ICF Reports Second Quarter 2023 Results

—Signed Definitive Agreements to Sell Commercial Marketing Group—
—Strategic Tuck-In Acquisition of Engineering Advisory Firm CMY Expands ICF's Addressable Market—
—Re-Affirms Full Year 2023 Guidance Ranges—

• Revenue Was $500 Million, Up 18%
• Net Income Was $20.3 Million and Diluted EPS Was $1.07, Inclusive of $3.5 Million and $0.13 Per Share in Tax-Effected M&A and Severance Charges
• EBITDA¹ Was $47.5 Million, Up 19%; Adjusted EBITDA¹ Was $51.0 Million, Up 15%
• Non-GAAP EPS¹ Was $1.57, Up 18%
• Diluted EPS and Non-GAAP EPS Include Tax Benefits of $0.21 
• Contract Awards Were $441 Million; TTM Contract Awards Were $2.5 Billion for a Book-to-Bill Ratio of 1.3

—Record Business Development Pipeline of $10.3 Billion Supports Outlook for Continued Growth—

RESTON, Va., Aug. 3, 2023 /PRNewswire/ -- ICF (NASDAQ:ICFI), a global consulting and technology services provider, reported results for the second quarter ended June 30, 2023. 

Commenting on the results, John Wasson, chair and chief executive officer, said, "The ICF team continued to deliver strong performance and effectively manage the business in the second quarter, driving double-digit revenue and EBITDA growth, substantially increasing contract awards and building our new business pipeline. At the same time, we executed transactions that strengthen ICF's position in key growth areas and support our long-term growth strategy.

"Year-on-year revenue increased 18.2%, representing 10% organic growth and the benefit of the SemanticBits acquisition we completed in mid-2022. Year-on-year growth was led by substantial double-digit increases in revenues from federal, state and local government and commercial energy clients, which together accounted for over 88% of total second quarter revenue. Revenues from our key growth markets, namely IT modernization/digital transformation, public health, disaster management, utility consulting, and climate, environment and infrastructure services, in the aggregate, continued to drive strong year-on-year revenue comparisons. Non-GAAP EPS increased 18.0% year-on-year, benefiting from revenue growth, favorable mix and scale efficiencies as well as tax optimization strategies, which offset higher interest expense. 

"This was another strong quarter of contract wins for ICF. The value of awards won increased 28% year-on-year and primarily represented new business. Our business development pipeline reached a record $10.3 billion at the end of the second quarter, indicative of the significant growth opportunities ahead.

"In the second quarter, we acquired CMY, a power engineering firm with a team of approximately 50 electrical engineers and other highly specialized experts who advise utilities and energy project developers across the U.S., Europe and Asia. This small but strategically important acquisition enlarges ICF's addressable market and expands our ability to support clients' needs for renewables interconnection, substation and distribution upgrades and grid resilience. We have successfully partnered with CMY on multiple projects, and our two organizations have a strong cultural alignment.

"In mid-July we signed definitive agreements to sell our Commercial Marketing Group. The group's projected revenues for 2023 as part of ICF are approximately $70 million. Included in the sale were our commercial loyalty programs and integrated communications services for consumer and financial clients. This group has brought ICF tremendous capabilities that have contributed to the growth of the engagement and communications services we provide to our government and utility clients. Given our focus on key growth markets within our government and commercial energy client sets, we believe the Commercial Marketing Group will be better positioned to thrive under its new ownership, and we are pleased to note that their senior leadership and staff have been offered positions by the acquiror," said Mr. Wasson.

The sale of ICF's Commercial Marketing Group is subject to closing conditions and is expected to be completed in this year's third quarter. Upon closing, ICF expects to recognize a small gain on the sale. Separately, the company will incur a one-time non-cash charge associated with stranded facilities of approximately $7 million. Proceeds from the sale of the Commercial Marketing Group will exceed the purchase price of the CMY acquisition and will be used for debt repayment.

Second Quarter 2023 Results

Second quarter 2023 revenue increased 18.2% to $500.1 million from $423.1 million in the second quarter of 2022. Subcontractor and other direct costs were 27.6% of revenue, in line with last year's second quarter. Operating income increased 7.6% to $32.0 million, up from $29.8 million, and operating margin on revenue was 6.3%. Net income totaled $20.3 million, and diluted EPS was $1.07 per share in the 2023 second quarter, inclusive of $3.5 million, or $0.13 per share of tax-effected M&A and severance charges. Second quarter 2023 net income and diluted EPS includes a one-time tax benefit and other tax optimization strategies of $0.21 per share.

Non-GAAP EPS increased 18.0% to $1.57 per share, from the $1.33 per share reported in the comparable year-ago period, inclusive of a one-time tax benefit and other tax optimization strategies of $0.21 per share. EBITDA was $47.5 million, an increase of 19.2% compared to the $39.8 million reported a year ago. Adjusted EBITDA increased 15.3% to $51.0 million, from $44.2 million in the second quarter of 2022.

Backlog and New Business

Total backlog was $3.6 billion at the end of the second quarter of 2023. Funded backlog was $1.6 billion, or approximately 45% of the total backlog. The total value of contracts awarded in the 2023 second quarter was $441.4 million, and trailing-twelve-month contract awards totaled $2.5 billion for a book-to-bill ratio of 1.3.

Government Revenue Second Quarter 2023 Highlights

Revenue from government clients was $379.3 million, up 19.4% year-over-year. 

• U.S. federal government revenue was $271.8 million, 20.6% above the $225.3 million reported in the year-ago quarter. Federal government revenue accounted for 54.4% of total revenue, compared to 53.2% of total revenue in the second quarter of 2022.
• U.S. state and local government revenue increased 27.5% to $81.2 million, from $63.7 million in the year-ago quarter. State and local government clients represented 16.2% of total revenue, compared to 15.1% in the second quarter of 2022.   
• International government revenue was $26.3 million, compared to $28.6 million in the year-ago quarter. International government revenue represented 5.3% of total revenue, compared to 6.8% in the second quarter of 2022.   

Key Government Contracts Awarded in the Second Quarter 2023

ICF was awarded government contracts with an aggregate value of over $270 million. Notable awards won in the second quarter 2023 included:

Digital Modernization

• A contract modification with a value of $32.3 million with a federal agency within the U.S. Department of Health and Human Services to continue to support its digital modernization efforts to improve access to critical public health data.
• A bridge contract with a value of $30.2 million with a U.S. federal government agency to support its digital modernization and maintenance efforts.
• A new task order with a value of $8.7 million with a U.S. federal government department to continue to support its digital modernization efforts.

Disaster Management

• A new contract with a value of $32.1 million with a U.S. territory to provide disaster management consulting services to accelerate federally funded recovery efforts across the territory.

Public Health and Social Programs

• A new single-award blanket purchase agreement with a ceiling of $30.0 million with the U.S. Department of the Interior to modernize the training systems and develop incident position standards for the nation's professional wildland firefighters.
• A new follow-on contract with a value of $13.8 million with the U.S. Department of Justice Office for Victims of Crime (OVC) to provide training and technical assistance (TTA) to support its Technical Assistance Collective that expands the collective impact of OVC's TTA providers through networking, collaboration and easily accessible online tools.
• A recompete task order with a potential value of $11.8 million with the U.S. National Cancer Institute to provide project management, technical, computing and administrative support to manage research portfolios for the Division of Cancer Control and Population Sciences.

Commercial Revenue Second Quarter 2023 Highlights

Commercial revenue was $120.7 million, 14.5% above the $105.5 million reported in the year-ago quarter.

• Commercial revenue accounted for 24.1% of total revenue compared to 24.9% of total revenue in the 2022 second quarter.  
• Energy markets, which includes energy efficiency programs, represented 73.2% of commercial revenue. Marketing services and aviation consulting accounted for 19.1% of commercial revenue.

Key Commercial Contracts Awarded in the Second Quarter 2023

ICF was awarded commercial projects during the quarter with an aggregate value of approximately $170 million. Notable commercial awards won in the second quarter 2023 included:

Energy Markets

• A new master services agreement with a Midwestern U.S. utility to provide energy efficiency program implementation services for its residential portfolio.
• A sole-source contract extension with a Northeastern U.S. utility to continue to provide implementation services for its residential energy efficiency program.
• A recompete contract with a North American energy regulator to provide digital modernization and ongoing support services for its program to provide utility bill offsets to low-income households.
• A new contract with a North American electricity system operator to provide support services for its energy efficiency retrofit program.
• A new contract with a Midwestern U.S. utility to provide energy efficiency program implementation services for its commercial and industrial pilot.

Commercial Marketing and Other Commercial Markets

• A contract extension with a U.S. hospitality company to continue to provide loyalty program operations support services.
• A recompete contract with a U.S. health insurance provider to provide brand strategy and execution services.

Dividend Declaration

On August 3, 2023, ICF declared a quarterly cash dividend of $0.14 per share, payable on October 13, 2023, to shareholders of record on September 8, 2023.

Summary and Outlook

"Our strong first-half revenue performance continues to illustrate how well-aligned ICF's expertise and capabilities are with market demand and clients' spending priorities. During the period, we continued to invest in people and technology that enabled ICF to execute effectively on our existing contracts, while positioning us to capture an even greater share of future growth opportunities. The sale of our Commercial Marketing Group was a strategic decision to streamline our business and deploy our resources to support the key growth markets we have identified, illustrated by the acquisition of CMY, which fully aligns with the increased demand we anticipate from commercial energy clients.

"The net impact from the sale of the Commercial Marketing Group and the acquisition of CMY is not expected to have a material effect on the guidance ranges we provided for full-year 2023. Therefore, we continue to expect 2023 total revenue of $1.930 billion to $2.0 billion, and we anticipate that subcontractor and other direct costs will be approximately 27% of total revenue. Likewise, we continue to estimate EBITDA to range from $210 million to $220 million, and diluted EPS is projected at $4.75 to $5.05, exclusive of special charges. Non-GAAP EPS is expected to range from $6.15 to $6.45. Operating cash flow is expected to be approximately $150 million in 2023.

"We recently released our 2023 Corporate Citizenship Report which highlights how ICF is investing in our people, minimizing our environmental footprint, supporting our communities, and serving our clients with integrity. Over 85% of ICF's first-half 2023 revenues were derived from services supporting energy saving, carbon reduction and natural resource protection programs as well as health, education, development and social justice programs. We are proud of the impact that ICF and its people are having on society," Mr. Wasson concluded.

¹ Non-GAAP EPS, 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. 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 ICF 
ICF is a global consulting and technology services company with approximately 9,000 employees, but we are not your typical consultants. At ICF, business analysts and policy specialists work together with digital strategists, data scientists and creatives. We combine unmatched industry expertise with cutting-edge engagement capabilities to help organizations solve their most complex challenges. Since 1969, public and private sector clients have worked with ICF to navigate change and shape the future. Learn more at icf.com.

Caution Concerning Forward-looking Statements 
Statements that are not historical facts and involve known and unknown risks and uncertainties are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may concern our current expectations about our future results, plans, operations and prospects and involve certain risks, including those related to the government contracting industry generally; our particular business, including our dependence on contracts with U.S. federal government agencies; and our ability to acquire and successfully integrate businesses. These and other factors that could cause our actual results to differ from those indicated in forward-looking statements 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.

Note on Forward-Looking Non-GAAP Measures
The company does not reconcile its forward-looking non-GAAP financial measures to the corresponding U.S. GAAP measures, due to the variability and difficulty in making accurate forecasts and projections and because not all of the information necessary for a quantitative reconciliation of these forward-looking non-GAAP financial measures (such as the effect of share-based compensation or the impact of future extraordinary or non-recurring events like acquisitions) is available to the company without unreasonable effort. For the same reasons, the company is unable to estimate the probable significance of the unavailable information. The company provides forward-looking non-GAAP financial measures that it believes will be achievable, but it cannot accurately predict all of the components of the adjusted calculations, and the U.S. GAAP financial measures may be materially different than the non-GAAP financial measures.

Investor Contacts:

Lynn Morgen, ADVISIRY PARTNERS, [email protected] +1.212.750.5800
David Gold, ADVISIRY PARTNERS, [email protected] +1.212.750.5800

Company Information Contact: 
Lauren Dyke, ICF, [email protected] +1.571.373.5577

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SOURCE ICF