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First Quarter Highlights:
Re-affirms Full Year 2022 Guidance for Double-Digit Revenue Growth and Strong Margin Performance
Record Business Development Pipeline of $7.9 Billion at Quarter-End Supports Multi-Year Growth Outlook
FAIRFAX, Va., May 4, 2022 /PRNewswire/ -- ICF (NASDAQ:ICFI), a global consulting and digital services provider, reported results for the first quarter ended March 31, 2022.
Commenting on the results, John Wasson, chair and chief executive officer, said, "We continued to execute effectively in the first quarter, building upon our positioning in high-growth areas through organic growth and acquisitions, and leveraging our capabilities to expand our addressable market. Year-on-year growth was led by our government client category, in which revenue from federal and state and local government clients increased 25% and 14%, respectively. This growth reflected particularly strong performance in the areas of IT modernization/digital transformation, public health and disaster management.
"Several factors contributed to our 13.9% adjusted EBITDA margin on service revenue, which expanded 40 basis points year-on-year, including revenue mix, high utilization levels and our increased scale. Additionally, profitability benefitted from past actions to consolidate ICF's real estate footprint and increase operating efficiencies. As a result, we were able to achieve significant margin expansion, while continuing to invest in people, technology and strategic initiatives to support future growth.
"Most of our first quarter contract awards represented new business wins at federal government and commercial energy clients, where ICF offers a unique combination of deep domain expertise together with increasing cross-cutting implementation capabilities. The substantial growth in our business development pipeline to $7.9 billion at the end of the first quarter is indicative of our expanded addressable market and the alignment of ICF's qualifications with dynamic long-term growth trends in our markets."
First Quarter 2022 Results
First quarter 2022 total revenue increased 9.2% to $413.5 million from $378.5 million in the first quarter of 2021. Service revenue was $304.6 million, up 8.9% year-over-year from $279.6 million. Net income totaled $17.9 million and diluted EPS was $0.94 per share in the 2022 first quarter, inclusive of $4.4 million, or $0.17 of tax-effected special charges, of which $0.12 represented M&A and previously disclosed facility-related charges. This compares to $18.4 million and $0.96 per share last year, inclusive of $0.05 of tax-effected special charges primarily related to facility closure and severance costs.
Non-GAAP EPS increased 15.9% to $1.31 per share from the $1.13 per share reported in the first quarter of 2021. EBITDA¹ was $37.9 million compared to $36.4 million a year ago. Adjusted EBITDA increased 12.1% to $42.3 million, from $37.7 million in the first quarter of 2021. Adjusted EBITDA margin on service revenue was 13.9%, compared to 13.5% reported in the year-ago quarter.
Backlog and New Business Awards
Total backlog was $3.2 billion at the end of the first quarter of 2022. Funded backlog was $1.6 billion, or approximately 50% of the total backlog. The total value of contracts awarded in the 2022 first quarter was $361 million, and trailing-twelve-month contract awards totaled $2.0 billion for a book-to-bill ratio of 1.27.
Government Revenue First Quarter 2022 Highlights
Revenue from government clients was $311.9 million, up 15.7% year-over-year
Key Government Contracts Awarded in the First Quarter 2022
ICF was awarded more than 100 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 over $180 million. Notable awards won in the first quarter 2022 included:
Digital Modernization
Transportation, Energy and Environment
Public HealthA subcontract ceiling increase with a value of $11.4 million to continue providing survey and evaluation services for the U.S. Agency for International Development's MEASURE Evaluation Phase IV.
Training and Technical Assistance
Commercial Revenue First Quarter 2022 Highlights
Commercial revenue was $101.6 million, compared to $108.9 million in the year-ago quarter.
Key Commercial Contracts Awarded in the First Quarter 2022
ICF was awarded commercial projects during the quarter with an aggregate value of approximately $180 million. Notable awards won in the first quarter 2022 included:
Energy Markets
Marketing Services and Other
.Dividend Declaration
On May 4, 2022, ICF declared a quarterly cash dividend of $0.14 per share, payable on July 14, 2022, to shareholders of record on June 10, 2022.
Summary and Outlook
"First quarter results represented a very positive start to the year and support our expectations for double-digit revenue growth and strong margin performance in full year 2022.
"We are pleased to re-affirm our guidance for service revenue of $1.225 billion to $1.275 billion, implying total revenue of $1.7 billion to $1.76 billion, EBITDA of between $160 million and $172 million and adjusted EBITDA of $168 million to $180 million, equivalent to an adjusted EBITDA margin on service revenue of 13.9% at the midpoints of the ranges. The difference between EBITDA and adjusted EBITDA guidance is primarily due to the add-back of a non-cash rent expense of approximately $8 million associated with our new Reston, Virginia, headquarters. GAAP EPS is projected at $4.15 to $4.45 exclusive of special charges, and non-GAAP EPS is expected to range from $5.15 to $5.45, representing increases of 16% and 10% at the mid-point, respectively, over 2021. Operating cash flow is expected to be approximately $130 million in 2022.
"We continue to expand our capabilities, backlog and pipeline in the key growth areas of IT modernization/digital transformation, public health, disaster management and utility consulting, as well as climate, environment and infrastructure, where we see strong, sustained demand, and which we expect to progressively increase as a percentage of ICF's service revenue over the next several years. In addition to representing growth catalysts for ICF, our work in these areas enables ICF to make a positive impact on society, which is the key element of our corporate purpose. Our ability to attract and retain professionals who are engaged in helping clients address many of the most challenging issues of the day has been critical to our success to date. As we build out our growth platform, ICF remains committed to providing a collaborative working environment and maintaining the collegial, entrepreneurial culture for which we are known," Mr. Wasson concluded.
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. |
About ICFICF (NASDAQ:ICFI) is a global consulting services company with approximately 8,000 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; our ability to acquire and successfully integrate businesses; and the effects of the novel coronavirus disease (COVID-19) and related federal, state and local government actions and reactions on the health of our staff and that of our clients, the continuity of our and our clients' operations, our results of operations and our outlook. 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.
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) | 2022 | 2021 | ||
Revenue | $ 413,468 | $ 378,478 | ||
Direct costs | 258,158 | 232,082 | ||
Operating costs and expenses: | ||||
Indirect and selling expenses | 117,452 | 109,982 | ||
Depreciation and amortization | 4,838 | 5,270 | ||
Amortization of intangible assets | 5,317 | 3,015 | ||
Total operating costs and expenses | 127,607 | 118,267 | ||
Operating income | 27,703 | 28,129 | ||
Interest expense | (2,697) | (2,683) | ||
Other expense | (369) | (417) | ||
Income before income taxes | 24,637 | 25,029 | ||
Provision for income taxes | 6,775 | 6,678 | ||
Net income | $ 17,862 | $ 18,351 | ||
Earnings per Share: | ||||
Basic | $ 0.95 | $ 0.97 | ||
Diluted | $ 0.94 | $ 0.96 | ||
Weighted-average Shares: | ||||
Basic | 18,795 | 18,885 | ||
Diluted | 19,012 | 19,118 | ||
Cash dividends declared per common share | $ 0.14 | $ 0.14 | ||
Other comprehensive income, net of tax | 2,659 | 2,780 | ||
Comprehensive income, net of tax | $ 20,521 | $ 21,131 | ||
ICF International, Inc. and Subsidiaries | ||||
Reconciliation of Non-GAAP financial measures(2) | ||||
(Unaudited) | ||||
Three Months Ended | ||||
March 31, | ||||
(in thousands, except per share amounts) | 2022 | 2021 | ||
Reconciliation of Service Revenue | ||||
Revenue | $ 413,468 | $ 378,478 | ||
Subcontractor and other direct costs (3) | (108,898) | (98,911) | ||
Service revenue | $ 304,570 | $ 279,567 | ||
Reconciliation of EBITDA and Adjusted EBITDA | ||||
Net income | $ 17,862 | $ 18,351 | ||
Other expense | 369 | 417 | ||
Interest expense | 2,697 | 2,683 | ||
Provision for income taxes | 6,775 | 6,678 | ||
Depreciation and amortization | 10,155 | 8,285 | ||
EBITDA | 37,858 | 36,414 | ||
Adjustment related to impairment of long-lived assets (4) | — | 303 | ||
Special charges related to acquisitions (5) | 1,319 | 95 | ||
Special charges related to severance for staff realignment (6) | 1,226 | 491 | ||
Special charges related to facilities consolidations and office closures (7) | — | 200 | ||
Special charges related to the transfer to our new corporate headquarters (8) | 1,882 | — | ||
Special charges related to retirement of Executive Chair (9) | — | 224 | ||
Total special charges | 4,427 | 1,313 | ||
Adjusted EBITDA | $ 42,285 | $ 37,727 | ||
EBITDA Margin Percent on Revenue (10) | 9.2% | 9.6% | ||
EBITDA Margin Percent on Service Revenue (10) | 12.4% | 13.0% | ||
Adjusted EBITDA Margin Percent on Revenue (10) | 10.2% | 10.0% | ||
Adjusted EBITDA Margin Percent on Service Revenue (10) | 13.9% | 13.5% | ||
Reconciliation of Non-GAAP Diluted EPS | ||||
Diluted EPS | $ 0.94 | $ 0.96 | ||
Adjustment related to impairment of long-lived assets | — | 0.02 | ||
Special charges related to acquisitions | 0.07 | — | ||
Special charges related to severance for staff realignment | 0.06 | 0.03 | ||
Special charges related to facilities consolidations and office closures | — | 0.01 | ||
Special charges related to the transfer to our new corporate headquarters | 0.10 | — | ||
Special charges related to retirement of Executive Chair | — | 0.01 | ||
Amortization of intangibles | 0.28 | 0.16 | ||
Income tax effects on amortization, special charges, and adjustments (11) | (0.14) | (0.06) | ||
Non-GAAP EPS | $ 1.31 | $ 1.13 | ||
(2) These tables provide reconciliations of non-GAAP financial measures to the most applicable GAAP numbers. While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Other companies may define similarly titled non-GAAP measures differently and, accordingly, care should be exercised in understanding how we define these measures. | ||||
(3) Subcontractor and other direct costs is direct costs excluding direct labor and fringe costs. | ||||
(4) Adjustment related to impairment of long-lived assets: We recognized impairment expense of $0.3 million in the first quarter of 2021 related to impairment of a right-of-use lease asset. | ||||
(5) Special charges related to acquisitions: These costs consist primarily of consultants and other outside third-party costs and integration costs associated with our acquisitions and/or potential acquisitions. | ||||
(6) Special charges related to severance for staff realignment: These costs are mainly due to involuntary employee termination benefits for our officers, groups of employees who have been notified that they will be terminated as part of a consolidation or reorganization or, to the extent that the costs are not included in the previous two categories, involuntary employee termination benefits for employees who have been terminated as a result of COVID-19. | ||||
(7) Special charges related to facilities consolidations and office closures: These costs are exit costs or gains associated with office lease contraction, terminated office leases, or full office closures. The exit costs include charges incurred under a contractual obligation that existed as of the date of the accrual and for which we will continue to pay until the contractual obligation is satisfied but with no economic benefit to us. | ||||
(8) Special charges related to the transfer to our new corporate headquarters: These costs are additional rent as a result of us taking possession of our new corporate headquarters in Reston, Virginia, during the fourth quarter of 2021 while maintaining our current headquarters in Fairfax, Virginia. We intend to complete the transition to our new corporate headquarters by the end of 2022 when our Fairfax lease ends. | ||||
(9) Special charges related to retirement of the former Executive Chair: Our former Executive Chair retired effective December 31, 2020. These costs relate to unvested equity awards that, as a result of his employment agreement, the departing officer was able to maintain certain equity awards beyond the date of employment. | ||||
(10) EBITDA Margin Percent and Adjusted EBITDA Margin Percent were calculated by dividing the non-GAAP measure by the corresponding revenue. | ||||
(11) Income tax effects were calculated using an effective U.S. GAAP tax rate of 27.5% and 26.7% for the three months ended March 31, 2022 and 2021. | ||||
ICF International, Inc. and Subsidiaries | ||||
Consolidated Balance Sheets | ||||
(Unaudited) | ||||
(in thousands, except share and per share amounts) | March 31,2022 | December 31,2021 | ||
ASSETS | ||||
Current Assets: | ||||
Cash and cash equivalents | $ 7,392 | $ 8,254 | ||
Restricted cash - current | 1,681 | 12,179 | ||
Contract receivables, net | 205,827 | 237,684 | ||
Contract assets | 189,147 | 137,867 | ||
Prepaid expenses and other assets | 41,176 | 42,354 | ||
Income tax receivable | 8,288 | 10,825 | ||
Total Current Assets | 453,511 | 449,163 | ||
Property and Equipment, net | 62,886 | 52,053 | ||
Other Assets: | ||||
Goodwill | 1,045,503 | 1,046,760 | ||
Other intangible assets, net | 74,274 | 79,645 | ||
Operating lease - right-of-use assets | 172,133 | 177,417 | ||
Other assets | 49,416 | 44,496 | ||
Total Assets | $ 1,857,723 | $ 1,849,534 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current Liabilities: | ||||
Current portion of long-term debt | $ 10,000 | $ 10,000 | ||
Accounts payable | 95,706 | 105,652 | ||
Contract liabilities | 31,491 | 39,665 | ||
Operating lease liabilities - current | 30,530 | 34,901 | ||
Accrued salaries and benefits | 94,931 | 85,517 | ||
Accrued subcontractors and other direct costs | 40,165 | 39,400 | ||
Accrued expenses and other current liabilities | 41,388 | 61,496 | ||
Total Current Liabilities | 344,211 | 376,631 | ||
Long-term Liabilities: | ||||
Long-term debt | 449,776 | 411,605 | ||
Operating lease liabilities - non-current | 189,857 | 191,805 | ||
Deferred income taxes | 47,684 | 41,913 | ||
Other long-term liabilities | 22,893 | 24,110 | ||
Total Liabilities | 1,054,421 | 1,046,064 | ||
Commitments and Contingencies | ||||
Stockholders' Equity: | ||||
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued | — | — | ||
Common stock, par value $.001; 70,000,000 shares authorized; 23,679,411 and 23,535,671 shares issued at March 31, 2022 and December 31, 2021, respectively; 18,793,455 and 18,876,490 shares outstanding at March 31, 2022 and December 31, 2021, respectively | 23 | 23 | ||
Additional paid-in capital | 388,639 | 384,984 | ||
Retained earnings | 664,532 | 649,298 | ||
Treasury stock, 4,885,956 and 4,659,181 shares at March 31, 2022 and December 31, 2021, respectively | (241,516) | (219,800) | ||
Accumulated other comprehensive loss | (8,376) | (11,035) | ||
Total Stockholders' Equity | 803,302 | 803,470 | ||
Total Liabilities and Stockholders' Equity | $ 1,857,723 | $ 1,849,534 | ||
ICF International, Inc. and Subsidiaries | |||||
Consolidated Statements of Cash Flows | |||||
(Unaudited) | |||||
Three Months Ended | |||||
March 31, | |||||
(in thousands) | 2022 | 2021 | |||
Cash Flows from Operating Activities | |||||
Net income | $ 17,862 | $ 18,351 | |||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||
(Recovery of) provision for credit losses | (170) | 5,334 | |||
Deferred income taxes | 4,505 | 1,838 | |||
Non-cash equity compensation | 3,563 | 3,275 | |||
Depreciation and amortization | 10,154 | 8,285 | |||
Facilities consolidation reserve | (78) | (75) | |||
Amortization of debt issuance costs | 154 | 155 | |||
Impairment of long-lived assets | — | 303 | |||
Other adjustments, net | 353 | 457 | |||
Changes in operating assets and liabilities, net of the effect of acquisitions: | |||||
Net contract assets and liabilities | (59,689) | (19,750) | |||
Contract receivables | 31,473 | 2,531 | |||
Prepaid expenses and other assets | (11,708) | 2,016 | |||
Operating lease assets and liabilities, net | (532) | (1,143) | |||
Accounts payable | (9,815) | (354) | |||
Accrued salaries and benefits | 9,513 | 4,715 | |||
Accrued subcontractors and other direct costs | 1,078 | (33,466) | |||
Accrued expenses and other current liabilities | (6,883) | 8,303 | |||
Income tax receivable and payable | 2,621 | 3,924 | |||
Other liabilities | 544 | 262 | |||
Net Cash (Used in) Provided by Operating Activities | (7,055) | 4,961 | |||
Cash Flows from Investing Activities | |||||
Capital expenditures for property and equipment and capitalized software | (6,454) | (3,595) | |||
Cash Flows from Financing Activities | |||||
Advances from working capital facilities | 329,690 | 185,755 | |||
Payments on working capital facilities | (291,662) | (174,674) | |||
Receipt of restricted contract funds | 4,301 | 451 | |||
Payment of restricted contract funds | (14,714) | (27,081) | |||
Proceeds from exercise of options | 92 | 2,702 | |||
Dividends paid | (2,644) | (2,642) | |||
Net payments for stock issuances and buybacks | (22,268) | (17,104) | |||
Payments on business acquisition liabilities | (121) | (682) | |||
Net Cash Provided by (Used in) Financing Activities | 2,674 | (33,275) | |||
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash | (525) | 745 | |||
Decrease in Cash, Cash Equivalents, and Restricted Cash | (11,360) | (31,164) | |||
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | 20,433 | 81,987 | |||
Cash, Cash Equivalents, and Restricted Cash, End of Period | $ 9,073 | $ 50,823 | |||
Supplemental Disclosure of Cash Flow Information | |||||
Cash paid during the period for: | |||||
Interest | $ 2,760 | $ 2,637 | |||
Income taxes | $ 949 | $ 961 | |||
Non-cash investing and financing transactions: | |||||
Tenant improvements funded by lessor | $ 10,843 | $ — | |||
ICF International, Inc. and Subsidiaries | |||||
Supplemental Schedule(12) | |||||
Revenue by client markets | Three Months Ended | ||||
March 31, | |||||
2022 | 2021 | ||||
Energy, environment, and infrastructure | 38% | 43% | |||
Health, education, and social programs | 50% | 42% | |||
Safety and security | 7% | 8% | |||
Consumer and financial | 5% | 7% | |||
Total | 100% | 100% | |||
Revenue by client type | Three Months Ended | ||||
March 31, | |||||
2022 | 2021 | ||||
U.S. federal government | 53% | 46% | |||
U.S. state and local government | 16% | 15% | |||
International government | 6% | 10% | |||
Total Government | 75% | 71% | |||
Commercial | 25% | 29% | |||
Total | 100% | 100% | |||
Revenue by contract mix | Three Months Ended | ||||
March 31, | |||||
2022 | 2021 | ||||
Time-and-materials | 40% | 42% | |||
Fixed price | 44% | 39% | |||
Cost-based | 16% | 19% | |||
Total | 100% | 100% | |||
(12) 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. | |||||
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SOURCE ICF
