ICF International (ICFI) 9 May 232023 Q1 Earnings call transcript

Welcome to the First Quarter 2023 ICF Earnings Conference Call. My name is Grace, and I will be your Operator for today's call. [Operator Instructions]

I will now turn the call over to Lynn Morgen of AdvisIRy Partners. Lynn, you may begin.

Operator. you, Thank and ICF's everyone, for us joining Good quarter thank XXXX review first performance. to afternoon, you With us today CEO; from ICF are John Broadus, and Wasson, CFO. Barry Chair and

Operating Joining Morgan, is Chief them James Officer.

May differ ICF those you make conference this to XXXX in filings and our X, subject statements call, events performance. will to to of to management's During could forward-looking discussions a cause about for expectations and actual risks. materially, number we release assist refer our statements you These our and are I future understanding press risks results that SEC of

In presented so. We statements today, this anticipate in obligation may, at that on Please elect our based today. developments addition, any to future do change. our cause light. update made will We call views statements are point, the forward-looking that views but some of information during to disclaim the as specifically to our consider

call I Wasson, the will CEO, first now discuss XXXX John to turn performance. John? over to ICF's quarter

thanks, for ICF's joining everyone. and us Thank XXXX. Lynn, you discuss review quarter results first afternoon, to and Well, outlook our for good

have these scale, percentage XXXX strong expect public XX% in, Thanks a to infrastructure Our results expanded revenue. and revenue we in ICF's in of to our grow and approximately expertise for and namely growth areas have for climate, clients These domain and accounted ICF's quarter services. our increased XXXX in continue of deep markets beyond. utility identified as have IT reflected areas the modernization, consulting, to management, health, we and disaster capabilities and first invested environment spending priority

the growth XX%, service X%. takeaways total increased revenue in over we to growth of reported First, from of quarter: In close north our organic and revenue performance which was of in terms XX%

of significant line higher This XX% increased achieved guidance reduced quarter, is with year-on-year margin expansion in resulting levels the the first utilization margin full service to in costs. margin revenue scale, primarily our we for expansion adjusted and EBITDA Second, from facility year.

a exit noncore contributing service to that Third, line we was U.K. events small commercial to the made not decision profitability.

immaterial are drive our strategy While that the the dollars indicative a to potential or areas and is service focus and investment capital have rest it human are in synergistic offerings. to perspective, from our our growth of with of revenue

and strong and Fourth, trailing year-on-year contract activity resulting of this $XXX we're quarter which XX-month well Also, for increased proposal than as was speaks as to level after sequentially wins, ratio X.X. XX% the experiencing pipeline another of awards million we up increased are of in of bidding ICF, more a in over business the book-to-bill value development on. XX% bid high contracts the our contract

a start XXXX performance together, to beyond. Taken in these strong represented and and the confidence in ICF's our underscore accomplishments year

Revenues client are which combination our single-digit across a and year. last Looking noting. acquisition, worth several of closed organic SemanticBits federal categories, highlights high of government over from the clients increased there from the July reflecting contribution in we growth XX%,

XXXX, reflecting category, markets and growth have client support. the fourth federal to in of place A XX% at forecasted be analysis taking spending with cited spend a billion is contract that recent agencies $XX Bloomberg record of for quarter. IT about civilian clients. areas public amongst agency were health funding Both first key robust of in spending bipartisan strong Our quarter IT drivers this and trends modernization our seen

of continued services data quarter, SemanticBits the along from In and a procurement of seen pattern with business Additionally, complete. not annual The analysis in to agencies which sweet are digital customer is are clients. noted growth additional existing XXXX. at least that is directly civilian access prioritizing we first experience continuing steady the spots. use, agency in since Federal win our integration

and revenue agency Medicaid synergies, are for we together that has working many years. for SemanticBits potential Medicare many Services, at an Centers on Additionally, primarily served the

quarter to mental a to As first and this global our health work. health a abuse, and federal In we quarter, security. agency health, public on substance disease the efforts strong number execute address for of infectious mentioned was continued previously, contracts supporting

determinants access issues on worked and related Families, also legal work Resettlement Children to for to Adjacent health Afghan services. quarter system. public in of We equity, the Administration arriving future and and a to new health of assist Refugee contract of Office to social the this immigration the refugees first was getting health for of the ramp-up

including modernization, to support has a digital and and environmental services. range assistance ICF programs. IIJA federal interest Jobs Additionally, federal of XX support analytical from projects we IIJA providing for considerable technical management ICF activities. including with planning states contracts, from services respect support prospective a Infrastructure Under than seen to we've to communications and and existing agency been services, clients agencies, for tasked of in IIJA range continue funding for ICF Act. and other experience with more the [Investment] is demand to million recipients support Also,

the amount awards to second half Our year. a approximately Act up This this to late currently modest IRA-related end million, pipeline and of from work of and expect Inflation at $XXX of to the related is containing IRA see to support million includes Reduction $XXX agencies' opportunities responsibilities or grow XXXX. continues Act IIJA of in the Federal we where work under at the

of million value support and of that from state will X new quarter, energy infrastructure to renewable program consulting effectively Its revenues new In executed a the case its new existing in implementation business provide with to on contract and management our and contracts disaster that key households eligible first an local installations energy the territory in a release, win we $XX.X increased particular, government environment clients year-on-year. work. In and award U.S. with power outage. with a continued areas: our XX.X% noted of extended of

doing across and territories, mitigation to to do markets and relationships mitigation enables to and and work key advisory implementation are clients states synergies continue There currently resilience with for work and in advisory work new recovery and new state us for our new geographies. for the work. downstream we recovery smaller local commercial and strategic work current and which XX-plus we energy-related in and X in disaster clients. build We are Also, clients resilience win significant jurisdictions XX between position

QX, we continue in to off In clients critical see pay good-sized wins these with synergies and infrastructure California. with Oregon

business in segue double-digit quarter, almost This to good is strong of the growth. a posting increased commercial where each revenues business, our energy with this component XX%

driven efficiency clients. strength We projects, efficiency coming of grid from expansion behavioral modernization, particular well program existing energy utility commercial revenue new as clients, projects electrification for innovative growth saw our related utility to marquee and the dynamic X pricing. Our as by was several addition of offerings large programs, the and the

ICF's experienced supported IIJA for energy IRA. areas our we Advisory, business by markets, In met and subscription EnergyInsite, demand and response. from identify particular, whose demand services service, We the and have favorable with Energy helping and project of the developers renewable in in both recently introduced service locations, power price been is renewable analyze technology-enabled developers client strong decarbonizing forecasting energy a new

undergrounding of first work infrastructure, for onshore as acquisition permit such both led the seeking energy reliability in as offshore ramping utilities Blanton in environmental resilience power the seeking and projects, Our up of developers projects. as projects sector-related for new and and well the substantially by environmental for to projects grew and Growth energy lines. was the environment projects general and large strong permits planning quarter,

guidance year the was that XXXX in progress To support period up, our in financial excellent full tiers ICF of first sum we our for as targets. longer-term which as quarter a execution made significant well

CFO, Barry review. Now financial I'll Barry? our turn Broadus, to for over the call a

Thank as We to commercial same increases This revenues our year-over-year government you, to and from benefited a $XXX.X clients, growth. increased Service from $XXX.X period of last grew revenues last of year. our compared the afternoon, the represented broad-based year. revenue balanced XXXX, million, our which XX.X% clients, XX.X% contribution the John. were quarter XX.X% XX.X% and up In first first up from million. revenue compared as to Good organic everyone. acquisition quarter total from

firmly media of the XX%. revenue buy revenue for $X the XX.X% of as range pass-through Our quarter total to first compared revenue this, million. approximately from XXXX. was for Even a at our growth over accounted benefited in adjusting after Pass-through revenue XX.X% in quarter first total the first of for total year-on-year in double-digit onetime quarter

and respectively. total Gross of reflected included on factors, revenue of contracts combination lower typically than Also, compared recognition XX.X% higher fees. revenue to XX.X% which acquisition, and year-over-year energy experience. similar fixed-price and margin the generates The XX% of XX.X% quarter, of a was Creative service our we incentive margin mainly EBITDA first acquisition, margin but as last revenue year's to a variance the gross timing in SemanticBits

points revenue, from revenue, we and indirect selling XX.X% our of levels adjusted last below percentage declined as expenses. year's service higher scale, on a service facility-related basis to benefit to of basis As reduced revenue, expenses and an XXX greater continue

In people indirect X.X% reflecting expenses support initiatives. investments technology selling absolute dollars, in year-on-year, and and ongoing long-term our our increased growth to

as $X.X as to debt a higher higher of last result million compared expense and was rates Interest balances year. interest

reducing the year. our last of interest on including number on mentioned our of call, other efficiency I in facility prioritizing As non-direct an managing expenses will our tax we strategies, offset expense, billable this half as costs, executing utilization, our higher manifest high which our initiatives to and a have implemented second

mentioned just in economies strong to XX.X% XX.X%, in together scale ago in growth, pleased point increase representing and EBITDA XX.X% year quarter. adjusted XX.X% to drove over the margin million. EBITDA the adjusted revenue I increase of million report We're initiatives also reported EBITDA to of an Our revenue improvement XX-basis our the $XX.X service on a and a service with $XX

quarter approximately its and totaled diluted share decision of events to noncore Of facility with the U.K. represented represented tax-affected expenses, of remainder income consolidation was service $X.XX million the line. $X.XX in first $XX.X special company's $X.XX severance, discontinue per charges. this, EPS or million The $X.X charges costs. acquisition-related Net and commercial associated small inclusive

facility substantially incurred further less would have While opportunities costs, on be XXXX. we may our than what horizon the they we to other reduce in

share income increased in Non-GAAP first $X.XX reported $XX.X year per of the net share $X.XX compared quarter quarter of inclusive share the and per of XXXX. the special from first first $X.XX quarter Our EPS $X.XX charges. per the last to to in tax-affected million X.X%

days year management essentially the of last working of same $X.X increased cash our a XX as period capital operating for first Days the as Capital historical for in outstanding totaled used to scale. to flow sheet. trends year, to needs our the our XX million and line sales in result quarter year's with Moving cash this in a initiatives. which million improved the compared days ago. and of quarter first expenditures statement is quarter We balance cash $XX

debt payroll of XXXX. million well of Our debt end year-end the the million driven cash was required the bonuses, as March stock increase compared $XXX the by of the cycle repurchases end seasonally an for $XXX extra at of at timing quarter. as quarter this was to in as first This

Our fixed rate. XX% a to total adjusted leverage quarter X.XX end X.XX compared was ratio debt of at our year-end. at Approximately is at

the remaining used first authorization $XX.X under strategy, Consistent still entirely acquisitions. with employee debt million shares, dividends, plan. incentive our to repurchasing as to million of impact $XX.X capital well as which the forecasted smaller is repurchase opportunistic reduction XXXX to the to programs, the paying allocation current focus dilution. offset we In plan company offset XXX,XXX We on sufficient the quarter, have shares making and

XXXX, per June share XX, We record also announced $X.XX on payable quarterly today of XXXX. shareholders on July a dividend X, to cash of

help there a from are your are our few in financial important metrics unchanged to you that March. early Now models, with guidance

from and intangibles million. range to should approximately expense expected million will depreciation $XX amortization $XX of $XX $XX Our Amortization range to $XX to from million. million. Interest be million expense is

Our approximately will full year XX.X%. tax rate be

operating is be flow Our $XXX to cash million. projected

$XX.X count approximately We expect to and are expenditures capital anticipated our million, average and million. be diluted between share $XX fully our weighted million to $XX be

I noticed his remarks. will You of and smaller markets for And Other Security closing that back revenue Markets. category end have Civilian streamlined market, by turn may and to John with the have we over the call breakout Commercial aggregating under also that, our total

you, Thank Barry.

demonstration growth We to addressable are year-on-year expand metrics. our ICF horizon, are which clear our advantages and scale investments the has to opportunities capabilities quarter to make our and priorities. results. a considerable Similarly, with ICF's how award pleased continue XXXX, continue our aligned the of will represents very and are achieve well in the market. pipeline growth financial key and growth capabilities The pleased requisite client first people to and we reaffirm guidance spending across strong build the with the on upon capture we for technology competitive we substantial to is

advance maintaining and the mindful impact While continue we'll for work we that society. are has known positive remain so, our to collaborative culture on doing of the

open Operator, questions. call I'd to the to now like

first Our Vafi Instructions] at [Operator Joe question Genuity. comes Canaccord from

at I pipeline growing. kind go in first see few the kind just IRA. results. that it's we to your IRA this growth But IRA more and you sounds the quarters? IIJA maybe point back comments, pipeline the Nice like pipeline the of not on combined that expect And mostly a couple have follow-ups. the John, next of thought to I IIJA of and then to Do it over contribute

not that and -- majority, significant will both your a we portion significant certainly, represents, is comment for And would year. certainly the pipeline. expect correct remain sales vast the sales discussed the the the this So of that of majority IIJA IIJA the majority I

think as see fundings more think we'll half it late is, be will XXXX in in provide how think play. the from this to the the year of talked ramp we've the significant the I more begin I we'll about, IRA the and I does see Certainly, upside years. be opportunity to think I it's much XXXX the IRA Joe, for and expect IIJA, us, year, for pipeline really the just outer up second given further along. that'll do

the it's pipeline more so contributing And run. -- to the coming in short

a the know with Sure. the sounds give is like of market for And power newer of the businesses kind get in a how you've that and more green done alternative up utilities big themselves, could commercial the lot overall you can It I a kind shaping breakdown. more you a energy, in core -- area, but you're business lot historically, there especially the with producers. Is see for entrants? utilities outside of and detailed then doing diversifying. we feel us maybe these how

Joe. Sure

vast a the we it year here say in a business, on I'd couple XX% the of energy the efficiency, mentioned focused it's Investor ago, true. of mean we've of majority at which, things. had my I wins still think the Day in as is I I our last I some quarter. XX%, remarks, think talked Certainly, about business good

newer said think management, equity-related XX%, continue to provides long the growth But see of decarbonization, areas. some the of there opportunities flexible We kind around of to higher growth range. that, mid- in electrification, that having XX% in high I run the load potential the single-digit double-digit business things, much growth areas,

decarbonization We are the seeing electrification some certainly signs front. of that, in

You mentioned a around of We're resources. opportunities seeing working opportunity renewable lot with developers on wind we're decarbonization. and seeing solar

of of to long And our is areas. growing run a would for so rate we'll rapidly. And business that those more in portion the business I portion energy the while that larger growth it's smaller, expect the in continue we'll business. see our And new accelerate

our for which it's broader does first and environment We've growth solar nice some environmental the quite with quarter work of also would -- been planning but projects. that wind, on nice on do and -- I also had working we say we've had infrastructure a there. business,

you honest pleased outlook business. be to basically quarter grew first positive in that us very so quarter, energy quite every and digits with of that bullish it and our business a gives And on the double we're

of next line Securities. Truist Tobey comes with the Our question Sommer from

for a to I Toby. on ask Wilson Jack is one. quick This just want

headcount growth hiring and So can you to speak XQ? in

we as services a I calls prior firm. mean, discussed professional think the we've that I on highest-level are

did head I look squeeze mode last in we nonorganic out the little from growth. all be to a growth, said, would a head certainly where our need which to acquisition an adding a about if the to X% so on also in we brought X% headcount. more little as we X% X% in I staff. X% it X% adding always we're to To count. But X% be Obviously, And perspective. quarter of basis, with say, annualized -- headcount to efficiency, the X% a deliver be more going SemanticBits And But think that's think organic that how I utilization as count. existing to to growing, range I expect the we're then year, our organically we we're

We have and successful before, are significantly to investing I headcount. in and the in -- as said adding recruiting quite generally we're attracting talent been

generally so And add the be feel good that able we'll to capabilities our the and to have achieve staff goals. growth

opportunity then for mitigation ICFI the [indiscernible] Okay. a And there space? an bit. shifting little Is gears in

said mitigation I'm space? I sorry, you missed I'm sorry, that. what

I meant space. the [indiscernible] mitigation

and significant recovery climate I'm we not PSAG on mean, change. work of disaster is. what on amount sure I a mitigation I work mitigation do know

clients And and local so to we across resilience state work. our for commercial, of do of mitigation both from federal all

We But specific familiar I'm that. on have I'm reference significant you're deep sure the expertise with. not making,

so referencing substances EPA. Yes, sort of, I emphasis making [indiscernible] putting I'm know truly it's that. on

mean It's just I'm doing we you know be with but EPA, do what details Yes. back Jack, to may don't the I something but on can I certainly significant work get we of not for familiar there. ICF it.

[Operator from Associates. Research Barrington comes Instructions] question Kevin our with Steinke next

I about your in just there. wanted and state sequential pickup local It a revenue ask government to nice business. had

more sort the things. wondering seeing opportunities the the as side, of disaster on both in the you're recovery pipeline mitigation Just side could what well as be on of

Sure.

growth in disaster of you up recovery are infrastructure large and and as for projects as I think, then governments. local our environment know, local our businesses. for we work and business our would quite mean, business I key environmental made planning know, that those you Kevin, state had state X nice I say, components, does and

side. quite remain We good say I those growth both the in pipelines on robust And recovery disaster saw would the businesses.

We're -- in Rico. a we We certainly in busy across -- doing Texas. front, nice the certainly continue Puerto we see mitigation We're on are have geographies. opportunities, multiple to pipeline

over mentioned, kind work. states I we're the As of working mitigation advisory with on XX

continue And we there. area pipeline so strong I to that's build an see and we the that think funding,

do to disaster I think we continuing traditional opportunities in have book. to addition our Rico. Again, Puerto In recovery work

in we in opportunities Coast area, see Texas. have the opportunities We Gulf

strong. so is quite And pipeline in the business there the

technologies On the infrastructure and and been the in in energy quite power building think, environment lines. I planning and given on I again, clean pipelines, again, IIJA think investment energy has around technologies the side, pipeline focus And the there. nicely generally,

those opportunities the so future areas we're in the us. And positive pipeline the trends and on quite in for

Okay.

Just government the been and about we pipeline there think any I of trends optimistic business, international that I perhaps in you update forward? as picking just what's on international government? had move cautiously terms -- the business up mean in

think we thought should business I government international that that return we've indicated for to growth. that generally XXXX,

thinking I think we're low mid-single-digit kind to of growth there.

last obviously difficult some that -- off at in for think we've had I were rolled and large did quarter. end first this XXXX, of of the We year, XXXX XXXX. project the implementation a But rolling early we we'll off we [indiscernible].

forward, I as should -- return low as mid-single-digit range so to believe go we we think And we look to the business growth we're forward. in that

are grow wondering then you there. any continues as to just but service thinking momentum the in to a this M&A. capabilities, specifically and there, if terms when spoke And if place I pieces your capabilities and that opportunity address you lot other of modernization to of add Okay. in have, need mentioned to And about that mix opportunity the there evolve, the that opportunity, think, IT you obviously, believe before I to you've

sure. Yes,

discussed what generally the federal the recent it's quarters, we modernization think in address, address arena. market of what in a I core IT need have feel to like we've we we I think

the have to acquisitions that the range you X capabilities acquisition SemanticBits capabilities made of that the significant kind and us open-source or X with full know, given we've then of market. us address gave low-code years As in X a last

think need. so core we I have of And the what we

new that, said as constantly new having platforms new constantly market entrants capabilities. is know, Kevin that But you and evolving, and and there's

more coming acquisitions. we're that we world, the probably to small would think important in we extent bring data artificial the on And in machine capabilities that be looking the news always I at things where out feel we potential around which are a as there'll and need we know, acquisitions or learning, medium-sized IT more, do would so lot. skills -- platforms and either do our so are market you new that acquisitions or analytics to modernization add intelligence like or

would feel mass give of critical significant think more large And as or to us we the market so I mass it like the kind to to capabilities of key address that have opposed acquisitions tuck-in need -- but we that as in acquisition I and critical critical effectively. just scale market.

the I going something should things if know thoughts this lastly, just wondering up don't and even these control could you that's on offer on on but ceiling just I mean, your is in typically any negotiations And but if outside Okay. debt obviously, just around the get have thoughts resolved, of if any mind, that? investors

I sure insights great not it's had not it the I'm have into Kevin, obviously, and carefully. first how any watching mean, issue. we're Yes, how mean I ceiling I resolve. this will debt time the we've

to I than history you resolved. any some the turbulence tends to be the the headlines be that gets But ultimately and out bumpiness And as headlines think it guide, in deal. next the expect issue work read when they is or greater through. much generally, would here the be worked risk could I the risk month there if ultimately

ultimately, it expect watching I would worked so And it to we're carefully. out. get But

focused modernization, really Republican on and markets, across know really budget, I you of that IT kind extent the the terms for administration. federal in the issues, that very depending and been to have both areas ultimately impact high Democratic budget public health the priorities health think we're lands do And is of -- note just impacted, in would on that us, that I on where

occur. -- wouldn't I high that that our growth in will would be and remain would priorities first markets, be terms the those of so key of cuts expect And many place

we're Obviously, And so at I we're would carefully. -- think watching I it. it that's looking how

civilian we X million to good budgets years, very Materially, I is, us. good news have obviously, think XX for million, the momentum. XX last the

very backlog. a good have We

very And feel carefully. it certainly about that, watching but good we're we so

now for I would back it remarks. to to like turn closing John

call. participating to forward and for events. for all today's today. care. We Thanks upcoming Take participating you look conferences Thank in connecting at

you participation program. today's This for conclude Thank conference. does your in the

You disconnect. now may