Q4 2023 CoreCivic Inc Earnings Call

Participants

Michael Grant; Managing Director, Investor Relations; CoreCivic Inc

Damon Hininger; President, Chief Executive Officer; CoreCivic Inc

David Garfinkle; Chief Financial Officer, Executive Vice President; CoreCivic Inc

Joe Gomes; Analyst; Noble Financial Capital Markets

Presentation

Operator

Thank you for standing by, and welcome to the CoreCivic fourth-quarter 2023 earnings call. (Operator Instructions)
As a reminder, today's program is being recorded.
And now I'd like to introduce your host for today's program, Mr. Mike Grant, Managing Director of Investor Relations.

Michael Grant

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us today. And participating on today's call are Damon, Hininger course, civics, President and Chief Executive Officer, and David Garfinkle, our Chief Financial Officer. We're also joined here in the room by our Vice President of Finance, Brian Hammonds.
On today's call, we will discuss our financial results for the fourth quarter of 2023 as well as financial guidance for the 2024 year. We will also discuss developments with our government partners and provide you with other general business updates during today's call. Our remarks, including our answers to your questions, will include forward-looking statements pursuant to the Safe Harbor provision of the Private Securities and Litigation Reform Act. Our actual results or trends may differ materially as a result of a variety of factors, including those identified in our fourth quarter 2023 earnings release issued after market yesterday and in our Securities and Exchange Commission filings, including Forms 10-K, 10-Q and 8-K reports. You are also cautioned that any forward-looking statements reflect management's current views only and the Company undertakes no obligation to revise or update such statements in the future.
On this call, management will also discuss certain non-GAAP measures. A reconciliation of the most comparable GAAP measurement is provided in the corresponding earnings release and included in the Company's quarterly supplemental financial data report posted on the Investors page of the Company's website at core civic.com.
With that, it is my pleasure to turn the call over to our President and CEO, Damon Hininger.

Damon Hininger

Thank you, Mike. Good morning, and thank you for joining us for our fourth quarter 2023 earnings call. On today's call, I'll provide the details of our fourth quarter financial performance and introduce our 2024 full year financial guidance. I will also discuss with you our latest operational developments and update you on the latest developments with our government partners. Following my remarks, I will turn the call over to our CFO, Dave Garfinkle, who will review our financial results and our 2024 financial guidance in greater detail. He will also provide a more detailed update on our ongoing capital structure initiatives, including debt reduction, share buybacks and our new bank credit facility attained in the fourth quarter.
I'll now provide a brief overview of our fourth quarter financial results. In the fourth quarter, we generated revenue of 491.2 million, which was a 4% increase compared to the prior year quarter. This increase comes in spite of the expiration of our federal prison contract with the Federal Bureau of Prisons at our previously owned McRae Correctional Facility in November of 2022, and the expiration of our lease agreement with the Oklahoma Department of Corrections at our North Fork Correctional facility on June 30th, 2023. Excluding these two expirations, our total revenue increased 6%, demonstrating strong occupancy and revenue growth from our core civic safety and community portfolios. We generated normalized funds from operations or FFO of $51.3 million or $0.45 per share compared to $49.1 million or $0.42 per share in the fourth quarter of 2022, representing a per-share increase of 7%. The increase in FFO was driven by the higher federal and state populations combined with lower interest expense resulting from our debt reduction strategy. The increase in FFO occurred despite the sale of our McRae facility and the expiration of the lease with Oklahoma, which resulted in a combined reductions to EBITDA of 2.3 million from the prior year quarter. We have achieved significant improvements in our attraction and retention rates, resulting from staffing strategies as well as an overall improvement in the hiring environment. That said, labor market pressures have necessitated temporary incentives and related incremental operating expense experienced through 2023, including the fourth quarter as we leave 2023, we believe that more favorable operating expense trends should continue as the tight labor market continues to loosen and as we continue to progress toward pre-pandemic staffing and Oxy levels. As mentioned on the past several conference calls, we have made significant investments in our existing staff and have successfully increased our staffing levels through improved recruiting and retention. These were the right investments to make, and they have enabled us to reduce usage of temporary incentives and from the prior year quarter and have positioned us well to manage our customers' higher population needs in the fourth quarter of 2023. We achieved our HA and Oxy rates since the second quarter of 2020, which as you may recall is the quarter immediately following the start of the COVID-19 pandemic response from the fourth quarter of 2022 to the fourth quarter of this year, our fee in our safety segment increased from 72% to 74.7%, and Oxy in our community segment increased from 58.4% to 63.7%. The increase in Oxy in our safety segment primarily resulted from higher detention population from our largest government partner, Immigrations and Customs Enforcement or ICE on May 11th, have afforded to pay temporary public health warning issued by the CDC that had essentially closed our nation's border to asylum seeking individuals since the onset of the COVID-19 pandemic came to an end at the same time parks, the restrictions implemented during the pandemic at our ICE facilities also came to an end without the authority granted under Title 42 to deny entry to or quickly remove individuals from United States. There has been an increase in the number of people have custody of the department, Homeland Security or DHS. It is one of the two agencies within the DHS that is responsible for enforcing immigration laws are resting and attaining individuals who have entered the country illegally. These activities have increased since the end of Title 42 and the country continues to report record numbers of people encounter at the southern border. Last quarter, we reported on the increase in demand for Intentia capacities announced a 42 was lifted from mid-May 2023 through December of 2023. The number of individuals in the category of ICE increased 74% over the same period. Ice detention populations within our facilities increased 76%, which we believe was possible in part because of our investments in staffing. Because many of our federal contracts include a fixed payment component the increase in residential populations do not result in proportionate increase in our financial results as such facilities until with collections clear to minimum compensate a bit total associated with the fixed payment levels. Most of our facilities are now at or above that level. Increased proxy in our safety segment also resulted from broad-based, higher RBC levels for many of our state government partners, notably from the states of Arizona, Georgia, Idaho and Colorado. Now it's in 2nd year under management contract with the State of Arizona, our old Palma Correctional Center in Utah, Arizona continues to show improvements in Oxy as well as operating and financial metrics. During the fourth quarter, we were able to sharply reduce the facility's reliance on temporary labor resources and incentives due to strong local hiring and oversight. The fourth quarter was an exceptionally busy quarter for new contracts as our best-of-class services demonstrated outcomes and facilities provide a flexible resource to partners recovering our financial services. During the quarter, we signed and commenced three new management contracts, each of which boosts the incremental Oxy at already 40 facilities with available capacity. As a reminder, ours is a leveraged business model and higher utilization of our facilities is correlated with expanded margins. In November, we announced a new management contract with the State of Montana to care for up to 120 male inmates or at our 1,896 beds oral Correctional Facility in Illinois, Arizona. The initial term of the contract is for two years and it may be extended by mutual agreement. A total term, including Renault, is up to seven years. We completed the intake process for the 120 and made before year end at December 31st, 2023. We also care for space 800 residents from Ally and nearly 600 residents from the state of Idaho adverse more a correctional facility. This new contract represents an expansion of our relationship with the state of Montana as we also manage for them, the fully occupied company own Crossroads Correctional Center as Shelby Montana under a separate management contract. Also in November, we announced a new management contract with the State of Wyoming to care for up to 240 inmates at our 2,672 bed Tallahatchie County Correctional Facility in total, our Mississippi. This is not our first time partnering with oil may as we previously care for their inmates under a management contract that had not been utilized since 2019. The term of the new contract runs through June 30th, 2026, when the intake process for the 240 inmates was complete as of December 31st, 2023.
Finally, we announced a third new management contract during November. This new contract with Harris County, Texas to care for up to 360 inmates at Tallahatchie County Correctional Facility. The contract includes the option for the county to access an additional 360 beds at the Tallahatchie facility. The initial contract term began on December first, 2023 and ends November 30th of this year. The contract may be extended at the county. The option for up to four additional one year terms. We began receiving inmates from Harris County during the fourth quarter of 2023, and we anticipate the intake process to be complete during the first quarter of this year, but also as an update on our carrier relationships. At the end of the third quarter, we signed a new management contract with Hinds County, Mississippi for up to 250 adult male pre-trial detainees also at our Tallahatchie County Correctional Facility. We completed the intake of that population during the fourth quarter, while historically, we have focused more on federal and state contracts. It is interesting to note that many large counties throughout the United States have begun to experience capacity constraints as a result of both larger populations and infrastructure problems, expanded Ken and populations typically precedes growth and state prison populations as the general population is adjudicated consensus Further, we remain in discussions with several additional jurisdictions to help address their challenges in the near to long term.
Now turning to our community segment, which is comprised of 23 residential reentry facilities, we experienced an increase in occupancy of 63.7% in the fourth quarter of 2023 from 58.4% in the prior year period. Populations continued to improve across many of our facilities serving both of Bureau prisons or BOP, as well as states, including Texas and Colorado. We also provide electronic monitoring and case management services in our community segment our community segment representing permission and is often critical to the successful reentry of residents in our care.
Net operating income in this segment increased 66% in the fourth quarter of 2023 from the prior year quarter due to the increase in occupancy as well as per diem increases, we have been able to attain and contract renewals. We were also able to reduce temporary staff in this is just as we did in our safety segment, we expect the Oxy trend to continue in the community segment. Now that pandemic related to public health policies that come to an end. And as more of our government partners return to these important residential reentry programs that help individuals be better prepared for successfully transitioning back from a period of incarceration into our communities.
Finally, the high performance of our colleagues and the high quality of our facilities continue to be rewarded with long-term commitments from our government partners. We never take for granted renewals of existing management contracts and continue to enjoy a contract retention rate of 95% over the five years through 2023 including the renewal of all 44 management contracts in our safety and community segments. It came up for renewal during the course of the year. As a reminder, we entered into an agreement with the State of Oklahoma to lease our 1,670 beds, David correctional facility effective October first, 2023, we successfully transitioned operations to the state, which is now operating our facility with government employees effectively converting the facility from one in which we owned and operated our Safety segment to one that we simply leased to the State that facility is now named the Allen gamble Correctional Center and is now reported in our Property segment. We remain pleased to have reached a mutually advantageous contract for this facility and we value our ongoing relationship with the state, Oklahoma. Looking forward, we remain optimistic in the long term macro permit for our federal, state and local business. Our governments are facing complex capacity infrastructure and population challenges, and we see increased opportunities to serve the growing needs at the federal level. Although we continue to see a steady increase in retention, better utilization, the long-term impact of the end of Title 42 is still unclear as there are other factors that impacted tension utilization levels are high. The most significant factor historically has been funding levels approved by Congress annually. However, the country is still facing significant challenges at the southern border and geopolitical events only enhanced the need for border security. We are already underway in the federal fiscal year, which ends September 30th, 2020 for the appropriations process for funding, the remaining fiscal year remains in flux following a supplemental funding bill proposed by the administration and includes significant funding for DHS and ICE has not been acted upon by Congress. While there is bipartisan recognition of the need to fund the HS. and IS. more robustly to address challenges at the southern border and finding resolution has not been reached. The outcome of the appropriations process is expect to have significant impact on the overall population levels in our ICE facilities moving forward. And even though detention funding and related services are just part of the overall solution, we are positioned well to serve their needs.
Another part of the overall management of the border that could potentially expand the scope of services includes alternatives to detention.
On your last year, ICE issued a request for information or RFI for release and reporting management services this RFI and seeking information about monitoring technology, participant coordination services, including physical space participant engagement and interactions and program management and community service to help people comply with their immigration obligations, so not yet funded by Congress and only in the early stages, the RFIs intended to apply to non citizens release from DHS custody. And according to the RFI involves engaging with a large portion of that 5.7 million individuals on the current nine attained docket at the state of our overall state budgets are in very good shape. Most of our state partners are reporting increases in prison populations and many states are also projecting further increases in their prison populations. Jail backlogs, which are a leading indicator for state prison populations remain significant. Additionally, rates continue to normalize operations and as cases are adjudicated, state correctional agencies will certainly be impacted.
In summary, while challenges and uncertainties remain, the general macro environment in which we operate continues to improve and our financial results have begun to reflect that improve at our Oxy is a multiyear high. Our margin has begun to reflect the operating leverage that comes with higher occupancy, and we are making solid progress against labor related cost pressures that rose sharply during the COVID-19 period.
In our press release, we were introduced our 2024 and full year financial guidance. It includes normalized FFO per share forecast a range of $1.46 to $1.61 and EBITDA range of 300 to $313 million. As we have been sharing on these calls for over a year, our lease with the State of California for our California City Correctional Center in March 31st of this year, that facility has generated slightly over 25 million of EBITDA. So the anticipated absence of that lease for the final three quarters of 2024, it negatively impacts EBITDA up and is reflected in our guidance. Obviously, we are focused on a solution to the pending lease expiration with the State of California at California City, finding a positive solution for this facility, which is in a great location and is comprised of Kroger replicate beds is a top priority for core civic. I'll now turn the call over to Dave Garfinkle, our CFO, who will provide a more detailed look at our financial results in the fourth quarter. He will also discuss in detail our financial guidance for 2044, as well as progress on our capital markets activities and further details about our new bank credit facility and capital allocation strategy, including debt reduction and share buybacks. Over to you, Dave.

David Garfinkle

Thank you, Damon, and good morning, everyone. In the fourth quarter of 2023, we reported GAAP net income of $0.23 per share compared to $0.21 per share in the prior quarter. Adjusting for special items, adjusted EPS during the fourth quarter of 2023 was $0.23 compared to $0.22 per share in the prior quarter. Normalized FFO per share was $0.45 during the fourth quarter of 2023 compared with $0.42 in the prior quarter. As we disclosed last year, adjusted and normalized figures in the fourth quarter of 2020 to include the impact of certain tax credits we were entitled to under the CARES Act. These credits were reflected as a reduction to operating expenses and favorably impacted per-share results by $0.02 in the prior year quarter. Net of related expenses resulting from the credits the increase in adjusted EPS and normalized FFO per share resulted from higher occupancy from federal and state populations, the continued normalization of our operating expense structure and lower interest expense, partially offset by an increase in G&A expenses. The trend of increasing ICE detention populations nationwide continued during the fourth quarter, albeit at a slower pace than the second and third quarters following the expiration of Title 42 on May 11th, 2023, total of 42 as a policy that have been used since March 2020, that denied entry at the US border to asylum seekers and anyone crossing the border without proper documentation or authority in an effort to contain the spread of COVID-19 at December 31st, 2023, ICE detention populations nationwide were up to 37,131, a 5.2% increase from September 30th. Average daily ICE detention populations within our facilities increased by 2023 residents or 23% during the fourth quarter of 2023 compared with the third quarter. Note that due to fixed payments at certain of our facilities increases in populations do not always result in incremental revenue and compensated occupancy because increases can occur at facilities where population levels were already included in our compensated population. Our average daily compensated populations from ICE was up 7.5% from Q3 to Q4. Higher sequential ICE populations, combined with new contract awards and a continuing normalization of operating expenses contributed to the increase in normalized FFO per share from Q. three of $0.35 to $0.45 in Q4, an increase of 29% and adjusted EPS from Q. three of $0.14 to $0.23 in Q4, an increase of 64% operating margins and our safety and community facilities improved to 24.4% in the fourth quarter of 2023 compared to 24.1% in the prior year quarter and 21.3% in the third quarter of 2023. Excluding the impact of the aforementioned tax credits, margins were 22.6% in the prior-year quarter. The increase in our operating margins was due to the increases in occupancy per diem increases. We have been successful in obtaining the continued normalization of operating expenses and the successful transition of the ELAM Gamal Correctional Center to lease in our Property segment. Segment compensated occupancy in our safety and community facilities was 74% in the fourth quarter of 2023 compared to 71.1% in the prior year. Quarter and up from 72% in the third quarter of 2023. The increases in occupancy enabled us to leverage incremental revenue over our fixed operating expenses. The increase in revenue resulting from the increases in occupancy was amplified by per diem increases. We've been able to obtain which increased 5.5% over the fourth quarter of 2022. During the fourth quarter, we were able to continue reducing certain incremental labor related expenses such as registry, nursing, temporary wage incentives and travel. Despite inflation and labor market pressures that have been steadily easing over the past several quarters. These three expense categories declined by 6.3 million from the fourth quarter of 2022 and $1.8 million from the third quarter of 2023. The successful transition of the Ellen gamble facility effective October first, 2023, improved operating margins in the fourth quarter of 2023 and will continue to provide stable returns in our Property segment going forward.
Turning next to the balance sheet. As previously disclosed, during the fourth quarter, we completed an amendment and extension of our bank credit facility, effectively replacing our previous bank credit facility, increasing the total size from $350 million to 400 million. The new bank credit facility increases available borrowings under the revolving credit facility, which remains undrawn from $250 million to 275 million and increases the size of the term loan from an initial balance under the previous facility of 100 million to 125 million, extended the maturity date to October 2028 from May 2026 and relaxed certain covenants while maintaining a similar pricing structure. We remain focused on paying down debt and continue to make progress on our debt reduction strategy. Our debt reduction strategy resulted in a decrease to interest expense of $1.9 million from the fourth quarter of 2022 and a decrease in interest expense of 12 million from the full year 2022. During 2023, we repaid 157.8 million of debt or $130.3 million net of the change in cash during 2023, we repurchased 27.9 million of our unsecured notes in the open market, including 6.9 million in the fourth quarter with clear visibility of reaching our targeted leverage ratio of two of the quarters to two and three quarters times. During the fourth quarter, we repurchased 872,000 shares of our common stock under our share repurchase program at an aggregate cost of 12.5 million, bringing our 2023 totals to 3.5 million shares at an aggregate cost of 38.1 million or an average price of $10.97 per share. Going forward, we expect to allocate our free cash flow toward both paying down debt and repurchasing shares, maintaining discipline on our targeted leverage ratio. Our leverage, measured by net debt to EBITDA was 2.8 times using the trailing 12 months ended December 31st, 2023. As of December 31st, we had 122 million of cash on hand and an additional $257 million of borrowing capacity on our revolving credit facility, providing us with total liquidity of $379 million.
Moving lastly to a discussion of our 2024 financial guidance, we expect to generate EPS of 58 to $0.72 and FFO per share of $1.46 to $1.61 our guidance reflects growth in state and local residential populations, largely attributable to the new contract awards obtained during the second half of 2023. Intakes under those contracts are substantially complete. Our state populations also reflect higher utilization than expected under existing contracts that we began to experience in 2023. Our guidance further reflects an increase in our average daily federal populations in 2024 compared with 2023, mainly due to the expiration of Title 42 in May. We expect these federal populations to remain stable throughout 2024. The most significant factor impacting detention utilization by our federal partners has historically been funding levels approved by Congress for ICE detention capacity is insufficient to meet the demand at the southern border funding under a continuing resolution for the Department of Homeland Security, including ICE expires March eighth. If Congress provides higher funding levels for detention beds or if the highly publicized supplemental funding bill is approved to include additional funding for border security. There could be upside to our guidance. Our guidance contemplates the continuation of an improving hiring market for labor with less reliance on temporary incentives, but resulting in higher staffing costs as we continue to progress toward pre-COVID staffing levels. Our guidance contemplates the expiration of the lease with the State of California and our California City Correctional Center, effective March 31st, 2024. This facility generated $31.1 million in revenue and 25.5 million in EBITDA during 2023 and is expected to result in a reduction to EBITDA of approximately 23 to $24 million in 2024, including carrying costs such as maintenance, property taxes and insurance that we will continue to incur after the lease expiration. Our guidance does not include any other contract losses or any new contract awards, not previously announced because the timing of government actions on new contracts is always difficult to predict. While we are encouraged by the strength of our margins in the fourth quarter, sustained margins at this quarter's level are likely to require higher populations as our staffing continues to return to pre-COVID levels for modeling our quarterly results. As a reminder, compared to the fourth quarter Q1 is seasonally weaker because of one fewer day in the quarter, higher utilities. And because we incur approximately 75% of our unemployment taxes during the first quarter, resulting in a collective $0.04 per share decline from Q4 to Q1 and negatively impacting our operating margins.
Moving now to our capital allocation strategy. Since our Board authorized the share repurchase program at May 2022. Through December 31st, 2023, we repurchased 10.1 million shares of our common stock at an aggregate cost of 112.6 million, leaving 112.4 million under the Board authorization. We will remain opportunistic in repurchasing shares of our common stock and expect to repurchase additional shares in 2024, taking into consideration our leverage earnings trajectory, stockprice liquidity and alternative opportunities to book to deploy capital. Our guidance includes a range of repurchase scenarios at various amounts and at various assumed prices. We also expect to use our cash on hand and cash flow from operations to continue paying down debt, which could include additional open-market purchases or partial redemptions of our 8.25% senior notes, which are scheduled to mature in 2026 and become redeemable at 104.125% of par on April 15th, 2024. We continue to monitor the debt capital markets and could issue additional debt securities to refinance portions of our existing debt to extend our weighted average debt maturities if and when we determine that market conditions and the opportunity to utilize the proceeds are favorable, given the strength of both our balance sheet and cash flows we have tremendous flexibility in how we deploy our liquidity and free cash flow and balance our capital allocation strategy between debt repayments and share repurchases. Again, our guidance contemplates a range of scenarios associated with debt reduction and share repurchases. We expect AFFO, which we consider a proxy for our cash flow available for capital allocation decisions to range from 158.3 million to 175.3 million or $1.42 to $1.57 per share. We expect our normalized effective tax rate to be 27% to 29%. And the full year EBITDA guidance in our press release provides you with our estimate of total depreciation and interest expense. We are forecasting G&A expenses in 2024 to be consistent with 2023. We plan to spend 62 to $66 million on maintenance capital expenditures during 2024 in line with 64 million incurred during 2023 and 7 to 9 million for other capital investments compared to 4 million in 2023.
I will now turn the call back to the operator to open up the lines for questions.

Question and Answer Session

Operator

(Operator Instructions)
Joe Gomes, Noble Capital.

Joe Gomes

Good morning, David and David. Nice quarter.

Damon Hininger

Good morning, Joe, and Joe, thank you so much.

Joe Gomes

So I wanted to start with the ICE populations in the quarter. Sounds like you had some good growth sequentially there on kind of like where where are we today and, you know, kind of in conjunction with that going through the supplemental, looks like you had two facilities that we're not yet to 75% occupancy to ICE facilities at the end of the year. Where are they today? And how do we get those up and above that 75% occupancy level?

Damon Hininger

Yes. So Joe, let me tag team with Dave on that. When I first part of your question, as of yesterday, our total population in our facilities from ICE was at 11,003 three four. So I give you a real-time number on current utilization, and I think that's up. I think we did see a little bit of them, which is pretty typical that time of year with the holidays I think was all those climb between Thanksgiving and Christmas. Again, that's pretty typical based on seasonality.
And then maybe just a quick comment, obviously, you probably know as much as I do. I'm just kind of following the discussions within Congress between the Senate leadership and House leadership and where that all ends up. I know there's a lot of people that don't know if that's going to be the path forward on the funding for additional resources with, I would say it's kind of bigger bill with Ukraine and Taiwan and Israel Finally, so again, we'll see what happens here in the coming coming days and weeks. And so on a parallel path, we'll watch very closely. The current fiscal year, as you know, is funded through a early March, and we'll be watching closely on kind of what what appropriation that adjustment that we've done there, especially for DHS and ICE and border patrol, but on your facility facilities, do that main pass over to Dave?

David Garfinkle

Yes, I think, Joel, you may be asking kind of where the facility stand relative to fixed payments because not all of our facilities have those fixed payments. So I'm not sure which facilities are referring to that are below the 75%.
They may or may not have fixed payments. But in total, we're really clearing those six payment hurdles at this point.
They're probably in aggregate across the portfolio, a few hundred and below the fixed payment level Southern our house. And so any incremental populations at this point would translate into incremental revenues for the most part.

Joe Gomes

Okay, great.
Thanks.
And then in the guidance you talked about you're assuming kind of flat. It's population on Jazan. We all know the funding for last year was 34,000 beds were at 38 five. I think was the most recent ICE population number on when you look at your guidance, you're expecting it to be at that 34 level on for funding or do you think it stays more than at 38? Just trying to get a little more detail there.

Damon Hininger

Yes, that's a possibility.
Dave.
Talk a little bit about our actual guidance, but I just the bigger number for ICE. So all populations, not just core Civic, it's kind of hard to say. You know, they've been working, as you know, since October first under continuing resolutions and so basically that's taking the Fundamo from last year, 34,000 in this year. So they clearly feel like you're in a position to go a little bit as we've gotten into a couple of months into the fiscal year. Joe, could Dave, could they go ahead and maybe fund that for the rest of the year at 34,000, but still run at 38,000.
That's possible.
You know, as you know, last year they did actually some road reprogramming. I think during the middle of our fiscal year that may be part of the strategy that maybe maybe Plan B, I don't know. But again, I think next couple of weeks will be pretty critical and determine obviously what happens through the rest of the year. I will say, though, that and maybe a little more to your second part of your question about the guidance that national number, obviously that will go up and down. It doesn't necessarily go in proportion with our populations to the national number, maybe go down a little bit, but our population is pretty flat. And you have based on utilization and what we're hearing kind of on the ground with our various stakeholder surmise in the different parts of the country where we operate and gives us some comfort that we've got a pretty good number for the rest of the year. But let me add let Dave add to that.

David Garfinkle

I think at a high level, Joe, the guidance would reflect populations consistent with what we saw in the fourth quarter. So we're not anticipating a supplemental funding going through or even when funding gets refreshed on March eighth, whether that's homes continuing resolution or a full budget for the rest of the year. We're not anticipating significant increases. And as I mentioned in my prepared remarks, if they do see increases in funding for detention beds, that could be upside to our guidance that like-for-like. Likewise, we're not assuming a decline in those populations are populations, like I said, probably from the fourth quarter. So So pretty stable populations, at least at the federal level throughout 2024.

Joe Gomes

Okay, thanks. It's David, you didn't mention anything really on the U.S. Marshals Service. I'm wondering if you might give us a little update on that client?

David Garfinkle

Yes. Appreciate that question.
Yes, we're basically just kind of steady as it goes, the populations a bit up and down a little bit nationally. Our populations also have been up and down a little bit. I think the national population right now for the more services, around 57, 58,000, that's been pretty stable over the last probably six, eight months, down a little bit over the last two, three years, but let's begin to fade 10 margin pretty stable.
So we're kind of forecasting that further for the rest of the year.
I don't see any big real changes with that customer for the rest of the year or if anything you'd add?
Yes, populations were very consistent in Q4 with Q3, in fact, they were up SLIGHTLY.

Joe Gomes

Okay, great. On the community segment, you kind of touched on this a little bit dated. It was a large increase in the revenue per compensated mandate I think year over year was up about $12.
And just you mentioned a little bit about some contract renewals you got. Is there anything else that's driving that. Should we kind of expect that that is a more of a high watermark? Or do you think there's more potential upside and that revenue per compensated man day on the community side?

David Garfinkle

Yes, Joe, actually, I'll tackle that one.
Yes, we've seen a couple of quarters in a row of really strong growth on the community side. So as you note both your occupancy growing, but also we've had some really good renewals where we've gotten kind of kind of reset the pricing on the and compensated afforded for the contract. I should say. So we continue to see good support and increased populations there. Again, that was a part of the population that was easy to go ahead and release with social distancing and everything going on with that with COVID. So we really think the big the big kind of bounce back is because now that the pandemic's over and some of those concerns are alleviated from a health perspective. We continue to see populations to go upsell, but again, really, really pleased with that and continue to see good growth there.

Joe Gomes

Okay.
And one more for me and I'll step aside here. Just you mentioned Cal City and you're looking for alternatives there. Whenever there's anything our significant you can you can tell us in terms of who you're talking to for that and any other types of new business that might be here in the near term?

Damon Hininger

Yes.
So Cal City and the new business, so I'm not here to discuss any specific client for that facility. But as noted in my script, I mean, it is a great location. New Southwest to see are not far from Los Angeles so we think it's a partner or a referral partner would be a good solution to facility.
Next, I think you know, Joe, in the past, the Marshals Service and ICE use that facility in the past. So I think that's a great facility for their mission. So we are continuing to have good conversations and see that again, is a great solution, not just location, but also its capabilities within the actual facility.
And to your second question about just generally about new business. I'll tell you I've met with a lot of governors and secretaries and directors of corrections here in the last probably six or eight months. And the message just continues to be the same, really challenging infrastructure issues within their system facilities are becoming more and more overcrowded because populations are starting to come out of the jails that have been backed up because of course being closed and then also seeing significant population increases over the next next three to five years or so that that message continues to be conveyed to us from Mark from our partners.
The other thing I'll just say that maybe a little bit surprised for folks is that some of our customers, they closed either units or maybe acquire facilities during COVID. And then what facility is a candidate for closure or reviews with the ones again that are maybe older, maybe more difficult to operate, but maybe really challenging the staff. And so some of this, I think, kind of more immediate opportunities for us are coming from customers who say, you know, we closed XYZ facility and certain in our jurisdiction, and it just doesn't make operational sense for us to reactivate it. So basically what I'm saying is that you may have a system or systems that their operational capacity has declined a little bit because they've got units or facilities that just didn't make sense to reactivate. So that's creating a little more demand from them to use our capacity in our system either.
I guess you'd add to that, Dave, just reemphasizing the underlying drivers of the new contracts that we signed in the second half of 2023 are still there. And as David just mentioned, getting getting more urgent. So we feel we feel really good about prospects moving into 2024 and have good momentum, having signed three, three new contracts in the fourth quarter, another contract in the third quarter of oh six both with state and county governments.

David Garfinkle

So good momentum as we're going into 24 yet actually did appreciate that.
One other thing I'd just say, Joe, it and if we miss our script, but if it were to reinforce it and that is, as you know, we leaned a little forward on staffing around the enterprise you about a year ago and also to have an act a little bit margins. And I know we have some good conversation about that along the way, but we think some of those investments and really now we're getting the benefits of that now with some of these new contracts, again, obviously, we're watching closely what happens with ICE. You know, with the supplemental, there's some discussion about funding there for 50,000 beds nationwide again, who knows how likely that is with the with the supplemental that long with and we continue to be very thoughtful on the staffing front, not just on what the needs are today, but you're trying to pry dissipate a little bit what customer need is either with existing customers or new customers.

Joe Gomes

Great. Thanks again for taking my questions and congrats on the quarter.

Operator

Amir and from Zach's your question in Q2.

So given COVID, the courts were obviously, you know, in a band and now that they're back up and running, it seems that we're still seeing a backlog and it seems like rather than getting smaller at it, yes, tubular to grow. So if that's the case, how do you think that might impact some of your, you know, utilization rate and some of your, you know, post COVID facility?

Damon Hininger

Yes, it's a good question.
And yes, it's a little bit of a couple of different catalysts. You alluded to it with you, of course, got to give back and where they were operationally pre pre COVID and this backlog as we've seen in numbers and Joe populations nationwide. So we again, we're seeing that now I think, again, with contracts like with Montana, increase utilization in Idaho, Wyoming, as we talked about, I mean, I think that's that's part of the reason I think, again, I think another part of the reason is, again, some of these systems took some capacity off-line and you said, okay, it just makes sense for us to reactivate it more cost effective, you're probably going to get a lot better outcomes to buy you the capacity within the within core civic.
And I guess I guess the third thing I'd say is that you're looking at them.
Another lead indicator, which is kind of crime rates around around the country, is of the actions that are happening at the state and local level. I think that's also going to have some immediate material impact of populations on top of what we're seeing today because of the backlog with COVID that or anything you'd add to that?
Dave?

No, I don't have anything at an he's covered it.
Okay.
So you also talk them in.
You're prepared, Mark, you mentioned no alternative to 10, and I'm guessing that you know that would include your electronic monitored monitoring services, maybe the community further cooperation. Do you see and we talked before about how you had some good quarters on Community Services operations, do you see that as potentially, you know, benefiting from some of the changes we're seeing in the courts and, you know, prevention of use, PRESIDENT detention?

Damon Hininger

Yes.
I mean that and keep me honest here, Dave. I say on the community, again, the big driver there has been just increased utilization from a collection perspective in our facilities and also some favorable renegotiation of contract terms that you've always had some improvements on the per diem and that compensated for day rates. But we also are seeing again good good use and good attraction to our monitoring and our case management services and other support services we can do within the year the community segment. But I'll also say this, I think may be a part of your question, too. We remain really bullish on that or the community business. And so we continue to make investments in both people and technology to meet the needs, either with existing partners or potentially new partners, again, going back to the least proposed supplemental from Congress on Sunday night of this week. Again, who knows how much this will carry on either through a supplemental, we have capacity and or have moved on to a full funding here, but there was also over $1 billion. I think that was earmarked for additional expansion of Altrus detention under under I. So again, I think the continued investment knowledge acknowledges that our opportunity, but also what we're seeing and with CVS cities and counties and even even the Bureau of Prisons, I think are good investments. And again, we continue to be really bullish on the business. But anything you'd add, Dave?
Yes, I think there's some inertia from the Federal Bureau of Prisons as well to expand utilization of residential reentry centers and whether that due to infrastructure, trying to get more people out of prison into the communities and helping them assimilate. So I think there could be some more funding there. That's kind of a began during the last administration and but it seems to be getting some some legs now. So I wouldn't be surprised if we saw the BOP expand its utilization of our RCF by early release programs, alternatives, so detention and and things like that. So I agree that there's a lot of upside there and we have a lot of capacity within our have to any portfolio to accommodate that need.

Operator

Okay, thank you.
Thank you.
And, Steve, do you want for our next question.
And our next question comes from the line of Keith from Imperial Capital. Your question, please.

Well, David, David, Brian, Mike, thanks for the call, Navarre and FortiGuard congratulations on the quarter. Just a couple of follow-ups on the ICE population. Did I hear that the immigration bill included funding for 50,000 beds?
Did I hear that correctly?

Damon Hininger

That's correct?
Yes. And Bill, that came out on Sunday night. And as you know, this was out of the Senate and you heard this a couple of times during the course of the week where the negotiators that Bill noted that they were looking at funding for taking up the population of 50,000 beds. That's been part of the talking points with the unveiling of this bill on Sunday. So again, you probably know as well that there is there is also some strong views about that Bill on the house. So again, not here to handicap that dilution is one indicator of that at least what the tenant was making relative to that supplemental.

Got it.
Well, that's that's helpful. Thank you. And where did your ICE population pre-pandemic pre-pandemic, keep me honest. You know, I think in the summer of 19, we got near 15,000 from 11,300 today.

Damon Hininger

Yes.

Got it.
Thank you.
And do you remember what the how many beds were funded back then on the nationwide populations around 55,000?
I don't know if they were necessarily funded at that level of scale probably lessened?

David Garfinkle

No, it was less than that, actually, I think, yes, it was pretty meaningful estimate now, I think about it now.

Interesting.
Okay.
Thank you. That's helpful. And then on California City. So now the lease expires in just a couple of months as has the states started to ramp that facility down.

David Garfinkle

They have yet they've been going through the steps for the activation, I think both population and staffing.

Okay, got it.
And are there any legal limitations as to what you can use that facility?

Damon Hininger

Four, there are a big pulp mill. I don't know right off top my head.
I think there's a few that obviously, we're out of California was in there. And then yes, we've had no issues on the housing.
So their interface in the place of that type have been made that your via media, right.
If I talked to you to make than I am, I don't know off top my head, we can follow up with you offline on that, but I suspect there's probably some limitations on maybe classification or something about that.
Got it.

Thank you.
And then on Harris County, that's a nice win. Can you just expand on that and how that came about and why they? Because if my Google Maps is working correctly, that's over 500 miles between Harris County and Tallahatchie. So I'm just curious what maybe expand on and on how that came about and why Tallahatchie?

Damon Hininger

Yes.
Yes, sir.
So we knew part of the playbook is that, you know, obviously, we're always monitoring not only existing needs to it needs with existing production side, but also partners like Harris County or potential partners you know, what's their system utilization and capacity and maybe some challenges that they're experiencing in Houston is I think, you know, that's where the Company really got started. Our very first contract was used in almost four years ago. So we did that in that county and it fits really, really well. And so I think they just expressed they had some issues with physical plant. They had some, I think, some really difficult outcomes here in the last couple of years because of overcrowding. I think there were some staffing issues and it's a pretty big system off the Metropolitan Houston and Harris County. That's a big system. Don't hold me to this, but I think they have almost 10,000 people in their in their jail system. So what that allowed us to do to kind of your last part of your question about the distances to say, okay, look at your entire population in his or her the population that would be well suited. And this is individuals that don't have to go to jail or go to Florida every day that could be in a setting of Tallahatchie County. And of course, we'll work with them on transportation, videoconferencing and whatnot to keep them connected as appropriate with the courts and the sheriff's office there in Harris County. So we've got a lot of plays in the playbook on helping them deal with some of the distance issues. But again, with a system that Lafarge, there's parts of the population that would be well suited again from a distance of you begin, as you said, 500 miles from from use of anything you'd add to that?

David Garfinkle

Dave McKay, I believe is a great facility is about 25% occupied. So it was a location where we could immediately satisfy the need and bring that bring the detainees and quickly, we could probably I mean there's about seven or eight different customers type facilities. So they're doing a fantastic job there. But with the exception of probably a handful of locations where we could accommodate a new customer like what we did in our so our old facility in Montana as well. So it is in Arizona, Montana moved 120 inmates there, but we do have it's like 120 and we have those facilities, but it is getting to the point now where we may have to look at activating a new facility to accommodate new contract new contract awards. If we see that kind of demand, obviously would do it speculatively. It's expensive to open up and staff and facility in advance of visibility on a customer. But Intel as it was a great location where we could we could accommodate Harris County and there are many of those left.
Well, that's interesting.

I appreciate it. Thank you.
Veronika.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Brian, really not from Wedbush question currently tomorrow, and thanks for taking my question.

For Brian, how many more than So just quickly, you talked quite a bit about the three state and local contract. When you in the fourth quarter.
Could you give us how much EBITDA, you anticipate those contracts will contribute in 2024?

Damon Hininger

We haven't disclosed that yet there.
They're probably different profiles. One was a facility that was largely occupied. So one of the buyers owner. Then Tallahatchie, as I just mentioned, was like 25% occupied. So it's probably a few million dollars in EBITDA between the two of them over a year, maybe a little bit north of that.
Okay.

Thank you.
And then I'm maybe hard for you to answer from your seat, but it seems like DHS has been reallocating funds two eyes for additional bed funding, given that we're over the 34 K. number, I guess from your perspective, do you anticipate that there's additional dollars that can be reallocated within DHS?
Or do we really need supplemental funding to see bed counts rise much more than they are today?

Damon Hininger

Well, the first part first part of your question, you're exactly right.
It's really hard to answer them again. They had that they had that playing a playbook last year. As you know, I think the sector came out in May or June of last year and indicated they were doing a reallocation of funding. So can they do that again? And do they have the ability? It really be hard for me to say I don't know if they even said publicly what the amount was. I think that sector just came out saying we're doing it, but I don't think I've ever heard an actual number on your population.
Again, a little bit to the question earlier about what you are currently at the 37, 38,000. Again, they're officially funded at 34. You get that number.
As I said, that was pretty consistent during the fourth quarter.
You had a little bit up and down because again seasonality. So do they feel like they could do that rest of the year. If they come to end of February and March and do the full funding until the end of fiscal year at 34,000 may be and again, we'll just have to we'll just have to have to wait and wait and see. And again, I think for them to go meaningfully above that. And I think that's the last part your question, it will require additional funding in an entity that could potentially be supplemental. We just talked about or you know, they could also they've got the ability to go into additional funding through the full funding year full budget for the full year. So that's still an option to begin. We'll be watching, obviously all these different discussions for different vehicles where they increased funding finding add to that and ultimately turn.

Great, great.
Thanks.

Joe Gomes

And then just one last one, if I could kind of on a similar note in terms of I'm looking at idle facilities. Is that something that you think that they can be involved with without supplemental funding potentially looking at some of your idle facilities having been outside of Calgary well at home.

Damon Hininger

And I guess I'll say it this way.
I mean, we have been in the last, I guess, year and it's a little bit to the discussion. We had on staffing. I mean, obviously, we've not we've worked through life of 40 years. So we are in daily conversations about what their needs are. And also we were getting direction from from DHS administration and to somewhat from some members of Congress. So we're always having a constant conversation of our capabilities where we've got capacity that's in bringing facilities or vacant facilities. And then with that, we make certain decisions were based on that information on and that's what we need to do on either CapEx and or on staff. And again, that's a little bit of what we did last year when we felt like you know, before Title 42 went away. As you know, we were at 5,000. We felt like we need to make some steps to get staffing in place for if and when I publish do go up, we would prepare for that. So so we're continuing to have those discussions internally, but also with the with our customer, that's just part of the kind of normal behavior and we're working with them. And we know that there on the IP a lot of eyes on them and they get a lot of direction from a lot of different stakeholders. But we do our best knowledge as to hear what they're saying, but also make it make some proactive steps as appropriate and also want to be prudent on that as appropriate to prepare for any future demand.

But I guess, Andy, you guys and if yes, I'd say if they consolidate, they wanted to consolidate populations from a number of local jails, for example, and then consolidate them into one of our facilities that would not require incremental funding because you're just transferring from multiple facilities into one facility. So we have had conversations with ICE at a particular facility on they haven't taken action on it yet, but that could be a potential where you could activate another facility without incremental funding.

Damon Hininger

That's a good point.
That's great. Thank you.

Appreciate you.

Operator

Sort of take you one moment for our questions question comes from the line of Greg Gilbert from Nordea Securities. Your question, please.

Hey, David and Dave, thanks for taking the question and congrats on the results.
You're garnering.
If you could maybe elaborate a little bit more on the assumptions for occupancy and compensation per bed that is implicit in your guidance. It sounds like ICE not really forecasting a change in population size there. But you know, just if you could talk about kind of any changing dynamics perspective, you don't split between some occupancy changes versus increased revenue and the occupancy front for our forecast is fairly stable, so not much higher than 74%.

Damon Hininger

And we've talked in past calls about getting to that magical pre-pandemic occupancy, just north of 80%. So the guidance certainly does not include that. It's probably stable, maybe a slight increase from the 74% occupancy we achieved in the fourth quarter.
With respect to that, would include the populations that we're bringing in under the or have actually already brought in under the four new contracts that we executed during the second half of 2023 suite as well as some population increases that we saw from a number of states under existing contracts. So those those will contribute to increases in occupancy on the per diem rate most of our per diem increases take effect in July and particularly from our state customers since that's when their fiscal years begin. So we will be beginning those conversations. If we haven't already engaging with our partners talking about our needs for per diem increases related to staffing and other inflationary costs. So hard to get that visibility. Now we take a pretty conservative approach when we talk about per diem increases that we include some of our contracts have stipulated per diem increases in them, in which case, obviously, we're going to put those per diem increases in the forecast. Others are dependent on appropriations. So depending on the history with a particular customer, we may or may not include that our federal federal contracts on the other hand, most of them have them and Skip per diem increases built into those contracts. So they would be built in the guidance as well. So I'd say probably a pretty average year last year, but 2023, we are quite successful in per diem increases, particularly from states that hadn't provided per diem increases during the pandemic. And we continue to provide wage increases. As I said, we feel we really need to get a per diem increase to attain our margins and payer staff appropriately. So I wouldn't say we're forecasting as good a year in 2024. As we had in 23, 23, we're making up for some up lost ground and during the pandemic.

Great makes sense. That's very helpful. And I wanted to follow up to it seemed like there were some nice profitability upside just from a normalization of expenses, particularly reducing temporary staffing and more. So going to a higher percentage of local based are more permanent. And I just wanted to ask if you see that as kind of a tailwind for continued margin improvement in 2024? Or do you kind of see that mostly already normalized?

David Garfinkle

And that's a great question.
I'd say a little bit of both.
There are some facilities where we still have some opportunities to look at to normalized expense structure, but we've made a lot of progress. And so if you go back to the fourth quarter of 2022 compared to the fourth quarter of 2023.
Significant reductions, as I pointed out in my prepared remarks, but I wouldn't say it's totally complete, but there's still some opportunities where we can reduce some of those travel expenses a bit further, we will also be hiring some additional staff to. So there's the put puts and takes on that. But overall, I'd say there's still some opportunities to normalize expenses.

Okay.
Good to hear things.

Damon Hininger

Thank you.
Thank you.

David Garfinkle

Thank you.

Operator

Once again, if you have a question at this time, please press star one one and this does conclude the question and answer session of today's program. I'd like to hand the program back to Damon Hininger for any further remarks.

Damon Hininger

Thank you so very much and thank you all for joining us our call today and especially to our investors.
Thank you for your trust and confidence and your investment in the company.
We look forward to talk to you in May as we talk about our first or first quarter results every day, everyone.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program you may now disconnect.