ICF Reports Third Quarter 2024 Results

―Margin Expansion Driven by Favorable Business Mix and Higher Utilization―
―GAAP EPS and Non-GAAP EPS¹ Include Tax Benefits of $0.25 Per Share―
―Record Business Development Pipeline of $10.6 Billion at Quarter-End―

―2024 Guidance: Adjusting Revenue Range to Account for Lower Pass-Throughs; Raising EPS Ranges to Reflect Margin Expansion and Tax Benefits―

Third Quarter Highlights: 

• Revenue Increased 3% to $517 Million, Up 6% Excluding Divestitures
• Net Income Was $33 Million and GAAP EPS Was $1.73, Up 38%
• Non-GAAP EPS Increased 18% to $2.13
• EBITDA¹ Increased 18% to $58.2 Million; Adjusted EBITDA¹ Was $58.5 Million, Up 8%
• Contract Awards Were $697 Million for a Quarterly Book-to Bill Ratio of 1.35 and a TTM Book-to-Bill Ratio of 1.31

RESTON, Va., Oct. 31, 2024 /PRNewswire/ — ICF (NASDAQ: ICFI), a global consulting and technology services provider, reported results for the third quarter ended September 30, 2024.

Commenting on the results, John Wasson, chair and chief executive officer, said, “This was another quarter of strong performance for ICF. Total revenues increased 3% year-on-year. Revenues from continuing operations increased 6% from last year’s levels, which includes a considerable impact from lower pass-throughs.

“Our Energy, Environment, Infrastructure and Disaster Recovery client market again was a key contributor to our third quarter results, delivering year-on-year revenue growth of 15.3% and accounting for 45.7% of total third quarter revenues, up from 40.8% in the similar period last year. We experienced continued strong demand from our utility clients for a broad range of ICF’s capabilities, including core energy efficiency programs, grid resilience, electrification, decarbonization and flexible load management, all of which have taken on greater importance given recent increases in projected electricity demand, particularly from the growth in data centers. ICF is a market leader with the unique experience, capabilities and scale to assist utility clients across all these areas with analytics, multidisciplinary solutions and program management.

“Favorable mix and higher utilization were key drivers of third quarter margin expansion. Operating margin increased by 250 basis points year-on-year to 8.9%, and Adjusted EBITDA margin expanded by 50 basis points to 11.3% from 10.8%.

“We ended the third quarter with a record business development pipeline of $10.6 billion, after $697 million in contract awards. Year-to-date contract awards increased 16% from last year’s levels to just over $2.0 billion, of which 63% represented new business wins, indicating how well aligned ICF’s capabilities are with client spending priorities.”

Third Quarter 2024 Results

Third quarter 2024 total revenue was $517.0 million, a 3.1% increase from the $501.5 million reported in the third quarter of 2023, and up 6.0% from last year’s third quarter revenues adjusted for the divestiture of our commercial marketing business lines. Subcontractor and other direct costs were 24.7% of total revenues compared to 27.1% in last year’s third quarter. Operating income was $46.0 million, up 44.3% from $31.9 million last year, and operating margin on revenue expanded to 8.9% from 6.4%. Net income totaled $32.7 million, representing a 37.7% year-on-year increase over the $23.7 million reported in the third quarter of 2023. Diluted EPS was $1.73 per share, up 38.4% from $1.25 reported in the third quarter of 2023, which included $5.2 million, or $0.20 per share, of tax-effected special charges. Third quarter 2024 net income and diluted EPS included incremental tax benefits beyond previous expectations of $0.25 per share. As a result, the company’s effective tax rate was 13.8% in the third quarter.

Non-GAAP EPS increased 17.7% to $2.13 per share, from $1.81 per share reported in the comparable period in 2023. EBITDA was $58.2 million, 18.4% above the $49.2 million reported in the year-ago period. Adjusted EBITDA increased 7.8% to $58.5 million from $54.3 million for the comparable period in 2023.

Backlog and New Business

Total backlog was $3.9 billion at the end of the third quarter of 2024. Funded backlog was $1.9 billion, or approximately 50% of the total backlog. The total value of contracts awarded in the 2024 third quarter was $696.9 million for a quarterly book-to-bill ratio of 1.35, and trailing twelve-month contract awards totaled $2.0 billion, up 16.0% year-on-year for a book-to-bill ratio of 1.31.

Government Revenue Third Quarter 2024 Highlights

Revenue from government clients was $387.8 million, up 1.1% year-over-year.

• U.S. federal government revenue was $282.0 million, an increase of 1.0% compared to the $279.3 million reported in the third quarter of 2023, and was impacted by a year-over-year decrease in subcontractor and other direct costs estimated at $10 million in the quarter. Federal government revenue accounted for 54.5% of total revenue, compared to 55.7% of total revenue in the third quarter of 2023.
• U.S. state and local government revenue increased 3.0% to $78.9 million, from $76.6 million in the year-ago quarter. State and local government clients represented 15.3% of total revenue, unchanged from the third quarter of 2023.
• International government revenue was $26.9 million, slightly down from the $27.5 million reported in the year-ago quarter. International government revenue represented 5.2% of total revenue, compared to 5.5% in the third quarter of 2023.

Key Government Contracts Awarded in the Third Quarter 2024

Notable government contract awards won in the third quarter of 2024 included:

Health and Social Programs

• A new task order with a value of $40.2 million with a U.S. federal agency to deliver strategic and digital communications and engagement campaigns to combat human trafficking.
• A contract modification with a value of $33.2 million with a U.S. federal agency to provide stakeholder engagement support services.
• A new contract with a value of $14.8 million with the U.S. Centers for Disease Control and Prevention (CDC) to provide support for CDC’s Needle Exchange Utilization Survey (NEXUS) surveillance project.
• A new subcontract with a value of $11.2 million to provide information resource support services for the U.S. National Institute of Neurological Disorders and Stroke, Office of Neuroscience Communications and Engagement.
• A new contract with a value of $10.9 million with the U.S. National Institutes of Health to support the National Library of Medicine’s User Services and Collections Division cross-functional initiatives, including advancing GenAI projects and other programming and technical development activities.
• A new contract with a value of $9.7 million with the U.S. Department of Education to provide capacity-building services to state, regional and local education agencies.

Disaster Management and Mitigation

• A contract extension with a value of $38.5 million with a U.S. state land agency to provide disaster recovery and mitigation grant management services.
• A new contract with a value of $10.5 million with the government of a U.S. territory to provide a comprehensive array of services to support compliance with federal and local disaster management regulations related to its hurricane recovery efforts.

IT Modernization

• A new contract with a value of $69.9 million with the government of a U.S. territory to design, build and implement a new geospatial data management system.
• A new task order under a blanket purchase agreement with a value of $8.9 million with a U.S. federal agency to provide data center modernization services.

Climate, Energy and Environment

• A single-award recompete blanket purchase agreement with a ceiling of $75 million with the U.S. Environmental Protection Agency Office of Water to provide environmental, economic, regulatory and evaluation services to the agency’s critical water programs.
• A recompete blanket purchase agreement with a ceiling of $40.0 million with the U.S. Federal Highway Administration to provide technical, engineering, publications, marketing and professional support services.

Commercial Revenue Third Quarter 2024 Highlights

Commercial revenue was $129.2 million, compared to $118.1 million reported in the third quarter of 2023; up 23.7% compared to revenues of $104.5 million excluding divestitures in 2023.

• Commercial revenue accounted for 25.0% of total revenue compared to 23.5% of total revenue in the 2023 third quarter.
• Energy markets revenue, which includes energy efficiency programs, increased 24.6% and represented 86.7% of commercial revenue.

Key Commercial Contracts Awarded in the Third Quarter of 2024

Notable commercial awards won in the third quarter of 2024 included:

• A contract modification with a mid-Atlantic U.S. utility to continue to provide program implementation services for its residential energy efficiency portfolio.
• A contract modification with a multinational energy company to prepare environmental impact statements for the company’s offshore wind projects.
• A new contract with an international renewable energy company to prepare an environmental impact statement for its offshore wind project.
• A new contract with a Midwestern U.S. utility to provide program implementation services for its residential energy efficiency program.
• A new contract with a Midwestern U.S. electric and gas utility to provide program implementation services for its residential energy efficiency program.
• A new contract with a Midwestern U.S. utility to provide demand-side management programs for both market rate and disadvantaged communities for its residential energy efficiency portfolio.
• A contract modification with a mid-Atlantic U.S. utility to continue to provide program implementation services for its energy efficiency programs.

Dividend Declaration

On October 31, 2024, ICF declared a quarterly cash dividend of $0.14 per share, payable on January 10, 2025, to shareholders of record on December 6, 2024.

Summary and Outlook

“Continued favorable business mix and utilization metrics, together with the incremental tax benefits of approximately $0.25 per share, have led us to increase the midpoint of our earnings per share guidance for full year 2024 by $0.35. Our revised guidance for GAAP EPS is in the range of $6.05 to $6.15, excluding special charges, and Non-GAAP EPS is expected to range from $7.40 to $7.50, representing year-on-year growth of 14.6% at the midpoint. We have adjusted our full year 2024 revenue guidance range to $2.0 billion to $2.03 billion from $2.03 billion to $2.10 billion to reflect an estimated $50 million reduction in expected pass-throughs. This primarily impacts revenue comparisons for our Health and Social Programs client market with no meaningful impact on margins. Based on our strong cash flow to date, we reaffirm our guidance for full year 2024 operating cash flow of approximately $155 million.

“Our forward-looking metrics support our confidence in continued growth for ICF as we enter 2025. We have a strong multiyear backlog, a record business development pipeline and a consistent track record of new business wins. We are experiencing robust demand from commercial clients for our energy and environment expertise and related implementation and technology capabilities. We have excellent credentials in disaster management, resilience and mitigation work to assist state and local governments with recovery after storms, flooding and wildfires, as well as with their future resilience planning. The large majority of our federal government work is in areas that have bipartisan support, particularly IT modernization, which remains an area of priority spending. And importantly, our people are fully engaged in achieving the objectives and missions of our clients, which underpins our confidence in ICF’s future growth potential,” Mr. Wasson concluded.

1 Non-GAAP EPS, EBITDA, and Adjusted EBITDA are non-GAAP measurements. A reconciliation of all non-GAAP measurements to the most applicable GAAP number is set forth below. Special charges are items that were included within our consolidated statements of comprehensive income but are not indicative of ongoing performance and have been presented net of applicable U.S. GAAP taxes. The presentation of non-GAAP measurements may not be comparable to other similarly titled measures used by other companies.

See the press release here.

About ICF

ICF is a global consulting and technology services company with approximately 9,000 employees, but we are not your typical consultants. At ICF, business analysts and policy specialists work together with digital strategists, data scientists and creatives. We combine unmatched industry expertise with cutting-edge engagement capabilities to help organizations solve their most complex challenges. Since 1969, public and private sector clients have worked with ICF to navigate change and shape the future. Learn more at icf.com.

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