ICF International (ICFI) 2 Nov 232023 Q3 Earnings call transcript

Welcome to the Third Quarter 2023 ICF Earnings Conference Call. My name is [ Hope ], and I will be your instructor for today's call. [Operator Instructions] Please be advised that today's conference is being recorded.I will now turn the call over to Lynn Morgen of Advisiry Partners. Lynn, you may begin.

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

Please call, Morgan, you assist and understanding of are X, I discuss ICF future Officer.During but to disclaim are future is John subject actual SEC statements presented in consider about turn We in call on based release Chief update over at expectations risks These them make results as specifically views and to forward-looking that to will anticipate and John? James discussions this light. call any We Joining conference performance. cause we developments obligation management's to to for will of quarter to statements made number Operating point, forward-looking our those statements CEO, our materially, events that cause addition, now refer that XXXX may, our elect today. statements do of change. the November so.I could this the differ to will some third you information our the press filings ICF's our XXXX performance. risks.In to views during today, to Wasson, a

a which our of of at U.K. Group for mid-September Thank end This outlook. metrics. business is review all, the Lynn, achieved reported awards, strong, sale record scale to quarter, higher metrics XXXX you, and was third both and call federal growth government costs discuss X.X%. thank for efficiencies.Third, driven noting.First, quarter lower significant for key year-on-year which quarter our Marketing we and reached business facility financial and This million, results. book-to-bill are in the another second in revenue contract participating in at as totaled for third to of growth be takeaways well is $XXX XXXX.Looking results X.X%.Second, of mix, of our of in key ICF X.Xx overall revenue continue closure Adjusting in million, expectations our today's this events in contract we you, year-to-date across quarter revenues our our at a awards, favorable worth quarter by the and business third growth growth the resulting as and considerable all supports estimated which quarter profitability strong recurring for utilization, $XXX commercial a There trailing X.Xx. XX-month book-to-bill several Commercial

positioned revenues. over modernization, we the We adjusting for from have revenues, management, XX% have several invested the and consulting, markets in exit CMG disaster digital Disaster market health for captured events U.K. public X-month which environment primarily commercial is XX% these business.Our markets, categories, the Social accounted years. for transformation, and accounted sale Programs, quarter our and of Energy, and IT namely be our Health in and major our roughly continue key well together utility Environment, growth of climate in first, very services, Infrastructure & and of second, identified in Recovery, to the third markets performance our infrastructure last growth These X

quarter accounted work efficiency Environment efficiency utility several there our major include programs, an and worth for in which are and programs, and for benefiting excellent our expanded Commercial increased third electrification energy quarter, & quarter market noting.Revenues several XX% of revenues. markets, management clients. energy our XX% Looking these from highlights Energy, disaster of third utility across Infrastructure had our

with electrical for as increased Our applications client great interconnection services We grant legislation, such XX X IIJA these advisory [ in IRA of power applications, are renewable load see engineering, increased and interest services, to resilience agencies now strong and integration pieces third energy on under services renewable design legislation. we saw advisory the technical the ] federal the of EV continue reflecting X state the station development exceptionally performed planning. quarter.We well of working for impact and charging in and utilities and and demand

our engagements news to together, include the flow bringing cumulative commercial our over contracts progress awards, clients, and under legislation.The IIJA been primarily dollars of rate IRA business and the of won not Taken government X more in million these valued quarter, third federal federal grew significant we many directly the has energy implementation for at of IRA-related acts. but from all in and IIJA approximately commercial made with and XX% our our $XXX work does assist state planning clients $XX This to quarter.In authorized programs, is to of specific that million. its the to associate recipients it's difficult in the

management monitoring, downstream continue ICF environmental engineering We engagement to restoration to begin the and management, and projects government we and on signing and community analysis, moved Puerto greater in XXXX, support stakeholder phases.In expect volume as market a $XX awarded materialize with additional construction XXXX support, were independent opportunities to Texas, construction permitting recompete for services and and in such and financially and supported of like, services, and services, destruction of existing in for contract to positioning contracts million effectively we execute in we monitoring contracts the in disaster recovery the quarter, contract to Rico's disaster Puerto with resilience new Rico homes our to XXXX. current third the million program disaster recovery response Hawaii.In Florida the project housing services. in the and $XX Community Idalia X,XXX longer-term horizon by and provide wildfires may to the for nearly that authority awarded activities a opportunities recently and following we be expanded partnership on Housing provide Oregon and Hurricane department services were public-private incorporate recovery Services Florida are

utilities, third the rate representing services Our environment all from as a cut quarter, wind, hydrogen the continued this with and agencies and addressing contracts developers.Sales growth at technologies, client federal for our environmental and and in revenues with area storage, solar, across a climate work this of developers included of range and across quarter increase categories, transmission infrastructure and general the impacts lines. business broad including to expanded double-digit permitting and as well portfolio wind

and and for existing our wins. market, well assisting broad representing and Social well of agencies the clients X% outcomes.As of run Food health our up been expanded and Environmental as Institutes support continue the for set These [indiscernible] Families, & across major USAID.These result, revenue Public growth third and positive Centers the expanded the the of well XXXX. won areas capabilities growth namely Centers swath new Administration of third well public Administration as Protection market provide quarter to bipartisan Health public have this programs, XX% IT and wins wins and posting and the several contract market and as ICF's very in deliver and the Health Public well substantial key did garnered driving Health, drivers Federal for quarter, us quarter also Drug are in us in other market, for a including and this modernization well in funded. third with and continued with Our in health we stellar have in historically revenues.The our performed clients, Agency Health, results rate had we IT work our Disease and National In modernization Children Health excellent new work share. Medicare the agency Services, And Control, Medicaid as growth

the In in transformation fact, ICF quarter. third won services agencies related contract over of and modernization awards for new federal digital $XXX million to IT

the As you U.S. can $XX release, with federal modernization contract see Human of new the agencies and also from this within earnings included substantial Services.We our work Department in other X million at won Health including a contract expansions agencies, IT

] provide significantly in to Enforcement contracts $XXX and heading recompete analysis XXXX. with services, Department related Homeland the awarded our federal from we million third $XXX task arena, to data management great in a science [ And growth record total Forest government we our expanded with scope federal strengthened and amounting the in both has capabilities and resilience wildfire $XX to modernize and applications services were Immigration Service million prospects to Custom advanced quarter and cybersecurity.The a elsewhere into a of the is orders won which within disaster Security. new our tie-in million

Our ability quarter substantial at third growth ICF's business to together a wins, contract our the at in of metrics, the pipeline significant $X.X opportunities quarter turn the strong diversified a Barry end horizon.Now across the to financial $X.X call over and was of our a stood the of review. set.These after I'll Barry? to confidence large billion. client backlog a opportunities representing And development our even for Broadus, our billion, capture set date performance CFO, the underscores with on

details quarter of XX.X% expectations. by of improvement revenues additional XX.X% to Programs last provide quarter to divested pleased quarter, the last Environmental Adjusting & points to this in grew year. is and financial quarter heavily Recovery year-on-year X.X%.Our $XXX.X $XXX.X in compared line I'm our total margins expanded year's which everyone. as was million, XX other the result afternoon, our good business, This quarter.Third by mix, categories. second favorable & we and was year's exited Subcontractor direct year-over-year strong third and related and of Infrastructure ICF Total toward events performance cost Commercial total Social was our in direct which totaled Health John, an in gross XXX performance. third year-over-year U.K. basis in points to estimated third increased quarter, in which commercial market slowed more you, growth XX.X% the the weighted revenues for Thank revenues strong basis labor a by prior with our Group, year represented sequentially, Marketing X.X% than Disaster on growth and third a driven million. the and and Energy, XXXX which revenue more

in to in the see quarter. We expect fourth further gross improvement margins

$XX.X reflecting $XX.X revenues, million year-on-year expenses Our indirect points other experience expenses represented XX.X% continue adjusted to third total XX.X% our to $XX.X percentage scale and by of year-over-year increased year-to-date EBITDA quarter million.As noncash of to million higher of year-over-year. the the certain total increased quarter, increased charges. X.X% third indirect timing increased Interest and On from facility as of expense expenses rationalize points selling basis a basis in XX.X%, to EBITDA a due as interest XXX basis, business.In economies and expenses XXXX XX of to $X.X of as to increased revenues the well adjusted $XXX.X million we XX.X% rates. decreased indirect the million, adjusted of and

special interest which ] was [ in $XX.X tax-effected and the the third was includes strategies, related facility tax the offset impact quarter, the diluted by severance charges rate drove year-over-year or CMG. million.Net and our of or million on million in tax optimization our a $X.XX per share costs $X.X income $X.X and decrease gain net share M&A to expense a in our per However, part reduction, sale of $X.XX

income included benefit other quarter year-over-year per second third net diluted share strategies, share which increases a tax call net discussed XX.X% we net XX.X%, reflect year. This our share.The one-time equated comparisons $X.XX quarter's previous also last our million income from diluted of and tax estimate and in from the that to of optimization of were income $X.XX per respectively, quarter during $XX.X above the contributions and and or

quarter non-GAAP to XXXX.Shifting to share and flows the to share cash reported XX.X% per $X.XX in balance of third compared our quarter per sheet. Third increased EPS $X.XX

the down was cash and the reduction, days the of which progress first to company's increased $XX.X as from flow of as in year's of innovative cash in operations management a in the improvement investments paydown ahead a flows compared third comparable in the debt million, The our improvements We proceeds to made $X.X XXXX. XX during expenditures million on significant cash this was comparable improved $XX.X combination infrastructure. sales quarter. X operating in million paying period well debt to initiatives.Our as outstanding result the year-to-date of similar of in client-facing inclusive we third quarter our and in quarter. $XXX compared in $XX.X divestiture of million, have to continued This last CMG. the to year, XXXX, debt million, the last of significantly by third the technologies and year XX CMY from the days CMG.As sale of reduced months of period Our totaled reflects the days Solutions Capital Blanton acquisitions

the at adjusted second end leverage X.Xx at end Our X.Xx ratio quarter to net was quarter. the of compared

Given confident our our turn the ability reduce to additional half by significant year-end. position in leverage progress, we [ by are ] a

target.As total we fixed position quarter at approximately is our rate be total XX% with of consistent debt around Our prioritize to our fixed XX% we continue rate debt at of debt expect end, our to was year-end. debt our which delevering,

to include debt quarterly per your share employee a $X.XX repurchases our organic January balanced addition growth XXXX cash note on the dividend incentive the to on to of XXXX, X, and capital dilution approach our XXXX.Now we reduction, announced share to shareholders December quarterly Difficulty] acquisitions, you XX, following. to please In dividends.Today, of with financial initiatives, payable models, allocations offset [Technical help programs

year amortization and cash million $XX the the XX% depreciation Amortization of in We to XX%.Operating guided to guidance be now be for we expense range rate with million previously flow to range projected of be fourth $XX Our this expense this narrowed in is $XX $XXX be to million. remains quarter the to million. expect tax million. the is at year intangibles to the of XX% to, has compared million. $XX of now approximately still range as to expected approximately to Interest $XX

share diluted be We anticipated guidance million $XX down million. expenditures of expect $XX our million fully $XX to million, weighted $XX and to our approximately $XX our and are prior between million, count average from to be capital

are indications. there some modeling, XXXX For preliminary

over $X.XX in will approximately and margins his rest for revenues the development the events assuming recur and robust commercial record estimated million business, lines growth our year-to-date organic I a contributed [ wind of down of EPS Marketing will for drive business single-digit high contributed our Together, businesses our John turn will lines U.K. business not XXXX, XXXX closing these includes divested approximately basis quarter Commercial and now pipeline these fourth in revenue.And approximately are back of contributed of on the impact XXXX. the to support service million with have addition, in divestiture remarks. Our $XX the recurring of XXXX.This to sales and that similar business Group call XXXX.In of that, of the $XX revenues the to of ]

Thank you, Barry.

for X key year-to-date efficiency Based year-to-date end we've U.K. growth deploy markets, of business, invest to date last operating of of we've resources our recent results from our decisions Marketing the streamlining Revenues our support growth at simultaneously ICF's and Our the second exit Commercial represented of X growth improving the our reflects years taken commercial of and advanced and our business. Group the on strengthening to performance of and commercial growth our sale in from $XXX be these to to and the invest XX% key we markets the and long-term business billion million full-year organically billion. in strengthen strategy, EBITDA the to profitability. range benefits $XXX over are $X.XX we while areas will And the anticipate of through of U.K. is our made quarter, to approximately position metrics million. revenue sale our that months narrowing XXXX.And total actions at end total range the expected XX% adjusted acquisitions to subcontractor XXXX reflect approximately XX% for to we our guidance and direct to marketing exit costs revenue.Adjusted CMG up revenue the from profitability $X.XX that other our

lower-than-anticipated We are $X.XX EPS $X.XX, to to for special to GAAP guidance due $X.XX EPS $X our charges, to rate. raising non-GAAP and tax exclusive to of

which open impact single-digit encourage high report improve in operating won recurring read year.We're has insights to supported and in its awards this further and notable another ahead to expect our industry-leading another we which a provides to by the we on people We our ahead XXXX, daily make are and integrity.Operator, sessions We strong call financial to people and our to with together by corporate to latest also be now into clients questions. several pleased working report, revenue are of highlighted ICF progress, looking positive XXXX to year for substantial looking growth society you our year to work. serve outcomes the metrics we'll

question first comes Securities. Truist Our Sommer Tobey Instructions] with [Operator from

on to Is on perspective? investor should was other expansion last think Tobey. we is Bibb might Jasper points any still like at that there a XX to margin you rate the to baseline year's get look I annually from This good what early there? Or factors outlined hoping basis for consider about? XX are 'XX a thoughts

margin I we next for think look I expect XX guided of And expect XX will we've as to bps consistently bps year. that that, would improvement XX I of improvement. the margin XX would to see forward continue. to

quarter, from and significant to bills year? highlighted bookings do could also related pickup in next those IIJA the there. hearing you Based you're bookings and Really how activity be what strong think on IRA clients, you X the wins

I a well growth growth we as single-digit organic And which I low I those if -- think beyond, look of could so that think for I by for 'XX greater double-digit -- high we've before, us, We're that go I we've on -- hard said to in know money think it's seeing the us. discussed, the think flow the that. organic growth $XXX I plays opportunities clients. we funds.And will is we local a mean, that as said speed think federal up seeing my to -- to -- the -- numbers and in seeing million. remarks mean, and of as I specific money third work positive to we're in I were funds think trends I I I of provide our We're increase. mean, the represent I we as that certainly our quarter $XX million and flow think IIJA continues IRA-related path of out from look 'XX, those to won as did to flowing important the forward. certainly

continued up. for Obviously, has me. to yield move Last question long-term

an helpful? like be interest interest on expense or will what 'XX perspective, any Just could rate color from look

Yes.

priority we the the go of year-over-year that previously, think would company, down to as -- expectation that delever. expense is interest is And activity, down. goes acquisition absent of the will I stated debt any as be our

Our comes Joseph with next question from Vafi Canaccord.

It broken results consistency. nice of a record kind once of Really again. is

But that. on at congrats growth. I guess, So like, looking single-digit know preliminarily you're I high revenue

Looking at year? emerging a there ahead are to next for going headcount? you linear revenue leverage how growth thinking Or is that, growing to still growth? to any is of have there I -- staffing revenue then headcount is about And Or follow-up. be

Yes.

generally the would in we've as expect headcount revenue. Joe, I think will with about talked I past, track that

about, as we know looking general, -- we're and you grow– pick utilization we've to if As and think in -- -- growing number. increase I always let's a talked so but X% we're

growing For at X%, we're headcount looking increase. X.X%

don't I I that think look in out business, the that's will shift the and as it next track. see nature year. generally a of I to

that And Did for were know it. talking modernization you sure I have not like out modernization called you And point? growth segments rate? I'm IT this about main area a the would acquisition at if then missed some their I out? might you still of be growth. IT and call you activity

I organic couple a federal say Joe. called that out I'd -- rate things. say We the -- think growth of the in we results, would I Yes.

I percent IT new think we're work. which what I we work A the would is substantial of emphasize with. there pleased quarter, million $XXX in won is modernization very

year continued as to strong we up think growth really set I going nicely it's for into there. go us next

market looking in capabilities platforms leader we've the our from building have -- the And we business a low-code/no-code think analytics think we also be capabilities. need capabilities -- that I to We're the and of talked good native data open and acquisitions, feel about, services so source there. at we as have core the that.In very those I provide we're terms to we about that

have core need. what we think I we of So the

that we specific I be looking likely are think more to tuck-in that capabilities. it's there, to extent skills niche for and acquisitions acquisitions fill the

so market. that's how we're And thinking think that about I

I think with IT story that's the modernization.

It want more now in Generative data, sneak use IT this much on? modernization. some Maybe it? to I'll clients there one in just like Do so opportunities. What feels all or be health the could business, saying right AI are on they going thinking about

forward move you technology? like wondering federal this Just may clients -- kind how clients with of fast think

clients. we're not in AI. mean, we've I I mean, for in I we're federal increased in interest the time, obviously, certainly been from AI clients, some seeing our would Generative certainly it But interest say seeing -- I from honestly, our doing particularly mean, sector. AI

that I have clients -- AI are with advantage certainly in on and are think in AI. are platforms discussions certainly have technologies who these we X,XXX Generative embedded taken of capabilities

And so lot interest. a there's of

how I a think we and it. portion of internally.I it's it we use clients but interest We're IT a are material it's of for lot it it. are with clients working we're our modernization, with on wouldn't in say growth -- also seeing looking engaged with on can

question William next comes Our [Audio Blair. Instructions] with Gap] from [indiscernible] [Operator

right. All

next We ahead take and our will go question.

Our Marc next with question comes Riddick from Sidoti.

if on seen more a of maybe sort any there any talk wondering little about kind recently? you're you action if bit projects? that that you a levels? activity accelerate are seeing was clients client bit I And of are you've could or pockets delay could touch there pull little back and if And

don't I change forward areas of we've say X activities Marc, think growth pulling terms mean, that significant as in the we've in or our clients' seen think I key we about, I new talked back. would have leaning drivers. any in I

to of continue we see opportunity lot there. think I a

and sales the pipeline I think good are good. is the

sales seen in in quite space. we strong federal would in the it's that space, last shift I -- coming haven't seen third shift business We haven't say any I any the quite quarter, end we backlog in -- client pleased of have think the the quarter.And with at in mean, and as activities our we usual. our the were I and

business. the any significant wouldn't no, the here I shifts of and clients in our focus last areas So quarter the highlight around with

near-term? on and should that you might the about opportunities, the days what Disaster little pipeline-wise be if noticed seeing announcement a of it I that had disaster-related a we in you the Recovery couple aware maybe talk or I was was you the not with believe -- bit when be And Oregon. anything wondering might be horizon then ago, whether I of of was there

up work Hurricane I pleased we were were picked pleased we're the from in -- We last think that Florida we well, quarter Idalia. in additional with that.

that are we look hard in tracking that. some in at think fires there. the we're And think to a still I stage are early the I Hawaii taking related opportunities

and think pipeline looking And the Recovery respectable so at for we're -- is is hard. Disaster I and

as think and think I in -- that newer say, said, I are there's focused that the I I on, opportunities potentially Hawaii. Florida we're would

the a any And one down to aware if kind was of odd, there particular for but up road? might be tracking last anything lead may me, this little initiatives opportunities coming are wondering ballot are be you of, I some guys or that that we that the should

I'm kind I broke me. You there sorry, of up What Marc, for just missed initiatives? it.

with Are you? election Any ballot or anything say up some coming that for opportunities initiatives areas might there create any day?

to mind immediately. Nothing comes

you looking I Barry, know, if James I'm -- have any…? me, do For don't or

No.

Yes, Marc, I ballot think would come that initiatives there's don't -- material no us. for that to be mind immediately, I

would further now time, to to turn this for closing no back it questions. John I like I'm remarks. showing At

today's participating and QX you we'll Thank you. call. see appreciate Okay. you. We our in call, Thank in you

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

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