ICF International(ICFI) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details the company's financial statements, management's analysis, market risk, and internal controls for the period Financial Statements For the first quarter of 2022, ICF International, Inc. reported total revenue of $413.5 million, a 9.2% increase year-over-year, but net income slightly decreased to $17.9 million from $18.4 million in Q1 2021 Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, including assets, liabilities, and equity, at the end of the period Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,392 | $8,254 | | Contract receivables, net | $205,827 | $237,684 | | Goodwill | $1,045,503 | $1,046,760 | | Total Assets | $1,857,723 | $1,849,534 | | Liabilities & Equity | | | | Total Current Liabilities | $344,211 | $376,631 | | Long-term debt | $449,776 | $411,605 | | Total Liabilities | $1,054,421 | $1,046,064 | | Total Stockholders' Equity | $803,302 | $803,470 | Consolidated Statements of Comprehensive Income This statement details the company's revenues, expenses, and net income, along with other comprehensive income, for the reporting period Consolidated Statements of Comprehensive Income (Unaudited) | (in thousands, except per share amounts) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenue | $413,468 | $378,478 | | Operating income | $27,703 | $28,129 | | Net income | $17,862 | $18,351 | | Diluted Earnings per Share | $0.94 | $0.96 | | Comprehensive income, net of tax | $20,521 | $21,131 | Consolidated Statements of Cash Flows This statement presents the cash inflows and outflows from operating, investing, and financing activities during the period Consolidated Statements of Cash Flows (Unaudited) | (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(7,055) | $4,961 | | Net Cash Used in Investing Activities | $(6,454) | $(3,595) | | Net Cash Provided by (Used in) Financing Activities | $2,674 | $(33,275) | | Decrease in Cash, Cash Equivalents, and Restricted Cash | $(11,360) | $(31,164) | Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements - The company provides professional services and technology solutions to government (U.S. federal, state, local, and international) and commercial clients across four main markets: energy/environment, health/education, safety/security, and consumer/financial[17][18] - As of March 31, 2022, the company had $461.6 million of long-term debt outstanding under its Credit Facility, with an available borrowing capacity of $250.4 million after performance-based limitations[33] - The company repurchased 176,375 shares for $17.0 million in Q1 2022. As of March 31, 2022, $111.9 million remained available for share repurchases under the authorized program[65] - The company is involved in a legal proceeding with the State of Louisiana regarding the Road Home Program, with the state seeking approximately $220.2 million. The company believes the claim has no merit and has not recorded a liability[70] Management's Discussion and Analysis of Financial Condition and Results of Operations In Q1 2022, revenue grew 9.2% to $413.5 million, driven by strong performance in U.S. federal and state government client markets, particularly in health, education, and social programs Overview and Outlook This section outlines the company's business model, strategic focus, and the impact of external factors like the ongoing pandemic on operations - The company operates as a single segment providing professional services to government and commercial clients in four key markets: Energy, Environment, and Infrastructure; Health, Education, and Social Programs; Safety and Security; and Consumer and Financial[76][77] - Long-term demand is expected to grow, driven by societal issues like clean energy, health promotion, and disaster relief. The company's strategy focuses on larger engagements, leveraging digital capabilities, and strategic acquisitions[78][79] - The COVID-19 pandemic continues to pose uncertainty, but the company has maintained operational continuity, with government clients (75% of Q1 2022 revenue) largely continuing services. Commercial marketing services, representing 7% of revenue, remain impacted by travel restrictions[82][83][84] Results of Operations This section analyzes the changes in revenue, direct costs, operating income, and net income for the reporting period Q1 2022 vs Q1 2021 Performance | (dollars in thousands) | Q1 2022 | Q1 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $413,468 | $378,478 | $34,990 | 9.2% | | Direct Costs | $258,158 | $232,082 | $26,076 | 11.2% | | Operating Income | $27,703 | $28,129 | $(426) | (1.5%) | | Net Income | $17,862 | $18,351 | $(489) | (2.7%) | - Revenue increased by $35.0 million (9.2%), primarily driven by growth in U.S. federal government's health, education, and social programs ($39.4 million) and U.S. state and local government's health programs ($7.4 million)[95] - Direct costs increased 11.2% to $258.2 million, outpacing revenue growth, due to higher direct labor and subcontractor costs. Direct costs as a percentage of revenue rose to 62.4% from 61.3%[96] - Amortization of intangible assets increased by 76.4% to $5.3 million, mainly due to the acquisitions of ESAC and Creative Systems and Consulting in late 2021[99] Non-GAAP Measures This section provides reconciliations of GAAP financial measures to non-GAAP metrics such as Adjusted EBITDA and Non-GAAP EPS Reconciliation of Net Income to Adjusted EBITDA | (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $17,862 | $18,351 | | EBITDA | $37,858 | $36,414 | | Total special charges and adjustments | $4,427 | $1,313 | | Adjusted EBITDA | $42,285 | $37,727 | Reconciliation of Diluted EPS to Non-GAAP EPS | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Diluted EPS | $0.94 | $0.96 | | Amortization of intangibles | $0.28 | $0.16 | | Special charges & other adjustments | $0.23 | $0.07 | | Income tax effects | $(0.14) | $(0.06) | | Non-GAAP EPS | $1.31 | $1.13 | Liquidity and Capital Resources This section details the company's cash position, debt levels, borrowing capacity, and share repurchase activities - The company's primary source of borrowing is its Credit Facility, which had $250.4 million of available capacity as of March 31, 2022, after accounting for performance-based limitations[121] - Days-Sales-Outstanding (DSO) was 79 days for Q1 2022, compared to 80 days for Q1 2021. Excluding the slower-paying Puerto Rico disaster relief work, DSO was 74 days versus 70 days in the prior year[127] - Operating activities used $7.1 million in cash in Q1 2022, a decrease of $12.1 million from the $5.0 million provided in Q1 2021, primarily due to a net decrease in billings and collections[139] - Financing activities provided $2.7 million in cash, reflecting $38.0 million in net advances from the Credit Facility, offset by $22.3 million for stock buybacks and $2.6 million for dividends[141] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk disclosures from those detailed in its most recent Annual Report on Form 10-K - There have been no material changes in the disclosures regarding market risk from the company's Annual Report[143] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the period - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the period covered by the report[144] - There were no significant changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[144] PART II. OTHER INFORMATION This section includes disclosures on legal proceedings, updated risk factors, equity sales, and a list of filed exhibits Legal Proceedings The company is involved in various legal matters arising in the ordinary course of business but does not currently believe that any ultimate liability from these proceedings will have a material adverse effect on its financial position, results of operations, or cash flows - The company is involved in various legal matters from the ordinary course of business, which are not expected to have a material adverse effect on its financial results[148] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred in the risk factors discussed in the company's Annual Report[149] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2022, the company repurchased a total of 226,775 shares at an average price of $95.76 per share Share Repurchase Activity for Q1 2022 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | January | 147,032 | $99.26 | 129,765 | | February | 10,435 | $93.33 | 10,435 | | March | 69,308 | $88.71 | 36,175 | | Total | 226,775 | $95.76 | 176,375 | - The current share repurchase program authorizes up to $200.0 million in repurchases. During Q1 2022, the company repurchased 176,375 shares under this program[151] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in iXBRL - The report includes certifications from the Principal Executive Officer and Principal Financial Officer, as well as financial data formatted in Inline eXtensible Business Reporting Language (iXBRL)[156]