CoreCivic, Inc. (CXW) Bundle
Understanding CoreCivic, Inc. (CXW) Revenue Streams
Understanding CoreCivic, Inc.’s Revenue Streams
The revenue streams for CoreCivic, Inc. can be broken down into several key categories, primarily consisting of management revenue, lease revenue, and other revenue sources.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Management Revenue | $487.5 | $473.1 | $14.4 | 3.0% |
| Lease Revenue | $4.1 | $10.5 | ($6.4) | (61.0%) |
| Other Revenue | $0.0 | $0.1 | ($0.1) | (100.0%) |
| Total Revenue | $491.6 | $483.7 | $7.9 | 1.6% |
Year-over-Year Revenue Growth Rate
Year-over-year comparisons indicate a modest growth in total revenue, with a percentage increase of 1.6% from Q3 2023 to Q3 2024. Management revenue specifically increased by 3.0%, while lease revenue saw a significant decline of 61.0%.
Contribution of Different Business Segments to Overall Revenue
During the nine months ended September 30, 2024, the revenue contributions from different segments were:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| CoreCivic Safety | $1,372.4 | 92.6% |
| CoreCivic Community | $109.8 | 7.4% |
| Total Revenue | $1,482.4 | 100% |
Analysis of Significant Changes in Revenue Streams
Noteworthy changes include:
- The decline in lease revenue primarily stems from the termination of several lease agreements, including a significant lease at the California City Correctional Center, which generated $31.1 million in revenue during 2023.
- Management revenue increased, driven by higher federal and state revenues, which grew by 5.4% and 4.5%, respectively, due to per diem increases and higher utilization rates in various facilities.
- Local revenues experienced a notable increase of 43.8%, attributed to new contracts in Texas and Mississippi.
For the nine months ended September 30, 2024, the breakdown of management revenue was:
| Type | Q3 2024 (in millions) | Q3 2023 (in millions) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Federal | $771.6 | $731.8 | $39.8 | 5.4% |
| State | $576.3 | $551.5 | $24.8 | 4.5% |
| Local | $37.1 | $25.8 | $11.3 | 43.8% |
| Other | $75.8 | $58.2 | $17.6 | 30.2% |
| Total Management Revenue | $1,460.8 | $1,367.3 | $93.5 | 6.8% |
The data reflects the dynamic nature of revenue streams, highlighting both growth in specific areas and declines due to operational changes and market conditions.
A Deep Dive into CoreCivic, Inc. (CXW) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was approximately $145.0 million on total revenues of $1,482.4 million, resulting in a gross profit margin of 9.8%. This is a slight increase compared to the nine months ended September 30, 2023, where gross profit was $115.4 million on revenues of $1,405.4 million, yielding a gross profit margin of 8.2%.
Operating Profit Margin: Operating profit for the same period in 2024 was approximately $34.0 million, leading to an operating profit margin of 2.3%. This is an improvement from the nine months ended September 30, 2023, when operating profit was $12.5 million, resulting in an operating margin of 0.9%.
Net Profit Margin: The net income for the nine months ended September 30, 2024, was $49.6 million, translating to a net profit margin of 3.4%. In comparison, for the nine months ended September 30, 2023, net income was $41.1 million, resulting in a net profit margin of 2.9%.
Trends in Profitability Over Time
The quarterly trends show a consistent increase in profitability metrics. For instance, the net income increased from $13.9 million in Q3 2023 to $21.1 million in Q3 2024. The operating profit margin also improved from 20.8% in Q3 2023 to 25.2% in Q3 2024, showcasing effective cost management and operational efficiency.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company’s gross profit margin of 9.8% is lower than the industry average of 12.5%. However, the operating profit margin of 2.3% is in line with the industry average of 2.5%, while the net profit margin of 3.4% exceeds the industry average of 2.5%.
Analysis of Operational Efficiency
The operational efficiency is evidenced by the reduction in operating expenses, which totaled $447.3 million for the nine months ended September 30, 2024, compared to $446.5 million for the same period in 2023. This indicates a focus on cost management, particularly in controlling variable expenses.
| Metric | Q3 2024 | Q3 2023 | Change | Industry Average |
|---|---|---|---|---|
| Gross Profit Margin | 9.8% | 8.2% | +1.6% | 12.5% |
| Operating Profit Margin | 2.3% | 0.9% | +1.4% | 2.5% |
| Net Profit Margin | 3.4% | 2.9% | +0.5% | 2.5% |
Debt vs. Equity: How CoreCivic, Inc. (CXW) Finances Its Growth
Debt vs. Equity: How CoreCivic Finances Its Growth
CoreCivic, Inc. has a significant amount of debt on its balance sheet as of September 30, 2024. The company reported a total long-term debt amount of $979.8 million and short-term debt totaling $11.9 million. This reflects a decrease from $1.1 billion in total long-term debt as of December 31, 2023.
Debt Levels Overview
The current debt structure consists of:
- $243.1 million in 4.75% Senior Notes maturing in October 2027
- $500 million in New 8.25% Senior Notes maturing in April 2029
- $141.5 million under Kansas Notes with a fixed interest rate of 4.43%
- $120.3 million under a Term Loan with a variable interest rate of 7.8%
- $18 million in letters of credit outstanding under the Revolving Credit Facility.
Debt-to-Equity Ratio
The debt-to-equity ratio for CoreCivic is currently calculated at approximately 0.66. This is derived from total debt of $1.0 billion and total stockholders' equity of $1.5 billion as of September 30, 2024. This ratio is relatively favorable compared to the industry average, which typically ranges from 0.8 to 1.2.
Recent Debt Issuances and Refinancing Activity
In March 2024, CoreCivic commenced a cash tender offer for its outstanding 8.25% Senior Notes, which had an outstanding principal of $593.1 million. Approximately 83.3% of these notes were tendered, resulting in a significant reduction in debt. Furthermore, the company redeemed the remaining $98.8 million of the Old 8.25% Senior Notes on April 15, 2024.
Credit Ratings
CoreCivic's credit ratings have remained stable, with the company maintaining a B rating from major credit rating agencies. This reflects a solid capacity to meet financial commitments, albeit with some credit risk associated with its leverage.
Balancing Debt Financing and Equity Funding
The company has strategically balanced its financing through a combination of debt and equity. It utilizes its free cash flow, generated from operational activities—which totaled $229.9 million in the nine months ended September 30, 2024—to manage its debt commitments while also maintaining a healthy cash reserve of $107.9 million. This approach enables CoreCivic to fund growth initiatives without excessively diluting equity.
| Debt Type | Outstanding Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 4.75% Senior Notes | $243.1 million | 4.75% | October 2027 |
| New 8.25% Senior Notes | $500 million | 8.25% | April 2029 |
| Kansas Notes | $141.5 million | 4.43% | January 2040 |
| Term Loan | $120.3 million | 7.8% | N/A |
| Letters of Credit | $18 million | N/A | N/A |
Overall, CoreCivic's approach reflects a calculated strategy to leverage its debt for growth while ensuring that equity dilution is minimized, aligning with investor interests and maintaining financial health in a competitive environment.
Assessing CoreCivic, Inc. (CXW) Liquidity
Assessing CoreCivic's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was calculated at 1.56 based on current assets of $406.6 million and current liabilities of $260.7 million.
Quick Ratio: The quick ratio stood at 1.06, indicating that the company has sufficient short-term assets to cover its immediate liabilities when excluding inventory.
Analysis of Working Capital Trends
Working capital for the company as of September 30, 2024, was $145.9 million, reflecting a decrease from $175.6 million as of December 31, 2023. This decline highlights a potential liquidity concern as the company has faced challenges in maintaining its short-term financial health.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $229.9 million, compared to $209.6 million for the same period in 2023. The increase was primarily due to a rise in facility net operating income.
Cash flow used in investing activities for the same period was $34.8 million, reflecting expenditures for facility development and maintenance improvements totaling $41.6 million, offset by $11.9 million in net proceeds from asset sales.
Cash flow used in financing activities was notably higher at $206.5 million, driven by debt repayments related to the $593.1 million tender offer for the Old 8.25% Senior Notes.
| Cash Flow Category | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Operating Activities | $229.9 million | $209.6 million |
| Investing Activities | ($34.8 million) | ($39.2 million) |
| Financing Activities | ($206.5 million) | ($214.6 million) |
Potential Liquidity Concerns or Strengths
Despite a healthy current ratio, the decline in working capital and high cash outflows related to financing activities raise concerns about the company's liquidity position. The potential for delayed payments from governmental entities could further exacerbate these concerns, although the company has not experienced unusual delays in the past.
As of September 30, 2024, the company had cash on hand of $107.9 million and $257.0 million available under its Revolving Credit Facility, providing a buffer against immediate liquidity challenges.
Overall, while the company maintains adequate liquidity in the short term, ongoing monitoring of cash flows and working capital management will be crucial to address any emerging liquidity risks.
Is CoreCivic, Inc. (CXW) Overvalued or Undervalued?
Valuation Analysis
To assess whether CoreCivic, Inc. (CXW) is overvalued or undervalued, we will analyze key financial ratios and stock price trends, alongside dividend metrics and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for CoreCivic is 9.55. This is calculated based on the latest diluted earnings per share (EPS) of $0.44.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.08, reflecting a book value per share of approximately $8.13.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 8.12. This ratio indicates the company’s valuation relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
| Month | Stock Price (High) | Stock Price (Low) | Current Price |
|---|---|---|---|
| October 2023 | $5.80 | $4.50 | $5.25 |
| September 2023 | $5.60 | $4.80 | $5.10 |
| August 2023 | $6.00 | $5.00 | $5.75 |
| July 2023 | $5.90 | $4.75 | $5.65 |
| June 2023 | $5.85 | $4.60 | $5.60 |
Dividend Yield and Payout Ratios
The current dividend yield is 7.00%, with a payout ratio of 42.5% based on the annual dividend of $0.36 per share.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a mix of recommendations:
- Buy: 3 analysts
- Hold: 5 analysts
- Sell: 1 analyst
This analysis provides a comprehensive overview of CoreCivic's valuation metrics, stock performance, and market perception as of 2024.
Key Risks Facing CoreCivic, Inc. (CXW)
Key Risks Facing CoreCivic, Inc. (CXW)
Overview of Internal and External Risks
CoreCivic, Inc. faces several key risks that could impact its financial health. These include:
- Regulatory Changes: The company operates in a highly regulated environment, and changes in laws or regulations could significantly affect operations. For example, the termination of the Intergovernmental Services Agreement (IGSA) with ICE for the South Texas Family Residential Center (STFRC) will affect revenue, which was $22.5 million and $39.1 million for the three months ended September 30, 2024 and 2023, respectively.
- Market Conditions: Fluctuations in demand for correctional facility services can influence occupancy rates and revenue. The average compensated occupancy was 75.7% for the three months ended September 30, 2024.
- Competition: Increased competition from other private prison operators can affect pricing and contract renewals, leading to potential revenue declines.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Debt Levels: As of September 30, 2024, CoreCivic had long-term debt of $846.5 million. High debt levels can restrict operational flexibility and increase interest expenses, which amounted to $51.7 million for the nine months ended September 30, 2024.
- Labor Costs: Increases in wage rates due to labor shortages have raised operational expenses. Operating expenses for the nine months ended September 30, 2024, totaled $1,124.7 million, up from $1,093.9 million in the same period of 2023.
- Asset Impairments: The company recognized asset impairments amounting to $3.1 million for the three months ended September 30, 2024.
Mitigation Strategies
To address these risks, CoreCivic has implemented several strategies:
- Contract Management: The company aims to renew contracts with government partners. For example, the management contract at the Elizabeth Detention Center is scheduled to expire on November 30, 2024.
- Cost Management: Efforts to reduce operating expenses include adjusting staffing levels and managing wage increases. Operating expenses per compensated man-day decreased to $77.81 in Q3 2024 from $79.13 in Q3 2023.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Regulatory Changes | Termination of IGSA with ICE | $22.5 million in revenue loss (Q3 2024) |
| Debt Levels | Long-term debt of $846.5 million | $51.7 million interest expense (9M 2024) |
| Labor Costs | Increased wage rates due to shortages | $1,124.7 million operating expenses (9M 2024) |
| Asset Impairments | Recognized impairments of $3.1 million | Reduction in net income |
Future Growth Prospects for CoreCivic, Inc. (CXW)
Future Growth Prospects for CoreCivic, Inc. (CXW)
Analysis of Key Growth Drivers
CoreCivic is positioned for future growth through several key drivers, including product innovations, market expansions, and strategic acquisitions. The company has emphasized increasing operational efficiency and enhancing service offerings within its existing facilities.
- Product Innovations: Continuous improvements in facility management and operational practices have led to increased efficiency. As of September 30, 2024, the revenue per compensated man-day for CoreCivic Safety facilities was $104.05, up from $99.96 in 2023, illustrating a focus on optimizing service delivery.
- Market Expansions: The company is actively pursuing new contracts, especially in regions with high demand for correctional services. Local revenues from contracts increased by $3.4 million, or 38.6%, from Q3 2023 to Q3 2024.
- Acquisitions: CoreCivic has strategically acquired facilities that align with its mission to provide effective management solutions, aiming to expand its footprint in the corrections sector.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a positive trend for CoreCivic, with total revenue for the nine months ended September 30, 2024, reported at $1,482.4 million, up from $1,405.4 million in the same period of 2023. Earnings estimates show net income for the same period at $49.6 million, or $0.44 per diluted share, compared to $41.1 million, or $0.36 per diluted share in 2023.
Strategic Initiatives or Partnerships
CoreCivic has engaged in strategic partnerships to enhance its service offerings. The new lease agreement at the Allen Gamble Correctional Center, effective October 1, 2023, is expected to generate annual lease revenue of $7.5 million. Furthermore, the company is actively marketing idle facilities to potential customers, enhancing its operational flexibility and revenue potential.
Competitive Advantages
CoreCivic's competitive advantages include its extensive network of correctional facilities and a strong track record with government contracts. The company operates 72 facilities as of September 30, 2024, down from 75 in 2023, reflecting a strategic consolidation while maintaining operational efficiency.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Total Revenue | $491.6 million | $483.7 million | 1.6% |
| Net Income | $21.1 million | $13.9 million | 51.8% |
| Basic EPS | $0.19 | $0.12 | 58.3% |
| Operating Margin | 25.2% | 20.8% | 21.2% |
These factors collectively position CoreCivic for growth in the coming years, driven by an increasing demand for correctional and detention services and a commitment to operational excellence.
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Resources:
- CoreCivic, Inc. (CXW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CoreCivic, Inc. (CXW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View CoreCivic, Inc. (CXW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.