ICF Reports Third Quarter 2019 Results

Published

FAIRFAX, Va., Nov. 6, 2019 /PRNewswire/ --

Third Quarter Highlights:

  • Total Revenue Was $374 Million, up 12 Percent
  • Diluted EPS Increased 19 Percent to $1.02 inclusive of $0.01 of Special Charges; Non-GAAP EPS¹ Was $1.12, up 11 Percent
  • Adjusted EBITDA Margin on Service Revenue¹ Was 14 Percent, Up 20 basis points Year-on-Year
  • Contract Awards of $477 Million For a Third Quarter Book-to-Bill Ratio of 1.3; TTM Contract Awards Were $1.5 Billion For a Book-to-Bill Ratio of 1.0 

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

"ICF's strong third quarter performance demonstrated the underlying growth catalysts in our key markets," said John Wasson, ICF's President and Chief Executive Officer. "Double-digit revenue growth was in line with our expectations and represented excellent execution on contracts across our client set. Revenues from government clients increased over 11 percent, and revenues from commercial clients were up over 14 percent.

"Higher service revenue¹ and favorable mix contributed to increased profitability in the third quarter, as diluted EPS growth substantially outpaced revenue growth, and Adjusted EBITDA margin on service revenue expanded by 20 basis points year-on-year to 14 percent.

"Third quarter contract awards represented a substantial number of wins with federal agency and commercial clients. We had a book-to-bill ratio of 1.3 in the third quarter, and we ended the quarter with a record business development pipeline in excess of $6.5 billion, comprised of a diversified universe of opportunities across our major markets."

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.

Third Quarter 2019 Results

Third quarter 2019 total revenue was $373.9 million, representing 12.3 percent growth over the $333.0 million reported in the third quarter of 2018. Service revenue increased 11.2 percent year-over-year to $257.2 million compared to $231.3 million. Net income was $19.6 million in the third quarter, up 17.7 percent from $16.7 million in the third quarter 2018. Diluted earnings per share amounted to $1.02, an 18.6 percent increase over the $0.86 per diluted share in the prior year quarter.  

Non-GAAP EPS increased 10.9 percent to $1.12 per share from $1.01 per share in the year-ago quarter. EBITDA¹ was $35.6 million, up 15.1 percent from $30.9 million reported in the third quarter of 2018. Adjusted EBITDA¹ was $36.0 million, 12.8 percent above the $31.9 million reported in the comparable quarter of 2018. Third quarter 2019 adjusted EBITDA margin on service revenue expanded by 20 basis points year-on-year to 14.0 percent.

Backlog and New Business Awards

Total backlog was $2.5 billion at the end of the third quarter of 2019. Funded backlog was $1.3 billion, or approximately 54 percent of the total backlog. The total value of contracts awarded in the 2019 third quarter was $477.2 million, resulting in a third quarter book-to-bill ratio of 1.3, and a trailing-twelve-month (TTM) book-to-bill ratio of 1.0.

Government Revenue Third Quarter 2019 Highlights

Revenue from government clients was $247.7 million, up 11.4 percent year-over-year.

  • U.S. federal government revenue was $148.2 million, compared to $140.3 million in the year ago quarter, an increase of 5.6 percent year-on-year. Federal government revenue accounted for 40 percent of total revenue, compared to 42 percent of total revenue in the third quarter of 2018.
  • U.S. state and local government revenue increased by 28.8 percent year-on-year to $71.5 million, driven by our disaster recovery work. State and local government clients represented 19 percent of total revenue, ahead of the 17 percent of total revenue accounted for in the 2018 third quarter.
  • International government revenue was $28.0 million, compared to $26.6 million in the year-ago quarter, an increase of 5.5 percent year-on-year. International government revenue accounted for 7 percent of total revenue, compared to 8 percent in the third quarter of 2018.

Key Government Contracts Awarded in the Third Quarter

ICF was awarded more than 150 U.S. federal contracts and task orders and more than 200 additional contracts from U.S. state and local and international governments with an aggregate value of $391.2 million. Notable awards won in the third quarter included: 

  • Training and technical assistance:
    • A recompete contract with the U.S. Department of Health and Human Services (HHS), Administration for Children and Families, Children's Bureau to provide training and technical assistance services for the Child Welfare Capacity Building Center for States.
    • Two recompete cooperative agreements to continue providing technical assistance nationwide to the U.S. Department of Housing and Urban Development's Community Compass program.
    • A new contract with the Centers for Disease Control and Prevention to develop and implement a comprehensive training and technical assistance program on opioids for CDC's "Overdose to Action" grantees.
  • Communications and outreach:
    • A contract with the National Cancer Institute to design, develop and monitor outreach campaigns that support the Smokefree.gov program, in addition to other behavioral and cancer control engagement initiatives.
    • A new contract to expand CDC's prescription awareness campaign.
  • Disaster recovery:
    • As mentioned in our second quarter earnings release, a new federally-funded contract to assist with Community Development Block Grant (CDBG) housing recovery programs in Puerto Rico associated with hurricanes Irma and Maria.
  • Technical support: 
    • A new contract with the U.S. Department of Education to provide capacity building services for a regional comprehensive center to support improved educator and student outcomes.
    • A recompete contract with the HHS Centers for Disease Control and Prevention to support demonstration projects to identify effective approaches to prevent HIV, sexually transmitted diseases and pregnancy in teens.
  • Program support: 
    • A bridge contract with the National Library of Medicine at the National Institutes of Health to support biomedical and clinical information services for a variety of library programs and projects.

Commercial Revenue Third Quarter 2019 Highlights

  • Commercial revenue was $126.2 million, up 14.1 percent from the $110.6 million reported in last year's third quarter. Commercial revenue accounted for 34 percent of total revenue compared to 33 percent of total revenue in the 2018 third quarter.
  • Energy markets, which include energy efficiency programs, represented 47 percent of commercial revenue. Marketing services accounted for 45 percent of commercial revenue.

Key Commercial Contracts Awarded in the Third Quarter 2019

Commercial sales were $85.9 million in the third quarter of 2019. ICF was awarded a diverse array of commercial projects globally during the third quarter including:

In Energy Markets:

  • A contract with a northeastern U.S. utility to support its electric vehicle charging program.
  • A contract with a southwestern U.S. utility to provide environmental compliance and related services.
  • A contract modification with a midwestern U.S. utility to continue delivery and administration of its energy efficiency programs.
  • A contract with a northeastern U.S. offshore wind farm to prepare a third-party environmental impact statement.

In Marketing Services:

  • A change order to continue providing marketing services to a U.S. health insurer.
  • A task order with a southwestern U.S. utility to provide communications support services.
  • Task orders under a Master Services Agreement with a U.S. commercial airline to support its loyalty program.
  • A contract with a global electrical company to support the digital transformation of one of its core brands through creative and technical implementation services.
  • A contract extension with a global laboratory equipment manufacturer to provide guidance around its digital roadmap and implement solutions.
  • A retainer with a food and beverage manufacturer to continue providing public relations services.

Dividend Declaration

On November 6, 2019, ICF declared a quarterly cash dividend of $0.14 per share, payable on January 14, 2020 to shareholders of record on December 13, 2019.

Summary and Outlook

"Year-to-date results have set the stage for strong full year 2019 performance. We reaffirm our expectation for full year 2019 revenues in the range of $1.475 to $1.5 billion, GAAP EPS to range from $3.80 to $3.95, exclusive of special charges, and Non-GAAP EPS of between $4.10 and $4.25. Operating cash flow is projected to be approximately $80 million, lower than our original guidance range due to the longer payment cycle we are presently experiencing associated with the large, federally-funded contract we won in Puerto Rico in 2018. Revised cash flow guidance is based on recent payments on this contract and expectations for additional payments prior to year-end.

"Recent contract awards, backlog levels and the size and diversity of our business development pipeline provide an excellent platform for future growth. Based on our current visibility, we expect 2020 to be a year of continued growth for ICF across our major client categories, driven by our deep subject matter expertise and our cross-cutting capabilities in technology and engagement," Mr. Wasson 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 StatementsStatements 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 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
ICF International, Inc. and Subsidiaries Reconciliation of Non-GAAP financial measures(2) 
Consolidated Statements of Comprehensive Income (Unaudited)
(Unaudited)
Three Months Ended Nine Months Ended
Three Months Ended Nine Months Ended September 30, September 30,
September 30, September 30, (in thousands, except per share amounts) 2019 2018 2019 2018
(in thousands, except per share amounts) 2019 2018 2019 2018 Reconciliation of Service Revenue
Revenue $          373,918 $          332,968 $         1,081,889 $          960,063 Revenue $                  373,918 $                  332,968 $               1,081,889 $                  960,063
Direct costs 238,158 213,060 689,160 608,451 Subcontractor and other direct costs (3) (116,710) (101,708) (330,990) (273,920)
Operating costs and expenses: Service revenue $                  257,208 $                  231,260 $                  750,899 $                  686,143
Indirect and selling expenses 100,130 88,960 298,099 269,029
Depreciation and amortization 5,035 4,210 15,392 12,724 Reconciliation of EBITDA and Adjusted EBITDA
Amortization of intangible assets 1,931 2,516 6,143 7,030 Net income $                    19,630 $                    16,671 $                    49,559 $                    42,705
Total operating costs and expenses 107,096 95,686 319,634 288,783 Other expense  141 351 367 565
Interest expense 2,824 2,240 8,211 6,073
Operating income 28,664 24,222 73,095 62,829 Provision for income taxes 6,069 4,960 14,958 13,486
Interest expense (2,824) (2,240) (8,211) (6,073) Depreciation and amortization 6,966 6,726 21,535 19,754
Other expense (141) (351) (367) (565) EBITDA 35,630 30,948 94,630 82,583
Income before income taxes 25,699 21,631 64,517 56,191 Adjustment related to impairment of intangible assets (4) 1,728
Provision for income taxes 6,069 4,960 14,958 13,486 Special charges related to acquisitions (5) 507 613
Net income $            19,630 $            16,671 $              49,559 $            42,705 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
Earnings per Share: Adjustment related to bad debt reserve (8) 115 (782) 115
Basic $                1.04 $                0.88 $                  2.63 $                2.27 Total special charges 360 962 2,530 1,723
Diluted $                1.02 $                0.86 $                  2.58 $                2.22 Adjusted EBITDA $                    35,990 $                    31,910 $                    97,160 $                    84,306
Weighted-average Shares: EBITDA Margin Percent on Revenue (9) 9.5% 9.3% 8.7% 8.6%
Basic 18,799 18,873 18,810 18,783 EBITDA Margin Percent on Service Revenue (9) 13.9% 13.4% 12.6% 12.0%
Diluted 19,169 19,306 19,208 19,256 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%
Cash dividends declared per common share $                0.14 $                0.14 $                  0.42 $                0.42
Reconciliation of Non-GAAP Diluted EPS
Other comprehensive loss, net of tax (3,281) (568) (5,851) (2,276) Diluted EPS $                        1.02 $                        0.86 $                        2.58 $                        2.22
Comprehensive income, net of tax $            16,349 $            16,103 $              43,708 $            40,429 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 ICF International, Inc. and Subsidiaries
ICF International, Inc. and Subsidiaries Reconciliation of Non-GAAP financial measures(2)  Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income (Unaudited) (Unaudited)
(Unaudited)
Three Months Ended Nine Months Ended (in thousands, except share and per share amounts) September 30, 2019 December 31, 2018
Three Months Ended Nine Months Ended September 30, September 30, ASSETS
September 30, September 30, (in thousands, except per share amounts) 2019 2018 2019 2018 Current Assets:
(in thousands, except per share amounts) 2019 2018 2019 2018 Reconciliation of Service Revenue Cash and cash equivalents $                      7,452 $                    11,694
Revenue $          373,918 $          332,968 $         1,081,889 $          960,063 Revenue $                  373,918 $                  332,968 $               1,081,889 $                  960,063 Contract receivables, net 269,368 230,966
Direct costs 238,158 213,060 689,160 608,451 Subcontractor and other direct costs (3) (116,710) (101,708) (330,990) (273,920) Contract assets 153,055 126,688
Operating costs and expenses: Service revenue $                  257,208 $                  231,260 $                  750,899 $                  686,143 Prepaid expenses and other assets 19,459 16,253
Indirect and selling expenses 100,130 88,960 298,099 269,029 Income tax receivable 7,621 6,505
Depreciation and amortization 5,035 4,210 15,392 12,724 Reconciliation of EBITDA and Adjusted EBITDA Total Current Assets 456,955 392,106
Amortization of intangible assets 1,931 2,516 6,143 7,030 Net income $                    19,630 $                    16,671 $                    49,559 $                    42,705 Property and Equipment, net 57,189 48,105
Total operating costs and expenses 107,096 95,686 319,634 288,783 Other expense  141 351 367 565 Other Assets:
Interest expense 2,824 2,240 8,211 6,073 Restricted cash - non-current 1,292
Operating income 28,664 24,222 73,095 62,829 Provision for income taxes 6,069 4,960 14,958 13,486 Goodwill 716,699 715,644
Interest expense (2,824) (2,240) (8,211) (6,073) Depreciation and amortization 6,966 6,726 21,535 19,754 Other intangible assets, net 27,478 35,494
Other expense (141) (351) (367) (565) EBITDA 35,630 30,948 94,630 82,583 Operating lease - right-of-use assets 138,156
Income before income taxes 25,699 21,631 64,517 56,191 Adjustment related to impairment of intangible assets (4) 1,728 Other assets 23,939 21,221
Provision for income taxes 6,069 4,960 14,958 13,486 Special charges related to acquisitions (5) 507 613 Total Assets $               1,420,416 $               1,213,862
Net income $            19,630 $            16,671 $              49,559 $            42,705 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 LIABILITIES and STOCKHOLDERS' EQUITY
Earnings per Share: Adjustment related to bad debt reserve (8) 115 (782) 115 Current Liabilities:
Basic $                1.04 $                0.88 $                  2.63 $                2.27 Total special charges 360 962 2,530 1,723 Accounts payable $                    97,359 $                  102,599
Diluted $                1.02 $                0.86 $                  2.58 $                2.22 Adjusted EBITDA $                    35,990 $                    31,910 $                    97,160 $                    84,306 Contract liabilities 32,086 33,494
Operating lease liabilities - current 30,935
Weighted-average Shares: EBITDA Margin Percent on Revenue (9) 9.5% 9.3% 8.7% 8.6% Accrued salaries and benefits 67,163 44,103
Basic 18,799 18,873 18,810 18,783 EBITDA Margin Percent on Service Revenue (9) 13.9% 13.4% 12.6% 12.0% Accrued subcontractors and other direct costs 40,507 58,791
Diluted 19,169 19,306 19,208 19,256 Adjusted EBITDA Margin Percent on Revenue (9) 9.6% 9.6% 9.0% 8.8% Accrued expenses and other current liabilities 34,032 39,072
Adjusted EBITDA Margin Percent on Service Revenue (9) 14.0% 13.8% 12.9% 12.3% Total Current Liabilities 302,082 278,059
Cash dividends declared per common share $                0.14 $                0.14 $                  0.42 $                0.42 Long-term Liabilities:
Reconciliation of Non-GAAP Diluted EPS Long-term debt 245,000 200,424
Other comprehensive loss, net of tax (3,281) (568) (5,851) (2,276) Diluted EPS $                        1.02 $                        0.86 $                        2.58 $                        2.22 Operating lease liabilities - non-current 124,864
Comprehensive income, net of tax $            16,349 $            16,103 $              43,708 $            40,429 Adjustment related to impairment of intangible assets 0.09 Deferred rent 13,938
Special charges related to acquisitions 0.03 0.03 Deferred income taxes 40,281 40,165
Special charges related to severance for staff realignment 0.01 0.02 0.07 0.05 Other long-term liabilities 22,687 20,859
Special charges related to facility consolidations, office closures, and our future corporate headquarters 0.01 0.01 0.06 0.01 Total Liabilities 734,914 553,445
Adjustment related to bad debt reserve (0.04)
Amortization of intangibles 0.10 0.13 0.32 0.37 Contingencies (Note 16)
Income tax effects (10) (0.02) (0.04) (0.12) (0.11)
Non-GAAP EPS $                        1.12 $                        1.01 $                        2.96 $                        2.57 Stockholders' Equity:
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued
(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.  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
(3)Subcontractor and Other Direct Costs is Direct Costs excluding Direct Labor and Fringe Costs. Retained earnings 528,103 486,442
Treasury stock (164,848) (139,704)
(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. Accumulated other comprehensive loss (18,402) (12,551)
Total Stockholders' Equity 685,502 660,417
(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. Total Liabilities and Stockholders' Equity $               1,420,416 $               1,213,862
(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 ICF International, Inc. and Subsidiaries ICF International, Inc. and Subsidiaries
ICF International, Inc. and Subsidiaries Reconciliation of Non-GAAP financial measures(2)  Consolidated Balance Sheets Consolidated Statements of Cash Flows
Consolidated Statements of Comprehensive Income (Unaudited) (Unaudited) (Unaudited)
(Unaudited)
Three Months Ended Nine Months Ended (in thousands, except share and per share amounts) September 30, 2019 December 31, 2018 Nine Months Ended
Three Months Ended Nine Months Ended September 30, September 30, ASSETS  September 30, 
September 30, September 30, (in thousands, except per share amounts) 2019 2018 2019 2018 Current Assets: 2019 2018
(in thousands, except per share amounts) 2019 2018 2019 2018 Reconciliation of Service Revenue Cash and cash equivalents $                      7,452 $                    11,694 (in thousands)
Revenue $          373,918 $          332,968 $         1,081,889 $          960,063 Revenue $                  373,918 $                  332,968 $               1,081,889 $                  960,063 Contract receivables, net 269,368 230,966 Cash Flows from Operating Activities
Direct costs 238,158 213,060 689,160 608,451 Subcontractor and other direct costs (3) (116,710) (101,708) (330,990) (273,920) Contract assets 153,055 126,688 Net income $                    49,559 $                    42,705
Operating costs and expenses: Service revenue $                  257,208 $                  231,260 $                  750,899 $                  686,143 Prepaid expenses and other assets 19,459 16,253 Adjustments to reconcile net income to net cash provided by operating activities:
Indirect and selling expenses 100,130 88,960 298,099 269,029 Income tax receivable 7,621 6,505 Bad debt expense 377 1,060
Depreciation and amortization 5,035 4,210 15,392 12,724 Reconciliation of EBITDA and Adjusted EBITDA Total Current Assets 456,955 392,106 Deferred income taxes 1,089 3,176
Amortization of intangible assets 1,931 2,516 6,143 7,030 Net income $                    19,630 $                    16,671 $                    49,559 $                    42,705 Property and Equipment, net 57,189 48,105 Non-cash equity compensation 11,682 8,682
Total operating costs and expenses 107,096 95,686 319,634 288,783 Other expense  141 351 367 565 Other Assets: Depreciation and amortization 21,535 19,753
Interest expense 2,824 2,240 8,211 6,073 Restricted cash - non-current 1,292 Facilities consolidation reserve (204) (193)
Operating income 28,664 24,222 73,095 62,829 Provision for income taxes 6,069 4,960 14,958 13,486 Goodwill 716,699 715,644 Amortization of debt issuance costs 380 385
Interest expense (2,824) (2,240) (8,211) (6,073) Depreciation and amortization 6,966 6,726 21,535 19,754 Other intangible assets, net 27,478 35,494 Impairment of long-lived assets 1,728
Other expense (141) (351) (367) (565) EBITDA 35,630 30,948 94,630 82,583 Operating lease - right-of-use assets 138,156 Other adjustments, net (1,110) 1,701
Income before income taxes 25,699 21,631 64,517 56,191 Adjustment related to impairment of intangible assets (4) 1,728 Other assets 23,939 21,221 Changes in operating assets and liabilities:
Provision for income taxes 6,069 4,960 14,958 13,486 Special charges related to acquisitions (5) 507 613 Total Assets $               1,420,416 $               1,213,862 Net contract assets and liabilities (28,793) (32,158)
Net income $            19,630 $            16,671 $              49,559 $            42,705 Special charges related to severance for staff realignment (6) 166 340 1,321 995 Contract receivables (39,711) (25,110)
Special charges related to facilities consolidations, office closures, and our future corporate headquarters (7) 194 263 LIABILITIES and STOCKHOLDERS' EQUITY Prepaid expenses and other assets (385) (6,841)
Earnings per Share: Adjustment related to bad debt reserve (8) 115 (782) 115 Current Liabilities: Accounts payable (5,052) (5,882)
Basic $                1.04 $                0.88 $                  2.63 $                2.27 Total special charges 360 962 2,530 1,723 Accounts payable $                    97,359 $                  102,599 Accrued salaries and benefits 23,227 12,921
Diluted $                1.02 $                0.86 $                  2.58 $                2.22 Adjusted EBITDA $                    35,990 $                    31,910 $                    97,160 $                    84,306 Contract liabilities 32,086 33,494 Accrued subcontractors and other direct costs (16,895) (7,897)
Operating lease liabilities - current 30,935 Accrued expenses and other current liabilities (6,756) 3,602
Weighted-average Shares: EBITDA Margin Percent on Revenue (9) 9.5% 9.3% 8.7% 8.6% Accrued salaries and benefits 67,163 44,103 Income tax receivable and payable (4,134) (5,535)
Basic 18,799 18,873 18,810 18,783 EBITDA Margin Percent on Service Revenue (9) 13.9% 13.4% 12.6% 12.0% Accrued subcontractors and other direct costs 40,507 58,791 Other liabilities (173) (16)
Diluted 19,169 19,306 19,208 19,256 Adjusted EBITDA Margin Percent on Revenue (9) 9.6% 9.6% 9.0% 8.8% Accrued expenses and other current liabilities 34,032 39,072 Net Cash Provided by Operating Activities 6,364 10,353
Adjusted EBITDA Margin Percent on Service Revenue (9) 14.0% 13.8% 12.9% 12.3% Total Current Liabilities 302,082 278,059
Cash dividends declared per common share $                0.14 $                0.14 $                  0.42 $                0.42 Long-term Liabilities: Cash Flows from Investing Activities
Reconciliation of Non-GAAP Diluted EPS Long-term debt 245,000 200,424 Capital expenditures for property and equipment and capitalized software (20,686) (15,593)
Other comprehensive loss, net of tax (3,281) (568) (5,851) (2,276) Diluted EPS $                        1.02 $                        0.86 $                        2.58 $                        2.22 Operating lease liabilities - non-current 124,864 Payments for business acquisitions, net of cash received (3,569) (22,847)
Comprehensive income, net of tax $            16,349 $            16,103 $              43,708 $            40,429 Adjustment related to impairment of intangible assets 0.09 Deferred rent 13,938 Net Cash Used in Investing Activities (24,255) (38,440)
Special charges related to acquisitions 0.03 0.03 Deferred income taxes 40,281 40,165
Special charges related to severance for staff realignment 0.01 0.02 0.07 0.05 Other long-term liabilities 22,687 20,859 Cash Flows from Financing Activities
Special charges related to facility consolidations, office closures, and our future corporate headquarters 0.01 0.01 0.06 0.01 Total Liabilities 734,914 553,445 Advances from working capital facilities 545,539 444,637
Adjustment related to bad debt reserve (0.04) Payments on working capital facilities (500,963) (418,383)
Amortization of intangibles 0.10 0.13 0.32 0.37 Contingencies (Note 16) Payments on capital expenditure obligations (1,621) (3,243)
Income tax effects (10) (0.02) (0.04) (0.12) (0.11) Debt issue costs (21)
Non-GAAP EPS $                        1.12 $                        1.01 $                        2.96 $                        2.57 Stockholders' Equity: Proceeds from exercise of options 1,883 5,842
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued Dividends paid (7,906) (5,269)
(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.  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 Net payments for stockholder issuances and buybacks (24,301) (12,399)
Additional paid-in capital 340,626 326,208 Net Cash Provided by Financing Activities 12,631 11,164
(3)Subcontractor and Other Direct Costs is Direct Costs excluding Direct Labor and Fringe Costs. Retained earnings 528,103 486,442 Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash (274) (253)
Treasury stock (164,848) (139,704)
(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. Accumulated other comprehensive loss (18,402) (12,551) Decrease in Cash, Cash Equivalents, and Restricted Cash (5,534) (17,176)
Total Stockholders' Equity 685,502 660,417 Cash, Cash Equivalents, and Restricted Cash, Beginning of Period 12,986 24,266
(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. Total Liabilities and Stockholders' Equity $               1,420,416 $               1,213,862 Cash, Cash Equivalents, and Restricted Cash, End of Period $                      7,452 $                      7,090
(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.   Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
(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. Interest $                      7,581 $                      7,193
Income taxes $                    18,061 $                    13,056
(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. Non-cash investing and financing transactions:
Capital expenditure obligations $                          — $                      6,121
(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 ICF International, Inc. and Subsidiaries ICF International, Inc. and Subsidiaries ICF International, Inc. and Subsidiaries
ICF International, Inc. and Subsidiaries Reconciliation of Non-GAAP financial measures(2)  Consolidated Balance Sheets Consolidated Statements of Cash Flows Supplemental Schedule(11)
Consolidated Statements of Comprehensive Income (Unaudited) (Unaudited) (Unaudited)
(Unaudited)
Three Months Ended Nine Months Ended (in thousands, except share and per share amounts) September 30, 2019 December 31, 2018 Nine Months Ended Revenue by client markets Three Months Ended Nine Months Ended
Three Months Ended Nine Months Ended September 30, September 30, ASSETS  September 30,  September 30, September 30,
September 30, September 30, (in thousands, except per share amounts) 2019 2018 2019 2018 Current Assets: 2019 2018 2019 2018 2019 2018
(in thousands, except per share amounts) 2019 2018 2019 2018 Reconciliation of Service Revenue Cash and cash equivalents $                      7,452 $                    11,694 (in thousands) Energy, environment, and infrastructure 46% 44% 46% 42%
Revenue $          373,918 $          332,968 $         1,081,889 $          960,063 Revenue $                  373,918 $                  332,968 $               1,081,889 $                  960,063 Contract receivables, net 269,368 230,966 Cash Flows from Operating Activities Health, education, and social programs 37% 38% 36% 40%
Direct costs 238,158 213,060 689,160 608,451 Subcontractor and other direct costs (3) (116,710) (101,708) (330,990) (273,920) Contract assets 153,055 126,688 Net income $                    49,559 $                    42,705 Safety and security 8% 9% 8% 8%
Operating costs and expenses: Service revenue $                  257,208 $                  231,260 $                  750,899 $                  686,143 Prepaid expenses and other assets 19,459 16,253 Adjustments to reconcile net income to net cash provided by operating activities: Consumer and financial services 9% 9% 10% 10%
Indirect and selling expenses 100,130 88,960 298,099 269,029 Income tax receivable 7,621 6,505 Bad debt expense 377 1,060 Total 100% 100% 100% 100%
Depreciation and amortization 5,035 4,210 15,392 12,724 Reconciliation of EBITDA and Adjusted EBITDA Total Current Assets 456,955 392,106 Deferred income taxes 1,089 3,176
Amortization of intangible assets 1,931 2,516 6,143 7,030 Net income $                    19,630 $                    16,671 $                    49,559 $                    42,705 Property and Equipment, net 57,189 48,105 Non-cash equity compensation 11,682 8,682
Total operating costs and expenses 107,096 95,686 319,634 288,783 Other expense  141 351 367 565 Other Assets: Depreciation and amortization 21,535 19,753 Revenue by client type Three Months Ended Nine Months Ended
Interest expense 2,824 2,240 8,211 6,073 Restricted cash - non-current 1,292 Facilities consolidation reserve (204) (193) September 30, September 30,
Operating income 28,664 24,222 73,095 62,829 Provision for income taxes 6,069 4,960 14,958 13,486 Goodwill 716,699 715,644 Amortization of debt issuance costs 380 385 2019 2018 2019 2018
Interest expense (2,824) (2,240) (8,211) (6,073) Depreciation and amortization 6,966 6,726 21,535 19,754 Other intangible assets, net 27,478 35,494 Impairment of long-lived assets 1,728 U.S. federal government 40% 42% 39% 43%
Other expense (141) (351) (367) (565) EBITDA 35,630 30,948 94,630 82,583 Operating lease - right-of-use assets 138,156 Other adjustments, net (1,110) 1,701 U.S. state and local government 19% 17% 19% 13%
Income before income taxes 25,699 21,631 64,517 56,191 Adjustment related to impairment of intangible assets (4) 1,728 Other assets 23,939 21,221 Changes in operating assets and liabilities: International government 7% 8% 8% 9%
Provision for income taxes 6,069 4,960 14,958 13,486 Special charges related to acquisitions (5) 507 613 Total Assets $               1,420,416 $               1,213,862 Net contract assets and liabilities (28,793) (32,158) Government 66% 67% 66% 65%
Net income $            19,630 $            16,671 $              49,559 $            42,705 Special charges related to severance for staff realignment (6) 166 340 1,321 995 Contract receivables (39,711) (25,110) Commercial 34% 33% 34% 35%
Special charges related to facilities consolidations, office closures, and our future corporate headquarters (7) 194 263 LIABILITIES and STOCKHOLDERS' EQUITY Prepaid expenses and other assets (385) (6,841) Total 100% 100% 100% 100%
Earnings per Share: Adjustment related to bad debt reserve (8) 115 (782) 115 Current Liabilities: Accounts payable (5,052) (5,882)
Basic $                1.04 $                0.88 $                  2.63 $                2.27 Total special charges 360 962 2,530 1,723 Accounts payable $                    97,359 $                  102,599 Accrued salaries and benefits 23,227 12,921
Diluted $                1.02 $                0.86 $                  2.58 $                2.22 Adjusted EBITDA $                    35,990 $                    31,910 $                    97,160 $                    84,306 Contract liabilities 32,086 33,494 Accrued subcontractors and other direct costs (16,895) (7,897) Revenue by contract mix Three Months Ended Nine Months Ended
Operating lease liabilities - current 30,935 Accrued expenses and other current liabilities (6,756) 3,602 September 30, September 30,
Weighted-average Shares: EBITDA Margin Percent on Revenue (9) 9.5% 9.3% 8.7% 8.6% Accrued salaries and benefits 67,163 44,103 Income tax receivable and payable (4,134) (5,535) 2019 2018 2019 2018
Basic 18,799 18,873 18,810 18,783 EBITDA Margin Percent on Service Revenue (9) 13.9% 13.4% 12.6% 12.0% Accrued subcontractors and other direct costs 40,507 58,791 Other liabilities (173) (16) Time-and-materials 49% 44% 47% 42%
Diluted 19,169 19,306 19,208 19,256 Adjusted EBITDA Margin Percent on Revenue (9) 9.6% 9.6% 9.0% 8.8% Accrued expenses and other current liabilities 34,032 39,072 Net Cash Provided by Operating Activities 6,364 10,353 Fixed-price 36% 38% 38% 40%
Adjusted EBITDA Margin Percent on Service Revenue (9) 14.0% 13.8% 12.9% 12.3% Total Current Liabilities 302,082 278,059 Cost-based 15% 18% 15% 18%
Cash dividends declared per common share $                0.14 $                0.14 $                  0.42 $                0.42 Long-term Liabilities: Cash Flows from Investing Activities Total 100% 100% 100% 100%
Reconciliation of Non-GAAP Diluted EPS Long-term debt 245,000 200,424 Capital expenditures for property and equipment and capitalized software (20,686) (15,593)
Other comprehensive loss, net of tax (3,281) (568) (5,851) (2,276) Diluted EPS $                        1.02 $                        0.86 $                        2.58 $                        2.22 Operating lease liabilities - non-current 124,864 Payments for business acquisitions, net of cash received (3,569) (22,847)
Comprehensive income, net of tax $            16,349 $            16,103 $              43,708 $            40,429 Adjustment related to impairment of intangible assets 0.09 Deferred rent 13,938 Net Cash Used in Investing Activities (24,255) (38,440) (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.
Special charges related to acquisitions 0.03 0.03 Deferred income taxes 40,281 40,165
Special charges related to severance for staff realignment 0.01 0.02 0.07 0.05 Other long-term liabilities 22,687 20,859 Cash Flows from Financing Activities
Special charges related to facility consolidations, office closures, and our future corporate headquarters 0.01 0.01 0.06 0.01 Total Liabilities 734,914 553,445 Advances from working capital facilities 545,539 444,637
Adjustment related to bad debt reserve (0.04) Payments on working capital facilities (500,963) (418,383)
Amortization of intangibles 0.10 0.13 0.32 0.37 Contingencies (Note 16) Payments on capital expenditure obligations (1,621) (3,243)
Income tax effects (10) (0.02) (0.04) (0.12) (0.11) Debt issue costs (21)
Non-GAAP EPS $                        1.12 $                        1.01 $                        2.96 $                        2.57 Stockholders' Equity: Proceeds from exercise of options 1,883 5,842
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued Dividends paid (7,906) (5,269)
(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.  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 Net payments for stockholder issuances and buybacks (24,301) (12,399)
Additional paid-in capital 340,626 326,208 Net Cash Provided by Financing Activities 12,631 11,164
(3)Subcontractor and Other Direct Costs is Direct Costs excluding Direct Labor and Fringe Costs. Retained earnings 528,103 486,442 Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash (274) (253)
Treasury stock (164,848) (139,704)
(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. Accumulated other comprehensive loss (18,402) (12,551) Decrease in Cash, Cash Equivalents, and Restricted Cash (5,534) (17,176)
Total Stockholders' Equity 685,502 660,417 Cash, Cash Equivalents, and Restricted Cash, Beginning of Period 12,986 24,266
(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. Total Liabilities and Stockholders' Equity $               1,420,416 $               1,213,862 Cash, Cash Equivalents, and Restricted Cash, End of Period $                      7,452 $                      7,090
(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.   Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
(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. Interest $                      7,581 $                      7,193
Income taxes $                    18,061 $                    13,056
(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. Non-cash investing and financing transactions:
Capital expenditure obligations $                          — $                      6,121
(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.

 

Investor Contacts: Lynn Morgen, ADVISIRY PARTNERS, lynn.morgen@advisiry.com +1.212.750.5800David Gold, ADVISIRY PARTNERS, david.gold@advisiry.com +1.212.750.5800Company Information Contact: Lauren Dyke, ICF, lauren.dyke@ICF.com +1.571.373.5577

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