—Signed Definitive Agreements to Sell Commercial Marketing Group—
—Strategic Tuck-In Acquisition of Engineering Advisory Firm CMY Expands ICF's Addressable Market—
—Re-Affirms Full Year 2023 Guidance Ranges—
- Revenue Was
$500 Million , Up 18% - Net Income Was
$20.3 Million and Diluted EPS Was$1.07 , Inclusive of$3.5 Million and$0.13 Per Share in Tax-Effected M&A and Severance Charges - EBITDA¹ Was
$47.5 Million , Up 19%; Adjusted EBITDA1 Was$51.0 Million , Up 15% - Non-GAAP EPS¹ Was
$1.57 , Up 18% - Diluted EPS and Non-GAAP EPS Include Tax Benefits of
$0 .21 - Contract Awards Were
$441 Million ; TTM Contract Awards Were$2.5 Billion for a Book-to-Bill Ratio of 1.3
—Record Business Development Pipeline of
Commenting on the results,
"Year-on-year revenue increased 18.2%, representing 10% organic growth and the benefit of the SemanticBits acquisition we completed in mid-2022. Year-on-year growth was led by substantial double-digit increases in revenues from federal, state and local government and commercial energy clients, which together accounted for over 88% of total second quarter revenue. Revenues from our key growth markets, namely IT modernization/digital transformation, public health, disaster management, utility consulting, and climate, environment and infrastructure services, in the aggregate, continued to drive strong year-on-year revenue comparisons. Non-GAAP EPS increased 18.0% year-on-year, benefiting from revenue growth, favorable mix and scale efficiencies as well as tax optimization strategies, which offset higher interest expense.
"This was another strong quarter of contract wins for ICF. The value of awards won increased 28% year-on-year and primarily represented new business. Our business development pipeline reached a record
"In the second quarter, we acquired CMY, a power engineering firm with a team of approximately 50 electrical engineers and other highly specialized experts who advise utilities and energy project developers across the
"In mid-July we signed definitive agreements to sell our
The sale of
Second Quarter 2023 Results
Second quarter 2023 revenue increased 18.2% to
Non-GAAP EPS increased 18.0% to
Backlog and New Business
Total backlog was
Government Revenue Second Quarter 2023 Highlights
Revenue from government clients was
U.S. federal government revenue was$271.8 million , 20.6% above the$225.3 million reported in the year-ago quarter. Federal government revenue accounted for 54.4% of total revenue, compared to 53.2% of total revenue in the second quarter of 2022.U.S. state and local government revenue increased 27.5% to$81.2 million , from$63.7 million in the year-ago quarter. State and local government clients represented 16.2% of total revenue, compared to 15.1% in the second quarter of 2022.- International government revenue was
$26.3 million , compared to$28.6 million in the year-ago quarter. International government revenue represented 5.3% of total revenue, compared to 6.8% in the second quarter of 2022.
Key Government Contracts Awarded in the Second Quarter 2023
ICF was awarded government contracts with an aggregate value of over
Digital Modernization
- A contract modification with a value of
$32.3 million with a federal agency within theU.S. Department of Health and Human Services to continue to support its digital modernization efforts to improve access to critical public health data. - A bridge contract with a value of
$30.2 million with aU.S. federal government agency to support its digital modernization and maintenance efforts. - A new task order with a value of
$8.7 million with aU.S. federal government department to continue to support its digital modernization efforts.
Disaster Management
- A new contract with a value of
$32.1 million with aU.S. territory to provide disaster management consulting services to accelerate federally funded recovery efforts across the territory.
Public Health and Social Programs
- A new single-award blanket purchase agreement with a ceiling of
$30.0 million with theU.S. Department of the Interior to modernize the training systems and develop incident position standards for the nation's professional wildland firefighters. - A new follow-on contract with a value of
$13.8 million with theU.S. Department of Justice Office for Victims of Crime (OVC) to provide training and technical assistance (TTA) to support its Technical Assistance Collective that expands the collective impact of OVC's TTA providers through networking, collaboration and easily accessible online tools. - A recompete task order with a potential value of
$11.8 million with theU.S. National Cancer Institute to provide project management, technical, computing and administrative support to manage research portfolios for theDivision of Cancer Control and Population Sciences .
Commercial Revenue Second Quarter 2023 Highlights
Commercial revenue was
- Commercial revenue accounted for 24.1% of total revenue compared to 24.9% of total revenue in the 2022 second quarter.
- Energy markets, which includes energy efficiency programs, represented 73.2% of commercial revenue. Marketing services and aviation consulting accounted for 19.1% of commercial revenue.
Key Commercial Contracts Awarded in the Second Quarter 2023
ICF was awarded commercial projects during the quarter with an aggregate value of approximately
Energy Markets
- A new master services agreement with a Midwestern
U.S. utility to provide energy efficiency program implementation services for its residential portfolio. - A sole-source contract extension with a
Northeastern U.S. utility to continue to provide implementation services for its residential energy efficiency program. - A recompete contract with a North American energy regulator to provide digital modernization and ongoing support services for its program to provide utility bill offsets to low-income households.
- A new contract with a North American electricity system operator to provide support services for its energy efficiency retrofit program.
- A new contract with a Midwestern
U.S. utility to provide energy efficiency program implementation services for its commercial and industrial pilot.
Commercial Marketing and Other Commercial Markets
- A contract extension with a
U.S. hospitality company to continue to provide loyalty program operations support services. - A recompete contract with a
U.S. health insurance provider to provide brand strategy and execution services.
Dividend Declaration
On
Summary and Outlook
"Our strong first-half revenue performance continues to illustrate how well-aligned ICF's expertise and capabilities are with market demand and clients' spending priorities. During the period, we continued to invest in people and technology that enabled ICF to execute effectively on our existing contracts, while positioning us to capture an even greater share of future growth opportunities. The sale of our
"The net impact from the sale of the
"We recently released our 2023 Corporate Citizenship Report which highlights how ICF is investing in our people, minimizing our environmental footprint, supporting our communities, and serving our clients with integrity. Over 85% of ICF's first-half 2023 revenues were derived from services supporting energy saving, carbon reduction and natural resource protection programs as well as health, education, development and social justice programs. We are proud of the impact that ICF and its people are having on society,"
1 Non-GAAP EPS, EBITDA, and Adjusted EBITDA are non-GAAP measurements. A reconciliation of all non-GAAP measurements to the most applicable GAAP number is set forth below. Special charges are items that were included within our consolidated statements of comprehensive income but are not indicative of ongoing performance and have been presented net of applicable
About ICF
ICF is a global consulting and technology services company with approximately 9,000 employees, but we are not your typical consultants. At ICF, business analysts and policy specialists work together with digital strategists, data scientists and creatives. We combine unmatched industry expertise with cutting-edge engagement capabilities to help organizations solve their most complex challenges. Since 1969, public and private sector clients have worked with ICF to navigate change and shape the future. Learn more at icf.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 that 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.
Note on Forward-Looking Non-GAAP Measures
The company does not reconcile its forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to the variability and difficulty in making accurate forecasts and projections and because not all of the information necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures (such as the effect of share-based compensation or the impact of future extraordinary or non-recurring events like acquisitions) is available to the company without unreasonable effort. For the same reasons, the company is unable to estimate the probable significance of the unavailable information. The company provides forward-looking non-GAAP financial measures that it believes will be achievable, but it cannot accurately predict all of the components of the adjusted calculations, and the U.S. GAAP financial measures may be materially different than the non-GAAP financial measures.
Investor Contacts:
Company Information Contact:
|
|
||||||||
|
Consolidated Statements of Comprehensive Income |
||||||||
|
(Unaudited) |
||||||||
|
Three Months Ended |
Six Months Ended |
|||||||
|
|
|
|||||||
|
(in thousands, except per share amounts) |
2023 |
2022 |
2023 |
2022 |
||||
|
Revenue |
$ 500,085 |
$ 423,110 |
$ 983,367 |
$ 836,578 |
||||
|
Direct costs |
325,404 |
268,905 |
637,969 |
527,063 |
||||
|
Operating costs and expenses: |
||||||||
|
Indirect and selling expenses |
126,522 |
114,403 |
250,255 |
231,855 |
||||
|
Depreciation and amortization |
6,826 |
5,063 |
13,135 |
9,901 |
||||
|
Amortization of intangible assets |
9,286 |
4,963 |
18,510 |
10,280 |
||||
|
Total operating costs and expenses |
142,634 |
124,429 |
281,900 |
252,036 |
||||
|
Operating income |
32,047 |
29,776 |
63,498 |
57,479 |
||||
|
Interest, net |
(10,132) |
(4,049) |
(19,589) |
(6,676) |
||||
|
Other (expense) income |
(677) |
44 |
(1,235) |
(395) |
||||
|
Income before income taxes |
21,238 |
25,771 |
42,674 |
50,408 |
||||
|
Provision for income taxes |
926 |
7,374 |
5,964 |
14,149 |
||||
|
Net income |
$ 20,312 |
$ 18,397 |
$ 36,710 |
$ 36,259 |
||||
|
Earnings per Share: |
||||||||
|
Basic |
$ 1.08 |
$ 0.98 |
$ 1.95 |
$ 1.93 |
||||
|
Diluted |
$ 1.07 |
$ 0.97 |
$ 1.94 |
$ 1.91 |
||||
|
Weighted-average Shares: |
||||||||
|
Basic |
18,791 |
18,796 |
18,785 |
18,795 |
||||
|
Diluted |
18,919 |
18,954 |
18,942 |
18,991 |
||||
|
Cash dividends declared per common share |
$ 0.14 |
$ 0.14 |
$ 0.28 |
$ 0.28 |
||||
|
Other comprehensive income (loss), net of tax |
3,151 |
(4,211) |
1,817 |
(1,552) |
||||
|
Comprehensive income, net of tax |
$ 23,463 |
$ 14,186 |
$ 38,527 |
$ 34,707 |
||||
|
|
||||||||
|
Reconciliation of Non-GAAP financial measures(2) |
||||||||
|
(Unaudited) |
||||||||
|
Three Months Ended |
Six Months Ended |
|||||||
|
|
|
|||||||
|
(in thousands, except per share amounts) |
2023 |
2022 |
2023 |
2022 |
||||
|
Reconciliation of EBITDA and Adjusted EBITDA |
||||||||
|
Net income |
$ 20,312 |
$ 18,397 |
$ 36,710 |
$ 36,259 |
||||
|
Interest, net |
10,132 |
4,049 |
19,589 |
6,676 |
||||
|
Provision for income taxes |
926 |
7,374 |
5,964 |
14,149 |
||||
|
Depreciation and amortization |
16,112 |
10,026 |
31,645 |
20,181 |
||||
|
EBITDA (3) |
$ 47,482 |
$ 39,846 |
$ 93,908 |
$ 77,265 |
||||
|
Impairment of long-lived assets (4) |
— |
— |
894 |
— |
||||
|
Acquisition and divestiture-related expenditures (5) |
2,103 |
2,262 |
2,906 |
3,581 |
||||
|
Severance and other costs related to staff realignment (6) |
1,365 |
185 |
3,860 |
1,411 |
||||
|
Facilities consolidations and office closures (7) |
— |
— |
359 |
— |
||||
|
Expenses related to the transfer to our new corporate headquarters (8) |
— |
1,882 |
— |
3,764 |
||||
|
Total Adjustments |
3,468 |
4,329 |
8,019 |
8,756 |
||||
|
Adjusted EBITDA |
$ 50,950 |
$ 44,175 |
$ 101,927 |
$ 86,021 |
||||
|
Net Income Margin Percent on Revenue (9) |
4.1 % |
4.3 % |
3.7 % |
4.3 % |
||||
|
EBITDA Margin Percent on Revenue (10) |
9.5 % |
9.4 % |
9.5 % |
9.2 % |
||||
|
Adjusted EBITDA Margin Percent on Revenue (10) |
10.2 % |
10.4 % |
10.4 % |
10.3 % |
||||
|
Reconciliation of Non-GAAP Diluted EPS |
||||||||
|
|
$ 1.07 |
$ 0.97 |
$ 1.94 |
$ 1.91 |
||||
|
Impairment of long-lived assets |
— |
— |
0.05 |
— |
||||
|
Acquisition and divestiture-related expenses |
0.11 |
0.12 |
0.15 |
0.19 |
||||
|
Severance and other costs related to staff realignment |
0.07 |
0.01 |
0.20 |
0.07 |
||||
|
Facilities consolidations and office closures |
— |
— |
0.02 |
— |
||||
|
Expenses related to the transfer to our new corporate headquarters |
— |
0.10 |
— |
0.20 |
||||
|
Amortization of intangibles |
0.49 |
0.26 |
0.98 |
0.54 |
||||
|
Income tax effects (11) |
(0.17) |
(0.13) |
(0.34) |
(0.28) |
||||
|
Non-GAAP Diluted EPS |
$ 1.57 |
$ 1.33 |
$ 3.00 |
$ 2.63 |
||||
|
(2) These tables provide reconciliations of non-GAAP financial measures to the most applicable GAAP numbers. While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Other companies may define similarly titled non-GAAP measures differently and, accordingly, care should be exercised in understanding how we define these measures. |
||||||||
|
(3) The calculation of EBITDA for the three and six months ended |
||||||||
|
(4) We recognized impairment expense of |
||||||||
|
(5) These costs consist primarily of third-party costs and integration costs associated with our acquisitions and/or potential acquisitions and separation costs associated with business discontinuation/divestitures. |
||||||||
|
(6) These costs are mainly due to involuntary employee termination benefits for our officers, and/or groups of employees who have been notified that they will be terminated as part of a consolidation or reorganization. |
||||||||
|
(7) These costs are exit costs associated with terminated leases or full office closures. The exit costs include charges incurred under a contractual obligation that existed as of the date of the accrual and for which we will (i) continue to pay until the contractual obligation is satisfied but with no economic benefit to us or (ii) we contractually terminated the obligation and ceased utilizing the facilities. |
||||||||
|
(8) These costs represent incremental non-cash lease expense associated with a straight-line rent accrual during the "free rent" period in the lease for our new corporate headquarters in |
||||||||
|
(9) Net Income Margin Percent on Revenue was calculated by dividing net income by revenue. |
||||||||
|
(10) EBITDA Margin Percent and Adjusted EBITDA Margin Percent on Revenue were calculated by dividing the non-GAAP measure by the corresponding revenue. |
||||||||
|
(11) Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 25.6% and 28.6% for the three months ended |
||||||||
|
|
|||||
|
Consolidated Balance Sheets |
|||||
|
(Unaudited) |
|||||
|
(in thousands, except share and per share amounts) |
|
|
|||
|
ASSETS |
|||||
|
Current Assets: |
|||||
|
Cash and cash equivalents |
$ 6,972 |
$ 11,257 |
|||
|
Restricted cash |
4,498 |
1,711 |
|||
|
Contract receivables, net |
226,360 |
232,337 |
|||
|
Contract assets |
200,202 |
169,088 |
|||
|
Prepaid expenses and other assets |
32,579 |
40,709 |
|||
|
Income tax receivable |
7,629 |
11,616 |
|||
|
Total Current Assets |
478,240 |
466,718 |
|||
|
Property and Equipment, net |
84,029 |
85,402 |
|||
|
Other Assets: |
|||||
|
Goodwill |
1,236,380 |
1,212,898 |
|||
|
Other intangible assets, net |
117,145 |
126,537 |
|||
|
Operating lease - right-of-use assets |
146,539 |
149,066 |
|||
|
Other assets |
53,089 |
51,637 |
|||
|
Total Assets |
$ 2,115,422 |
$ 2,092,258 |
|||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
|
Current Liabilities: |
|||||
|
Current portion of long-term debt |
$ 20,500 |
$ 23,250 |
|||
|
Accounts payable |
113,273 |
135,778 |
|||
|
Contract liabilities |
19,647 |
25,773 |
|||
|
Operating lease liabilities |
17,544 |
19,305 |
|||
|
Finance lease liabilities |
2,420 |
2,381 |
|||
|
Accrued salaries and benefits |
86,777 |
85,991 |
|||
|
Accrued subcontractors and other direct costs |
43,623 |
45,478 |
|||
|
Accrued expenses and other current liabilities |
65,372 |
78,036 |
|||
|
Total Current Liabilities |
369,156 |
415,992 |
|||
|
Long-term Liabilities: |
|||||
|
Long-term debt |
581,297 |
533,084 |
|||
|
Operating lease liabilities - non-current |
185,924 |
182,251 |
|||
|
Finance lease liabilities - non-current |
14,894 |
16,116 |
|||
|
Deferred income taxes |
62,820 |
68,038 |
|||
|
Other long-term liabilities |
28,486 |
23,566 |
|||
|
Total Liabilities |
1,242,577 |
1,239,047 |
|||
|
Commitments and Contingencies |
|||||
|
Stockholders' Equity: |
|||||
|
Preferred stock, par value |
— |
— |
|||
|
Common stock, par value |
24 |
23 |
|||
|
Additional paid-in capital |
411,187 |
401,957 |
|||
|
Retained earnings |
734,468 |
703,030 |
|||
|
Treasury stock, 5,131,585 and 4,906,209 shares at |
(266,518) |
(243,666) |
|||
|
Accumulated other comprehensive loss |
(6,316) |
(8,133) |
|||
|
Total Stockholders' Equity |
872,845 |
853,211 |
|||
|
Total Liabilities and Stockholders' Equity |
$ 2,115,422 |
$ 2,092,258 |
|||
|
|
||||
|
Consolidated Statements of Cash Flows |
||||
|
(Unaudited) |
||||
|
Six Months Ended |
||||
|
|
||||
|
(in thousands) |
2023 |
2022 |
||
|
Cash Flows from Operating Activities |
||||
|
Net income |
$ 36,710 |
$ 36,259 |
||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
|
Provision for (recovery of) credit losses |
837 |
(172) |
||
|
Deferred income taxes |
(4,823) |
4,741 |
||
|
Non-cash equity compensation |
6,688 |
6,507 |
||
|
Depreciation and amortization |
31,646 |
20,181 |
||
|
Facilities consolidation reserve |
— |
(156) |
||
|
Amortization of debt issuance costs |
651 |
617 |
||
|
Impairment of long-lived assets |
888 |
— |
||
|
Other adjustments, net |
(1,411) |
868 |
||
|
Changes in operating assets and liabilities, net of the effects of acquisitions: |
||||
|
Net contract assets and liabilities |
(38,332) |
(71,612) |
||
|
Contract receivables |
8,856 |
17,520 |
||
|
Prepaid expenses and other assets |
13,864 |
(5,758) |
||
|
Operating lease assets and liabilities, net |
2,894 |
(997) |
||
|
Accounts payable |
(22,742) |
(5,801) |
||
|
Accrued salaries and benefits |
405 |
1,512 |
||
|
Accrued subcontractors and other direct costs |
(2,173) |
6,754 |
||
|
Accrued expenses and other current liabilities |
(18,311) |
(3,253) |
||
|
Income tax receivable and payable |
3,999 |
(1,572) |
||
|
Other liabilities |
233 |
771 |
||
|
Net Cash Provided by Operating Activities |
19,879 |
6,409 |
||
|
Cash Flows from Investing Activities |
||||
|
Capital expenditures for property and equipment and capitalized software |
(13,139) |
(11,026) |
||
|
Proceeds from working capital adjustments related to prior business acquisition |
— |
2,911 |
||
|
Payments for business acquisitions, net of cash acquired |
(32,664) |
— |
||
|
|
(45,803) |
(8,115) |
||
|
Cash Flows from Financing Activities |
||||
|
Advances from working capital facilities |
669,437 |
869,529 |
||
|
Payments on working capital facilities |
(624,553) |
(838,259) |
||
|
Proceeds from other short-term borrowings |
7,632 |
— |
||
|
Repayments of other short-term borrowings |
(2,483) |
— |
||
|
Receipt of restricted contract funds |
4,940 |
10,967 |
||
|
Payment of restricted contract funds |
(3,962) |
(20,550) |
||
|
Debt issuance costs |
— |
(4,776) |
||
|
Payments of principal portion of finance leases |
(1,183) |
— |
||
|
Proceeds from exercise of options |
278 |
194 |
||
|
Dividends paid |
(5,271) |
(5,280) |
||
|
Net payments for stock issuances and buybacks |
(20,588) |
(20,778) |
||
|
Payments on business acquisition liabilities |
— |
(121) |
||
|
Net Cash Provided by (Used in) Financing Activities |
24,247 |
(9,074) |
||
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
179 |
(1,189) |
||
|
Decrease in Cash, Cash Equivalents, and Restricted Cash |
(1,498) |
(11,969) |
||
|
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period |
12,968 |
20,433 |
||
|
Cash, Cash Equivalents, and Restricted Cash, End of Period |
$ 11,470 |
$ 8,464 |
||
|
Supplemental Disclosure of Cash Flow Information |
||||
|
Cash paid during the period for: |
||||
|
Interest |
$ 19,129 |
$ 6,473 |
||
|
Income taxes |
$ 8,450 |
$ 12,373 |
||
|
Non-cash investing and financing transactions: |
||||
|
Tenant improvements funded by lessor |
$ — |
$ 20,243 |
||
|
|
||||||||
|
Supplemental Schedule (13)(14) |
||||||||
|
Three Months Ended |
Six Months Ended |
|||||||
|
|
|
|||||||
|
Client Markets: |
2023 |
2022 |
2023 |
2022 |
||||
|
Energy, environment, infrastructure, and disaster recovery |
41 % |
41 % |
40 % |
41 % |
||||
|
Health and social programs |
41 % |
37 % |
42 % |
38 % |
||||
|
Security and other civilian & commercial |
18 % |
22 % |
18 % |
21 % |
||||
|
Total |
100 % |
100 % |
100 % |
100 % |
||||
|
Three Months Ended |
Six Months Ended |
|||||||
|
|
|
|||||||
|
Client Type: |
2023 |
2022 |
2023 |
2022 |
||||
|
|
55 % |
53 % |
55 % |
53 % |
||||
|
|
16 % |
15 % |
16 % |
15 % |
||||
|
International government |
5 % |
7 % |
5 % |
7 % |
||||
|
Total Government |
76 % |
75 % |
76 % |
75 % |
||||
|
Commercial |
24 % |
25 % |
24 % |
25 % |
||||
|
Total |
100 % |
100 % |
100 % |
100 % |
||||
|
Three Months Ended |
Six Months Ended |
|||||||
|
|
|
|||||||
|
Contract Mix: |
2023 |
2022 |
2023 |
2022 |
||||
|
Time-and-materials |
42 % |
40 % |
42 % |
40 % |
||||
|
Fixed-price |
45 % |
44 % |
45 % |
44 % |
||||
|
Cost-based |
13 % |
16 % |
13 % |
16 % |
||||
|
Total |
100 % |
100 % |
100 % |
100 % |
||||
|
(13) As is shown in the supplemental schedule, we track revenue by key metrics that provide useful information about the nature of our operations. Client markets provide insight into the breadth of our expertise. Client type is an indicator of the diversity of our client base. Revenue by contract mix provides insight in terms of the degree of performance risk that we have assumed. |
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|
(14) During the first quarter of 2023, we re-aligned our client markets from four to three and reclassified the 2022 percentages to conform to the current presentation. Certain immaterial revenue percentages in the prior year have also been reclassified due to minor adjustments and reclassification. |
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SOURCE ICF
