Earnings Call Transcript - GEO Q1 2020

Operator, Operator

Good morning and welcome to the GEO Group's Earnings Conference Call for the first quarter of 2020. This event is being recorded. I will now hand it over to Pablo Paez, Executive Vice President of Corporate Relations. Please proceed.

Pablo Paez, Executive Vice President of Corporate Relations

Thank you, operator. Good morning everyone and thank you for joining us for today's discussion of the GEO Group's First Quarter 2020 Earnings Results. With us today are George Zoley, Chairman and Chief Executive Officer; Brian Evans, Senior Vice President and Chief Financial Officer; Ann Schlarb, Senior Vice President and President of GEO Care; and David Donahue, Senior Vice President of GEO Secure Services. This morning we will discuss our first quarter results and outlook for the balance of the year. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our investor website at investors.geogroup.com. Today we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings including the Form 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, George Zoley. George?

George Zoley, Chairman and Chief Executive Officer

Thank you Pablo and good morning to everyone. This morning we reported our first quarter results, updated our guidance for the full year and issued guidance for the second quarter. As our country and the world face an unprecedented health and economic crisis, GEO employees and facilities throughout the United States and internationally have also been impacted by the spread of the COVID-19 virus. Some of our employees live in communities that have endured significant hardship and a few of our facilities have experienced cases of COVID-19 among both our staff and individuals entrusted to our care. From the outset of this global pandemic, our corporate, regional and field staff have implemented comprehensive steps to address and mitigate the risks of COVID-19 to all of those in our care and our employees. Ensuring the health and safety of all those in our facilities and our employees has always been our number one priority. As a longstanding provider of essential government services, we have the experience for the implementation of best practices for the prevention, assessment and management of infectious diseases. All of our facilities operate safely and without overcrowding. All of our facilities have access to regular handwashing with clean water and soap, as well as ample hygiene and sanitation products. All of our GEO Secure facilities provide 24/7 access to healthcare. In the case of our ICE processing centers, the number of healthcare staff is typically double the number of healthcare staff at state correctional facilities. Most of our facilities are equipped with airborne infection isolation rooms specifically designed to manage infectious diseases. During this call, David Donahue and Ann Schlarb will discuss the steps we've taken at our GEO Secure Services and GEO Care facilities to implement best practices consistent with the guidance issued by the Centers for Disease Control and Prevention. Even though we have continued our operations as an essential government service provider, the spread of COVID-19 has also negatively impacted our projected revenues and cash flows for the year. Our ICE and U.S. Marshals facilities have experienced lower overall occupancy as a result of declines in crossings and apprehensions along the Southwest border, as well as decreasing court and sentencing activity at the federal level. Additionally, the federal government recently issued COVID-19 operational guidance recommending a reduction to 75% capacity at ICE processing centers where possible to promote social distancing practices. It's important to note that most of our GEO Secure facilities contracts contain fixed-price or minimum guarantee payment provisions intended to ensure adequate staffing levels and consistent service delivery. Currently, our ICE processing centers and U.S. Marshals facilities are operating at around the capacity level tied to the fixed-price or minimum guarantee payment provisions. Although it is possible that we may experience an improvement in occupancy levels at ICE and U.S. Marshals facilities later this year, our updated financial guidance assumes a continuation of the currently lower levels for the entire year. With respect to off-site medical expenses at our ICE processing centers and U.S. Marshals facilities, the federal government typically bears the cost for off-site medical care. Our GEO Care segment has also experienced a decline in revenue, primarily related to lower occupancy across our GEO reentry centers and day reporting programs. While we hope the trends will improve later this year, our updated guidance assumes lower occupancy levels for the entire year. During the first quarter, we began the intake process at the government-owned 512-bed El Centro detention facility in California under a new nine-year fixed-monthly-price contract with the U.S. Marshals Service. We also completed the intake process and achieved normalized operations at our company-owned 1,800-bed North Lake Correctional Facility in Michigan. And in Texas, we completed the intake process and achieved normalized operations at the county-owned 1,800-bed Reeves County Detention Center I & II and the 1,376-bed Reeves County Detention Center III. These facilities were activated under new 10-year contracts with the Federal Bureau of Prisons providing for fixed monthly payments. Before I turn the call over to Brian Evans to review the results outlook and liquidity position, I would like to say a few words about our frontline employees. Every day, more than 20,000 GEO employees report to work at over 200 GEO facilities and program locations. These frontline employees make daily sacrifices to care for all of those in our facilities and programs. They are security officers, social workers, case managers, teachers, maintenance staff, doctors, nurses, but more importantly, they are members of the diverse communities whose families have also been impacted like everyone else. I'd like to express our deepest gratitude and appreciation to all of our frontline GEO employees for their daily dedication and sacrifice, which is truly an inspiration for us all. Despite this quarter's many challenges, our revenues and cash flows remained resilient and continue to support our dividend payments. I'll now turn the call over to Brian Evans.

Brian Evans, Senior Vice President and Chief Financial Officer

Thank you, George. Good morning everyone. Today, we reported first quarter revenues of approximately $605 million and net income attributable to GEO of $0.21 per diluted share. Our first quarter results reflect approximately $0.03 per share in higher employment tax expense, which is front-loaded in the first quarter of each year. Additionally, our first quarter results reflect a $400,000 gain on real-estate assets, a $1.6 million gain on the extinguishment of debt, $2 million in start-up expenses, $1.9 million in closeout expenses, and $900,000 in COVID-19-related expenses, all pre-tax associated with additional personal protective equipment, diagnostic tests, and medical expenses. Excluding these items, we reported first quarter adjusted net income of $0.24 per diluted share. We also reported first quarter 2020 AFFO of $0.55 per diluted share. As George discussed, the spread of COVID-19 has resulted in lower occupancy at a number of our facilities and programs beginning in late March and is therefore expected to result in lower full year revenues, primarily for our ICE and U.S. Marshals facilities and our GEO Reentry Services business. Currently, our ICE and U.S. Marshals facilities are operating at or around the capacity level tied to the fixed price or minimum occupancy payment provisions in our contracts. While it is possible that we may experience an increase in occupancy levels at these facilities later this year, our updated full year guidance assumes a continuation of the currently lower levels through the end of the year, resulting in an estimated revenue decline of approximately 8% for the full year. Our GEO Reentry Services business has also seen an occupancy decline beginning in late March in both our residential centers and non-residential day reporting centers due to lower levels of referrals by federal, state, and local agencies. Again, while it is possible that referral levels may increase later this year, our updated full year guidance assumes lower occupancy levels for our reentry segment through the end of the year resulting in an estimated revenue decline of approximately 4% for the full year. We have also increased our spending on personal protective equipment, diagnostic testing, and medical expenses as a result of COVID-19 and expect to incur several million dollars in nonrecurring costs during 2020. Our updated guidance continues to assume no contribution from our Central Valley, Desert View, and Golden State facilities in California, even though we are hopeful these facilities will be activated as ICE processing center annexes during the second half of this year. Despite several challenges, we believe that our cash flows and revenues remain resilient. We expect full year net income attributable to GEO to be in a range of $0.92 to $1.04 per diluted share. We expect full year adjusted net income to be in a range of $1 to $1.12 per diluted share. We expect full year AFFO to be in a range of $2.25 to $2.35 per diluted share. For the second quarter, we expect net income attributable to GEO to be in a range of $0.20 to $0.24 per diluted share and adjusted net income to be in a range of $0.23 to $0.27 per diluted share. We expect second quarter AFFO to be between $0.54 and $0.58 per diluted share. As a reminder, compared to our first quarter results, our subsequent quarters historically reflect lower employment tax expenses, which are front-loaded in the first quarter of each year. Moving to our capital structure. At the end of the first quarter, we had approximately $32 million in cash on hand and approximately $350 million in available capacity under our revolving credit facility, in addition to an accordion feature of $450 million under our credit facility. With respect to our capital expenditures, we expect total CapEx in 2020 to be approximately $85 million, including $19 million for maintenance CapEx, below our previous estimate. At this time, I will turn the call over to Dave Donahue for a review of GEO Secure Services segment.

David Donahue, Senior Vice President of GEO Secure Services

Thanks, Brian and good morning, everyone. I'd like to provide you with an update on our GEO Secure Services business unit and specifically on the steps we have taken at our Secure Service facilities to address and mitigate the risk associated with COVID-19. From the onset of the pandemic, we issued guidance to all of our facilities consistent with the guidance issued for correctional and detention facilities by the Centers for Disease Control and Prevention. We immediately updated our policies and procedures to include best practices for the prevention, assessment and management of COVID-19, again relying on the guidance issued by the CDC. These best practices include the implementation of quarantine and cohorting procedures to isolate confirmed and presumptive cases of COVID-19, including medical isolation and the use of airborne infection isolation rooms at our facilities. We also provided educational guidance to our employees and individuals in our care on the best preventive measures to avoid the spread of COVID-19, such as frequent and careful handwashing, avoiding touching areas of the face including facial hair, avoiding individuals exhibiting flu-like symptoms, proper cough and sneeze etiquette, social distancing requirements and adjustments to laundry and meal schedules. We have increased the distribution of personal hygiene products including soap, shampoo, body wash, and tissue paper to at least twice per week at all of our facilities and more frequently if needed. Additionally, bars of soap or soap dispensers are placed at each sink daily for hand washing. We have also deployed specialized sanitation teams to sterilize high-contact areas of our facilities and have developed intensive schedules and procedures for the cleaning and disinfecting of facility spaces above and beyond normal cleaning activities. We have procured additional cleaning equipment and sanitation products that are proven health care-grade disinfectants. We advised our employees to remain home if they exhibit flu-like symptoms. And we've exercised flexible paid leave and paid-time-off policies to allow for employees to remain home if they exhibit flu-like symptoms or care for a family member. We engaged with our government partners to promptly suspend nonessential visitation at all of our facilities and we have employed additional measures during the intake process in all of our facilities to include screening specific to COVID-19. These additional screening procedures include temperature checks for all staff and any legally required visits before entering our facilities as well. Verbal medical screening questionnaires are also available. We ordered and received swab kits for COVID-19 from a national supplier and we enacted quarantine and testing policies for any employees who may have come into contact with any individual who has tested positive for COVID-19. At every one of our facilities, we have worked closely with our government agency partners and local health officials to develop COVID-19 emergency plans and testing policies for the individuals in our care. In March of this year, we started procuring additional personal protective equipment and began issuing it clinically needed at facilities impacted by COVID-19. And over the course of April, we coordinated with our government partners to distribute personal protective equipment including face masks to all staff, inmates, and detainees as a precautionary measure at all of our GEO Secure Services facilities. A few of our facilities, primarily in our Eastern region of the country, have experienced multiple cases of COVID-19 among both our staff and individuals entrusted in our care. A small percentage of these cases have required hospitalization and a very small number tragically resulted in fatalities, which has left all of us with very heavy hearts. However, our facilities have thankfully not experienced a disproportionate impact from the pandemic. And most of our facilities have had very few or no cases of COVID-19. We are incredibly grateful for our frontline employees who make daily sacrifices to report to work and provide high-quality and compassionate care to all of those in our facilities. We believe it is our – their dedication and commitment that have allowed GEO to effectively manage the spread of COVID-19 and mitigate its risk. Before I turn the call over to Ann, I'd like to briefly discuss a few other operational highlights in the quarter. During the first quarter, we began the intake process under a new managed-only contract with the U.S. Marshals Service, at the government-owned 512-bed El Centro Detention Facility in California. This new contract has a term of approximately nine years and is expected to generate approximately $29 million in annualized revenue. Additionally, we completed the intake process and achieved normalized operations at our company-owned 1,800-bed North Lake Correctional Facility in Michigan under a new 10-year contract with the Federal Bureau of Prisons. This 10-year contract is expected to generate approximately $37 million in annualized revenues. And in Texas, under two new 10-year contracts with the Bureau of Prisons, we worked with Reeves County to complete the intake process and have achieved normalized operations at the county-owned 1,800-bed Reeves County Detention Center I & II and the 1,376-bed Reeves County Detention Center III. As a reminder, GEO provides management consulting and support services to Reeves County in relation to this facility, while the county holds the contract with the Bureau of Prisons for the operation of the facility. Finally, we are continuing to undertake expansion projects at our Ravenhall, Junee, and Fulham facilities in Australia, which are expected to add close to 1,000 beds during 2020. At this time, I'll turn the call over to Ann for a review of GEO Care.

Ann Schlarb, Senior Vice President and President of GEO Care

Thank you, Dave. Good morning, everyone. I'd like to provide you an update on the steps we have taken to address the risk and mitigate the spread of COVID-19 across our GEO Care business unit. Consistent with the efforts undertaken by our GEO Secure Services facilities, all of our residential facilities and GEO Reentry and GEO Youth Services had issued COVID-19 guidance consistent with the guidance issued by the Centers for Disease Control and Prevention. We have updated our policies and procedures to include best practices for the prevention, assessment, and management of COVID-19 including the implementation of quarantine and cohorting procedures to isolate confirmed and presumptive cases of COVID-19. We have provided educational guidance to our employees and all individuals in our care on the best preventative measures to avoid the spread of COVID-19 and we have increased the distribution of personal hygiene products. Similar to our GEO Secure Services facilities, we have deployed specialized sanitation teams to sterilize high-contact areas of our facilities and have developed special schedules and procedures for the cleaning and disinfecting of facility spaces using sanitation products that are proven health care-grade disinfectants. We have also advised our employees to remain home if they exhibit flu-like symptoms and have exercised flexible paid leave and paid-time-off policies to allow for employees to remain home as needed. We have implemented additional screening measures for entry into our facilities and we are providing face masks to all staff and residents. At all of our facilities, we have worked closely with our government agency partners and local health officials to develop COVID-19 emergency plans and testing policies consistent with CDC guidance. We have also established rapid response teams to be deployed to assist facilities that have been impacted by COVID-19. The COVID-19 pandemic has affected many communities where our employees live, especially in the Northeast. Before I turn the call back to George, I would also like to thank all our GEO Care employees, whose dedication and daily sacrifice make us all very proud. Our frontline employees report to work every day to care for all our participants in both residential and non-residential programs and have found innovative ways to deliver rehabilitation programming through virtual technologies in ways we have never seen before. We are incredibly proud of all of our employees. At this time, I'll turn the call back to George for his closing remarks. George?

George Zoley, Chairman and Chief Executive Officer

Thank you, Ann. At times of unprecedented uncertainty, we often see the best in our people and their abilities. We are incredibly proud of all of our employees whose daily commitment and dedication has allowed our company to meet this crisis head-on. As you've heard today, we have taken comprehensive steps to address and mitigate the risk of COVID-19 across all of our facilities and programs. Ensuring the health and safety of all of those in our care and our employees has always been our number one priority. We are committed to working closely with our government agency partners and local health officials across the country as well as continuing to fight the spread of COVID-19. Despite the significant challenges associated with this global pandemic, our business, earnings, and cash flows remain resilient. We've taken what we believe is a prudent approach to our guidance for the full year and we believe we have adequate liquidity and access to capital. We remain focused on the effective allocation of capital and on the continued enhancement of long-term value for our shareholders, which include many of our employees. Finally, I want to thank David Donahue for his 11 years with GEO and bringing additional professionalism to our company. David will be retiring on July 11 and will be followed by Blake Davis, who is presently in the role of President of GEO Secure Services. That completes our presentation. We would be glad to address any questions.

Operator, Operator

And our first question comes from Joe Gomes of Noble Capital. Please go ahead.

Joe Gomes, Analyst

Good morning and thanks for taking my questions. Can you hear me?

George Zoley, Chairman and Chief Executive Officer

Yes, I can. Good morning.

Joe Gomes, Analyst

Thank you. I would like to begin by asking if you could provide an overview of how the quarter performed. In January and February, were you meeting or exceeding your expectations, and when did the impact of COVID start to be noticeable in March?

George Zoley, Chairman and Chief Executive Officer

I think it was mid-March. So it was late in the quarter, and we made our quarter results. But our revised guidance is an indication that the occupancies did recede in late March and have stayed there. And we've taken, I think, the prudent approach of forecasting the continuation until the situation changes.

Brian Evans, Senior Vice President and Chief Financial Officer

And Joe, I would like to add to what George said. Normally, we would expect our occupancy levels to begin improving towards the end of the first quarter. Typically, the first quarter sees lower occupancy levels, but rather than seeing that improvement begin, we have essentially maintained our current numbers, aided by a decrease in payroll tax expense in the second, third, and fourth quarters. This is how the trends have diverged from our usual expectations.

Joe Gomes, Analyst

Okay. Following up on that, if you look at ICE, the average daily populations at the end of December were at 42,000. I believe it was last week or two weeks ago that the average daily population for the week was around 30,000, reflecting roughly a 26% decline from the start of the year. You mentioned an 8% year-over-year decline in your revenue from ICE, and I'm curious if you could clarify how that aligns with such a significant drop in the ICE population since the beginning of the year?

Brian Evans, Senior Vice President and Chief Financial Officer

Sure. So first of all, as we mentioned in the call, the 8% was a combination of ICE and US Marshals. But as we've mentioned and I think we mentioned in the call, the majority of our contracts with ICE have a fixed-price component, a significant fixed-price component to cover the high level of fixed cost that it takes to operate a facility. So even though the occupancy levels are lower, it's not a proportionate impact to our revenues from the lower occupancy level. So that's why those minimum occupancies or fixed-price components of our contracts are so important. And most, as George mentioned, most of our ICE contracts have that, not quite as many of the US Marshals, there's a little more variability, and then most of our state and our Bureau of Prisons contracts also have those fixed-price arrangements. So that's why you see the impact more on the ICE side just due to the volatility in those contracts and the US Marshals.

Joe Gomes, Analyst

Okay, great. Thanks for the color on that. And then lastly, if you could just talk a little bit your experience in previous economic downturns on overall prison populations. As we know, the prison, overall, prison populations have been declining over time here. What have you guys seen in the past when we've seen an economic downturn on the impact, either positively or negatively on prison populations?

George Zoley, Chairman and Chief Executive Officer

Well, usually, the question is about economic situations. Our company seems to do just as well in difficult economic situations. As far as state populations, our state occupancy is fairly static. Our facilities are medium security and up. So we're not losing prisoners. The ones that are being released at the federal level are not our prisoners. They are in other types of facilities and in the state facilities as well. They're usually released from low-security institutions.

Joe Gomes, Analyst

Okay, great. I will jump in line. Thank you very much.

Operator, Operator

Our next question comes from Mitra Ramgopal of Sidoti. Please go ahead.

Mitra Ramgopal, Analyst

Yes. Hi. Good morning. Thanks for taking the questions. I was just curious in terms of how you see the environment playing out assuming we get back to hopefully normal before the end of the year. And I'm referring to I think you mentioned the ICE processing centers the operational guidance of 75% capacity to promote social distancing practices. So just curious if you see that becoming the norm or you probably go back to how things were pre-COVID?

George Zoley, Chairman and Chief Executive Officer

We would think that the guidance that was issued about the COVID at 75% occupancy or below is a temporary measure that will be lifted once the health situations in their respective communities improves. Our facilities are primarily in the Sun Belt states where there has been less activity of the virus. And we're hopeful that in the states that are reopening now, as you hear them reported on the news, that things will get back to normal in the next one, two, three months. But as a publicly traded company, I think we have to be fairly prudent and conservative in our forecasts to account for all kinds of scenarios that may occur. So the basis of our forecasts, as Brian mentioned, is a continuation of the existing situation, which we will hope will end in the near future, but we've provided guidance as we feel appropriate.

Mitra Ramgopal, Analyst

Okay. And then just a follow-up on that. I guess, obviously, you've taken a number of steps to improve the safety, et cetera and the sanitation. I think you mentioned things like daily soap being available, et cetera. Are those things also just temporary, or is that going to be sort of the norm going forward?

George Zoley, Chairman and Chief Executive Officer

I think they're temporary in the magnitude that they're being applied at this time. We're incurring costs for masks and gloves and disinfectants at a much higher level than we would expect in the future. But there probably will be a continuation to a lesser degree of some of these procedures. Just as some predicted there could be a further outbreak in fall just like the flu season. But we have faced these situations on a lesser extent previously where you have outbreaks of mumps or measles and people have to be quarantined. And so in ICE in particular we face these situations. We have the procedures. We have the organizational and financial resources to deal with these kinds of situations.

David Donahue, Senior Vice President of GEO Secure Services

Mitra, this is Dave. And to add to George's comment, the focus and support for personal hygiene has always been sustained and maintained at a very high level in our organization. So those protective equipment that are now specific to COVID-19, we would anticipate those to be lessened in the future as the pandemic is obviously medically understood and scientifically controlled, but our focus on personal hygiene has always been at the highest levels.

Mitra Ramgopal, Analyst

Thanks. I appreciate the clarification. Just wanted to touch base on CapEx. I know you pulled that in a little and a number of companies are obviously scaling back their CapEx or investment spending given the low visibility and the uncertainty that's out there right now. But just curious for some of them, it's more about cash constraint, et cetera. It seems like in your case it's probably more just reduced opportunities in the near-term given the environment as opposed to more liquidity issues. Is that fair?

Brian Evans, Senior Vice President and Chief Financial Officer

That's correct. We adjusted the growth CapEx slightly, but the majority of the reduction came from the maintenance side. This is mainly about deferring some projects and pushing them out a bit further. There are no liquidity issues; we are simply looking for ways to offset the reductions we had to make on the revenue side.

Mitra Ramgopal, Analyst

Thanks. Finally, regarding the growth initiatives, you have always been considering international expansion. I'm curious if you are observing any significant changes in that area due to the global pandemic. Additionally, regarding acquisitions, I assume some of your competitors or other companies in the industry might be facing challenging conditions, which could create opportunities for you in the near or medium term. What are your thoughts on that?

George Zoley, Chairman and Chief Executive Officer

Well, on the international front we have expansions occurring in Australia, as I think David mentioned. So that still looks quite good for us. And as far as acquisitions, we really don't talk about that very much.

Mitra Ramgopal, Analyst

Okay. Thanks again for taking the questions.

Operator, Operator

Our next question will come from Matthew Larson of National Securities. Please go ahead.

Matthew Larson, Analyst

Okay. Thanks for taking my call. Appreciate it. I'm not really surprised that your guidance for the remainder of the year has been lessened. I mean, the virus issue has made business difficult across all industries. And actually your reduction is, to me, minimal. If I'm looking at the numbers, your revenues are down $100 million and your AFFO is down about 10% or 12% or something like that. But the stock's down quite a bit more than that. And in a world where yield is at a premium and the yield that's from your dividend is really enormous, which should be attractive to people, what do you think you could do to get your stock price up? I mean, the yield should be attracting people. And I understand that there are certain groups of people who won't invest in for-profit prisons and things like that. But since there are really only two firms, yourself and CoreCivic, that are publicly traded in this area and there's plenty of private equity money out there, trillions I understand, that would love the sort of return you're able to generate. Is there a game plan to hopefully get this price up, since you don't have any coverage or sponsorship out there and other ways that normally you might be able to generate some interest in the stock, once some of these concerns fade away, whether the political concerns or if the virus finally abates?

George Zoley, Chairman and Chief Executive Officer

Well, I think, as the second quarter unfolds, shareholders will see a stark comparison between our company and the industry versus others. We're an essential government service provider. And you correctly stated that our profitability is maybe compressing by 10% to 11%, but that's far better than the typical companies throughout the country. And I think shareholders and investors will see a stark comparison as time moves forward this year. And we plan to reach out to the investment community throughout the year in different road shows and talk about the company and remind them of the kind of business we're in, the predictability of our cash flows, and the generous nature of our dividend. So we think the economic conditions are in our favor. And in time, more and more people will see this and the stock will increase.

Matthew Larson, Analyst

All right. Okay. Thank you. That's kind of my thoughts as well. It's just a matter of time, as long as you can execute. In the meantime, if you can maintain some semblance of your current dividend, that's going to continue to attract some attention. So, thanks for your time this morning.

George Zoley, Chairman and Chief Executive Officer

Thank you.

Operator, Operator

Our next question comes from David Naftzger of Artiea Capital Management. Please go ahead.

David Naftzger, Analyst

Hi. My question is related to the previous ones. What percentage of prisons, apart from the two public companies, are private prison facilities?

Brian Evans, Senior Vice President and Chief Financial Officer

I mean, between ourselves and CoreCivic, we're about 80% of the privately managed facilities in the U.S.

George Zoley, Chairman and Chief Executive Officer

Maybe more.

Brian Evans, Senior Vice President and Chief Financial Officer

Yes, maybe a little bit more now, so less than 20% or less.

David Naftzger, Analyst

And do you have any incentive, other than just being good corporate citizens and citizens of the world for GEO Care? Do you get any reward in some way for helping your patients and reducing recidivism?

George Zoley, Chairman and Chief Executive Officer

I believe our state clients recognize the value of the Continuum of Care program we have developed, which we consider to be among the best offender rehabilitation programs globally. It is highly comprehensive, covering both on-site rehabilitation components and post-release services that assist individuals with financial needs, transportation, employment, and housing after they leave our facilities. We have around 15 positions dedicated to these post-release services. In the state incarceration sector, we feel we offer more in terms of rehabilitation than any other organization I'm aware of. Our corporate offices have 50 people focused on this rehabilitation program. I don't know of any other public or private correctional organization that has assembled as many resources as we have.

Brian Evans, Senior Vice President and Chief Financial Officer

10%.

George Zoley, Chairman and Chief Executive Officer

10% of GEO's net profit is spent on supporting this offender rehabilitation program. I can't think of any other companies in the world that committed 10% of their profits to offender rehabilitation or criminal justice reform as we have.

David Naftzger, Analyst

I'm pleased to hear that because your work is often seen through a political lens. As someone who believes in effective capitalism, I see this happening frequently. However, it seems you are facing criticism as if you are not making a positive impact, while I suspect that you are actually performing better than the state-run and federal facilities. Like the previous question mentioned, how can you effectively communicate this and encourage people to invest in your stock?

George Zoley, Chairman and Chief Executive Officer

We will be releasing our next annual report that describes the activities of the Continuum of Care program for 2019 that will pay out next month, and we'll send that to all of our shareholders and investors.

David Naftzger, Analyst

I look forward to it because I would prefer more positive publicity instead of people claiming that private industry should not profit from prisoners, as if private companies are responsible for creating prisoners. They are not creators of prisoners; they simply provide housing for them.

George Zoley, Chairman and Chief Executive Officer

No. We take care of them. And it was really in our own initiative that we developed this program. We weren't paid to do it. We spent our own money developing it for many, many years. And we're proud that we have what we believe is possibly the finest offender rehabilitation program in the world.

David Naftzger, Analyst

Keep up the good work and get the word out. Thank you.

George Zoley, Chairman and Chief Executive Officer

Thank you.

Operator, Operator

Our next question comes from Harvey Poppel of Poptech, LP. Please go ahead.

Harvey Poppel, Analyst

Thank you very much. You've been very clear about the impact. I appreciate the clarity. You made one comment though very briefly and I would want to just have you comment on it. You said something to the effect that your results are adequate to cover the dividend. Does that imply that the dividend is safer now?

George Zoley, Chairman and Chief Executive Officer

I'm not sure what your question is. Are you asking whether it's temporarily safe?

Harvey Poppel, Analyst

Well, I think, whatever your comments you'll have, but how far out is it did you see that it's safe?

George Zoley, Chairman and Chief Executive Officer

Well, it's certainly safe consistent with our forecast our guidance.

Harvey Poppel, Analyst

Okay, good. The second question is about the overhang on the stock due to the potential for a Democratic sweep in November. I would like to hear your thoughts on what the potential downside could be and how you are getting ready for it.

George Zoley, Chairman and Chief Executive Officer

Well, there might be less occupancy in our ICE facilities, but I don't think it would be less than it is today. We operated very profitably under the eight years of the Obama administration. In fact, we expanded considerably under the Obama administration. And the reason why is because under that administration there was a raising of the standards of quality for those that were civilly detained. And there were physical plant upgrades that were necessary, staffing upgrades, health care upgrades, and a lot of the previous service providers for ICE in particular said, no, we're not able to meet those requirements. And ICE turned to the private sector which did meet those standards. So we built new facilities that met those standards. And that I would think if there is a Democratic president, such as the former Vice President, that he would have a continuation of those policies.

Harvey Poppel, Analyst

Okay. Thank you very much.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to George Zoley for any closing remarks.

George Zoley, Chairman and Chief Executive Officer

Well, thanks to everyone for joining us today. We look forward to addressing you on the second quarter earnings call. Thank you.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.