Second Quarter Highlights
- Total Revenue Increased Slightly
Over Last Year, led by a 6.1 Percent Increase in Commercial
Revenue; Service Revenue1 Increased 1.2
Percent
- Diluted EPS was $0.63, up 14.5
Percent Over Last Year; Non-GAAP EPS1 was $0.73, up
5.8 Percent
- Contract Awards Were $340 Million;
TTM Contract Awards Were $1.47 Billion for a Book-to-Bill of
1.22x
- Operating Cash Flow for the First
Half Was $17.2 Million, up 9.6 Percent Over Last Year
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 EBITDA
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 reduction in workforce of senior management in the
second quarter of 2017, and international staff realignment in the
second quarter of 2016.
(3)
Income tax effects were calculated using
an effective U.S. GAAP tax rate of 40.0% and 37.2% for the second
quarter of fiscal year 2017 and 2016, respectively, and an
effective tax rate of 36.3% and 36.7% for the first six months of
fiscal year 2017 and 2016, respectively.
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 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170802006134/en/
Investor Contacts:MBS Value PartnersLynn
Morgen,
+1.212.750.5800lynn.morgen@mbsvalue.comorMBS
Value PartnersDavid Gold,
+1.212.750.5800david.gold@mbsvalue.comorCompany
Information Contact:ICFErica Eriksdotter,
+1.703.934.3668erica.eriksdotter@icf.com
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