GEO Group Inc. shares fell in Aug. 7 trading after the company reported lower second-quarter revenue as a result of lower utilization rates at "a few" of the company's facilities contracted with U.S. Immigration and Customs Enforcement.
On an earnings call the same day, management called the drop in the utilization rate year over year at the ICE facilities "temporary" and said metrics should normalize by year-end.
With its results, the company said utilization at its ICE facilities should improve in the third quarter but still be "slightly below" earlier projections.
"Our ICE populations usually experience seasonal declines during the first quarter, and begin to improve during the second quarter," CFO Brian Evans said on the earnings call. "This year, our ICE populations at a few facilities remained seasonally lower during the second quarter compared to prior years. It is well known that illegal border crossings have declined in 2017 compared to 2016."
The company already has cut labor costs to offset the revenue drop. Evans posited on the call that the U.S. is in a "transition period" with respect to space demand drivers, however. The Trump administration, having reduced illegal border crossings, will move to focus on interior enforcement. He spoke of likely increases in demand from ICE in the north and northeastern regions.
"The new interior enforcement initiative may very well provide additional opportunities due to the need for establishing additional processing centers throughout the country, rather than only clustered along the southern border," he said.
GEO Group shares had fallen nearly 8% in Aug. 7 trading as of press time.