ICF Reports First Quarter 2024 Results

May 2, 2024

-- Record First Quarter Results Represent a Strong Start to 2024 --

-- Re-affirms Full Year Guidance --

First Quarter Highlights: 

  • Revenue Increased 2% to $494 Million, Up 9% Excluding Divestitures
  • Net Income Was $27 Million and GAAP EPS1 Was $1.44, Up 66% Inclusive of Certain Quarter-Specific Benefits
  • Non-GAAP EPS1 Was $1.77, Up 25%
  • EBITDA1 Was $56.4 Million, Up 22%; Adjusted EBITDA1 Was $55.2 Million, Up 8%
  • Contract Awards Were $495 Million, Up 21% Year-on-Year for a TTM Book-to-Bill Ratio of 1.23

RESTON, Va., May 2, 2024 /PRNewswire/ -- ICF (NASDAQ: ICFI), a global consulting and technology services provider, reported results for the first quarter ended March 31, 2024. 

Commenting on the results, John Wasson, chair and chief executive officer, said, "This was a record first quarter for ICF. Revenues increased 2% year-on-year, however, adjusting for the divestiture of our commercial marketing business lines during 2023, first quarter revenue increased 9% year-over-year. This strong performance was led by robust growth in revenues from commercial energy clients and supported by solid revenue growth from government clients.

"ICF performed exceptionally well in our Energy, Environment, Infrastructure and Disaster Recovery client market, with revenues up 20% year-over-year, representing 45% of ICF's total first quarter revenues. In this market, we combine our deep domain expertise in energy efficiency, decarbonization, electrification, environmental and climate impacts, and disaster recovery and mitigation to provide comprehensive services and solutions to over 75 utility clients, as well as developers of renewable energy sources, energy companies, and federal, state and local and international government clients.

"The substantial increase in first quarter profitability was attributable to both recurring and quarter-specific factors. Revenue mix together with higher utilization, lower facility costs and our increased scale continued to drive improved margin performance. Additionally, margins benefited from the ramp-up of several recently awarded energy efficiency contracts, which are more profitable during the startup phase.

"This was another strong quarter of contract awards, which increased 21% from the year-ago quarter, maintaining our trailing twelve-month book-to-bill ratio of 1.2. Approximately 70% of our over $2.4 billion in contract awards over the last 12 months represented new business, demonstrating ICF's excellent positioning in growth areas within both our government and commercial client sets. Our business development pipeline remained at $9.7 billion at the end of the quarter, providing further confidence in our ability to sustain our high single-digit organic growth going forward."

First Quarter 2024 Results

First quarter 2024 total revenue was $494.4 million, a 2.3% increase from the $483.3 million reported in the first quarter of 2023, and up 8.7% from last year's first quarter revenues adjusted for the divestiture of our commercial marketing business lines. Subcontractor and other direct costs were 24.4% of total revenues compared to 27.3% in last year's first quarter. Operating income was $40.9 million, up 30.2% from $31.5 million, and operating margin on total revenue expanded to 8.3% from 6.5%. Net income totaled $27.3 million, and GAAP EPS was $1.44 per share, inclusive of a net benefit of $0.5 million, or $0.02 per share of tax-effected special charges. This compares to net income and GAAP EPS of $16.4 million, and $0.87, respectively, reported in the first quarter of 2023, which included $4.6 million, or $0.18 per share of tax-effected special charges. In the 2024 first quarter, the company's tax rate was 20.4% compared to 23.5% in the 2023 first quarter.

Non-GAAP EPS increased 24.6% to $1.77 per share, from the $1.42 per share reported in the comparable period in 2023. EBITDA was $56.4 million, 21.6% above the $46.4 million reported for the year-ago period. Adjusted EBITDA increased 8.2% to $55.2 million from $51.0 million for the comparable period in 2023.

Backlog and New Business 

Total backlog was $3.6 billion at the end of the first quarter of 2024. Funded backlog was $1.8 billion, or approximately 50% of the total backlog. The total value of contracts awarded in the 2024 first quarter was $495 million, and trailing twelve-month contract awards totaled $2.4 billion for a book-to-bill ratio of 1.23.

Government Revenue First Quarter 2024 Highlights 

Revenue from government clients was $376.4 million, up 3.5% year-over-year. 

  • U.S. federal government revenue was $274.2 million, an increase of 2.4% compared to the $267.7 million reported in the first quarter of 2023 and was impacted by a year-over-year decrease in subcontractor and other direct costs of approximately $5 million in the quarter. Federal government revenue accounted for 55.5% of total revenue, similar to 55.4% of total revenue in the first quarter of 2023.
  • U.S. state and local government revenue increased 2.2% to $76.9 million, from $75.2 million in the year-ago quarter. State and local government clients represented 15.6% of total revenue, unchanged from the first quarter of 2023.
  • International government revenue was $25.3 million, up 22.2% from the $20.7 million reported in the year-ago quarter. International government revenue represented 5.1% of total revenue, compared to 4.3% in the first quarter of 2023.

Key Government Contracts Awarded in the First Quarter 2024

Notable government contract awards won in the first quarter of 2024 included:

Health and Social Programs

  • A single-award indefinite delivery, indefinite quantity recompete contract with a ceiling of $75.0 million with the U.S. Environmental Protection Agency's Office of Research and Development to provide human health and environmental risk assessments.
  • A subcontract modification with a value of $6.6 million to continue to provide medical modeling simulation and training support to a branch of the U.S. Armed Forces.

IT Modernization

  • One new task order and one task order modification with a combined value of $17.0 million with a U.S. federal agency to continue to provide digital modernization services.
  • A new subcontract with a value of $8.1 million to provide enhancement, operations and maintenance services to further increase healthcare data sharing for the U.S. Centers for Medicare and Medicaid Services (CMS).
  • Multiple contract modifications and one new contract with a combined value of $21.7 million with CMS to continue to provide digital modernization services.

Disaster Management and Mitigation

  • A contract modification with a value of $8.9 million with a Southern U.S. state to continue to provide Federal Emergency Management Agency Public Assistance grants management services.

Climate, Energy and Environment

  • A recompete master framework contract with a ceiling of more than $20 million with a directorate general of the European Commission to provide consulting services related to climate policy.

Commercial Revenue First Quarter 2024 Highlights 

Commercial revenue was $118.1 million, compared to $119.6 million reported in the first quarter of 2023; up 29.3% compared to revenues of $91.3 million excluding divestitures in 2023. 

  • Energy markets revenue, which includes energy efficiency programs, increased 32.3% and represented 87.3% of commercial revenue.

Key Commercial Contracts Awarded in the First Quarter of 2024

Notable commercial awards won in the first quarter of 2024 included:

Energy Markets

  • A new contract with a Western U.S. utility to implement a first-of-its kind statewide wildfire and natural disaster resiliency rebuild program.
  • One recompete contract and one new contract with a Mid-Atlantic U.S. utility to provide energy efficiency program implementation services for its new and existing residential and commercial and industrial (C&I) programs.
  • One recompete contract and one new contract with a Mid-Atlantic U.S. utility to provide energy efficiency program implementation services for its new and existing residential and C&I programs.
  • A new subcontract to support the implementation of a beneficial electrification plan for a Midwestern U.S. utility.
  • A contract modification with a Mid-Atlantic U.S. utility to continue to provide energy efficiency program marketing services.
  • A subcontract extension to continue to support a residential building envelope program for a Midwestern U.S. utility.
  • A recompete contract with a Mid-Atlantic U.S. utility to continue to support its portfolio of existing energy efficiency programs.

Other Commercial

  • A new contract with a value of $13.0 million with a U.S. commercial client to implement an inspections solution to modernize its inspection process and establish an enterprise data solution to enable data insights and improve data management.

Dividend Declaration

On May 2, 2024, ICF declared a quarterly cash dividend of $0.14 per share, payable on July 12, 2024, to shareholders of record on June 7, 2024.

Summary and Outlook 

"ICF's robust first quarter performance supports our full year guidance and sets the stage for another year of substantial growth in 2024. Our energy efficiency and utility consulting, together with ICF's climate and infrastructure services continue to benefit from strong demand from commercial and government clients; our disaster management work is moving forward with new contract wins; and our key areas of focus in the federal government arena, namely public health and IT modernization/digital transformation provide us with significant long-term growth opportunities.

"Based on our strong backlog and current visibility, we are pleased to reaffirm our guidance for 2024. We expect 2024 organic revenues from continuing operations to range from $2.03 billion to $2.10 billion, representing year-on-year growth of 5.2% at the midpoint when compared to reported 2023 and 8.5% growth at the midpoint on continuing operations. EBITDA is expected to range from $220 million to $230 million, reflecting year-on-year growth of 14.2% at the midpoint. Our guidance range for GAAP EPS is $5.25 to $5.55, excluding special charges, and for Non-GAAP EPS is $6.60 to $6.90. Assuming similar margins to the rest of the business, the company's commercial marketing business lines are estimated to have contributed $0.20 of Non-GAAP EPS in 2023, which will not recur in 2024. We expect full year 2024 operating cash flow of approximately $155 million.

"We are proud that our work involves helping clients address many of the most challenging issues of the day. Our ability to attract and retain professionals who are committed to excellent execution and making a positive impact on society has been and remains critical to our success," Mr. Wasson concluded.

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. GAAP EPS refers to U.S. GAAP Diluted EPS. Non-GAAP EPS refers to Non-GAAP Diluted EPS. 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 U.S. GAAP taxes. The presentation of non-GAAP measurements may not be comparable to other similarly titled measures used by other companies.

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: 

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

ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)








Three Months Ended



March 31,

(in thousands, except per share amounts)  


2024


2023

Revenue


$                    494,436


$                  483,282

Direct costs


310,533


312,565

Operating costs and expenses:





Indirect and selling expenses


129,094


123,733

Depreciation and amortization


5,574


6,309

Amortization of intangible assets


8,291


9,224

Total operating costs and expenses


142,959


139,266

Operating income


40,944


31,451

Interest, net


(8,238)


(9,457)

Other income (expense)


1,630


(558)

Income before income taxes


34,336


21,436

Provision for income taxes


7,019


5,038

Net income


$                      27,317


$                    16,398






Earnings per Share:





Basic


$                          1.46


$                        0.87

Diluted


$                          1.44


$                        0.87






Weighted-average common shares outstanding:





Basic


18,757


18,779

Diluted


18,946


18,949






Cash dividends declared per common share


$                          0.14


$                        0.14






Other comprehensive income (loss), net of tax


684


(1,334)

Comprehensive income, net of tax


$                      28,001


$                    15,064

 

ICF International, Inc. and Subsidiaries

Reconciliation of Non-GAAP financial measures (2) 

(Unaudited)








Three Months Ended



March 31,

(in thousands, except per share amounts)


2024


2023

Reconciliation of Revenue, Adjusted for Impact of Exited Business 





Revenue


$                  494,436


$                  483,282

Less: Revenue from exited business (3)



(28,317)

Total Revenue, Adjusted for Impact of Exited Business


$                  494,436


$                  454,965






Reconciliation of EBITDA and Adjusted EBITDA (4)





Net income


$                    27,317


$                    16,398

Interest, net


8,238


9,457

Provision for income taxes


7,019


5,038

Depreciation and amortization


13,865


15,533

EBITDA 


56,439


46,426

Impairment of long-lived assets (5)



894

Acquisition and divestiture-related expenses (6)


66


803

Severance and other costs related to staff realignment (7)


365


2,495

Charges for facility consolidations and office closures (8)



359

Pre-tax gain from divestiture of a business (9)


(1,715)


Total Adjustments


(1,284)


4,551

Adjusted EBITDA


$                    55,155


$                    50,977






Net Income Margin Percent on Revenue (10)


5.5 %


3.4 %

EBITDA Margin Percent on Revenue (11)


11.4 %


9.6 %

Adjusted EBITDA Margin Percent on Revenue (11)


11.2 %


10.5 %






Reconciliation of Non-GAAP Diluted EPS (4)





U.S. GAAP Diluted EPS


$                        1.44


$                        0.87

Impairment of long-lived assets



0.04

Acquisition and divestiture-related expenses



0.04

Severance and other costs related to staff realignment


0.02


0.13

Expenses related to facility consolidations and office closures (12)


0.04


0.02

Pre-tax gain from divestiture of a business


(0.09)


Amortization of intangibles


0.44


0.49

Income tax effects of the adjustments (13)


(0.08)


(0.17)

Non-GAAP Diluted EPS


$                        1.77


$                        1.42


(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) Revenue from the exited U.K. commercial marketing business (June 30, 2023), U.S. commercial marketing business (September 11, 2023), and Canadian mobile text aggregation business (November 1, 2023). 






(4) Reconciliations of EBITDA, Adjusted EBITDA, and Non-GAAP Diluted EPS were calculated using numbers as reported in U.S. GAAP.






(5) Represents impairment of an intangible asset associated with the exit of our commercial marketing business in the United Kingdom in 2023.






(6) These are primarily third-party costs related to acquisitions and potential acquisitions, integration of acquisitions, and separation of discontinued businesses or divestitures.






(7) These costs are mainly due to involuntary employee termination benefits for our officers, and employees who have been notified that they will be terminated as part of a business reorganization or exit.






(8) These are exit costs associated with terminated leases or full office closures that we either (i) will continue to pay until the contractual obligations are satisfied but with no economic benefit to us, or (ii) paid upon termination and ceasing to use the leased facilities.






(9) Pre-tax gain resulting from the release of an escrow related to the 2023 divestiture of our U.S. commercial marketing business.






(10) Net Income Margin Percent on Revenue was calculated by dividing net income by revenue.






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






(12) These are exit costs related to actual office closures (previously included in Adjusted EBITDA) and accelerated depreciation related to fixed assets for planned office closures.






(13) Income tax effects were calculated using the effective tax rate, adjusted for discrete items, if any, of 20.4% and 23.5% for the three months ended March 31, 2024 and 2023, respectively.

 

ICF International, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)






(in thousands, except share and per share amounts)


March 31, 2024


December 31, 2023

ASSETS





Current Assets:





Cash and cash equivalents


$                        3,683


$                       6,361

Restricted cash


916


3,088

Contract receivables, net


202,246


205,484

Contract assets


230,412


201,832

Prepaid expenses and other assets


28,401


28,055

Income tax receivable



2,337

Total Current Assets


465,658


447,157

Property and Equipment, net


74,296


75,948

Other Assets:





Goodwill


1,219,031


1,219,476

Other intangible assets, net


86,613


94,904

Operating lease - right-of-use assets


128,356


132,807

Other assets


43,740


41,480

Total Assets


$                 2,017,694


$                2,011,772






LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:





Current portion of long-term debt


$                      26,000


$                     26,000

Accounts payable


119,285


134,503

Contract liabilities


22,099


21,997

Operating lease liabilities 


20,889


20,409

Finance lease liabilities


2,545


2,522

Accrued salaries and benefits


70,176


88,021

Accrued subcontractors and other direct costs


48,707


45,645

Accrued expenses and other current liabilities


82,966


79,129

Total Current Liabilities


392,667


418,226

Long-term Liabilities:





Long-term debt


448,748


404,407

Operating lease liabilities - non-current


170,575


175,460

Finance lease liabilities - non-current


13,227


13,874

Deferred income taxes


21,975


26,175

Other long-term liabilities


54,353


56,045

Total Liabilities


1,101,545


1,094,187






Commitments and Contingencies










Stockholders' Equity:





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



Common stock, par value $.001; 70,000,000 shares authorized; 24,110,071 and 23,982,132 shares
issued at March 31, 2024 and December 31, 2023, respectively; 18,754,762 and 18,845,521
shares outstanding at March 31, 2024 and December 31, 2023, respectively


24


24

Additional paid-in capital


425,160


421,502

Retained earnings


799,796


775,099

Treasury stock, 5,355,309 and 5,136,611 shares at March 31, 2024 and December 31, 2023
respectively


(297,630)


(267,155)

Accumulated other comprehensive loss


(11,201)


(11,885)

Total Stockholders' Equity


916,149


917,585

Total Liabilities and Stockholders' Equity


$                 2,017,694


$                2,011,772

 

ICF International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



Three Months Ended



March 31,

(in thousands)


2024


2023

Cash Flows from Operating Activities





Net income


$                    27,317


$                    16,398

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





Provision for credit losses


1,347


567

Deferred income taxes and unrecognized income tax benefits


(4,786)


2,187

Non-cash equity compensation


3,551


3,750

Depreciation and amortization


13,865


15,533

Gain on divestiture of a business


(1,715)


Other operating adjustments, net


46


393

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





Net contract assets and liabilities


(29,024)


(18,716)

Contract receivables


1,604


10,929

Prepaid expenses and other assets


(192)


15,353

Operating lease assets and liabilities, net


523


1,016

Accounts payable


(15,119)


(26,083)

Accrued salaries and benefits


(17,775)


(24,678)

Accrued subcontractors and other direct costs


3,303


(2,613)

Accrued expenses and other current liabilities


(3,988)


(14,688)

Income tax receivable and payable


11,375


3,192

Other liabilities


(333)


629

Net Cash Used in by Operating Activities


(10,001)


(16,831)






Cash Flows from Investing Activities





Payments for purchase of property and equipment and capitalized software


(5,226)


(6,441)

Payments for business acquisitions, net of cash acquired



(459)

Proceeds from divestiture of a business


1,715


Net Cash Used in Investing Activities


(3,511)


(6,900)






Cash Flows from Financing Activities





Advances from working capital facilities


355,877


334,995

Payments on working capital facilities


(311,813)


(293,640)

Proceeds from other short-term borrowings


24,356


2,483

Repayments of other short-term borrowings


(23,950)


Receipt of restricted contract funds


1,261


2,916

Payment of restricted contract funds


(3,391)


(1,131)

Dividends paid


(2,636)


(2,641)

Net payments for stockholder issuances and buybacks


(30,355)


(22,815)

Other financing, net


(516)


(479)

Net Cash Provided by Financing Activities


8,833


19,688

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


(171)


11






Decrease in Cash, Cash Equivalents, and Restricted Cash


(4,850)


(4,032)

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


9,449


12,968

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


$                      4,599


$                      8,936






Supplemental Disclosure of Cash Flow Information





Cash paid during the period for:





Interest


$                      7,740


$                      5,924

Income taxes


$                      1,133


$                         914

 

ICF International, Inc. and Subsidiaries

Supplemental Schedule (14)











Revenue by client markets


Three Months Ended



March 31, 



2024


2023

Energy, environment, infrastructure, and disaster recovery


45 %


39 %

Health and social programs


39 %


42 %

Security and other civilian & commercial


16 %


19 %

Total


100 %


100 %











Revenue by client type


Three Months Ended



March 31, 



2024


2023

U.S. federal government


55 %


55 %

U.S. state and local government


16 %


16 %

International government


5 %


4 %

Government


76 %


75 %

Commercial


24 %


25 %

Total


100 %


100 %











Revenue by contract mix


Three Months Ended



March 31, 



2024


2023

Time-and-materials


42 %


42 %

Fixed-price


45 %


45 %

Cost-based


13 %


13 %

Total


100 %


100 %


(14) 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.

 

 

SOURCE ICF