Press Release

ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2019

2018

2019

2018

Revenue

$          373,918

$          332,968

$         1,081,889

$          960,063

Direct costs

238,158

213,060

689,160

608,451

Operating costs and expenses:

Indirect and selling expenses

100,130

88,960

298,099

269,029

Depreciation and amortization

5,035

4,210

15,392

12,724

Amortization of intangible assets

1,931

2,516

6,143

7,030

Total operating costs and expenses

107,096

95,686

319,634

288,783

Operating income

28,664

24,222

73,095

62,829

Interest expense

(2,824)

(2,240)

(8,211)

(6,073)

Other expense

(141)

(351)

(367)

(565)

Income before income taxes

25,699

21,631

64,517

56,191

Provision for income taxes

6,069

4,960

14,958

13,486

Net income

$            19,630

$            16,671

$              49,559

$            42,705

Earnings per Share:

Basic

$                1.04

$                0.88

$                  2.63

$                2.27

Diluted

$                1.02

$                0.86

$                  2.58

$                2.22

Weighted-average Shares:

Basic

18,799

18,873

18,810

18,783

Diluted

19,169

19,306

19,208

19,256

Cash dividends declared per common share

$                0.14

$                0.14

$                  0.42

$                0.42

Other comprehensive loss, net of tax

(3,281)

(568)

(5,851)

(2,276)

Comprehensive income, net of tax

$            16,349

$            16,103

$              43,708

$            40,429

ICF International, Inc. and Subsidiaries

Reconciliation of Non-GAAP financial measures⁽²⁾ 

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2019

2018

2019

2018

Reconciliation of Service Revenue

Revenue

$                  373,918

$                  332,968

$               1,081,889

$                  960,063

Subcontractor and other direct costs ⁽³⁾

(116,710)

(101,708)

(330,990)

(273,920)

Service revenue

$                  257,208

$                  231,260

$                  750,899

$                  686,143

Reconciliation of EBITDA and Adjusted EBITDA

Net income

$                    19,630

$                    16,671

$                    49,559

$                    42,705

Other expense 

141

351

367

565

Interest expense

2,824

2,240

8,211

6,073

Provision for income taxes

6,069

4,960

14,958

13,486

Depreciation and amortization

6,966

6,726

21,535

19,754

EBITDA

35,630

30,948

94,630

82,583

Adjustment related to impairment of intangible assets ⁽⁴⁾

—

—

1,728

—

Special charges related to acquisitions ⁽⁵⁾

—

507

—

613

Special charges related to severance for staff realignment ⁽⁶⁾

166

340

1,321

995

Special charges related to facilities consolidations, office closures, and our future corporate headquarters ⁽⁷⁾

194

—

263

—

Adjustment related to bad debt reserve ⁽⁸⁾

—

115

(782)

115

Total special charges

360

962

2,530

1,723

Adjusted EBITDA

$                    35,990

$                    31,910

$                    97,160

$                    84,306

EBITDA Margin Percent on Revenue ⁽⁹⁾

9.5%

9.3%

8.7%

8.6%

EBITDA Margin Percent on Service Revenue ⁽⁹⁾

13.9%

13.4%

12.6%

12.0%

Adjusted EBITDA Margin Percent on Revenue ⁽⁹⁾

9.6%

9.6%

9.0%

8.8%

Adjusted EBITDA Margin Percent on Service Revenue ⁽⁹⁾

14.0%

13.8%

12.9%

12.3%

Reconciliation of Non-GAAP Diluted EPS

Diluted EPS

$                        1.02

$                        0.86

$                        2.58

$                        2.22

Adjustment related to impairment of intangible assets

—

—

0.09

—

Special charges related to acquisitions

—

0.03

—

0.03

Special charges related to severance for staff realignment

0.01

0.02

0.07

0.05

Special charges related to facility consolidations, office closures, and our future corporate headquarters

0.01

0.01

0.06

0.01

Adjustment related to bad debt reserve

—

—

(0.04)

—

Amortization of intangibles

0.10

0.13

0.32

0.37

Income tax effects ⁽¹⁰⁾

(0.02)

(0.04)

(0.12)

(0.11)

Non-GAAP EPS

$                        1.12

$                        1.01

$                        2.96

$                        2.57

⁽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⁾Subcontractor and Other Direct Costs is Direct Costs excluding Direct Labor and Fringe Costs.

⁽⁴⁾Adjustment related to impairment of intangible assets: We recognized impairment expense of $1.7 million in the second quarter of 2019 related to intangible assets associated
with a historical business acquisition.

⁽⁵⁾Special charges related to acquisitions: These costs are mainly related to closed and anticipated-to-close acquisitions, consisting primarily of consultant and other outside
third-party costs and amortization of deferred consideration payments, discounted as part of the acquisition.

⁽⁶⁾ Special charges related to severance for staff realignment: These costs are mainly due to involuntary employee termination benefits for our officers and groups of employees
who have been notified that they will be terminated as part of a consolidation or reorganization.  

⁽⁷⁾ Special charges related to facility consolidations, office closures, and our future corporate headquarters: 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 continue to pay until the
contractual obligation is satisfied but with no economic benefit to us.  Additionally, we incurred one-time charges with respect to the execution of a new lease agreement for our
corporate headquarters.

⁽⁸⁾ Adjustment related to bad debt reserve: During 2018, we established a bad debt reserve for amounts due from a utility client that had filed for bankruptcy and included the
reserve as an adjustment due to its relative size. The adjustment reflects a favorable revision of our prior estimate of collectability based on a third party acquiring the receivables.

⁽⁹⁾ EBITDA Margin Percent and Adjusted EBITDA Margin Percent were calculated by dividing the non-GAAP measure by the corresponding revenue.

⁽¹⁰⁾ Income tax effects were calculated using an effective U.S. GAAP tax rate of 23.6% and 22.9% for the three months ended September 30, 2019 and 2018, respectively, and 23.2%
and 24.0% for the nine months ended September 30, 2019 and 2018, respectively.

ICF International, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

September 30, 2019

December 31, 2018

ASSETS

Current Assets:

Cash and cash equivalents

$                      7,452

$                    11,694

Contract receivables, net

269,368

230,966

Contract assets

153,055

126,688

Prepaid expenses and other assets

19,459

16,253

Income tax receivable

7,621

6,505

Total Current Assets

456,955

392,106

Property and Equipment, net

57,189

48,105

Other Assets:

Restricted cash - non-current

—

1,292

Goodwill

716,699

715,644

Other intangible assets, net

27,478

35,494

Operating lease - right-of-use assets

138,156

—

Other assets

23,939

21,221

Total Assets

$               1,420,416

$               1,213,862

LIABILITIES and STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$                    97,359

$                  102,599

Contract liabilities

32,086

33,494

Operating lease liabilities - current

30,935

—

Accrued salaries and benefits

67,163

44,103

Accrued subcontractors and other direct costs

40,507

58,791

Accrued expenses and other current liabilities

34,032

39,072

Total Current Liabilities

302,082

278,059

Long-term Liabilities:

Long-term debt

245,000

200,424

Operating lease liabilities - non-current

124,864

—

Deferred rent

—

13,938

Deferred income taxes

40,281

40,165

Other long-term liabilities

22,687

20,859

Total Liabilities

734,914

553,445

Contingencies (Note 16)

Stockholders' Equity:

Preferred stock, par value $.001; 5,000,000 shares authorized; none issued

—

—

Common stock, par value $.001; 70,000,000 shares authorized; 22,788,318 and 22,445,576 shares issued as of September 30, 2019 and December 31, 2018, respectively; 18,811,087 and 18,817,495 shares outstanding as of September 30, 2019 and December 31, 2018, respectively

23

22

Additional paid-in capital

340,626

326,208

Retained earnings

528,103

486,442

Treasury stock

(164,848)

(139,704)

Accumulated other comprehensive loss

(18,402)

(12,551)

Total Stockholders' Equity

685,502

660,417

Total Liabilities and Stockholders' Equity

$               1,420,416

$               1,213,862

ICF International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

 September 30, 

2019

2018

(in thousands)

Cash Flows from Operating Activities

Net income

$                    49,559

$                    42,705

Adjustments to reconcile net income to net cash provided by operating activities:

Bad debt expense

377

1,060

Deferred income taxes

1,089

3,176

Non-cash equity compensation

11,682

8,682

Depreciation and amortization

21,535

19,753

Facilities consolidation reserve

(204)

(193)

Amortization of debt issuance costs

380

385

Impairment of long-lived assets

1,728

—

Other adjustments, net

(1,110)

1,701

Changes in operating assets and liabilities:

Net contract assets and liabilities

(28,793)

(32,158)

Contract receivables

(39,711)

(25,110)

Prepaid expenses and other assets

(385)

(6,841)

Accounts payable

(5,052)

(5,882)

Accrued salaries and benefits

23,227

12,921

Accrued subcontractors and other direct costs

(16,895)

(7,897)

Accrued expenses and other current liabilities

(6,756)

3,602

Income tax receivable and payable

(4,134)

(5,535)

Other liabilities

(173)

(16)

Net Cash Provided by Operating Activities

6,364

10,353

Cash Flows from Investing Activities

Capital expenditures for property and equipment and capitalized software

(20,686)

(15,593)

Payments for business acquisitions, net of cash received

(3,569)

(22,847)

Net Cash Used in Investing Activities

(24,255)

(38,440)

Cash Flows from Financing Activities

Advances from working capital facilities

545,539

444,637

Payments on working capital facilities

(500,963)

(418,383)

Payments on capital expenditure obligations

(1,621)

(3,243)

Debt issue costs

—

(21)

Proceeds from exercise of options

1,883

5,842

Dividends paid

(7,906)

(5,269)

Net payments for stockholder issuances and buybacks

(24,301)

(12,399)

Net Cash Provided by Financing Activities

12,631

11,164

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

(274)

(253)

Decrease in Cash, Cash Equivalents, and Restricted Cash

(5,534)

(17,176)

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

12,986

24,266

Cash, Cash Equivalents, and Restricted Cash, End of Period

$                      7,452

$                      7,090

Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:

Interest

$                      7,581

$                      7,193

Income taxes

$                    18,061

$                    13,056

Non-cash investing and financing transactions:

Capital expenditure obligations

$                          —

$                      6,121

ICF International, Inc. and Subsidiaries

Supplemental Schedule⁽¹¹⁾

Revenue by client markets

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Energy, environment, and infrastructure

46%

44%

46%

42%

Health, education, and social programs

37%

38%

36%

40%

Safety and security

8%

9%

8%

8%

Consumer and financial services

9%

9%

10%

10%

Total

100%

100%

100%

100%

Revenue by client type

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

U.S. federal government

40%

42%

39%

43%

U.S. state and local government

19%

17%

19%

13%

International government

7%

8%

8%

9%

Government

66%

67%

66%

65%

Commercial

34%

33%

34%

35%

Total

100%

100%

100%

100%

Revenue by contract mix

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Time-and-materials

49%

44%

47%

42%

Fixed-price

36%

38%

38%

40%

Cost-based

15%

18%

15%

18%

Total

100%

100%

100%

100%

⁽¹¹⁾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.