FAIRFAX, Va.–(BUSINESS WIRE)–ICF (NASDAQ:ICFI), a consulting and technology services provider to
government and commercial clients around the world, reported results for
the second quarter ended June 30, 2017.
Second Quarter and First Half 2017 Results
“ICF’s results continued to benefit from our diversified business model,
serving government and commercial clients both domestically and
internationally. In the second quarter, our work for commercial clients
increased 6 percent over prior-year levels, representing our fourth
consecutive quarter of strong year-on-year growth. This momentum, along
with positive state and local and international government revenue
comparisons, offset lower revenue from federal government clients which
was mainly due to reduced materials and subcontracting activity,” said Sudhakar
Kesavan, ICF’s Chairman and Chief Executive Officer.
“Higher utilization and the increased contribution of higher margin
revenue drove significant EBITDA margin¹ expansion and led to
double-digit growth in diluted earnings for the quarter. The EBITDA¹
results include the impact of $0.6 million in special charges that were
incurred in connection with ongoing efforts to actively manage our cost
structure.
“Positive trends in contract awards and a robust business development
pipeline have set the stage for ICF’s continued growth. Contract wins
for the first half of 2017 were $590 million, which included a notable
addition to ICF Olson’s loyalty program client roster; and our business
development pipeline continues to be healthy at $4.6 billion as of the
end of the quarter,” Mr. Kesavan noted.
Second quarter 2017 total revenue was $306.4 million, a 0.3 percent
increase from $305.4 million for the second quarter of 2016. Service
revenue was up 1.2 percent at $224.9 million, compared to $222.4 million
reported last year. Net income was $11.9 million in the second quarter
of 2017, up 12.8 percent from the $10.6 million reported last year.
Diluted earnings per share increased 14.5 percent to $0.63 from $0.55
reported last year. Non-GAAP EPS increased 5.8 percent to $0.73 per
share compared to $0.69 in the prior year. EBITDA for the second quarter
of 2017 was $29.3 million, up 10 percent from $26.6 million reported
last year, and the second quarter EBITDA margin expanded 80 basis points
year-on-year to 9.5 percent of total revenue. Adjusted EBITDA margin¹
for the second quarter was 9.7 percent of total revenue and 13.3 percent
of service revenue, which represents year-on-year increases of 70 basis
points and 80 basis points, respectively. Operating cash flow for the
first half of 2017 was up 9.6 percent over last year.
Backlog and New Business Awards
Total backlog was $2.0 billion at the end of the second quarter of 2017.
Funded backlog was $927 million, or approximately 46 percent of the
total backlog. The total value of contracts awarded in the 2017 second
quarter was $340 million, up 12 percent year-on-year, bringing the
trailing twelve month book-to-bill ratio to 1.22.
Government Business Second Quarter 2017 Highlights
- U.S. federal government revenue was $141.3 million, a 4.8 percent
decline resulting primarily from lower materials and subcontracting
revenue. Federal government revenue accounted for 46 percent of total
revenue compared to 49 percent of total revenue in the second quarter
of 2016. - U.S. state and local government revenue increased 4.7 percent
year-on-year to $35.9 million and accounted for 12 percent of total
revenue, compared to 11 percent of total revenue in the 2016 second
quarter. - International government revenue increased 0.9 percent year-on-year,
and accounted for 7 percent of total revenue, compared to 6 percent of
total revenue in the 2016 second quarter.
Key Government Contracts Awarded in the Second Quarter
ICF was awarded more than 90 U.S. federal government contracts and task
orders and more than 200 additional contracts from state and local and
international governments. The largest awards included:
- Cybersecurity: A recompete contract with a value of up to $93
million with the U.S. Army Research Laboratory to support
research and develop solutions for Defensive Cyber Operations. - Program Support: A blanket purchase agreement with a ceiling of
$50 million with the U.S. Agency for International Development (USAID)
as one of four awardees to support
its Climate Integration Support Facility. - Policy and Program Support: A recompete contract with a value
of up to $20.8 million with the Federal Emergency Management Agency to
provide policy support, exercise planning, training development,
program management and administrative support. - Program Support: A funding increase of $5.7 million from the
Pennsylvania Department of Insurance to provide program support
services for the Underground Storage Tanks Indemnification Fund. - Disaster Recovery: Two task order extensions with a combined
value of $4.3 million with the New Jersey Department of Community
Affairs to continue to implement Hurricane Sandy housing recovery
programs. - Program Implementation: A recompete contract with a value of up
to $3.7 million with the Administration for Children and Families of
the Department of Health and Human Services (HHS) for a regional
customer services improvement project.
Other government contract wins with a value of at least $2 million
included: physical security system customization services for the HHS
Centers for Medicare and Medicaid Service; content management and
communications support for the Corporation for National and Community
Service; continued support for digital strategy for the HHS Office of
the Secretary; and extension of services in support of enterprise
strategy and management for the Bureau of Consular Affairs of the U.S.
Department of State.
Commercial Business Second Quarter 2017 Highlights
- Commercial revenue was $108.7 million, 6.1 percent above the $102.4
million in last year’s second quarter. Commercial revenue accounted
for 35 percent of total revenue compared to 34 percent of total
revenue in the 2016 second quarter. - Marketing services accounted for 40 percent of commercial revenue.
Energy markets, which include energy efficiency programs, represented
38 percent of commercial revenue.
Key Commercial Contracts Awarded in the Second Quarter
Commercial sales were $159.2 million in the second quarter of 2017, and
ICF was awarded more than 650 commercial projects globally during the
period. The largest awards were:
Energy Markets:
- Two task orders with a combined value of up to $29 million with two
utilities in the eastern U.S. to support commercial and industrial
energy efficiency programs. - Three contracts with a combined value of $5.4 million with a renewable
energy producer to provide environmental compliance and cultural
resources monitoring services. - A contract with a value of $5 million with a western U.S. utility to
provide permitting and construction compliance services for a new
substation.
Marketing Services:
- Two contracts with a combined value of $36.4 million with a major
hospitality company to implement a Tally® loyalty program
solution and provide ongoing loyalty support. - A contract with a value of $11.3 million with a U.S. health insurance
provider to expand marketing campaign support services. - Two contracts with a combined value of $7.3 million with a western
U.S. utility to provide marketing services support. - A master services agreement with a ceiling of $2.5 million with a
publishing company to provide search engine optimization and content
production services.
Other commercial contract and task order wins which were at least $1.5
million included: continued support for multiple energy efficiency
programs for an eastern U.S. utility; retainer and additional resources
for marketing services for a floor care product manufacturer; digital
services for a major U.S. health insurer; consulting services for a
provider of industrial aviation services; marketing services for a
global beverage company and a global fast food chain; marketing
automation services for a U.S. software company; e-commerce design and
implementation for a global online employment solutions provider;
additional resources to support a digital transformation project for an
international hotel chain; and biological pre-construction surveys,
construction compliance monitoring and reporting for a western U.S.
utility’s substation construction project.
Summary and Outlook
“ICF’s second quarter results illustrate the advantages of providing
advisory work based on deep subject matter expertise and offering
implementation services to a diversified roster of government and
commercial clients. We have entered the second half of 2017 with a
substantial funded backlog, positive momentum in year-to-date sales, the
majority of which represented new contracts, and a near-record business
development pipeline.
“Our year-to-date performance has positioned us for continued growth in
2017 and is consistent with our full-year revenue and earnings
expectations. Based on our current visibility, we re-affirm our guidance
for 2017 revenue ranging from $1.20 billion to $1.24 billion. We
maintain our guidance range for diluted earnings per share at $2.50 to
$2.75, and our Non-GAAP EPS guidance range of $2.84 to $3.09 per diluted
share. Additionally, we continue to expect operating cash flow to be in
the range of $90 million to $100 million,” Mr. Kesavan concluded.
About ICF
ICF (NASDAQ:ICFI) is a global consulting and technology services
provider with more than 5,000 professionals focused on making big things
possible for our clients. We are business analysts, public policy
experts, technologists, researchers, digital strategists, social
scientists and creatives. Since 1969, government and commercial clients
have worked with ICF to overcome their toughest challenges on issues
that matter profoundly to their success. Come engage with us at www.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.
1 Non-GAAP EPS, Service Revenue, EBITDA, and Adjusted EBITDA
are non-GAAP measurements. A reconciliation of all non-GAAP measurements
to the most applicable GAAP number is set forth below. EBITDA margin and
Adjusted EBITDA margin are calculated by dividing these non-GAAP
measures by the corresponding revenue.
| ICF International, Inc. and Subsidiaries | ||||||||||||||||||||
| Consolidated Statements of Comprehensive Income | ||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Three months ended |
| Six months ended | |||||||||||||||||
| June 30, |
| June 30, | |||||||||||||||||
| 2017 |
| 2016 |
| 2017 |
| 2016 | |||||||||||||
| (Unaudited) |
| (Unaudited) | |||||||||||||||||
| Revenue | $ | 306,392 | $ | 305,419 | $ | 602,687 | $ | 589,018 | ||||||||||||
| Direct Costs | 190,896 | 194,188 | 374,503 | 371,387 | ||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Indirect and selling expenses | 86,240 | 84,641 | 175,042 | 166,200 | ||||||||||||||||
| Depreciation and amortization | 4,299 | 4,084 | 8,818 | 8,103 | ||||||||||||||||
| Amortization of intangible assets | 2,749 | 3,148 | 5,483 | 6,276 | ||||||||||||||||
| Total operating costs and expenses | 93,288 | 91,873 | 189,343 | 180,579 | ||||||||||||||||
| Operating Income | 22,208 | 19,358 | 38,841 | 37,052 | ||||||||||||||||
| Interest expense | (2,537 | ) | (2,460 | ) | (4,488 | ) | (4,905 | ) | ||||||||||||
| Other income (expense) | 226 | (57 | ) | 335 | 218 | |||||||||||||||
| Income before income taxes | 19,897 | 16,841 | 34,688 | 32,365 | ||||||||||||||||
| Provision for income taxes | 7,960 | 6,258 | 12,574 | 11,891 | ||||||||||||||||
| Net income | $ | 11,937 | $ | 10,583 | $ | 22,114 | $ | 20,474 | ||||||||||||
| Earnings per Share: | ||||||||||||||||||||
| Basic | $ | 0.64 | $ | 0.56 | $ | 1.17 | $ | 1.08 | ||||||||||||
| Diluted | $ | 0.63 | $ | 0.55 | $ | 1.15 | $ | 1.06 | ||||||||||||
| Weighted-average Shares: | ||||||||||||||||||||
| Basic | 18,775 | 19,008 | 18,840 | 19,001 | ||||||||||||||||
| Diluted | 19,086 | 19,293 | 19,252 | 19,320 | ||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Foreign currency translation adjustments, net of tax | 2,100 | (2,026 | ) | 2,472 | (2,943 | ) | ||||||||||||||
| Comprehensive income, net of tax | $ | 14,037 | $ | 8,557 | $ | 24,586 | $ | 17,531 | ||||||||||||
| ICF International, Inc. and Subsidiaries | ||||||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Three months ended |
| Six months ended | |||||||||||||||||
| June 30, |
| June 30, | |||||||||||||||||
| 2017 |
| 2016 |
| 2017 |
| 2016 | |||||||||||||
| (Unaudited) |
| (Unaudited) | |||||||||||||||||
Reconciliation of Service Revenue | ||||||||||||||||||||
| Revenue | $ | 306,392 | $ | 305,419 | $ | 602,687 | $ | 589,018 | ||||||||||||
| Subcontractor and Other Direct Costs | (81,446 | ) | (83,052 | ) | (157,980 | ) | (154,221 | ) | ||||||||||||
| Service Revenue | $ | 224,946 | $ | 222,367 | $ | 444,707 | $ | 434,797 | ||||||||||||
Reconciliation of EBITDA and Adjusted | ||||||||||||||||||||
| Net Income | $ | 11,937 | $ | 10,583 | $ | 22,114 | $ | 20,474 | ||||||||||||
| Other (income) expense | (226 | ) | 57 | (335 | ) | (218 | ) | |||||||||||||
| Interest expense | 2,537 | 2,460 | 4,488 | 4,905 | ||||||||||||||||
| Provision for income taxes | 7,960 | 6,258 | 12,574 | 11,891 | ||||||||||||||||
| Depreciation and amortization | 7,048 | 7,232 | 14,301 | 14,379 | ||||||||||||||||
| EBITDA | 29,256 | 26,590 | 53,142 | 51,431 | ||||||||||||||||
| Special charges related to severance for staff realignment(2) | 577 | 1,086 | 577 | 1,086 | ||||||||||||||||
| Special charges related to facility consolidations and office closures | 21 | 55 | 1,719 | 55 | ||||||||||||||||
| Adjusted EBITDA | $ | 29,854 | $ | 27,731 | $ | 55,438 | $ | 52,572 | ||||||||||||
Reconciliation of Non-GAAP EPS | ||||||||||||||||||||
| Diluted EPS | $ | 0.63 | $ | 0.55 | $ | 1.15 | $ | 1.06 | ||||||||||||
| Special charges related to severance for staff realignment | 0.03 | 0.06 | 0.03 | 0.06 | ||||||||||||||||
| Special charges related to facility consolidations and office closures | — | — | 0.10 | — | ||||||||||||||||
| Amortization of intangibles | 0.14 | 0.16 | 0.28 | 0.32 | ||||||||||||||||
| Income tax effects(3) | (0.07 | ) | (0.08 | ) | (0.15 | ) | (0.14 | ) | ||||||||||||
| Non-GAAP EPS | $ | 0.73 | $ | 0.69 | $ | 1.41 | $ | 1.30 | ||||||||||||
| (2) | Special charges related to severance were for an unplanned | |
| (3) | Income tax effects were calculated using an effective U.S. GAAP | |
| ICF International, Inc. and Subsidiaries | ||||||||||
| Consolidated Balance Sheets | ||||||||||
| (in thousands, except share and per share amounts) | ||||||||||
| June 30, 2017 |
| December 31, 2016 | |||||||
| (Unaudited) | |||||||||
| Current Assets: | ||||||||||
| Cash and cash equivalents | $ | 9,493 | $ | 6,042 | ||||||
| Contract receivables, net | 288,178 | 281,365 | ||||||||
| Prepaid expenses and other | 13,278 | 11,724 | ||||||||
| Income tax receivable | 5,325 | — | ||||||||
| Total current assets | 316,274 | 299,131 | ||||||||
| Total property and equipment, net | 37,881 | 40,484 | ||||||||
| Other assets: | ||||||||||
| Goodwill | 685,071 | 683,683 | ||||||||
| Other intangible assets, net | 40,692 | 46,129 | ||||||||
| Restricted cash | 1,254 | 1,843 | ||||||||
| Other assets | 16,874 | 14,301 | ||||||||
| Total Assets | $ | 1,098,046 | $ | 1,085,571 | ||||||
| Current Liabilities: | ||||||||||
| Accounts payable | $ | 60,734 | $ | 70,586 | ||||||
| Accrued salaries and benefits | 40,793 | 44,003 | ||||||||
| Accrued expenses and other current liabilities | 44,540 | 52,631 | ||||||||
| Deferred revenue | 27,113 | 29,394 | ||||||||
| Income tax payable | — | 106 | ||||||||
| Total current liabilities | 173,180 | 196,720 | ||||||||
| Long-term liabilities: | ||||||||||
| Long-term debt | 278,000 | 259,389 | ||||||||
| Deferred rent | 14,983 | 15,600 | ||||||||
| Deferred income taxes | 44,439 | 39,114 | ||||||||
| Other | 14,314 | 8,744 | ||||||||
| Total Liabilities | 524,916 | 519,567 | ||||||||
| Commitments and Contingencies | ||||||||||
| Stockholders’ Equity: | ||||||||||
| Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none issued | — | — | ||||||||
| Common stock, $.001 par value; 70,000,000 shares authorized; 21,920,299 and 21,663,432 shares issued; and 18,717,713 and 19,021,262 shares outstanding as of June 30, 2017, and December 31, 2016, respectively | 22 | 22 | ||||||||
| Additional paid-in capital | 300,394 | 292,427 | ||||||||
| Retained earnings | 394,004 | 371,890 | ||||||||
| Treasury stock | (114,122 | ) | (88,695 | ) | ||||||
| Accumulated other comprehensive loss | (7,168 | ) | (9,640 | ) | ||||||
| Total Stockholders’ Equity | 573,130 | 566,004 | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | 1,098,046 | $ | 1,085,571 | ||||||
ICF International, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) | ||||||||||
| Six months ended | |||||||||
| June 30, | |||||||||
| 2017 |
| 2016 | |||||||
| (Unaudited) | |||||||||
| Cash flows from operating activities | ||||||||||
| Net income | $ | 22,114 | $ | 20,474 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Non-cash equity compensation | 5,361 | 5,042 | ||||||||
| Depreciation and amortization | 14,301 | 14,379 | ||||||||
| Facilities consolidation reserve | 1,663 | — | ||||||||
| Deferred taxes and other adjustments, net | 4,383 | 1,768 | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Contract receivables, net | (4,203 | ) | (27,158 | ) | ||||||
| Prepaid expenses and other assets | (2,978 | ) | (10,650 | ) | ||||||
| Accounts payable | (9,953 | ) | (4,147 | ) | ||||||
| Accrued salaries and benefits | (3,375 | ) | 18,336 | |||||||
| Accrued expenses and other current liabilities | (8,876 | ) | (827 | ) | ||||||
| Deferred revenue | (2,658 | ) | 2,182 | |||||||
| Income tax receivable and payable | (5,441 | ) | (2,311 | ) | ||||||
| Restricted cash | 597 | (3 | ) | |||||||
| Other liabilities | 6,307 | (1,348 | ) | |||||||
| Net cash provided by operating activities | 17,242 | 15,737 | ||||||||
| Cash flows from investing activities | ||||||||||
| Capital expenditures for property and equipment and capitalized software | (6,083 | ) | (7,856 | ) | ||||||
| Payments for business acquisitions, net of cash received | (91 | ) | — | |||||||
| Net cash used in investing activities | (6,174 | ) | (7,856 | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Advances from working capital facilities | 348,975 | 259,215 | ||||||||
| Payments on working capital facilities | (330,364 | ) | (252,843 | ) | ||||||
| Payments on capital expenditure obligations | (2,276 | ) | (2,020 | ) | ||||||
| Debt issue costs | (1,489 | ) | — | |||||||
| Proceeds from exercise of options | 2,431 | 1,158 | ||||||||
| Net payments for stockholder issuances and buybacks | (25,253 | ) | (10,695 | ) | ||||||
| Net cash used in financing activities | (7,976 | ) | (5,185 | ) | ||||||
| Effect of exchange rate changes on cash | 359 | 405 | ||||||||
| Increase in cash and cash equivalents | 3,451 | 3,101 | ||||||||
| Cash and cash equivalents, beginning of period | 6,042 | 7,747 | ||||||||
| Cash and cash equivalents, end of period | $ | 9,493 | $ | 10,848 | ||||||
| Supplemental disclosure of cash flow information | ||||||||||
| Cash paid during the period for: | ||||||||||
| Interest | $ | 3,923 | $ | 3,804 | ||||||
| Income taxes | $ | 12,982 | $ | 12,059 | ||||||
| ICF International, Inc. and Subsidiaries | ||||||||||||||||
| Supplemental Schedule | ||||||||||||||||
| Revenue by market | Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Energy, environment, and infrastructure | 40 | % | 38 | % | 40 | % | 38 | % | ||||||||
| Health, education, and social programs | 41 | % | 44 | % | 41 | % | 44 | % | ||||||||
| Safety and security | 9 | % | 8 | % | 9 | % | 8 | % | ||||||||
| Consumer and financial | 10 | % | 10 | % | 10 | % | 10 | % | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Revenue by client | Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| U.S. federal government | 46 | % | 49 | % | 46 | % | 49 | % | ||||||||
| U.S. state and local government | 12 | % | 11 | % | 11 | % | 11 | % | ||||||||
| International government | 7 | % | 6 | % | 7 | % | 6 | % | ||||||||
| Government | 65 | % | 66 | % | 64 | % | 66 | % | ||||||||
| Commercial | 35 | % | 34 | % | 36 | % | 34 | % | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| Revenue by contract | Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Time-and-materials | 42 | % | 44 | % | 43 | % | 44 | % | ||||||||
| Fixed-price | 40 | % | 36 | % | 39 | % | 37 | % | ||||||||
| Cost-based | 18 | % | 20 | % | 18 | % | 19 | % | ||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||