GEO Group’s third quarter was marked by substantial revenue growth, but the market reacted negatively as margin pressures and near-term headwinds overshadowed the top-line beat. Management attributed the sales gains to new and expanded contracts with U.S. Immigration and Customs Enforcement (ICE) and the U.S. Marshals, which drove facility occupancy and transportation services. CEO George Zoley highlighted that "these facility activations have increased our total ICE capacity to over 26,000 beds, and our current census is over 22,000, the highest ICE population we've ever had." However, higher staffing costs and the expense of ramping up new contracts weighed on overall profitability.
Is now the time to buy GEO? Find out in our full research report (it’s free for active Edge members).
GEO Group (GEO) Q3 CY2025 Highlights:
- Revenue: $682.3 million vs analyst estimates of $665.7 million (13.1% year-on-year growth, 2.5% beat)
- EPS (GAAP): $1.24 vs analyst estimates of $0.78 (58.8% beat)
- Adjusted EBITDA: $120.1 million vs analyst estimates of $120.1 million (17.6% margin, in line)
- Revenue Guidance for Q4 CY2025 is $663.5 million at the midpoint, below analyst estimates of $696.2 million
- EPS (GAAP) guidance for Q4 CY2025 is $0.25 at the midpoint, missing analyst estimates by 19.4%
- EBITDA guidance for the full year is $460 million at the midpoint, below analyst estimates of $473.9 million
- Operating Margin: 6%, down from 13.7% in the same quarter last year
- Market Capitalization: $2.04 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From GEO Group’s Q3 Earnings Call
- Joseph Gomes (NOBLE Capital): Asked about the slower-than-expected pace of ICE detention contract awards and population growth. CEO George Zoley pointed to government shutdowns and ICE staffing needs as main bottlenecks.
- Gomes (NOBLE Capital): Inquired about margin expectations for the ISAP 5 contract. Zoley acknowledged margin compression due to competitive pricing, but expects efficiencies in staffing and device costs to support future profitability.
- Gomes (NOBLE Capital): Sought clarity on staffing challenges for new facility openings. Zoley explained that recruiting and training for ICE clearance is time-consuming and costly, impacting near-term earnings.
- Matthew Erdner (JonesTrading): Asked about the scale and timing of ISAP contract revenue ramp-up. CFO Mark Suchinski said actual participant counts and revenue timing depend on government actions, which are uncertain.
- Gregory Gibas (Northland Securities): Queried about the ongoing shift toward higher-intensity monitoring and its impact on guidance. Suchinski confirmed a steady increase in ankle bracelet usage, expecting further benefits as the mix evolves.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will be watching (1) the ramp-up and normalization of new ICE facility contracts and whether utilization rates remain high; (2) the pace and mix of participant growth in the ISAP 5 program, including the adoption of higher-intensity monitoring devices; and (3) progress in managing staffing costs and operational efficiencies as facility activations stabilize. Developments in government contract timing and ICE funding will also be important indicators for GEO’s future outlook.
GEO Group currently trades at $15.07, down from $16.82 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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