with a combined annualized revenue value of approximately $400 million, and involve the hiring and training of approximately 2,000 new employees. The census across our active ICE facilities has continued to steadily increase from the third quarter at approximately 22,000 to presently approximately 24,000, which is the highest level of ICE populations we've ever had. This past year, we also significantly expanded the delivery of our secured transportation services on behalf of both ICE and the U.S. Marshals Service, valued at approximately $60 million in incremental annualized revenue. The increase in ICE enforcement and removal operations has resulted in an increased need for secured ground and air transportation services. In 2025, we entered into a new or amended contracts to expand secure ground transportation services at 4 existing ICE facilities and at our 3 newly activated ICE facilities. And the support services that we provide under our ICE air transportation subcontract continue to steadily increase throughout this past year. In addition to the secured ground transportation services we have historically provided for the U.S. Marshals, last year, we signed a new 5-year contract with the agency covering 26 federal judicial districts in spanning 14 states. At the state level, we were awarded 2 new management-only contracts in 2025 from the Florida Department of Corrections. The 1,884-bed Graceville facility and the 985-bed Bay facility are scheduled to transition to GEO-management on July 1 of this year and a combined annualized revenues of approximately $100 million. Of particular importance 2025, we also secured a new 2-year contract for the ISAP 5-program following a competitive procurement process. ISAP is the only ICE program currently in place to provide electronic monitoring and case management services for individuals on the 9 detain docket. It's mainly for people, ICE considers a higher flight risk or who have a pending asylum or removal cases but are still allowed to live in the community. The program relies on several forms of monitoring, including GPS ankle bracelets or risk worn devices that provide real-time tracking as well as a phone app which relies on facial recognition, voice ID and GPS to confirm a person's location during predetermined check-ins. The ISAP counts have declined slightly over the last year due to approximately 180,000 presently due to a decline in the use of a phone app called SmartLink, provided by GEO at a very nominal cost. Instead, we've had a steady increase in more intensive and higher-priced monitoring devices such as ankle monitors. The number of ISAP participants on GPS ankle monitors has increased from approximately 17,000 in early 2025 to more than 42,000 ankle monitors today. Correspondingly, the number of ISAP participants on the SmartLink mobile app has declined to less than 135,000 participants today. Currently, with this trend, we've also seen an increase in the number of ISAP participants additionally assigned to case management services, which involves staff interaction and monitoring for approximately 106,000 individuals at this time. If this trend continues, the technology and case management mix shift would increase the revenues and earnings generated under the ISAP contract even if overall volume remains constant. Thus, we continue to be optimistic about the importance and growth potential of the ICE contract. The new 2-year contract includes pricing for 361,000 participants year 1 and 465 participants in year 2. With the capital investment we made in 2025, we believe we have the capability in scaling 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. In December of 2025, we were awarded a new 2-year contract by ICE for the provision of skip tracing services valued at up to $60 million in revenues per year. Skip tracing entails enhanced location research primarily with identifiable information and commercial data verification to verify current address information and investigate alternative address information for individuals on the non-data docket. This 2-year contract award follows initial skip tracing pilot contract that we successfully implemented, which generated approximately $10 million in revenues during the fourth quarter of 2025. Looking at our initial guidance for 2026, we believe there are several sources of potential upside, including additional growth in our Secure Services segment, additional volume increases or accelerated mix shift in our ISAP contract, additional growth in our secured transportation segment and the normalization of higher labor expenses at newly activated facilities. It is our understanding that the present ICE detention census is presently approximately 70,000 distributed over 225 separate locations, which are primarily short-term GEO facilities. We believe the federal government is continuing its focus to increase immigration detention capacity and looking for solutions as to how to upscale to 100,000 beds or more and consolidate to fewer larger facilities. As a 40-year partner to ICE, we expect to be part of this solution. We continue to be in active discussions with ICE regarding our remaining available capacity and are currently in discussions for the potential activation of additional facilities. We have approximately 6,000 idle beds at 6 company-owned facilities, which are primarily former U.S. Bureau Prisons facilities and are currently therefore, high security facilities making them ideally suited for the current needs of the federal government. At full capacity, these 6,000 beds would generate more than $300 million in combined incremental annualized revenues. We are obviously aware that ICE is exploring the purchase of several commercial warehouses that would be retrofitted to further increase retention capacity. This procurement process would result in the federal government owning these assets while contracting with private sector companies to retrofit and operate these potential sites. We are cautiously participating in this process and are evaluating select potential sites with the possibility of responding to this procurement opportunity. With respect to the federal government's annual appropriations process, the Department of Homeland Security is currently funded under a short-term continuing resolution that expires tomorrow night. If no additional appropriation bill is passed by Congress before the expiration of the current continuing resolution, there will be a partial government shutdown involving the Department of Homeland Security. It's important to note that this process only affects the annual appropriations ICE receives from Congress, which is approximately $10 billion. It does not impact the funding under the one big beautiful bill, which is available through September 30, 2029. Under that budget reconciliation bill, ICE was allocated approximately $75 billion, including $45 billion for detention. Historically, during government shutdowns, the services rendered under our contracts with ICE have continued uninterrupted as they are considered essential public safety services. However, the timing of payments and collections could be delayed, requiring us to carefully manage our liquidity and working capital needs. With the recent expansion of our revolving credit facility by $100 million, we believe we have substantial liquidity. While the exact timing of government actions, including congressional funding decisions and new contract awards, it's difficult to estimate, we expect the balance of 2026 to be very active. In addition to the opportunities at the federal level, we are pursuing additional opportunities at the state level, specifically in the field of mental health services. In Florida, we are currently participating in a procurement by the Department of Children families for the management contract at the South Florida valuation and Treatment Center, which is a state for psychiatric hospital, which -- at one time, we were the operator. In addition to our efforts to capture new growth, we believe we also have made significant progress towards strengthening our capital structure and enhancing shareholder value. Our efforts to strengthen our balance sheet were enhanced by the successful sale of the Lawton, Oklahoma fiscally for $312 million and the Hector Garza facility in Texas for $10 million. We used approximately $60 million of the Lawton facility sale gain to purchase the 770-bed downtown San Diego, California facility that we have operated for the U.S. Marshals Service for 25 years. In 2025, we also began returning capital to shareholders through a share repurchase program that was initiated in August and expanded to $500 million in November. As of year-end '25, we had repurchased approximately 5 million shares for approximately $91 million, bringing our total share outstanding to approximately $136 million. Given the intrinsic value of our assets, including 50,000 owned beds at 70 facilities, and our expected growth, we continue to believe our stock is significantly undervalued and offers a very attractive investment opportunity. Our stock is trading at a historically low multiple despite the significant growth opportunities we expect going forward. We recognize that this imbalance creates a unique opportunity to enhance value for our shareholders through share repurchases. At this time, I will turn the call over to our CFO, Mark Suchinski, to review our financial highlights and guidance.

Thank you, George, and good afternoon, everyone. For the fourth quarter of 2025, we reported net income attributable to GEO operations of approximately $32 million or $0.23 per diluted share on quarterly revenues of approximately $708 million. This compares to net income attributable to GEO operations of approximately $15.5 million or $0.11 per diluted share in the fourth quarter of 2024 on revenues of approximately $608 million. Excluding extraordinary items, we reported adjusted net income of approximately $35 million or $0.25 per diluted share for the fourth quarter of 2025 compared to approximately $18 million or $0.13 per diluted share for the prior year's fourth quarter. Adjusted EBITDA for the fourth quarter of 2025 was approximately $126 million, up from approximately $108 million reported for the prior year's fourth quarter. Looking at revenue trends. Our owned and leased secure service revenues increased by approximately $70 million or 23% in the fourth quarter of 2025 compared to the prior year's fourth quarter. This increase was primarily driven by the activation of our 3 company-owned facilities under new contracts with ICE, which was offset by revenue loss from the sale of the Lawton, Oklahoma facility and the population of the Lea County, New Mexico facility. Quarterly revenues for our managed-only contracts increased by approximately $26 million or 17% from the prior year's fourth quarter. This increase was primarily driven by the joint venture agreement for the management of the North Florida detention facility as well as certain transportation revenue increases that are reported in this segment. Quarterly revenues for our reentry services increased by approximately 3%, while quarterly revenues for our nonresidential services was largely unchanged compared to the prior year's fourth quarter. Finally, quarterly revenues for our electronic monitoring and supervision services increased by approximately 3% from the prior year's fourth quarter. Fourth quarter 2025 results for our electronic monitoring and supervision services reflect the reduced pricing for our ISAP 5 contract which was offset by favorable technology and case management mix shift and the skip tracing pilot contract that was implemented during the quarter. Additionally, our fourth quarter 2025 results for our electronic monitoring and supervision services was impacted by $1.6 million in employee severance costs as part of our efficiency initiative, which will lead to labor cost improvements in '26 of approximately $2 million to $3 million per quarter. Turning to our expenses. During the fourth quarter of 2025, our operating expenses increased by approximately 18.5% as a result of activation of our new ICE facility contracts and increased occupancy compared to the prior year's fourth quarter. Our general and administrative expenses for the fourth quarter of 2025 declined to 8.4% of revenue as compared to 10% of revenue in the prior year's fourth quarter. Our fourth quarter 2025 results reflect a year-over-year decrease in net interest expense of approximately $6 million as a result of our reduction in our net debt. Our effective tax rate for the fourth quarter of 2025 was approximately 35%. For the full year 2025, we reported net income attributable to GEO operations of approximately $254 million or $1.82 per diluted share on annual revenues of approximately $2.63 billion. This compares to net income attributable to GEO operations of approximately $32 million or $0.22 per diluted share on annual revenues of $2.42 billion for the full year 2024. In 2025, we completed the sale of our Lawton, Oklahoma facility for $312 million and the Hector Garza Texas facility for $10 million. These 2 transactions result in a $232 million pretax gain on asset sales during the third quarter. Additionally, during '25, we incurred a noncash contingent litigation reserve of approximately $38 million, which we disclosed last quarter. Excluding the noncash contingent litigation reserve, the gain on asset sales and extraordinary items, adjusted net income for the full year of 2025 was approximately $120 million or $0.86 per diluted share compared to approximately $101 million or $0.75 per diluted share for the full year 2024. Full year 2025 adjusted EBITDA was approximately $464 million, largely in line with the approximate $463 million reported for the full year 2024. Moving to our outlook. We have issued our initial financial guidance for the full year and first quarter of 2026. We expect full year 2026 GAAP net income to be in the range of $0.99 to $1.07 per diluted share on annual revenues of $2.9 billion to $3.1 billion and based on an effective tax rate of approximately 28%, inclusive of no discrete items. We expect full year 2026 adjusted EBITDA to be in the range of $490 million to $510 million. We expect capital -- total capital expenditures for the full year of 2026 to be between $120 million and $155 million. Our 2026 guidance includes an assumption for some modest organic growth in the second half of the year as well as the corresponding impact of start-up expenses. While the assumptions we have included in our 2026 guidance result in a temporary compression in our margins due to the impact of start-up expenses and the gradual nature of contract activations, we would expect our margins to normalize as growth begins to layer in, resulting in higher adjusted EBITDA run rate as we exit the year. For the first quarter of 2026, we expect GAAP net income to be in the range of $0.17 to $0.19 per diluted share on quarterly revenues of $680 million to $690 million. We expect first quarter 2026 adjusted EBITDA to be between $107 million and $112 million. Compared to the fourth quarter of 2025 results, our first quarter 2026 guidance reflects higher payroll tax expenses, which are front-loaded in the beginning of every year, 2 fewer days during the period and no revenue or earnings assumptions for the skip tracing contract as we transition from the pilot contract that was implemented in the fourth quarter to the new 2-year contract. As a result of these factors, along with the assumptions we have made in our guidance related to start-up expenses, our first quarter 2026 guidance reflects a decline from our fourth quarter '25 results. However, we would expect subsequent quarters in 2026 to reflect more normalized results. Moving to our balance sheet. We closed 2025 with approximately $70 million in cash on hand and approximately $1.65 billion in total debt. During the fourth quarter of 2025, we experienced a temporary increase in accounts receivable in part as a result of the federal government shutdown in October and November, which resulted in a temporary increase in our outstanding debt borrowings. In recent weeks, we have been able to significantly improve our accounts receivable position, further improving our liquidity, resulting in improvement in our current net debt balance to approximately $1.5 billion. With the recent expansion of our revolving credit facility by $100 million, which we announced last month, we believe we have adequate liquidity to support our diverse capital needs. Additionally, with the prospect of a potential partial government shutdown in the future, we believe we have strong support from our lenders and creditors to address our liquidity should it be necessary. The significant achievements in 2025 have allowed us to make good progress towards strengthening our balance sheet as we enter 2026. As a result of these efforts, we achieved an annual reduction in interest expense of approximately $30 million in 2025 compared to the prior year. We also believe we've made great progress towards enhancing long-term value for our shareholders through our share repurchase program, which we only initiated in August and was later increased to $500 million in November. As of year-end 2025, we had repurchased approximately 5 million shares for approximately $91 million leaving approximately $409 million available under our current stock buyback authorization. We recognize the unique opportunity to enhance value for our shareholders through our share repurchases given the current valuations of our stock, which reflects a historical low multiple despite the growth we have already captured and the significant growth opportunities we expect going forward. We believe that our strong cash flows will allow us to support all of our capital allocation priorities. At this time, I will turn the call back to George for some closing comments.

Thank you, Mark. In closing, we are pleased with our strong fourth quarter results and the significant progress we've made in '25 towards meeting our financial and strategic objectives. Over the past year, we've captured new growth opportunities that we could generate up to $520 million in annualized revenues, making it the most successful period for new business wins in our company's history. We expect '26 to be as active as '25, and we believe we have upside potential across our diversified business segments. We have approximately 6,000 idle high-security beds that remain available and could generate in excess of $300 million in annualized revenues at full capacity. The continued shift in technology and case management mix and potential increases in accounts under our ISAP 5 contract could also provide upside throughout 2026. . We're also well positioned to continue to expand our delivery of secured ground and air transportation services for ICE and the U.S. Marshals Service. While the exact timing of government actions that including new contract awards is difficult to estimate, we remain focused on pursuing new growth opportunities and allocating capital to enhance long-term value for our shareholders. Finally, as we announced this morning, our CEO, Dave Donahue, has informed GEO of his decision to retire at the end of February. I'd like to thank Dave for his more than 11 years of service to GEO and wish him well in his retirement. I will be returning to my previous position of Chairman and CEO under an amended employment agreement effective through April 2, 2029. I look forward to working with our management team and our Board of Directors and leading our company through what we expect to be a very active period with significant growth opportunities that lie ahead. That completes our remarks, and we would be glad to take some questions.

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

George, I know in the past, you've said that if ICE wanted to get to that 100,000-bed level it all couldn't come from the existing private that there would have to be alternatives out there. And with these warehouses I guess kind of the question is, I know you've talked about something that you are exploring, participating in. But do you see ICE's focus on this? Is that somewhat potentially behind the, I'll say, delay in awarding new contracts for currently idle facilities as they kind of taken their the focus off of that and moved it over there to the warehouses?

Well, I think they're on a dual track to do both. But the warehouse initiative is large scale and its coast-to-coast and it's very complicated to find locations in areas that are suitable to their needs and would meet with the less political resistance. You got red states versus blue states issues go to solve through. But you're right. The private sector available bed capacity at this time, will not get them to the 100,000. I estimate they need to do at least 20,000 if they want to get to 100,000, and they may very well want to go beyond 100,000 and do 20,000, 30,000, 40,000 new beds. So we're looking at it. And we've been a long-term 4-decade partner with ICE. We want to be supportive in playing a role in this new initiative and hopefully see our idle facilities be utilized because, as I've said, most of our idle beds are prior BOP facilities, which are high-security facilities, which I think are very well suitable to their needs.

And on ISAP, yes, the populations have been slightly declining here over the past year about 180,000 as you mentioned. And then the new contract they talk about up to funding for, I think, up to like 360,000 in year 1 and 460-some-thousand in year 2. In the past, you did hit that 370,000 type of level. If ICE came to you and said, "Hey, in 2026, we want to start really increasing the number of people under ISAP to that -- get up to that 360,000 level." Are you set up that you could move quickly and get up to those levels?

Absolutely. We've made the investments on all of our devices from ankle monitors to wrist-worn devices to the phone apps that we can reach. The levels you described that were included in the procurement as well as go beyond those levels.

Okay. Perfect. And then one last one for me. Looking at the stock price, and it's something that there's a lot of discussion about, but you hit a new 52-week low today, and you guys have done a great job on the buyback. But given where the stock is, is it possible or something that consider or maybe even be getting more aggressive on the buyback at these levels?

Joe, as you said, I think we've done a great job. We launched our stock purchase program in August -- late August, and we were able to buy back over 5 million shares in a short period of time. And so our focus is to lean in hard when there are opportunities, as you just mentioned. And I think we've been very diligent about making sure that we manage our liquidity and take advantage of the stock buyback program when we can. And so we're going to lean into it hard. We're looking at it, and we'll continue to do that. But we're -- as I said, we've done a good job, and we'll continue to look at buying back stock and creating some value for our shareholders. But I think that's what we can say at this point.

The next question comes from Matthew Erdner with JonesTrading.

I'd like to kind of touch on the monitoring as well. You mentioned the investments that you guys have made there kind of on the forefront. But I see the margin kind of coming down to around 42.5 from a little under 50, quarter-over-quarter. And I apologize if I missed it earlier, but is there a reason as to why the margin is compressing? Or is that just the mix shift change?

It's primarily the mix shift change that is related to the reduction in the phone apps, which we have had in the past, and those have reduced what is increasing significantly are the ankle monitors. There's a desire to have a higher level of security for these individuals and as well as increased case management services. So the top-level numbers kind of obscure what's happening below those numbers. There's a mix change that's occurring that goes beyond the top-level numbers because the 100-and-some thousand people that get the case management services is really on top of the 180,000 participants. It's just another billing mechanism within the 180,000. So it's -- I don't know that the 180,000 is an accurate metric to be using any more when we have different -- they call them clans, and these are billing mechanisms of which there are 40 within that program, and they're kind of all emanated into that 180,000, but it's -- that's the top level number. But below that number, there's 40 different pricings that support the services that are rendered to the 180,000 participants.

Got it. And then I guess on a go-forward basis, I guess, assuming that say there's the 360,000 in year 1. I guess, what would the margin be if say that 360,000 was all on ankle monitors versus it's kind of a half split between SmartLink and ankle monitor?

Well, the ankle monitors, I believe, is our most expensive monitor devices, so the margins would substantially increase because of that. And we are -- I think we are the largest providers of ankle monitors in the world. We make all of our devices in Boulder, Colorado, and we are -- we have properly resourced that company, which is called BI to scale up to whatever level services ICE wants, whether it's a few more hundred thousand or beyond that. We're ready to go.

Got it. Yes, that makes sense. And then last one for me and then I'll step out. In the guidance, it has about 134 million to 136 million for end of your share count. If you guys repurchased the same amount that you did in the fourth quarter, you'd already be at the low range of that target. Should we expect you guys to be a little more aggressive there? Or how are you thinking about capital allocation throughout the year?

Again, we're going to -- we've talked about it in the past, we're going to look at the capital allocation process. We're very diligent about allocating capital to our growth needs. -- addressing paydown of debt and returning capital back to shareholders. And as you indicated, when the stock price goes low, there's opportunity for us to jump in the market and be more aggressive. And I think if you look at the last 5 months, we've done a pretty good job with that.

The next question comes from Greg Gibas with Northland Securities.

First, with the midpoint of guidance set below your Q4 EBITDA run rate. It seems conservative when considering uplift in '26 from a number of items like ISAP cost savings that I think you previously said are $8 million to $12 million Adelanto cost normalization, ongoing mix shift in ISAP tech. And then those incremental Florida contracts. Is that fair? Or is there some offset to take into account there?

Greg, I wouldn't say there's nothing that we're aware of in the business that would create a big offset to that. I think we're starting out here. I think we're prudent as it relates to the guidance that we've provided here. The skip tracing contract that we talked that we won that's coming off a protest. So we don't think it will contribute much here in the first quarter. But we're starting the year. We're executing well. We've factored in some modest growth, particularly as it relates to ISAP, as George talked about, the mix shift, the GPS and higher case management services. We're looking at continued expansion and growth around our Marshalls transportation contract in ICE Air. We're going to factor -- we factor in some skip tracing later in the year. So it's earlier in the year. I think we've done a good job of balancing the risks and opportunities that we've looked at our forecast. And as you indicated, we know what our run rate was in the fourth quarter. But we think at this point in time, it's a well-balanced approach to guidance. And as the quarters unfold, and we continue to pursue these growth opportunities, we'll have opportunities to update that our guidance.

Great. And I wanted to touch on your commentary around participating in the process. I think you said on the potential warehouse managed-only opportunities. Wondering if you could maybe add any color there and kind of what phase those negotiations or bidding that process is in?

Well, we have a relationship with the prime contractor that's listed as eligible to participate in that procurement. And we're looking at the some sites, predominantly in the Sun Belt states, predominantly in red states to be very frank about it. So we want to be careful as to where we extend our financial and operational commitments.

The next question comes from Raj Sharma with Texas Capital Bank.

Good quarter. Congratulations. I had a question on the guidance. Again, just trying to understand that fiscal '26 does seem that the guidance seems to have been sort of taken down from just about a quarter ago, even if the facilities get activated at pace and even outside of new activations, plus the ISAP dynamics in the ankle monitors. It seems like the numbers are conservative. And are you incorporating? And what sort of start-up expenses are you incorporating? Can you give more color on that? And I know you've talked about this earlier. We just wanted to understand if you're being more conservative than not.

Well, again, I think I tried to talk a little bit about the guidance with Greg's question a few moments ago. But the truth is, we're -- we still are incurring some level of start-up expenses on the activation of our idle facilities, particularly on the West Coast. So that's creating a little bit of headwind as we move into the year here. But as I said earlier, we expect the back half of the year to really normalize, and we expect to see some expansion of our margins as we get into the back half of the year. So I would say this, there's nothing inherently going on from a business standpoint. Fourth quarter was helped a little bit by the skip tracing contract, and we talked about the fact that we haven't built that into our first quarter forecast. So as I said earlier, I think it's a balance and prudent approach, and we'll look to update things as the business progresses over the coming quarters.

Got it. Got it. And just the second, my next question is also you would kind of talked about this. So there were no new activations in Q4, was that sort of government shutdown or year-end related? And also, there's been a lot of talk of warehouses and given -- can you help us understand a little bit, given your favorable history with ICE and the low to reasonable sort of cost for detention bed shouldn't all your idle facilities be reactivated soon for ICE to meet their retention goals?

Well, you're correct that there have been no new awards, but we are in active discussions with ICE about all of our facilities. They are aware of where the facilities are. They're assessing their facilities to their needs. So fourth quarter did have the shutdown and did have the conceptualization, let's say, of this new warehouse initiative. And all that takes time and the government, I guess, slowed down is a fair way of saying that in the fourth quarter, and may be a bit delayed if there's another shutdown. You can't say what exactly it's going to happen. But we do expect more activations in '26 and more activity that will drive our financial results.

Right. I just wanted to kind of understand that, given the stock price reaction and trying to make sense of what the concerns are. And -- so I wanted to understand that even outside of this talk of warehouses, it's fairly certain that the pace of reactivations should continue given where ICE goals stand -- right, and so you're saying, yes.

Yes. We're in discussions. We're hopeful of awards. So -- and these are high-security facilities, of which I believe, are more desirable by ICE compared to lower security facilities. And -- so as that plays out, we think there will be more awards sometime this year.

The next question comes from Brendan McCarthy with Sidoti & Co.

I wanted to ask a follow-up on the facility reactivation side. I know in recent quarters, we had discussed certain headwinds around the fall government shutdown, maybe ICE staffing challenges and then the DHS policy around contract approvals. Do you still sense that those headwinds are in force today? Or what's your kind of sense around how that's impacting the contract or facility reactivations?

Well, I think it's similar to what I just discussed. I think there was a slowdown because of the government shutdown, the time spent on conceptualizing this warehouse program. But we -- as I said, we are active discussions with ICE about our available facilities and they're high security, they're high quality, and they're -- I think, comparatively speaking, there very high quality compared to any other facilities in the country actually because they were formerly Bureau of Prisons facilities, Several of them are mostly cellular type facilities, not dormitories and I think they're well suited for ICE needs. And we just continue to have discussions with ICE about those things. And not only just the facilities, but what physical plant changes they want to those facilities, all of which takes time and it has to be evaluated by different sections of the department. You have the security section of the department. You have the health services section of the department. You have transportation. Putting -- standing up a new facility is a very complicated process. And particularly now as the objectives advice has expanded. They've hired another 10,000 staff. Those staff have to go somewhere. And in part, they will be going at to these facilities around the country. There's been a request to add more space at, I think, at most of our facilities actually. So that is part of the discussion, providing office space, courtroom space, transportation space, expanded health care space, all those things take time to be worked out and that we hope will eventually lead to more awards.

Understood there. I appreciate the detail. And I wanted to ask a question on the skip tracing contract. I think you mentioned that contract is included in guidance likely to have an impact in the back half of 2026. Just curious as to what kind of case volume assumptions you make with that contract? And maybe if you could provide detail on the margin profile there.

Brendan, we're not going to get into margins. We don't go to that level of specificity on these types of calls here. So we won't talk about that. And as George indicated, it's -- the award was a 2-year award for $121 million, approximately $60 million per year. We talked about the fact that the protest just was removed. We don't anticipate any activity on that here in the first quarter. We expect there to start to ramp up in the second quarter, but we expect it mainly to occur in the back half of the year. And so as that -- it's a new program for us. It's one that we don't have a lot of history with from a projection standpoint. So we're working closely with our with our client on that to understand their needs and help support them. So again, we've factored in some modest assumptions as it relates to this -- and then as we start to execute with our client, I think we'll be able to provide more specifics on that in the coming quarters.

Got it. And lastly, on capital allocation. I know that you mentioned net debt has stepped down to about $1.5 billion in recent weeks. What's your sense for how much debt you may look to pay down in 2026 just regarding your priorities.

Yes. Again, we're going to focus on continuing to pay down debt. The goal here in 2026 is to get our net debt below 3x levered, right? And so we believe as we move through the course of the year, we'll be able to achieve that goal.

The next question comes from Kirk Ludtke with Imperial Capital.

you mentioned that ICE was looking to consolidate those 225 facilities, mostly short-term jail facilities. There's a lot of people in those -- as you know, a lot of people in those facilities. I'm just curious, what's the motivation there? Is it cost? Is it that those facilities don't do a good job? Or what -- is there any background you can share?

Well, the complexity of overseeing 225 facilities is enormous. I think just a human preference would be to have fewer facilities but they need some level of access because interior ICE enforcements occur throughout the country, and they need to have a relationship with county jails throughout the country. And that's what most of those things are. So they have a few beds here and a few beds there. But those people are in a short-term detention confinement. And most of them will eventually go to an ICE processing center for evaluation of their cases and most of them will be then deported outside the country, but they have to go through a process, which typically does not occur at the county jail level. They need to go to a formal ICE processing facilities. And of course, in the federal government prefer to enjoy economies of scale of having larger facilities rather than smaller facilities, which would be a force multiplier in the ability to process and detain and deport approximately 100,000 people per month.

Yes. No, that all makes sense. I'm sure you would prefer to utilize your own beds first before you facilitated additional government-owned capacity. But the contracts to just operate the facilities, those are pretty attractive contracts, aren't they? I mean in terms of ROI, that's operating those facilities could be a pretty good business, right?

Are you speaking of our facilities or the warehouses?

The warehouses, just managing facilities?

I think it's a reasonable opportunity that we're assessing. We've only had one experience in renovating a warehouse. And that occurred maybe 30 years ago. So it's more complicated than you may think. As far as the physical plant, renovations of a warehouse to get it operational, it's complicated. And then the operational implications of how you manage such a facility, particularly a large-scale facility is going to be concerning because our prior experience was only on -- I think it was a like 200-bed facility. What is being discussed are 500-bed facilities, 1,500-bed facilities and facilities of several thousands of beds, 7,000, 8,000 or 9,000 beds per facility, which is an enormous capacity and it has to be carefully evaluated as to how you would do that. Because those are larger numbers than any in existence. Now I think the largest facility is probably 2,500 beds, not more than 3,000 beds in the country.

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

Well, thank you for participating in today's call, and we look forward to addressing you on the next one.