ICF International Inc

Previous wording

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in Item 8.“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions, such as statements of our plans, objectives, expectations, and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applying to all related forward-looking statements wherever they appear in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to our actual results differing materially from those anticipated include those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 1, 2023, and is incorporated by reference into this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Current wording

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in Item 8.“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions, such as statements of our plans, objectives, expectations, and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applying to all related forward-looking statements wherever they appear in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to our actual results differing materially from those anticipated include those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This section of the Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2023 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 28, 2024, and is incorporated by reference into this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Previous wording

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 four key markets:

Current wording

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 the following key markets:

Previous wording

Our largest clients are U.S. federal government departments and agencies. Our federal government clients have included every cabinet-level department, most significantly HHS, DoD, and DoS. Federal government clients generated approximately 55%, 55%, and 47% of our revenue in 2023, 2022, and 2021, respectively. State and local government clients generated approximately 16%, 15%, and 15% of our revenue in each of 2023, 2022, and 2021, respectively. International government clients generated approximately 5%, 6%, and 9% of our revenue in 2023, 2022, and 2021, respectively.

Current wording

Our largest clients are U.S. federal government departments and agencies. Our federal government clients include every cabinet-level department, most significantly HHS, EPA, and DoS. Federal government clients generated approximately 54%, 55%, and 55% of our revenue in 2024, 2023, and 2022, respectively. State and local government clients generated approximately 16%, 16%, and 15% of our revenue in each of 2024, 2023, and 2022, respectively. International government clients generated approximately 5%, 5%, and 6% of our revenue in 2024, 2023, and 2022, respectively.

Previous wording

We also serve a variety of commercial clients worldwide, including: airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, transportation, non-profits/associations, manufacturing firms, retail chains, and distribution companies. Our commercial clients, which include clients outside the U.S., generated approximately 24%, 24%, and 29% of our revenue in 2023, 2022, and 2021, respectively. We believe that our domain expertise and the program knowledge developed from our research and analytics, and assessment and advisory engagements further position us to provide a full suite of services.

Current wording

We also serve a variety of commercial clients worldwide, including: airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, transportation, non-profits/associations, manufacturing firms, retail chains, and distribution companies. Our commercial clients, which include clients outside the U.S., generated approximately 25%, 24%, and 24% of our revenue in 2024, 2023, and 2022, respectively. We believe that our domain expertise and the program knowledge developed from our research and analytics, and assessment and advisory engagements further position us to provide a full suite of services.

Previous wording

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 healthcare can be delivered effectively on a cross-jurisdiction basis; natural disaster relief and rebuild efforts; and ongoing homeland security threats. In the wake of the major hurricanes (Ian, Harvey, Ida, Idalia, Irma, Maria, Laura and Michael) that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, the affected areas remain in various stages of relief and recovery efforts. We believe our prior and current experience with disaster relief and rebuild efforts, including after hurricanes Katrina and Rita and Superstorm Sandy, put us in a favorable position to continue to provide recovery and housing assistance, and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments and agencies, state, territorial, and local jurisdictions, and regional agencies.

Current wording

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 healthcare can be delivered effectively on a cross-jurisdiction basis; natural disaster relief and rebuild efforts; and ongoing homeland security threats. In the wake of the major hurricanes that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, and the impact of wildfires in Hawaii, Oregon, and southern California, the affected areas remain in various stages of evacuation, relief, and recovery efforts. We believe our prior and current experience with disaster relief and rebuild efforts, including after hurricanes Katrina and Rita and Superstorm Sandy, and the wildfires in Oregon, put us in a favorable position to continue to provide recovery and housing assistance, and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments and agencies, state, territorial, and local jurisdictions, and regional agencies.

Previous wording

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, such as our acquisitions of ESAC and Creative Systems in 2021, SemanticBits and Blanton in 2022, and CMY in 2023 that enhance our subject matter knowledge, broaden our service offerings, gain access to or expand customer relationships, 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 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.

Current wording

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, gain access to or expand customer relationships, 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 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.

Previous wording

A key element of our growth strategy is to pursue acquisitions. During the previous three fiscal years, we completed five acquisitions summarized as follows:

Current wording

A key element of our growth strategy is to pursue acquisitions. During the previous three fiscal years, we completed four acquisitions summarized as follows:

Previous wording

For cost-based contracts, we recognize revenue as a single performance obligation based on contract costs incurred, as we become contractually entitled to reimbursement of the contract costs, plus a most likely estimate of award or incentive fees earned on those costs even though final determination of fees earned occurs after the contractually stipulated performance assessment period ends. For the years ended December 31, 2023, 2022, and 2021, revenue from cost-based contracts totaled $265.3 million, $263.7 million, and $274.1 million, respectively.

Current wording

For cost-based contracts, we recognize revenue as a single performance obligation based on contract costs incurred, as we become contractually entitled to reimbursement of the contract costs, plus a most likely estimate of award or incentive fees earned on those costs even though final determination of fees earned occurs after the contractually stipulated performance assessment period ends. For the years ended December 31, 2024, 2023, and 2022, revenue from cost-based contracts totaled $231.9 million, $265.1 million, and $263.7 million, respectively.

Previous wording

For performance obligations requiring the delivery of a service for a fixed price, we use the ratio of actual costs incurred to total estimated costs at completion (“EAC”) provided that costs incurred (an input method) represents a reasonable measure of progress towards the satisfaction of a performance obligation, in order to estimate the portion of total revenue earned. Contract costs that are not reflective of our progress toward satisfying a performance obligation are not included in the calculation of the measure of progress. We estimate the EAC by making certain assumptions and judgments such as the level of efforts from internal staff and/or subcontractors and cost of materials needed to complete the tasks. Our cost estimate is based on our prior experience and expertise in delivery of similar services, which allow us to make reasonable assumptions and estimates that are close to actual costs to complete the obligations; however, changes in the scope or complexity of work, availability of materials needed, or performance could cause a change in the EAC. We routinely review EACs for changes that could materially impact our measurement of progress toward completion of the performance obligations and adjust our revenue in the period that the changes occur. When a contract EAC exceeds the contract value, we recognize the loss in the same period of determination. For the years ended December 31, 2023, 2022, and 2021, our revenue from contracts in which we use EACs totaled $310.1 million, $287.4 million, and $253.6 million, respectively.

Current wording

For performance obligations requiring the delivery of a service for a fixed price, we use the ratio of actual costs incurred to total estimated costs at completion (“EAC”) provided that costs incurred (an input method) represents a reasonable measure of progress towards the satisfaction of a performance obligation, in order to estimate the portion of total revenue earned. Contract costs that are not reflective of our progress toward satisfying a performance obligation are not included in the calculation of the measure of progress. We estimate the EAC by making certain assumptions and judgments such as the level of efforts from internal staff and/or subcontractors and cost of materials needed to complete the tasks. Our cost estimate is based on our prior experience and expertise in delivery of similar services, which allow us to make reasonable assumptions and estimates that are close to actual costs to complete the obligations; however, changes in the scope or complexity of work, availability of materials needed, or performance could cause a change in the EAC. We routinely review EACs for changes that could materially impact our measurement of progress toward completion of the performance obligations and adjust our revenue in the period that the changes occur. When a contract EAC exceeds the contract value, we recognize the loss in the same period of determination. For the years ended December 31, 2024, 2023, and 2022, our revenue from contracts in which we use EACs totaled $479.7 million, $310.1 million, and $287.4 million, respectively.

Previous wording

Our contracts may include variable considerations such as award fees and incentives that may increase or decrease the transaction price. The actual amounts are typically determined and awarded at the end of a performance period and the final awarded amount is based on achieving certain performance metrics, program milestones, or cost targets at the customer’s discretion. We estimate the most likely amount expected to achieve based on our prior history in providing the services to the customer or, if no history exists, we constrain the variable consideration until the initial determination by the customer.

Current wording

Our contracts may include variable considerations such as award fees and incentives that may increase or decrease the transaction price. The actual amounts are typically determined and awarded at the end of a performance period and the final awarded amount is based on achieving certain performance metrics, program milestones, or cost targets at the customer’s discretion. We estimate the most likely amount expected to be achieved based on our prior history in providing the services to the customer or, if no history exists, we constrain the variable consideration until the initial determination by the customer.

Previous wording

Our consolidated balance sheets as of December 31, 2023 and 2022 include $94.9 million and $126.5 million, respectively, of net intangible assets that were created through business acquisitions.

Current wording

Our consolidated balance sheets as of December 31, 2024 and 2023 include $88.3 million and $94.9 million, respectively, of net intangible assets that were created through business acquisitions.

Previous wording

Our primary clients within the client markets are the agencies and departments of the federal government and commercial clients. Most of our revenue is from contracts on which we are the prime contractor, which we believe provides us with strong client relationships. In 2023, 2022, and 2021, approximately 89%, 91%, and 91% of our revenue, respectively, was from prime contracts.

Current wording

Our primary clients within the client markets are the agencies and departments of the federal government and commercial clients. Most of our revenue is from contracts on which we are the prime contractor, which we believe provides us with strong client relationships. In 2024, 2023, and 2022, approximately 87%, 89%, and 91% of our revenue, respectively, was from prime contracts.

Previous wording

Revenue. The growth in revenue of $183.3 million was driven by increases of $103.3 million from U.S. federal government clients, $48.4 million from U.S. state and local government clients, and $31.8 million from commercial clients, respectively, offset by a decrease of $0.2 million from international government clients.

Current wording

Revenue. The growth in revenue of $56.5 million was driven by increases of $39.3 million from commercial clients, $7.4 million from international government clients, $6.6 million from U.S. state and local government clients, and $3.3 million from U.S. federal government clients, respectively.

Previous wording

Revenue from Energy, Environment & Infrastructure and Disaster Recovery client market increased by $91.8 million, or 12.9%, due to:

Current wording

Revenue from Energy, Environment & Infrastructure and Disaster Recovery client market increased by $123.8 million, or 15.4%, due to:

Previous wording

Revenue from Health and Social Programs client market increased by $110.0 million, or 15.6%, driven by:

Current wording

Revenue from Health and Social Programs client market decreased by $50.3 million, or 6.2%, due to:

Previous wording

Revenue from Security and Other Civilian & Commercial client market saw a decrease of $18.6 million, or 5.1%, as a result of:

Current wording

Revenue from Security and Other Civilian & Commercial client market saw a decrease of $16.9 million, or 4.9%, as a result of:

Previous wording

Decreases of $20.4 million from commercial, driven by the divestiture of the commercial marketing business, and $4.0 million from U.S. federal government client markets, respectively, offset by

Current wording

Decreases of $34.8 million from commercial clients, driven by the divestiture of the commercial marketing and events business during fiscal year 2023, $1.4 million from international government clients, and $0.3 million from U.S. state and local government clients, respectively, offset by

Previous wording

Direct costs. The increase in direct costs of $130.6 million was driven by additional direct labor and related fringe benefit costs of $90.5 million and subcontractors and other direct costs of $40.1 million to support new and existing revenue-generating contracts. For the years ended December 31, 2023 and 2022, direct labor and related fringe benefit costs were 57.7% and 56.4% of total direct costs, respectively, and subcontractors and other direct costs were 42.3% and 43.6% of total direct costs, respectively. The total direct costs as a percentage of revenue remained steady at 64.4% for the year ended December 31, 2023 compared to 63.7% for 2022.

Current wording

Direct costs. The increase in direct costs was driven by additional direct labor and related fringe benefit costs of $44.9 million which reflected growth in the ongoing business, offset by a decrease of subcontractors and other direct costs of $27.9 million primarily as a result of our exit from the commercial marketing and events business during 2023. For the years ended December 31, 2024 and 2023, direct labor and related fringe benefit costs were 60.5% and 57.7% of total direct costs, respectively, and subcontractors and other direct costs were 39.5% and 42.3% of total direct costs, respectively. The total direct costs as a percentage of revenue was 63.5% for the year ended December 31, 2024 compared to 64.4% for 2023.

Previous wording

Indirect and selling expenses. The increase in indirect and selling expenses of $18.3 million for the year ended December 31, 2023 compared to 2022 was due to an additional $31.7 million in indirect labor and related fringe benefit costs offset by a decrease of $13.4 million in general and administrative costs. As a percentage of total indirect and selling expenses, indirect labor and associated fringe costs were 71.1% and 67.2%, respectively, and general and administrative costs were 28.9% and 32.8%, respectively, for the years ended December 31, 2023 and 2022. The increase in indirect labor and associated fringe costs was a result of additional headcount from our recent acquisitions in 2022 and 2023 as well as additional labor resources to support our growth. The decrease in our general and administrative costs was primarily from lower facilities expense that was, in part, attributed to our Fairfax lease ending at the end of the 2022 fiscal year. As a percentage of revenue, indirect and selling expenses decreased to 25.7% for the year ended December 31, 2023 compared to 27.4% for the year ended December 31, 2022.

Current wording

Indirect and selling expenses. The increase in indirect and selling expenses was due to additional $8.9 million in indirect labor and related fringe benefit costs and $4.4 million in general and administrative costs. As a percentage of total indirect and selling expenses, indirect labor and associated fringe costs were 71.0% and 71.1%, respectively, and general and administrative costs were 29.0% and 28.9%, respectively, for the years ended December 31, 2024 and 2023. As a percentage of revenue, indirect and selling expenses was 25.7% for the years ended December 31, 2024 and 2023.

Previous wording

Interest, net. The increase in interest, net was primarily due to higher average debt balance of $613.5 million in 2023 compared to $575.0 million in 2022, and higher average interest rate of 6.7% in 2023 compared to 3.3% in 2022. We utilize floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt. Our 2023 interest expense from our debt was reduced by $6.9 million from the swap agreements, compared to $0.5 million in additional interest expense added to 2022. Our average interest rate inclusive of the impact of the swap agreements was 5.6% for 2023 compared to 3.7% for 2022.

Current wording

Interest, net. The decrease in interest, net was primarily due to our lower average debt balance of $474.0 million in 2024 compared to $613.5 million in 2023. The average interest rate was 6.6% in 2024 compared to 6.7% in 2023. We utilize floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt. Our 2024 interest expense from our debt was reduced by $6.2 million from the swap agreements, compared to $6.9 million in 2023. Our average interest rate inclusive of the impact of the swap agreements was 5.3% for 2024 compared to 5.6% for 2023.

Previous wording

Other income (expense). The increase in other income (expense) was primarily due to pre-tax gains of $2.5 million and $3.2 million from the divestiture of our U.S. commercial marketing and Canadian mobile aggregation businesses in 2023.

Current wording

Other income. The decrease in other income was primarily due to higher pre-tax gains from the divestiture of our U.S. commercial marketing and Canadian mobile aggregation businesses in 2023. We recognized $5.7 million of pre-tax gains in 2023 fiscal year compared to $2.0 million in 2024 fiscal year.

Previous wording

Provision for income taxes. The effective income tax rate for the years ended December 31, 2023 and 2022 was 14.4% and 23.5%, respectively. The decrease in provision for income taxes in 2023 was primarily due to tax credits, restructuring of the ownership of a Canadian subsidiary, the wind-down of our U.K. commercial marketing business, and U.S. return-to-provision adjustments in connection with our federal income tax return filing, partially offset by provisions for uncertain tax positions, and additional valuation allowance on certain tax attributes generated during the period.

Current wording

Provision for income taxes. The effective income tax rate for the years ended December 31, 2024 and 2023 was 20.2% and 14.4%, respectively. The increase in provision for income taxes in 2024 was primarily due to the favorable impact of one-time tax planning strategies implemented in 2023 which were not repeated in 2024.

Previous wording

Includes pre-tax gain of $2.5 million and of $3.2 million from the divestitures of our U.S. commercial marketing and Canadian mobile text aggregation businesses.

Current wording

Includes pre-tax gain from the divestitures of our U.S. commercial marketing and Canadian mobile text aggregation businesses.

Previous wording

Income tax effects were calculated using the effective tax rate, adjusted for discrete items, if any, of 22.8%, 28.0% and 28.9% for the years ended December 31, 2023, 2022, and 2021, respectively.

Current wording

Income tax effects were calculated using the effective tax rate, adjusted for discrete items, if any, of 20.2%, 22.8% and 28.0% for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

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, as described in “Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report on Form 10-K. As of December 31, 2023, we had $591.9 million of unused borrowing capacity, or $575.5 million after taking into account the financial and performance-based limitations, available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program. Should the need arise, we intend to further increase our borrowing capacity in the future to provide us with adequate working capital to continue our ongoing operations.

Current wording

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, as described in “Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report on Form 10-K. As of December 31, 2024, we had $541.1 million of unused borrowing capacity available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program. Should the need arise, we intend to further increase our borrowing capacity in the future to provide us with adequate working capital to continue our ongoing operations.

Previous wording

There are certain geo-political and macro-economic conditions, such as the ongoing wars in Ukraine and the 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 in the near future; 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 continue to monitor the state of the financial markets on a regular basis to assess the availability and cost of additional capital resources from both debt and equity sources. We believe that we will be able to access these markets at commercially reasonable terms and conditions if, in the future, we need additional borrowings or capital.

Current wording

There are other conditions, such as the ongoing wars in Ukraine and the instability in 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

Material Cash Requirements from Contractual Obligations. As of December 31, 2023, contractual obligations that require a material use of cash include repayments of our Credit Facility and operating lease obligations for facilities and equipment.

Current wording

Material Cash Requirements from Contractual Obligations. As of December 31, 2024, contractual obligations that require a material use of cash include payments of interest on our Credit Facility and operating lease obligations for facilities and equipment.

Previous wording

At December 31, 2023, our outstanding Credit Facility balance was $430.4 million, net of unamortized debt issuance costs, of which the principal amounts of $26.0 million is due in 2024, $35.8 million in 2025, $39.0 million in 2026, and the remaining $333.3 million due upon maturity in 2027. We borrow funds under the Credit Facility at interest rates based on both the SOFR (i.e., 1-, 3-, or 6-month rates) and a fluctuating Base Rate (see “Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report). Assuming that our interest rate on the Credit Facility is the same as on December 31, 2023, we anticipate our interest payments on the debt to be approximately $29.5 million in 2024, $27.5 million in 2025, $24.9 million in 2026, and $8.1 million in 2027 when our Credit Facility expires. The estimates do not take into account future drawdowns and repayments on the debt or changes in the variable interest rate, and actual interest may be different.

Current wording

At December 31, 2024, our outstanding Credit Facility balance, net of unamortized debt issuance costs, was $411.7 million, which is due in 2027 upon maturity. We borrow funds under the Credit Facility at interest rates based on both the SOFR (i.e., 1-, 3-, or 6-month rates) and a fluctuating Base Rate (see “Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report). Assuming that our interest rate on the Credit Facility is the same as on December 31, 2024, we anticipate our interest payments on the debt to be approximately $23.6 million in 2025, $23.6 million in 2026, and $6.2 million in 2027 when our Credit Facility expires. The estimates do not take into account future drawdowns and repayments on the debt or changes in the variable interest rate, and actual interest may be different.

Previous wording

As of December 31, 2023, we have operating leases for facilities and equipment with remaining terms ranging from 1 to 15 years. Our current and long-term operating lease liabilities of $195.9 million at December 31, 2023 represent the present value of the minimum payments required under the non-cancellable leases, and the actual cash payments total $241.1 million. The operating lease payment obligations by year are further discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”.

Current wording

As of December 31, 2024, we have operating leases for facilities and equipment with remaining terms ranging from 1 to 14 years. Our current and long-term operating lease liabilities of $176.7 million at December 31, 2024 represent the present value of the minimum payments required under the non-cancellable leases, and the actual cash payments total $214.9 million. The operating lease payment obligations by year are further discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”.

Previous wording

As of December 31, 2023, we also have finance leases for equipment and furniture with lease payment obligations through 2029 as discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”. The current and long-term finance lease liabilities at December 31, 2023 of $16.4 million represent the present value of the minimum payments totaling $18.1 million.

Current wording

As of December 31, 2024, we also have finance leases for equipment and furniture with lease payment obligations through 2029 as discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”. The current and long-term finance lease liabilities at December 31, 2024 of $13.9 million represent the present value of the minimum payments totaling $15.1 million.

Previous wording

Cash provided by operating activities for the year ended December 31, 2023 decreased by $9.8 million compared to 2022 primarily due to higher interest and tax payments and the timing of collections of our billed receivables and payments of our operating liabilities.

Current wording

Cash provided by operating activities for the year ended December 31, 2024 increased by $19.2 million compared to 2023 primarily due to the profitability of our contracts, our ability to invoice our customers and subsequent collection of cash, and the timing of vendor payments.