CoreCivic, Inc. (CXW) Earnings

Management highlights

### Overall Financial Performance - Q2 2026 results beat average analyst expectations: adjusted EPS beat by 4 cents, adjusted EBITDA beat by $2 million. - GAAP EPS was 37 cents per share, Funds From Operations (FFO) per share was 63 cents. Adjusted EPS (excluding M&A expenses) was 38 cents, up from 36 cents year-over-year; normalized FFO per share was $0.64, up from $0.59 year-over-year. Adjusted EBITDA was $109.4 million, up 19.3% year-over-year after excluding the prior year ERC impact. - Results were driven by activation of five previously idle facilities under new ICE contracts, the 2025 acquisition of Farmville Detention Center, and the 2026 acquisition of CSP. Share repurchases reduced diluted weighted average shares outstanding by 8.9% year-over-year, boosting per-share results. ### Recent Transactions and Capital Allocation - The firm completed sales of four detention facilities to the U.S. Department of Homeland Security for a total gross proceeds of $2.234 billion, generating ~$1.622 billion in net proceeds after taxes and transaction costs. CoreCivic retains management contracts for all four facilities, though contract terms may be modified following the ownership transfer. - Proceeds have been used to repay $608.5 million in outstanding debt, including full repayment of the $575 million revolving credit facility (which remains available for redraw) and a planned August 2026 redemption of $238.5 million of 2027 senior notes. - The Board approved a $500 million increase to the share repurchase program, bringing total available repurchase capacity to ~$756 million. Management prioritizes share repurchases given the current share price trades at a meaningful discount to its long-term average enterprise value-to-EBITDA multiple and estimated fair value. - Management is in preliminary discussions with ICE for the potential sale of additional facilities; no assurance any additional sales will be completed. Any future M&A will require strong strategic fit and favorable valuation relative to alternative capital uses. ### Operational Updates - Total federal partner revenue (primarily ICE and U.S. Marshals Service) represented 53% of total Q2 revenue, with total federal revenue up 27.2% year-over-year: ICE revenue increased $91.3 million (51.6%) while U.S. Marshals Service revenue decreased $14.1 million, driven by mix shift as ICE took over shared capacity. - ICE population nationwide hit a historic high of ~70,800 in January 2026, then dropped 10,500 by early April due to a DHS funding shutdown, leadership reorganization, and temporary redeployment of ICE agents to TSA checkpoints. Populations have since rebounded to ~65,500 by early July 2026, and ICE populations in CoreCivic's care rose 17.7% between early April and mid-July 2026. - CoreCivic recently won a new 1600-bed contract to reactivate the idle Prairie Correctional Facility, which has been idle since 2010. Staff hiring is underway, with detainee intake expected to begin in Q4 2026, and minimal earnings contribution expected in 2026. - CoreCivic continues to hold 5,500 beds across four idle facilities, ready to meet future increases in federal or state demand. As of Q2 end, newly activating facilities: California City Detention Facility held 1,674 detainees, Diamondback Correctional Facility held 1,522, and Midwest Regional Reception Center held 379.

Guidance

- Updated full-year 2026 adjusted diluted EPS guidance is $1.62 to $1.70, upwardly revised from the prior range of $1.53 to $1.63. Reported diluted EPS (including the facility sale gain) is expected to be $15 to $15.20. - Normalized FFO per share guidance is maintained at $2.61 to $2.70, with the upper end of the range unchanged from prior guidance. - Adjusted EBITDA guidance is lowered to $440.5 million to $445.5 million, from the prior range of $453.8 million to $461.8 million, to reflect the impact of the four completed facility sales. - Guidance incorporates management's best estimate of potential modifications to the retained management contracts for the sold facilities, as contract negotiations are still ongoing. No impact from potential additional facility sales is included. - Guidance assumes faster ICE population growth in the second half of 2026 than previously forecast, reflecting the faster-than-expected population rebound since early April 2026. The new Prairie Correctional Facility contract is included, with an immaterial 2026 earnings impact due to phased startup. - Total capital expenditure guidance is unchanged overall: maintenance capex is projected at $65 to $75 million, other capex at $15 million (up $5 million from prior guidance), and activation capex for idle facilities at $35 to $40 million (down $5 million from prior guidance). - Adjusted Funds From Operations (AFFO), a proxy for cash available for capital allocation, is projected to be $257.5 million to $271.5 million for 2026. The annual effective tax rate guidance is unchanged at 25% to 28%. G&A expenses are projected to be $173 to $175 million, increased for higher incentive compensation tied to the facility sales. - No impact from second half 2026 share repurchases is included in guidance. While share repurchases will reduce cash (and thus related interest income) to lower total net income, FFO, and EBITDA, they will positively impact per-share metrics via reduced share count.

Segment performance

CoreCivic redefined its operating segments in Q2 2026 to align with internal management practices. 1. CoreCivic Residential: This segment includes 64 correctional, detention, and reentry facilities managed by the firm, and generated 92.4% of total segment net operating income in the quarter. Total segment occupancy was 78.4%, up 1.6 percentage points year-over-year, with an average daily population of 56,363, up from 54,026 year-over-year. The operating margin for the segment was 22.4%, down from 26.1% in Q2 2025; this decline is primarily driven by an $8.2 million employee retention credit (ERC) that boosted results in the prior year quarter (the margin would have been 24.5% excluding ERCs in 2025), temporary Q2 2026 ICE population declines, and 55% average occupancy across four newly activating facilities. 2. CoreCivic Services: This segment includes complementary correctional industry services (pharmaceuticals via Clinical Solutions Pharmacy (CSP), transportation, electronic monitoring and case management), and generated 6.1% of total segment net operating income in Q2 2026, up from 0.5% year-over-year due to the CSP acquisition. The segment's operating margin was 10.2%, in line with management expectations. 3. CoreCivic Properties: This segment is unchanged from prior reporting, consisting of five correctional facilities held for lease to government agencies. No separate operating income or margin figures were provided for this segment in the quarter.

Risks & headwinds

- Contract terms for the four recently sold facilities (which CoreCivic continues to manage) may be modified following the change in ownership, which could negatively impact future earnings and operating margins. - Discussions for additional potential facility sales to ICE are only at a preliminary stage, and there is no assurance any additional transactions will be completed. Ongoing due diligence for potential transactions may restrict near-term share repurchase activity depending on negotiation status. - Temporary population declines in Q2 2026 pressured segment margins, and margins could face further pressure from startup activities at the newly awarded Prairie Correctional Facility in the second half of 2026. - ICE detention population levels remain volatile, affected by shifting DHS policy, funding uncertainty, leadership changes, and changes to enforcement priorities, which creates uncertainty for future occupancy and revenue. - Newly activating facilities currently have low occupancy, and there is no guarantee that ramp-up will proceed as expected to reach target occupancy levels to meet margin expectations. - Any future reactivation of additional idle capacity or expansion of existing facilities depends on sustained demand growth from ICE, which is difficult to project in timing and scale.

Analyst Q&A

• Q: How large is the EBITDA impact of anticipated contract adjustments for the sold facilities, and when will contract changes take effect? Could you also share what ICE population assumptions for H2 2026 are, and how they changed from prior guidance?

  A: Management incorporated a range of potential outcomes from contract negotiations into the updated guidance, but declined to publicly quantify the impact as negotiations are still ongoing, and the effective date of any changes is not yet determined. Management had already forecast Q2 ICE population declines and H2 growth in prior guidance, but now expects growth to occur 5 to 10 million dollars faster than previously anticipated, reflecting the faster-than-expected rebound in nationwide populations.

• Q: Will preliminary discussions for additional facility sales lead to a temporary pause in share repurchases, and why were no repurchases done in Q2? What is the historical peak for consolidated facility occupancy?

  A: Share repurchase activity depends on the status of negotiations, as ongoing due diligence for transactions created repurchase restrictions during the prior round of facility sales. The earnings blackout is expected to end next week, and management expects to be able to repurchase stock in H2 2026 barring unexpected changes in negotiation status. No shares were repurchased in Q2 due to these restrictions, not because management sees the stock as less undervalued. The last peak for total occupancy was in the upper 80% pre-pandemic; the last time occupancy exceeded 90% was in the 1990s, so it has been decades since occupancy hit that level.

• Q: If CoreCivic fully executes the new $500 million share repurchase authorization, how much will this increase FFO per share? Is an automatic 10b5-1 repurchase plan possible to trade during blackouts? What is the maximum share repurchase possible while retaining enough leverage headroom, and what is the path to investment grade credit?

  A: No share repurchases are included in guidance. Depending on repurchase price, buying the full $500 million would reduce share count by roughly 15% to 17% at current prices, which would proportionally increase per-share FFO. A 10b5-1 plan can allow trading during closed windows, but the plan must be initiated during an open trading window. Under current leverage covenants, CoreCivic can repurchase roughly $1 billion in shares while remaining below the 2x net leverage threshold. Management's stated leverage policy targets 2.25x to 2.75x net leverage, and investment grade credit is not an explicit target; the firm prioritizes value-optimized leverage and currently maintains flexibility below 2x leverage for repurchases or investments.

• Q: What is the margin profile for the Prairie Correctional Facility once it is fully operational, and what is the expected ramp cadence for existing activating facilities? How is DHS's overall detention capacity strategy evolving?

  A: Prairie's margins will align with the company's average for other ICE contracts. Existing large activating facilities (California City, Diamondback) were only 55% occupied in Q2, so they will continue ramping in H2 2026. Prairie will not begin intake until late 2026 and will not reach full activation until Q2 2027, so it has minimal impact on 2026 guidance. DHS has publicly de-emphasized its prior warehouse strategy, but is still exploring conversion of some purchased warehouses. Policy has shifted multiple times under the current administration, but CoreCivic's turnkey, ready-to-operate facilities position it well to meet any demand changes, as demonstrated by the recent Prairie contract award.

• Q: Given record recent ICE apprehensions and a stated target of 100,000 to 120,000 total detention beds, how do you see demand for reactivation of your idle 5,500 beds, and how could the industry reach ICE's capacity target? Would alternative capacity like soft-sided facilities be part of that expansion?

  A: Recent increases in enforcement have already translated to higher detention populations and new contract awards for previously idled capacity across the industry. CoreCivic's 5,500 ready idle beds are fully marketed and available to meet additional demand, but it is too early to project timing for further reactivation. CoreCivic believes turnkey existing facilities are the optimal first option to meet near-term demand, and the industry has enough existing turnkey capacity to meet initial additional needs. Expansion of existing facilities (including potential soft-sided capacity additions on current sites) is a viable pathway to reach higher capacity targets, as co-locating additional capacity improves operational efficiency for both the firm and ICE.