ICF International, Inc.

Welcome to the third quarter 2021 ICF earnings conference call. My name is Vanessa and I will be your operator for today's call. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question and answer session. At that time, if you have a question, please press star 1 on your touchtone phone to register for a question. Please note, this conference is being recorded on Tuesday, November 2, 2021, and cannot be reproduced or rebroadcast without permission from the company. And now, I would like to turn the program over to Lynn Morgan of Advisory Partners.

Thank you, Vanessa. Good afternoon, everyone, and thank you for joining us to review ICF's third quarter 2021 performance. With us today from ICF are John Wasson, President and CEO, and Bettina Welsh, CFO. Joining them is James Morgan, Chief of Business Operations. During this conference call, we will make forward-looking statements to assist you in understanding ICF management's expectations for our future performance. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our November 2, 2021 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today. We anticipate that future developments will cause our views to change. Please consider the information presented in that light. We may at some point elect to update the forward-looking statements made today, but specifically disclaim any obligation to do so. I will now turn the call over to ICF's CEO, John Wasson, to discuss third quarter 2021 performance. John?

Thank you, Lynn, and thank you all for participating in our call today to review our third quarter and year-to-date performance and discuss our business outlook. By all measures, this was another strong quarter for ICF, demonstrating the positive momentum in our business that we have experienced throughout this year and pointing to the substantial growth opportunities on the horizon as we head into 2022. Key takeaways that I would like to highlight include The continued revenue growth from government and commercial energy clients was together accounted for 88% of year-to-date revenues. The 7.1% year-to-date increase in service revenue of which over 60% represented work in the key growth areas that we identified two years ago and where we believe the opportunities are even more robust given the current administration's priorities. Our efficient execution on existing contracts which in tandem with higher utilization and other positive factors drove the exceptional expansion of our adjusted EBITDA to service revenue margin. While this margin level is not sustainable due to higher anticipated costs in future periods, we expect our business model to be able to continue to drive considerable operating leverage and our success in retention and new business capture which resulted in a book to bill of 1.5 times in Q3 and 1.33 times for the trailing 12 months. along with our record new business development pipeline of $7.3 billion, underscore how well aligned ICF subject matter expertise and cross-cutting implementation skills are with market demand. Looking more closely at our performance by client category, third quarter federal government revenues increased 11.4% year-on-year, led by our continued work in IT modernization, digital transformation, public health and social programs, climate change, and resilience. We continue to execute well on our IT modernization and digital transformation contracts, with year-to-date service revenue growth in this area of 17%. And our pipeline of new opportunities has never been higher, reaching $1.8 billion at the end of the third quarter. This has also been a strong year for us in public health contract awards. In the third quarter alone, ICF was awarded over $75 million in re-compete contracts by the US Centers for Disease Control and Prevention and the National Institutes of Health to support the nationwide surveillance platform Biosense, as well as to provide an array of digital transformation, health surveillance, program management, and communication services to several agencies, divisions, and offices to support HIV prevention, smoking cessation, cancer prevention, and genetic and rare disease research. Additionally, we were awarded $15 million in contracts tied to COVID-19 response. bringing the cumulative total value of our pandemic-related contract wins to over $70 million. Today, we announced the acquisition of the small but uniquely specialized firm that further strengthens ICF's position in the public health arena. ESAC brings advanced health analytics and bioinformatics capabilities to ICF, along with a highly credentialed 40-person staff that serves a roster of government and academic clients, as well as federally funded research centers and private organizations. We look forward to working together with the ESAC team to gain revenue synergies by expanding ICS services at existing federal clients and leveraging their contract relationships with clients such as the Center for Medicare and Medicaid Services and the Department of the Veteran Administration. On a related note, you will see our earnings release that we called out an after-tax third quarter expense of 12 cents per share related to M&A costs. This was in connection with a highly competitive transaction that we pursued but ultimately passed on late in the process as pricing moved above our comfort zone based on anticipated revenue synergies. Revenues from state and local government clients increased 15% in the third quarter, reflecting growth in our disaster management and environmental consulting work. We continue to extend and expand our work in Puerto Rico in the third quarter occupying a central role in FEMA project formulation and grants management. And we won a new award for $22.1 million for the City Revitalization Program under the Puerto Rico Department of Housing. In addition, in early October, the Puerto Rico Disaster Recovery Transparency Portal noted that ICF was awarded a 33-month, $89 million contract for follow-on FEMA grant management support. ICF has a rigorous process for announcing new contract wins but we wanted to make sure you were aware of this notification. The mitigation market continues to develop as U.S. communities continue to suffer from the increasing evidence of severe weather-related events. In the third quarter, FEMA released a notice of funding opportunity for the 2021 Building Resilient Infrastructure and Communities Program, known as BRIC, at double the funding levels of 2020. In addition, more than half the opportunities in the HUD-funded Community Development Block Grant mitigation appropriations funded by Congress in 2018 remain to be awarded. Just yesterday, HUD announced the allocation of more than $2 billion in CDBG disaster recovery and mitigation funding for 15 separate disasters that occurred across 10 states in 2020. And we expect the Biden administration to continue to add to mitigation programs in the future. With climate, resilience, and grants management qualifications, and our position as the largest provider in the CDBG mitigation program, ICF continues to be very competitive within the mitigation and resilience market. Additionally, we continue to support our state and local government clients with environmental services, particularly in transportation, water, energy, and planning and development. ICF was recently awarded a new $30 million environmental services contract for the San Francisco Bay Area Rapid Transit Authority's Link 21 program to provide environmental services to support a major infrastructure expansion to its passenger rail network. ICS Climate, Environment, and Transportation Division also won a number of contracts in the third quarter, including multiple task orders with the city and county of Honolulu, the Texas Department of Transportation, the California Energy Commission, the Minnesota Metropolitan Council, New York City's Mayor's Office of Sustainability, the Metropolitan Washington Council of Governments, and Hawaii State Energy Office. As noted in our earnings release, revenues from international government clients increased substantially in the third quarter, with approximately one-third of the 60% increase tied to a sizable short-term project with substantial passive revenues that we expect to wind down by the end of Q1 2022. In terms of trends, we are seeing greater clarity from clients, particularly in the European Commission, on new funding initiatives as the impact of COVID recedes and continued demand for services related to climate and social inclusion. Moving to the commercial category, in marketing services, we continue to gain recognition for excellent client work and win new business, but overall activity levels remain below pre-pandemic levels. Turnover is an industry-wide issue, and year-on-year revenue comparisons reflect the completion of a large contract at the end of last year. That said, we continue to leverage the excellent engagement qualifications and expertise that are resonant in our commercial marketing business across the ICF footprint, which is materializing and expanded work for government and commercial energy clients. And we continue to carefully manage this part of our commercial business, which represented about 9% of total year-to-date revenues. In the last two quarters, we have seen a discernible pickup in our aviation consulting business, while still a small part of our commercial revenues. Our airline and airport clients are engaging ICF for sustainable aviation and tourism projects in Europe and for logistics projects in North America. Our energy market work remained the core of ICF's commercial client category. Year-to-date, revenues increased 8.7% representing solid growth across our energy efficiency, energy markets advisory, and domestic environmental services businesses. With contract awards from utility clients including traditional energy efficiency programs, electrification programs, distributed energy resources, and customer analytics, we anticipate continued strong market demand. And while we are one of the largest players in this area, we believe there is opportunity to not only grow within the market, but to also increase our market share. In addition to California, we continue to monitor developments in several other states as energy efficiency-related programs are instituted or expanded to address state climate targets. For example, in New York, ICF implements the Clean Heat Program for all the New York investor-owned utilities. This innovative program is designed to replace fossil fuel heating systems with electric heat pumps. We expect similar electrification programs including expansion of electric vehicle programs in several other jurisdictions. Also, our energy markets advisory business has seen continued high demand for ICS financial and engineering due diligence services around the deployment and development of renewable resources and energy storage. Our environmental services business has also been active on energy project development opportunities as we won an additional contract for an East Coast offshore wind project a construction compliance project for solar development in Arizona, an environmental impact assessment for a wind project in Wyoming, and numerous smaller engagements with renewable developers and utilities. This gives you a good sense of the breadth of our commercial energy portfolio of services, which we see as having substantial runway for growth in the coming years. In summary, the third quarter marked another period of significant growth for ICF following the very positive comparisons we achieved in the first half of this year. This performance has set the stage for an excellent 2021 and together with our strong backlog and robust business development pipeline underscores ICF's significant growth prospects for 2022 and beyond. And there do remain additional catalysts in the near term associated with infrastructure and stimulus legislation and 2022 civilian fiscal priorities that could further expand our growth opportunities for the next year and beyond. Now I'll turn the call over to our CFO Bettina Welch for a financial review. Bettina?