GEO raised its outlook. Why did cash flow rise so much faster?

GEO raised its 2026 adjusted earnings forecast as new and expanded government contracts lifted revenue. The detention and correctional services company also reported a much bigger improvement in operating cash flow, helped by the timing of customer collections.

It now expects annual adjusted EBITDA of $568 million to $573 million, up from $550 million to $560 million in August. The midpoint of its revenue outlook remains $3 billion. More of the upgrade therefore comes from expected earnings on those sales.

Adjusted EBITDA measures earnings before interest, taxes, depreciation and amortization. GEO also removes stock compensation, asset gains and specified litigation, startup and other costs.

A modest beat, followed by a higher target

Third-quarter adjusted EBITDA reached $145.3 million, up from $120.1 million a year earlier and just above the $145 million ceiling of management's August forecast. Revenue of $761.1 million was within the earlier $755 million to $805 million range.

Adjusted net income rose to $51.8 million from $35.0 million. Reported net income fell to $49.2 million from $173.9 million because the year-earlier quarter included a large property-sale gain.

Collections helped cash grow faster than earnings

Across the first nine months, operating cash flow rose to $445.4 million from $189.9 million. Adjusted EBITDA increased to $418.7 million from $338.5 million over the same period.

Receivables, prepaid expenses and other assets supplied $41.9 million of cash, compared with a $63.4 million use a year earlier. GEO attributes that change primarily to when it billed customers and collected payment.

Payables, accrued expenses and other liabilities supplied another $136.7 million, reflecting payment timing. They had supplied an even larger $142.8 million a year earlier, so this part of the cash benefit was already present in the comparison.

GEO also spent less cash on property and equipment: $74.7 million, down from $161.3 million. That spending is recorded separately from operating cash flow. Its annual forecast of $140 million to $150 million covers capital spending that customers do not reimburse, a different measure.

The next contracts need time to ramp up

GEO expects the Big Horn and Rivers facilities to finish activation by year-end and reach normal operations and earnings contribution early in 2027. Those contracts were already disclosed in August.

The Big Spring complex, under an arrangement effective November 1, is expected to finish activation in the first quarter of 2027 and reach normal contribution in the second quarter. GEO forecasts about $200 million in revenue in its first full operating year. U.S. Immigration and Customs Enforcement, or ICE, will reimburse reactivation capital spending and fund startup expenses across these three contracts covering four facilities.

An October sale changes the debt picture

The quarter-end balance sheet predates another major cash event. GEO completed the Adelanto property sale on October 2 for $950 million, estimating $705 million after taxes and fees, while retaining its service contract.

On October 15, it used sale proceeds to redeem $650 million of notes due in 2029. The redemption cost approximately $678 million before accrued interest. In November, GEO reported about $600 million of liquidity, including cash and available borrowing.

The sale and redemption were announced before these results. With new facilities still ramping up, earnings growth now depends partly on the operating schedules extending into 2027. The GEO company profile follows those contracts, the revised forecasts and the balance-sheet changes.