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 March 31, 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.)
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 April 29, 2022, there were 18,793,455 shares outstanding of the registrant’s common stock.

ICF INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE

PERIOD ENDED MARCH 31, 2022

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at March 31, 2022 (Unaudited) and December 31, 2021	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2022 and 2021	4
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2022 and 2021	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31

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)	March 31, 2022			December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents	$	7,392		$	8,254
Restricted cash - current		1,681			12,179
Contract receivables, net		205,827			237,684
Contract assets		189,147			137,867
Prepaid expenses and other assets		41,176			42,354
Income tax receivable		8,288			10,825
Total Current Assets		453,511			449,163
Property and Equipment, net		62,886			52,053
Other Assets:
Goodwill		1,045,503			1,046,760
Other intangible assets, net		74,274			79,645
Operating lease - right-of-use assets		172,133			177,417
Other assets		49,416			44,496
Total Assets	$	1,857,723		$	1,849,534
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	10,000		$	10,000
Accounts payable		95,706			105,652
Contract liabilities		31,491			39,665
Operating lease liabilities - current		30,530			34,901
Accrued salaries and benefits		94,931			85,517
Accrued subcontractors and other direct costs		40,165			39,400
Accrued expenses and other current liabilities		41,388			61,496
Total Current Liabilities		344,211			376,631
Long-term Liabilities:
Long-term debt		449,776			411,605
Operating lease liabilities - non-current		189,857			191,805
Deferred income taxes		47,684			41,913
Other long-term liabilities		22,893			24,110
Total Liabilities		1,054,421			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; 23,679,411 and 23,535,671 shares issued at March 31, 2022 and December 31, 2021, respectively; 18,793,455 and 18,876,490 shares outstanding at March 31, 2022 and December 31, 2021, respectively		23			23
Additional paid-in capital		388,639			384,984
Retained earnings		664,532			649,298
Treasury stock, 4,885,956 and 4,659,181 shares at March 31, 2022 and December 31, 2021, respectively		(241,516	)		(219,800	)
Accumulated other comprehensive loss		(8,376	)		(11,035	)
Total Stockholders’ Equity		803,302			803,470
Total Liabilities and Stockholders’ Equity	$	1,857,723		$	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
	March 31,
(in thousands, except per share amounts)	2022			2021
Revenue	$	413,468		$	378,478
Direct costs		258,158			232,082
Operating costs and expenses:
Indirect and selling expenses		117,452			109,982
Depreciation and amortization		4,838			5,270
Amortization of intangible assets		5,317			3,015
Total operating costs and expenses		127,607			118,267
Operating income		27,703			28,129
Interest expense		(2,697	)		(2,683	)
Other expense		(369	)		(417	)
Income before income taxes		24,637			25,029
Provision for income taxes		6,775			6,678
Net income	$	17,862		$	18,351
Earnings per Share:
Basic	$	0.95		$	0.97
Diluted	$	0.94		$	0.96
Weighted-average Shares:
Basic		18,795			18,885
Diluted		19,012			19,118
Cash dividends declared per common share	$	0.14		$	0.14
Other comprehensive income, net of tax		2,659			2,780
Comprehensive income, net of tax	$	20,521		$	21,131

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

4

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Cash Flows from Operating Activities
Net income	$	17,862		$	18,351
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
(Recovery of) provision for credit losses		(170	)		5,334
Deferred income taxes		4,505			1,838
Non-cash equity compensation		3,563			3,275
Depreciation and amortization		10,154			8,285
Facilities consolidation reserve		(78	)		(75	)
Amortization of debt issuance costs		154			155
Impairment of long-lived assets		—			303
Other adjustments, net		353			457
Changes in operating assets and liabilities, net of the effects of acquisitions:
Net contract assets and liabilities		(59,689	)		(19,750	)
Contract receivables		31,473			2,531
Prepaid expenses and other assets		(11,708	)		2,016
Operating lease assets and liabilities, net		(532	)		(1,143	)
Accounts payable		(9,815	)		(354	)
Accrued salaries and benefits		9,513			4,715
Accrued subcontractors and other direct costs		1,078			(33,466	)
Accrued expenses and other current liabilities		(6,883	)		8,303
Income tax receivable and payable		2,621			3,924
Other liabilities		544			262
Net Cash (Used in) Provided by Operating Activities		(7,055	)		4,961
Cash Flows from Investing Activities
Capital expenditures for property and equipment and capitalized software		(6,454	)		(3,595	)
Cash Flows from Financing Activities
Advances from working capital facilities		329,690			185,755
Payments on working capital facilities		(291,662	)		(174,674	)
Receipt of restricted contract funds		4,301			451
Payment of restricted contract funds		(14,714	)		(27,081	)
Proceeds from exercise of options		92			2,702
Dividends paid		(2,644	)		(2,642	)
Net payments for stock issuances and buybacks		(22,268	)		(17,104	)
Payments on business acquisition liabilities		(121	)		(682	)
Net Cash Provided by (Used in) Financing Activities		2,674			(33,275	)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(525	)		745
Decrease in Cash, Cash Equivalents, and Restricted Cash		(11,360	)		(31,164	)
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		20,433			81,987
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	9,073		$	50,823
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	2,760		$	2,637
Income taxes	$	949		$	961
Non-cash investing and financing transactions:
Tenant improvements funded by lessor	$	10,843		$	—

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

5

Notes to Consolidated Financial Statements

(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 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. 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,  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 over 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 months periods ended March 31, 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 (the “Annual Report”).

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 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 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 the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact of the transition from LIBOR to alternative reference interest rates for the current Credit Facility (see Note 7—Long-Term Debt) and the related interest rate hedges (see Note 9—Derivative Instruments and Hedging Activities) but does not expect a significant impact to its 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 three months ended March 31, 2022 and 2021:

	March 31, 2022				March 31, 2021
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	8,254	$	7,392	$	13,841	$	8,592
Restricted cash - current (1)		12,179		1,681		68,146		42,231
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	20,433	$	9,073	$	81,987	$	50,823

(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 borrowings 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: 

	March 31, 2022			December 31, 2021
Billed and billable	$	211,827		$	245,425
Allowance for expected credit losses		(6,000	)		(7,741	)
Contract receivables, net	$	205,827		$	237,684

NOTE 4 – GOODWILL

The changes in the carrying amount of goodwill during the three-months period ended March 31, 2022 were as follows:

Balance as of December 31, 2021	$	1,046,760
Measurement period adjustments - ESAC acquisition		87
Measurement period adjustments  - Creative Systems and Consulting acquisition		(1	)
Effect of foreign currency translation		(1,343	)
Balance as of March 31, 2022	$	1,045,503

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NOTE 5 – LEASES

The Company has operating leases for facilities and equipment which have remaining terms ranging from 1 to 17 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.

The Company’s lease cost is recognized on a straight-line basis over the lease term. Lease cost consists of the following:

	Three Months Ended
	March 31, 2022			March 31, 2021
Operating lease cost	$	9,502		$	8,793
Short-term lease cost		133			131
Variable lease cost		20			10
Sublease income		(10	)		—
Total lease cost	$	9,645		$	8,934

Future minimum lease payments under non-cancellable leases as of March 31, 2022 were as follows:

March 31, 2023	$	33,057
March 31, 2024		20,984
March 31, 2025		23,628
March 31, 2026		21,643
March 31, 2027		20,369
Thereafter		152,425
Total future minimum lease payments		272,106
Less:  Interest		(51,719	)
Total operating lease liabilities	$	220,387
Operating lease liabilities - current	$	30,530
Operating lease liabilities - non-current		189,857
Total operating lease liabilities	$	220,387

Other information related to operating leases is as follows:

	March 31, 2022			March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,110		$	4,130
Right-of-use assets obtained in exchange for operating lease liabilities	$	2,952		$	142
Weighted-average remaining lease term - operating leases		11.5			5.8
Weighted-average discount rate - operating leases		3.2	%		3.4	%

8

NOTE 6 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

At March 31, 2022 and December 31, 2021, accrued expenses and other current liabilities consisted of the following:

	March 31, 2022		December 31, 2021
Deposits	$	21,162	$	21,088
Restricted contract funds		1,668		12,165
Accrued IT and software licensing costs		1,231		1,702
Accrued taxes and insurance premiums		3,632		5,267
Accrued facilities rental and lease exit costs		1,027		1,291
Accrued interest		171		212
Accrued professional services		2,363		3,068
Accrued dividends		2,627		2,643
Contingent and contractual liabilities from acquisitions		1,212		1,245
Interest rate swap liability - current		508		3,026
Forward contract agreements liability - current		182		—
Other accrued expenses and current liabilities		5,605		9,789
Total accrued expenses and other current liabilities	$	41,388	$	61,496

NOTE 7 – LONG-TERM DEBT

At March 31, 2022 and December 31, 2021, debt consisted of:

	March 31, 2022				December 31, 2021
	Average Interest Rate	Outstanding Balance			Average Interest Rate	Outstanding Balance
Term Loan		$	180,000			$	182,500
Revolving Credit			281,583				241,055
Total before debt issuance costs	1.40%		461,583		1.65%		423,555
Unamortized debt issuance costs			(1,807	)			(1,950	)
		$	459,776			$	421,605
Current portion of long-term debt		$	10,000			$	10,000
Long-term debt - non-current			449,776				411,605
		$	459,776			$	421,605

On March 3, 2020, the Company entered into the First Amendment (the “First Amendment”) to the Fifth Amended and Restated Business Loan and Security Agreement with a group of ten commercial banks (the “Credit Facility”). The First Amendment amended the Fifth Amended and Restated Business Loan and Security Agreement to, among other things, (i) add a new term loan facility in the original principal amount of $200.0 million; (ii) increase the swing line commitment amount by $25.0 million to $75.0 million; (iii) extend the maturity date; and (iv) modify certain definitions and certain covenants. As a result, the Credit Facility now consists of (i) a term loan facility of $200.0 million; (ii) a revolving line of credit of up to $600.0 million with additional revolving credit commitments of up to $300.0 million, subject to lenders’ approval (the “Accordion”); and (iii) a sub-limit of $75.0 million for swing line loans. The Credit Facility matures on March 3, 2025.

The Company has the option to borrow funds under the Credit Facility at interest rates based on both LIBOR (1, 3, or 6-month rates) and the Base Rate (as defined herein), at its discretion, plus their applicable margins. Base Rates are fluctuating per annum rates of interest equal to the highest of (i) the Overnight Bank Funding Rate, plus 0.5%, (ii) the Prime Rate (as defined under the Credit Facility) and (iii) the daily LIBOR rate, plus a LIBOR margin between 1.00% and 2.00% based on its Leverage Ratio (as defined under the Credit Facility). The interest accrued based on LIBOR rates is to be paid on the last business day of the interest period (1, 3, or 6 months), while interest accrued based on the Base Rate is to be paid in quarterly installments. The Credit Facility also provides for letters of credit aggregating up to $60.0 million which reduce the funds available under the Credit Facility when issued. The unused portion of the Credit Facility is subject to a commitment fee between 0.13% and 0.25% per annum based on the Leverage Ratio.

The Credit Facility is collateralized by substantially all the assets of the Company and requires that the Company remain in compliance with certain financial and non-financial covenants. The financial covenants require, among other things, that the Company maintain at all times an Interest Coverage Ratio (as defined under the Credit Facility) of not less than 3.00 to 1.00 and a Leverage Ratio of not more than 4.00 to 1.00 (subject to a step-up to 4.25 to 1.0 for a four quarter period following permitted acquisitions as

9

defined under the Credit Facility) for each fiscal quarter. As of March 31, 2022, the Company was in compliance with its covenants under the Credit Facility. The Credit Facility also has a conforming dividend covenant that allows the Company to pay dividends as long as it remains in compliance with the financial covenants set forth in the Credit Facility.

As of March 31, 2022, the Company had $461.6 million of long-term debt outstanding from the Credit Facility (including the term loan of $180.0 million, exclusive of unamortized debt issuance costs of $1.8 million), and unused borrowing capacity under the $600.0 million revolving line of credit of $315.1 million under the Credit Facility.  The unused borrowing capacity is inclusive of nine outstanding letters of credit totaling $3.3 million. Taking into account the financial, performance-based limitations, available borrowing capacity (excluding the Accordion and the term loan) was $250.4 million as of March 31, 2022. 

Future scheduled repayments of debt principal are as follows:

Payments due by	Term Loan		Revolving Credit		Total
March 31, 2023	$	10,000	$	—	$	10,000
March 30, 2024		15,000		—		15,000
March 3, 2025 (Maturity)		155,000		281,583		436,583
Total	$	180,000	$	281,583	$	461,583

NOTE 8 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market, client type and contract mix. Client markets provide insight into the breadth of the Company’s expertise. In classifying revenue by client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market. The Company also classifies revenue by the type of entity for which it does business, which is an indicator of the diversity of its client base. The Company attributes revenue generated as a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Disaggregation by contract mix provides insight in terms of the degree of performance risk that the Company has assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contracts for negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements