ICF International, Inc. (NASDAQ:ICFI) Q1 2021 Earnings Conference Call May 4, 2021 4:30 PM ET Company Participants Lynn Morgen - Investor Relations, AdvisIRy Partners John Wasson - President & Chief Executive Officer Bettina Welsh - Chief Financial Officer Conference Call Participants Joseph Vafi - Canaccord Genuity Tobey Sommer - Truist Securities Trevor Romeo - William Blair & Company Marc Riddick - Sidoti & Company Operator Welcome to the First Quarter 2021 ICF Earnings Conference Call. My name is Vaness ...

Revenue Breakdown - For the three months ended March 31, 2021, government clients accounted for approximately 71.4% of total revenues[76] - The remaining 28.6% of total revenue was primarily generated from commercial energy markets and marketing services, with commercial marketing services representing less than 9.6% of total revenues[77] - Governmental revenue increased by $30.8 million or 12.9%, while commercial revenue decreased by $10.6 million or 8.9% year-over-year[86] - Revenue for the three months ended March 31, 2021 was $378.5 million, an increase of $20.2 million or 5.6% compared to $358.2 million for the same period in 2020[86] - Service revenue grew by $24.2 million or 9.5% year-over-year, representing 73.97% of total revenue for the three months ended March 31, 2021[97] Operational Performance - The company experienced a continuity in work for government clients despite challenges posed by COVID-19, indicating resilience in demand for services[76] - The company continues to monitor the impact of COVID-19 on its operations and is taking actions to mitigate adverse consequences[78] - The company is focused on enhancing client relationships and integrating strategic acquisitions to drive future growth[73] Financial Metrics - Operating income rose to $28.1 million for the three months ended March 31, 2021, an increase of $11.8 million or 72.4% from $16.3 million in 2020[92] - Net income for the three months ended March 31, 2021 was $18.4 million, a 72.9% increase from $10.6 million in the same period last year[86] - Adjusted EBITDA for the three months ended March 31, 2021 was $37.7 million, compared to $28.0 million for the same period in 2020[103] Costs and Expenses - Direct costs for the three months ended March 31, 2021 were $232.1 million, an increase of $1.5 million or 0.6% compared to $230.6 million in 2020[88] - Indirect and selling expenses increased to $110.0 million, a rise of $6.7 million or 6.5% compared to $103.3 million in 2020[89] - The effective income tax rate for the three months ended March 31, 2021 was 26.7%, up from 18.3% in the same period last year[95] - Interest expense decreased to $2.7 million for the three months ended March 31, 2021, down $0.8 million or 23.9% from $3.5 million in 2020[93] Cash Flow and Liquidity - Cash and cash equivalents decreased to $8.6 million as of March 31, 2021, down from $13.8 million on December 31, 2020, a decline of 37.0%[115] - Net cash provided by operating activities was $4.96 million for Q1 2021, compared to a cash outflow of $15.23 million in Q1 2020[124] - Cash used in investing activities was $3.6 million for Q1 2021, significantly lower than $257.7 million in Q1 2020[125] - Contract receivables decreased to $214.3 million as of March 31, 2021, from $222.9 million on December 31, 2020, a decrease of 3.0%[115] Shareholder Returns - The company repurchased 151,200 shares at an average price of $84.36 per share during Q1 2021[122] - Cash dividends paid during both periods totaled $2.6 million, indicating consistent shareholder returns[126] Debt and Financing - Long-term debt increased to $326.9 million as of March 31, 2021, from $315.8 million on December 31, 2020, an increase of 3.5%[119] - The company has $33.3 million remaining available for share repurchases under the Credit Facility as of March 31, 2021[123] - For the three months ended March 31, 2021, cash flows used in financing activities amounted to $33.3 million, primarily due to restricted contract funds payment of $27.1 million and stock buybacks of $17.1 million[126] - The company experienced a significant decrease in financing cash flows from 2020 to 2021, reflecting a drop of approximately 89.8%[126] Workforce and Operations - The company had nearly 7,500 full and part-time employees globally, serving clients from over 56 regional offices in the U.S. and more than 22 international offices[80] - The company has utilized staff reductions and furloughs in response to the pandemic but has been able to reduce these measures as of March 31, 2021[79] - The company plans to begin a phased return to in-person operations no earlier than September 2021, depending on the COVID-19 situation[78] Market Position - The company believes it is well positioned to provide a broad range of services in support of federal, state, local, and international government initiatives[74] - There have been no material changes in the disclosures regarding market risk as per the Annual Report[127] Earnings Per Share - Non-GAAP diluted EPS for Q1 2021 was $1.13, up from $0.83 in Q1 2020, reflecting a 36.1% increase[110] Days Sales Outstanding - Days-sales-outstanding (DSO) increased to 80 days for Q1 2021, compared to 67 days for Q4 2020 and 88 days for Q1 2020[116]

ICF International, Inc. (NASDAQ:ICFI) Q4 2020 Earnings Conference Call February 25, 2021 4:30 PM ET Company Participants Lynn Morgen - Investor Relations, AdvisIRy Partners John Wasson - President and Chief Executive Officer Bettina Garcia Welsh - Chief Financial Officer Conference Call Participants Joseph Vafi - Canaccord Genuity Tobey Sommer - Truist Securities Sam England - Berenberg Capital Markets LLC Trevor Romeo - William Blair & Company Kevin Steinke - Barrington Research Associates, Inc. Marc Riddi ...

Part I [Business](index=4&type=section&id=ITEM%201.%20Business) ICF provides professional services and technology-based solutions to government and commercial clients across four key markets Key Financial Metrics | Financial Metric | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Revenue** | $1,506.9M | $1,478.5M | $1,338.0M | | **Total Backlog** | $2,897.6M | $2,402.7M | $2,377.7M | - The company's primary services include Advisory, Program Implementation, Analytics, Digital, and Engagement Services[19](index=19&type=chunk) - In January 2020, ICF acquired Incentive Technology Group, LLC (ITG) to strengthen its offerings in **IT modernization and cloud-based platform services** for the federal government[42](index=42&type=chunk)[59](index=59&type=chunk) Revenue by Client Type | Client Type | 2020 Revenue % | 2019 Revenue % | 2018 Revenue % | | :--- | :--- | :--- | :--- | | **Government** | 65% | 65% | 64% | | **Commercial** | 35% | 35% | 36% | [Key Markets and Services](index=6&type=section&id=1.1%20Key%20Markets%20and%20Services) ICF operates across four key markets, providing energy, health, security, and consumer-focused professional services and solutions - In the **Energy, Environment, and Infrastructure** market, ICF assists with power market analysis, energy efficiency programs, and environmental compliance for infrastructure projects[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - In **Health, Education, and Social Programs**, the company supports HHS, NIH, and CDC with data collection, program management, and IT applications, including extensive support for disaster recovery programs[37](index=37&type=chunk) - The **Safety and Security** market work includes supporting DoD with logistics and cybersecurity, and DHS with critical infrastructure protection and emergency preparedness[42](index=42&type=chunk)[43](index=43&type=chunk) - In the **Consumer and Financial** market, ICF combines strategic communications and marketing with interactive technologies to help companies engage with customers, focusing on loyalty marketing and e-commerce[44](index=44&type=chunk) [Client and Contract Mix](index=13&type=section&id=1.2%20Client%20and%20Contract%20Mix) In 2020, government clients represented 65% of revenue, with HHS being the largest, while prime contracts constituted 92% of total revenue Top Government Clients by Revenue Percentage | Top Government Client | 2020 Revenue % | 2019 Revenue % | 2018 Revenue % | | :--- | :--- | :--- | :--- | | Dept. of Health and Human Services | 17% | 16% | 17% | | Dept. of Defense | 6% | 6% | 5% | | Dept. of State | 5% | 4% | 6% | | Commonwealth of Puerto Rico | 4% | 8% | — | - Revenue from prime contracts accounted for approximately **92% of total revenue** in 2020, 2019, and 2018[69](index=69&type=chunk) - International revenues **decreased by $41.0 million** to $153.5 million in 2020, a decline attributed to COVID-19 impacts on programs for clients in Europe and the U.K[71](index=71&type=chunk) [Contract Backlog](index=14&type=section&id=1.3%20Contract%20Backlog) The company's total contract backlog increased to $2.9 billion at the end of 2020, driven by growth in both funded and unfunded components Contract Backlog Breakdown (in millions) | Backlog (in millions) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Funded** | $1,522.3 | $1,268.4 | $1,140.1 | | **Unfunded** | $1,375.3 | $1,134.3 | $1,237.6 | | **Total Backlog** | $2,897.6 | $2,402.7 | $2,377.7 | - Total backlog is defined as the future revenue expected from contracts and other engagements, including priced but unexercised contract options[72](index=72&type=chunk) [Human Capital](index=15&type=section&id=1.4%20Human%20Capital) ICF employed approximately 7,500 people with a low voluntary turnover rate and a strong commitment to diversity and inclusion - The company employs approximately 7,500 people, with a **voluntary turnover rate of 11.7%** in 2020, significantly below the industry benchmark[83](index=83&type=chunk) - In 2020, **56% of employees identified as female**, and within the U.S., 21% classified as non-white, while 50% of managers are female[85](index=85&type=chunk) - The company promoted 11.2% of its employees in 2020 and its learning and development programs achieved a **93.1% satisfaction rating**[84](index=84&type=chunk) [Risk Factors](index=16&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces material risks from its dependence on government contracts, the COVID-19 pandemic, cybersecurity threats, and acquisition integration - A majority of revenue is derived from government contracts, making the company **vulnerable to budget delays, continuing resolutions, and government shutdowns**[87](index=87&type=chunk)[91](index=91&type=chunk) - The **COVID-19 pandemic** presents risks including reduced demand for services, slowdowns in client decision-making, and potential workforce disruptions[92](index=92&type=chunk)[94](index=94&type=chunk) - The completed Road Home contract with the State of Louisiana continues to pose a risk, with a pending lawsuit seeking approximately **$220.2 million in alleged overpayments**[125](index=125&type=chunk)[128](index=128&type=chunk) - **Cybersecurity attacks** are a constant risk, with heightened threats due to the company's status as a federal contractor handling sensitive data[135](index=135&type=chunk)[136](index=136&type=chunk) - As of December 31, 2020, **goodwill and purchased intangibles accounted for approximately 55% and 4% of total assets**, respectively, creating a risk of impairment write-downs[147](index=147&type=chunk) [Properties](index=29&type=section&id=ITEM%202.%20Properties) ICF leases all its office space, totaling approximately 1.3 million square feet, and has secured a new headquarters lease in Reston, Virginia - The company leases all its properties, with approximately **1.3 million square feet** of office space in over 75 locations as of year-end 2020[160](index=160&type=chunk) - A new corporate headquarters lease in Reston, VA will commence on March 1, 2022, covering approximately **208,000 square feet** with a term extending to April 2039[159](index=159&type=chunk) [Legal Proceedings](index=29&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in ordinary course legal matters and provides a specific update on the Road Home contract litigation - The company is involved in various legal matters, but does not believe they will have a material adverse effect on its financial position[161](index=161&type=chunk) - Litigation related to the **Road Home contract** is ongoing and discussed further in Note 20 of the financial statements[162](index=162&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=ITEM%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ICF's stock trades on NASDAQ as 'ICFI', the company plans to continue dividends, and it repurchased 71,762 shares in Q4 2020 - The company's common stock trades on the NASDAQ Global Select Market under the symbol **'ICFI'**[166](index=166&type=chunk) Q4 2020 Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | **Q4 2020 Total** | 102,437 | $73.33 | 71,762 | $46,097,458 | - The current share repurchase program, extended in November 2019, authorizes up to **$100.0 million** in repurchases[174](index=174&type=chunk) [Selected Financial Data](index=33&type=section&id=ITEM%206.%20Selected%20Financial%20Data) The company shows consistent five-year revenue growth to $1.51 billion in 2020, with fluctuating net income and steadily growing total assets Selected Financial Data | (in thousands, except per share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Revenue** | $1,506,875 | $1,478,525 | $1,337,973 | | **Operating Income** | $89,109 | $101,393 | $92,272 | | **Net Income** | $54,959 | $68,938 | $61,400 | | **Diluted EPS** | $2.87 | $3.59 | $3.18 | | **Total Assets** | $1,667,290 | $1,396,034 | $1,213,862 | | **Total Stockholders' Equity** | $746,961 | $714,551 | $660,417 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=ITEM%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 1.9% in 2020, but net income decreased 20.3% due to higher costs, while liquidity improved with strong cash from operations Key Performance Changes (2020 vs 2019) | Metric | 2020 vs 2019 Change | Reason | | :--- | :--- | :--- | | **Revenue** | +1.9% | Increase in federal government revenue (including ITG acquisition), offset by decreases in state/local and international government revenue | | **Operating Income** | -12.1% | Increase in indirect & selling expenses and amortization of intangible assets | | **Net Income** | -20.3% | Lower operating income and higher interest expense | | **Cash from Operations** | +$81.7M | Strong collections on disaster relief contracts and deferred employer social security taxes under the CARES Act | - The company completed the acquisition of Incentive Technology Group (ITG) in January 2020 for **$255.0 million** to enhance its IT modernization and cloud platform services for federal clients[197](index=197&type=chunk) - The COVID-19 pandemic negatively impacted commercial marketing services related to travel and events, but the majority of government work continued; the company deferred **$20.9 million** in employer Social Security taxes under the CARES Act[189](index=189&type=chunk)[190](index=190&type=chunk) [Results of Operations](index=44&type=section&id=7.1%20Results%20of%20Operations) In 2020, revenue grew 1.9% to $1.51 billion, while operating income and net income fell 12.1% and 20.3% respectively due to higher costs Consolidated Results of Operations | (in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $1,506,875 | $1,478,525 | 1.9% | | **Direct Costs** | $972,406 | $953,187 | 2.0% | | **Indirect and selling expenses** | $411,612 | $395,763 | 4.0% | | **Amortization of intangible assets** | $13,349 | $8,083 | 65.1% | | **Operating Income** | $89,109 | $101,393 | (12.1)% | | **Net Income** | $54,959 | $68,938 | (20.3)% | - The increase in indirect and selling expenses was driven by higher indirect labor and compensation costs, including **$8.8 million** related to the retiring Executive Chair's employment agreement, and **$4.4 million** in expenses for lease terminations[251](index=251&type=chunk) - The effective tax rate increased to **26.4%** in 2020 from 23.6% in 2019[257](index=257&type=chunk) [Non-GAAP Measures](index=45&type=section&id=7.2%20Non-GAAP%20Measures) The company's non-GAAP metrics show a 4.1% growth in service revenue and a slight increase in Non-GAAP Diluted EPS to $4.17 Reconciliation of Revenue to Service Revenue | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Revenue** | $1,506,875 | $1,478,525 | | **Subcontractor and other direct costs** | $(463,364) | $(475,717) | | **Service revenue** | $1,043,511 | $1,002,808 | Reconciliation of Net Income to Adjusted EBITDA | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Net income** | $54,959 | $68,938 | | **EBITDA** | $122,857 | $129,575 | | **Total special charges and adjustments** | $20,305 | $5,208 | | **Adjusted EBITDA** | $143,162 | $134,783 | Reconciliation of GAAP EPS to Non-GAAP EPS | Per Share Data | 2020 | 2019 | | :--- | :--- | :--- | | **Diluted EPS (GAAP)** | $2.87 | $3.59 | | **Total Adjustments** | $1.30 | $0.56 | | **Non-GAAP EPS** | $4.17 | $4.15 | [Liquidity and Capital Resources](index=48&type=section&id=7.3%20Liquidity%20and%20Capital%20Resources) Liquidity strengthened with a significant increase in cash from operations to $173.1 million and an improved DSO of 67 days - In March 2020, the company amended its Credit Facility, adding a **$200.0 million term loan** and extending the maturity to March 2025[268](index=268&type=chunk) Summary of Cash Flows | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $173,145 | $91,440 | | **Net cash used in investing activities** | $(270,948) | $(30,470) | | **Net cash provided by (used in) financing activities** | $169,955 | $(67,640) | - **Days-sales-outstanding (DSO) decreased from 83 days** at year-end 2019 to **67 days** at year-end 2020, primarily due to strong collections from disaster relief contracts and accelerated collections for media placements[273](index=273&type=chunk)[284](index=284&type=chunk) - During 2020, the company repurchased 278,582 shares at an average price of $78.66 per share; **$46.1 million remained available for repurchases** at year-end[281](index=281&type=chunk)[489](index=489&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=52&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to interest rate risk, managed via swaps, and foreign exchange risk from its international operations - A **1% increase in interest rates** would have increased 2020 interest expense by approximately **$4.3 million**[294](index=294&type=chunk) - The company has four interest rate swap agreements with a total notional amount of **$200.0 million** to hedge against interest rate changes[294](index=294&type=chunk) - A **10% change in the value of the U.S. dollar** against all currencies would have an estimated impact on revenue of approximately **$11.7 million**[294](index=294&type=chunk) [Controls and Procedures](index=53&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls, procedures, and internal controls were effective - The Principal Executive Officer and Principal Financial Officer concluded that **disclosure controls and procedures were effective** as of December 31, 2020[298](index=298&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of December 31, 2020, based on the COSO framework[299](index=299&type=chunk) Part III Part III incorporates information by reference from the company's 2021 Proxy Statement for items 10 through 14 [Directors, Executive Officers, and Corporate Governance](index=54&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the 2021 Proxy Statement[306](index=306&type=chunk) [Executive Compensation](index=54&type=section&id=ITEM%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the 2021 Proxy Statement[307](index=307&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=54&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information regarding security ownership is **incorporated by reference** from the 2021 Proxy Statement[308](index=308&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=54&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is **incorporated by reference** from the 2021 Proxy Statement[309](index=309&type=chunk) [Principal Accountant Fees and Services](index=54&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference** from the 2021 Proxy Statement[310](index=310&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=55&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section contains the consolidated financial statements, auditor's report, and exhibits, with revenue recognition on fixed-price contracts noted as a critical audit matter - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion** on the financial statements and internal controls over financial reporting[324](index=324&type=chunk)[325](index=325&type=chunk)[338](index=338&type=chunk) - The auditor identified **'Revenue Recognition – Estimates-at-Completion'** for fixed-price contracts as a critical audit matter due to the significant management judgments involved[329](index=329&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk) [Note 10 - Long-Term Debt](index=76&type=section&id=Note%2010%20-%20Long-Term%20Debt) Total long-term debt increased to $313.2 million due to a new $200 million term loan used to finance the ITG acquisition Long-Term Debt Composition | (in thousands) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Term Loan | $192,500 | $— | | Revolving Credit | $123,281 | $165,444 | | **Total before debt issuance costs** | **$315,781** | **$165,444** | - In March 2020, the company amended its credit facility to add a **$200 million term loan**, increase the swing line to $75 million, and extend the maturity to March 3, 2025[424](index=424&type=chunk) - Financial covenants require an Interest Coverage Ratio of not less than 3.00 to 1.00 and a Leverage Ratio of not more than 4.00 to 1.00; the company was **in compliance** as of year-end[426](index=426&type=chunk) [Note 15 - Accounting for Stock-Based Compensation](index=84&type=section&id=Note%2015%20-%20Accounting%20for%20Stock-Based%20Compensation) The company recognized $24.6 million in stock-based compensation expense in 2020, with $22.1 million in unrecognized expense remaining Stock-Based Compensation Expense | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Stock-Based Comp. Expense** | $24,570 | $26,031 | $19,581 | - As of December 31, 2020, there were **305,399 non-vested RSUs** and **241,481 non-vested CSRSUs** outstanding[466](index=466&type=chunk)[469](index=469&type=chunk) - Performance Share Awards (PSAs) vest based on two goals: **compounded annual growth in EPS** and **relative Total Shareholder Return (rTSR)** over a three-year period[473](index=473&type=chunk) [Note 16 - Business Combinations](index=89&type=section&id=Note%2016%20-%20Business%20Combinations) The company acquired ITG for $255.0 million, resulting in $188.3 million of goodwill, and also acquired Eco-Tech Consultants, Inc - The company acquired ITG on January 31, 2020, for **$255.0 million** to augment its federal government business with cloud-based platform services[480](index=480&type=chunk) - The ITG acquisition resulted in preliminary allocations of **$188.3 million to goodwill** and **$47.3 million to other intangible assets**, with the goodwill expected to be deductible for tax purposes[481](index=481&type=chunk) [Note 20 - Commitment and Contingencies](index=91&type=section&id=Note%2020%20-%20Commitment%20and%20Contingencies) The company faces a $220.2 million claim from the State of Louisiana regarding the Road Home Program, which it believes is without merit - The State of Louisiana is seeking approximately **$220.2 million** from an ICF subsidiary related to the administration of the Road Home Program, which ended in 2009; the company believes the claim is without merit[496](index=496&type=chunk)[498](index=498&type=chunk) - Executive Chair Sudhakar Kesavan retired on December 31, 2020, triggering compensation under his employment agreement, including **$1.8 million in severance** and a **$0.9 million pro rata bonus**[499](index=499&type=chunk)

ICF International, Inc. (NASDAQ:ICFI) Q3 2020 Results Earnings Conference Call November 5, 2020 4:30 PM ET Company Participants Lynn Morgen - AdvisIRy Partners, IR John Wasson - President and CEO Bettina Welsh - Chief Financial Officer Sudhakar Kesavan - Executive Chairman James Morgan - Chief, Business Operations Conference Call Participants Tobey Sommer - Truist Securities Sam England - Berenberg Joseph Vafi - Canaccord Andrew Nicholas - William Blair Marc Riddick - Sidoti Operator Welcome to the Third Qu ...

PART I. FINANCIAL INFORMATION The first part presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of comprehensive income, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items for ICF International, Inc. and its subsidiaries [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show the company's financial position at September 30, 2020, compared to December 31, 2019, highlighting changes in assets, liabilities, and stockholders' equity | (in thousands) | September 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------------- | :------------------ | | **ASSETS** | | | | Total Current Assets | $410,579 | $434,717 | | Property and Equipment, net | $62,020 | $58,237 | | Goodwill | $906,999 | $719,934 | | Other intangible assets, net | $63,200 | $25,829 | | Total Assets | $1,607,471 | $1,396,034 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total Current Liabilities | $305,747 | $337,982 | | Total Liabilities | $880,560 | $681,483 | | Total Stockholders' Equity | $726,911 | $714,551 | | Total Liabilities and Stockholders' Equity | $1,607,471 | $1,396,034 | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The consolidated statements of comprehensive income provide a comparative view of the company's financial performance for the three and nine months ended September 30, 2020 and 2019, detailing revenue, expenses, net income, and earnings per share | (in thousands, except per share amounts) | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $360,315 | $373,918 | $1,072,540 | $1,081,889 | | Operating income | $28,250 | $28,664 | $67,351 | $73,095 | | Net income | $17,871 | $19,630 | $42,139 | $49,559 | | Basic Earnings per Share | $0.95 | $1.04 | $2.24 | $2.63 | | Diluted Earnings per Share | $0.94 | $1.02 | $2.20 | $2.58 | | Comprehensive income, net of tax | $21,542 | $16,349 | $34,523 | $43,708 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows outline the cash generated from or used in operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019, showing a significant increase in cash from operating and financing activities in 2020 | (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $95,171 | $6,364 | | Net Cash Used in Investing Activities | $(266,000) | $(24,255) | | Net Cash Provided by Financing Activities | $172,707 | $12,631 | | Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $1,755 | $(5,534) | | Cash, Cash Equivalents, and Restricted Cash, End of Period | $8,237 | $7,452 | [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, specific account balances, and other relevant financial information [NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION%20AND%20NATURE%20OF%20OPERATIONS) This note describes the company's business as a provider of professional services and technology-based solutions to government and commercial clients across four key markets, outlining its primary services and the use of estimates in financial reporting - The Company provides professional services and technology-based solutions to government and commercial clients, including management, marketing, technology, and policy consulting and implementation services[17](index=17&type=chunk) - Key client markets include **energy, environment, and infrastructure**; **health, education, and social programs**; **safety and security**; and **consumer and financial services**[17](index=17&type=chunk) - The Company adopted ASU 2016-13, resulting in a cumulative-effect adjustment of **$0.5 million** to opening retained earnings[28](index=28&type=chunk) [NOTE 2 – CONTRACT RECEIVABLES, NET](index=8&type=section&id=NOTE%202%20%E2%80%93%20CONTRACT%20RECEIVABLES%2C%20NET) This note details the composition of contract receivables, net, including billed and billable amounts and the allowance for doubtful accounts, showing a decrease in net contract receivables from December 31, 2019, to September 30, 2020 | (in thousands) | September 30, 2020 | December 31, 2019 | | :-------------------------- | :------------------- | :------------------ | | Billed and billable | $235,431 | $264,682 | | Allowance for doubtful accounts | $(5,154) | $(3,506) | | Contract receivables, net | $230,277 | $261,176 | [NOTE 3 – GOODWILL](index=8&type=section&id=NOTE%203%20%E2%80%93%20GOODWILL) This note outlines the changes in the carrying amount of goodwill, primarily driven by the acquisition of Incentive Technology Group (ITG) during the nine-month period ended September 30, 2020 | | Amount (in thousands) | | :------------------------------------------ | :---------------------- | | Balance as of December 31, 2019 | $719,934 | | Goodwill resulting from business combination – ITG | $188,253 | | Effect of foreign currency translation | $(1,188) | | Balance as of September 30, 2020 | $906,999 | [NOTE 4 – LONG-TERM DEBT](index=8&type=section&id=NOTE%204%20%E2%80%93%20LONG-TERM%20DEBT) This note details the company's long-term debt, including a new term loan facility and an increased revolving line of credit under the Credit Facility, primarily to finance the ITG acquisition | Debt Type | September 30, 2020 (Outstanding Balance, in thousands) | December 31, 2019 (Outstanding Balance, in thousands) | | :------------------------ | :--------------------------------------- | :-------------------------------------- | | Term Loan | $195,000 | $0 | | Revolving Credit | $180,000 | $165,444 | | Total before debt issuance costs | $375,000 | $165,444 | | Unamortized debt issuance costs | $(2,720) | $(1,183) | | Total Debt | $372,280 | $164,261 | - On March 3, 2020, the Company amended its Credit Facility, adding a new **$200.0 million** term loan facility and increasing the revolving line of credit to **$600.0 million**[32](index=32&type=chunk)[33](index=33&type=chunk) - As of September 30, 2020, the Company had **$375.0 million** long-term debt outstanding and was in compliance with its financial covenants, including an Interest Coverage Ratio of not less than **3.00 to 1.00** and a Leverage Ratio of not more than **4.00 to 1.00** (with a step-up to 4.25 to 1.0)[34](index=34&type=chunk)[35](index=35&type=chunk) [NOTE 5 – LEASES](index=9&type=section&id=NOTE%205%20%E2%80%93%20LEASES) This note provides details on the company's operating leases for facilities and equipment, including right-of-use assets, liabilities, rent expense, and future minimum lease payments | (in thousands) | September 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------------- | :------------------ | | Total operating lease right-of-use assets | $138,582 | $133,965 | | Total operating lease liabilities | $157,555 | $151,750 (implied from current/non-current) | | Operating lease costs (3 months) | $9,605 | $9,256 | | Operating lease costs (9 months) | $28,375 | $26,762 | - Future minimum lease payments under non-cancellable leases totaled **$174.9 million** as of September 30, 2020[39](index=39&type=chunk) - The Company had an additional operating lease not yet commenced with a potential liability of **$117.4 million**, anticipated to start in 2022[39](index=39&type=chunk) [NOTE 6 – OTHER COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS](index=10&type=section&id=NOTE%206%20%E2%80%93%20OTHER%20COMPREHENSIVE%20%28LOSS%29%20INCOME%20AND%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note details the components of other comprehensive income (loss) and accumulated other comprehensive loss, including foreign currency translation adjustments, gains on interest rate hedge agreements, and changes in the fair value of interest rate hedges for both three and nine-month periods | (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :------------------------------------------------ | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Total current period other comprehensive (loss) income | $3,671 | $(3,281) | $(7,616) | $(5,851) | | Accumulated other comprehensive (loss) income at period end | $(19,760) | $(18,402) | $(19,760) | $(18,402) | [NOTE 7 – STOCKHOLDERS' EQUITY](index=12&type=section&id=NOTE%207%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) This note presents a comprehensive breakdown of changes in stockholders' equity for the three and nine months ended September 30, 2020 and 2019, covering net income, other comprehensive income, equity compensation, stock option exercises, share buybacks, and dividends | (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :-------------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Balance at beginning of period | $705,103 | $666,637 | $714,551 | $660,417 | | Net income | $17,871 | $19,630 | $42,139 | $49,559 | | Other comprehensive income (loss) | $3,671 | $(3,281) | $(7,616) | $(5,851) | | Equity compensation | $3,128 | $3,817 | $9,472 | $11,682 | | Net payments for stock issuances and buybacks | $(223) | $(143) | $(23,247) | $(24,301) | | Dividends declared | $(2,639) | $(2,622) | $(7,912) | $(7,898) | | Balance at end of period | $726,911 | $685,502 | $726,911 | $685,502 | - The effective tax rate for the three months ended September 30, 2020, was **27.2%** (2019: 23.6%), and for the nine months, it was **25.7%** (2019: 23.2%)[43](index=43&type=chunk) [NOTE 8 – RESTRICTED CASH](index=13&type=section&id=NOTE%208%20%E2%80%93%20RESTRICTED%20CASH) This note reconciles cash and cash equivalents with restricted cash as reported in the consolidated balance sheets and statements of cash flows for the nine months ended September 30, 2020 and 2019 | (in thousands) | 2020 (Beginning) | 2020 (Ending) | 2019 (Beginning) | 2019 (Ending) | | :------------------------------------------------------------------------------------------------ | :--------------- | :-------------- | :--------------- | :-------------- | | Cash and cash equivalents | $6,482 | $8,237 | $11,694 | $7,452 | | Restricted cash - non-current | $0 | $0 | $1,292 | $0 | | Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows | $6,482 | $8,237 | $12,986 | $7,452 | [NOTE 9 – REVENUE RECOGNITION](index=13&type=section&id=NOTE%209%20%E2%80%93%20REVENUE%20RECOGNITION) This note disaggregates revenue by client market, client type, and contract mix for the three and nine months ended September 30, 2020 and 2019, also detailing changes in contract assets and liabilities Revenue by Client Markets | Client Markets (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :-------------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Energy, environment, and infrastructure | $148,286 (41%) | $170,640 (46%) | $451,404 (42%) | $485,925 (45%) | | Health, education, and social programs | $159,508 (44%) | $143,433 (38%) | $457,553 (43%) | $408,712 (38%) | | Safety and security | $29,281 (8%) | $29,416 (8%) | $89,978 (8%) | $88,249 (8%) | | Consumer and financial services | $23,240 (7%) | $30,429 (8%) | $73,605 (7%) | $99,003 (9%) | | Total | $360,315 (100%) | $373,918 (100%) | $1,072,540 (100%) | $1,081,889 (100%) | Revenue by Client Type | Client Type (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :--------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | U.S. federal government | $175,093 (49%) | $148,339 (40%) | $501,496 (47%) | $421,696 (39%) | | U.S. state and local government | $51,589 (14%) | $71,505 (19%) | $170,617 (16%) | $209,993 (19%) | | International government | $20,299 (6%) | $28,003 (7%) | $61,421 (6%) | $86,839 (8%) | | Commercial | $113,334 (31%) | $126,071 (34%) | $339,006 (31%) | $363,361 (34%) | | Total | $360,315 (100%) | $373,918 (100%) | $1,072,540 (100%) | $1,081,889 (100%) | Net Contract Assets (Liabilities) | (in thousands) | September 30, 2020 | December 31, 2019 | $ Change | % Change | | :-------------------------- | :------------------- | :------------------ | :--------- | :--------- | | Contract assets | $139,860 | $142,337 | $(2,477) | -1.7% | | Contract liabilities | $(36,473) | $(37,413) | $940 | (2.5%) | | Net contract assets (liabilities) | $103,387 | $104,924 | $(1,537) | -1.5% | [NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=15&type=section&id=NOTE%2010%20%E2%80%93%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note explains the company's use of derivative instruments, specifically fixed interest rate swaps, to manage interest rate risk on variable rate borrowings - The Company uses fixed interest rate swaps to convert a portion of variable interest rate payments to fixed payments, designated as cash flow hedges[52](index=52&type=chunk) - On February 20, 2020, a new floating-to-fixed interest rate swap for **$100.0 million** notional amount was entered, with a fixed rate of **1.294%** per annum from February 28, 2020, to February 28, 2025[53](index=53&type=chunk) [NOTE 11 – INCOME TAXES](index=15&type=section&id=NOTE%2011%20%E2%80%93%20INCOME%20TAXES) This note provides information on the company's effective tax rates, unrecognized tax benefits, and the impact of COVID-19 tax-relief programs, including the deferral of employer Social Security taxes under the CARES Act | Period | Effective Tax Rate | | :-------------------------------- | :------------------- | | Three Months Ended Sep 30, 2020 | 27.2% | | Three Months Ended Sep 30, 2019 | 23.6% | | Nine Months Ended Sep 30, 2020 | 25.7% | | Nine Months Ended Sep 30, 2019 | 23.2% | - The Company deferred approximately **$13.5 million** of employer Social Security taxes during the nine months ended September 30, 2020, under the CARES Act[60](index=60&type=chunk) [NOTE 12 – ACCOUNTING FOR STOCK COMPENSATION](index=16&type=section&id=NOTE%2012%20%E2%80%93%20ACCOUNTING%20FOR%20STOCK%20COMPENSATION) This note details the 2018 Omnibus Incentive Plan, including the types of awards granted (RSUs, CSRSUs, PSAs) and the associated stock-based compensation expense, specifying shares available and unrecognized expense - The 2018 Omnibus Plan allows for granting **1,600,000 shares**, with approximately **1,112,118 shares** available for grant as of September 30, 2020[62](index=62&type=chunk) | Period | Stock-based Compensation Expense (in millions) | | :-------------------------------- | :--------------------------------------------- | | Three Months Ended Sep 30, 2020 | $4.5 | | Three Months Ended Sep 30, 2019 | $6.5 | - Unrecognized compensation expense totaled approximately **$15.1 million** for RSUs, **$8.4 million** for CSRSUs, and **$3.0 million** for PSAs as of September 30, 2020[64](index=64&type=chunk) [NOTE 13 – FAIR VALUE](index=16&type=section&id=NOTE%2013%20%E2%80%93%20FAIR%20VALUE) This note presents the fair value measurements of financial instruments on a recurring basis, categorized by Level 1, Level 2, and Level 3 inputs, for September 30, 2020, and December 31, 2019 | (in thousands) | September 30, 2020 (Total) | December 31, 2019 (Total) | | :---------------------------------------------------------------- | :--------------------------- | :-------------------------- | | **Assets:** | | | | Forward contract agreements | $9 | $733 | | Deferred compensation investments in cash surrender life insurance | $15,117 | $15,020 | | Total Assets | $15,126 | $15,753 | | **Liabilities:** | | | | Deferred compensation plan liabilities | $15,299 | $14,855 | | Interest rate swaps | $12,179 | $3,811 | | Total Liabilities | $27,478 | $18,666 | [NOTE 14 – BUSINESS COMBINATION](index=17&type=section&id=NOTE%2014%20%E2%80%93%20BUSINESS%20COMBINATION) This note details the acquisition of Incentive Technology Group, LLC (ITG) on January 31, 2020, for $255.0 million, resulting in significant goodwill and other intangible assets - On January 31, 2020, the Company acquired ITG for **$255.0 million**, enhancing its federal government business with cloud-based platform services[67](index=67&type=chunk) - The acquisition resulted in **$188.3 million** in goodwill and **$47.3 million** in other intangible assets, with a weighted average amortization period of **5.7 years**[68](index=68&type=chunk) [NOTE 15 – EARNINGS PER SHARE](index=17&type=section&id=NOTE%2015%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note explains the calculation of basic and diluted earnings per share (EPS), detailing weighted-average shares outstanding and the dilutive effect of stock options, RSUs, and performance shares | | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :---------------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $17,871 | $19,630 | $42,139 | $49,559 | | Weighted-average number of basic shares outstanding | 18,853 | 18,799 | 18,841 | 18,810 | | Dilutive effect of stock options, RSUs, and performance shares | 233 | 370 | 270 | 398 | | Weighted-average number of diluted shares outstanding | 19,086 | 19,169 | 19,111 | 19,208 | | Basic earnings per share | $0.95 | $1.04 | $2.24 | $2.63 | | Diluted earnings per share | $0.94 | $1.02 | $2.20 | $2.58 | [NOTE 16 – SHARE REPURCHASE PROGRAM](index=18&type=section&id=NOTE%2016%20%E2%80%93%20SHARE%20REPURCHASE%20PROGRAM) This note describes the company's share repurchase program, which authorizes repurchases up to $100.0 million, noting the termination of its Rule 10b5-1 plan due to COVID-19 uncertainties - The share repurchase program authorizes repurchases up to **$100.0 million**, subject to Credit Facility limitations[73](index=73&type=chunk) - The Rule 10b5-1 plan element was terminated on **March 13, 2020**, due to COVID-19 uncertainties[73](index=73&type=chunk) - As of September 30, 2020, **$51.4 million** remained available for share repurchases[73](index=73&type=chunk) [NOTE 17 – SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2017%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses subsequent events, including a board-approved cash dividend and the ongoing assessment of the COVID-19 pandemic's impact on the company's future financial position - On **November 5, 2020**, the board approved a **$0.14 per share** cash dividend, payable January 12, 2021[74](index=74&type=chunk) - The Company is continuously monitoring and assessing the impact of the COVID-19 pandemic on its business, customers, employees, and financial results[75](index=75&type=chunk) [NOTE 18 – CONTINGENCIES](index=18&type=section&id=NOTE%2018%20%E2%80%93%20CONTINGENCIES) This note addresses legal matters, specifically the ongoing Road Home Program litigation where the State of Louisiana seeks approximately $220.2 million in alleged overpayments, which the company believes lacks merit - The Company is involved in various legal matters, including a lawsuit by the State of Louisiana seeking **$220.2 million** related to the Road Home Program[77](index=77&type=chunk)[78](index=78&type=chunk) - The Company believes the Road Home claim has no merit and intends to vigorously defend its position, thus no liability has been recorded[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity, offering insights into performance drivers, critical accounting policies, and the impact of external factors like the COVID-19 pandemic [Forward-Looking Statements](index=20&type=section&id=Forward-Looking%20Statements) This subsection serves as a cautionary statement regarding forward-looking information, highlighting known and unknown risks that could cause actual results to differ materially from expectations - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[80](index=80&type=chunk) - Key risk factors include dependence on government contracts, changes in government spending, effects of COVID-19, audit results, cyclical commercial work, and integration challenges from acquisitions[80](index=80&type=chunk) [Impacts of the COVID-19 Pandemic](index=21&type=section&id=Impacts%20of%20the%20COVID-19%20Pandemic) This section details the significant uncertainty and potential adverse effects of the COVID-19 pandemic on the company's operations, balance sheet, results, and cash flows, discussing mitigation strategies - COVID-19 creates significant uncertainty, potentially impacting operations, balance sheet, results, and cash flows, with adverse effects on staff health, travel, client decision-making, and spending priorities[83](index=83&type=chunk) - Government clients (**69% of revenue**) have shown continuity, while commercial marketing services (less than **12% of revenue**) were impacted by travel restrictions and event cancellations[84](index=84&type=chunk)[85](index=85&type=chunk) - Management actions include remote work, staff reductions, furloughs, temporary wage reductions, and deferral of **$13.5 million** in employer Social Security taxes under the CARES Act[86](index=86&type=chunk)[87](index=87&type=chunk) [Overview and Outlook](index=21&type=section&id=Overview%20and%20Outlook) This section provides an overview of the company's professional services and technology-based solutions, its four key client markets, and primary service offerings, outlining long-term growth opportunities and strategic acquisitions - The Company provides professional services and technology-based solutions in **Energy, Environment, and Infrastructure**; **Health, Education, and Social Programs**; **Safety and Security**; and **Consumer and Financial Services**[88](index=88&type=chunk)[94](index=94&type=chunk) - Primary services include **Advisory, Program Implementation, Analytics, Digital, and Engagement Services**[94](index=94&type=chunk) - Long-term demand for services is expected to grow due to critical societal and natural resource issues, with a focus on leveraging digital and client engagement capabilities and strategic acquisitions like ITG[91](index=91&type=chunk)[92](index=92&type=chunk) [Critical Accounting Policies and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights critical accounting policies and estimates, including revenue recognition, impairment of goodwill and other intangible assets, income taxes, and stock-based compensation, emphasizing ongoing monitoring of COVID-19 impacts - Critical accounting policies include **revenue recognition**, **impairment of goodwill and other intangible assets**, **income taxes**, and **stock-based compensation**[95](index=95&type=chunk) - Goodwill and long-lived assets are tested for impairment annually or when circumstances indicate; no impairment was recognized for the period ended September 30, 2020, but COVID-19 impacts are being monitored[97](index=97&type=chunk)[98](index=98&type=chunk) [Recent Accounting Pronouncements](index=23&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for a discussion of recent accounting standards and their impact on the consolidated financial statements [Selected Key Metrics](index=23&type=section&id=Selected%20Key%20Metrics) This section explains that the company tracks revenue by client markets, client type, and contract mix to evaluate operations and understand business nature, with significant variances discussed in the revenue section of results of operations [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance for the three and nine months ended September 30, 2020, versus 2019, covering revenue, direct costs, operating expenses, and net income [Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019](index=24&type=section&id=Three%20Months%20Ended%20September%2030%2C%202020%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202019) Revenue decreased by 3.6% to $360.3 million, primarily due to a $12.7 million decrease in commercial clients, partially offset by an increase in federal government clients from the ITG acquisition, while operating income slightly decreased | (dollars in thousands) | Sep 30, 2020 | Sep 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenue | $360,315 | $373,918 | $(13,603) | (3.6%) | | Direct Costs | $223,288 | $238,158 | $(14,870) | (6.2%) | | Operating Income | $28,250 | $28,664 | $(414) | (1.4%) | | Net Income | $17,871 | $19,630 | $(1,759) | (9.0%) | - Revenue decreased by **$13,603 thousand (3.6%)**, driven by a **$12,700 thousand** decrease in commercial clients (travel-related markets impacted by COVID-19) and a **$900 thousand** decrease in government clients, partially offset by a **$26,700 thousand** increase in federal government clients (including ITG acquisition)[104](index=104&type=chunk) - Direct costs decreased by **$14,870 thousand (6.2%)**, primarily due to a **$21,100 thousand** decrease in subcontractor and other direct costs, leading to an improvement in gross margin (direct costs as a percent of revenue decreased to **62.0%** from 63.7%)[105](index=105&type=chunk) [Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019](index=25&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202020%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202019) Revenue for the nine months decreased by 0.9% to $1,072.5 million, with a $24.3 million decrease in commercial clients offset by a $15.0 million increase in government revenue, largely from federal clients including ITG, leading to a 15.0% decrease in net income | (dollars in thousands) | Sep 30, 2020 | Sep 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | Revenue | $1,072,540 | $1,081,889 | $(9,349) | (0.9%) | | Direct Costs | $677,311 | $689,160 | $(11,849) | (1.7%) | | Operating Income | $67,351 | $73,095 | $(5,744) | (7.9%) | | Net Income | $42,139 | $49,559 | $(7,420) | (15.0%) | - Revenue decreased by **$9,349 thousand (0.9%)**, primarily due to a **$24,300 thousand** decrease in commercial clients (consumer and financial services impacted by COVID-19), offset by a **$15,000 thousand** increase in government revenue, driven by a **$79,800 thousand** increase in federal clients (including ITG acquisition)[114](index=114&type=chunk)[115](index=115&type=chunk) - Direct costs decreased by **$11,849 thousand (1.7%)**, mainly from a **$39,800 thousand** decrease in subcontractor and other direct costs, improving gross margin (direct costs as a percent of revenue decreased to **63.2%** from 63.7%)[116](index=116&type=chunk) [Non-GAAP Measures](index=27&type=section&id=Non-GAAP%20Measures) This section presents non-GAAP financial measures, including Service Revenue, EBITDA, Adjusted EBITDA, and Non-GAAP Diluted Earnings per Share, providing reconciliations to their most directly comparable GAAP measures [Service Revenue](index=27&type=section&id=Service%20Revenue) Service revenue, a non-GAAP measure, represents revenue less subcontractor and other direct costs, providing insight into revenue generated from services provided by employees, showing increases for both three and nine-month periods in 2020 | (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :------------------------------ | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Revenue | $360,315 | $373,918 | $1,072,540 | $1,081,889 | | Subcontractor and other direct costs | $(95,592) | $(116,710) | $(291,217) | $(330,990) | | Service revenue | $264,723 | $257,208 | $781,323 | $750,899 | [EBITDA and Adjusted EBITDA](index=27&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) EBITDA and Adjusted EBITDA are non-GAAP measures used to evaluate operating performance, with Adjusted EBITDA excluding specific non-recurring or non-operational items, showing increases for both three and nine-month periods in 2020 | (in thousands) | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :---------------------------------------------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Net income | $17,871 | $19,630 | $42,139 | $49,559 | | EBITDA | $36,904 | $35,630 | $92,580 | $94,630 | | Total special charges | $858 | $360 | $5,648 | $2,530 | | Adjusted EBITDA | $37,762 | $35,990 | $98,228 | $97,160 | [Non-GAAP Diluted Earnings per Share](index=28&type=section&id=Non-GAAP%20Diluted%20Earnings%20per%20Share) Non-GAAP diluted EPS, a non-GAAP measure, excludes the impact of certain items like impairment, acquisition expenses, severance, facility costs, bad debt reserve adjustments, and amortization of intangibles. For the three months ended September 30, 2020, Non-GAAP EPS was $1.10, and for the nine months, it was $2.81 | | Sep 30, 2020 (3 Months) | Sep 30, 2019 (3 Months) | Sep 30, 2020 (9 Months) | Sep 30, 2019 (9 Months) | | :---------------------------------------------------------------- | :------------------------ | :------------------------ | :------------------------ | :------------------------ | | Diluted EPS | $0.94 | $1.02 | $2.20 | $2.58 | | Amortization of intangibles | $0.18 | $0.10 | $0.52 | $0.32 | | Non-GAAP EPS | $1.10 | $1.12 | $2.81 | $2.96 | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity, borrowing capacity, and financial condition, including changes in cash flows, debt, and working capital, highlighting the impact of the ITG acquisition and improved collections [Liquidity and Borrowing Capacity](index=28&type=section&id=Liquidity%20and%20Borrowing%20Capacity) The company's liquidity was enhanced by the First Amendment to the Credit Facility in March 2020, which increased borrowing capacity to fund the ITG acquisition and working capital, with expectations to meet short-term needs - The Credit Facility was amended in March 2020, adding a **$200.0 million** term loan and increasing borrowing capacity to fund the ITG acquisition and working capital[132](index=132&type=chunk)[133](index=133&type=chunk) - The company expects to meet liquidity requirements through cash flow from operations, available bank borrowings, and cash on hand, despite uncertainties from the COVID-19 pandemic[134](index=134&type=chunk)[135](index=135&type=chunk) [Financial Condition](index=29&type=section&id=Financial%20Condition) The company's financial condition saw contract receivables decrease due to improved collections, reducing Days Sales Outstanding (DSO) to 83 days, while goodwill, other intangible assets, and long-term debt increased significantly due to the ITG acquisition - Contract receivables, net, decreased to **$230.3 million** from **$261.2 million**, primarily due to improved collections from disaster relief and international business[137](index=137&type=chunk)[138](index=138&type=chunk) - Days-sales-outstanding (DSO) decreased from **94 days** (Sep 30, 2019) to **83 days** (Sep 30, 2020)[138](index=138&type=chunk) - Goodwill and other intangible assets increased due to the ITG acquisition, adding **$188.3 million** in goodwill and **$47.3 million** in intangible assets[140](index=140&type=chunk) - Long-term debt increased to **$375.0 million** from **$165.4 million**, primarily from net draws on the Credit Facility to fund the ITG acquisition[142](index=142&type=chunk) [Share Repurchase Program](index=30&type=section&id=Share%20Repurchase%20Program) The company's share repurchase program, authorizing up to $100.0 million, saw the termination of its Rule 10b5-1 plan on March 13, 2020, due to COVID-19 uncertainties, with $51.4 million remaining available - The Rule 10b5-1 plan element of the share repurchase program was terminated on **March 13, 2020**, due to COVID-19 uncertainties[146](index=146&type=chunk) - During the nine months ended September 30, 2020, **206,820 shares** were repurchased at an average price of **$80.41** per share[146](index=146&type=chunk) - As of September 30, 2020, **$51.4 million** remained available for share repurchases under the program[146](index=146&type=chunk) [Dividends](index=30&type=section&id=Dividends) This section lists the cash dividends declared per common share for 2020, with a consistent $0.14 per share approved quarterly | Dividend Declaration Date | Dividend Per Share | | :------------------------ | :------------------- | | February 27, 2020 | $0.14 | | May 5, 2020 | $0.14 | | August 4, 2020 | $0.14 | | November 5, 2020 | $0.14 | [Cash Flow](index=31&type=section&id=Cash%20Flow) Operating activities provided $95.2 million in cash for the nine months ended September 30, 2020, a significant increase from $6.4 million in 2019, driven by decreased contract receivables and deferred employer payroll taxes, while investing activities used $266.0 million primarily for the ITG acquisition | (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :---------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $95,171 | $6,364 | | Net Cash Used in Investing Activities | $(266,000) | $(24,255) | | Net Cash Provided by Financing Activities | $172,707 | $12,631 | | Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $1,755 | $(5,534) | - Operating cash flows increased significantly due to decreased contract receivables (improved collections) and the deferral of **$13.5 million** in employer payroll taxes under the CARES Act[148](index=148&type=chunk) - Investing activities used **$266.0 million**, primarily for the **$253.1 million** ITG acquisition and **$12.9 million** in capital expenditures[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section notes that there have been no material changes to market risk disclosures since the last annual report, except for the broad effects of the COVID-19 outbreak, which may impact interest rates and cause foreign currency fluctuations - The COVID-19 outbreak may affect interest rates and cause foreign currency fluctuations, impacting market risk[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and internal controls over financial reporting, concluding that they were effective as of the reporting period [Disclosure Controls and Procedures and Internal Controls Over Financial Reporting](index=32&type=section&id=Disclosure%20Controls%20and%20Procedures%20and%20Internal%20Controls%20Over%20Financial%20Reporting) The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the reporting period, ensuring timely and accurate reporting of information to the SEC - The CEO and CFO concluded that disclosure controls and procedures were effective for ensuring timely and accurate reporting[153](index=153&type=chunk) [Limitations on the Effectiveness of Controls](index=32&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This subsection acknowledges that all control systems have inherent limitations, providing only reasonable, not absolute, assurance that objectives are met, and that misstatements due to error or fraud may occur and not be detected - Control systems provide reasonable, but not absolute, assurance that objectives are met due to inherent limitations and resource constraints[154](index=154&type=chunk) PART II. OTHER INFORMATION The second part provides additional information including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters in the ordinary course of business but believes that any ultimate liability will not have a material adverse effect on its financial position, results of operations, or cash flows - The Company believes that any ultimate liability from ongoing legal matters will not materially adversely affect its financial position, results of operations, or cash flows[157](index=157&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the Annual Report, specifically adding new risks related to health epidemics and pandemics like COVID-19, which may materially adversely affect demand for services, staffing, client payments, and access to capital - New risk factors include those related to health epidemics and pandemics (e.g., COVID-19), which may adversely affect demand for services, staffing, client decision-making, and global business conditions[158](index=158&type=chunk)[159](index=159&type=chunk) - The pandemic could impact the workforce, subcontractors, and suppliers, potentially leading to an inability to perform contracts efficiently and delays in client payments[160](index=160&type=chunk)[161](index=161&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes the company's share repurchase activity for the three months ended September 30, 2020, noting the purchase of 3,086 shares from employees for tax withholding obligations | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------- | :------------------------------- | :--------------------------- | | July 1 - July 31 | — | — | | August 1 - August 31 | 3,086 | $72.29 | | September 1 - September 30 | — | — | | Total | 3,086 | $72.29 | - The shares purchased were from employees to pay required withholding taxes related to the settlement of restricted stock units and performance-based share awards[163](index=163&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[165](index=165&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[166](index=166&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information to report[167](index=167&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including amendments to the Credit Facility, officer certifications, and financial statements in iXBRL format - Key exhibits include the First Amendment to the Fifth Amended and Restated Business Loan and Security Agreement, officer certifications (**31.1, 31.2, 32.1, 32.2**), and financial statements in iXBRL format (**101**)[168](index=168&type=chunk)

| --- | --- | --- | --- | --- | --- | --- | |-------------|----------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | ICF Investor Presentation | | | | | | | August 2020 | | | | | | | Certain statements made by us in this presentation that are not historical facts or that relate to future plans, events, or performances are forward-looking statements within the meaning of the federal securities laws. Our actual results may differ materially from those expressed in any forward-l ...

ICF International, Inc. (NASDAQ:ICFI) Q2 2020 Earnings Conference Call August 4, 2020 4:30 PM ET Company Participants Lynn Morgen - Investor Relations John Wasson - President and Chief Executive Officer Bettina Welsh - Chief Financial Officer Sudhakar Kesavan - Executive Chairman James Morgan - Chief, Business Operations Conference Call Participants Joseph Vafi - Canaccord Tobey Sommer - SunTrust Sam England - Berenberg Capital Andrew Nicholas - William Blair Kevin Steinke - Barrington Research Marc Riddick ...

PART I. FINANCIAL INFORMATION This section provides the company's unaudited consolidated financial statements and management's discussion of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, with notes detailing accounting policies and key financial changes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Summarizes the company's financial position, showing assets, liabilities, and equity at specific points in time | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $1,615,524 | $1,396,034 | $219,490 | 15.7% | | Total Current Assets | $419,041 | $434,717 | $(15,676) | (3.6%) | | Goodwill | $905,101 | $719,934 | $185,167 | 25.7% | | Other intangible assets, net | $66,558 | $25,829 | $40,729 | 157.7% | | Total Liabilities | $910,421 | $681,483 | $228,938 | 33.6% | | Long-term debt | $440,928 | $164,261 | $276,667 | 168.4% | | Total Stockholders' Equity | $705,103 | $714,551 | $(9,448) | (1.3%) | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $353,987 | $366,717 | $(12,730) | (3.5%) | | Operating income | $22,782 | $22,542 | $240 | 1.1% | | Net income | $13,656 | $14,611 | $(955) | (6.5%) | | Basic EPS | $0.73 | $0.78 | $(0.05) | (6.4%) | | Diluted EPS | $0.72 | $0.76 | $(0.04) | (5.3%) | | Metric | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------- | :------- | | Revenue | $712,225 | $707,971 | $4,254 | 0.6% | | Operating income | $39,101 | $44,431 | $(5,330) | (12.0%) | | Net income | $24,268 | $29,929 | $(5,661) | (18.9%) | | Basic EPS | $1.29 | $1.59 | $(0.30) | (18.9%) | | Diluted EPS | $1.27 | $1.56 | $(0.29) | (18.6%) | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports the cash generated and used by operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net Cash Provided by (Used in) Operating Activities | $10,801 | $(47,946) | $58,747 | | Net Cash Used in Investing Activities | $(262,105) | $(16,335) | $(245,770) | | Net Cash Provided by Financing Activities | $254,366 | $57,492 | $196,874 | | Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | $2,582 | $(6,682) | $9,264 | [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the figures presented in the consolidated financial statements [NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS](index=6&type=section&id=NOTE%201%20-%20BASIS%20OF%20PRESENTATION%20AND%20NATURE%20OF%20OPERATIONS) Describes ICF International's professional services, client markets, U.S. GAAP basis, and recent accounting standard adoptions - The Company provides professional services and technology-based solutions to government and commercial clients, including management, marketing, technology, and policy consulting and implementation services[17](index=17&type=chunk) - Major clients include U.S. federal government departments and agencies (e.g., Department of Health and Human Services, Department of State, Department of Defense), U.S. state and local governments, international governments, and commercial clients worldwide[18](index=18&type=chunk) - The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), in Q1 2020, resulting in a **$0.5 million** cumulative-effect adjustment to opening retained earnings[28](index=28&type=chunk) [NOTE 2 – CONTRACT RECEIVABLES, NET](index=8&type=section&id=NOTE%202%20%E2%80%93%20CONTRACT%20RECEIVABLES%2C%20NET) Contract receivables, net, decreased by $36.8 million due to reduced billable amounts and increased allowance for doubtful accounts | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Billed and billable | $229,327 | $264,682 | $(35,355) | | Allowance for doubtful accounts | $(4,948) | $(3,506) | $(1,442) | | Contract receivables, net | $224,379 | $261,176 | $(36,797) | [NOTE 3 – GOODWILL](index=8&type=section&id=NOTE%203%20%E2%80%93%20GOODWILL) Goodwill increased by $185.2 million, primarily driven by the Incentive Technology Group (ITG) acquisition | Metric | Amount (in thousands) | | :------------------------------------ | :-------------------- | | Balance as of December 31, 2019 | $719,934 | | Goodwill resulting from business combination - ITG | $188,369 | | Effect of foreign currency translation | $(3,202) | | Balance as of June 30, 2020 | $905,101 | [NOTE 4 – LONG-TERM DEBT](index=8&type=section&id=NOTE%204%20%E2%80%93%20LONG-TERM%20DEBT) Long-term debt increased to $450.9 million, mainly due to a new $200.0 million term loan and increased revolving credit for the ITG acquisition | Debt Type | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Term Loan | $197,500 | $0 | $197,500 | | Revolving Credit | $256,292 | $165,444 | $90,848 | | Total before debt issuance costs | $453,792 | $165,444 | $288,348 | | Unamortized debt issuance costs | $(2,864) | $(1,183) | $(1,681) | | Total Long-term Debt | $450,928 | $164,261 | $286,667 | | Average Interest Rate (Total) | 2.74% | 3.59% | (0.85%) | - On March 3, 2020, the Company amended its Credit Facility to add a new **$200.0 million** term loan facility and increase the revolving line of credit to **$600.0 million**, extending the maturity to March 3, 2025[32](index=32&type=chunk) - As of June 30, 2020, the Company had **$453.8 million** in long-term debt outstanding and **$340.9 million** in unused borrowing capacity under the Credit Facility[35](index=35&type=chunk) [NOTE 5 – LEASES](index=9&type=section&id=NOTE%205%20%E2%80%93%20LEASES) The company holds operating leases for facilities and equipment, with ROU assets of $139.2 million and total operating lease liabilities of $154.9 million | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total operating lease right-of-use assets | $139,189 | $133,965 | | Total operating lease liabilities | $154,949 | $151,750 (calculated from current and non-current) | | Rent Expense Type | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :---------------------- | :---------------------------------------- | :---------------------------------------- | | Operating lease costs | $18,770 | $17,505 | | Short-term lease costs | $873 | $1,003 | | Variable lease costs | $1 | $184 | | Total rent expense | $19,644 | $18,692 | - As of June 30, 2020, the Company had additional operating leases not yet commenced with a potential lease liability of **$129.1 million**, anticipated to commence over the next three years[39](index=39&type=chunk) [NOTE 6 – OTHER COMPREHENSIVE (LOSS) INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS](index=10&type=section&id=NOTE%206%20%E2%80%93%20OTHER%20COMPREHENSIVE%20%28LOSS%29%20INCOME%20AND%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss increased to $23.4 million, mainly due to foreign currency translation and interest rate hedge fair value changes | Component | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------------------------ | :----------------------------- | :------------------------------- | | Foreign Currency Translation Adjustments | $(15,209) | $(10,995) | | Gain on Sale of Interest Rate Hedge Agreement | $1,368 | $1,634 | | Change in Fair Value of Interest Rate Hedge Agreements | $(9,590) | $(2,783) | | Total Accumulated Other Comprehensive Loss | $(23,431) | $(12,144) | - The Company expects to reclassify **$0.7 million** net gains related to the Gain on Sale of Interest Rate Hedge Agreement and **$3.7 million** net losses related to the Change in Fair Value of Interest Rate Hedge Agreement from accumulated other comprehensive loss into earnings during the next 12 months[43](index=43&type=chunk) [NOTE 7 – STOCKHOLDERS' EQUITY](index=12&type=section&id=NOTE%207%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) Total stockholders' equity decreased to $705.1 million, influenced by net income, equity compensation, dividends, and stock buybacks | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Stockholders' Equity | $705,103 | $714,551 | | Net income (six months) | $24,268 | N/A (period-specific) | | Equity compensation (six months) | $6,344 | N/A (period-specific) | | Dividends declared (six months) | $(5,273) | N/A (period-specific) | | Net payments for stock issuances and buybacks (six months) | $(23,024) | N/A (period-specific) | | Accumulated other comprehensive loss | $(23,431) | $(12,144) | [NOTE 8 – RESTRICTED CASH](index=13&type=section&id=NOTE%208%20%E2%80%93%20RESTRICTED%20CASH) Cash, cash equivalents, and restricted cash increased from $6.5 million to $9.1 million, with no non-current restricted cash | Metric | Beginning of Period 2020 (in thousands) | End of Period 2020 (in thousands) | | :-------------------------------------------------------------------------------- | :------------------------------------ | :------------------------------ | | Cash and cash equivalents | $6,482 | $9,064 | | Restricted cash - non-current | $0 | $0 | | Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows | $6,482 | $9,064 | [NOTE 9 – REVENUE RECOGNITION](index=13&type=section&id=NOTE%209%20%E2%80%93%20REVENUE%20RECOGNITION) Revenue decreased 3.5% for three months but increased 0.6% for six months, driven by federal government growth offset by commercial declines | Client Market (3 Months) | June 30, 2020 (in thousands) | June 30, 2019 (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | | Energy, environment, and infrastructure | $151,481 | $166,520 | (9.0%) | | Health, education, and social programs | $148,528 | $134,346 | 10.6% | | Consumer and financial services | $22,538 | $35,821 | (37.1%) | | Client Type (3 Months) | June 30, 2020 (in thousands) | June 30, 2019 (in thousands) | % Change | | :----------------------- | :----------------------------- | :----------------------------- | :------- | | U.S. federal government | $170,748 | $141,253 | 20.9% | | U.S. state and local government | $57,982 | $73,101 | (20.7%) | | Commercial | $107,159 | $120,746 | (11.3%) | | Contract Mix (3 Months) | June 30, 2020 (in thousands) | June 30, 2019 (in thousands) | % Change | | :---------------------- | :----------------------------- | :----------------------------- | :------- | | Time-and-materials | $168,489 | $167,009 | 0.9% | | Fixed price | $123,970 | $146,967 | (15.7%) | | Cost-based | $61,528 | $52,741 | 16.7% | | Contract Balances | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | % Change | | :------------------------ | :----------------------------- | :------------------------------- | :------- | | Contract assets | $150,577 | $142,337 | 5.8% | | Contract liabilities | $(30,135) | $(37,413) | (19.5%) | | Net contract assets (liabilities) | $120,442 | $104,924 | 14.8% | - The Company had **$1.5 billion** in unfulfilled performance obligations as of June 30, 2020, expected to be satisfied in one to two years[51](index=51&type=chunk) [NOTE 10 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=15&type=section&id=NOTE%2010%20%E2%80%93%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) The company uses fixed interest rate swaps as cash flow hedges, including a new $100.0 million swap entered in February 2020 - On February 20, 2020, the Company entered into a **$100.0 million** floating-to-fixed interest rate swap, designated as a cash flow hedge, with a fixed rate of **1.294%** per annum from February 28, 2020, to February 28, 2025[53](index=53&type=chunk)[54](index=54&type=chunk) [NOTE 11 – INCOME TAXES](index=15&type=section&id=NOTE%2011%20%E2%80%93%20INCOME%20TAXES) Effective income tax rates increased due to non-deductible losses, with unrecognized tax benefits rising to $2.7 million and $6.4 million in deferred Social Security taxes | Period | Effective Tax Rate 2020 | Effective Tax Rate 2019 | | :-------------------------- | :---------------------- | :---------------------- | | Three Months Ended June 30 | 29.0% | 26.2% | | Six Months Ended June 30 | 24.6% | 22.9% | | Metric | June 30, 2020 (in thousands) | June 30, 2019 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Unrecognized tax benefits | $2,700 | $200 | | Accrued penalty and interest | $100 | $100 | - The Company deferred payment of approximately **$6.4 million** of employer Social Security taxes during the quarter ended June 30, 2020, under the CARES Act[60](index=60&type=chunk) [NOTE 12 – ACCOUNTING FOR STOCK COMPENSATION](index=16&type=section&id=NOTE%2012%20%E2%80%93%20ACCOUNTING%20FOR%20STOCK%20COMPENSATION) The 2018 Omnibus Incentive Plan had 1,095,772 shares available for grant, with $4.0 million in stock-based compensation expense for the quarter - As of June 30, 2020, approximately **1,095,772 shares** were available for grant under the 2018 Omnibus Plan[62](index=62&type=chunk) - During the six months ended June 30, 2020, the Company granted **166,051 RSUs**, **112,479 CSRSUs**, and **55,264 PSAs**[63](index=63&type=chunk) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Stock-based compensation expense | $4,000 | $5,900 | | Unrecognized Compensation Expense (June 30, 2020) | Amount (in thousands) | Weighted-Average Period | | :------------------------------------------------ | :-------------------- | :---------------------- | | RSUs | $17,900 | 2.2 years | | CSRSUs | $9,400 | 1.9 years | | PSAs | $3,800 | 1.6 years | [NOTE 13 – FAIR VALUE](index=16&type=section&id=NOTE%2013%20%E2%80%93%20FAIR%20VALUE) Deferred compensation investments totaled $14.4 million and interest rate swap liabilities were $13.0 million, both Level 2 fair value measurements | Financial Instrument (June 30, 2020) | Total (in thousands) | Location on Balance Sheet | | :----------------------------------- | :------------------- | :------------------------ | | Deferred compensation investments | $14,435 | Other assets | | Deferred compensation plan liabilities | $14,353 | Other long-term liabilities | | Interest rate swaps | $13,044 | Other long-term liabilities | [NOTE 14 – BUSINESS COMBINATION](index=17&type=section&id=NOTE%2014%20%E2%80%93%20BUSINESS%20COMBINATION) The company acquired ITG for $255.0 million, resulting in $188.4 million in goodwill and $47.3 million in other intangible assets - On January 31, 2020, the Company acquired Incentive Technology Group, LLC (ITG) for **$255.0 million**[67](index=67&type=chunk) - The acquisition resulted in a preliminary allocation of approximately **$188.4 million to goodwill** and **$47.3 million to other intangible assets**[68](index=68&type=chunk) - The weighted average amortization period for the acquired intangible assets is **5.7 years**[68](index=68&type=chunk) [NOTE 15 – EARNINGS PER SHARE](index=17&type=section&id=NOTE%2015%20%E2%80%93%20EARNINGS%20PER%20SHARE) Diluted EPS decreased to $0.72 for three months and $1.27 for six months, with certain awards excluded from calculations | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Basic earnings per share | $0.73 | $0.78 | | Diluted earnings per share | $0.72 | $0.76 | | Dilutive effect of stock options, RSUs, and performance shares | 191 | 328 | | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Basic earnings per share | $1.29 | $1.59 | | Diluted earnings per share | $1.27 | $1.56 | | Dilutive effect of stock options, RSUs, and performance shares | 285 | 398 | - For the three months ended June 30, 2020, **19,755 weighted-average shares** were excluded from EPS calculation as anti-dilutive, and for the six months, **19,881 shares** were excluded[71](index=71&type=chunk) [NOTE 16 – SHARE REPURCHASE PROGRAM](index=18&type=section&id=NOTE%2016%20%E2%80%93%20SHARE%20REPURCHASE%20PROGRAM) The $100.0 million share repurchase program had $51.4 million remaining, with its Rule 10b5-1 plan terminated due to COVID-19 - As of June 30, 2020, **$51.4 million** remained available for share repurchases under the program[73](index=73&type=chunk) - The Rule 10b5-1 plan element of the share repurchase program was terminated on March 13, 2020, due to uncertainties associated with the COVID-19 pandemic[73](index=73&type=chunk) [NOTE 17 – SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2017%20%E2%80%93%20SUBSEQUENT%20EVENTS) The board approved a $0.14 per share cash dividend, and the company continues to assess the uncertain impacts of COVID-19 - On August 4, 2020, the Company's board of directors approved a **$0.14 per share cash dividend**, payable October 13, 2020[74](index=74&type=chunk) - The Company is continuously assessing the financial impacts of COVID-19 on its business, customers, employees, and capital markets, with future impacts remaining uncertain[75](index=75&type=chunk) [NOTE 18 – CONTINGENCIES](index=18&type=section&id=NOTE%2018%20%E2%80%93%20CONTINGENCIES) The company faces a $220.2 million lawsuit from the State of Louisiana regarding the Road Home Program, which it believes lacks merit - The State of Louisiana filed an administrative demand and lawsuit seeking approximately **$220.2 million** in alleged overpayments from the Road Home Program against ICF Emergency Management Services, L.L.C., a subsidiary of the Company[77](index=77&type=chunk)[78](index=78&type=chunk) - The Company believes the claim has no merit and intends to vigorously defend its position, thus no liability has been recorded as of June 30, 2020[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, and outlook, covering COVID-19 impacts, revenue, costs, liquidity, and strategic focus [FORWARD-LOOKING STATEMENTS](index=20&type=section&id=FORWARD-LOOKING%20STATEMENTS) Outlines forward-looking statements and key risks, including government contract dependence, COVID-19 impacts, and acquisition integration challenges - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[80](index=80&type=chunk) - Key risk factors include dependence on government contracts, changes in federal government budgeting, impacts of COVID-19, results of government audits, dependence on cyclical commercial sectors, difficulties in integrating acquisitions, and the Road Home contract lawsuit[80](index=80&type=chunk) [Impacts of the COVID-19 Pandemic](index=21&type=section&id=Impacts%20of%20the%20COVID-19%20Pandemic) COVID-19 created uncertainty, impacting commercial services and leading to staff adjustments and deferred employer Social Security taxes - Government clients, accounting for approximately **69% of revenues** for the six months ended June 30, 2020, have largely continued to require services despite postponements and travel challenges[84](index=84&type=chunk) - Commercial marketing services, representing less than **12% of total revenues**, were impacted by travel restrictions and deferral/cancellation of marketing events[85](index=85&type=chunk) - The Company has implemented staff reductions, furloughs, and temporary wage reduction programs and deferred approximately **$6.4 million of employer Social Security taxes** under the CARES Act[86](index=86&type=chunk)[87](index=87&type=chunk) [OVERVIEW AND OUTLOOK](index=21&type=section&id=OVERVIEW%20AND%20OUTLOOK) ICF provides professional services across four markets, anticipating long-term demand and focusing on client relationships, larger engagements, and strategic acquisitions - The Company provides advisory, program implementation, analytics, digital, and engagement services to government and commercial clients[89](index=89&type=chunk) - Long-term demand for services is expected to grow due to concerns about clean energy, health promotion, natural disaster relief, and homeland security[91](index=91&type=chunk) - Strategic priorities include leveraging digital and client engagement capabilities, enhancing client relationships, seeking larger engagements, and evaluating strategic acquisition opportunities such as the recent ITG acquisition[92](index=92&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=23&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Financial statements rely on critical accounting policies and estimates, with management monitoring COVID-19 impacts on goodwill and intangible asset fair values - Critical accounting policies and estimates include revenue recognition, impairment of goodwill and other intangible assets, income taxes, and stock-based compensation[95](index=95&type=chunk) - The Company is monitoring COVID-19 impacts on goodwill and intangible asset fair values; future sustained impacts could result in material impairment recognition[97](index=97&type=chunk)[98](index=98&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=23&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) Refers to Note 1 for recent accounting pronouncements, including ASU 2020-04 on Reference Rate Reform - Recent accounting pronouncements are discussed in Note 1, including ASU 2020-04 on Reference Rate Reform, which the Company is currently evaluating for impact[29](index=29&type=chunk)[99](index=99&type=chunk) [SELECTED KEY METRICS](index=23&type=section&id=SELECTED%20KEY%20METRICS) The company tracks revenue by client markets, types, and contract mix to evaluate operations and business nature - Key metrics tracked include revenue by client market (breadth of expertise), client type (diversity of client base), and contract mix (degree of performance risk)[100](index=100&type=chunk) [RESULTS OF OPERATIONS](index=24&type=section&id=RESULTS%20OF%20OPERATIONS) Revenue decreased 3.5% for three months but increased 0.6% for six months, while net income declined due to increased amortization and expenses [Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019](index=24&type=section&id=Three%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202019) Compares financial performance for the three months ended June 30, 2020, against the same period in 2019 | Metric | 2020 (in thousands) | 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Revenue | $353,987 | $366,717 | $(12,730) | (3.5%) | | Direct Costs | $223,407 | $235,053 | $(11,646) | (5.0%) | | Operating Income | $22,782 | $22,542 | $240 | 1.1% | | Interest expense | $(3,908) | $(2,934) | $(974) | 33.2% | | Net Income | $13,656 | $14,611 | $(955) | (6.5%) | - Revenue decrease was primarily due to a **$13.6 million decrease** from commercial clients (especially consumer and financial services, impacted by COVID-19) and decreases in state/local and international government clients, partially offset by a **$29.5 million increase** from federal government clients (including ITG acquisition)[103](index=103&type=chunk) - Amortization of intangible assets increased by **$1.4 million (67.5%)** due to the ITG acquisition[107](index=107&type=chunk) [Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019](index=25&type=section&id=Six%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202019) Compares financial performance for the six months ended June 30, 2020, against the same period in 2019 | Metric | 2020 (in thousands) | 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Revenue | $712,225 | $707,971 | $4,254 | 0.6% | | Direct Costs | $454,023 | $451,002 | $3,021 | 0.7% | | Operating Income | $39,101 | $44,431 | $(5,330) | (12.0%) | | Interest expense | $(7,433) | $(5,387) | $(2,046) | 38.0% | | Net Income | $24,268 | $29,929 | $(5,661) | (18.9%) | - Revenue increase was driven by a **$52.9 million increase** from federal clients (including ITG acquisition), offset by decreases in commercial and state/local government contracts[113](index=113&type=chunk) - Operating income decreased by **12.0%** due to a constant gross margin, increased amortization of intangible assets, and higher indirect and selling expenses[118](index=118&type=chunk) [NON-GAAP MEASURES](index=26&type=section&id=NON-GAAP%20MEASURES) Presents non-GAAP measures like Service Revenue, EBITDA, and Non-GAAP Diluted EPS, used by management to evaluate operational performance [Service Revenue](index=26&type=section&id=Service%20Revenue) Defines and reconciles service revenue, a non-GAAP measure excluding subcontractor and other direct costs - Service revenue represents revenue less subcontractor and other direct costs, considered a key source of profit from services provided by employees[122](index=122&type=chunk) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | $353,987 | $366,717 | | Subcontractor and other direct costs | $(92,789) | $(114,381) | | Service revenue | $261,198 | $252,336 | | Metric | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | | Revenue | $712,225 | $707,971 | | Subcontractor and other direct costs | $(195,625) | $(214,280) | | Service revenue | $516,600 | $493,691 | [EBITDA and Adjusted EBITDA](index=27&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) Defines and reconciles EBITDA and Adjusted EBITDA, non-GAAP measures for evaluating operating performance - EBITDA and Adjusted EBITDA are non-GAAP measures used to evaluate operating performance, with Adjusted EBITDA further eliminating impacts of certain non-recurring items[124](index=124&type=chunk)[125](index=125&type=chunk) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income | $13,656 | $14,611 | | EBITDA | $31,325 | $30,214 | | Adjusted EBITDA | $32,501 | $32,712 | | Metric | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $24,268 | $29,929 | | EBITDA | $55,676 | $59,000 | | Adjusted EBITDA | $60,466 | $61,170 | [Non-GAAP Diluted Earnings per Share](index=28&type=section&id=Non-GAAP%20Diluted%20Earnings%20per%20Share) Defines and reconciles non-GAAP diluted EPS, excluding specific non-recurring and non-cash items - Non-GAAP diluted EPS excludes the impact of impairment of intangible assets, acquisition expenses, severance, facility costs, bad debt reserve adjustments, amortization of intangible assets, and income tax effects[132](index=132&type=chunk) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | | Diluted EPS | $0.72 | $0.76 | | Non-GAAP EPS | $0.89 | $0.97 | | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $1.27 | $1.56 | | Non-GAAP EPS | $1.71 | $1.85 | [LIQUIDITY AND CAPITAL RESOURCES](index=28&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity was impacted by a $288.3 million Credit Facility draw for the ITG acquisition, with management confident in sufficient liquidity despite COVID-19 [Liquidity and Borrowing Capacity](index=28&type=section&id=Liquidity%20and%20Borrowing%20Capacity) Discusses the company's liquidity position, borrowing capacity, and strategies for managing financial resources - The Company increased its borrowing capacity by **$200.0 million** through a new term loan facility in March 2020, drawing upon the Credit Facility to fund the ITG acquisition and working capital needs[134](index=134&type=chunk) - Management believes internally generated funds, available bank borrowings, and cash on hand will provide sufficient liquidity to fund ongoing operations, capital expenditures, acquisitions, dividends, and share repurchases[137](index=137&type=chunk) - A **$100.0 million** floating-to-fixed interest rate swap was entered into on February 20, 2020, to hedge variable rate indebtedness[146](index=146&type=chunk) [Cash Flow](index=30&type=section&id=Cash%20Flow) Analyzes cash flows from operating, investing, and financing activities, highlighting significant changes and drivers | Cash Flow Activity | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Cash Provided by (Used in) Operating Activities | $10,801 | $(47,946) | | Net Cash Used in Investing Activities | $(262,105) | $(16,335) | | Net Cash Provided by Financing Activities | $254,366 | $57,492 | - Operating cash flows improved significantly to **$10.8 million provided** in 2020 from **$47.9 million used** in 2019, primarily due to a decrease in contract receivables[148](index=148&type=chunk) - Investing activities used **$262.1 million**, largely due to the **$253.1 million ITG acquisition**[149](index=149&type=chunk) - Financing activities provided **$254.4 million**, mainly from net advances on the Credit Facility[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses market risks, including potential impacts of COVID-19 on interest rates and foreign currency fluctuations - The COVID-19 outbreak may affect interest rates and cause foreign currency fluctuations, impacting market risk[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective, with no significant changes in internal controls over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2020[152](index=152&type=chunk) - No significant changes in internal controls over financial reporting were identified[152](index=152&type=chunk) - Control systems provide reasonable, but not absolute, assurance due to inherent limitations and resource constraints[153](index=153&type=chunk) PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal proceedings and risk factors [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, including the Road Home Program lawsuit, but expects no material adverse financial impact - The Company is involved in various legal matters, including the Road Home Program lawsuit, but believes ultimate liability will not have a material adverse effect on its financial position, results of operations, or cash flows[156](index=156&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, emphasizing potential adverse impacts of health epidemics like COVID-19 on demand, staffing, and financial results - New risk factors include those related to health epidemics and pandemics like COVID-19, which may materially adversely affect demand for services, staffing, client decision-making, global business conditions, and capital access[157](index=157&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - The pandemic could cause delays in client performance, including timely payments, and affect the Company's workforce due to illness, quarantines, or government actions[159](index=159&type=chunk)[160](index=160&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 791 common shares from employees at $64.87 per share for tax withholding obligations | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :---------------- | :----------------------------- | :--------------------------- | | May 1 - May 31 | 791 | $64.87 | | Total (3 months) | 791 | $64.87 | - These repurchases were from employees to pay required withholding taxes related to the settlement of restricted stock units and performance-based share awards[162](index=162&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported by the company - No defaults upon senior securities were reported[164](index=164&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[165](index=165&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported[166](index=166&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including Credit Facility amendments, CEO/CFO certifications, and iXBRL financial statements - Exhibits include the First Amendment to Fifth Amended and Restated Business Loan and Security Agreement, CEO and CFO certifications, and financial statements in iXBRL format[167](index=167&type=chunk)

| --- | --- | --- | --- | --- | --- | |-------------------------------------------------|-------|-------|----------------------------------------|-------|-------| | | | | | | | | | | | | | | | ICF Investor Presentation & Services Conference | | | Baird 2020 Global Consumer, Technology | | | | June 2, 2020 | | | | | | ICF Certain statements made by us in this presentation that are not historical facts or that relate to future plans, events, or performances are forward-looking statements within the meaning of ...