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 June 30, 2021

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.)
9300 Lee Highway, Fairfax, VA	22031
(Address of Principal Executive Offices)	(Zip Code)

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

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbols(s)	Name of each exchange on which registered
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 July 30, 2021, there were 18,859,735 shares outstanding of the registrant’s common stock.

ICF INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE

PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at June 30, 2021 (Unaudited) and December 31, 2020	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Six Months Ended June 30, 2021 and 2020	4
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2021 and 2020	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION		31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32

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)	June 30, 2021			December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	9,603		$	13,841
Restricted cash		26,307			68,146
Contract receivables, net		242,562			222,850
Contract assets		150,390			143,369
Prepaid expenses and other assets		25,784			25,492
Income tax receivable		8,717			1,977
Total Current Assets		463,363			475,675
Property and Equipment, net		53,083			62,434
Other Assets:
Goodwill		910,640			909,913
Other intangible assets, net		53,899			59,887
Operating lease - right-of-use assets		111,755			127,132
Other assets		40,049			32,249
Total Assets	$	1,632,789		$	1,667,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	10,000		$	10,000
Accounts payable		94,939			91,365
Contract liabilities		35,700			42,050
Operating lease liabilities - current		35,128			23,350
Accrued salaries and benefits		82,297			80,512
Accrued subcontractors and other direct costs		41,610			78,842
Accrued expenses and other current liabilities		67,252			100,908
Total Current Liabilities		366,926			427,027
Long-term Liabilities:
Long-term debt		321,681			303,214
Operating lease liabilities - non-current		96,746			115,614
Deferred income taxes		37,790			34,330
Other long-term liabilities		38,135			40,144
Total Liabilities		861,278			920,329
Commitments and Contingencies (Note 18)
Stockholders’ Equity:
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued		—			—
Common stock, par value $.001; 70,000,000 shares authorized; 23,483,971 and 23,305,255 shares issued at June 30, 2021 and December 31, 2020, respectively; 18,859,735 and 18,909,983 shares outstanding at June 30, 2021 and December 31, 2020, respectively		23			23
Additional paid-in capital		376,622			369,058
Retained earnings		622,113			588,731
Treasury stock, 4,624,236 and 4,395,272 shares at June 30, 2021 and December 31, 2020, respectively		(216,353	)		(196,745	)
Accumulated other comprehensive loss		(10,894	)		(14,106	)
Total Stockholders’ Equity		771,511			746,961
Total Liabilities and Stockholders’ Equity	$	1,632,789		$	1,667,290

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						Six Months Ended
	June 30,						June 30,
(in thousands, except per share amounts)	2021			2020			2021			2020
Revenue	$	392,525		$	353,987		$	771,003		$	712,225
Direct costs		246,646			223,407			478,728			454,023
Operating costs and expenses:
Indirect and selling expenses		106,178			99,255			216,160			202,526
Depreciation and amortization		4,728			5,064			9,998			10,243
Amortization of intangible assets		3,019			3,479			6,034			6,332
Total operating costs and expenses		113,925			107,798			232,192			219,101
Operating income		31,954			22,782			60,083			39,101
Interest expense		(2,612	)		(3,908	)		(5,295	)		(7,433	)
Other (expense) income		(46	)		349			(463	)		539
Income before income taxes		29,296			19,223			54,325			32,207
Provision for income taxes		8,984			5,567			15,662			7,939
Net income	$	20,312		$	13,656		$	38,663		$	24,268
Earnings per Share:
Basic	$	1.08		$	0.73		$	2.05		$	1.29
Diluted	$	1.07		$	0.72		$	2.03		$	1.27
Weighted-average Shares:
Basic		18,843			18,829			18,864			18,835
Diluted		19,022			19,020			19,078			19,120
Cash dividends declared per common share	$	0.14		$	0.14		$	0.28		$	0.28
Other comprehensive income (loss), net of tax		432			(164	)		3,212			(11,287	)
Comprehensive income, net of tax	$	20,744		$	13,492		$	41,875		$	12,981

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

4

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,
(in thousands)	2021			2020
Cash Flows from Operating Activities
Net income	$	38,663		$	24,268
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		7,782			1,153
Deferred income taxes		2,489			6,070
Non-cash equity compensation		6,163			6,344
Depreciation and amortization		16,032			16,575
Non-cash lease expense		(3,361	)		(783	)
Facilities consolidation reserve		(148	)		(141	)
Amortization of debt issuance costs		309			403
Impairment of long-lived assets		303			—
Other adjustments, net		1,365			(863	)
Changes in operating assets and liabilities, net of the effects of acquisitions:
Net contract assets and liabilities		(13,698	)		(15,050	)
Contract receivables		(29,070	)		54,729
Prepaid expenses and other assets		(3,108	)		(1,866	)
Accounts payable		3,667			(65,293	)
Accrued salaries and benefits		2,738			4,658
Accrued subcontractors and other direct costs		(37,035	)		(9,227	)
Accrued expenses and other current liabilities		20,619			(8,685	)
Income tax receivable and payable		(7,193	)		(8,158	)
Other liabilities		(176	)		6,667
Net Cash Provided by Operating Activities		6,341			10,801
Cash Flows from Investing Activities
Capital expenditures for property and equipment and capitalized software		(7,475	)		(9,015	)
Payments for business acquisitions, net of cash acquired		—			(253,090	)
Net Cash Used in Investing Activities		(7,475	)		(262,105	)
Cash Flows from Financing Activities
Advances from working capital facilities		382,552			914,507
Payments on working capital facilities		(364,395	)		(626,159	)
Payments on capital expenditure obligations		—			(1,712	)
Receipt of restricted contract funds		75,158			—
Payment of restricted contract funds		(117,399	)		—
Debt issue costs		—			(2,084	)
Proceeds from exercise of options		2,773			37
Dividends paid		(5,284	)		(5,275	)
Net payments for stock issuances and buybacks		(18,365	)		(23,024	)
Payments on business acquisition liabilities		(682	)		(1,924	)
Net Cash (Used in) Provided by Financing Activities		(45,642	)		254,366
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		699			(480	)
(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash		(46,077	)		2,582
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		81,987			6,482
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	35,910		$	9,064
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	5,319		$	7,875
Income taxes	$	20,714		$	10,123

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

5

Notes to Consolidated Financial Statements

(in thousands, except per share amounts)

NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ICF International, Inc. and its subsidiaries (collectively, the “Company”), and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). All significant intercompany transactions and balances have been eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions to government and commercial clients, 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 services. The Company offers a full range of services to these clients throughout the entire life cycle of a policy, program, project, or initiative, from research and analysis and 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-profits/associations, law firms, 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 Fairfax, Virginia. The Company maintains additional offices throughout the world, including more than 50 offices in the U.S. and U.S. territories and 22 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 assets and 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 six month periods ended June 30, 2021 and 2020 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, 2020 and the notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 26, 2021 (the “Annual Report”).

6

Accrued Expenses and Other Current Liabilities

At June 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

	June 30, 2021		December 31, 2020
Deposits	$	17,048	$	9,881
Restricted deposits		26,292		68,138
Accrued IT and software licensing costs		1,605		2,157
Accrued taxes and insurance premiums		5,027		4,327
Accrued facilities rental and lease exit costs		1,483		780
Accrued interest		226		214
Accrued professional services		2,467		2,094
Accrued dividends		2,638		2,641
Contingent liabilities from acquisitions		—		683
Interest rate swap liability - current		3,700		3,693
Other accrued expenses and current liabilities		6,766		6,300
Total accrued expenses and other current liabilities	$	67,252	$	100,908

Reclassifications

The Company has reclassified “Non-cash lease expense” which was previously part of “Other adjustments, net” on the consolidated statements of cash flows for the six months ended June 30, 2020 for consistency of presentation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 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 the 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. The Company can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. Also, the Company can elect various optional expedients that would allow for the Company 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 the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements.

NOTE 2 – RESTRICTED CASH

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets for the periods presented to the total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the six months ended June 30, 2021 and 2020:

	2021				2020
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	13,841	$	9,603	$	6,482	$	9,064
Restricted cash (1)		68,146		26,307		—		—
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	81,987	$	35,910	$	6,482	$	9,064

(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 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 borrowings and recorded in restricted cash and accrued expenses and other current 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.”

7

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following: 

	June 30, 2021			December 31, 2020
Billed and billable	$	257,548		$	230,466
Allowance for expected credit losses		(14,986	)		(7,616	)
Contract receivables, net	$	242,562		$	222,850

NOTE 4 – GOODWILL

The changes in the carrying amount of goodwill during the six-months period ended June 30, 2021 were as follows:

Balance as of December 31, 2020	$	909,913
Effect of foreign currency translation		727
Balance as of June 30, 2021	$	910,640

NOTE 5 – LEASES

The Company has operating leases for facilities and equipment which have remaining terms ranging from 1 to 12 years. The leases may include options to extend the lease periods for up to 5 years at rates approximating market rates and/or options to terminate the leases within 1 year. The leases may include a residual value guarantee or a responsibility to return the property to its original state of use. A limited number of leases contain provisions that provide for rental increases based on consumer price indices. The change in rent expense resulting from changes in these indices are included within variable rent.

Operating leases consisted of the following at June 30, 2021:

	June 30, 2021			December 31, 2020
Real estate facilities	$	156,436		$	157,010
Office equipment		2,120			1,864
Other		612			580
		159,168			159,454
Amortization of right-of-use assets		(47,413	)		(32,322	)
Total operating lease right-of-use assets	$	111,755		$	127,132

Rent expense is recognized on a straight-line basis over the lease term.  Rent expense consists of the following:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease costs	$	8,654	$	9,444	$	17,447	$	18,770
Short-term lease costs		105		442