UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number:
(Exact name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
Trading Symbols(s) |
Name of each exchange on which registered |
The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
As of April 26, 2024, there were
ICF INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
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Item 1. |
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Consolidated Balance Sheets at March 31, 2024 (Unaudited) and December 31, 2023 |
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Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ICF International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share amounts) |
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March 31, 2024 |
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December 31, 2023 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Contract receivables, net |
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Contract assets |
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Prepaid expenses and other assets |
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Income tax receivable |
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Total Current Assets |
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Property and Equipment, net |
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Other Assets: |
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Goodwill |
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Other intangible assets, net |
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Operating lease - right-of-use assets |
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Other assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Current portion of long-term debt |
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$ |
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Accounts payable |
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Contract liabilities |
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Operating lease liabilities |
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Finance lease liabilities |
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Accrued salaries and benefits |
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Accrued subcontractors and other direct costs |
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Accrued expenses and other current liabilities |
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Total Current Liabilities |
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Long-term Liabilities: |
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Long-term debt |
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Operating lease liabilities - non-current |
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Finance lease liabilities - non-current |
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Deferred income taxes |
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Other long-term liabilities |
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Total Liabilities |
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Stockholders’ Equity: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, |
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( |
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Accumulated other comprehensive loss |
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( |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
ICF International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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Three Months Ended |
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March 31, |
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(in thousands, except per share amounts) |
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2024 |
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2023 |
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Revenue |
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$ |
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$ |
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Direct Costs |
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Operating costs and expenses: |
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Indirect and selling expenses |
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Depreciation and amortization |
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Amortization of intangible assets |
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Total operating costs and expenses |
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Operating income |
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Interest, net |
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Other income (expense) |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Earnings per Share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average Shares: |
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Basic |
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Diluted |
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Cash dividends declared per common share |
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$ |
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$ |
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Other comprehensive income (loss), net of tax |
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Comprehensive income, net of tax |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
ICF International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
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Common Stock |
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Additional |
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Retained |
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Treasury Stock |
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Accumulated |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Earnings |
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Shares |
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Amount |
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Loss |
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Total |
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Balance at January 1, 2024 |
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( |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of shares pursuant to vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Payments for share repurchases |
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( |
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— |
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— |
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— |
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( |
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— |
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( |
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Dividends declared |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common Stock |
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Additional |
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Retained |
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Treasury Stock |
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Accumulated |
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(in thousands) |
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Shares |
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Amount |
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Capital |
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Earnings |
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Shares |
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Amount |
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Loss |
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Total |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Equity compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Issuance of shares pursuant to vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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Payments for share repurchases |
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( |
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— |
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— |
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— |
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( |
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— |
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( |
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Dividends declared |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
5
ICF International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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March 31, |
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(in thousands) |
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2024 |
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2023 |
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Cash Flows from Operating Activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Provision for credit losses |
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Deferred income taxes and unrecognized income tax benefits |
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( |
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Non-cash equity compensation |
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Depreciation and amortization |
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Gain on divestiture of a business |
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Other operating adjustments, net |
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Changes in operating assets and liabilities, net of the effects of acquisitions: |
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Net contract assets and liabilities |
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( |
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Contract receivables |
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Prepaid expenses and other assets |
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( |
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Operating lease assets and liabilities, net |
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Accounts payable |
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( |
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( |
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Accrued salaries and benefits |
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( |
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( |
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Accrued subcontractors and other direct costs |
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( |
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Accrued expenses and other current liabilities |
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( |
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( |
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Income tax receivable and payable |
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Other liabilities |
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( |
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Net Cash Used in Operating Activities |
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( |
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Cash Flows from Investing Activities |
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Payments for purchase of property and equipment and capitalized software |
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( |
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Payments for business acquisitions, net of cash acquired |
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— |
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( |
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Proceeds from divestiture of a business |
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— |
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Net Cash Used in Investing Activities |
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( |
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( |
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Cash Flows from Financing Activities |
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Advances from working capital facilities |
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Payments on working capital facilities |
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( |
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Proceeds from other short-term borrowings |
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Repayments of other short-term borrowings |
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( |
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— |
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Receipt of restricted contract funds |
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Payment of restricted contract funds |
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( |
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( |
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Dividends paid |
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( |
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( |
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Net payments for stock issuances and share repurchases |
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( |
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( |
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Other financing, net |
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( |
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( |
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Net Cash Provided by Financing Activities |
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Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
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( |
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Decrease in Cash, Cash Equivalents, and Restricted Cash |
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( |
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( |
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Cash, Cash Equivalents, and Restricted Cash, Beginning of Period |
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Cash, Cash Equivalents, and Restricted Cash, End of Period |
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$ |
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$ |
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Supplemental Disclosure of Cash Flow Information |
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Cash paid during the period for: |
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Interest |
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$ |
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$ |
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Income taxes |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
6
Notes to Consolidated Financial Statements
(Unaudited)
(Dollar amounts in tables in thousands, except share and per share data)
NOTE 1 – BASIS OF PRESENTATION
Basis of Presentation
The accompanying consolidated financial statements include the accounts of ICF International, Inc. (“ICFI”) and its principal subsidiary, ICF Consulting Group, Inc. (“Consulting,” and together with ICFI, the “Company”), and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). Consulting is a wholly owned subsidiary of ICFI. ICFI is a holding company with no operations or assets other than its investment in the common stock of Consulting. All other subsidiaries of the Company are wholly owned by Consulting. Intercompany transactions and balances have been eliminated. The terms “federal” or “federal government” refer to the U.S. federal government, and “state and local” or “state and local government” refer to U.S. state (including territories) and local governments, unless otherwise indicated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Key estimates include estimates related to variable consideration on contracts with customers, costs to complete fixed-price contracts, bonus and other incentive compensation, reserves for tax benefits and valuation allowances on deferred tax assets, collectability of receivables, valuation and useful lives of acquired tangible and intangible assets, impairment of goodwill and long-lived assets, and contingencies. Actual results experienced by the Company may differ from management’s estimates.
Interim Results
The unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These rules and regulations permit some of the information and footnote disclosures normally included in financial statements, prepared in accordance with U.S. GAAP, to be condensed or omitted. In management’s opinion, the unaudited consolidated financial statements contain all adjustments that are of a normal recurring nature, necessary for a fair presentation of the results of operations and financial position of the Company for the interim periods presented. The Company reports operating results and financial data in
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
Segment Reporting
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07: Improvements to Reportable Segment Disclosures to update reportable segment disclosure requirements for public entities under the Accounting Standards Codification (“ASC”). ASU 2023-07 enhances the current segment reporting disclosures of Topic 280 by requiring disclosure of significant segment expenses that are regularly reviewed by the Chief Operating Decision Maker (the “CODM”), the amount and description of other segment items, and interim disclosures of reportable segment’s profit or loss and assets. ASU 2023-07 also requires public entities that have a single reportable segment to provide all of the disclosures required in Topic 280, as amended. ASU 2023-07 is effective for the Company for the fiscal year ending December 31, 2024 and interim periods within the 2025 fiscal year on a retrospective basis, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2023-07 but does not expect the adoption to have a material impact, if any, on the consolidated financial statements.
7
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires greater disaggregation of income tax rate and amounts paid by entities. ASU 2023-09 specifically requires all entities to disclose, on an annual basis, disaggregated domestic and foreign pre-tax income or loss from continuing operations and the disaggregated income tax expense or benefit by federal, state, and foreign components, and a tabular rate reconciliation, using both percentages and reporting currency amounts, of eight specific categories as well as any individual reconciling items that are equal to or greater than 5% of a threshold computed by multiplying pretax income or loss from continuing operations by the applicable federal rate. Additionally, the amendments also require disclosure of income taxes paid disaggregated by federal, state, and foreign jurisdictions as well as any individual jurisdictions over 5% of the total income taxes paid. ASU 2023-09 is effective for the Company for the fiscal year ending December 31, 2025, with early adoption permitted. The amendments may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of the adoption of ASU 2023-09 but does not expect the adoption to have a material impact, if any, on the consolidated financial statements.
NOTE 2 – RESTRICTED CASH
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets for the periods presented to the total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023:
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||||||||||
|
|
Beginning |
|
|
Ending |
|
|
Beginning |
|
|
Ending |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 3 – CONTRACT RECEIVABLES, NET
Contract receivables, net consisted of the following:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Billed and billable |
|
$ |
|
|
$ |
|
||
Allowance for expected credit losses |
|
|
( |
) |
|
|
( |
) |
Contract receivables, net |
|
$ |
|
|
$ |
|
||
The Company sells certain billed receivables in accordance with its Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”). The receivables that are sold without recourse and where the Company does not retain any ongoing financial interest in the transferred receivables, other than providing servicing activities, are accounted for as sales under ASC 860, Transfers and Servicing (“ASC 860”). Consequently, these receivables are derecognized from the Company’s consolidated balance sheets at the date of the sale, and the cash received from MUFG is presented as part of cash flows from operating activities.
8
The following is the summary of the amount of ASC 860 eligible contract receivables sold to MUFG but not yet collected from the customers, as of March 31, 2024, and 2023, respectively:
|
|
As of and for the Three Months Ended |
|
|||||
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Billed receivables sold during the period |
|
|
|
|
|
|
||
Collections from customers during the period |
|
|
( |
) |
|
|
( |
) |
Ending balance (1) |
|
$ |
|
|
$ |
|
||
The following is a reconciliation of cash collections and remittances to MUFG for the sale of billed receivables as of and for the three months ended March 31, 2024 and 2023:
|
|
As of and for the Three Months Ended |
|
|||||
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Collections from customers during the period |
|
|
|
|
|
|
||
Remittances to MUFG during the period |
|
|
( |
) |
|
|
( |
) |
Ending balance (1) |
|
$ |
|
|
$ |
|
||
The Company services the receivables sold by collecting cash and remitting it to MUFG. The related servicing fee received from MUFG was immaterial.
The Company also sold certain receivables to MUFG that did not qualify as sales under ASC 860. Consequently, the cash received from and remitted back to MUFG is presented as cash from financing activities within “Proceeds from other short-term borrowings” and “Repayments of other short-term borrowings” on the Company’s consolidated statements of cash flows. At March 31, 2024 and December 31, 2023, the amounts due to MUFG for cash collected and not yet remitted for receivables sold that did not qualify as sales under ASC 860 totaled $
NOTE 4 – LEASES
The Company has operating and finance leases for facilities and equipment which have remaining terms ranging from
|
|
Operating |
|
|
Finance |
|
||
March 31, 2025 |
|
$ |
|
|
$ |
|
||
March 31, 2026 |
|
|
|
|
|
|
||
March 31, 2027 |
|
|
|
|
|
|
||
March 30, 2028 |
|
|
|
|
|
|
||
March 31, 2029 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total future minimum lease payments |
|
|
|
|
|
|
||
Less: Interest |
|
|
( |
) |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
$ |
|
||
9
NOTE 5 – DEBT
At March 31, 2024 and December 31, 2023, debt consisted of:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||
|
|
Average |
|
Outstanding |
|
|
Average |
|
Outstanding |
|
||
Term Loan |
|
|
|
$ |
|
|
|
|
$ |
|
||
Delayed-Draw Term Loan |
|
|
|
|
|
|
|
|
|
|
||
Revolving Credit |
|
|
|
|
|
|
|
|
|
|
||
Total before debt issuance costs |
|
|
|
|
|
|
|
|
||||
Unamortized debt issuance costs |
|
|
|
|
( |
) |
|
|
|
|
( |
) |
Total |
|
|
|
$ |
|
|
|
|
$ |
|
||
As of March 31, 2024, the Company had $
Future contractual repayments of debt principal are as follows:
Payments due by |
|
Term Loan |
|
|
Delayed-Draw Term Loan |
|
|
Revolving Credit |
|
|
Total |
|
||||
March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
March 31, 2026 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
March 31, 2027 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
May 6, 2027 (Maturity) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 6 – REVENUE RECOGNITION
Disaggregation of Revenue
The Company disaggregates revenue from clients into categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market, client type, and contract mix.
|
|
Three Months Ended March 31, |
|
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
||||||||||
|
|
Dollars |
|
|
Percent |
|
|
Dollars |
|
|
Percent |
|
|
||||
Client Markets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy, environment, infrastructure, and disaster recovery |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
Health and social programs |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Security and other civilian & commercial |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
|
|
Three Months Ended March 31, |
|
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
||||||||||
|
|
Dollars |
|
|
Percent |
|
|
Dollars |
|
|
Percent |
|
|
||||
Client Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. federal government |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
U.S. state and local government |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
International government |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Total Government |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Commercial |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
10
|
|
Three Months Ended March 31, |
|
|
|||||||||||||
|
|
2024 |
|
|
2023 |
|
|
||||||||||
|
|
Dollars |
|
|
Percent |
|
|
Dollars |
|
|
Percent |
|
|
||||
Contract Mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time-and-materials |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
Fixed-price |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Cost-based |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
||||
Contract Assets and Liabilities
Contract assets consist of unbilled receivables on contracts where revenue recognized exceeds the amount billed. Contract liabilities result from advance payments received on a contract or from billings in excess of revenue recognized on long-term contracts.
The following table summarizes the contract assets and liabilities as of March 31, 2024 and December 31, 2023:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Contract assets |
|
$ |
|
|
$ |
|
||
Contract liabilities |
|
|
( |
) |
|
|
( |
) |
Net contract assets (liabilities) |
|
$ |
|
|
$ |
|
||
The increase in net contract assets (liabilities) is primarily due to the timing difference between the performance of services and billings to and payments from customers. During the three months ended March 31, 2024 and 2023, the Company recognized $
Unfulfilled Performance Obligations
The Company had $
NOTE 7 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
At March 31, 2024, the Company had floating-to-fixed interest rate swap agreements for an aggregate notional amount of $
NOTE 8 – INCOME TAXES
A reconciliation of the Company’s statutory rate to the effective tax rate for the three months ended March 31, 2024 and 2023 is as follows:
|
Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Statutory tax rate |
|
% |
|
|
% |
||
State taxes, net of federal benefit |
|
% |
|
|
% |
||
Executive compensation |
|
% |
|
|
% |
||
Corporate-owned life insurance |
|
( |
%) |
|
|
( |
%) |
Other permanent differences |
|
% |
|
|
( |
%) |
|
Uncertain tax position |
|
% |
|
|
— |
|
|
Valuation allowance |
|
% |
|
|
% |
||
Equity-based compensation |
|
( |
%) |
|
|
( |
%) |
Tax credits |
|
( |
%) |
|
|
( |
%) |
Effective tax rate |
|
% |
|
|
% |
||
The uncertain tax position and tax credits recognized during the three months ended March 31, 2024 are both primarily related to the Research & Experimentation (R&E) credits.
11
NOTE 9 – STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss as of March 31, 2024 and 2023 included the following:
|
|
Three Months Ended March 31, 2024 |
|
|||||||||
|
|
Foreign |
|
|
Change in |
|
|
Total |
|
|||
Accumulated other comprehensive (loss) income at December 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Current period other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|||
Other comprehensive (loss) income before reclassifications |
|
|
( |
) |
|
|
|
|
|
|
||
Amounts reclassified from accumulated other comprehensive (loss) income (1) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Effect of taxes |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total current period other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
|
||
Accumulated other comprehensive (loss) income at March 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
(1)
|
|
Three Months Ended March 31, 2023 |
|
|||||||||
|
|
Foreign |
|
|
Change in |
|
|
Total |
|
|||
Accumulated other comprehensive (loss) income at December 31, 2022 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Current period other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|||
Other comprehensive (loss) income before reclassifications |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive (loss) income |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Effect of taxes |
|
|
( |
) |
|
|
|
|
|
|
||
Total current period other comprehensive (loss) income |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Accumulated other comprehensive (loss) income at March 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Share Repurchases
The Company repurchased shares under a $
In addition, the Company repurchased shares in connection with vesting of restricted stock units granted to employees. During the three months ended March 31, 2024 and 2023, the Company used $
12
NOTE 10 – STOCK-BASED COMPENSATION
The Company’s 2018 Amended and Restated Omnibus Incentive Plan (the “2018 A&R Omnibus Plan”) allows the Company to grant up to
The following awards were granted during the three months ended March 31, 2024 and 2023:
|
|
Awards Granted |
|
|
Average Grant Date Fair Value |
|
||||||||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||
|
|
March 31, |
|
|
March 31, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Employee Stock Awards |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Cash-Settled Restricted Stock Units |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The total stock-based compensation expense was $
The Company’s earnings per share (“EPS”) is computed by dividing reported net income by the weighted-average number of shares outstanding. Diluted EPS considers the potential dilution that could occur if the Company’s common stock options, restricted stock units (“RSUs”), and performance share awards (“PSAs”) were exercised or converted into the Company’s common stock. PSAs are included in the computation of diluted shares only to the extent that the underlying performance conditions: (i) are satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related performance period and the result would be dilutive under the treasury stock method.
As of March 31, 2024, the PSAs granted during the year ended December 31, 2022 met the related performance conditions for the initial performance period and were included in the calculation of diluted EPS. However, the PSAs granted during the year ended December 31, 2023 and during the three months ended March 31, 2024 have not yet completed their initial
EPS, including the dilutive effect of stock awards for each period reported is summarized below:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(in thousands, except per share data) |
|
2024 |
|
|
2023 |
|
||
Net Income |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted-average number of basic shares outstanding during the period |
|
|
|
|
|
|
||
Dilutive effect of stock awards |
|
|
|
|
|
|
||
Weighted-average number of diluted shares outstanding during the period |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Basic earnings per share |
|
$ |
|
|
$ |
|
||
Diluted earnings per share |
|
$ |
|
|
$ |
|
||
NOTE 12 – FAIR VALUE
Financial instruments measured at fair value on a recurring basis and their location within the accompanying consolidated balance sheets are as follows:
|
March 31, 2024 |
|
|
|
|||||||||||||
(in thousands) |
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Location on Balance Sheet |
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps - current portion |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
Prepaid expenses and other assets |
||
Foreign currency forward and swap contracts |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Prepaid expenses and other assets |
||
Interest rate swaps - long-term portion |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Other assets |
||
Company-owned life insurance policies |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Other assets |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps - long-term portion |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
Other long-term liabilities |
||
13
|
December 31, 2023 |
|
|
|
|||||||||||||
(in thousands) |
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Location on Balance Sheet |
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps - current portion |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
Prepaid expenses and other assets |
||
Foreign currency forward and swap contracts |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Prepaid expenses and other assets |
||
Interest rate swaps - long-term portion |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Other assets |
||
Company-owned life insurance policies |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
Other assets |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps - long-term portion |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
Other long-term liabilities |
||
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Letters of Credit
The Company had open standby letters of credit totaling $
Guarantees
At March 31, 2024 and December 31, 2023, the Company had $
Litigation and Claims
The Company is involved in various legal matters and proceedings arising in the ordinary course of business. While these matters and proceedings cause it to incur costs, including, but not limited to, attorneys’ fees, the Company currently believes that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on its financial position, results of operations, or cash flows.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” or similar words. You should read statements that contain these words carefully. The risk factors described in our filings with the Securities and Exchange Commission (the “SEC”), as well as any cautionary language in this Quarterly Report, provide examples of risks, uncertainties, and events that may cause actual results to differ materially from the expectations described in the forward-looking statements, including, but not limited to:
Our forward-looking statements are based on the beliefs and assumptions of our management and the information available to our management at the time these disclosures were prepared. Although we believe the expectations reflected in these statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. We undertake no obligation to update these forward-looking statements, even if our situation changes in the future.
The terms “we,” “our,” “us,” and “the Company,” as used throughout this Quarterly Report, refer to ICF International, Inc. and its subsidiaries, unless otherwise indicated. The terms “federal” or “federal government” refer to the U.S. federal government, and “state and local” or “state and local government” refer to U.S. state and local governments and the governments of U.S. territories. The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, and liquidity and capital resources. You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024 (our “Annual Report”).
15
OVERVIEW AND OUTLOOK
We provide professional services and technology-based solutions, including management, technology, and policy consulting and implementation services. We help our clients conceive, develop, implement, and improve solutions that address complex business, natural resource, social, technological, and public safety issues. Our services primarily support clients that operate in three key markets:
We provide services to our diverse client base that deliver value throughout the entire life cycle of a policy, program, project, or initiative. Our primary services include:
We report operating results and financial data as a single segment based on the consolidated information used by our chief operating decision-maker in evaluating the financial performance of our business and allocating resources. Our single segment represents our core business: professional services to our broad array of clients. Although we describe our multiple service offerings to clients that operate in three markets to provide a better understanding of the scope and scale of our business, we do not manage our business or allocate our resources based on those service offerings or client markets. Rather, on a project-by-project basis, we assemble the best team from throughout the enterprise to deliver highly customized solutions that are tailored to meet the needs of each client.
We believe that, in the long-term, demand for our services will continue to grow as government, industry, and other stakeholders seek to address critical long-term societal and natural resource issues due to heightened concerns about the environment and use of clean energy and energy efficiency; health promotion, treatment, and cost control; the means by which public health can be improved effectively on a cross-jurisdiction basis; natural disaster recovery and rebuild efforts; and ongoing homeland security threats.
We also see significant opportunity to further leverage our digital and client engagement capabilities across our client base. Our future results will depend on the success of our strategy to enhance our client relationships and seek larger engagements that span the entire program life cycle, and to complete and successfully integrate additional strategic acquisitions. We will continue to focus on building scale in our vertical and horizontal domain expertise, developing business with our existing clients as well as new customers, and replicating our business model in selective geographies. In doing so, we will continue to evaluate strategic acquisition opportunities that enhance our subject matter knowledge, broaden our service offerings, and/or provide scale in specific geographies.
Although we continue to see favorable long-term market opportunities, there are certain business challenges facing all government service providers. Administrative and legislative actions by the federal government to address changing priorities or in response to the budget deficit and/or debt ceiling could have a negative impact on our business, which may result in a reduction to our revenue and profit and adversely affect cash flow. Similarly, the very nature of opportunities arising out of disaster recovery means they can involve unusual challenges. Factors such as the overall stress on communities and people affected by disaster recovery situations, political complexities and challenges among involved government agencies, and a higher-than-normal risk of audits and investigations may result in a reduction to our revenue and profit and adversely affect cash flow. However, we believe we are well positioned to provide a broad range of services in support of initiatives that will continue to be priorities to the federal government, as well as to state and local and international governments and commercial clients. We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ongoing operations, potential acquisitions, customary capital expenditures, and other working capital requirements.
16
RESULTS OF OPERATIONS
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
The table below sets forth select line items of our unaudited consolidated statements of comprehensive income, the percentage of revenue for these select items, and the period-over-period rate of change and percentage of revenue for the periods indicated.
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||||||||||
|
|
Dollars |
|
|
Percentages of Revenue |
|
|
Year-to-Year Change |
|
|||||||||||||||
(dollars in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
Dollars |
|
|
Percent |
|
||||||
Revenue |
|
$ |
494,436 |
|
|
$ |
483,282 |
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
$ |
11,154 |
|
|
|
2.3 |
% |
Direct Costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Direct labor & related fringe |
|
|
190,023 |
|
|
|
180,587 |
|
|
|
38.4 |
% |
|
|
37.4 |
% |
|
|
9,436 |
|
|
|
5.2 |
% |
Subcontractors & other direct costs |
|
|
120,510 |
|
|
|
131,978 |
|
|
|
24.4 |
% |
|
|
27.3 |
% |
|
|
(11,468 |
) |
|
|
(8.7 |
%) |
Total Direct Costs |
|
|
310,533 |
|
|
|
312,565 |
|
|
|
62.8 |
% |
|
|
64.7 |
% |
|
|
(2,032 |
) |
|
|
(0.7 |
%) |
Operating Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Indirect and selling expenses |
|
|
129,094 |
|
|
|
123,733 |
|
|
|
26.1 |
% |
|
|
25.6 |
% |
|
|
5,361 |
|
|
|
4.3 |
% |
Depreciation and amortization |
|
|
5,574 |
|
|
|
6,309 |
|
|
|
1.1 |
% |
|
|
1.3 |
% |
|
|
(735 |
) |
|
|
(11.7 |
%) |
Amortization of intangible assets |
|
|
8,291 |
|
|
|
9,224 |
|
|
|
1.7 |
% |
|
|
1.9 |
% |
|
|
(933 |
) |
|
|
(10.1 |
%) |
Total Operating Costs and Expenses |
|
|
142,959 |
|
|
|
139,266 |
|
|
|
28.9 |
% |
|
|
28.8 |
% |
|
|
3,693 |
|
|
|
2.7 |
% |
Operating Income |
|
|
40,944 |
|
|
|
31,451 |
|
|
|
8.3 |
% |
|
|
6.5 |
% |
|
|
9,493 |
|
|
|
30.2 |
% |
Interest, net |
|
|
(8,238 |
) |
|
|
(9,457 |
) |
|
|
(1.7 |
%) |
|
|
(2.0 |
%) |
|
|
1,219 |
|
|
|
(12.9 |
%) |
Other income (expense) |
|
|
1,630 |
|
|
|
(558 |
) |
|
|
0.3 |
% |
|
|
(0.1 |
%) |
|
|
2,188 |
|
|
nm |
|
|
Income before Income Taxes |
|
|
34,336 |
|
|
|
21,436 |
|
|
|
6.9 |
% |
|
|
4.4 |
% |
|
|
12,900 |
|
|
|
60.2 |
% |
Provision for Income Taxes |
|
|
7,019 |
|
|
|
5,038 |
|
|
|
1.4 |
% |
|
|
1.0 |
% |
|
|
1,981 |
|
|
|
39.3 |
% |
Net Income |
|
$ |
27,317 |
|
|
$ |
16,398 |
|
|
|
5.5 |
% |
|
|
3.4 |
% |
|
$ |
10,919 |
|
|
|
66.6 |
% |
nm - not meaningful
Revenue. The increase in revenue of $11.2 million was driven by $6.4 million, $4.6 million, and $1.7 million from our U.S. federal government, international government, and U.S. state and local government clients, respectively, offset by a decrease of $1.5 million from our commercial clients. Our revenue from client markets were impacted by varying amounts by our exit from the commercial marketing and events business during 2023 and resulted in the following changes:
Revenue includes subcontractor & other direct costs, which decreased $11.5 million, or 8.7%, from the first quarter of 2023 and totaled $120.5 million and $132.0 million for the three months ended March 31, 2024 and 2023, respectively, and the margin on such costs.
17
Direct Costs. The decrease of $2.0 million in direct costs was driven by a decrease of $11.5 million in our subcontractor & other direct costs, primarily as a result of our exit from the commercial marketing and events business during 2023, offset by an increase of $9.4 million in our direct labor and associated fringe benefit costs. Our subcontractor & other direct costs as a percentage of direct costs were 38.8% and 42.2% for the three months ended March 31, 2024 and 2023, respectively. Our direct labor & related fringe benefit costs as a percentage of direct costs were 61.2% and 57.8% for the three months ended March 31, 2024 and 2023, respectively. Our subcontractor & other direct costs as a percentage of revenue were 24.4% and 27.3% for the three months ended March 31, 2024 and 2023, respectively, and our direct labor & related fringe benefit costs as a percentage of revenue were 38.4% and 37.4% for the three months ended March 31, 2024 and 2023, respectively. Our total direct costs as a percentage of revenue were 62.8% for the three months ended March 31, 2024, compared to 64.7% for the three months ended March 31, 2023.
Indirect and selling expenses. For the three months ended March 31, 2024, our indirect and selling expenses increased $5.4 million, or 4.3%, compared to the prior year. As a percentage of revenue, our indirect and selling expenses increased to 26.1% from 25.6%. The increase in indirect and selling expenses was primarily due to higher compensation costs.
Depreciation and amortization. The decrease of $0.7 million in our depreciation and amortization was primarily due to fewer capital assets as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.
Amortization of intangible assets. The decrease of $0.9 million in amortization of intangible assets was primarily due to the divestiture of our U.S. commercial marketing business in the third quarter of 2023 that resulted in fewer intangible assets in the first quarter of 2024 compared to 2023.
Interest, net. The decrease of $1.2 million in interest, net, was primarily from a decrease of our average debt balance to $508.8 million for the three months ended March 31, 2024 compared to $634.3 million for the same period in 2023. We utilize floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt. For the three months ended March 31, 2024, settlements of the swap agreements reduced our interest expense, net, by $1.7 million compared to $1.4 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the three months ended March 31, 2024 was $7.2 million compared to $8.8 million for 2023 and our interest rate inclusive of the swap agreements was 5.6% for the three months ended March 31, 2024 compared to 5.5% for 2023.
Other income (expense). The change in other income (expense) of $2.2 million was primarily from a gain of $1.7 million that was recognized after the release of an escrow the 2023 divestiture of our U.S. commercial marketing business.
Provision for Income Taxes. Our effective income tax rate for the three months ended March 31, 2024 and 2023 was 20.4% and 23.5%, respectively. The decrease in the effective income tax rate was primarily due to the impact of windfall tax benefits relating to equity-based compensation that vested during the quarter partially offset by non-deductible executive compensation, and an additional valuation allowance on excess foreign tax credits generated during the quarter.
NON-GAAP MEASURES
The following tables provide reconciliations of financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. to their most comparable U.S. GAAP measures (“non-GAAP”). While we believe that these non-GAAP financial measures provide additional information to investors and may be useful in evaluating our financial information, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define similarly titled non-GAAP measures differently and, accordingly, care should be exercised in understanding how we define these measures as similarly named measures are unlikely to be comparable across different companies.
EBITDA and Adjusted EBITDA
Earnings before interest, tax, and depreciation and amortization (“EBITDA”) is a measure we use to evaluate operating performance. We believe EBITDA is useful in assessing ongoing trends and, as a result, may provide additional visibility in understanding our operations.
Adjusted EBITDA is EBITDA further adjusted to eliminate the impact of certain items that we do not consider to be indicative of the performance of our ongoing operations (“Adjusted EBITDA”). We evaluate these adjustments on an individual basis based on both the quantitative and qualitative aspects of the item, including their size and nature, as well as whether or not we expect them to occur as part of our normal business on a regular basis.
EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow as these measures do not include certain cash requirements such as interest payments, tax payments, capital expenditures, and debt service.
18
The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Net income |
|
$ |
27,317 |
|
|
$ |
16,398 |
|
Interest, net |
|
|
8,238 |
|
|
|
9,457 |
|
Provision for income taxes |
|
|
7,019 |
|
|
|
5,038 |
|
Depreciation and amortization |
|
|
13,865 |
|
|
|
15,533 |
|
EBITDA |
|
|
56,439 |
|
|
|
46,426 |
|
Impairment of long-lived assets (1) |
|
|
— |
|
|
|
894 |
|
Acquisition and divestiture-related expenses (2) |
|
|
66 |
|
|
|
803 |
|
Severance and other costs related to staff realignment (3) |
|
|
365 |
|
|
|
2,495 |
|
Charges for facility consolidations and office closures (4) |
|
|
— |
|
|
|
359 |
|
Pre-tax gain from divestiture of a business (5) |
|
|
(1,715 |
) |
|
|
— |
|
Total Adjustments |
|
|
(1,284 |
) |
|
|
4,551 |
|
Adjusted EBITDA |
|
$ |
55,155 |
|
|
$ |
50,977 |
|
Non-GAAP Diluted Earnings per Share
Non-GAAP diluted earnings per share (“Non-GAAP Diluted EPS”) represents diluted U.S. GAAP earnings per share (“U.S. GAAP Diluted EPS”) excluding the impact of certain items noted above, amortization of intangible assets, and the related income tax effects. While these adjustments may be recurring and not infrequent or unusual, we do not consider these adjustments to be indicative of the performance of our ongoing operations. We believe that the supplemental adjustments provide additional useful information to investors.
The following table presents a reconciliation of U.S. GAAP Diluted EPS to Non-GAAP Diluted EPS for the periods indicated.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
U.S. GAAP Diluted EPS |
|
$ |
1.44 |
|
|
$ |
0.87 |
|
Impairment of long-lived assets |
|
|
— |
|
|
|
0.04 |
|
Acquisition and divestiture-related expenses |
|
|
— |
|
|
|
0.04 |
|
Severance and other costs related to staff realignment |
|
|
0.02 |
|
|
|
0.13 |
|
Expenses related to facility consolidations and office closures (1) |
|
|
0.04 |
|
|
|
0.02 |
|
Pre-tax gain from divestiture of a business |
|
|
(0.09 |
) |
|
|
— |
|
Amortization of intangibles |
|
|
0.44 |
|
|
|
0.49 |
|
Income tax effects of the adjustments (2) |
|
|
(0.08 |
) |
|
|
(0.17 |
) |
Non-GAAP Diluted EPS |
|
$ |
1.77 |
|
|
$ |
1.42 |
|
19
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Borrowing Capacity. Short-term liquidity requirements are created by our use of funds for working capital, capital expenditures, debt service, dividends, and share repurchases. We expect to meet these requirements through a combination of our cash and cash equivalents at hand, cash flow from operations, and borrowings. Our primary source of borrowings is from our Credit Facility with a syndicate of multiple commercial banks, as described in “Note 5 – Debt” in the “Notes to Consolidated Financial Statements” in this Quarterly Report. As of March 31, 2024, we had $541.3 million available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.
We have entered into floating-to-fixed interest rate swap agreements for a total notional value of $275.0 million to hedge a portion of our floating rate Credit Facility. The swap agreements will expire in 2025 and 2028, respectively, and we may consider entering into additional swap agreements as these existing hedges expire. As of March 31, 2024, the percentage of our fixed-rate debt to floating-rate debt was 58%.
There are other conditions, such as the ongoing wars in Ukraine and the Middle East, and the recent increase in inflation, both in the U.S. and globally, that create uncertainty in the global economy, which in turn may impact, among other things, our ability to generate positive cash flows from operations and our ability to successfully execute and fund key initiatives. However, our current belief is that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ongoing operations, customary capital expenditures and acquisitions, quarterly cash dividends, share repurchases, and organic growth. Additionally, we continuously analyze our capital structure to ensure we have capital to fund future strategic acquisitions.
We continuously monitor the state of the financial markets to assess the availability of borrowing capacity under the Credit Facility and the cost of additional capital from both debt and equity markets. At present, we believe we will be able to continue to access these markets at commercially reasonable terms and conditions if we need additional capital in the near term.
Dividends. We have historically paid quarterly cash dividends to our shareholders of record at $0.14 per share. Total dividend payments during the three months ended March 31, 2024 were $2.6 million.
Cash dividends declared thus far in 2024 are as follows:
Dividend Declaration Date |
|
Dividend Per Share |
|
|
Record Date |
|
Payment Date |
|
February 27, 2024 |
|
$ |
0.14 |
|
|
March 22, 2024 |
|
April 12, 2024 |
May 2, 2024 |
|
$ |
0.14 |
|
|
June 7, 2024 |
|
July 12, 2024 |
Cash Flow. The following table sets forth our sources and uses of cash for the three months ended March 31, 2024 and 2023:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Net Cash Used in Operating Activities |
|
$ |
(10,001 |
) |
|
$ |
(16,831 |
) |
Net Cash Used in Investing Activities |
|
|
(3,511 |
) |
|
|
(6,900 |
) |
Net Cash Provided by Financing Activities |
|
|
8,833 |
|
|
|
19,688 |
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash |
|
|
(171 |
) |
|
|
11 |
|
Decrease in Cash, Cash Equivalents, and Restricted Cash |
|
$ |
(4,850 |
) |
|
$ |
(4,032 |
) |
Cash used in Operating Activities decreased $6.8 million as a result of favorable impact of working capital changes and the timing of servicing the receivables sold to MUFG Bank, Ltd., under our Master Receivables Purchase Agreement (the “MRPA”). See “Note 3 - Contract Receivables, Net” in the “Notes to Consolidated Financial Statements” in this Quarterly Report for additional details on the sale of receivables under the MRPA.
Cash used in investing activities decreased by $3.4 million due to reduced capital expenditures and cash received in connection with the 2023 divestiture of our U.S. commercial marketing business.
Cash provided by financing activities decreased by $10.9 million, primarily due to increased share repurchases of $7.5 million and higher payments to MUFG of $2.1 million under the MRPA.
20
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the disclosures discussed in the section entitled “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report.
Item 4. Controls and Procedures
Disclosure Controls and Procedures and Internal Controls Over Financial Reporting. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act of 1934) and have concluded that as of March 31, 2024, our disclosure controls and procedures were effective. There have been no significant changes in our internal controls over financial reporting during the quarterly period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various legal matters and proceedings arising in the ordinary course of business. While these matters and proceedings cause us to incur costs, including, but not limited to, attorneys’ fees, we currently believe that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on our financial position, results of operations, or cash flows.
Item 1A. Risk Factors
There have been no material changes in the risk factors discussed in the section entitled “Risk Factors” disclosed in Part I, Item 1A of our Annual Report.
The risks described in our Annual Report are not the only risks that we encounter. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, and/or operating results.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Share Repurchase Program. One of the objectives of our share repurchase program has been to offset dilution resulting from our employee incentive plan. The timing and extent to which we repurchase our shares will depend upon market conditions and other corporate considerations, as may be considered in our sole discretion. Repurchases are funded from our existing cash balances and/or borrowings, and repurchased shares are held as treasury stock.
During the three months ended March 31, 2024, we repurchased 172,817 shares by using $23.8 million under the program and $69.9 million remained available for share repurchases as of March 31, 2024.
Repurchases of Equity Securities. The following table summarizes the share repurchase activity for the three months ended March 31, 2024 for our share repurchase program and shares purchased in satisfaction of employee tax withholding obligations related to the settlement of restricted stock units.
Period |
|
Total Number |
|
|
Average Price |
|
|
Total Number of |
|
|
Approximate |
|
||||
January 1 - January 31 |
|
|
129,786 |
|
|
$ |
133.46 |
|
|
|
113,179 |
|
|
$ |
78,608,384 |
|
February 1 - February 29 |
|
|
47,089 |
|
|
$ |
144.76 |
|
|
|
46,602 |
|
|
$ |
71,855,335 |
|
March 1 - March 31 |
|
|
41,823 |
|
|
$ |
151.65 |
|
|
|
13,036 |
|
|
$ |
69,905,208 |
|
Total |
|
|
218,698 |
|
|
$ |
139.37 |
|
|
|
172,817 |
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
22
Item 5. Other Information
On
On
On
23
Item 6. Exhibits
Exhibit Number |
|
Exhibit |
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101 |
|
The following materials from the ICF International, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.* |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Submitted electronically herewith.
+ Indicates a management contract or compensatory plan or arrangement required to be filed as an exhibit.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ICF INTERNATIONAL, INC. |
||
|
|
|
|
May 2, 2024 |
By: |
|
/s/ John Wasson |
|
|
|
John Wasson |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
May 2, 2024 |
By: |
|
/s/ Barry Broadus |
|
|
|
Barry Broadus |
|
|
|
Chief Financial Officer (Principal Financial Officer) |
25