ICF International Inc

Previous wording

Failure of the presidential administration (the “Administration”) and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;

Current wording

Failure of the presidential administration and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;

Previous wording

Revenue. The increase in revenue was driven by $5.2 million, $3.8 million, $2.5 million, and $0.4 million from our commercial, U.S. state and local government, international government, and U.S. federal government clients, respectively. Our revenue from client markets was impacted in varying amounts by our exit from the commercial marketing and events businesses during 2023. The following were changes in revenue from our various client markets:

Current wording

Revenue. The increase in revenue was driven by $11.2 million, $2.7 million, and $2.3 million from our commercial, U.S. federal government, and U.S. state and local government clients, respectively, offset by a decrease of $0.7 million from our international government clients. Our revenue from client markets was impacted in varying amounts by our exit from the commercial marketing business during 2023. The following were changes in revenue from our various client markets:

Previous wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $28.8 million, or 14.1%, in the second quarter of 2024 compared to 2023, driven primarily by increases of $19.8 million and $8.2 million from our commercial and U.S. federal government clients, respectively.

Current wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $31.3 million, or 15.3%, driven primarily by increases of $22.3 million, $8.3 million, and $0.8 million from commercial, U.S. federal government, and U.S. state and local government clients, respectively.

Previous wording

Health and Social Programs client market revenues decreased $10.6 million, or 5.2%, in the second quarter of 2024 compared to 2023. The decrease was driven by a decrease in subcontractor pass-through on several of our U.S. federal contracts and our exit from the commercial marketing business during 2023, resulting in decreases of $14.3 million and $2.7 million from our U.S. federal government and commercial clients, respectively, offset by increases of $3.6 million and $2.8 million from our U.S. state and local government and international government clients, respectively.

Current wording

Health and Social Programs client market revenues decreased $13.2 million, or 6.3%, driven by a decrease in subcontractor pass-through on several of our U.S. federal contracts and our exit from the commercial marketing business during 2023, resulting in decreases of $10.6 million, $2.5 million, and $1.8 million from U.S. federal government, commercial, and international government clients, respectively, offset by an increase of $1.7 million from U.S. state and local government clients.

Previous wording

Revenue for the three months ended June 30, 2024 includes subcontractor and other direct costs, which decreased $4.9 million, or 3.5%, from the second quarter of 2023 and totaled $132.8 million and $137.7 million for the three months ended June 30, 2024 and 2023, respectively, and the margin on such costs.

Current wording

Revenue for the three months ended September 30, 2024 includes subcontractor and other direct costs, which decreased $8.5 million, or 6.3%, from the third quarter of 2023 and totaled $127.6 million and $136.1 million for the three months ended September 30, 2024 and 2023, respectively, and the margin on such costs.

Previous wording

Direct Costs. The increase of $3.9 million in direct costs was driven by an increase in direct labor and related fringe benefit costs which reflected the growth in the business, offset by a decrease in subcontractor and other direct costs primarily as a result of our exit from the commercial marketing and events business during 2023. For the three months ended June 30, 2024 and 2023, direct labor and related fringe benefit costs as a percentage of direct costs were 59.7% and 57.7%, respectively, and subcontractor and other direct costs as a percentage of direct costs were 40.3% and 42.3%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 38.4% and 37.5%, respectively, and subcontractor and other direct costs were 25.9% and 27.5%, respectively, for the three months ended June 30, 2024 and 2023. Total direct costs as a percentage of revenue were 64.3% for the three months ended June 30, 2024, compared to 65.1% for the three months ended June 30, 2023.

Current wording

Direct Costs. The increase of $1.5 million in direct costs was driven by an increase in direct labor and related fringe benefit costs which reflected the growth in the business, offset by a decrease in subcontractor and other direct costs as well as our exit from the commercial marketing and events business during 2023. For the three months ended September 30, 2024 and 2023, direct labor and related fringe benefit costs as a percentage of direct costs were 60.8% and 57.9%, respectively, and subcontractor and other direct costs as a percentage of direct costs were 39.2% and 42.1%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 38.2% and 37.4%, respectively, and subcontractor and other direct costs were 24.7% and 27.1%, respectively, for the three months ended September 30, 2024 and 2023. Total direct costs as a percentage of revenue were 62.9% for the three months ended September 30, 2024, compared to 64.5% for the three months ended September 30, 2023.

Previous wording

Indirect and selling expenses. For the three months ended June 30, 2024, our indirect and selling expenses increased slightly by $0.6 million, or 0.4%, compared to the prior year. As a result, our indirect and selling expenses as a percentage of revenue decreased to 24.8% for the three months ended June 30, 2024 from 25.3% for the three months ended June 30, 2023.

Current wording

Indirect and selling expenses. For the three months ended September 30, 2024, our indirect and selling expenses increased by $1.3 million, or 1.0%, compared to the prior year, primarily from general and administrative costs. As a result, our indirect and selling expenses as a percentage of revenue decreased to 25.7% for the three months ended September 30, 2024 from 26.2% for the three months ended September 30, 2023.

Previous wording

Depreciation and amortization. The decrease in 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.

Current wording

Depreciation and amortization. The decrease in depreciation and amortization was primarily due to having fewer capital assets as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.

Previous wording

Amortization of intangible assets. The decrease 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 second quarter of 2024 compared to 2023.

Current wording

Amortization of intangible assets. The decrease in amortization of intangible assets was primarily due to having fewer intangible assets in the third quarter of 2024 compared to 2023 as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.

Previous wording

Interest, net. The decrease of $2.4 million in interest, net, was primarily from a decrease of our average debt balance to $493.7 million for the three months ended June 30, 2024, compared to $668.8 million for the same period in 2023, as well as an increase in utilization of our Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”). Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $1.7 million compared to $1.8 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the three months ended June 30, 2024 was $6.7 million compared to $9.4 million for 2023 and our interest rate inclusive of the swap agreements was 5.3% for the three months ended June 30, 2024 compared to 5.5% for 2023.

Current wording

Interest, net. The decrease of $3.4 million in interest, net, was primarily from a decrease of our average debt balance to $462.9 million for the three months ended September 30, 2024, compared to $621.1 million for the same period in 2023. The decrease in our average debt balance was due, in part, to collection of receivables, decrease in our interest rates, as well as an increase in utilization of our Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”). Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $1.7 million compared to $2.1 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the three months ended September 30, 2024 was $6.2 million compared to $8.8 million for the same period in 2023 and our interest rate inclusive of the swap agreements was 5.3% for the three months ended September 30, 2024 compared to 5.5% for 2023.

Previous wording

Other income (expense). The change in other income (expense) included a gain of $1.7 million during the six months ended June 30, 2024 that was recognized after the release of an escrow originating from the 2023 divestiture of our U.S. commercial marketing business, and to a lesser degree the impact of changes in foreign currency exchange rates.

Current wording

Other (expense) income. The change in other (expense) income of $3.6 million was primarily due to a pre-tax gain of $2.4 million recognized in the third quarter of 2023 and an impact of $1.5 million as a result of changes in foreign currency exchange rates.

Previous wording

Revenue. The increase in revenue was driven by $7.1 million, $6.9 million, $5.5 million, and $3.6 million from international government, U.S. federal government, U.S. state and local government, and commercial clients, respectively. Our revenue from client markets was impacted in varying amounts by our exit from the commercial marketing and events businesses during 2023. The following were changes in revenue from our various client markets:

Current wording

Revenue. The increase in revenue was driven by $15.1 million, $9.6 million, $7.4 million, and $6.5 million from commercial, U.S. federal government, U.S. state and local governments, and international government clients, respectively. Our revenue from client markets was impacted in varying amounts by our exit from the commercial marketing and events businesses during 2023. The following were changes in revenue from our various client markets:

Previous wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $66.2 million, or 16.9%, in 2024 compared to 2023, driven primarily by $44.1 million and $17.9 million from our commercial and U.S. federal government clients, respectively.

Current wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $97.5 million, or 16.4%, in 2024 compared to 2023, driven primarily by $66.7 million and $26.3 million from commercial and U.S. federal government clients, respectively.

Previous wording

Health and Social Programs client market revenues decreased $23.2 million, or 5.7%, in 2024 compared to 2023. This was primarily driven by a decrease in subcontractor pass-throughs on several of our U.S. federal contracts and our exit from the commercial marketing business during 2023, resulting in decreases of $22.7 million and $11.5 million from our U.S. federal government and commercial client markets, respectively, offset by increases of $6.9 million and $4.1 million from our international government and U.S. state and local government clients, respectively.

Current wording

Health and Social Programs client market revenues decreased $35.8 million, or 5.8%, in 2024 compared to 2023. This was driven by a decrease in subcontractor pass-throughs on several of our U.S. federal contracts and our exit from the commercial marketing business during 2023, resulting in decreases of $32.7 million and $13.9 million from U.S. federal government and commercial clients, respectively, offset by increases of $5.8 million and $5.1 million from U.S. state and local government and international government clients, respectively.

Previous wording

Security and Other Civilian & Commercial client market decreased $6.3 million, or 6.9%, in the second quarter of 2024 compared to 2023. The decrease was primarily driven by our exit from the commercial marketing and events businesses during 2023 resulting, in part, by decreases of $11.8 million and $1.0 million from commercial and international government clients, respectively, offset by an increase of $6.4 million from U.S. federal government clients.

Current wording

Security and Other Civilian & Commercial client market revenues decreased $23.1 million, or 8.5%, in 2024 compared to 2023. The decrease was primarily driven by our exit from the commercial marketing and events business during 2023 resulting in decreases of $37.6 million and $1.3 million from commercial and international clients, respectively, offset by an increase of $16.0 million from U.S. federal government clients.

Previous wording

Revenue for the six months ended June 30, 2024 includes subcontractor and other direct costs, which decreased $16.3 million, or 6.1%, and totaled $253.3 million and $269.6 million for the six months ended June 30, 2024 and 2023, respectively, and the margin on such costs.

Current wording

Revenue for the nine months ended September 30, 2024 includes subcontractor and other direct costs, which decreased $24.8 million, or 6.1%, and totaled $380.9 million and $405.7 million for the nine months ended September 30, 2024 and 2023, respectively, and the margin on such costs.

Previous wording

Direct Costs. The increase in direct costs was driven by an increase in direct labor and related fringe benefit costs which reflected the growth in the business, and offset by a decrease in subcontractor and other direct costs, primarily as a result of our exit from the commercial marketing and events business during 2023. For the six months ended June 30, 2024 and 2023, direct labor and related fringe benefit costs as a percentage of direct costs were 60.4% and 57.7%, respectively, and subcontractor and other direct costs as a percentage of total direct costs were 39.6% and 42.3%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 38.4% and 37.5%, respectively, and subcontractor and other direct costs were 25.2% and 27.4% respectively, for the six months ended June 30, 2024 and 2023. Total direct costs as a percentage of revenue were 63.6% for the six months ended June 30, 2024, compared to 64.9% for the six months ended June 30, 2023.

Current wording

Direct Costs. The increase in direct costs was driven by an increase in direct labor and related fringe benefit costs which reflected the growth in the business, and offset by a decrease in subcontractor and other direct costs, primarily as a result of our exit from the commercial marketing and events business during 2023. For the nine months ended September 30, 2024 and 2023, direct labor and related fringe benefit costs as a percentage of direct costs were 60.5% and 57.8%, respectively, and subcontractor and other direct costs as a percentage of total direct costs were 39.5% and 42.2%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 38.3% and 37.4%, respectively, and subcontractor and other direct costs were 25.0% and 27.3% respectively, for the nine months ended September 30, 2024 and 2023. Total direct costs as a percentage of revenue were 63.3% for the nine months ended September 30, 2024, compared to 64.8% for the nine months ended September 30, 2023.

Previous wording

Indirect and selling expenses. The increase in indirect and selling expenses of $5.9 million, or 2.4%, was primarily due to higher compensation costs offset by lower general and administrative costs for the six months ended June 30, 2024 compared to 2023. However, indirect and selling expenses as a percentage of revenue were consistent at 25.5% for the six months ended June 30, 2024 compared to 25.4% for 2023.

Current wording

Indirect and selling expenses. Indirect and selling expenses as a percentage of revenue were consistent at 25.5% for the nine months ended September 30, 2024 compared to 25.7% for 2023.

Previous wording

Depreciation and amortization. The decrease 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.

Current wording

Depreciation and amortization. The decrease in our depreciation and amortization was primarily due to having fewer capital assets primarily as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.

Previous wording

Amortization of intangible assets. The decrease in amortization of intangible assets was primarily due to fewer intangible assets as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.

Current wording

Amortization of intangible assets. The decrease in amortization of intangible assets was primarily due to having fewer intangible assets primarily as a result of the divestiture of our U.S. commercial marketing business in the third quarter of 2023.

Previous wording

Interest, net. The decrease in interest, net, was primarily from a decrease of our average debt balance to $501.3 million for the six months ended June 30, 2024 compared to $651.6 million for the same period in 2023, as well as an increase in the utilization of the MRPA. Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $3.3 million compared to $3.1 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the six months ended June 30, 2024 was $13.9 million compared to $18.1 million for 2023 and our interest rate inclusive of the swap agreements was 5.5% for both the six months ended June 30, 2024 and 2023, respectively.

Current wording

Interest, net. The decrease in interest, net, was primarily from a decrease of our average debt balance to $488.4 million for the nine months ended September 30, 2024 compared to $641.4 million for the same period in 2023. The decrease in our average debt balance was due, in part, to collection of receivables, decrease in our interest rates, as well as an increase in the utilization of the MRPA. Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $5.0 million for the nine months ended September 30, 2024 compared to $5.2 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the nine months ended September 30, 2024 was $20.1 million compared to $26.9 million for 2023 and our interest rate inclusive of the swap agreements was 5.4% and 5.5% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Other income (expense). The change in other income (expense) was primarily due to the impact of changes in foreign currency exchange rates.

Current wording

Other income. The change in other income was primarily due to the impact of changes in foreign currency exchange rates.

Previous wording

Provision for Income Taxes. Our effective income tax rate for the three months ended June 30, 2024 and 2023 was 26.3% and 4.4%, respectively. The increase in the effective income tax rate was primarily due to the impact of tax planning strategy regarding the ownership structure of our Canadian subsidiaries implemented during the second quarter of 2023.

Current wording

Provision for Income Taxes. Our effective income tax rate for the nine months ended September 30, 2024 and 2023 was 20.0% and 9.4%, respectively. The difference was primarily due to the impact of a tax planning strategy regarding the ownership structure of our Canadian subsidiaries implemented during 2023 as well as the deduction for worthless stock related to the wind-down of our commercial marketing business in the U.K. during the third quarter of 2023 which reduced the effective income tax rate for the nine months ended September 30, 2023. See “Note 8– Income Taxes” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

Previous wording

Represents impairment of an intangible asset associated with the exit of our commercial marketing business in the United Kingdom in 2023.

Current wording

Represents impairment charges recorded in the first and third quarters of 2023 of $0.9 million and $2.9 million, respectively, of an intangible asset associated with the exit of our commercial marketing business in the U.K. and operating lease right-of-use assets.

Previous wording

Pre-tax gain resulting from the release of an escrow related to the 2023 divestiture of our U.S. commercial marketing business.

Current wording

Pre-tax gain related to the 2023 divestiture of our U.S. commercial marketing business which include contingent gains realized in the first and the third quarter of 2024.

Previous wording

Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 26.3% and 25.6% for the three months ended June 30, 2024 and 2023, respectively, and 23.4% and 24.6% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 13.8% and 21.7% for the three months ended September 30, 2024 and 2023, respectively, and 20.0% and 23.5% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Liquidity and Borrowing Capacity. In addition to cash and cash equivalents on hand and cash generated from operations, our primary source of liquidity 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 June 30, 2024, we had $575.9 million available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.

Current wording

Liquidity and Borrowing Capacity. In addition to cash and cash equivalents on hand and cash generated from operations, our primary source of liquidity 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. The Credit Facility requires that we remain in compliance with certain financial and non-financial covenants (as defined by the Credit Agreement, see our Annual Report for additional details). As of September 30, 2024, we were in compliance with the covenants and we had $588.2 million available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.

Previous wording

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 June 30, 2024, the percentage of our fixed-rate debt to floating-rate debt was 63%.

Current wording

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 September 30, 2024, the percentage of our fixed-rate debt to floating-rate debt was 65%.

Previous wording

There are other conditions, such as the ongoing wars in Ukraine and the Middle East, and the sustained 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, 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.

Current wording

There are other conditions, such as the ongoing wars in Ukraine and the Middle East, 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, 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.

Previous wording

Dividends. We have historically paid quarterly cash dividends to our shareholders of record at $0.14 per share. Total dividend payments during the six months ended June 30, 2024 were $5.3 million.

Current wording

Dividends. We have historically paid quarterly cash dividends to our shareholders of record at $0.14 per share. Total dividend payments during the nine months ended September 30, 2024 were $7.9 million.

Previous wording

Cash Flow. The following table sets forth our sources and uses of cash for the six months ended June 30, 2024 and 2023:

Current wording

Cash Flow. The following table sets forth our sources and uses of cash for the nine months ended September 30, 2024 and 2023:

Previous wording

Cash provided by operating activities increased by $30.8 million to $50.6 million as a result of higher net income, the favorable impact of working capital changes, and the timing of servicing the receivables sold to MUFG under 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.

Current wording

Cash provided by operating activities increased by $30.6 million to $76.2 million as a result of higher net income, the net favorable impact of working capital changes, including the timing of servicing the receivables sold to MUFG under 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.

Previous wording

Cash used in investing activities decreased by $37.1 million due to reduced capital expenditures, timing of acquisitions, and cash received in connection with the 2023 divestiture of our U.S. commercial marketing business.

Current wording

Cash used in investing activities increased by $10.2 million due to the timing of acquisitions and cash received in connection with the 2023 divestiture of our U.S. commercial marketing business.

Previous wording

Cash used in financing activities increased by $70.8 million, due to reduced net borrowings primarily from our Credit Facility and an increase in share repurchases.

Current wording

Cash used in financing activities increased by $17.5 million due to increases in share repurchases and net repayments of our borrowings.