The Geo Group (GEO) Q4 2021 Earnings Call Transcript

The Geo Group (GEO 1.99%)
Q4 2021 Earnings Call
Feb 17, 2022, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

I would now like to turn the conference over to Pablo Paez, executive vice president, corporate relations. Please go ahead.

Pablo Paez -- President, Corporate Relations

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of the Geo Group's fourth quarter 2021 earnings results. With us today are George Zoley, executive chairman of the board; Jose Gordo, chief executive officer; Brian Evans, chief financial officer; James Black, president of Geo Secure services; and Ann Schlarb, president of Geo Care. This morning, we will discuss our fourth quarter results and our outlook.

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, reconciliation from non-GAAP basis information to GAAP basis results is included in the press release, and the supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we gave 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 executive chairman, George Zoley.

George?

George Zoley -- Executive Chairman of the Board

Thank you, Pablo, and good morning to everyone and thank you for joining us on our fourth quarter 2021 earnings call. I'm pleased to be joined today by our senior management to review our financial results for the fourth quarter and the full year. The trends for each of our business segments, our financial guidance for 2022, and the recent developments impacting our government agency partners. With respect to our quarterly performance, we continue to be pleased with the strength of our operating and financial results.

In the fourth quarter of 2021, we reported revenues of $557.5 million, which is only approximately 3.5% lower than our quarterly revenues for the fourth quarter of 2020. Despite the non-renewal of seven of our federal Department of Justice contracts in 2021. During the fourth quarter, we incurred a one-time non-cash deferred tax charge and additional tax expenses related to our transition to a taxable C Corporation, which resulted in a net loss attributable to a deal of $0.41 per diluted share. Excluding the deferred tax charge and other extraordinary items from net loss attributable to GEO, our fourth quarter 2021 adjusted net income increased by 15% to $0.38 per diluted share.

Our AFFO for the fourth quarter of 2021 increased by 5% to $0.65 per diluted share. And our adjusted EBITDA increased 15% year over year to $124 million in the fourth quarter of 2021. Despite the ongoing challenges associated with the COVID 19 pandemic and the non-renewal of seven of our federal Department of Justice contracts in 2021, our diversified business units delivered consistently better than expected performance throughout the year. For the full year, we reported revenues of approximately $2.26 billion, which was less than a 5% decline from 2020, despite all the challenges we face during the year.

Our full-year adjusted net income of $159 million exceeded our full-year 2020 results in our full-year AFFO of $299 million was largely consistent year over year. And our adjusted EBITDA for the year increased by 6% to $467 million. Looking at each of our segments in more detail, our GEO Secure Services-owned at least facilities experience a year-over-year decline in compensated occupancy rates of 200 basis points ending the year at 85% of capacity for our active facilities. Our secure services own and lease segment is comprised primarily of facilities under contract with our three federal government agency partners, the Federal Bureau of Prisons, the US Marshals Service, and the US Immigration and Customs Enforcement.

The BOP Marshals Service is part of the US Department of Justice, and ICE is part of the US Department of Homeland Security. In addition to the impact of the COVID-19 pandemic, the BOP and Marshals Service are subject to the President's January 21 executive order, which directed the US attorney general to not renew the Department of Justice contracts with privately operated criminal detention facilities. As a result of the executive orders, six of our company-owned facilities under direct contracts with the BOP were not renewed at different times during the year, resulting in the phase-out of approximately $240 million in annualized revenues. As of the end of the year, we only had one company-owned facility under direct contract with the BOP, which generates approximately $38 million in annual revenues, which we expect will not be renewed when the current contract option expires at the end of September 2022.

In addition, one of our company-owned facilities under direct contract with the US Marshals Service with annualized revenues of approximately $19 million was not renewed in March of '21. And we successfully sold the facility in August of '21. At the end of '21, we had three company-owned or company leased facilities under direct contracts with the US Marshals Service with annualized revenues of approximately $135 million. One of these facilities has a contract option period that was extended for a six-month period and expires at the end of March this year, while the other two expire in 2023.

At this time, our. 2022 guidance does not include that facility, although we continue to work on options for keeping the facility in operation. With respect to ICE, detainee populations have remained significantly below historical levels, in part, we believe, due to the impact of COVID-19 related restrictions. At the end of this year or last year, ICE facilities housed approximately 21,000 individuals nationwide, while ICE is currently funded for 34,000 beds.

In addition to court mandates related to COVID-19 that limit capacity utilization on certain facilities. A driver of low utilization across ICE facilities has been the Title 42 COVID-related restrictions in place at the southwest border since March 2020. While these restrictions have been eased or lifted for the family units and unaccompanied minors, they remain largely in place for single adults, which is the population that is ICE facilities have historically housed. We have, however, seen an increase in the utilization of alternatives to detention programs.

The Intensive Supervision and Appearance Program or ISAP is a key component of the federal government's alternatives to detention. Our BI subsidiary provides a full suite of monitoring and technology services under the ISAP contract to ensure compliance for individuals undergoing the immigration review process. During 2021, ISAP almost doubled the number of participants under the program. Moving to our managed-only business, our facilities have continued to experience stable occupancy rates ending the year at 97% capacity.

During the fourth quarter, we renew to manage only contracts in our secure services segment. In Florida, our contract for the Blackwater River Correctional and Rehabilitation Facility was renewed for a two-year term. In Arizona, we renewed our contract for the Central Arizona Correctional Facility for a five-year term. Our own and lease reentry services facilities experienced a year over year increase in occupancy rates of 100 basis points, but remain at below 50% capacity at year-end, as COVID-19 related challenges continued to impact this segment.

Throughout the pandemic, new intake at residential reentry centers has significantly slowed down as government agencies across the country have opted for nonresidential alternatives including furloughs, home confinement, day reporting, etc. Our non-residential businesses experienced an increase consistent with these trends with compensated man-days for our day reporting programs and location and electronic monitoring services growing by approximately 25% in 2021. Our electric monitoring and supervision segment has continued to enjoy strong growth, increasing annual revenues by 15% in 2021. Despite the ongoing COVID-19 challenges in our residential reentry services business, we successfully renewed five residential reentry contracts during the fourth quarter, including four contracts with the Federal Bureau of Prisons.

As we look forward to 2022, our operational focus remains on mitigating the challenges of the COVID-19 pandemic while delivering high-quality support services on behalf of our government agency partners. While we experience a significant increase in COVID cases in the early part of 2022 consistent with the spread of the Omicron variant across the country, we are currently seeing a significant decline in cases among our staff and the individuals in our care. Our commitment to operational excellence is unwavering, and our continued success is underpinned by the dedication of our frontline employees who provide humane and compassionate care to all those entrusted to our facilities and programs. One of the significant challenges we face is the ability to recruit and retain staff in what has become a very difficult labor market.

We've been working collaboratively with our government agency partners who themselves are facing the same challenges. Over the past year, we have increased wages in a number of states and are evaluating additional initiatives including bonuses, changing benefits, policies, and alternatives to address the challenges of finding adequate and affordable housing. At the management and board level, we remain focused on reducing our debt and deleveraging our balance sheet. During the fourth quarter, our board unanimously approved a plan to terminate our reelection and become a taxable C Corporation effective for the 2021 fiscal year.

The board also voted unanimously to discontinue our quarterly dividend. We expect the change in our corporate tax structure will give us additional flexibility to allocate free cash flow toward reducing net recourse debt. Over the last two years, we have reduced our net recourse debt by approximately $250 million, and we expect to focus all of our excess cash flow over the next several quarters to further reduce our net recourse debt. The decisions made by our board are consistent with the proactive and multifaceted approach we have implemented to address our future debt maturities, which include our continuing focus on net recourse debt reduction and deleveraging our review of potential sales of company-owned assets and businesses, and our ongoing discussions with our banks and the advisors for our lender and bondholder groups concerning a potential transaction to further reduce our funded recourse debt and extend our debt maturities.

We believe that these are prudent steps which are in the best interest of our shareholders and other stakeholders. After attaining our objective of net recourse debt reduction and deleveraging, we plan to evaluate the allocation of a portion of free cash flow to fund quality growth opportunities and potentially return capital to shareholders in the future. Before I turn the call over to Brian, I'd like to highlight another important milestone we achieved in the fourth quarter of 2021 with the publication of our third annual human rights, environmental, social, and governance report. This simple report includes new disclosures related to our board's oversight of human rights and ESG matters employee, diversity and training programs, corporate governance, and environmental sustainability.

Our ESG report also highlights our continued commitment to respecting human rights and improving the lives of those entrusted to our care. Our ESG report reinforces our commitment to providing enhanced rehabilitation and post-release support services through our award-winning GEO Continuum of Care program. During 2021, our continuum of care facilities delivered approximately 2.8 million hours of enhanced rehabilitation programs. We also awarded approximately 2,100 GEDs and high school equivalency degrees, 6,800 vocational certifications, 5,500 substance abuse treatment completion, and 38,600 behavioral program completions.

We continue to be committed to advancing our ESG goals throughout our organization and to that objective our board committee structure has been expanded to include a committee on Criminal Justice Rehabilitation and human rights, and we look forward to continued engagement with our shareholders and other stakeholders as we evaluate additional human rights and ESG initiatives. At this time, I'll turn the call over to Brian Evans to address our debt reduction initiatives in more detail and review our financial results and guidance.

Brian Evans -- Chief Financial Officer

Thank you, George. Good morning, everyone. As a result of our transition to a taxable C Corporation in the fiscal year 2021, during the fourth quarter, we incurred a one-time non-cash deferred tax charge of approximately $71 million. We also incurred approximately $21 million in incremental income tax in the fourth quarter due to our new higher effective tax rate including a catch-up tax expense of approximately $17 million in connection with the first three quarters of 2021.

Due to these tax items, we reported a GAAP net loss attributable to GEO of $0.41 per diluted share during the fourth quarter on quarterly revenues of approximately $557.5 million. Our fourth quarter results also include a $700,000 pre-tax gain on real estate assets, $2.2 million in start-up expenses, $4.1 million in M&A related expenses pre-tax, $1.3 million pre-tax loss and settlement on asset divestiture for the previously announced divestiture of our youth services business, $3.3 million and closeout expenses pre-tax, and $2.6 million benefits in the tax effect of the adjustment to net income attributable to GEO. Excluding these items, the one-time non-cash deferred tax charge in the portion of additional income tax expense associated with the first three quarters of 2021, we reported fourth quarter adjusted net income of $0.38 per diluted share and AFFO $0.65 per diluted share. Our fourth quarter 2021 adjusted EBITDA increased by 15% to $124 million.

Our performance for the entire year exceeded our prior expectations, which we believe is a testament to the stability and strength of the business. Despite the non-renewal of seven of our federal facility contracts in 2021, representing annualized revenues of approximately $259 million, our company delivered strong financial results. Our full-year 2021 revenues declined less than 5% to $2.26 billion. Our full-year 2021 normalized FFO of $234 million and AFFO of $299 million were largely consistent year over year, and our full-year 2021 adjusted EBITDA increased by 6% to $467 million.

Moving to our financial guidance for 2022, we expect full-year net income attributable to GEO and adjusted net income both to be in a range of $0.99 to $1.7 per diluted share on an annual basis -- on annual revenues of approximately $2.17 billion. We expect full-year 2022 AFFO to be in a range of $2.5 to $2.13 per diluted share, and adjusted EBITDA to be in a range of $422 million to $438 million. We expect to continue to focus on net recourse debt reduction in 2022 consistent with our efforts over the last two years, during which period we reduce net recourse debt by approximately $250 million. For the first quarter of 2022, we expect net income attributable to GEO and adjusted net income, both to be between $0.21 and $0.23 per diluted share and AFFO to be between $0.48 and $0.50 per diluted share on quarterly revenues of $550 million to $555 million.

Our 2022 guidance reflects the normalization of the non-renewal of our seven Department of Justice contracts during 2021, with combined annualized revenues of approximately $259 million. Our guidance also does not include the two additional the Department of Justice direct contracts that have contract option periods scheduled to expire during 2022, with combined annualized revenues of approximately $90 million. Our guidance also reflects higher operating expenses, primarily related to wage increases and bonuses for our facility staff, which we have implemented working collaboratively with our government agency partners and have been largely supported by increases in our per diem rates. With respect to other inflationary pressures at this time, the primary impact on our facilities from inflation is related to higher overall labor costs.

While we have also experienced inflationary increases in other areas, labor costs have always been our largest operating expense. With respect to our occupancy rates, we have not assumed a significant improvement in utilization in our guidance for our reentry centers and ICE facilities, which currently remain significantly below historical levels. In part, we believe, due to the impact of COVID-19 related restrictions. Despite all these factors, we are pleased that our guidance reflects a decline of less than 10% in our projected adjusted EBITDA for 2022.

Our guidance also reflects a higher effective tax rate, which we expect to be approximately 29% as a result of our transition to a taxable C Corporation. Finally, working with our financial and legal advisors, we remain engaged in discussions with our banks and with the advisors to ad-hoc groups representing our term loan lenders and our bondholders. The goal of this process is to reach an agreement on and execute a transaction or series of transactions to reduce our net recourse debt and extend the maturities of our outstanding senior unsecured notes, revolving credit facility, and term loan on reasonable terms. We believe that our company, our lenders, and bondholders share an interest in accomplishing this goal, and we are encouraged by our ongoing and productive discussions with these constituencies and their advisors.

We will update our financial guidance accordingly if we are able to complete a transaction to reflect the expected increase in interest expense. For each 1% increase in our weighted average cost of debt, our annualized interest expense would increase by approximately $18 million to $20 million based on our current net resource debt. Moving to our capital structure at the end of 2021, we had approximately $506 million in cash on hand, primarily resulting from the previously announced drawdown of our revolving credit facility. Taking into account our $506 million of cash on hand, our net recourse debt currently stands at approximately $2.1 billion not including non-recourse debt finance lease obligations or the mortgage on our corporate headquarters.

We have continued to execute our multifaceted approach focusing on deleveraging our balance sheet. Between 2020 and 2021, we reduced net recourse debt by approximately $250 million. Going forward, we plan to continue to focus on net recourse debt reduction and deleveraging with the objective of reducing net recourse debt by at least $150 million to $200 million annually. And we continue to believe we will be able to address our debt maturities in due course on reasonable terms.

Our strategy also includes the exploration of potential opportunities to sell company-owned assets and businesses. Between January 2021 and February 2022, we have completed or have entered into contracts for eight sale transactions with proceeds of approximately $64 million. At this time, I will turn the call over to James Black for a review of our GEO Secure Services segment.

James Black -- President, Geo Secure Services

Thank you, Brian. Good morning, everyone. I'd like to begin by providing you with an update on the 2021 operational highlights for GEO Secure Services. Throughout the year, our operational efforts have been focused on the continued implementation of mitigation strategies to address the risks associated with the COVID-19 pandemic.

These mitigation initiatives and practices are consistent with the guidance issued by the Centers for Disease Control and Prevention. Our employees have continued to have access to paid leave and paid time off to be able to remain home as needed. And we have made face masks and cleaning supplies continuously available across our facilities. We made a significant investment of $2 million to deploy Abbott Rapid test devices across our facilities, allowing us to screen new arrivals at intake and isolate and quarantine positive cases.

Through the end of 2021, we had administered approximately 206,000 COVID tests at our Secure Services facility since the start of the pandemic. We also invested $3.7 million to install bipolar ionization systems at select care services facilities to reduce the spread of airborne bacteria and viruses. We continue to work closely with our government agency partners and health departments to make vaccinations available at our facilities. At the end of 2021 approximately 48,000 individuals in our secure services facilities had been vaccinated.

At this time, 72% of our staff close to half of our detainees, and 80% of state inmates are vaccinated across our secure services facilities. We continue to evaluate these steps, and we'll make adjustments based on updated guidance by the CDC and other best practices. Despite the unprecedented challenges associated with the pandemic, our employees and facilities achieved several important milestones in 2021. Our facility successfully underwent over 150 audits, including internal audits, government reviews, third-party accreditations and certifications under the Prison Rape Elimination Act.

Our medical service staff undertook more than 400,000 quality healthcare-related encounters, including intake health screenings, medical and dental visits, sick calls, and offsite appointments. In 2021, we also completed more than 1.9 million employee training hours and over 42,500 training sessions. Our GTI transportation division safely completed approximately 13.5 million miles driven in the United States and overseas. We are proud of our frontline employees for their commitment to operational excellence and dedication to delivering humane and compassionate care to all those in our facilities.

Moving to a review of trends impacting our government agency partners starting at the federal level. The Bureau of Prisons has experienced a decline in federal prison populations over the last decade. This decline has accelerated in the last two years as a result of the COVID-19 pandemic, which slowed the adjudication of criminal cases in the federal courts, further slowing the rate of new intakes into the federal prison system. After the signing of the President's executive order in January of 2021, the BOP did not renew the direct contracts of our six company-owned facilities, totaling more than 10,000 beds that had contract option periods expiring in 2021.

Throughout 2021, we worked closely with the Bureau of Prisons to transition those populations at these facilities. We have enjoyed decades-long partnerships with the Bureau of Prisons and our facilities provide high-quality support services during times when the federal prison system was facing overcrowding challenges. At the end of 2021, we now have only one remaining company-owned facility with 1,800 beds under direct contract with the Bureau of Prison. And we expect this contract to not be renewed at the end of September 2022.

Unlike the BOP, the US Marshal Service has had stable population levels over the last several years. The USMS houses pretrial detainees who are facing criminal charges or awaiting sentencing in the federal courts. The USMS does not own and operate detention facilities. This agency contracts for detention capacity primarily through intergovernmental agreements and to a lesser extent, direct contract contracts with private sector service providers.

In 2021, one of our company-owned facilities under direct contract with the USMS was not renewed when its option period expired at the end of the month. We have since sold that facility. Additionally, one other facility, which we lease from a third party has a direct contract with an option period that was set to expire at the end of September '21. This contract was extended by the US Marshals Service through the end of March of 2022, and our current guidance does not include that contract, although we continue to work on options for keeping the facility in operation.

We also have one of the company-owned facilities and one company leased facility that have direct contracts with the US Marshals Service. And in those cases, the contract option period expires in 2023. With respect to ICE, the processing centers the agency relies on upon continue to face COVID-19 related restrictions and their utilization remains significantly below historical levels. Court-mandated guidelines related to social distancing and the Title 42 public health restrictions at the southwest border have been the primary driver of this lower your lower utilization.

At the end of 2021, ICE processing centers nationwide have approximately 21,000 individuals. ICE is currently funded for 34,000 beds, and the agency is currently under a continuing resolution. Appropriations bills for the current fiscal year, which ends on September 30th and for the next fiscal year, which begins on October 1st, are currently being considered by Congress. Our focus continues to be on providing high-quality support to ICE and the Department of Homeland Security.

The ICE processing centers where GEO provides support services offer 24/7 access to quality healthcare, access to legal counsel, culturally sensitive meals approved by registered dietitians, access to faith-based and religious opportunities, and enhanced recreational amenities, including artificial turf soccer fields, covered pavilions, and exercise equipment, etc. Move into a discussion of our state government agency partners. Nationwide, correctional agencies are facing significant staffing challenges as a result of a rapidly changing labor market. Over the last year, we have increased wages at a number of our facilities and we are exploring additional initiatives to improve the recruitment and retention of staff in the communities where our facilities are located.

These initiatives include paying bonuses, enhancing paid time off policies, and considering alternatives to address the challenges our staff often face in finding adequate and affordable housing. We are undertaking these efforts in a collaborative way with our government agency partners. Over the last couple of years, we have been able to secure additional funding in Arizona, Georgia, Florida, Oklahoma, and other states, either through the legislative appropriations process or working directly with our customers to support wage increases and other recruitment and retention efforts. With respect to contracted activity during the fourth quarter, we were moved to State Correctional Facility contracts.

In Florida, we renewed our contract for the Blackwater River Correctional and Rehabilitation Facility for a two-year period. In Arizona, our contract for the Central Arizona Correctional Facility was renewed for a five-year term. The significant challenges of the COVID 19 pandemic have also highlighted the need for modern facilities to replace older, inefficient prisons that are more costly to operate. Several of our US state and government partners have in recent years pursued initiatives to replace older infrastructure with more modern facilities under public-private partnerships.

In Arizona, the state recently announced the closure of several older prisons to be replaced with the increased use of public-private partnership facilities. In Alabama, we recently entered into a purchase agreement for the state to buy our idle Perry County Correctional Facility. In New Mexico, the state transitioned our Guadalupe County Correctional Facility to a leased-only agreement with the Department of Corrections taking over the management functions. In Georgia, the current budget under consideration by the state legislature includes funding for the state to purchase or lease a public-private partnership facility and separately build a new prison.

In Florida, the state legislature is considering the construction of two new 4,500 bed correctional facilities as part of its correctional modernization program. Temporarily other states, including Hawaii, are considering building replacement facilities to replace older prisons. At this time, I will turn the call over to Dr. Ann Schlarb for a review of GEO Care.

Ann Schlarb -- President, Geo Care

Thank you, James, and good morning, everyone. I'd like to review the 2021 operational highlights for our GEO Care business unit, which includes our reentry services and electronic monitoring and supervision segments, as well as our GEO Continuum of Care programs. Consistent with the efforts on our secure services facilities, GEO Care facilities, and programs focused on implementing COVID-19 mitigation strategies throughout the year. These strategies and practices are consistent with the guidance issued by the CDC.

Our efforts continue to be focused on increased sanitation, testing, deploying facemasks, additional screening measures for entry into our facilities, as well as ensuring that our employees have access to paid leave and paid time off to remain home as needed. We evaluate these steps on an ongoing basis and we will make adjustments based on updated guidance by the CDC and other best practices. Looking at each of our segments, our GEO reentry services facilities continue to operate significantly below historical occupancy levels throughout 2021. Our residential reentry centers have been impacted by the spread of COVID-19 and the imperative of providing safe environments that includes social distancing measures and other practices.

As a result, government agencies across the country have prioritized the placement of justice-involved individuals into nonresidential alternatives like furloughs, home confinement, day reporting, and electronic monitoring programs. Notwithstanding these challenges, during 2021, GEO reentry services renewed 31 residential reentry contracts, including 15 contracts with the Federal Bureau of Prisons. Additionally, our nonresidential businesses experiencing strong growth in 2021 as a result of these trends. Throughout the year, we opened 12 New Day reporting centers in Idaho, Tennessee, Louisiana, and California with the capacity to provide services for up to approximately 1,000 individuals.

Our electronic monitoring and supervision segment also continued to grow during 2021, with annual revenues increasing by 15%. BI provides a full suite of electronic monitoring and supervision solutions, products, and technologies on behalf of federal, state, and local agencies across the country. At the federal level, BI supports the US Department of Homeland Security providing technology solutions, ballistic case management, supervision, and monitoring under the intensive supervision and appearance program also called ISAP. ISAP is a key component of the federal government's alternatives to detention programs or ATD.

BI has provided services under the ATD program since 2004 and was awarded a five-year contract for ISAP in 2020 through a competitive review that is effective through July of 2025. Over this long tenure, BI has established itself as the premier provider of comprehensive, community-based case management, supervision, and monitoring services with an unparalleled footprint of offices, technology, and partnerships with community-based and non-governmental organizations. During 2021, the number of non-citizens under the ISAP program almost doubled. Recently, ICE issued a competitive procurement for a new ATD program, which is incremental to ISAP.

This new program involves young adults and is expected to have approximately 16,000 participants. This program is expected to closely resemble the family case management program that ICE implemented seven years ago. Which GEO Care bid on one and implemented it back then. We expect the ICE to bid on this new ATD program for young adults, and we believe that we are well-positioned for this procurement given the ICE unparalleled expertise and skills.

Finally, despite the significant challenges associated with the COVID-19 pandemic, we are proud that our GEO Continuum of Care programs achieves several important milestones throughout the year. In 2021, we completed approximately 2.8 million hours of an enhanced rehabilitation program. Our academic programs are awarded approximately 2,100 GEDs and high school equivalency degrees. And our vocational courses awarded approximately 6,800 vocational training certifications.

Our substance abuse treatment programs awarded approximately 5,500 program completion. And we achieved over 38,000 behavioral program completions. We also provided post-release support services to more than 4500 individuals returning to their respective communities. Our GEO  Continuum of care integrates enhanced in-custody rehabilitation including cognitive-behavioral treatment with post-release support services that address community needs of released individuals including housing, food, clothing, transportation, and employment assistance.

We believe that the scope of our award-winning program is unparalleled and provides a proven successful model on how the 2.2 million people in the US criminal justice system can be better served in changing their lives. We're very proud of our frontline employees who have continued to deliver rehabilitation and reentry programming to those in our care throughout these difficult times. At this time, I'll turn the call to Jose for closing remarks.

Jose Gordo -- Chief Executive Officer

Thank you, Ann. We are very proud of all of our employees who have demonstrated incredible commitment and dedication during this unprecedented global pandemic. We are pleased with our operational achievements and financial performance throughout 2021. We recognize the challenges that our facilities continue to face.

We are very focused on efforts to enhance the recruitment and retention of staff across the country. This is one of the most significant challenges facing both public and private organizations today and our management team fully recognizes its importance. We are also working diligently to address our debt maturities. We recognize the concerns related to our ability to access financing in the future.

We have made significant progress toward reducing our net recourse debt over the last two years and that will continue to be a key focus going forward. We have laid out a multifaceted approach to address our future debt maturities, including a continued focus on debt reduction and deleveraging, the change in our corporate tax structure from a REIT to a taxable C Corporation, and ongoing review of potential sales of company-owned assets and businesses. And more recently, our ongoing engagement with our banks and with the advisors of our lender and bondholder groups. Our goal with this process is to be able to reach an agreement on and execute a transaction or series of transactions to reduce our net recourse debt and extend the maturities of our outstanding senior unsecured notes, our revolving credit facility, and our term loan all unreasonable terms.

We are engaged in these discussions in good faith and believe that we share a common interest with our lenders and bondholders to successfully complete this process. But we also plan to evaluate other capital structure alternatives with the assistance of our financial and legal advisors. After attaining our objective of net recourse debt reduction, we plan to evaluate the allocation of a portion of free cash flow to fund quality growth opportunities and potentially return capital to shareholders in the future. We believe that our company remains resilient with strong cash flows that are supported by valuable real estate assets and diversified contracts entailing essential government services.

That completes our remarks, we would be glad to take questions.

Questions & Answers:

Operator

[Operator instructions] The first question will come from Joe Gomes of NOBLE Capital. Please go ahead.

Joe Gomes -- NOBLE Capital -- Analyst

Good morning, and thanks for taking my questions.

Jose Gordo -- Chief Executive Officer

Good morning, Joe

Joe Gomes -- NOBLE Capital -- Analyst

So, I wanted to start off, there's a report out, I think it was yesterday on a potential BI pilot -- a US pilot program that BI could be doing under for immigrants under house arrest. And I was wondering, how does that -- is that the same one you were talking about for the 16,000 potential? Are those two different potential programs? And on the pilot program, if it is a different program, maybe you can give us some type of color as to timing for the pilot and what that could potentially mean for BI?

Ann Schlarb -- President, Geo Care

Good morning, Joe, this is Ann Schlarb, and thank you for your questions. These are two different programs that you're reading about in the media. The one that is publicly announced is the RFP for our young adult case management program. And that's for six -- that's for approximately 16,000 participants in about 16 different locations across the company.

The second that is in the media is a home confinement pilot that's been discussed in the media, and we're not at liberty to speak further about that at this point.

Joe Gomes -- NOBLE Capital -- Analyst

OK. But obviously, there's lots of stuff going on that potentially could be an incremental positive for BI there.

Ann Schlarb -- President, Geo Care

As we discussed, our population has grown significantly and alternatives are being used extensively. So I believe that is correct.

Joe Gomes -- NOBLE Capital -- Analyst

OK, thank you for that, and on the debt reduction. You mentioned a couple of times your objective for net recourse debt reduction am wondering, can you kind of quantify that? Are you looking for a specific number or net leverage ratio? And also, kind of hand-in-hand with that, with your discussions, with the various groups on the debt holders, they've been going on for a while reportedly. What are you have come to an agreement with or close to an agreement with? And what still seems to be something that you need to narrow the gap in?

Brian Evans -- Chief Financial Officer

Well, let me address the first, I think what we've said is on an annual basis, we believe we'll generate approximately $150 million to $2 million in net free cash flow that we can use to reduce debt. And we speak about net recourse debt reduction right now because currently, we're sitting with a lot of cash on the balance sheet. We haven't actually paid down any debt this year. We pay down some debt, but mostly we're sitting on cash.

And part of that is to be used in connection with these negotiations with the various creditor groups. And it'll be, part of the negotiation is the allocation of that cash to the different tranches of debt that we've discussed. I think there are a number of different items that we're discussing. I don't really want to prejudice the discussions by talking about those publicly.

We did release some information that there are issues around covenants, structure, mandatory payments, access cash flow sweep interest rates. So there are a lot of different items that are being discussed. And we're I think we're making good grounds on most of those areas.

Joe Gomes -- NOBLE Capital -- Analyst

Any feel for how much longer this will take? Or is it just still, hey, we're in the discussion process and they could just drag on for a while here?

Brian Evans -- Chief Financial Officer

Well, as we said, I think all of the parties or their advisors are involved and engaged, and so we hope that it'll move it at a reasonable pace, but it is a complicated process. There's obviously different -- there are the banks, there are the term loan lenders, there are the noteholders, there are different constituencies within those groups. So it's a complicated process to work through resolving that. But we're hopeful that will make meaningful progress in the first half of this year, hopefully.

Joe Gomes -- NOBLE Capital -- Analyst

OK. And kind of similarity, you've talked about, potential are reviewing potential asset sales or business sales. Can you give us any kind of color update on the progress there and what kind of timing you may be looking at for the completion of that review?

Brian Evans -- Chief Financial Officer

Well, I would say it's an ongoing review, as I think I mentioned, and maybe George mentioned as well that we sold over the last year or so about $65 million worth of net proceeds mostly of asset sales. And mostly we're looking at, idle facilities as they become available that we believe makes more sense to sell rather than try to redeploy. Most of those have been smaller facilities. The most recent one was our Perry facility in Alabama, that was about $15 million.

And there are some other lands that we own other idle assets, smaller assets that we continue to market and try to sell.

Joe Gomes -- NOBLE Capital -- Analyst

OK, thanks for that. And you mentioned, as we all know, the government's operating under a continuing resolution and you talk about some of the bills that are for the rest of this government fiscal year and going into the '23 government fiscal year that is currently being reviewed in Congress. And could you give us maybe some color as to where the current negotiations are in funding compared to where they've been historical? You mentioned a couple of times that there are today roughly around 19,000 ICE detainees. They have funding for 34,000 do you still think they're going to stay or that 34,000 level from funding? Or do you think that's going to come down from there?

Jose Gordo -- Chief Executive Officer

Well, we really don't know that the current discussions are about another short-term continuing resolution of just four to six weeks, I believe. So, following that, there will be an attempt to do a full budget for the balance of the fiscal year, but it could be another continuing resolution. I think somebody said it's been maybe 20 years since there has been an actual budget that has been approved. So since then, we've been working on continuing resolutions of some sort or another.

Joe Gomes -- NOBLE Capital -- Analyst

OK. Thanks for that. And I guess one more, if I may. Any kind of new news that you guys might be seeing when Title 42 might be lifted?

Jose Gordo -- Chief Executive Officer

No, we really don't have any insight into that. We've been hearing that it's imminent, but it's been imminent a long time.

Joe Gomes -- NOBLE Capital -- Analyst

Yes, that is true. Well, thanks for taking the questions, really appreciate it.

Jose Gordo -- Chief Executive Officer

Thank you, Joe.

Brian Evans -- Chief Financial Officer

Thank you.

Operator

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

Mitra Ramgopal -- Sidoti and Company -- Analyst

Yes, hi, good morning, thanks for taking the questions. First, a couple of as it relates to the labor environment. Most likely, you should be seeing a pickup in occupancy rates with the pandemic receding and mandates being largely lifted, etc. Curious in terms of your ability to handle increased occupancy given a tight labor market?

George Zoley -- Executive Chairman of the Board

We are -- our vacancy levels are our most depressed in state facilities as compared to our federal facilities, where the wages are significantly higher and there's often a contractual requirement to provide essentially full staffing. So the area of concern is primarily in the adult -- in the area of state institutions, and we've been working with our governmental partners to increase those wages, and I think we've been fairly successful on a client by client basis in doing so. And we're hoping, by the midpoint of the year or maybe a little bit later that the labor market normalizes, then we get back to where we were and pre-pandemic days.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK, so you do have the ability to go back to the client fairly quickly to sort of mitigating the --

George Zoley -- Executive Chairman of the Board

Yes, we do.

Mitra Ramgopal -- Sidoti and Company -- Analyst

Cost increases you're seeing right now, OK? And as it relates to debt refinancing, just one clarification here, and I know it's very complicated and still early in the process. But should we be looking for maybe three separate announcements as it relates to 2023, '24, and '26? Or could it potentially be all taken care of in terms of one big announcement?

Jose Gordo -- Chief Executive Officer

I would -- I don't want to say anything's possible, I mean, the preference and objective are to deal with it. The bulk of the capital structure at one time is sort of a global type process or settlement. So the -- what we're working toward and there's obviously no guarantee of that, it could be something piecemeal. But the idea is to have an announcement that relates to the -- clearly the maturities of '23 and '24 across all of the capital stack or the debt stack.

And then even some of the '26 maturities might be affected as well.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK, thanks. And, Brian, as it relates to the fourth quarter, we saw a lot of one-time items in there. Just curious as we look into the first quarter here or even it to 2022 if most of that will be pretty much gone?

Brian Evans -- Chief Financial Officer

Yeah, I think that's the case. We had a number of, I call it, maybe transitional items in 2021. We had some at the asset divestitures. I think we'll continue to maybe see some gain or loss on the disposal of assets.

And as we're working through this financial restructuring, we'll continue to have some costs associated with that. But I would think that would be the big areas of potential sort of one-off type issues or cost.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK, thanks. And then just on the revenue guidance, just curious in terms of maybe your assumptions or expectations as it relates to occupancy rates moving up what is from border apprehensions, etc, or increase in court sentencing activity. Just some more color on your thought process there. And I know you've talked about BI growing really strongly in 2021 and maybe your expectations in terms of that run rate continuing in '22 and maybe beyond?

Brian Evans -- Chief Financial Officer

So I would say on -- I think James went through in pretty good detail each of our different customer segments if you will. And as George mentioned, our state customers are, for the most part pretty high occupancy levels. The Marshals' contracts are a little more volatile but are in pretty good shape as well. We continue to see lower occupancy levels in our ICE facilities and I think in 2021 we were pretty transparent that we did not forecast occupancy levels above the minimum occupancy guarantees.

And for the most part in 2022, we've been consistent with that, although we do expect those numbers to improve maybe later in the year. But we haven't really forecasted anything above that. As you indicated, there was significant growth in the ISAP contract during 2021. We've got continued growth, but not at that kind of rate.

We're not going to be that aggressive with, what may occur. It's, policies around that can be volatile. So we've tried to take a sort of prudent approach with that. There is some growth, but it's not as significant as what we saw in 2021.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK, thanks. And then on the idle facilities, I'm assuming you're not counting on any new business. In terms of where things stand on that front right now?

Jose Gordo -- Chief Executive Officer

And, yeah, in our guidance we usually don't include any speculative new business. We're certainly working aggressively to reactivate some of those facilities, but we haven't included any new business related to those facilities in the forecast.

Mitra Ramgopal -- Sidoti and Company -- Analyst

OK. Thanks for taking the questions.

Operator

The next question will come from Kirk Ludtke of Imperial Capital. Please go ahead.

Kirk Ludtke -- Imperial Capital -- Analyst

Hello, everyone. Can you hear me?

Jose Gordo -- Chief Executive Officer

Yes, we can.

Kirk Ludtke -- Imperial Capital -- Analyst

Wonderful. I just have -- very helpful call. Thank you. I just have a couple of follow-ups with respect to the guidance.

And then maybe some of these new business opportunities. The revenue guidance for '22 looks like it's down about $100 million year over year at the midpoint. And I suspect that some of that is the loss of these nine contracts that you've assumed go away. What are the --

Jose Gordo -- Chief Executive Officer

Yeah, I mean, most that are going to be driven by the BOP facility and the one Marshals' facility that went away in 2021, the normalization of those expirations. And then, as we indicated, there are few contracts in 2022 that we also expect to transition away. And then that's offset by various per diem adjustments that George alluded to related to some of our state contracts for -- to deal with some of the mostly wage pressure that we've had at those facilities. And then, as well as whatever assumptions we've made on our nonresidential electronic monitoring business.

Kirk Ludtke -- Imperial Capital -- Analyst

Interesting, thank you. That's helpful. You might have mentioned this, but what have you assumed with respect to the ICE contracts that are expiring in fiscal '22?

Jose Gordo -- Chief Executive Officer

So we've assumed the contracts renew as they come up. We don't have any of those going away.

Kirk Ludtke -- Imperial Capital -- Analyst

OK. Fantastic. Thank you, and the margins look pretty consistent with fiscal '21. Despite the higher labor costs.

It's really, really remarkable with respect to the new business, you mentioned Georgia and Florida. Do you know how many people reside in those facilities in Georgia that they're scheduled to close?

George Zoley -- Executive Chairman of the Board

No, on Georgia there -- I don't know that there be a closure of a facility. James do you know?

James Black -- President, Geo Secure Services

No, I don't know if they've announced any closure, but --

George Zoley -- Executive Chairman of the Board

And they certainly haven't announced any closures in Florida that's yet to be determined, probably over a period of time.

Kirk Ludtke -- Imperial Capital -- Analyst

OK. I thought Georgia had, I guess they just announced that they're going to build new facilities.

George Zoley -- Executive Chairman of the Board

Yes.

Kirk Ludtke -- Imperial Capital -- Analyst

And I guess I assume that they are closing some old ones, but maybe not. In any event, does that --  is that -- does that situation in Georgia an opportunity for you? I mean, I know you've got D. Ray vacant

Jose Gordo -- Chief Executive Officer

Yes, we believe there's an opportunity in Georgia for us.

Kirk Ludtke -- Imperial Capital -- Analyst

Great. Do you know what they're thinking in terms of timing?

George Zoley -- Executive Chairman of the Board

No, I mean, they're still in the legislative session, and they have to get through that, and I'm assuming that it's favorably reviewed and approved by the governor that it would probably be in the second half of the year. Same with Florida.

Kirk Ludtke -- Imperial Capital -- Analyst

Do you have a -- I mean, you might have mentioned this, but how big the opportunity in Florida is?

George Zoley -- Executive Chairman of the Board

Well, the discussion presently is for 4,500-bed facilities.

Kirk Ludtke -- Imperial Capital -- Analyst

Wow. OK. Sizable. Thank you.

And then lastly, on voluntary work programs, I noticed that you -- ICE agreed to let you close or shut down the program in Washington state. I'm just curious if you have plans to do something similar elsewhere in other ICE facilities and if there's any update you can provide on that front with respect to maybe ICE indemnifying you for any losses you incur that type of thing.

George Zoley -- Executive Chairman of the Board

Well, the program that was shut down in Tacoma would result in a fairly modest increase in contracted services to replace the program. So we have essentially full staffing at that facility and a modest detainee population level of approximately 500. So there's probably 300 staff, 300 or 400 staff to look after 500 detainees. That's because of the pandemic and COVID-19 either the detainee levels and the employee levels are kind of out of whack in the sense that there are a lot more employees to look after a lot less detainees.

Kirk Ludtke -- Imperial Capital -- Analyst

Thank you. I was wondering if you were terminating the voluntary work programs throughout all of your ICE facilities.

George Zoley -- Executive Chairman of the Board

No, no, we're not. And that's not our decision. It's an ICE decision as to where discontinuation of this program could take place because otherwise, it's the contractual requirement for any operator of an ICE facility to have to administer the volunteer work program.

Kirk Ludtke -- Imperial Capital -- Analyst

Got it. Thank you. Is there -- and it might be too early for this. But have they expressed any willingness to share any costs you may be incurring, offering that program to detainees?

George Zoley -- Executive Chairman of the Board

Well, we're in discussions on that issue.

Kirk Ludtke -- Imperial Capital -- Analyst

Great, thank you very much. Great call.

George Zoley -- Executive Chairman of the Board

Thank you.

Operator

The next question will be from Jordan Sherman with Ranger Global. Please go ahead.

Jordan Sherman -- Ranger Global -- Analyst

Hey, thanks. Thanks for hanging in there. I just want to clarify something on the guidance. Apologize if I missed it specifically, you said, embedded in the guidance is a current interest rate on the facilities or an expected change in the interest rate other facilities -- on your facilities that are in discussions?

Jose Gordo -- Chief Executive Officer

The guidance is based on our status quo debt capital structure.

Jordan Sherman -- Ranger Global -- Analyst

Got it. OK. Then, I want to ask you about in terms of assets for sales, or is it individual assets? Is it business lines? Is there anything off the table for sale?

Jose Gordo -- Chief Executive Officer

Well, I think I describe what is for sale. I don't I don't know that I would say what's off the table, but we described what is for sale generally. Idle facilities are smaller assets that we feel make more sense economically to dispose of than it does to try to redeploy those assets.

Jordan Sherman -- Ranger Global -- Analyst

Got it. Okay. I apologize I missed that comment. And then just lastly, the electronic monitoring business, I'm wondering where is that comment about the potential pilot program with ICE.

I'm just wondering from a government standpoint it doesn't seem like a particularly difficult business to -- I shouldn't say it that way? But it doesn't require a new facility to be built. It just requires staffing essentially plus some equipment. Why is that a business that's not being done run by the government? I mean all things considered, what's going on with politically, why is that something they're considering doing with you rather than doing, themselves?

Jose Gordo -- Chief Executive Officer

I think most --.

Ann Schlarb -- President, Geo Care

Hey, Jordan, this is Ann Schlarb. I would say the government would have to respond to specifically why they were procuring rather than doing it themselves. But ICE is fundamentally a law enforcement agency and the services that are provided are very much on the case management side. So it essentially becomes a valuable tool to augment it for ICE when they're carrying out their responsibilities.

Of note on this particular RFP, it is not a technology-based RFP, so it does not include electronic monitoring. It's a very case management-intensive type of program, and it works very closely with community-based and non-governmental organizations. And those are the types of services that we've been providing for the agency for 17, 18 years now. And so I think there's a proven track record and working closely with the private sector in providing these and generating good outcomes and successes in the programs.

Jordan Sherman -- Ranger Global -- Analyst

But I guess let me ask got a little bit. I appreciate that point is that -- I wasn't asking you why they -- what are they not deciding? I apologize that you answered the question I asked. Not the one I was trying to ask. I guess my question is, in general, there are state and local agencies that do this type of monitoring.

Is that correct? Monitoring case management.

George Zoley -- Executive Chairman of the Board

Probably there are, but as I think Ann said that ICE is not an -- they're not operators. There is more of a law enforcement agency. I mean, they don't operate any ICE facilities and they don't --

Jose Gordo -- Chief Executive Officer

They don't operate a call center.

George Zoley -- Executive Chairman of the Board

No. And the Marshals Service are not an operating entity. So it's not unusual. It's nor and its --

Jose Gordo -- Chief Executive Officer

Most of the -- most to George's point, most of the -- at the state, federal or local level, these are services that are provided by companies like BI and other private sector companies.

Jordan Sherman -- Ranger Global -- Analyst

Got it. I guess I appreciate the point about ICE and Marshals, even at the local level, you're saying that generally speaking, these are not services provided by governmental agencies.

Ann Schlarb -- President, Geo Care

These are more social service-type services that they're looking at in this RFP again, doing -- looking --

Jose Gordo -- Chief Executive Officer

Yeah.

Ann Schlarb -- President, Geo Care

ICE makes the decision to refer them, but then there's an assessment that's done. It's identifying means, looking at -- how to successfully move them through the immigration process, connecting them with the local government -- non-governmental organizations, making sure they get to court on time. Really helping and assisting them through the process.

Jose Gordo -- Chief Executive Officer

Right.

Ann Schlarb -- President, Geo Care

Which is a level of detail and work that isn't just a normal part of the law enforcement day-to-day routine.

Jordan Sherman -- Ranger Global -- Analyst

Yes. No, I apologize. I appreciate that point. I was moving on from that ICE thing to just asking about the electronic monitoring and services business in general, right? So in general, not specifically related to the ICE new pilot program.

Are electronic monitoring services and these other social services are also provided by governmental agencies and outsourced in some cases-- it's just not a business I apologize because this is a business I have been focused on that as much?

George Zoley -- Executive Chairman of the Board

In some cases, like county sheriff departments have electronic monitoring programs. In other cases in local government, they contract out those services. So it's -- there's thousands and thousands of local governments around the country. I think it's 3,000.

So we don't have an explanation of what all of them do. We know that we have several of those customers. I think in BI, they have 1,000 customers between counties and local government.

Ann Schlarb -- President, Geo Care

That's correct, George. And there's a variety of models out there. They're pretty numerous where they normally lease the equipment. And then the intensity of how the provider gets involved in assisting the government is up to how they put their scope of work out, what they're looking for, and that is varied across the thousands of contracts that we have across the country.

Jordan Sherman -- Ranger Global -- Analyst

Perfect. That's what I was aiming at, thank you, Ann Schlarb.

Ann Schlarb -- President, Geo Care

You're welcome. Sorry, I can be a little literal in my response.

Jordan Sherman -- Ranger Global -- Analyst

No, no, no. You asked the right -- we eventually got to my right question. That wasn't you. I'm sorry.

Thank you.

Ann Schlarb -- President, Geo Care

You're welcome.

Operator

The next question is from Oren Shaked of BTIG. Please go ahead.

Oren Shaked -- BTIG -- Analyst

Hi, good morning. Most of my questions have been answered, but I just had two quick ones. The cost performance in 2021 was obviously excellent in light of some of the comments that you've made. Is it fair to assume that you don't see the same opportunity to potentially outperform again this year?

Brian Evans -- Chief Financial Officer

This is Brian. So we've taken a tempered view on, as we've said, some of those cost benefits were the result of lower occupancy levels at our facilities as a result of the COVID pandemic. There could be some benefit that continues in 2022, but we've tried to take a reasoned and moderate approach to that.

Oren Shaked -- BTIG -- Analyst

Understood. And Brian, the cash did come in a little lighter than what you were forecasting in the cleansing docs. Can you just help us out with why that is?

Brian Evans -- Chief Financial Officer

So we had one customer of -- a fairly substantial customer that was delayed in payments. Nothing to do with us or any invoicing. They actually put in place a new system of payment processing system. And they're probably about four months behind on payments, which is worth about price $30 to $40 million.

So we expect them to catch up in the first quarter at the latest early second quarter.

Oren Shaked -- BTIG -- Analyst

Understood. That's it for me. Thank you.

Operator

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

George Zoley -- Executive Chairman of the Board

Well, thank you for joining us on this conference call. We look forward to our next one. Thank you.

Operator

[Operator signoff]

Duration: 75 minutes

Call participants:

Pablo Paez -- President, Corporate Relations

George Zoley -- Executive Chairman of the Board

Brian Evans -- Chief Financial Officer

James Black -- President, Geo Secure Services

Ann Schlarb -- President, Geo Care

Jose Gordo -- Chief Executive Officer

Joe Gomes -- NOBLE Capital -- Analyst

Mitra Ramgopal -- Sidoti and Company -- Analyst

Kirk Ludtke -- Imperial Capital -- Analyst

Jordan Sherman -- Ranger Global -- Analyst

Oren Shaked -- BTIG -- Analyst

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