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, 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 October 29, 2021, there were 18,875,187 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, 2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at September 30, 2021 (Unaudited) and December 31, 2020	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2021 and 2020	4
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 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	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II. OTHER INFORMATION		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

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, 2021			December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	7,883		$	13,841
Restricted cash		34,419			68,146
Contract receivables, net		215,323			222,850
Contract assets		154,804			143,369
Prepaid expenses and other assets		31,109			25,492
Income tax receivable		4,999			1,977
Total Current Assets		448,537			475,675
Property and Equipment, net		51,602			62,434
Other Assets:
Goodwill		909,226			909,913
Other intangible assets, net		50,816			59,887
Operating lease - right-of-use assets		103,923			127,132
Other assets		41,509			32,249
Total Assets	$	1,605,613		$	1,667,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	10,000		$	10,000
Accounts payable		96,644			91,365
Contract liabilities		38,108			42,050
Operating lease liabilities - current		35,418			23,350
Accrued salaries and benefits		89,790			80,512
Accrued subcontractors and other direct costs		41,782			78,842
Accrued expenses and other current liabilities		70,435			100,908
Total Current Liabilities		382,177			427,027
Long-term Liabilities:
Long-term debt		269,732			303,214
Operating lease liabilities - non-current		87,532			115,614
Deferred income taxes		39,202			34,330
Other long-term liabilities		36,418			40,144
Total Liabilities		815,061			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; 23,497,782 and 23,305,255 shares issued at September 30, 2021 and December 31, 2020, respectively; 18,869,892 and 18,909,983 shares outstanding at September 30, 2021 and December 31, 2020, respectively		23			23
Additional paid-in capital		380,215			369,058
Retained earnings		639,862			588,731
Treasury stock, 4,627,890 and 4,395,272 shares at September 30, 2021 and December 31, 2020, respectively		(216,683	)		(196,745	)
Accumulated other comprehensive loss		(12,865	)		(14,106	)
Total Stockholders’ Equity		790,552			746,961
Total Liabilities and Stockholders’ Equity	$	1,605,613		$	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						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share amounts)	2021			2020			2021			2020
Revenue	$	394,060		$	360,315		$	1,165,063		$	1,072,540
Direct costs		254,175			223,288			732,903			677,311
Operating costs and expenses:
Indirect and selling expenses		99,940			100,123			316,100			302,649
Depreciation and amortization		4,665			5,143			14,663			15,386
Amortization of intangible assets		3,015			3,511			9,049			9,843
Total operating costs and expenses		107,620			108,777			339,812			327,878
Operating income		32,265			28,250			92,348			67,351
Interest expense		(2,550	)		(3,488	)		(7,845	)		(10,921	)
Other income (expense)		81			(223	)		(382	)		316
Income before income taxes		29,796			24,539			84,121			56,746
Provision for income taxes		9,406			6,668			25,068			14,607
Net income	$	20,390		$	17,871		$	59,053		$	42,139
Earnings per Share:
Basic	$	1.08		$	0.95		$	3.13		$	2.24
Diluted	$	1.07		$	0.94		$	3.10		$	2.20
Weighted-average Shares:
Basic		18,865			18,853			18,864			18,841
Diluted		19,061			19,086			19,077			19,111
Cash dividends declared per common share	$	0.14		$	0.14		$	0.42		$	0.42
Other comprehensive (loss) income, net of tax		(1,971	)		3,671			1,241			(7,616	)
Comprehensive income, net of tax	$	18,419		$	21,542		$	60,294		$	34,523

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)	2021			2020
Cash Flows from Operating Activities
Net income	$	59,053		$	42,139
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		11,324			1,517
Deferred income taxes		4,062			7,838
Non-cash equity compensation		9,756			9,472
Depreciation and amortization		23,712			25,229
Non-cash lease expense		(4,743	)		(1,540	)
Facilities consolidation reserve		(225	)		(214	)
Amortization of debt issuance costs		463			557
Impairment of long-lived assets		339			—
Other adjustments, net		1,818			(738	)
Changes in operating assets and liabilities, net of the effects of acquisitions:
Net contract assets and liabilities		(16,381	)		2,842
Contract receivables		(6,688	)		49,428
Prepaid expenses and other assets		(9,224	)		1,084
Accounts payable		5,653			(65,044	)
Accrued salaries and benefits		10,377			29,418
Accrued subcontractors and other direct costs		(36,436	)		(7,622	)
Accrued expenses and other current liabilities		17,002			(9,107	)
Income tax receivable and payable		(3,490	)		(4,380	)
Other liabilities		(1,609	)		14,292
Net Cash Provided by Operating Activities		64,763			95,171
Cash Flows from Investing Activities
Capital expenditures for property and equipment and capitalized software		(12,279	)		(12,910	)
Payments for business acquisitions, net of cash acquired		—			(253,090	)
Net Cash Used in Investing Activities		(12,279	)		(266,000	)
Cash Flows from Financing Activities
Advances from working capital facilities		559,830			946,201
Payments on working capital facilities		(593,775	)		(736,645	)
Payments on capital expenditure obligations		—			(1,712	)
Receipt of restricted contract funds		194,504			—
Payment of restricted contract funds		(227,700	)		—
Debt issue costs		—			(2,093	)
Proceeds from exercise of options		2,773			37
Dividends paid		(7,923	)		(7,910	)
Net payments for stock issuances and buybacks		(18,695	)		(23,247	)
Payments on business acquisition liabilities		(682	)		(1,924	)
Net Cash (Used in) Provided by Financing Activities		(91,668	)		172,707
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(501	)		(123	)
(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash		(39,685	)		1,755
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		81,987			6,482
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	42,302		$	8,237
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	7,882		$	11,331
Income taxes	$	25,062		$	11,138
Non-cash investing and financing transactions:
Tenant improvements funded by lessor	$	—		$	2,207

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

5

Notes to Consolidated Financial Statements

(Amounts in tables in thousands, except per share data or otherwise noted)

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 55 offices in the U.S. and U.S. territories and 24 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 nine month periods ended September 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 September 30, 2021 and December 31, 2020, accrued expenses and other current liabilities consisted of the following:

	September 30, 2021		December 31, 2020
Deposits	$	14,069	$	9,881
Restricted deposits		34,404		68,138
Accrued IT and software licensing costs		1,445		2,157
Accrued taxes and insurance premiums		3,504		4,327
Accrued facilities rental and lease exit costs		1,351		780
Accrued interest		236		214
Accrued professional services		3,825		2,094
Accrued dividends		2,641		2,641
Contingent liabilities from acquisitions		—		683
Interest rate swap liability - current		3,584		3,693
Other accrued expenses and current liabilities		5,376		6,300
Total accrued expenses and other current liabilities	$	70,435	$	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 nine months ended September 30, 2020 for consistency of presentation with the same period in 2021.

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 nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30,
	2021				2020
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	13,841	$	7,883	$	6,482	$	8,237
Restricted cash (1)		68,146		34,419		—		—
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	81,987	$	42,302	$	6,482	$	8,237

(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

7

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.”

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following: 

	September 30, 2021			December 31, 2020
Billed and billable	$	223,791		$	230,466
Allowance for expected credit losses		(8,468	)		(7,616	)
Contract receivables, net	$	215,323		$	222,850

NOTE 4 – GOODWILL

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

Balance as of December 31, 2020	$	909,913
Effect of foreign currency translation		(687	)
Balance as of September 30, 2021	$	909,226

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 September 30, 2021:

	September 30, 2021			December 31, 2020
Real estate facilities	$	156,020		$	157,010
Office equipment		2,117			1,864
Other		690			580
		158,827			159,454
Amortization of right-of-use assets		(54,904	)		(32,322	)
Total operating lease right-of-use assets	$	103,923		$	127,132

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

	Three Months Ended		Nine Months Ended
	September 30, 2021	September 30, 2020	September 30, 2021	September 30, 2020
Operating lease costs