Business Overview and History
CoreCivic, Inc. (CXW) is a diversified government solutions company that has established itself as a leading provider of correctional, detention, and residential reentry services in the United States. With a rich history spanning over four decades, the company has navigated various market conditions and emerged as a trusted partner for government agencies seeking innovative and cost-effective solutions to complex challenges.
CoreCivic was founded in 1983 and quickly became a pioneer in the private corrections industry. The company designed, built, and operated the first private prison in the United States, establishing itself as a trailblazer in the field. CoreCivic also achieved several other notable milestones, including managing the first private maximum-security facility under a direct contract with the federal government, purchasing the first government-owned correctional facility in the U.S. to manage it for the government agency, leasing the first private prison to a state government, and developing the first privately-owned, build-to-suit correctional facility to be operated by a government agency through a long-term lease agreement.
Over the years, CoreCivic has continued to expand its footprint, owning or controlling, via long-term leases, 38 of the 42 correctional and detention facilities it currently operates. The company has faced challenges and resistance to the privatization of correctional, detention, and residential reentry facilities, encountering opposition from groups that believe these facilities should only be operated by governmental agencies. Despite this, CoreCivic has maintained a high contract renewal rate of approximately 96% over the five years ended December 31, 2024, demonstrating the value it provides to its government partners.
In addition to its core correctional and detention services, CoreCivic has diversified its business model to include a network of 21 residential reentry centers, which it owns or controls via long-term leases, as well as a properties segment that owns six correctional real estate properties. The company has also expanded its offerings to include electronic monitoring and case management services, and government real estate solutions. This diversification has allowed the company to adapt to changing market dynamics and provide a broader range of solutions to its government partners.
In 2021, CoreCivic made a significant strategic decision by revoking its election to be taxed as a real estate investment trust (REIT). This move has improved the company's overall credit profile and allowed it to allocate more free cash flow toward debt repayment and potential return of capital to shareholders.
Financial Strength and Liquidity
As of December 31, 2024, CoreCivic reported total assets of $2.93 billion and total liabilities of $1.44 billion, resulting in a healthy debt-to-equity ratio of 0.68. The company's strong balance sheet and liquidity position are further evidenced by its $107.5 million in cash and cash equivalents and $257 million in available borrowing capacity under its revolving credit facility as of the same date. CoreCivic's current ratio and quick ratio both stand at 1.57, indicating a solid ability to meet short-term obligations.
CoreCivic's financial performance in 2024 was commendable, with revenue reaching $1.96 billion and net income of $68.9 million, or $0.62 per diluted share. The company's adjusted EBITDA for the year was $330.8 million, highlighting its ability to generate robust cash flows. Additionally, CoreCivic's operating cash flow for 2024 was $269.2 million, with free cash flow of $198 million, demonstrating its financial flexibility and capacity to invest in growth initiatives or return capital to shareholders.
In the fourth quarter of 2024, CoreCivic reported revenue of $479.3 million, a 2% decrease from the same period in 2023. However, this decline was primarily due to the termination of the inter-governmental service agreement for the South Texas Family Residential Center and the expiration of the lease for the California City Correctional Center. Excluding these impacts, underlying revenue growth increased by 8% in Q4 2024 compared to the prior year quarter. Net income for Q4 2024 was $19.3 million, while adjusted EBITDA reached $74.2 million, down from $90 million in Q4 2023 due to the aforementioned contract termination and lease expiration, partially offset by increased occupancy and reduced labor costs.
Diversified Revenue Streams and Expanding Partnerships
CoreCivic's revenue is primarily derived from contracts with federal, state, and local government agencies, with federal customers, including the U.S. Immigration and Customs Enforcement (ICE) and the U.S. Marshals Service (USMS), accounting for 51% of total revenue in 2024. The company's state revenue, which represented 40% of total revenue, has also shown strong growth, increasing by 5% in 2024 compared to the prior year.
Recent contract awards and expansions have further diversified CoreCivic's revenue streams and strengthened its relationships with key government partners. In 2023, the company signed new management contracts with the state of Wyoming, Hinds County, Mississippi, and Harris County, Texas, which have contributed to its revenue growth. Additionally, in January 2025, CoreCivic announced a new management contract with the state of Montana to care for an additional 240 inmates at its Tallahatchie County Correctional Facility in Mississippi.
Operational Efficiency and Cost Management
CoreCivic has demonstrated its ability to effectively manage costs and drive operational efficiency across its business segments. In 2024, the company was able to reduce its reliance on temporary staffing and registry nursing expenses, which had been elevated due to pandemic-related labor market pressures. This, combined with higher occupancy rates, contributed to an improvement in the company's operating margins, excluding the impact of the terminated South Texas Family Residential Center contract.
The company's focus on cost optimization and operational excellence has been a key driver of its financial performance. CoreCivic has implemented various initiatives, such as standardizing supply and service purchasing practices, improving offender management and resource consumption, and reconfiguring facility bed space to optimize capacity utilization.
Navigating Challenges and Capitalizing on Opportunities
CoreCivic has faced its share of challenges, including the termination of its contract for the South Texas Family Residential Center in 2024 and the expiration of its lease at the California City Correctional Center. However, the company has demonstrated its resilience by offsetting the impact of these events through new contract awards and the expansion of existing partnerships.
Looking ahead, CoreCivic is well-positioned to capitalize on the expected increase in demand for its services from federal partners, particularly ICE and the USMS, as the new presidential administration emphasizes public safety and immigration enforcement priorities. The company has proactively prepared its facilities and workforce to be ready to quickly meet this anticipated surge in demand, allocating $40 million to $45 million in capital expenditures to activate idle facilities and enhance its transportation capabilities.
Furthermore, CoreCivic's diversified business model, strong balance sheet, and proven track record of cost management position the company to navigate market challenges and seize new opportunities. The company's 2025 financial guidance reflects its confidence in its ability to deliver robust financial performance, with projected diluted earnings per share of $0.48 to $0.61 and funds from operations per share of $1.37 to $1.50. This guidance assumes steady increases in federal populations throughout the year, utilizing existing contracts, but does not include the impact of potential new contract awards.
Segment Performance and Strategy
CoreCivic operates through three principal business segments: CoreCivic Safety, CoreCivic Community, and CoreCivic Properties.
The CoreCivic Safety segment, which includes 42 correctional and detention facilities with a total design capacity of approximately 62,000 beds, generated total revenue of $1.82 billion in 2024, an increase of 4.9% from the prior year. Facility net operating income for this segment increased 15.8% to $434.3 million, driven by a 3.3% increase in average revenue per compensated man-day and a decrease in variable operating expenses. The average compensated occupancy of the CoreCivic Safety facilities improved to 75.7% in 2024, up from 72.2% in 2023.
The CoreCivic Community segment, consisting of 21 residential reentry centers with a total design capacity of approximately 4,000 beds, saw total revenue increase by 3.1% to $118.7 million in 2024. However, facility net operating income for this segment decreased 6.3% to $21.7 million, primarily due to higher staffing costs and legal expenses. The average compensated occupancy of the CoreCivic Community facilities improved to 65.1% in 2024, up from 62.2% in 2023.
The CoreCivic Properties segment, which includes six correctional real estate properties owned by the company, experienced a 47.7% decrease in total revenue to $26.1 million in 2024. This decline was primarily due to the termination of lease agreements for the California City Correctional Center and North Fork Correctional Facility. Consequently, facility net operating income for the Properties segment declined 66% to $12.3 million.
Industry Trends and Market Outlook
The corrections and detention industry has seen increased demand for beds from the federal government, particularly from Immigration and Customs Enforcement (ICE) and the U.S. Marshals Service, due to changes in immigration and criminal justice policies under the new presidential administration. This trend is expected to drive a high single-digit to low double-digit compound annual growth rate (CAGR) for the industry over the next 3-5 years.
CoreCivic is well-positioned to benefit from these industry trends, given its extensive network of facilities and strong relationships with government partners. The company's 2025 guidance contemplates staying within its targeted leverage range of 2.25x to 2.75x net debt to adjusted EBITDA, providing financial flexibility to pursue growth opportunities while maintaining a strong balance sheet.
Capital Allocation and Future Investments
For 2025, CoreCivic plans to invest $60 million to $65 million in maintenance capital expenditures and an additional $6 million to $7 million in other capital expenditures. The company has also earmarked $40 million to $45 million for capital expenditures associated with potential idle facility activations, demonstrating its commitment to meeting anticipated increases in demand for its services.
CoreCivic's adjusted funds from operations (AFFO) for 2025 is expected to be between $148.5 million and $165.5 million, providing ample resources for strategic investments and potential return of capital to shareholders.
Conclusion
CoreCivic's four-decade history, diversified service offerings, and strong financial foundations make it a compelling investment opportunity in the government solutions sector. Despite facing headwinds, the company has demonstrated its resilience, operational efficiency, and ability to adapt to changing market conditions. As the new presidential administration emphasizes public safety and immigration enforcement, CoreCivic is poised to capitalize on the anticipated increase in demand for its services, leveraging its robust infrastructure, experienced workforce, and innovative solutions to drive long-term shareholder value.
With a solid financial position, strategic focus on operational efficiency, and opportunities for growth in its core markets, CoreCivic is well-equipped to navigate the evolving landscape of the corrections and detention industry while delivering value to its government partners and shareholders alike.