UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

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: 001-33045

ICF International, Inc.

(Exact name of Registrant as Specified in its Charter)

Delaware	22-3661438
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1902 Reston Metro Plaza, Reston VA	20190
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (703) 934-3000

9300 Lee Highway, Fairfax, VA 22031

(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
Common Stock	ICFI	NASDAQ

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. ☒ Yes ☐ No

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). ☒ Yes ☐ No

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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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 ☒ No

As of October 28, 2022, there were 18,843,895 shares outstanding of the registrant’s common stock.

ICF INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE

PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at September 30, 2022 (Unaudited) and December 31, 2021	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2022 and 2021	4
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2022 and 2021	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

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)	September 30, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	8,483		$	8,254
Restricted cash		1,993			12,179
Contract receivables, net		282,271			237,684
Contract assets		196,811			137,867
Prepaid expenses and other assets		30,612			42,354
Income tax receivable		11,979			10,825
Total Current Assets		532,149			449,163
Property and Equipment, net		85,295			52,053
Other Assets:
Goodwill		1,190,450			1,046,760
Other intangible assets, net		135,932			79,645
Operating lease - right-of-use assets		163,438			177,417
Other assets		50,496			44,496
Total Assets	$	2,157,760		$	1,849,534
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	20,500		$	10,000
Accounts payable		128,528			105,652
Contract liabilities		24,599			39,665
Operating lease liabilities - current		22,959			34,901
Finance lease liabilities - current		1,779			—
Accrued salaries and benefits		74,766			85,517
Accrued subcontractors and other direct costs		46,610			39,400
Accrued expenses and other current liabilities		52,249			61,496
Total Current Liabilities		371,990			376,631
Long-term Liabilities:
Long-term debt		681,197			411,605
Operating lease liabilities - non-current		187,481			191,805
Finance lease liabilities - non-current		13,270			—
Deferred income taxes		46,449			41,913
Other long-term liabilities		19,634			24,110
Total Liabilities		1,320,021			1,046,064
Commitments and Contingencies (Note 19)
Stockholders’ Equity:
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued		—			—
Common stock, par value $.001; 70,000,000 shares authorized; 23,723,490 and 23,535,671 shares issued at September 30, 2022 and December 31, 2021, respectively; 18,833,688 and 18,876,490 shares outstanding at September 30, 2022 and December 31, 2021, respectively		23			23
Additional paid-in capital		396,962			384,984
Retained earnings		696,792			649,298
Treasury stock, 4,889,802 and 4,659,181 shares at September 30, 2022 and December 31, 2021, respectively		(241,896	)		(219,800	)
Accumulated other comprehensive loss		(14,142	)		(11,035	)
Total Stockholders’ Equity		837,739			803,470
Total Liabilities and Stockholders’ Equity	$	2,157,760		$	1,849,534

The accompanying notes are an integral part of these consolidated financial statements.

3

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share amounts)	2022			2021			2022			2021
Revenue	$	467,777		$	394,060		$	1,304,355		$	1,165,063
Direct costs		307,295			254,175			834,358			732,903
Operating costs and expenses:
Indirect and selling expenses		118,290			99,940			350,145			316,100
Depreciation and amortization		5,297			4,665			15,198			14,663
Amortization of intangible assets		8,661			3,015			18,941			9,049
Total operating costs and expenses		132,248			107,620			384,284			339,812
Operating income		28,234			32,265			85,713			92,348
Interest expense		(7,474	)		(2,550	)		(14,274	)		(7,845	)
Other income (expense)		887			81			616			(382	)
Income before income taxes		21,647			29,796			72,055			84,121
Provision for income taxes		2,542			9,406			16,691			25,068
Net income	$	19,105		$	20,390		$	55,364		$	59,053
Earnings per Share:
Basic	$	1.01		$	1.08		$	2.94		$	3.13
Diluted	$	1.01		$	1.07		$	2.91		$	3.10
Weighted-average Shares:
Basic		18,826			18,865			18,806			18,864
Diluted		19,009			19,061			19,001			19,077
Cash dividends declared per common share	$	0.14		$	0.14		$	0.42		$	0.42
Other comprehensive (loss) income, net of tax		(1,555	)		(1,971	)		(3,107	)		1,241
Comprehensive income, net of tax	$	17,550		$	18,419		$	52,257		$	60,294

The accompanying notes are an integral part of these consolidated financial statements.

4

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	September 30,
(in thousands)	2022			2021
Cash Flows from Operating Activities
Net income	$	55,364		$	59,053
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		91			11,324
Deferred income taxes		6,023			4,062
Non-cash equity compensation		10,023			9,756
Depreciation and amortization		34,139			23,712
Facilities consolidation reserve		(236	)		(225	)
Amortization of debt issuance costs		940			463
Impairment of long-lived assets		—			339
Other adjustments, net		474			1,818
Changes in operating assets and liabilities, net of the effects of acquisitions:
Net contract assets and liabilities		(72,619	)		(16,381	)
Contract receivables		(31,770	)		(6,688	)
Prepaid expenses and other assets		(11,991	)		(9,224	)
Operating lease assets and liabilities, net		(1,305	)		(4,743	)
Accounts payable		23,394			5,653
Accrued salaries and benefits		(13,971	)		10,377
Accrued subcontractors and other direct costs		9,441			(36,436	)
Accrued expenses and other current liabilities		(476	)		17,002
Income tax receivable and payable		(1,667	)		(3,490	)
Other liabilities		742			(1,609	)
Net Cash Provided by Operating Activities		6,596			64,763
Cash Flows from Investing Activities
Capital expenditures for property and equipment and capitalized software		(17,323	)		(12,279	)
Payments for business acquisitions, net of cash acquired		(238,991	)		—
Proceeds from working capital adjustments related to prior business acquisition		2,911			—
Net Cash Used in Investing Activities		(253,403	)		(12,279	)
Cash Flows from Financing Activities
Advances from working capital facilities		1,358,335			559,830
Payments on working capital facilities		(1,074,888	)		(593,775	)
Receipt of restricted contract funds		13,525			194,504
Payment of restricted contract funds		(23,358	)		(227,700	)
Debt issue costs		(4,852	)		—
Proceeds from exercise of options		412			2,773
Dividends paid		(7,912	)		(7,923	)
Net payments for stock issuances and buybacks		(21,105	)		(18,695	)
Payments on business acquisition liabilities		(1,132	)		(682	)
Net Cash Provided by (Used in) Financing Activities		239,025			(91,668	)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(2,175	)		(501	)
Decrease in Cash, Cash Equivalents, and Restricted Cash		(9,957	)		(39,685	)
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		20,433			81,987
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	10,476		$	42,302
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	13,595		$	7,882
Income taxes	$	14,384		$	25,062
Non-cash investing and financing transactions:
Tenant improvements funded by lessor	$	20,253		$	—
Acquisition of property and equipment through finance lease	$	15,027		$	—

The accompanying notes are an integral part of these consolidated financial statements.

5

Notes to Consolidated Financial Statements

(Unaudited)

(dollar amounts in tables in thousands, except share and per share data)

NOTE 1 – BASIS OF PRESENTATION AND NATURE OF OPERATIONS

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. All significant intercompany transactions and balances have been eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions, including management, marketing, technology, and policy consulting and implementation services, in the areas of energy, environment, and infrastructure; health, education, and social programs; safety and security; and consumer and financial. The Company offers a full range of services to clients throughout the entire life cycle of a policy, program, project, or initiative, from research and analysis, assessment and advice to design and implementation of programs and technology-based solutions, and the provision of engagement services and programs.

The Company’s major clients are U.S. federal government departments and agencies, most significantly the Department of Health and Human Services, Department of State, and Department of Defense. The Company also serves U.S. state (including territories) and local government departments and agencies, international governments, and commercial clients worldwide. Commercial clients include airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, transportation, travel and hospitality firms, non-profit associations, manufacturing firms, retail chains, and distribution companies. The term “federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and local government” refers to U.S. state (including territories) and local governments, unless otherwise indicated.

The Company, incorporated in Delaware, is headquartered in Reston, Virginia. The Company maintains additional offices throughout the world, including more than 50 offices in the U.S. and U.S. territories and more than 20 offices in key markets outside the U.S., including offices in the United Kingdom, Belgium, China, India, and Canada.

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. Areas of the consolidated financial statements where estimates may have the most significant effect include contractual and regulatory reserves, valuation and lives of tangible and intangible assets, contingent consideration related to business acquisitions, impairment of goodwill and long-lived assets, accrued liabilities, revenue recognition and costs to complete fixed-price contracts, bonus and other incentive compensation, stock-based compensation, reserves for tax benefits and valuation allowances on deferred tax assets, provisions for income taxes, collectability of receivables, and loss accruals for litigation. 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 one operating segment and reporting unit. Operating results for the three and nine month periods ended September 30, 2022 and 2021 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2021 and the notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 25, 2022.

6

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease accounting and financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The provisions of this ASU are elective and apply to all entities, subject to meeting certain criteria, that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Entities can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. Also, entities can elect various optional expedients that would allow it to continue to apply hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. This guidance was effective beginning on March 12, 2020 and entities may elect to apply the amendments prospectively through December 31, 2022.

During the third quarter of 2022, the Company amended certain interest rate swap contracts to change the benchmark rate from LIBOR to term Secured Overnight Financing Rate (“SOFR”) based interest pricing conventions. Contemporaneously, the Company adopted ASU 2020-04 and elected to apply the optional expedient to consider the amended swap contracts as a continuation of the existing arrangements. The optional expedient did not result in a material impact on the Company’s operating results, financial position, or cash flows.

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 nine months ended September 30, 2022 and 2021:

	September 30, 2022				September 30, 2021
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	8,254	$	8,483	$	13,841	$	7,883
Restricted cash(1)		12,179		1,993		68,146		34,419
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	20,433	$	10,476	$	81,987	$	42,302

(1)Under a contract with a customer that commenced in the fourth quarter of fiscal year 2020, the Company received advance payments to be used to pay providers of services to the customer, a separate third party. The advanced payments are treated as restricted cash - current as the Company is required under the contract to distribute the advanced funds to the third-party providers of services or return the advanced funds to the customer. Because the Company receives the advance payments from the customer, which must be refunded to the customer or remitted to a third party, the cash receipts are treated as liabilities rather than receipts for the provision of goods or services. Therefore, these cash receipts are presented in the consolidated statements of cash flows as financing cash inflows, “Receipt of restricted contract funds,” with the subsequent payments classified as financing cash outflows, “Payment of restricted contract funds.” See Note 6—Accrued Expenses and Other Current Liabilities for the corresponding liability.

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following: