CoreCivic : 2021 Annual Letter to Shareholders

2021

ANNUAL REPORT

Financial Highlights*

* Please refer to page A-1 in the Form 10-K insert accompanying the Annual Letter to Stockholders for a calculation of Adjusted Net Income, Adjusted Diluted EPS, Normalized FFO, Normalized FFO Per Share, EBITDA, and Adjusted EBITDA, and a reconciliation to their most comparable measures presented in accordance with generally accepted accounting principles.

(in thousands, except per share amounts)

2021	2020	2019
Revenue	$1,862,616	$1,905,485	$1,980,689
Net Income (Loss)	($51,896)	$55,338	$188,886
Adjusted Net Income	$126,746	$159,722	$204,806
Diluted EPS	($0.43)	$0.45	$1.59
Adjusted Diluted EPS	$1.04	$1.32	$1.72
Normalized FFO	$225,484	$271,768	$311,921
Normalized FFO Per Diluted Share	$1.85	$2.25	$2.62
EBITDA	$316,406	$304,038	$427,958
Adjusted EBITDA	$402,026	$404,805	$443,878

CoreCivic is a diversified government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. CoreCivic provides a broad range of solutions to government partners that serve the public good through corrections and detention management, a network of residential reentry centers to help address America's recidivism crisis, and government real estate solutions. CoreCivic is the nation's largest owner of partnership correctional, detention and residential reentry facilities, and believes it is the largest private owner of real estate used by government agencies in the U.S. CoreCivic has been a flexible and dependable partner for government for nearly 40 years. CoreCivic's employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more atwww.corecivic.com.

Dear Fellow Shareholders,

I find it difficult to think of 2021 on a standalone basis, which I'm sure is a feeling a lot of us share. In many ways, it felt like a continuation of the unprecedented series of events that started in 2020, so many of the themes I cover here will feel similar to last spring. And, of course, any discussion of the last year has to begin with COVID-19.

We've all felt the mental and physical fatigue brought about by the personal and professional stress of managing this pandemic for two years. That's exactly why I believe it's so important to call attention to the incredible team of over 10,000 professionals we have at CoreCivic. I'm constantly inspired by their passion and have seen firsthand their heroic efforts in supporting the individuals in our care throughout the pandemic. It's first and foremost the effort of the collective team at CoreCivic that allows us to deliver on our mission to better the public good, which ultimately benefits the individuals in our care, our government partners, our communities and you, our shareholders.

COVID-19 was at the forefront of our minds every day. Throughout the year, we worked closely with our government partners to adjust our operational policies in response to changing advice coming from leading health experts. As vaccines became available, we also had to work closely with relevant state and local health departments who were charged with coordinating distribution on a location-by-location basis. It was no small undertaking by our team to man-age this process because each state established their own vaccine rollout strategy and prioritized different population groups at different times, as well as the fact that vaccine distribution differed greatly in both quantity and type across the country. At this same time, we were working diligently to develop and distribute educational information on the vaccines to our employees and the individuals in our care to encourage its acceptance. The vaccination rates for our employees and individuals in our care increased steadily throughout the year, very similar to those of the general public.

While these efforts increased the pace at which our facilities could return to pre-pandemic activities like in-person visitation, mutations in the virus -- particularly the Delta and Omicron strains -- extended the need for most of our pandemic-driven operational policies. We believe these policies helped prevent our facilities from experiencing the significant uptick in positive cases that we saw in the general public in the fall and winter of 2021 due to these variants. As we hopefully approach the end of the pandemic phase of this virus, we remain positive in our outlook toward returning to fully normalized facility operations. There are many lessons learned over the last two years that will continue to inform our policies as we move forward, and we believe we've done everything possible to put CoreCivic in an even stronger position for future success.

Now turning to our business segments, CoreCivic Safety is a national leader in high-quality corrections and detention man-agement, guided by correctional best practices and held to independent, national accreditation standards. CoreCivic Com-munity provides residential and nonresidential services focused

President and CEO Damon Hininger visits staff at Nevade Souther Detention Center in Pahrump, Nevada

on helping returning citizens successfully reintegrate into their communities after prison or as a way to avoid being incarcer-ated in the first place. CoreCivic Properties leverages our nearly

40 years of experience designing, building and managing government real estate projects and facilities to deliver cost-saving real estate solutions to our government partners throughout the United States. Enterprise-wide we own over 15.1 million square feet of real estate used by federal, state and local governments

Each of our three segments performed well considering the challenging circumstances faced throughout the year due to the pandemic. Although our financial results for 2021 were negatively impacted due to higher income taxes resulting from our conversion to a C-Corporation effective January 1, 2021, we once again showed the resilience of our business and the critical need for the services we provide. Revenue of $1.86 billion only declined 2.2% compared with 2020. Our 2021 Normalized Funds From Operations of $225 million, or $1.85 per share, was relatively consis-tent with our 2020 performance when taking into consideration the higher income taxes we incurred from the transi-tion in our corporate tax structure from a Real Estate Investment Trust (REIT) in 2020 to a taxable C-Corporation in 2021. We also continued to support our reentry programs within the parameters of the pandemic. For example, our educators continued to meet the needs of those in our care with innovative education delivery. Their efforts resulted in nearly 3,300 individuals receiving either a high school equivalency diploma or an industry-recognized certification.

We continue to strongly advocate for public policies aimed at reducing recidivism and removing barriers that inhibit successful community reentry. Each year, our team researches legislation across the United States that supports pro-reentry initiatives. We support legislation that will help returning citizens access education more easily, restore their voting rights, and secure stable employment once they are released. Our goal is to see action in the form of meaningful legislation passed at the state and federal levels. Since launching our public policy advocacy initiative in 2017, we have sent nearly 2,700 letters to federal and state officials in support of nearly 100 bills aimed at helping people succeed in their communities after incarceration. These efforts are core to our mission and we continue to seek additional opportunities to support successful reentry.

As the first company in our sector to publish an Environmental, Social, and Governance (ESG) report back in 2019, our transparency into these factors continues to expand as we will publish our fourth annual ESG report in 2022. Like its predecessors, this report provides a comprehensive and transparent look at topics of greatest material impact to our stakeholders by sharing our progress towards established goals and management's related processes.

We've made meaningful progress reducing our overall debt since we announced our corporate structure change in the summer of 2020. After careful consideration of market conditions and our projected future cost of borrowing at the time, the management team and board of directors chose to make a strategic shift in our corporate structure. Our decision has already resulted in improving our access to the debt capital markets and reducing our cost of borrowing. Although we aim for further improvement, our progress so far has been meaningful in improving our long-term ability to cost-effectively fund our business. There remains a disconnect between our credit ratings and the strength of our balance sheet, the durability of our cash flows and the creditworthiness of our government partners. It is because of this that we remain focused on continuing to reduce our overall debt levels.

We continue to believe our capital allocation strategy is the most prudent approach for positioning the company to generate long-term value through a stable capital structure and continue to cost-effectively meet the needs of our government customers with less reliance on outside sources of capital. However, starting in 2022, we expect to be in a position to shift our capital allocation strategy to one that once again returns a portion of our cash flows to our shareholders while continuing to reduce leverage and without sacrificing investments in our people that will be needed in this challenging labor market. We believe the valuation of our equity remains well below its intrinsic value, and we feel strongly that once we achieve our debt reduction goals, we could create substantial value for our shareholders by repurchasing shares over multiple years.

Looking ahead, a new, recently announced contract with the state of Arizona is going to provide a great solution for the state in the form of a much-needed modern facility as they transition away from the aging Arizona State Prison Complex in Florence. With the significant correctional infrastructure challenges nationwide, our ability to provide flexible solutions like the one in Arizona will become even more vital. Over the last five to 10 years, we've seen a shift in thinking regarding the need to modernize aging prison facilities around the country. Two years ago, we put together an innovative solution for the state of Kansas, and last year we provided another solution in New Mexico. There's a growing need to replace aging facilities-especially considering the challenges of COVID-19-because they are costly to maintain and don't have adequate facilities for effective medical and mental health programming. In the coming years, I believe more correctional systems will look to the private sector for infrastructure solutions, and we'll be ready to help develop an individualized approach to meet those unique needs.

Among other meaningful, nationwide impacts from COVID-19, one of the most notable has been around staffing availability and meaningful wage inflation. It's been challenging for all businesses in this labor market to recruit new employees. This is not just a CoreCivic issue, but a nationwide shift in the behavior of employees and employers. With support from our board and government partners, we have been able to make additional investments in our employees. There is still work to be done, but we are committed to keeping this as an area of focus in 2022.

Reflecting on all of the above, I would like to once again express my deep appreciation and tremendous pride in our CoreCivic team. Their dedication throughout 2021, with all the challenges it presented, was once again exceptional and inspiring. For that, I am grateful and honored to work alongside them.

To our shareholders, we remain focused on long-term value creation by ensuring the company can continue to deliver mission-critical solutions to our government partners in an efficient, cost-effective way. I hope you can see our pas-sion and dedication to our mission, our government partners and improving the lives of the individuals in our care. The last year presented many challenges, but I believe through our actions we have emerged an even stronger, more durable organization and are well positioned to deliver long-term shareholder value. Your investment in CoreCivic helps support our team of over 10,000 professionals as they work every day to positively change lives and better the public good -- a core mission we're all proud to support.

Damon T. Hininger

President and CEO