UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 26, 2019

 

ICF International, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (703) 934-3000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

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Item 2.02 Results of Operations and Financial Condition

On February 26, 2019, ICF International, Inc. (the “Company”) announced its financial results for the fourth quarter and full year ended December 31, 2018.  The press release containing this announcement is attached hereto as Exhibit 99.1.

 

The information contained in this report, including Exhibit 99.1, is considered to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section.  The information in this report shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

The release contains forward-looking statements regarding the Company and includes a cautionary statement identifying important factors that could cause actual result to differ materially from those anticipated.

Item 8.01 Other Events

On February 26, 2019, the Company's Board of Directors declared a quarterly dividend in an amount equal to $0.14 per share. This quarterly cash dividend will be paid on April 16, 2019 to stockholders of record as of the close of business on March 29, 2019.

The cash dividend policy and the payment of future cash dividends under that policy will be made at the discretion of the Company's Board of Directors and will depend on earnings, operating and financial conditions, capital requirements, and other factors deemed relevant by the Board, including the applicable requirements of the Delaware General Corporation Law and the best interests of the Company’s stockholders.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

 

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Exhibit Index

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Exhibit 99.1

 

NEWS RELEASE

ICF Reports Fourth Quarter and Full Year 2018 Results

 

Fourth Quarter Highlights:

 

Full Year Highlights:

 

2019 Guidance:

 

FOR IMMEDIATE RELEASE

Investor Contacts:

Lynn Morgen, ADVISIRY PARTNERS, lynn.morgen@advisiry.com +1.212.750.5800

David Gold, ADVISIRY PARTNERS, david.gold@advisiry.com +1.212.750.5800

Company Information Contact:

Lauren Dyke, ICF, lauren.dyke@ICF.com +1.571.373.5577

 

FAIRFAX, Va.— Feb. 26, 2019-- ICF (NASDAQ:ICFI), a global consulting and digital services provider, reported results for the fourth quarter and full year ended December 31, 2018.

 

¹ Non-GAAP EPS, Service Revenue, EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin on Service Revenue 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 statement of operations but are not indicative of ongoing performance and have been presented net of applicable U.S. GAAP taxes. The presentation of non-GAAP measurements may not be comparable to other similarly titled measures used by other companies.

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“Fourth quarter results represented a strong finish to a record year for ICF and demonstrated the strength of the growth drivers that will continue in 2019,” said Sudhakar Kesavan, Chairman and Chief Executive Officer.

“Revenue growth in the fourth quarter was broad-based, across each of our client categories. Revenue from government clients increased 22 percent, driven by our disaster recovery work for state and local government clients. Revenue from commercial clients increased 12 percent from the 2017 fourth quarter, reflecting positive comparisons in both marketing services and energy markets, which together comprised over 90 percent of ICF’s commercial revenue this quarter.

“On a consolidated basis, we delivered 10 percent service revenue¹ growth in the fourth quarter, which together with a favorable business mix and higher utilization drove a 26 percent increase in adjusted EBITDA¹, and an exceptional adjusted EBITDA to service revenue margin of 16.5 percent.

“Additionally, this was a solid quarter of new contract awards for ICF following a record third quarter, bringing the value of contracts won in 2018 to $1.82 billion, equivalent to a book-to-bill ratio of 1.4.  At the same time, our year-end business development pipeline increased to over $5.8 billion, representing a year-over-year increase of 38 percent,” Mr. Kesavan noted.  

Fourth Quarter 2018 Results

 

Fourth quarter 2018 total revenue was $377.9 million, representing 17.7 percent growth over the $321.2 million reported in the fourth quarter of 2017. Service revenue increased 10.0 percent year-over-year to $239.6 million, from $217.8 million. Net income amounted to $18.7 million in the 2018 fourth quarter, or $0.97 per diluted share, inclusive of $0.09 of tax-effected special charges, which included $0.05 for a reserve related to the bankruptcy of Pacific Gas & Electric. The 2018 fourth quarter effective tax rate was higher than anticipated primarily due to valuation allowances of foreign tax credits.  In the 2017 fourth quarter, net income was $27.1 million, or $1.41 per diluted share, inclusive of a one-time benefit of $0.85 per diluted share in connection with the Tax Cuts and Jobs Act and $0.13 of tax-effected special charges.

 

Non-GAAP EPS increased 50.0 percent to $1.17 per share from $0.78 per share in 2017. EBITDA¹ was $36.9 million, up 36.1 percent from $27.1 million reported in the fourth quarter of 2017.  Adjusted EBITDA was $39.4 million, 25.5 percent above the $31.4 million reported in the 2017 fourth quarter. Fourth quarter 2018 adjusted EBITDA margin on service revenue was 16.5 percent compared to 14.4 percent in the 2017 fourth quarter.

 

Full Year 2018 Results

 

For 2018, total revenue amounted to $1.34 billion, representing 8.9 percent growth over the $1.23 billion reported for full year 2017. Service revenue increased 4.7 percent year-over-year to $925.8 million, from $884.2 million in 2017. Full year 2018 net income amounted to $61.4 million, or $3.18 per diluted share, inclusive of $0.17 of tax-effected special charges, which included $0.05 for a reserve related to the bankruptcy of Pacific Gas & Electric. This compares to net income of $62.9 million, or $3.27 per diluted share for last year, inclusive of $0.84 for a one-time tax benefit and $0.24 of tax-effected special charges.

 

Non-GAAP EPS increased 23.5 percent year-over-year to $3.73 per share from $3.02 per share. EBITDA was $119.5 million, up 7.6 percent from $111.0 million reported in 2017. Adjusted EBITDA was $123.8 million, a 5.0 percent increase over $117.9 million in 2017. The 2018 adjusted EBITDA margin on service revenue was 13.4 percent, as compared to 13.3 percent reported in 2017.

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Backlog and New Business Awards

 

Total backlog was $2.4 billion at the end of the fourth quarter of 2018. Funded backlog was $1.1 billion, or approximately 48 percent of the total backlog. The total value of contracts awarded in the 2018 fourth quarter was $285.8 million.  For full year 2018, contract awards were $1.82 billion, representing a book-to-bill ratio of 1.4.

 

Government Revenue Fourth Quarter 2018 Highlights

 

Revenue from government clients was $226.0 million, up 21.7 percent year-over-year.

 

 

Key Government Contracts Awarded in the Fourth Quarter

 

ICF was awarded more than 80 U.S. federal contracts and task orders and more than 250 additional contracts from U.S. state and local and international governments with an aggregate value of $156.4 million. Year-to-date government awards totaled $1.36 billion. Awards won in the fourth quarter included:  

 

 

Select other government contract and task order wins with a value greater than $2 million included: ongoing technical assistance services for the U.S. Department of Education’s Appalachia Regional Comprehensive Center; program support services for the responsible fatherhood clearinghouse of the Office of Family Assistance; and analysis and planning services for a western U.S. water resources board.

Commercial Revenue Fourth Quarter 2018 Highlights

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Key Commercial Contracts Awarded in the Fourth Quarter

 

Commercial sales were $129.3 million in the fourth quarter of 2018 and $464.5 million year-to-date.  ICF was awarded more than 650 commercial projects globally during the fourth quarter including:

 

In Energy Markets:

 

In Marketing Services:

          

Select other commercial contract and task order wins with a value of more than $1 million included: loyalty program services for two hospitality chains; ongoing support for residential energy efficiency programs for a utility in the midwestern U.S.; and program support services for a non-road electrification program for a southeastern U.S. utility.

 

Dividend Declaration

 

On February 26, 2019, ICF declared a quarterly cash dividend of $0.14 per share, payable on April 16, 2019 to shareholders of record on March 29, 2019.

 

2018 Recognitions

ICF received several important recognitions in 2018:

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Summary and Outlook

 

“Looking ahead, we have strong visibility into 2019 based on our existing contract backlog. We expect the catalysts that benefitted our 2018 performance to continue to drive significant growth and further margin expansion in 2019. Each of our client categories is positioned for year-over-year progress in 2019. In government markets, ICF’s domain expertise and cross-cutting implementation skills align with federal agency spending priorities and funding appropriated for post-hurricane housing recovery. In commercial markets, we have a strong pipeline of energy efficiency programs and continue to build our distributed energy and resiliency consulting services. Additionally, we have substantial opportunities to further leverage our commercial marketing services and engagement capabilities broadly across our domestic and international client sets.

 

“For full year 2019, we expect revenue of $1.45 billion to $1.50 billion. This guidance includes the impact of the partial government shutdown that took place in January 2019 and affected several of ICF’s federal agency clients. The Company expects to re-capture the approximately $3 million in lost revenue due to the shutdown throughout 2019 but will absorb the related operating expenses, which are expected to impact diluted EPS by $0.05 in the first quarter. GAAP earnings per diluted share are expected to be in the range of $3.75 to $3.95, exclusive of any special charges. Non-GAAP diluted EPS is expected to range from $4.05 to $4.25. Per share guidance is based on a weighted average number of shares outstanding of 19.3 million. Operating cash flow, which was slightly below our 2018 guidance due to timing issues, is projected to be in the range of $100 million to $120 million for 2019. Full year 2019 guidance does not include any significant new disaster recovery-related contract wins that might occur,” concluded Mr. Kesavan.

 

 

 

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About ICF

ICF (NASDAQ:ICFI) is a global consulting services company with over 5,500 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 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.

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ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

 

 

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ICF International, Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures ⁽²⁾

(in thousands, except per share amounts)

 

 

⁽²⁾ These tables provide reconciliations of non-GAAP financial measures to the most applicable U.S. 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 U.S. 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 equal to Direct Costs minus Direct Labor and Fringe Costs.

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⁽⁴⁾ Special charges related to acquisitions: These costs are mainly related to closed and anticipated-to-close acquisitions, consisting primarily of consultants and other outside party costs and an increase in the contingent consideration liability.  The amortization of deferred consideration payments, discounted as part of the acquisition, are included in the calculation of non-GAAP earnings per share.

⁽⁵⁾ Special charges related to severance for staff realignment:  These costs are mainly due to involuntary employee termination benefits for Company officers or groups of employees who have been terminated as part of a consolidation or reorganization.

⁽⁶⁾ Special charges related to facilities consolidations and office closures: These costs are exit costs associated with terminated leases or full office closures. These 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.

⁽⁷⁾ Special charges due to additional cash bonus expense: In response to the Tax Act that was passed in December 2017 and took effect in 2018, we increased the portion of bonuses that will be paid in cash, which increased the amount that can be deducted for income tax purposes for 2017.

⁽⁸⁾ Special charge related bad debt reserve:  This cost is related to the January 2019 bankruptcy filing of a utility client.

⁽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 29.8% and 25.9% for the quarter and the year ended December 31, 2018, respectively, and 41.1% and 37.0%, prior to the adjustments for changes in the tax rate under the new tax regulations, for the quarter and the year ended December 31, 2017, respectively.

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ICF International, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share amounts)

 

 

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ICF International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

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ICF International, Inc. and Subsidiaries

Supplemental Schedule ^(11)(12)

 

 

⁽¹¹⁾ As is shown in the supplemental schedule, we track revenue by key metrics (including client markets and client type) that provide useful information about the nature of our operations. The client markets metric provides insight into the breadth of our expertise while the client type metric is an indicator of the diversity of our client base.

⁽¹²⁾ Certain immaterial revenue percentages in the prior year have been reclassified due to minor adjustments and reclassification within contract mix.

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