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ICF International Reports Second Quarter 2013 Results

  • Total Revenue of $242 Million; Diluted Earnings Per Share of $0.52
  • Commercial Revenues Growing; Energy Efficiency Program Revenues Up 21 Percent
  • Federal Revenues Remain Stable
  • Contract Sales of $236 Million, Up 16 Percent
  • First-Half Cash Flow From Operations Was $30.3 Million, Up 7 Percent
  • Raises Full Year 2013 Guidance Midpoints for Revenues and Diluted EPS
  • Completed Acquisition of E-commerce Technology Services Firm on July 31

FAIRFAX, Va.--(BUSINESS WIRE)--Aug. 1, 2013-- ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, reported results for the second quarter ended June 30, 2013.

Second Quarter 2013 Results and Highlights

“Second quarter results were similar to those of the first quarter, reflecting the continued growth of our commercial business, which was driven by a 21.3 percent increase in energy efficiency revenues, and the improved traction of our non-U.S. government business. At the same time, U.S. Federal Government revenues remained stable compared to last year, which we consider to be solid performance in light of current market conditions. Earnings per diluted share were the same as the prior year’s second quarter, inclusive of acquisition expenses, although operating income was lower due primarily to higher subcontractor activity on government contracts,” said ICF Chairman and Chief Executive Officer Sudhakar Kesavan.

For the second quarter, total revenue was $241.6 million, a 0.8 percent increase over the $239.6 million reported for the 2012 second quarter. Service revenue, total revenue less subcontractor and other direct costs, was $179.5 million, a 1.1 percent decline from second quarter 2012 levels. Operating income was $17.3 million, down from the $18.3 million reported in last year’s second quarter; operating margin was 7.2 percent compared to 7.6 percent a year ago. EBITDA was $22.4 million and EBITDA margin was 9.3 percent, compared to $24.4 million and 10.2 percent, respectively, in last year’s second quarter. Net income for the 2013 second quarter was $10.3 million or $0.52 per diluted share, equivalent to last year’s net income of $10.3 million and diluted earnings per share of $0.52. Acquisition charges amounted to $0.3 million in this year’s second quarter.

For the 2013 first half, total revenue was $475.5 million, up 1.8 percent over the $467.3 million reported in the 2012 first half. Operating income was $34.9 million, up 0.9 percent; net income was up 6.0 percent to $20.4 million, and earnings per diluted share were $1.02 compared to $0.96.

“The pace of contract sales increased in the second quarter, resulting in a solid book-to-bill ratio of nearly 1.0 for the period, compared to 0.85 in the prior year,” Mr. Kesavan said. “Ongoing investments to expand our business development capabilities have enabled ICF to respond to a greater number of government and commercial requests for proposals. We have continued to see solid demand for our domain expertise and IT services across key markets and expect sales in the second half of 2013 to be significantly ahead of the $462 million booked in the first half of the year, which we believe will position us for continued growth in 2014.”

“Additionally, on July 31 we completed the acquisition of an e-commerce technology services firm (Ecommerce Accelerator LLC, or ECA), with approximately $10 million in annual revenue, that will enhance ICF’s multi-channel, end-to-end e-commerce solutions. We have a robust acquisition pipeline and continue to evaluate acquisition opportunities that enhance our subject matter knowledge, broaden our service offerings, and/or provide scale in specific geographies,” Mr. Kesavan said.

Backlog and New Business Awards

Backlog was $1.5 billion at the end of the 2013 second quarter. Funded backlog was $647 million, or 44 percent of the total.

The total value of contracts awarded was $236 million in the second quarter of 2013 and $462 million for the 2013 first half, up 16.3 percent and 6.0 percent, respectively, from last year’s second quarter and first half.

Commercial Client Second Quarter/First Half 2013 Highlights

Revenues from commercial clients increased 3.3 percent in the 2013 second quarter to $66.9 million and were up 8.2 percent in the first half to $133.6 million. Excluding a large commercial infrastructure project that is currently in a slower phase of construction, commercial revenues would have increased 7.4 percent in the second quarter and 10.4 percent for the first half.

Revenues from commercial energy efficiency programs increased 21.3 percent and 15.6 percent in the second quarter and first half of 2013, respectively, and accounted for 37.5 percent and 36.6 percent, respectively, of commercial revenues.

Commercial sales awards were $36.8 million for the 2013 second quarter and $159.0 million for the first half, representing 34 percent of total sales for the first six months of 2013.

ICF was awarded more than 450 commercial projects globally in the second quarter. Primary areas of awards included energy efficiency program support, airline and airport management consulting, environmental program management, interactive data applications, strategic communications support for non-profits, commercial health consulting for payers, and energy market and portfolio assessment for utilities.

Key Government Sales Highlights for the Second Quarter 2013

ICF was awarded nearly 100 new U.S. Federal Government contract and task order awards and hundreds of additional awards from other domestic (state and local) and non-U.S. governments. The largest awards included:

  • Health Informatics: A $72 million contract with the National Institutes of Health to continue to support the Electronic Research Administration grants management program across a range of health informatics and systems engineering activities.
  • Program and IT Management: A $34 million contract with the United States Postal Service to provide support for the Mailing Information Systems and Domestic Products divisions.
  • Disaster Recovery Support: An award estimated to exceed $10 million to assist one of the states affected by Superstorm Sandy with analytical and program support for disaster recovery programs.
  • European Employment Programs: An $8.9 million contract with the European Commission to provide employment program support.
  • Health Survey Research: A $7.8 million contract with the Centers for Disease Control and Prevention supporting the 2013-2014 Tobacco Survey.

Additional individual government sales awards in excess of $2 million included providing program and organizational management support for the U.S. Department of the Navy, energy efficiency program support for the Association of Bay Area Governments (California) and the New York State Energy Research and Development Authority, environmental and engineering support services for the U.S. Bureau of Reclamation, survey research support for the National Science Foundation, and monitoring and evaluation support for the World Health Organization.

Summary and Outlook

“ICF’s year-to-date 2013 results illustrate the benefits of revenue diversification with emphasis on leveraging expertise in key markets across a growing client base. We expect that second half 2013 performance will exceed that of the first half, benefiting from the continued growth of our commercial business and the ramp up of certain government contracts,” Mr. Kesavan said.

“The Company narrowed its revenue guidance range for full year 2013 revenues to $955 million to $975 million; narrowed its expectations for EBITDA margin to 9.5 percent to 10.0 percent; and narrowed its guidance range for earnings per diluted share to $2.02 to $2.10. Guidance is based upon approximately 20 million diluted weighted average shares outstanding and an effective tax rate of 39 percent. Operating cash flow for 2013 is estimated to exceed $70 million,” Mr. Kesavan concluded.

About ICF International

ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver professional services and technology solutions in the energy, environment, and infrastructure; health, social programs, and consumer/financial; and public safety and defense markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program lifecycle, from research and analysis through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 4,500 employees serve these clients from more than 60 offices worldwide. ICF's website is http://www.icfi.com.

Caution Concerning Forward-Looking Statements

Statements that are not historical facts and involve known and unknown risks and uncertainties are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may concern our current expectations about our future results, plans, operations and prospects and involve certain risks, including those related to the government contracting industry generally; our particular business, including our dependence on contracts with U.S. federal government agencies; and our ability to acquire and successfully integrate businesses. These and other factors that could cause our actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of our securities filings with the Securities and Exchange Commission. The forward-looking statements included herein are only made as of the date hereof, and we specifically disclaim any obligation to update these statements in the future.

       
ICF International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)
 
Three months ended Six months ended
June 30, June 30,
2013 2012 2013 2012
(Unaudited) (Unaudited)
 
Gross Revenue $ 241,568 $ 239,649

$

475,489

$ 467,290
Direct Costs 151,528 147,861 294,346 288,049
Operating costs and expenses:
Indirect and selling expenses 67,604 67,404 135,866 133,257
Depreciation and amortization 2,782 2,597 5,581 4,292
Amortization of intangible assets   2,359     3,519     4,752     7,050  
Total operating costs and expenses   72,745     73,520     146,199     144,599  
Operating Income 17,295 18,268 34,944 34,642
Interest expense (626 ) (814 ) (1,394 ) (2,241 )
Other income (expense)   (9 )   (212 )   69     (263 )
Income before income taxes 16,660 17,242 33,619 32,138
Provision for income taxes   6,329     6,896     13,176     12,855  
Net income $ 10,331   $ 10,346  

$

20,443

  $ 19,283  
 
Earnings per Share:
Basic $ 0.52   $ 0.52  

$

1.04

  $ 0.98  
Diluted $ 0.52   $ 0.52  

$

1.02

  $ 0.96  
 
Weighted-average Shares:
Basic   19,706     19,774     19,625     19,771  
Diluted   19,996     19,971     19,993     20,061  
 
Other comprehensive income:
Foreign currency translation adjustments   (197 )   (230 )   (442 )   (619 )
Comprehensive income $ 10,134   $ 10,116  

$

20,001

  $ 18,664  
 
 
 
Reconciliation of non-GAAP financial measures:
 

Reconciliation of Service Revenue

Revenue $ 241,568 $ 239,649

$

475,489

$ 467,290
Subcontractor and Other Direct Costs*   62,072     58,205     117,114     110,955  
Service Revenue $ 179,496   $ 181,444  

$

358,375

  $ 356,335  
 

Reconciliation of EBITDA

Operating Income $ 17,295 $ 18,268

$

34,944

$ 34,642
Depreciation and amortization   5,141     6,116     10,333     11,342  
EBITDA 22,436 24,384 45,277 45,984
Acquisition-related expenses**   261     -     261     625  
Adjusted EBITDA $ 22,697   $ 24,384  

$

45,538

  $ 46,609  
 
      *   Subcontractor and Other Direct Costs exclude Direct Labor and Fringe.
** Acquisition-related expenses include expenses related to closed and anticipated-to-close acquisitions.
 
 
ICF International, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
   
June 30, 2013 December 31, 2012
(Unaudited)
 
Current Assets:
Cash $ 5,486 $ 14,725
Contract receivables, net 207,440 204,938
Prepaid expenses and other 10,960 7,608
Income tax receivable   3,660     11,231  
Total current assets   227,546     238,502  
Total property and equipment, net 27,927 28,860
Other assets:
Goodwill 410,482 410,583
Other intangible assets, net 16,264 21,016
Restricted cash 2,168 2,015
Other assets   9,601     8,745  
Total Assets $ 693,988   $ 709,721  
 
Current Liabilities:
Accounts payable $ 37,541 $ 44,665
Accrued salaries and benefits 41,423 42,264
Accrued expenses 30,138 31,779
Deferred revenue 21,097 22,333
Deferred income taxes   4,728     5,790  
Total current liabilities   134,927     146,831  
Long-term liabilities:
Long-term debt 75,000 105,000
Deferred rent 11,772 10,599
Deferred income taxes 11,902 9,081
Other   9,251     9,460  
Total Liabilities 242,852 280,971
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none issued
Common stock, $.001 par value; 70,000,000 shares authorized; 20,467,724 and 20,171,613 shares issued; and 19,761,996 and 19,559,409 shares outstanding as of June 30, 2013, and December 31, 2012, respectively 20 20
Additional paid-in capital 242,207 237,262
Retained earnings 227,020 206,577
Treasury stock (16,428 ) (13,868 )
Accumulated other comprehensive loss   (1,683 )   (1,241 )
Total Stockholders’ Equity   451,136     428,750  
Total Liabilities and Stockholders’ Equity $ 693,988   $ 709,721  
 
 
ICF International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
 
  Six months ended

 

June 30,
2013   2012
(Unaudited)
Cash flows from operating activities
Net income $ 20,443 $ 19,283
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes 1,710 3,611
Loss on disposal of fixed assets 7 76
Non-cash equity compensation 4,283 3,927
Depreciation and amortization 10,333 11,342
Amortization of debt issue costs 238 323
Deferred rent 1,302 2,317
Changes in operating assets and liabilities, net of the effect of acquisitions:
Contract receivables, net (2,351 ) (962 )
Prepaid expenses and other assets (4,752 ) (2,205 )
Accounts payable (6,183 ) (2,021 )
Accrued salaries and benefits (841 ) 888
Accrued expenses (17 ) (1,766 )
Deferred revenue (1,236 ) (1,940 )
Income tax receivable and payable 7,571 (5,582 )
Other liabilities   (209 )   1,130  
Net cash provided by operating activities   30,298     28,421  
Cash flows from investing activities
Capital expenditures (7,197 ) (8,102 )
Payments for business acquisitions, net of cash received       (8,532 )
Net cash used in investing activities   (7,197 )   (16,634 )
 
Cash flows from financing activities
Advances from working capital facilities 58,317 122,220
Payments on working capital facilities (88,317 ) (123,690 )
Debt issue costs (1,896 )
Proceeds from exercise of options 460 23
Tax benefits of stock option exercises and award vesting 26 648
Net payments for stockholder issuances and buybacks   (2,384 )   (7,313 )
Net cash used in financing activities (31,898 ) (10,008 )
Effect of exchange rate on cash   (442 )   (619 )
Increase (decrease) in cash (9,239 ) 1,160
Cash, beginning of period   14,725     4,097  
Cash, end of period $ 5,486   $ 5,257  
 
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 1,409   $ 1,737  
Income taxes $ 3,783   $ 14,197  
 
       
ICF International, Inc. and Subsidiaries
Supplemental Schedule
 
 
Revenue by market Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
 
Energy, environment, and infrastructure 38 % 41 % 39 % 40 %
Health, social programs, and consumer/financial 49 % 46 % 48 % 46 %
Public safety and defense 13 % 13 % 13 % 14 %
       
Total 100 % 100 % 100 % 100 %
 
 
 
Revenue by client Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
 
U.S. federal government 59 % 59 % 59 % 61 %
U.S. state and local government 9 % 10 % 9 % 10 %
Non-U.S. government 4 % 4 % 4 % 3 %
Government 72 % 73 % 72 % 74 %
 
Commercial 28 % 27 % 28 % 26 %
       
Total 100 % 100 % 100 % 100 %
 
 
 
Revenue by contract Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
 
Time-and-materials 51 % 49 % 51 % 50 %
Fixed-price 28 % 30 % 29 % 29 %
Cost-based 21 % 21 % 20 % 21 %
       
Total 100 % 100 % 100 % 100 %
 

Source: ICF International

ICF International
Douglas Beck, 1-703-934-3820
or
MBS Value Partners
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