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CoreCivic, Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

CoreCivic, Inc.

Filing date:

02/21/2025

TLDR:

CoreCivic’s 2024 performance shows slight increases in net income and revenue, driven by occupancy and rate increases. However, the termination of the STFRC contract and government policy risks create uncertainty.

ELI5:

CoreCivic made a bit more money this year, but they face some challenges because a contract ended and the government might change some rules about how they operate.

Accession #:

0000950170-25-024745

Published on

Analyst Summary

  • Total Revenue increased by 3.4% to $1,961.6 million.
  • Net Income increased by 1.9% to $68.9 million.
  • Basic Earnings Per Share increased by 5.1% to $0.62.
  • Average Compensated Occupancy increased to 75%.
  • Operating Margin (Safety Segment) improved to 23.9%.
  • Fixed Charge Coverage Ratio is strong at 4.2x.
  • Debt Leverage Ratio is manageable at 2.3x.
  • Normalized Funds From Operations (FFO) increased by 12.87%.

Opportunities and Risks

  • Risk: Government Policy Changes could restrict the use of private correctional facilities.
  • Risk: Contract Terminations pose a threat to revenue stability.
  • Risk: Increasing Competition from government agencies and other private operators.
  • Risk: Labor Shortages challenge staffing levels.
  • Opportunity: Increased Federal Demand from ICE could boost revenue.
  • Opportunity: Utilization of Idle Facilities can generate additional revenue.
  • Opportunity: Community Corrections Growth offers expansion possibilities.
  • Opportunity: Real Estate Solutions can address government infrastructure needs.
  • Opportunity: Share Repurchases can return capital to shareholders.

Potential Implications

Company Performance

  • Future performance depends on securing new contracts to offset the STFRC termination.
  • Cost containment and operational efficiencies are crucial for profitability.
  • Expansion of community corrections can drive growth.
  • Government policy changes will significantly impact operations.

Stock Price

  • Government policy risks may negatively impact stock price.
  • Successful utilization of idle facilities could boost investor confidence.
  • Continued revenue growth and profitability will support stock value.
  • Share repurchase programs may positively influence stock price.

CoreCivic, Inc. (CXW) – 10-K Filing Analysis – FY2024

Executive Summary

This report analyzes CoreCivic, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. CoreCivic, a diversified government solutions company, operates through three segments: Safety, Community, and Properties. Key findings include a slight increase in net income, growth in management revenue, and strategic debt management. However, the termination of the South Texas Family Residential Center (STFRC) contract poses a challenge to operating margins. The company’s ability to secure new contracts and manage costs will be critical for future performance. Overall, a cautious “Hold” rating is suggested, pending further clarity on the utilization of idle facilities and the impact of government policy changes.

Company Overview

CoreCivic is a government solutions company providing correctional, detention, and residential reentry services, as well as government real estate solutions. The company operates primarily in the United States, serving federal, state, and local government agencies. Recent developments include contract renewals, new management contracts, and strategic capital allocation through share repurchases. The company’s business is significantly influenced by government policies, budgetary constraints, and public sentiment regarding private sector involvement in corrections.

Detailed Analysis

Financial Statement Analysis

The following table summarizes key financial data extracted from the 10-K filing:

Metric 2024 2023 Change
Total Revenue (Millions) $1,961.6 $1,896.6 3.4% Increase
Net Income (Millions) $68.9 $67.6 1.9% Increase
Basic Earnings Per Share $0.62 $0.59 5.1% Increase
Average Compensated Occupancy (Total) 75% 72% 3% Increase
Federal Revenue (% of Total) 51% 52% –
State Revenue (% of Total) 40% 39% –

Key Ratios:

  • Operating Margin (Safety Segment): 23.9% (2024) vs. 21.7% (2023) – Indicates improved operational efficiency in the Safety segment.
  • Fixed Charge Coverage Ratio: 4.2x (2024) – Demonstrates strong ability to cover fixed charges.
  • Debt Leverage Ratio: 2.3x (2024) – Suggests a manageable level of debt relative to earnings.

Trends:

  • Revenue growth driven by increased occupancy and per diem rate increases.
  • Operating expenses increased due to wage pressures and staffing investments.
  • Strategic debt management through refinancing and repurchases.

Management’s Discussion and Analysis (MD&A) Insights

  • Management expresses optimism about future demand from federal government, particularly ICE.
  • Emphasis on reentry programs and advocacy for recidivism-reducing policies.
  • Focus on cost containment and operational efficiencies.
  • Acknowledges risks related to government policy changes and competition.

Red Flags:

  • Termination of the STFRC contract negatively impacts operating margins.
  • Dependence on a limited number of governmental customers.
  • Potential for future executive orders restricting private correctional facilities.

Uncommon Metrics:

  • Compensated Man-Day: Used to measure revenue and expenses per offender per day.
  • Contract Renewal Rate: Approximately 96% over the five years ended December 31, 2024, indicating strong customer retention.

Risk and Opportunity Assessment

Risks:

  • Government Policy Changes: Potential for executive orders or legislation restricting the use of private correctional facilities.
  • Contract Terminations: Risk of non-renewal or termination of government contracts.
  • Competition: Increasing competition from government agencies and other private operators.
  • Labor Shortages: Challenges in attracting and retaining qualified personnel.
  • Litigation: Exposure to various types of litigation, including claims related to employee or offender misconduct.
  • Cybersecurity Threats: Risk of cyberattacks and data breaches.

Opportunities:

  • Increased Federal Demand: Potential for increased demand from ICE due to changes in immigration policy.
  • Utilization of Idle Facilities: Opportunity to generate additional revenue by activating idle correctional and detention facilities.
  • Community Corrections Growth: Expanding the scope of non-residential correctional alternative solutions.
  • Real Estate Solutions: Providing real estate solutions to government agencies with aging infrastructure.
  • Share Repurchases: Returning capital to shareholders through share repurchase programs.

Conclusion and Actionable Insights

CoreCivic’s 2024 performance reflects a mixed picture of growth and challenges. While the company has demonstrated its ability to increase revenue and manage its capital structure, the termination of the STFRC contract and ongoing risks related to government policy create uncertainty.

Overall Assessment: Hold

Recommendations:

  • Monitor Government Policy: Closely track any potential changes in government policies that could impact the utilization of private correctional facilities.
  • Focus on New Contracts: Prioritize efforts to secure new contracts to utilize idle facilities and offset the loss of revenue from the STFRC termination.
  • Manage Costs: Continue to focus on cost containment and operational efficiencies to improve profitability.
  • Expand Community Corrections: Explore opportunities to expand the scope of non-residential correctional alternative solutions.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit Margin is not directly available from the provided data.
    • Commentary: Unable to calculate due to lack of gross profit data.
  • Operating Profit Margin:

    • Calculation: Operating Income / Revenue = (Revenue – Operating Expenses) / Revenue = ($1,961,646 – $1,493,357) / $1,961,646 = 23.87%
    • Trend: Previous year’s Operating Profit Margin = ($1,896,635 – $1,462,430) / $1,896,635 = 22.90%. Percentage Change = (23.87% – 22.90%) / 22.90% = 4.23%
    • Industry: The REIT industry generally has operating margins between 20% and 40%. CoreCivic’s operating margin of 23.87% is within this range.
  • Net Profit Margin:

    • Calculation: Net Income / Revenue = $68,868 / $1,961,646 = 3.51%
    • Trend: Previous year’s Net Profit Margin = $67,590 / $1,896,635 = 3.56%. Percentage Change = (3.51% – 3.56%) / 3.56% = -1.40%
    • Industry: The REIT industry generally has net profit margins between 10% and 20%. CoreCivic’s net profit margin of 3.51% is below this range.
  • Return on Assets (ROA):

    • Calculation: Net Income / Total Assets = $68,868 / $2,931,891 = 2.35%
    • Trend: Previous year’s ROA = $67,590 / $3,105,399 = 2.18%. Percentage Change = (2.35% – 2.18%) / 2.18% = 7.80%
    • Industry: The REIT industry generally has ROA between 2% and 4%. CoreCivic’s ROA of 2.35% is within this range.
  • Return on Equity (ROE):

    • Calculation: Net Income / Total Stockholders’ Equity = $68,868 / $1,493,351 = 4.61%
    • Trend: Previous year’s ROE = $67,590 / $1,477,566 = 4.57%. Percentage Change = (4.61% – 4.57%) / 4.57% = 0.88%
    • Industry: The REIT industry generally has ROE between 5% and 15%. CoreCivic’s ROE of 4.61% is below this range.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Basic EPS = $68,868 / 110,939 = $0.62. Diluted EPS = $68,868 / 111,841 = $0.62
    • Trend: Previous year’s Basic EPS = $0.59. Diluted EPS = $0.59. Percentage Change = ($0.62 – $0.59) / $0.59 = 5.08%
    • Industry: EPS varies widely across the REIT industry.

Liquidity

  • Current Ratio:

    • Calculation: Current Assets / Current Liabilities = $449,818 / $285,797 = 1.57
    • Trend: Previous year’s Current Ratio = $474,914 / $297,454 = 1.59. Percentage Change = (1.57 – 1.59) / 1.59 = -1.26%
    • Industry: A current ratio of 1.57 indicates adequate liquidity.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Current Assets – Inventory) / Current Liabilities. Assuming no inventory, the quick ratio is the same as the current ratio = 1.57
    • Trend: Previous year’s Quick Ratio = 1.59. Percentage Change = (1.57 – 1.59) / 1.59 = -1.26%
    • Industry: A quick ratio of 1.57 indicates adequate liquidity.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Restricted Cash) / Current Liabilities = ($107,487 + $14,623) / $285,797 = 0.43
    • Trend: Previous year’s Cash Ratio = ($121,845 + $7,111) / $297,454 = 0.43. Percentage Change = (0.43 – 0.43) / 0.43 = 0.00%
    • Industry: A cash ratio of 0.43 indicates the company can cover 43% of its current liabilities with its most liquid assets.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Debt / Total Stockholders’ Equity = $997,380 / $1,493,351 = 0.67
    • Trend: Previous year’s Debt-to-Equity Ratio = $1,106,691 / $1,477,566 = 0.75. Percentage Change = (0.67 – 0.75) / 0.75 = -10.67%
    • Industry: A debt-to-equity ratio of 0.67 is moderate.
  • Debt-to-Assets Ratio:

    • Calculation: Total Debt / Total Assets = $997,380 / $2,931,891 = 0.34
    • Trend: Previous year’s Debt-to-Assets Ratio = $1,106,691 / $3,105,399 = 0.36. Percentage Change = (0.34 – 0.36) / 0.36 = -5.56%
    • Industry: A debt-to-assets ratio of 0.34 is moderate.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: EBIT / Interest Expense = (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($68,868 + $23,095 + $67,415) / $67,415 = 2.35
    • Trend: Previous year’s Interest Coverage Ratio = ($67,590 + $28,233 + $72,960) / $72,960 = 2.31. Percentage Change = (2.35 – 2.31) / 2.31 = 1.73%
    • Industry: An interest coverage ratio of 2.35 indicates the company can cover its interest expenses 2.35 times.

Activity/Efficiency

  • Asset Turnover:

    • Calculation: Revenue / Total Assets = $1,961,646 / $2,931,891 = 0.67
    • Trend: Previous year’s Asset Turnover = $1,896,635 / $3,105,399 = 0.61. Percentage Change = (0.67 – 0.61) / 0.61 = 9.84%
    • Industry: An asset turnover of 0.67 indicates the company generates $0.67 of revenue for every $1 of assets.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Market Cap / Net Income = (Shares Outstanding * Stock Price) / Net Income = (109,861 * $18.02) / $68,868 = 28.73
    • Industry: A P/E ratio of 28.73 is moderate.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity = (Shares Outstanding * Stock Price) / Total Stockholders’ Equity = (109,861 * $18.02) / $1,493,351 = 1.33
    • Industry: A P/B ratio of 1.33 is moderate.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Revenue = (Shares Outstanding * Stock Price) / Revenue = (109,861 * $18.02) / $1,961,646 = 1.01
    • Industry: A P/S ratio of 1.01 is moderate.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash and Cash Equivalents = (109,861 * $18.02) + $997,380 – $107,487 = $2,087,685. EBITDA = Net Income + Interest Expense + Income Tax Expense + Depreciation and Amortization = $68,868 + $67,415 + $23,095 + $128,011 = $287,389. EV/EBITDA = $2,087,685 / $287,389 = 7.26
    • Industry: An EV/EBITDA ratio of 7.26 is moderate.

Growth Rates

  • Revenue Growth:

    • Calculation: ($1,961,646 – $1,896,635) / $1,896,635 = 3.43%
  • Net Income Growth:

    • Calculation: ($68,868 – $67,590) / $67,590 = 1.89%
  • EPS Growth:

    • Calculation: ($0.62 – $0.59) / $0.59 = 5.08%

Other Relevant Metrics

  • Normalized Funds From Operations (Normalized FFO):

    • Calculation: Provided in the filing. 2024: $190,114, 2023: $168,436, 2022: $165,216.
    • Trend: Increased from $168,436 in 2023 to $190,114 in 2024, a 12.87% increase.
    • Significance: Normalized FFO is a non-GAAP measure used by REITs to assess operating performance. It adjusts net income to exclude items such as gains or losses from property sales and depreciation. The increase suggests improved operational performance.
  • Revenue per compensated man-day (Safety):

    • Calculation: Provided in the filing. 2024: $102.79, 2023: $99.53.
    • Trend: Increased from $99.53 in 2023 to $102.79 in 2024, a 3.28% increase.
    • Significance: Indicates increased efficiency in generating revenue from safety facilities.
  • Operating margin (Safety):

    • Calculation: Provided in the filing. 2024: 23.9%, 2023: 21.7%.
    • Trend: Increased from 21.7% in 2023 to 23.9% in 2024, a 10.14% increase.
    • Significance: Indicates improved profitability in safety facilities.

Commentary

CoreCivic’s financial performance in 2024 shows a slight improvement in profitability metrics like ROA and EPS, alongside revenue growth. The company maintains adequate liquidity with a current ratio of 1.57. While the net profit margin is below the REIT industry average, the increase in Normalized FFO suggests improved operational efficiency. The decrease in the debt-to-equity ratio indicates a reduction in leverage, contributing to a healthier financial structure.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️