Nov
2
2012

ICF International Reports Third Quarter 2012 Results

  • Total Revenue Increased 9 Percent
  • Operating Income Up 5 Percent; EBITDA Up 11 Percent
  • Net Income Increased 3 Percent to $9.6 Million; Diluted EPS Was $0.48
  • Contract Awards Totaled $360 Million; Book-to-Bill Ratio Was 1.51
  • Cash Flow From Operations Was $67 Million for First Nine Months of 2012
 

 

Fairfax, Virginia, November 2, 2012 -

ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, reported results for the third quarter ended September 30, 2012.

First Nine Months 2012 Results

For the third quarter, revenue was $237.9 million, an 8.8 percent increase over the $218.7 million reported in the 2011 third quarter. Service revenue, total revenue less subcontractor and other direct costs, increased 12.4 percent to $176.2 million. EBITDA increased 10.6 percent to $23.2 million from $21 million, and EBITDA margin was 9.8 percent, up from 9.6 percent in the 2011 third quarter. Operating income, which included $1.1 million in higher amortization expenses related to recent acquisitions, was $16.9 million, an increase of 4.8 percent over the $16.1 million reported in last year’s third quarter. Net income was $9.6 million, or $0.48 per diluted share, compared to net income of $9.3 million, or $0.47 per diluted share, earned in the comparable 2011 period.

For the first nine months of 2012, revenue was $705.2 million, a 12.5 percent increase over the $626.8 million reported in the same period in 2011. Service revenue increased 14.9 percent to $532.6 million. EBITDA increased 14.9 percent to $69.2 million, and EBITDA margin was 9.8 percent, up from 9.6 percent in the first nine months of 2011. Operating income increased 13.6 percent to $51.2 million, net income was up 10.9 percent to $28.9 million, and earnings per diluted share were $1.44 compared to $1.31 for the first nine months of 2011.

Commenting on ICF’s third quarter results, Chairman and Chief Executive Officer Sudhakar Kesavan said, “As expected, revenue growth continued to be driven by substantial increases in business with our commercial and non-U.S. government clients, which in the aggregate accounted for 29 percent of total revenues, up from 24 percent in last year’s third quarter. This strong performance more than offset the continued headwinds in business with the U.S. Federal Government. Organic revenue growth1 rates in 2012 have been affected in both the third quarter and first nine months of 2012 by a reduction as a percentage of revenue in subcontractor and other direct costs. As a result, reported organic growth for the third quarter was negative 1.7 percent. Organic growth for the first nine months of 2012 is a positive 1.9 percent.” 

“We continued to achieve growth across all of our major markets in the third quarter. Energy, Environment, & Infrastructure increased 4.6 percent; Health, Social Programs, & Consumer/Financial increased 15.2 percent; and Public Safety & Defense increased 2.9 percent. In addition, business awards this quarter included a number of important strategic wins and a high percentage of new contracts versus re-competes with government and commercial clients,” Mr. Kesavan noted.

“EBITDA continued to increase at a faster pace than revenues, even during this period of seasonally higher bid and proposal activity and increased investments in commercial business developments. This is a result of productivity improvements throughout the organization as we have realigned resources to address changing business trends,” Mr. Kesavan noted.

Commercial Business Third Quarter Highlights

Commercial business revenues increased 20.4 percent in the 2012 third quarter to $60.6 million and represented 25 percent of total revenue, up from 23 percent in last year’s third quarter. Commercial business growth was driven by the acquisition of Ironworks Consulting, L.L.C., in December 2011; increases in aviation consulting work; and increases in the domestic energy efficiency business, which rose 9.3 percent over the prior year and accounted for more than 35 percent of total commercial revenues.

Commercial sales awards were $48.6 million for the 2012 third quarter and $223.9 million for the first nine months of 2012, or 28.1 percent of total year-to-date sales. 

Key Commercial Sales Highlights for the Third Quarter

ICF was awarded more than 350 commercial projects globally in the third quarter, primarily in the areas of energy efficiency program management; aviation industry projects; interactive data applications for commercial health clients, nonprofits, retail, and financial firms; power market assessments; transportation studies; and environmental management, especially of infrastructure projects. Among the most significant wins were:

  • A $7.5 million expansion in scope for an existing residential energy efficiency program for a large utility
  • Two aviation projects valued at a total of more than $5 million, including a market assessment for a global financial institution and commercial planning for a large airport
  • A strategic communications campaign for a major U.S. charitable organization valued at $2.1 million
  • A $1.7 million contract to continue cybersecurity applications support for a national association
  • A $1.5 million contract to continue interactive data application development and support at a major U.S. financial institution

In addition, we anticipate two other large energy efficiency wins, which are in contract negotiation and will be announced in the fourth quarter.

Government Business Third Quarter Highlights

  • U.S. Federal Government revenues increased 0.3 percent in the 2012 third quarter to $143.7 million. Growth was primarily in the health, social programs, and consumer/financial market. Federal government business represented 61 percent of total revenues compared to 66 percent in last year’s third quarter.

  • U.S. state and local government revenues increased 10.4 percent and accounted for 10 percent of total revenue, reflecting the continued strength of our infrastructure management services, specifically in the Western states.

  • Non-U.S. government revenues more than tripled to $9.1 million from $2.9 million in last year’s third quarter, primarily because of the acquisition of GHK Holdings Limited, a London-based advisory firm, which was acquired in February 2012.

Key Government Contracts Won in the Third Quarter

Backlog and New Business Awards

Backlog was $1.6 billion at the end of the 2012 third quarter. Funded backlog was $766 million, or 48 percent of the total.

The total value of contracts awarded in the third quarter of 2012 was $360 million and $796 million for the first nine months of 2012, resulting in a third quarter book-to-bill ratio of 1.51 and a year-to-date book-to-bill ratio of 1.13.

Summary and Outlook

“ICF continues to post solid results in the face of softness in the federal government arena thanks to our commercial business, our ability to leverage key subject matter expertise across a broad client universe, and our strategic approach to making and building upon acquisitions. We believe that these differentiators will continue to result in performance that exceeds the industry average,” Mr. Kesavan said. 

“For full year 2012, we have narrowed our revenue guidance range to $930 million to $945 million, representing year-over-year growth of 11.5 percent at the midpoint, and we narrowed our earnings per diluted share guidance range to $1.90 to $1.95, equivalent to 10 percent year-over-year growth at the midpoint. Cash flow from operations has been very strong, reaching $67 million for the first nine months of 2012. Based on these results, we are increasing our guidance for cash flow from operations for full year 2012 from more than $60 million to more than $75 million,” Mr. Kesavan noted. 

“For the fourth quarter of 2012, revenues are expected to range from $225 million to $240 million, and diluted earnings per share are expected to range from $0.46 to $0.51.”

Expectations for diluted earnings per share are based upon an effective tax rate of approximately 40 percent for both full year 2012 and the fourth quarter and 20 million weighted average shares outstanding for the full year and 19.7 million for the fourth quarter.

“With our strong year-to-date bookings, ICF is well positioned for future growth. Based on our current visibility and portfolio, we expect to enter 2013 with a funded backlog similar to levels at the beginning of 2012. Additionally, we expect the positive momentum in our energy efficiency, aviation consulting, and digital interactive businesses to continue in 2013, resulting in another year of strong growth in our commercial business," Mr. Kesavan concluded.

To view the full release, including financial tables, download the PDF.


1Organic revenue excludes revenue from acquisitions closed during the previous four quarters.


ICF International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)
 
        Three months ended     Nine months ended
        September 30,     September 30,
        2012     2011     2012     2011
          (Unaudited)       (Unaudited)
 
Gross Revenue $ 237,864   $ 218,691   $ 705,154   $ 626,828
Direct Costs   148,267     137,343     436,316     389,086
Operating costs and expenses:
  Indirect and selling expenses   66,356     60,336     199,613     177,483
  Depreciation and amortization   2,886     2,544     7,501     8,083
  Amortization of intangible assets   3,480     2,369     10,530     7,105
    Total operating costs and expenses   72,722     65,249     217,644     192,671
  Operating Income   16,875     16,099     51,194     45,071
  Interest expense   (804)     (539)     (2,722)     (1,732)
  Other income (expense)   (116)     (5)     (379)     35
  Income before income taxes   15,955     15,555     48,093     43,374
  Provision for income taxes   6,382     6,221     19,237     17,351
Net income $ 9,573   $ 9,334   $ 28,856   $ 26,023
 
  Earnings per Share:
    Basic $ 0.49   $ 0.47   $ 1.46   $ 1.32
    Diluted $ 0.48   $ 0.47   $ 1.44   $ 1.31
 
  Weighted-average Shares:
    Basic   19,610     19,728     19,717     19,666
    Diluted   19,770     19,860     20,004     19,888
   
  Other comprehensive income:
    Foreign currency translation adjustments   84     (211)     (535)     (11)
  Comprehensive income    9,657     9,123     28,321     26,012
 
           
  Reconciliation of Service Revenue                      
  Revenue   237,864     218,691       705,154     626,828
  Subcontractor and Other Direct Costs*   61,634     61,861       172,589     163,145
  Service Revenue   176,230     156,830       532,565     463,683
                         
                         
  Reconciliation of EBITDA                      
  Operating Income   16,875     16,099       51,194     45,071
  Depreciation and amortization   6,366     4,913       18,031     15,188
  EBITDA 23,241     21,012       69,225     60,259
  Acquisition-related expenses** 51     -       676     -
  Adjusted EBITDA 23,292     21,012         69,901     60,259
                         
  * Subcontractor and Other Direct Costs exclude Direct Labor and Fringe.
  ** Acquisition-related expenses include expenses related to closed acquisitions.



ICF International, Inc. and Subsidiaries
Consolidated Balance Sheets

(in thousands, except share amounts)
             
      September 30, 2012     December 31, 2011
      (Unaudited)      
             
Current Assets:          
  Cash $ 6,062   $ 4,097
  Contract receivables, net   205,636     209,426
  Prepaid expenses and other   8,053     7,948
  Income tax receivable   1,813     1,155
  Deferred income taxes   4,478     7,963
Total current assets   226,042     230,589
Total property and equipment, net   27,878     21,067
Other assets:          
  Goodwill   409,979     401,134
  Other intangible assets, net   24,788     33,740
  Restricted cash   1,822     1,208
  Other assets   9,097     6,877
Total Assets $ 699,606   $ 694,615
             
Current Liabilities:          
  Accounts payable $ 42,520   $ 38,685
  Accrued salaries and benefits   46,446     46,215
  Accrued expenses   32,269     29,252
  Deferred revenue   18,843     20,180
Total current liabilities   140,078     134,332
Long-term liabilities:          
  Long-term debt   115,000     145,000
  Deferred rent   9,811     7,223
  Deferred income taxes   8,628     9,247
  Other   9,566     5,785
Total Liabilities   283,083     301,587
Commitments and Contingencies      
Stockholders' Equity:          
  Preferred stock, par value $.001 per share; 5,000,000 shares authorized; none issued    
  Common stock, $.001 par value; 70,000,000 shares authorized; 20,156,573 and 19,887,459 shares issued; and 19,528,019 and 19,792,499 shares outstanding as of September 30, 2012, and December 31, 2011, respectively 20     20
  Additional paid-in capital   234,752     227,577
  Retained earnings   197,358     168,502
  Treasury stock   (14,267)     (2,266)
  Accumulated other comprehensive loss   (1,340)     (805)
Total Stockholders' Equity   416,523     393,028
Total Liabilities and Stockholders' Equity $ 699,606   $ 694,615



ICF International, Inc. and Subsidiariess
Consolidated Statements of Cash Flows

(in thousands)
 
    Nine months ended
    September 30,
    2012     2011
    (Unaudited)
Cash flows from operating activities
Net income $ 28,856   $ 26,023
Adjustments to reconcile net income to net cash provided by operating activities:          
   Deferred income taxes   2,915     (2,525)
   (Gain) loss on disposal of fixed assets   102     (13)
  Non-cash equity compensation   6,419     4,786
  Depreciation and amortization   18,031     15,188
  Deferred rent   2,745     1,809
  Changes in operating assets and liabilities, net of the effect of acquisitions:          
      Contract receivables, net   13,045     (8,537)
      Prepaid expenses and other assets   (765)     (1,745)
      Accounts payable   462     2,718
      Accrued salaries and benefits   (115)     3,086
      Accrued expenses   2,930     2,023
      Deferred revenue   (6,151)     852
      Income tax receivable and payable   (910)     118
      Restricted cash   (614)     1,628
      Other liabilities   (95)     1,395
Net cash provided by operating activities   66,855     46,806
Cash flows from investing activities          
  Capital expenditures   (10,404)     (6,889)
  Capitalized software development costs       (28)
  Payments for business acquisitions, net of cash received   (10,749)     (6,220)
Net cash used in investing activities   (21,153)     (13,137)
 
Cash flows from financing activities          
  Advances from working capital facilities   150,516     104,469
  Payments on working capital facilities   (180,516)     (139,469)
  Debt issue costs   (1,957)    
  Proceeds from exercise of options   67     447
  Tax benefits of stock option exercises and award vesting   649     815
  Net payments for stockholder issuances and buybacks   (11,961)     (1,211)
Net cash used in financing activities   (43,202)     (34,949)
  Effect of exchange rate on cash   (535)     (11)
Increase (decrease) in cash   1,915     (1,291)
Cash, beginning of period   4,097     3,301
Cash, end of period $ 6,062   $ 2,010
 
Supplemental disclosure of cash flow information
  Cash paid during the period for:          
      Interest $ 2,593   $ 1,694
      Income taxes $ 16,706   $ 19,174



ICF International, Inc. and Subsidiaries
Supplemental Schedule
 
 
Revenue by market Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2012     2011   2012     2011
                     
Energy, environment, and infrastructure 41%     43%   41%     42%
Health, social programs, and consumer/financial   45%     42%   45%     42%
Public safety and defense 14%     15%   14%     16%
                     
Total 100%     100%   100%     100%
 
 
Revenue by client Three Months Ended
September 30,
  Nine Months Ended
September 30,
2012     2011   2012     2011
                       
  U.S. federal government 61%     66%   61%     67%
  U.S. state and local government 10%     10%   10%     10%
  Non-U.S. Government   4%     1%   3%     1%
Government   75%     77%   74%     78%
                     
Commercial   25%     23%   26%     22%
                     
Total   100%     100%   100%     100%
 
 
Revenue by contract Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2012     2011   2012     2011
                     
Time-and-materials 48%     48%   49%     50%
Fixed-price   30%     28%   29%     27%
Cost-based 22%     24%   22%     23%
                     
Total   100%     100%   100%     100%
 

 

About ICF International

ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver professional services and technology solutions in the energy, environment, and infrastructure; health, social programs, and consumer/financial; and public safety and defense markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program lifecycle, from research and analysis through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 4,500 employees serve these clients from more than 50 offices worldwide. ICF's website is http://www.icfi.com.

Caution Concerning Forward-looking Statements

Statements that are not historical facts and involve known and unknown risks and uncertainties are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may concern our current expectations about our future results, plans, operations and prospects and involve certain risks, including those related to the government contracting industry generally; our particular business, including our dependence on contracts with U.S. federal government agencies; and our ability to acquire and successfully integrate businesses. These and other factors that could cause our actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of our securities filings with the Securities and Exchange Commission. The forward-looking statements included herein are only made as of the date hereof, and we specifically disclaim any obligation to update these statements in the future.

For Immediate Release

Dr. Douglas Beck
ICF International
+1.703.934.3820

Lynn Morgen
MBS Value Partners
1.212.750.5800

Betsy Brod
MBS Value Partners
1.212.750.5800

 
 
 

© Copyright 1992–2014 ICF International, Inc. All Rights Reserved.