Press Release

ICF Reports Second Quarter 2019 Results

Aug 1, 2019

FAIRFAX, Va., Aug. 1, 2019 /PRNewswire/ --

Second Quarter Highlights:

  • Total Revenue Was $367 Million, up 13 Percent
  • Diluted EPS Increased 7 Percent to $0.76, Inclusive of $0.13 in Special Charges; Non-GAAP EPS1 Was $0.97, up 21 Percent
  • Adjusted EBITDA Margin on Service Revenue1 Was 13 Percent, up 110-Basis Points Year-on-Year
  • Contract Awards of $403 Million; TTM Contract Awards Were $1.6 Billion For a Book-to-Bill Ratio of 1.15

—Raises Midpoints of 2019 Revenue and Earnings Guidance Ranges—

—Names John Wasson CEO; Sudhakar Kesavan Moves to Executive Chairman—

ICF (NASDAQ: ICFI), a global consulting and digital services provider, reported results for the second quarter ended June 30, 2019.

"This was another quarter of strong operating performance for ICF, in which we posted double-digit revenue growth that was aligned with the positive catalysts we have identified in our government and commercial markets," said Sudhakar Kesavan, Chairman and Chief Executive Officer.

"Revenue from government clients increased 17.8 percent, led by our work on disaster recovery programs and higher revenues from U.S. federal government agency clients. Commercial revenues increased 4.6 percent year-on-year, reflecting growth in marketing services and energy efficiency implementation programs. Favorable revenue mix, increased service revenue1, and higher utilization drove a 19.5 percent increase in adjusted EBITDA1. Our adjusted EBITDA margin on service revenue was 13.0 percent, 110 basis points higher year-on-year.

"Second quarter contract awards of over $400 million included a modification to our FEMA-funded disaster recovery contract with the Government of Puerto Rico that significantly expanded our services, as well as several strategically important awards from both government and commercial clients. Subsequent to the end of the quarter, ICF was awarded a three-year federally-funded contract to assist with Community Development Block Grant (CDBG) housing recovery in Puerto Rico following the damage caused by the 2017 hurricanes.

"Our first half performance positions ICF well for continued growth in 2019. Our contract backlog increased sequentially to $2.4 billion, and our business development pipeline was $6.3 billion, representing substantial year-on-year increases across key client categories," Mr. Kesavan noted.

1 Non-GAAP EPS, Service Revenue, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, 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 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.

Second Quarter 2019 Results

Second quarter 2019 total revenue was $366.7 million, representing 13.1 percent growth over the $324.3 million reported in the second quarter of 2018. Service revenue increased 9.2 percent year-over-year to $252.3 million, from $231.0 million. Net income was $14.6 million in the second quarter, up 7.3 percent from $13.6 million in the second quarter of 2018. Diluted earnings per share amounted to $0.76, a 7.0 percent increase from $0.71 per diluted share in the prior year quarter.

Non-GAAP EPS increased 21.3 percent to $0.97 per share from $0.80 per share in the year ago quarter. EBITDA1 was $30.2 million, up 10.5 percent from $27.3 million reported in the second quarter of 2018. Adjusted EBITDA1 was $32.7 million, 19.5 percent above the $27.4 million reported in the comparable quarter of 2018. Second quarter 2019 adjusted EBITDA margin on service revenue expanded by 110 basis points to 13.0 percent from 11.9 percent in the 2018 second quarter.

Backlog and New Business Awards

Total backlog was $2.4 billion at the end of the second quarter of 2019. Funded backlog was $1.0 billion, or approximately 43 percent of the total backlog. The total value of contracts awarded in the 2019 second quarter was $403.1 million, resulting in a trailing-twelve-month (TTM) book-to-bill ratio of 1.15.

Government Revenue Second Quarter 2019 Highlights

Revenue from government clients was $245.7 million, up 17.8 percent year-over-year.

  • U.S. federal government revenue increased by 1.2 percent year-on-year to $141.2 million, compared to $139.5 million in the year ago quarter. Federal government revenue accounted for 38 percent of total revenue, compared to 43 percent of total revenue in the second quarter of 2018.
  • U.S. state and local government revenue increased by 111.1 percent year-on-year to $72.9 million, driven by our disaster recovery work. State and local government clients represented 20 percent of total revenue, significantly ahead of the 11 percent of total revenue accounted for in the 2018 second quarter.
  • International government revenue was $31.7 million, compared to $34.6 million in the year-ago quarter, and accounted for 9 percent of total revenue, compared to 11 percent in the second quarter of 2018. On a constant currency basis, international government revenue was down an estimated 2.6 percent.

Key Government Contracts Awarded in the Second Quarter

ICF was awarded more than 100 U.S. federal contracts and task orders and almost 300 additional contracts from U.S. state and local and international governments with an aggregate value of $280.9 million. Notable awards won in the second quarter included: 

  • Disaster recovery: A contract modification to continue providing hazard mitigation and related services in Puerto Rico that are part of disaster recovery activities associated with Hurricanes Irma and Maria.
  • Technical support: A recompete contract with the U.S. Environmental Protection Agency to provide technical support to the National Center for Environmental Assessment.
  • Program support: A contract with a U.S. federal agency to support the launch of in-school youth apprenticeship programs.
  • Strategic communications: A recompete contract with the National Institutes of Health to provide communications and media services related to health education.
  • Survey research: A recompete contract with the New York State Department of Health to provide survey support for the Behavioral Risk Factor Surveillance System of the U.S. Centers for Disease Control.
  • Cybersecurity and resilience: A recompete contract with the Maryland Administrative Office of the Courts to provide enterprise cybersecurity support.

Subsequent to the end of the second quarter, the Company was awarded a $25 million, three-year federally-funded contract to assist with CDBG housing recovery programs in Puerto Rico associated with hurricanes Irma and Maria.

Commercial Revenue Second Quarter 2019 Highlights

  • Commercial revenue was $121.0 million, up 4.6 percent from the $115.7 million reported in last year's second quarter. Commercial revenue accounted for 33 percent of total revenue compared to 35 percent of total revenue in the 2018 second quarter.
  • Energy markets, which include energy efficiency programs, represented 45 percent of commercial revenue. Marketing services accounted for 46 percent of commercial revenue.

Key Commercial Contracts Awarded in the Second Quarter 2019

Commercial sales were $122.1 million in the second quarter of 2019. ICF was awarded more than 750 commercial projects globally during the second quarter including:

In Energy Markets: 

  • A recompete contract with a northeastern U.S. utility to support its portfolio of energy efficiency programs.
  • A contract with a midwestern U.S. utility to support its commercial and industrial energy efficiency programs.
  • A contract with a North American energy agency to support implementation of business, non-profit, and institutional energy savings programs.

In Marketing Services:

  • A recompete contract with a U.S. health insurer to provide marketing services.
  • A contract with a U.S. health insurer to provide program rollout and design thinking support services.
  • A contract with a U.S. pharmaceutical company to provide additional corporate communications and related services.

Dividend Declaration

On August 1, 2019, ICF declared a quarterly cash dividend of $0.14 per share, payable on October 15, 2019 to shareholders of record on September 13, 2019.

Summary and Outlook

"ICF continued to execute well in the first half of this year, leveraging our domain expertise to take advantage of growth opportunities across our government and commercial client sets. Year-to-date operating results, recent wins and pipeline activity support our expectations for substantial growth in 2019 and beyond. Consequently, we have raised the midpoints for our guidance ranges for revenues and earnings. We now expect 2019 revenues to range from $1.475 billion to $1.5 billion, GAAP EPS to be between $3.80 and $3.95, exclusive of special charges, and Non-GAAP EPS to be in the range of $4.10 to $4.25. Operating cash flow is projected to be in the range of $100 million to $120 million.

"We were pleased to announce today via a separate press release that our Board of Directors has approved a succession plan that calls for the appointment of John Wasson, President, to the additional position of Chief Executive Officer and Board Member, and that I will move to Executive Chairman effective October 1, 2019. This represents a seamless succession at ICF, ensuring that we have the continuity of leadership needed to continue on our growth path," Mr. Kesavan concluded.

About ICF
ICF (NASDAQ: ICFI) is a global consulting services company with over 7,000 full- and part-time 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 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. 

 


ICF International, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)




Three Months Ended


Six Months Ended



June 30,

June 30,

(in thousands, except per share amounts)


2019


2018


2019


2018

Revenue


$                  366,717


$  324,315


$  707,971


$  627,095

Direct costs


235,053


206,565


451,002


395,391

Operating costs and expenses:









Indirect and selling expenses


101,450


90,410


197,969


180,069

Depreciation and amortization


5,595


4,045


10,357


8,514

Amortization of intangible assets


2,077


2,270


4,212


4,514

Total operating costs and expenses


109,122


96,725


212,538


193,097










Operating income


22,542


21,025


44,431


38,607

Interest expense


(2,934)


(2,167)


(5,387)


(3,833)

Other income (expense)


186


(318)


(226)


(214)

Income before income taxes


19,794


18,540


38,818


34,560

Provision for income taxes


5,183


4,923


8,889


8,526

Net income


$                    14,611


$    13,617


$    29,929


$    26,034










Earnings per Share:









Basic


$                        0.78


$        0.72


$        1.59


$        1.39

Diluted


$                        0.76


$        0.71


$        1.56


$        1.36










Weighted-average Shares:









Basic


18,805


18,806


18,815


18,738

Diluted


19,133


19,209


19,213


19,208










Cash dividends declared per common share


$                        0.14


$        0.14


$        0.28


$        0.28










Other comprehensive loss, net of tax


(2,853)


(3,317)


(2,570)


(1,708)

Comprehensive income, net of tax


$                    11,758


$    10,300


$    27,359


$    24,326


 

 

ICF International, Inc. and Subsidiaries

Reconciliation of Non-GAAP financial measures(2) 

(Unaudited)












Three Months Ended


Six Months Ended



June 30,


June 30,

(in thousands, except per share amounts)


2019


2018


2019


2018

Reconciliation of Service Revenue









Revenue


$ 366,717


$ 324,315


$  707,971


$  627,095

Subcontractor and other direct costs (3)


(114,381)


(93,330)


(214,280)


(172,212)

Service revenue


$ 252,336


$ 230,985


$  493,691


$  454,883










Reconciliation of EBITDA and Adjusted EBITDA









Net income


$   14,611


$   13,617


$    29,929


$    26,034

Other (income) expense 


(186)


318


226


214

Interest expense


2,934


2,167


5,387


3,833

Provision for income taxes


5,183


4,923


8,889


8,526

Depreciation and amortization


7,672


6,315


14,569


13,028

EBITDA


30,214


27,340


59,000


51,635

Adjustment related to impairment of intangible assets (4)


1,728



1,728


Special charges related to acquisition expenses (5)



44



106

Special charges related to severance for staff realignment (6)


701



1,155


655

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


69



69


Adjustment related to bad debt reserve (8)




(782)


Total special charges


2,498


44


2,170


761

Adjusted EBITDA


$   32,712


$   27,384


$    61,170


$    52,396










EBITDA Margin Percent on Revenue (9)


8.2%


8.4%


8.3%


8.2%

EBITDA Margin Percent on Service Revenue (9)


12.0%


11.8%


12.0%


11.4%

Adjusted EBITDA Margin Percent on Revenue (9)


8.9%


8.4%


8.6%


8.4%

Adjusted EBITDA Margin Percent on Service Revenue (9)


13.0%


11.9%


12.4%


11.5%










Reconciliation of Non-GAAP Diluted EPS









Diluted EPS


$       0.76


$       0.71


$        1.56


$        1.36

Adjustment related to impairment of intangible assets


0.09



0.09


Special charges related to severance for staff realignment


0.04



0.06


0.03

Special charges related to facility consolidations and office closures


0.05



0.05


Adjustment related to bad debt reserve




(0.04)


Amortization of intangibles


0.11


0.12


0.22


0.24

Income tax effects (10)


(0.08)


(0.03)


(0.09)


(0.07)

Non-GAAP EPS


$       0.97


$       0.80


$        1.85


$        1.56










(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: The Company 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 acquisition expenses: 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 Company officers 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 consolidation and office closure: 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.










(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 third party interest in 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 26.2% and 26.6% for the three months ended June 30, 2019 and 2018, respectively, and 22.9% and 24.7% for the six months ended June 30, 2019 and 2018, respectively.

 

ICF International, Inc. and Subsidiaries

Consolidated Balance Sheets









June 30, 2019



December 31, 2018

(in thousands, except share and per share amounts)


(Unaudited)




Assets






Current Assets:






Cash and cash equivalents


$                           6,304



$                               11,694

Contract receivables, net


276,982



230,966

Contract assets


141,960



126,688

Prepaid expenses and other assets


16,733



16,253

Income tax receivable


12,194



6,505

Total Current Assets


454,173



392,106

Property and Equipment, net


54,455



48,105

Other Assets:






Restricted cash - non-current




1,292

Goodwill


719,117



715,644

Other intangible assets, net


29,548



35,494

Operating lease - right-of-use assets


132,715



Other assets


23,762



21,221

Total Assets


$                    1,413,770



$                          1,213,862







Liabilities and Stockholders' Equity






Current Liabilities:






Accounts payable


$                         95,068



$                             102,599

Contract liabilities


33,435



33,494

Operating lease liabilities - current


29,238



Accrued salaries and benefits


47,636



44,103

Accrued subcontractors and other direct costs


41,275



58,791

Accrued expenses and other current liabilities


27,311



39,072

Total Current Liabilities


273,963



278,059

Long-term Liabilities:






Long-term debt


288,544



200,424

Operating lease liabilities - non-current


116,940



Deferred rent




13,938

Deferred income taxes


42,079



40,165

Other long-term liabilities


25,607



20,859

Total Liabilities


747,133



553,445







Contingencies (Note 15)












Stockholders' Equity:






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




Common stock, par value $.001; 70,000,000 shares authorized; 22,722,494 and 22,445,576 shares issued as of June 30, 2019 and December 31, 2018, respectively; 18,758,986 and 18,817,495 shares outstanding as of June 30, 2019 and December 31, 2018, respectively


23



22

Additional paid-in capital


335,345



326,208

Retained earnings


511,095



486,442

Treasury stock


(164,705)



(139,704)

Accumulated other comprehensive loss


(15,121)



(12,551)

Total Stockholders' Equity


666,637



660,417

Total Liabilities and Stockholders' Equity


$                    1,413,770



$                          1,213,862

 

ICF International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)








Six Months Ended



June 30,



2019


2018

(in thousands)



Cash Flows from Operating Activities





Net income


$                      29,929


$                    26,034

Adjustments to reconcile net income to net cash used in operating
   activities:





Bad debt expense


304


638

Deferred income taxes


2,872


598

Non-cash equity compensation


7,865


5,347

Depreciation and amortization


14,569


13,027

Facilities consolidation reserve


(134)


(127)

Amortization of debt issuance costs


254


256

Impairment of long-lived assets


1,728


Other adjustments, net


(450)


485

Changes in operating assets and liabilities:





Net contract assets and liabilities


(15,508)


(19,658)

Contract receivables


(46,212)


(6,609)

Prepaid expenses and other assets


(1,609)


(7,115)

Accounts payable


(7,569)


(11,283)

Accrued salaries and benefits


3,535


(1,378)

Accrued subcontractors and other direct costs


(17,479)


(17,280)

Accrued expenses and other current liabilities


(11,460)


3,757

Income tax receivable and payable


(8,733)


(7,315)

Other liabilities


152


(1,102)

Net Cash Used in Operating Activities


(47,946)


(21,725)






Cash Flows from Investing Activities





Capital expenditures for property and equipment and capitalized software


(14,516)


(9,397)

Payments for business acquisitions, net of cash received


(1,819)


(11,838)

Net Cash Used in Investing Activities


(16,335)


(21,235)






Cash Flows from Financing Activities





Advances from working capital facilities


378,474


284,773

Payments on working capital facilities


(290,354)


(247,378)

Payments on capital expenditure obligations


(1,621)


(3,131)

Debt issue costs



(21)

Proceeds from exercise of options


429


3,533

Dividends paid


(5,278)


(2,635)

Net payments for stockholder issuances and buybacks


(24,158)


(8,597)

Net Cash Provided by Financing Activities


57,492


26,544

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


107


(249)






Decrease in Cash, Cash Equivalents, and Restricted Cash


(6,682)


(16,665)

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


12,986


24,266

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


$                      6,304


$                      7,601






Supplemental Disclosure of Cash Flow Information





Cash paid during the period for:





Interest


$                      4,697


$                      3,641

Income taxes


$                    15,426


$                    11,490

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


Six Months Ended



June 30,


June 30,



2019


2018


2019


2018

Energy, environment, and infrastructure


46%


41%


46%


41%

Health, education, and social programs


36%


41%


36%


41%

Safety and security


8%


8%


8%


8%

Consumer and financial services


10%


10%


10%


10%

Total


100%


100%


100%


100%



















Revenue by client type


Three Months Ended


Six Months Ended



June 30,


June 30,



2019


2018


2019


2018

U.S. federal government


38%


43%


39%


44%

U.S. state and local government


20%


11%


19%


10%

International government


9%


11%


8%


10%

Government


67%


65%


66%


64%

Commercial


33%


35%


34%


36%

Total


100%


100%


100%


100%



















Revenue by contract mix


Three Months Ended


Six Months Ended



June 30,


June 30,



2019


2018


2019


2018

Time-and-materials


46%


39%


46%


40%

Fixed-price


40%


42%


40%


41%

Cost-based


14%


19%


14%


19%

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.

 

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

SOURCE ICF