ICF International(ICFI) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2020 was $360.3 million, a decrease of 3.6% year-on-year, primarily due to lower pass-through revenues, which accounted for 26.5% of total revenue this quarter compared to 31.2% in the same quarter last year [36] - Service revenue increased by 2.9% in Q3 to $264.7 million, with a year-to-date increase of 4.1% compared to last year [36] - Adjusted EBITDA increased by 4.9% to $37.8 million during Q3, with an adjusted EBITDA margin on service revenue of 14.3%, compared to 14% last year [39] - Net income for the quarter was $17.9 million or $0.94 per diluted share, compared to $19.6 million or $1.02 per diluted share in Q3 2019 [41] Business Line Data and Key Metrics Changes - The federal government business saw an 18% year-on-year growth, driven by both organic growth and the ITG acquisition [14] - The commercial energy business performed well, supported by strong demand for financial and technical advisory services related to renewables and energy efficiency programs [29] - Disaster management revenues are expected to contribute approximately $110 million this year, with significant contracts won in several states [22][24] Market Data and Key Metrics Changes - The business development pipeline was reported at $6.8 billion at the end of Q3, indicating a diversified set of opportunities across clients [33] - The company’s net leverage ratio improved to 2.88 at the end of September, down from 3.52 at the end of June 2020, reflecting debt repayment from strong cash flow [45] Company Strategy and Development Direction - The company aims to grow organically, fund acquisitions, and pay down debt while continuing to pay dividends and repurchase shares [47] - There is a focus on optimizing facility costs and maintaining cost savings achieved during the pandemic as permanent [13][75] - The company sees significant growth opportunities in public health and IT modernization, with a robust pipeline of contracts expected to drive future growth [19][120] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company’s growth prospects heading into 2021, citing considerable service revenue growth and a strong business development pipeline [53] - The company has managed well through the COVID-19 crisis, with 90% of its business seeing no impact from the pandemic [100] - Management highlighted the importance of being a good corporate citizen, focusing on environmental and social issues, including achieving carbon neutrality [55] Other Important Information - The company declared a quarterly cash dividend of $0.14 per share, payable on January 12, 2021 [47] - Year-to-date operating cash flow was $95.2 million, significantly higher than $6.4 million for the same period last year, leading to an increased full-year guidance for operating cash flow [43][52] Q&A Session Summary Question: Proportion of new contract awards - Approximately 40% to 45% of contract awards were re-competes, while 55% were new contract awards in Q3 [59] Question: Impact of ITG on recent sizable awards - The success in IT modernization contracts is attributed to synergies from ITG's capabilities and existing client relationships [63] Question: RFP volumes and potential slowdowns - No slowdown has been observed in RFP volumes on the federal or state and local side, with a robust pipeline of opportunities [72] Question: Permanent cost savings - The company has identified potential permanent savings in travel and facility costs due to the shift to remote work [75] Question: Project cancellations in the commercial sector - No project cancellations have been reported in the commercial energy side, and the commercial marketing services business is managing well [78] Question: Update on energy efficiency market opportunities - The company is actively engaged in proposals for California's energy efficiency programs, expecting awards in 2021 [115] Question: ITG acquisition performance - The integration of ITG has exceeded expectations, with a robust pipeline and significant contract wins since the acquisition [120]