Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2022

2021

2022

2021

Revenue

$

467,777

$

394,060

$

1,304,355

$

1,165,063

Direct costs

307,295

254,175

834,358

732,903

Operating costs and expenses:

Indirect and selling expenses

118,290

99,940

350,145

316,100

Depreciation and amortization

5,297

4,665

15,198

14,663

Amortization of intangible assets

8,661

3,015

18,941

9,049

Total operating costs and expenses

132,248

107,620

384,284

339,812

Operating income

28,234

32,265

85,713

92,348

Interest expense

(7,474

)

(2,550

)

(14,274

)

(7,845

)

Other income (expense)

887

81

616

(382

)

Income before income taxes

21,647

29,796

72,055

84,121

Provision for income taxes

2,542

9,406

16,691

25,068

Net income

$

19,105

$

20,390

$

55,364

$

59,053

Earnings per Share:

Basic

$

1.01

$

1.08

$

2.94

$

3.13

Diluted

$

1.01

$

1.07

$

2.91

$

3.10

Weighted-average Shares:

Basic

18,826

18,865

18,806

18,864

Diluted

19,009

19,061

19,001

19,077

Cash dividends declared per common share

$

0.14

$

0.14

$

0.42

$

0.42

Other comprehensive (loss) income, net of tax

(1,555

)

(1,971

)

(3,107

)

1,241

Comprehensive income, net of tax

$

17,550

$

18,419

$

52,257

$

60,294

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share amounts)

2022

2021

2022

2021

Reconciliation of Service Revenue

Revenue

$

467,777

$

394,060

$

1,304,355

$

1,165,063

Subcontractor and other direct costs (3)

(132,348

)

(118,471

)

(358,037

)

(328,522

)

Service revenue

$

335,429

$

275,589

$

946,318

$

836,541

Reconciliation of EBITDA and Adjusted EBITDA

Net income

$

19,105

$

20,390

$

55,364

$

59,053

Other (income) expense

(887

)

(81

)

(616

)

382

Interest expense

7,474

2,550

14,274

7,845

Provision for income taxes

2,542

9,406

16,691

25,068

Depreciation and amortization

13,958

7,680

34,139

23,712

EBITDA

42,192

39,945

119,852

116,060

Adjustment related to impairment of long-lived assets(4)

—

35

—

338

Special charges related to acquisitions(5)

1,940

3,261

5,521

3,410

Special charges related to staff realignment(6)

3,757

335

5,168

1,144

Special charges related to facilities consolidations and office closures(7)

—

—

—

139

Special charges related to the transfer to our new corporate headquarters(8)

1,883

—

5,647

—

Special charges related to retirement of Executive Chair(9)

—

254

—

478

Total special charges and adjustments

7,580

3,885

16,336

5,509

Adjusted EBITDA

$

49,772

$

43,830

$

136,188

$

121,569

EBITDA Margin Percent on Revenue(10)

9.0

%

10.1

%

9.2

%

10.0

%

EBITDA Margin Percent on Service Revenue(10)

12.6

%

14.5

%

12.7

%

13.9

%

Adjusted EBITDA Margin Percent on Revenue(10)

10.6

%

11.1

%

10.4

%

10.4

%

Adjusted EBITDA Margin Percent on Service Revenue(10)

14.8

%

15.9

%

14.4

%

14.5

%

Reconciliation of Non-GAAP Diluted EPS

U.S. GAAP Diluted EPS

$

1.01

$

1.07

$

2.91

$

3.10

Adjustment related to impairment of long-lived assets

—

—

—

0.02

Special charges related to acquisitions

0.10

0.17

0.29

0.18

Special charges related to staff realignment

0.20

0.02

0.27

0.06

Special charges related to facilities consolidations and office closures

—

—

—

0.01

Special charges related to the transfer to our new corporate headquarters

0.10

—

0.30

—

Special charges related to retirement of Executive Chair

—

0.01

—

0.03

Amortization of intangibles

0.46

0.16

1.00

0.47

Income tax effects on amortization, special charges, and adjustments(11)

(0.26

)

(0.11

)

(0.54

)

(0.23

)

Non-GAAP Diluted EPS

$

1.61

$

1.32

$

4.23

$

3.64

(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 long-lived assets: We recognized impairment expense of $0.3 million in the first quarter of 2021 related to impairment of a right-of-use lease asset.

(5) Special charges related to acquisitions: These costs consist primarily of consultants and other outside third-party costs and integration costs associated with our acquisitions and/or potential acquisitions.

(6) Special charges related to staff realignment: 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) Special charges related to facilities consolidations and office closures: These costs are exit costs or gains associated with office lease contraction, terminated office 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.

(8) Special charges related to the transfer to our new corporate headquarters: These costs are additional rent as a result of us taking possession of our new corporate headquarters in Reston, Virginia, during the fourth quarter of 2021 while maintaining our current headquarters in Fairfax, Virginia. We intend to complete the transition to our new corporate headquarters by the end of 2022 when our Fairfax lease ends.

(9) Special charges related to retirement of the former Executive Chair: Our former Executive Chair retired effective December 31, 2020. These costs relate to unvested equity awards that, as a result of his employment agreement, the departing officer was able to maintain certain equity awards beyond the date of employment.

(10)  EBITDA Margin Percent and Adjusted EBITDA Margin Percent 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 discrete items, if any, of 29.4% and 31.6% for the three months ended September 30, 2022 and 2021, respectively, and 28.5% and 29.8% for the nine months ended September 30, 2022 and 2021, respectively.

(in thousands, except share and per share amounts)

September 30, 2022

December 31, 2021

ASSETS

Current Assets:

Cash and cash equivalents

$

8,483

$

8,254

Restricted cash

1,993

12,179

Contract receivables, net

282,271

237,684

Contract assets

196,811

137,867

Prepaid expenses and other assets

30,612

42,354

Income tax receivable

11,979

10,825

Total Current Assets

532,149

449,163

Property and Equipment, net

85,295

52,053

Other Assets:

Goodwill

1,190,450

1,046,760

Other intangible assets, net

135,932

79,645

Operating lease - right-of-use assets

163,438

177,417

Other assets

50,496

44,496

Total Assets

$

2,157,760

$

1,849,534

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current portion of long-term debt

$

20,500

$

10,000

Accounts payable

128,528

105,652

Contract liabilities

24,599

39,665

Operating lease liabilities - current

22,959

34,901

Finance lease liabilities - current

1,779

—

Accrued salaries and benefits

74,766

85,517

Accrued subcontractors and other direct costs

46,610

39,400

Accrued expenses and other current liabilities

52,249

61,496

Total Current Liabilities

371,990

376,631

Long-term Liabilities:

Long-term debt

681,197

411,605

Operating lease liabilities - non-current

187,481

191,805

Finance lease liabilities - non-current

13,270

—

Deferred income taxes

46,449

41,913

Other long-term liabilities

19,634

24,110

Total Liabilities

1,320,021

1,046,064

Commitments and Contingencies

Stockholders’ Equity:

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

—

—

Common stock, par value $.001; 70,000,000 shares authorized; 23,723,490 and 23,535,671 shares issued at September 30, 2022 and December 31, 2021, respectively; 18,833,688 and 18,876,490 shares outstanding at September 30, 2022 and December 31, 2021, respectively

23

23

Additional paid-in capital

396,962

384,984

Retained earnings

696,792

649,298

Treasury stock, 4,889,802 and 4,659,181 shares at September 30, 2022 and December 31, 2021, respectively

(241,896

)

(219,800

)

Accumulated other comprehensive loss

(14,142

)

(11,035

)

Total Stockholders’ Equity

837,739

803,470

Total Liabilities and Stockholders’ Equity

$

2,157,760

$

1,849,534

Nine Months Ended

September 30,

(in thousands)

2022

2021

Cash Flows from Operating Activities

Net income

$

55,364

$

59,053

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

Provision for credit losses

91

11,324

Deferred income taxes

6,023

4,062

Non-cash equity compensation

10,023

9,756

Depreciation and amortization

34,139

23,712

Facilities consolidation reserve

(236

)

(225

)

Amortization of debt issuance costs

940

463

Impairment of long-lived assets

—

339

Other adjustments, net

474

1,818

Changes in operating assets and liabilities, net of the effects of acquisitions:

Net contract assets and liabilities

(72,619

)

(16,381

)

Contract receivables

(31,770

)

(6,688

)

Prepaid expenses and other assets

(11,991

)

(9,224

)

Operating lease assets and liabilities, net

(1,305

)

(4,743

)

Accounts payable

23,394

5,653

Accrued salaries and benefits

(13,971

)

10,377

Accrued subcontractors and other direct costs

9,441

(36,436

)

Accrued expenses and other current liabilities

(476

)

17,002

Income tax receivable and payable

(1,667

)

(3,490

)

Other liabilities

742

(1,609

)

Net Cash Provided by Operating Activities

6,596

64,763

Cash Flows from Investing Activities

Capital expenditures for property and equipment and capitalized software

(17,323

)

(12,279

)

Payments for business acquisitions, net of cash acquired

(238,991

)

—

Proceeds from working capital adjustments related to prior business acquisition

2,911

—

Net Cash Used in Investing Activities

(253,403

)

(12,279

)

Cash Flows from Financing Activities

Advances from working capital facilities

1,358,335

559,830

Payments on working capital facilities

(1,074,888

)

(593,775

)

Receipt of restricted contract funds

13,525

194,504

Payment of restricted contract funds

(23,358

)

(227,700

)

Debt issue costs

(4,852

)

—

Proceeds from exercise of options

412

2,773

Dividends paid

(7,912

)

(7,923

)

Net payments for stock issuances and buybacks

(21,105

)

(18,695

)

Payments on business acquisition liabilities

(1,132

)

(682

)

Net Cash Provided by (Used in) Financing Activities

239,025

(91,668

)

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

(2,175

)

(501

)

Decrease in Cash, Cash Equivalents, and Restricted Cash

(9,957

)

(39,685

)

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

20,433

81,987

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

$

10,476

$

42,302

Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:

Interest

$

13,595

$

7,882

Income taxes

$

14,384

$

25,062

Non-cash investing and financing transactions:

Tenant improvements funded by lessor

$

20,253

$

—

Acquisition of property and equipment through finance lease

$

15,027

$

—

Revenue by client markets

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Energy, environment, and infrastructure

36

%

40

%

37

%

42

%

Health, education, and social programs

53

%

46

%

51

%

43

%

Safety and security

7

%

7

%

7

%

8

%

Consumer and financial

4

%

7

%

5

%

7

%

Total

100

%

100

%

100

%

100

%

Revenue by client type

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

U.S. federal government

58

%

50

%

55

%

48

%

U.S. state and local government

14

%

15

%

15

%

15

%

International government