CoreCivic Q2 FY26 earnings call CXW

CoreCivic completed the sale of four facilities for a total gross proceeds of $2.234 billion, resulting in estimated net proceeds of $1.6 billion after taxes and transaction costs. These sales, including California City Detention Facility, Otay Mesa Detention Center, Midwest Regional Reception Center, and Prairie Correctional Facility, demonstrate the underlying value of the company's real estate portfolio. The proceeds were primarily used to repay $608.5 million of outstanding debt, including the $575 million revolving credit facility and $238.5 million of senior notes due 2027, significantly strengthening the balance sheet and increasing liquidity to $1 billion cash on hand and $553.3 million in borrowing capacity.

Following the substantial asset sales, the Board of Directors approved a $500 million increase to the existing share repurchase program, bringing the total authorization to $755.8 million. Management intends to utilize a substantial portion of the remaining net proceeds for share repurchases, viewing the stock as significantly undervalued at approximately 6x EBITDA compared to a 20-year average of 9.5x. The company's leverage policy target is 2.25x to 2.75x, with current net debt to adjusted EBITDA at 2.9x as of June 30, 2026, and a potential to drop below 2x after further debt repayments and share repurchases.

CoreCivic redefined its operating segments into CoreCivic Residential, CoreCivic Services, and CoreCivic Properties to align with its operational strategy. The company exceeded analyst estimates for adjusted EPS by $0.04 and adjusted EBITDA by $2 million in Q2 FY26. Total occupancy for the Residential segment was 78.4%, up 1.6 points YoY, with an average daily population of 56,363 individuals. Revenue from federal partners, primarily ICE, increased 27.2% YoY, with ICE revenue specifically up 51.6%.

ICE populations in CoreCivic's care increased by approximately 6,000 individuals (59.6%) from early 2025 to June 30, 2026. While nationwide ICE detention populations saw a temporary decline in Q2 FY26 due to a government shutdown and leadership changes, they have since begun to rise, reaching 65,500 in early July. CoreCivic continues to activate facilities, including California City and Diamondback, which were 55% occupied in Q2, and recently secured a new contract for the 1,600-bed Prairie Correctional Facility, expecting minimal earnings contribution in 2026 due to start-up activities.

The updated FY26 guidance reflects the financial impact of the facility sales, including interest income from residual cash balances and increased G&A for incentive compensation. The company maintains a vast real estate portfolio of 56 facilities with 63,727 beds, emphasizing its continued role as a significant owner of specialized real estate infrastructure. Discussions with ICE for potential additional facility sales are in preliminary stages and not included in current guidance, highlighting ongoing strategic flexibility.

At the state level, CoreCivic successfully secured traditional inflation-related per diem increases and adjustments for staff wage compensation, with state operations performing well and a solid outlook for the remainder of the year. While U.S. Marshals Service revenue decreased by $14.1 million YoY due to mix shifts where ICE and Marshals share contracts, positive movement in Marshal populations was observed in the last quarter, consistent with seasonal expectations.