ICF International Reports Full Year and Fourth Quarter 2013 Results Full Year 2013 Highlights *Total Revenue Increased 1 Percent *Commercial Revenues Up 7 Percent, Driven by 18 Percent Increase in Energy Efficiency Revenues *EPS Was $1.95; Adjusted EPS of $1.98 Exclusive of Acquisition Costs *Contract Awards Reached Record $1.2 Billion; Book-to-Bill of 1.23 *Cash Flow from Operations Was $81 Million Fourth Quarter Highlights *Total Revenue Declined 1 Percent, Due to U.S. Federal Government Shutdown *Commercial Revenues Up 2 Percent Despite Expected Decline in Infrastructure Project Revenue *EPS Was $0.38; Adjusted EPS of $0.40 Exclusive of Acquisition Costs *Contract Awards Were $224 Million, Up 36 Percent Acquisitions *Announces Acquisition of CITYTECH, Inc. *Completed Mostra Acquisition on February 6, 2014 2014 Full Year Guidance *Revenues Estimated $1.025 Billion to $1.065 Billion *Diluted EPS Estimated $2.27 to $2.37 Business Wire FAIRFAX, Va. -- February 26, 2014 ICF International, Inc. (NASDAQ:ICFI), a leading provider of consulting services and technology solutions to government and commercial clients, reported results for the full year and fourth quarter ended December 31, 2013. Full Year 2013 Results “Full year 2013 was representative of our differentiated business model. For the third consecutive year, commercial revenue growth significantly outpaced total revenue growth, driven by an 18 percent increase in revenues from energy efficiency clients and solid performance across our other commercial activities. International government revenues increased 44 percent year-on-year, demonstrating our ability to successfully leverage existing expertise and qualifications and integrate acquisitions to expand our pipeline and improve win rates.” “ICF’s increased spending on business development over the last two years has yielded excellent returns on our investments. Contract awards reached a record $1.2 billion in 2013, up 21 percent year-over-year, reflecting the importance of our domain expertise in the broad areas of health and energy and the increasing number of implementation projects that we have captured as natural follow-ons to our advisory work,” said Sudhakar Kesavan, Chairman and Chief Executive Officer. For full year 2013, revenue was $949.3 million, up 1.3 percent over the $937.1 million reported for full year 2012. Service revenue, total revenue less subcontractor and other direct costs, increased 0.6 percent to $709.8 million. EBITDA was $85.4 million; and EBITDA margin was 9.0 percent. Operating income was $64.7 million compared to the $66.2 million reported in 2012. Net income increased 3.3 percent to $39.3 million, and earnings per diluted share were $1.95, up from $1.91. Adjusted earnings per diluted share, which exclude acquisition costs, were $1.98 in 2013, up from $1.93. ICF experienced growth across two of its three key markets in 2013. Health, Social Programs, and Consumer/Financial increased 4.0 percent, and Energy, Environment, and Infrastructure was up 1.7 percent, together accounting for 88 percent of total revenues. “ICF’s fourth quarter results were affected by the 16-day government shutdown in October, but were in line with the guidance we provided in November,” said Mr. Kesavan. “As anticipated, our growing commercial and international government businesses, and a pick up in state and local projects, enabled us to partially offset the revenue decline related to the government closure.” For the fourth quarter, revenue was $229.8 million, a 1.0 percent decrease from the $232.0 million reported in the 2012 fourth quarter. Service revenue decreased 0.8 percent to $171.3 million. Fourth quarter profitability was significantly impacted by the government shutdown. EBITDA was $17.7 million, and EBITDA margin was 7.7 percent. Operating income was $12.6 million, compared to the $14.5 million reported in the 2012 fourth quarter. Net income was $7.8 million, or $0.38 per diluted share compared to $9.2 million, or $0.47 per diluted share earned in the comparable 2012 period. Backlog and New Business Awards Backlog was $1.7 billion at the end of 2013, up 10 percent from $1.5 billion at 2012 year-end. Funded backlog was $697 million, or 42 percent of total backlog. The total value of contracts awarded in the fourth quarter of 2013 was $224 million, up 36 percent from the same period last year. The total value of contracts awarded in 2013 was $1.2 billion, up 21 percent over 2012 levels. Commercial Business 2013 Highlights Revenues from commercial clients increased 7 percent in 2013 to $267.9 million and represented 28 percent of total revenue, up from 27 percent in 2012. Excluding a large infrastructure project that was in a slower phase of construction in 2013, commercial revenues increased 9.7 percent. Revenues from energy efficiency clients increased 18 percent and accounted for 39 percent of commercial revenues. Key Commercial Sales Highlights for the Fourth Quarter Commercial sales awards were $83 million for the 2013 fourth quarter, representing 37 percent of total sales for the period, and a book-to-bill ratio of 1.2. ICF was awarded more than 400 commercial projects globally in the fourth quarter. Individual commercial sales in excess of $1 million included: *Eight energy efficiency contracts for U.S. Northeast, Midwest, and West Coast utilities encompassing new residential market contracts, scope expansion and extensions of existing contracts *Environmental infrastructure support projects on the U.S. West Coast *New interactive data applications for a utility and for a major financial institution Primary areas of additional awards included residential as well as commercial and industrial energy efficiency projects, aviation industry consulting, management consulting for health insurers, health survey research, interactive data applications for health care insurers and large financial institutions, environmental program and compliance management, and market studies for utilities and industry associations. Government Business 2013 Highlights *U.S. Federal Government revenues declined 2.5 percent to $549.6 million in 2013 and accounted for 58 percent of total revenue, compared to 60 percent in 2012. Growth areas included education, public health, and international health survey research. *U.S. state and local government revenues declined 4.7 percent and accounted for 9 percent of total revenue, compared to 10 percent in 2012. *International government revenues increased 43.6 percent and accounted for 5 percent of total revenue, up from 3 percent in 2012, primarily reflecting recent contract wins with the European Commission and the U.K. government. Key Government Contracts Won in the Fourth Quarter ICF was awarded more than 100 U.S. Federal Government contracts and task orders and hundreds of additional contracts from other U.S. state and local and international governments. The largest awards included: *Human Health Risk Assessment: A contract valued at approximately $33 million to continue to support the Environmental Protection Agency’s National Center for Environmental Assessment to conduct human health risk assessments on chemicals and other environmental stressors. *Cybersecurity: A contract valued at nearly $20 million to continue cybersecurity and identification management support for the Social Security Administration. *Health Informatics: A contract valued at more than $10 million with the National Science Foundation (NSF) to provide data collection, information technology, and analysis support of 11 NSF education and training grant programs. *Clean Energy: A $6 million contract with the Environmental Protection Agency to support clean energy and climate change strategies and programs. *European Immigration Policy: A $5 million contract with the European Commission to provide program support to the European Migration Network. Additional individual government awards of greater than $1 million included educational simulation support for medical training for the U.S. Navy, strategic communications and software support to two offices of the National Institutes of Health, web support for two offices of the Department of Health and Human Services, information portal support for the Department of Education, program support for two offices of the Department of Transportation, and analytical support to the National Science Foundation. Acquisitions of CITYTECH, Inc., and Mostra SA ICF is announcing today that it has signed a definitive agreement to purchase CITYTECH, Inc., a Chicago-based digital interactive consultancy specializing in enterprise applications development, web experience management, mobile application development, cloud enablement, and managed services. For 2013, CITYTECH had annual revenues of approximately $16 million and 100 employees. “A leading partner with Adobe, CITYTECH will add expertise to ICF’s content management capabilities. It is a complementary fit with ICF Interactive, which combines user experience, creative services, systems integration, marketing, and e-commerce services into an integrated suite of capabilities designed to meet commercial and government clients’ digital and interactive business needs,” Mr. Kesavan said. This transaction follows ICF’s recent acquisition of Brussels-based Mostra SA, a fully-integrated communications firm with annual revenues of approximately $40 million and 140 employees. Mostra offers end-to-end, multi-channel communications solutions to assist government and commercial clients in reaching out to their stakeholders and customers. The firm is a key provider of strategic communications to European Union institutions, in particular the European Commission, and significantly increases ICF’s ability to deliver implementation services in Europe. Summary and Outlook “In 2013, we continued to execute effectively on our strategy to drive growth by building our commercial and international government qualifications and business wins. Since the end of the year, we have announced two acquisitions that are strategically important and expected to be accretive in 2014. Both position us to further expand our implementation activities, and Mostra will also enable us to replicate the success of our program lifecycle strategy in our international operations.” “In 2014, we expect our commercial and international government activities to further increase as a percentage of revenues. While we will continue to invest in growth initiatives, we expect to see meaningful margin improvement coming from scale benefits, a more favorable business mix, and increased productivity.” “In 2014, we expect to exceed the $1 billion milestone in revenues and generate EBITDA around $100 million. Based on our current portfolio of business, including the acquisitions of Mostra and CITYTECH, we expect full year 2014 revenues of$1.025 billion to $1.065 billion and earnings per diluted share of $2.27 to $2.37, based on approximately 20.2 million diluted weighted average number of shares outstanding and an effective tax rate of 38.5 percent. Our operating cash flow for 2014 is expected to be $70 million to $80 million,” Mr. Kesavan noted. About ICF International ICF International (NASDAQ:ICFI) provides professional services and technology solutions that deliver beneficial impact in areas critical to the world’s future. ICF is fluent in the language of change, whether driven by markets, technology, or policy. Since 1969, we have combined a passion for our work with deep industry expertise to tackle our clients’ most important challenges. We partner with clients around the globe—advising, executing, innovating—to help them define and achieve success. Our more than 4,500 employees serve government and commercial clients from more than 60 offices worldwide. ICF's website is www.icfi.com. Caution Concerning Forward-looking Statements Statements that are not historical facts and involve known and unknown risks and uncertainties are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements may concern ICF’s current expectations about its future results, plans, operations and prospects and involve certain risks, including those related to the government contracting industry generally; ICF’s particular business, including its dependence on contracts with U.S. federal government agencies; and its ability to acquire and successfully integrate businesses. These statements include those that refer to ICF’s current expectations about the acquisitions of Mostra and CITYTECH. These and other factors that could cause ICF’s actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of ICF’s securities filings with the Securities and Exchange Commission. Although ICF’s expectations are based on what management believes to be reasonable assumptions, it cannot assure the expectations reflected in this document will be achieved as they are subject to risks and uncertainties that are difficult to predict and may be outside of ICF’s control. Such risks and uncertainties include the possibility that the benefits anticipated from the Mostra and CITYTECH transactions will not be fully realized, the possibility the CITYTECH transaction may not close, and other risks in connection with both the proposed CITYTECH transaction and the integration of Mostra. The forward-looking statements included herein are only made as of the date hereof, and ICF specifically disclaims any obligation to update these statements in the future. ICF International, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (in thousands, except per share amounts) Three months ended Twelve months ended December 31, December 31, 2013 2012 2013 2012 (Unaudited) Gross Revenue $ 229,759 $ 231,979 $ 949,303 $ 937,133 Direct Costs 143,146 146,879 591,516 583,195 Operating costs and expenses: Indirect and 68,874 64,265 272,387 263,878 selling expenses Depreciation and 2,886 2,731 11,238 9,789 amortization Amortization of 2,266 3,559 9,477 14,089 intangible assets Total operating 74,026 70,555 293,102 287,756 costs and expenses Operating Income 12,587 14,545 64,685 66,182 Interest expense (577 ) (781 ) (2,447 ) (3,946 ) Other (expense) (221 ) 54 (12 ) (325 ) income Income before 11,789 13,818 62,226 61,911 income taxes Provision for 4,033 4,599 22,896 23,836 income taxes Net income $ 7,756 $ 9,219 $ 39,330 $ 38,075 Earnings per Share: Basic $ 0.39 $ 0.47 $ 1.99 $ 1.94 Diluted $ 0.38 $ 0.47 $ 1.95 $ 1.91 Weighted-average Shares: Basic 19,826 19,501 19,755 19,663 Diluted 20,233 19,690 20,186 19,957 Other comprehensive income: Foreign currency translation 248 99 251 (436 ) adjustments Comprehensive $ 8,004 $ 9,318 $ 39,581 $ 37,639 income Reconciliation of non-GAAP financial measures: Reconciliation of Service Revenue Revenue $ 229,759 $ 231,979 $ 949,303 $ 937,133 Subcontractor and 58,423 59,249 239,529 231,838 Other Direct Costs* Service Revenue $ 171,336 $ 172,730 $ 709,774 $ 705,295 Reconciliation of EBITDA Operating Income $ 12,587 $ 14,545 $ 64,685 $ 66,182 Depreciation and 5,152 6,290 20,715 23,878 amortization EBITDA 17,739 20,835 85,400 90,060 Acquisition-related 536 - 903 676 expenses** Adjusted EBITDA $ 18,275 $ 20,835 $ 86,303 $ 90,736 Reconciliation of Diluted EPS Diluted EPS $ 0.38 $ 0.47 $ 1.95 $ 1.91 EPS impact of acquisition costs, 0.02 — 0.03 0.02 net of tax Adjusted EPS $ 0.40 $ 0.47 $ 1.98 $ 1.93 *Subcontractor and Other Direct Costs exclude Direct Labor and Fringe. **Acquisition-related expenses include expenses related to closed and anticipated-to-close acquisitions. ICF International, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands, except share amounts) December 31, 2013 December 31, 2012 Current Assets: Cash $ 8,953 $ 14,725 Contract receivables, net 205,062 204,938 Prepaid expenses and other 7,847 7,608 Income tax receivable 4,482 11,231 Total current assets 226,344 238,502 Total property and equipment, 30,214 28,860 net Other assets: Goodwill 418,839 410,583 Other intangible assets, net 12,239 21,016 Restricted cash 1,864 2,015 Other assets 11,414 8,745 Total Assets $ 700,914 $ 709,721 Current Liabilities: Accounts payable $ 45,544 $ 44,665 Accrued salaries and benefits 45,994 42,264 Accrued expenses 32,256 31,779 Deferred revenue 20,282 22,333 Deferred income taxes 6,144 5,790 Total current liabilities 150,220 146,831 Long-term liabilities: Long-term debt 40,000 105,000 Deferred rent 12,912 10,599 Deferred income taxes 10,780 9,081 Other 12,911 9,460 Total Liabilities 226,823 280,971 Commitments and Contingencies Stockholders’ Equity: Preferred stock, par value $.001 per share; 5,000,000 shares — — authorized; none issued Common stock, $.001 par value; 70,000,000 shares authorized; 20,617,270 and 20,171,613 shares issued; and 19,764,634 and 21 20 19,559,409 shares outstanding as of December 31, 2013, and December 31, 2012, respectively Additional paid-in capital 250,698 237,262 Retained earnings 245,907 206,577 Treasury stock (21,545 ) (13,868 ) Accumulated other comprehensive (990 ) (1,241 ) loss Total Stockholders’ Equity 474,091 428,750 Total Liabilities and $ 700,914 $ 709,721 Stockholders’ Equity ICF International, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Twelve months ended December 31, 2013 2012 Cash flows from operating activities Net income $ 39,330 $ 38,075 Adjustments to reconcile net income to net cash provided by operating activities: Bad debt expense 112 336 Deferred income taxes 2,434 13,637 (Gain) loss on disposal of fixed assets (15 ) 122 Non-cash equity compensation 8,891 8,770 Depreciation and amortization 20,715 23,878 Amortization of debt issue costs 476 562 Deferred rent 2,606 3,594 Changes in operating assets and liabilities, net of the effect of acquisitions: Contract receivables 829 12,457 Prepaid expenses and other assets (3,619 ) (162 ) Accounts payable 730 2,604 Accrued salaries and benefits 3,699 (4,154 ) Accrued expenses 42 1,619 Deferred revenue (2,706 ) (2,638 ) Income tax receivable and payable 6,749 (10,451 ) Restricted cash 150 (807 ) Other liabilities 609 (201 ) Net cash provided by operating activities 81,032 87,241 Cash flows from investing activities Capital expenditures for property and (14,161 ) (13,561 ) equipment and capitalized software Payments for business acquisitions, net of (4,763 ) (9,974 ) cash received Net cash used in investing activities (18,924 ) (23,535 ) Cash flows from financing activities Advances from working capital facilities 139,215 172,270 Payments on working capital facilities (204,215 ) (212,270 ) Debt issue costs — (1,955 ) Proceeds from exercise of options 3,103 78 Tax benefits of stock option exercises and 1,213 804 award vesting Net payments for stockholder issuances and (7,447 ) (11,569 ) buybacks Net cash used in financing activities (68,131 ) (52,642 ) Effect of exchange rate changes on cash 251 (436 ) (Decrease) increase in cash (5,772 ) 10,628 Cash, beginning of period 14,725 4,097 Cash, end of period $ 8,953 $ 14,725 Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 2,459 $ 3,243 Income taxes $ 13,670 $ 20,377 Non-cash investing and financing transactions: Fair value of contingent consideration payable $ 2,842 $ — in connection with acquisition ICF International, Inc. and Subsidiaries Supplemental Schedule Revenue by market Three Months Ended Twelve Months Ended December 31, December 31, 2013 2012 2013 2012 Energy, environment, and 41 % 40 % 39 % 39 % infrastructure Health, social programs, and 48 % 47 % 49 % 47 % consumer/financial Public safety and defense 11 % 13 % 12 % 14 % Total 100 % 100 % 100 % 100 % Revenue by client Three Months Ended Twelve Months Ended December 31, December 31, 2013 2012 2013 2012 U.S. federal government 55 % 58 % 58 % 60 % U.S. state and local government 10 % 9 % 9 % 10 % Non-U.S. government 5 % 4 % 5 % 3 % Government 70 % 71 % 72 % 73 % Commercial 30 % 29 % 28 % 27 % Total 100 % 100 % 100 % 100 % Revenue by contract Three Months Ended Twelve Months Ended December 31, December 31, 2013 2012 2013 2012 Time-and-materials 52 % 48 % 52 % 49 % Fixed-price 30 % 31 % 29 % 30 % Cost-based 18 % 21 % 19 % 21 % Total 100 % 100 % 100 % 100 % Contact: ICF International, Inc. Douglas Beck, 1-703-934-3820 or MBS Value Partners Lynn Morgen/Betsy Brod, 1-212-750-5800
ICF International Reports Full Year and Fourth Quarter 2013 Results
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