Third Quarter Highlights
- Total Revenue was
$305 Million , Supported by 4 Percent Year-over-Year Growth in Commercial Revenue - Diluted EPS was
$0.72 ; Non-GAAP EPS¹ Was$0.83 - EBITDA¹ Margin on Revenue was 10.1 Percent; EBITDA Margin on Service Revenue¹ was 13.9 Percent
- Contract Awards Totaled
$401 Million ; Trailing Twelve Month Contract Awards were$1.29 Billion , Representing a Book-to-Bill Ratio of 1.1 - Operating Cash Flow Reached
$70 Million Year-to-Date, up 21.6 Percent Year-over-Year
Third Quarter 2017 Results
“Third quarter results set the stage for us to achieve the full year 2017 revenue, earnings and cash flow guidance we provided at the beginning of this year,” said
“Efficient program performance and staff utilization, together with benefits from ongoing cost reduction initiatives, drove solid EBITDA performance in the third quarter, resulting in EBITDA margins of 10.1 percent and 13.9 percent on total and service revenue, respectively.
“Third quarter revenue was stable with last year’s levels even with one less working day, and year-to-date revenue increased 1.4 percent. In this year’s third quarter we experienced delays in pass-through revenue on several government contracts, which we expect to partially recapture in the fourth quarter. Due to the addition of these and other pass-through revenue, we expect to see a shift in the historical seasonality of ICF’s revenue trends this year, with fourth quarter revenue sequentially above third quarter levels.
“As expected, revenue from commercial clients continued to increase, driven by our energy markets work, and accounted for over 36 percent of third-quarter revenue. Government revenue was modestly below year-ago levels primarily as a result of the delay of pass-through revenue to the fourth quarter and into 2018. Except for the impact of lower pass-through activity, federal government revenue was approximately flat year-on-year. Strong double-digit revenue growth from international government clients more than offset the decline in state and local government revenue, which resulted from temporary delays in certain environmental and infrastructure projects in
“We continued to see sequential improvement in contract award activity in the third quarter, although as expected with the transition to the new administration, the seasonal trajectory in federal government contract activity associated with the government year-end was muted. Our current trailing twelve month book-to-bill ratio is at 1.1, and at the end of the third quarter funded backlog was 48 percent of total backlog. ICF’s business development pipeline was over
“Additionally, in the wake of Hurricanes Harvey, Irma and Maria, we were awarded two IDIQ contracts by state and local agencies in October that represent vehicles through which ICF will bid on task orders that fall within our area of housing recovery expertise. We expect additional RFPs to be released for support of CDBG-funded housing recovery programs at the state, county and local levels in
Third quarter 2017 total revenue was
Backlog and New Business Awards
Total backlog was
Government Business Third Quarter 2017 Highlights
- U.S. federal government revenue was
$142.3 million , a 4.9 percent decline due to lower pass-through revenue that was pushed out into the fourth quarter and 2018. Federal government revenue accounted for 47 percent of total revenue, compared to 49 percent of total revenue in the third quarter of 2016. - U.S. state and local government revenue decreased 11 percent year-on-year to
$29.8 million due to temporary project delays and accounted for 10 percent of total revenue, compared to 11 percent of total revenue in the 2016 third quarter. - International government revenue increased 31 percent year-on-year, continuing its positive momentum, and accounted for 7 percent of total revenue, compared to 5 percent of total revenue in the 2016 third quarter.
Key Government Contracts Awarded in the Third Quarter
ICF was awarded more than 150 U.S. federal government contracts and task orders and more than 200 additional contracts from state and local and international governments. Some of the largest awards included:
- Strategic communications: A re-compete blank purchase agreement with a ceiling of
$50 million with theNational Cancer Institute to provide biomedical informatics services, communications, and content. - Program support: A single-award indefinite-delivery, indefinite quantity re-compete contract with a ceiling of
$25 million with the U.S. Department of Health and Human Services’ (HHS) Assistant Secretary for Preparedness and Response (ASPR) to continue the development and operation of the agency’s information gateway and technical assistance center for healthcare system preparedness and response. - Program management and communications: A contract with a ceiling of
$20.7 million with theU.S. Department of Interior Bureau of Reclamation to provide program management, compliance documentation, modeling, and a variety of communications support for the long-term operation of California’sCentral Valley Project and State Water Project. - Strategic communications: A re-compete contract with a ceiling of
$20 million with theNational Cancer Institute to provide communications services for theDivision of Cancer Control and Population Sciences . - Survey and program support: A re-compete task order with a value of more than
$13 million with theCenters for Disease Control to continue to administer theNational Youth Tobacco Survey . - Program support: A task order with a value of
$12.6 million with theU.S. Department of Defense Air Force Air Mobility Command to provide support to the Enterprise Learning Office. - Program support: A contract with a value of
$9.8 million with theU.S. Postal Service to provide customer registration program support. - Program support: A task order with a value of
$9.2 million with the CDC Cancer Surveillance system to collect, process, analyze, and disseminate cancer incidence data.
Other government contract wins with a value of at least
Commercial Business Third Quarter 2017 Highlights
- Commercial revenue was
$110.6 million , 4.3 percent above the$106.1 million in last year’s third quarter. Commercial revenue accounted for 36 percent of total revenue, compared to 35 percent of total revenue in the 2016 third quarter. - Energy markets, which include energy efficiency programs, represented 40 percent of commercial revenue. Marketing services accounted for 40 percent of commercial revenue.
Key Commercial Contracts Awarded in the Third Quarter
Commercial sales were
Energy Markets
- Four task orders with a combined value of
$17.9 million with a utility in the southeastern U.S. to provide marketing services for its energy efficiency programs. - A contract with a ceiling of
$8.3 million with an eastern U.S. utility to provide visual inspections and simple energy efficiency measures to its low- and moderate-income customers. - Two contracts with a combined value of
$2.4 million with a wind energy company to prepare an environmental impact statement and master plan for a wind energy development project.
Marketing Services
- Multiple contracts and modifications with a combined value of
$27.3 million with a health insurance company to provide marketing services for its programs. - Multiple contracts and task orders with a combined value of
$2.6 million with a health insurance company to provide program management support.
Other commercial contract and task order wins which were at least
Summary and Outlook
“ICF’s year-to-date results reflect solid performance and represents our ability to capture growth across our diversified client set.
“Based on year-to-date results and current visibility, we have narrowed our full year 2017 guidance ranges. We expect revenue to range from
“Looking ahead to 2018, we believe that ICF’s government business is well positioned to support key federal agencies where spending is likely to remain stable or increase compared to fiscal 2017 levels, to assist state and local jurisdictions with post-hurricane housing recovery, and to further drive international revenue growth. On the commercial side, we expect energy markets to continue to grow thanks to contracts won and a robust business development pipeline, and commercial marketing services to build on positive year-to-date business development momentum and success in winning integrated contracts,” Mr. Kesavan concluded.
About ICF
ICF is a global consulting services company with over 5,000 specialized experts, 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 are included in the "Risk Factors" section of our securities filings with the
1 Non-GAAP EPS, Service Revenue, 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. EBITDA margin percent is calculated by dividing the non-GAAP measure by the corresponding revenue.
| ICF International, Inc. and Subsidiaries | ||||||||||||||||
| Consolidated Statements of Comprehensive Income | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue | $ | 305,301 | $ | 306,520 | $ | 907,988 | $ | 895,538 | ||||||||
| Direct Costs | 189,992 | 191,310 | 564,495 | 562,697 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Indirect and selling expenses | 84,558 | 84,193 | 259,600 | 250,393 | ||||||||||||
| Depreciation and amortization | 4,613 | 4,130 | 13,431 | 12,233 | ||||||||||||
| Amortization of intangible assets | 2,742 | 3,111 | 8,225 | 9,387 | ||||||||||||
| Total operating costs and expenses | 91,913 | 91,434 | 281,256 | 272,013 | ||||||||||||
| Operating Income | 23,396 | 23,776 | 62,237 | 60,828 | ||||||||||||
| Interest expense | (2,175 | ) | (2,407 | ) | (6,663 | ) | (7,312 | ) | ||||||||
| Other (expense) income | (311 | ) | 732 | 24 | 950 | |||||||||||
| Income before income taxes | 20,910 | 22,101 | 55,598 | 54,466 | ||||||||||||
| Provision for income taxes | 7,218 | 8,664 | 19,792 | 20,555 | ||||||||||||
| Net income | $ | 13,692 | $ | 13,437 | $ | 35,806 | $ | 33,911 | ||||||||
| Earnings per Share: | ||||||||||||||||
| Basic | $ | 0.73 | $ | 0.71 | $ | 1.90 | $ | 1.79 | ||||||||
| Diluted | $ | 0.72 | $ | 0.70 | $ | 1.86 | $ | 1.75 | ||||||||
| Weighted-average Shares: | ||||||||||||||||
| Basic | 18,666 | 18,965 | 18,807 | 18,989 | ||||||||||||
| Diluted | 19,024 | 19,329 | 19,218 | 19,345 | ||||||||||||
| Other comprehensive income (loss), net of tax | 558 | (165 | ) | 3,030 | (3,108 | ) | ||||||||||
| Comprehensive income, net of tax | $ | 14,250 | $ | 13,272 | $ | 38,836 | $ | 30,803 | ||||||||
| ICF International, Inc. and Subsidiaries | ||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Three months ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Reconciliation of Service Revenue | ||||||||||||||||
| Revenue | $ | 305,301 | $ | 306,520 | $ | 907,988 | $ | 895,538 | ||||||||
| Subcontractor and Other Direct Costs | (83,534 | ) | (83,346 | ) | (241,514 | ) | (237,567 | ) | ||||||||
| Service Revenue | $ | 221,767 | $ | 223,174 | $ | 666,474 | $ | 657,971 | ||||||||
Reconciliation of EBITDA and Adjusted EBITDA | ||||||||||||||||
| Net Income | $ | 13,692 | $ | 13,437 | $ | 35,806 | $ | 33,911 | ||||||||
| Other expense (income) | 311 | (732 | ) | (24 | ) | (950 | ) | |||||||||
| Interest expense | 2,175 | 2,407 | 6,663 | 7,312 | ||||||||||||
| Provision for income taxes | 7,218 | 8,664 | 19,792 | 20,555 | ||||||||||||
| Depreciation and amortization | 7,355 | 7,241 | 21,656 | 21,620 | ||||||||||||
| EBITDA | 30,751 | 31,017 | 83,893 | 82,448 | ||||||||||||
| Special charges related to severance for staff realignment (2) | 264 | 389 | 841 | 1,475 | ||||||||||||
| Special charges related to facility consolidations and office closures | 2 | 53 | 1,721 | 108 | ||||||||||||
| Adjusted EBITDA | $ | 31,017 | $ | 31,459 | $ | 86,455 | $ | 84,031 | ||||||||
| EBITDA Margin Percent on Revenue (3) | 10.1 | % | 10.1 | % | 9.2 | % | 9.2 | % | ||||||||
| EBITDA Margin Percent on Service Revenue (3) | 13.9 | % | 13.9 | % | 12.6 | % | 12.5 | % | ||||||||
| Adjusted EBITDA Margin Percent on Revenue (3) | 10.2 | % | 10.3 | % | 9.5 | % | 9.4 | % | ||||||||
| Adjusted EBITDA Margin Percent on Service Revenue (3) | 14.0 | % | 14.1 | % | 13.0 | % | 12.8 | % | ||||||||
Reconciliation of Non-GAAP EPS | ||||||||||||||||
| Diluted EPS | $ | 0.72 | $ | 0.70 | $ | 1.86 | $ | 1.75 | ||||||||
| Special charges related to severance for staff realignment | 0.01 | $ | 0.02 | 0.04 | 0.08 | |||||||||||
| Special charges related to facility consolidations and office closures | 0.01 | — | 0.11 | 0.01 | ||||||||||||
| Amortization of intangibles | 0.14 | $ | 0.16 | 0.43 | 0.49 | |||||||||||
| Income tax effects (4) | (0.05 | ) | $ | (0.07 | ) | (0.20 | ) | (0.22 | ) | |||||||
| Non-GAAP EPS | $ | 0.83 | $ | 0.81 | $ | 2.24 | $ | 2.11 | ||||||||
| (2) Special charges related to severance were for an unplanned reduction in workforce of senior management in the third quarter of 2016 and the second and third quarter of 2017, and international staff realignment in the second quarter of 2016. |
| (3) EBITDA Margin Percent and Adjusted EBITDA Margin Percent were calculated by dividing the non-GAAP measures by the corresponding revenue. |
| (4) Income tax effects were calculated using an effective U.S. GAAP tax rate of 34.5% and 39.2% for the third quarter of fiscal year 2017 and 2016, respectively, and an effective tax rate of 35.6% and 37.7% for the first nine months of fiscal year 2017 and 2016, respectively. |
| ICF International, Inc. and Subsidiaries | ||||||||
| Consolidated Balance Sheets | ||||||||
| (in thousands, except share and per share amounts) | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 6,485 | $ | 6,042 | ||||
| Contract receivables, net | 288,060 | 281,365 | ||||||
| Prepaid expenses and other | 12,902 | 11,724 | ||||||
| Income tax receivable | 1,598 | — | ||||||
| Total current assets | 309,045 | 299,131 | ||||||
| Total property and equipment, net | 36,027 | 40,484 | ||||||
| Other assets: | ||||||||
| Goodwill | 685,922 | 683,683 | ||||||
| Other intangible assets, net | 37,971 | 46,129 | ||||||
| Restricted cash | 1,251 | 1,843 | ||||||
| Other assets | 17,431 | 14,301 | ||||||
| Total Assets | $ | 1,087,647 | $ | 1,085,571 | ||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 62,604 | $ | 70,586 | ||||
| Accrued salaries and benefits | 54,807 | 39,763 | ||||||
| Accrued expenses and other current liabilities | 44,377 | 52,631 | ||||||
| Deferred revenue | 34,485 | 29,394 | ||||||
| Income tax payable | — | 106 | ||||||
| Total current liabilities | 196,273 | 192,480 | ||||||
| Long-term liabilities: | ||||||||
| Long-term debt | 230,080 | 259,389 | ||||||
| Deferred rent | 14,970 | 15,600 | ||||||
| Deferred income taxes | 47,160 | 39,114 | ||||||
| Other | 14,378 | 12,984 | ||||||
| Total Liabilities | 502,861 | 519,567 | ||||||
| Commitments and Contingencies (Note 13) | ||||||||
| 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; 22,009,402 and 21,663,432 shares issued; 18,639,314 and 19,021,262 shares outstanding as of September 30, 2017 and December 31, 2016, respectively | 22 | 22 | ||||||
| Additional paid-in capital | 305,394 | 292,427 | ||||||
| Retained earnings | 407,696 | 371,890 | ||||||
| Treasury stock | (121,716 | ) | (88,695 | ) | ||||
| Accumulated other comprehensive loss | (6,610 | ) | (9,640 | ) | ||||
| Total Stockholders’ Equity | 584,786 | 566,004 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 1,087,647 | $ | 1,085,571 | ||||
| ICF International, Inc. and Subsidiaries | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 35,806 | $ | 33,911 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Non-cash equity compensation | 8,158 | 7,674 | ||||||
| Depreciation and amortization | 21,655 | 21,620 | ||||||
| Facilities consolidation reserve | 1,351 | — | ||||||
| Deferred taxes and other adjustments, net | 7,473 | 5,223 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Contract receivables, net | (3,876 | ) | (18,286 | ) | ||||
| Prepaid expenses and other assets | (2,835 | ) | (4,875 | ) | ||||
| Accounts payable | (8,822 | ) | (4,387 | ) | ||||
| Accrued salaries and benefits | 14,795 | 18,921 | ||||||
| Accrued expenses and other current liabilities | (9,996 | ) | 3,779 | |||||
| Deferred revenue | 4,470 | 160 | ||||||
| Income tax receivable and payable | (1,710 | ) | (5,567 | ) | ||||
| Other liabilities | 3,815 | (386 | ) | |||||
| Net cash provided by operating activities | 70,284 | 57,787 | ||||||
| Cash flows from investing activities | ||||||||
| Capital expenditures for property and equipment and capitalized software | (8,475 | ) | (10,654 | ) | ||||
| Payments for business acquisitions, net of cash received | (92 | ) | — | |||||
| Net cash used in investing activities | (8,567 | ) | (10,654 | ) | ||||
| Cash flows from financing activities | ||||||||
| Advances from working capital facilities | 460,875 | 360,947 | ||||||
| Payments on working capital facilities | (490,184 | ) | (391,285 | ) | ||||
| Payments on capital expenditure obligations | (3,394 | ) | (3,030 | ) | ||||
| Debt issue costs | (1,591 | ) | — | |||||
| Proceeds from exercise of options | 4,722 | 2,104 | ||||||
| Net payments for stockholder issuances and buybacks | (32,934 | ) | (13,408 | ) | ||||
| Net cash used in financing activities | (62,506 | ) | (44,672 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 640 | (596 | ) | |||||
| Increase in Cash, Cash Equivalents, and Restricted Cash | (149 | ) | 1,865 | |||||
| Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | 7,885 | 9,109 | ||||||
| Cash, Cash Equivalents, and Restricted Cash, End of Period | $ | 7,736 | $ | 10,974 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 6,042 | $ | 6,085 | ||||
| Income taxes | $ | 15,085 | $ | 15,137 | ||||
| ICF International, Inc. and Subsidiaries | |||||||||
| Supplemental Schedule | |||||||||
| Revenue by market | Three Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | ||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||
| Energy, environment, and infrastructure | 40% | 40% | 40% | 39% | |||||
| Health, education, and social programs | 42% | 42% | 42% | 43% | |||||
| Safety and security | 8% | 8% | 8% | 8% | |||||
| Consumer and financial | 10% | 10% | 10% | 10% | |||||
| Total | 100% | 100% | 100% | 100% | |||||
| Revenue by client | Three Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | ||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||
| U.S. federal government | 47% | 49% | 46% | 49% | |||||
| U.S. state and local government | 10% | 11% | 11% | 11% | |||||
| International government | 7% | 5% | 7% | 6% | |||||
| Government | 64% | 65% | 64% | 66% | |||||
| Commercial | 36% | 35% | 36% | 34% | |||||
| Total | 100% | 100% | 100% | 100% | |||||
| Revenue by contract | Three Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | ||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||
| Time-and-materials | 41% | 42% | 42% | 43% | |||||
| Fixed-price | 40% | 39% | 39% | 38% | |||||
| Cost-based | 19% | 19% | 19% | 19% | |||||
| Total | 100% | 100% | 100% | 100% | |||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006612/en/
Source: ICF
Investor Contacts:
MBS Value Partners
Lynn Morgen, 1-212-750-5800
lynn.morgen@mbsvalue.com
or
MBS Value Partners
David Gold, 1-212-750-5800
david.gold@mbsvalue.com
or
Company Information Contact:
ICF
Lauren Dyke, +1-571-373-5577
lauren.dyke@icf.com
