ICF International, Inc.

Welcome to the First Quarter 2022 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 0 then 1 on your touchtone phone to register for a question. Please note that this conference is being recorded on Wednesday, May 4, 2022, and cannot be reproduced or rebroadcast without permission from the company. And now, I would like to turn the program over to David Gold, Investor Relations. Sir, you may begin.

Thank you, Vanessa. Good afternoon, everyone, and thank you for joining us to review ICF's first quarter 2022 performance. With us today from ICF are John Wasson, Chairman and CEO, and Barry Broadus, CFO. Joining them is James Morgan, Chief of Business Operations. During this conference call, we will be making forward-looking statements to assist you in understanding ICF management's expectations about 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 May 4, 2022 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 CEO, John Wasson, to discuss first quarter 2022 performance. John?

Thank you, David, and thank you all for participating in today's call to review first quarter business and financial trends and discuss our business outlook. ICF's first quarter results represented a very strong start to the year, supporting outlook for considerable growth in 2022. In terms of the key takeaways from our first quarter performance, first, we continue to build our position in high growth markets. These markets, namely IT modernization and digital transformation, public health, disaster management, utility consulting, together with our climate, environmental, and infrastructure services, are expected to account for approximately 70% of service revenue in 2022, up from around 65% at the end of 2021. Second, we continue to drive margin improvement. Our adjusted EBITDA to service revenue expanded to 13.9%, while we continue to invest in people, technology, and strategic initiatives to support our future growth. And third, our business development results continue to support our long-term growth outlook. At the end of the first quarter, our trailing 12-month book-to-bill ratio was 1.27, and our business development pipeline was a record 7.9 billion, pointing to ICF's substantial runway for future growth. The strongest year-on-year revenue comparisons in the first quarter were in our federal government business, which was up 25%, reflecting organic growth across our growth markets and the acquisition of Creative Systems and Consulting, which we completed at the end of 2021. As you'll recall, Creative is an IT modernization digital transformation solutions provider to U.S. federal agencies that expanded our addressable market in two ways. First, it brought substantial expertise in Salesforce and Microsoft platforms that complement our ServiceNow and Appian capabilities, strengthening our qualifications for new awards. Second, it expanded our presence in several civilian agencies, including USDA and Treasury, where we see additional growth potential. The acquisition is performing well in line with our expectations of mid-teens revenue growth, and we see significant opportunities for revenue synergies as we now offer leading practices supporting the three most widely adopted low-code, no-code platforms in the U.S. federal government. The passage of the Omnibus Spending Package for fiscal year 2022, increased civilian spending opportunities by 8.9%, and with only six months left in the year, we are experiencing a very busy bid and proposal season. Additionally, we are closely monitoring the CDC's recently announced agency-wide modernization review that is expected to include the development of new systems and processes to deliver its science to the American public, as well as facilitate its public health work. In addition to the healthy omnibus increases for fiscal year 2022, the president submitted his fiscal 23 budget request to Congress in March, and while it is far from passage, it does reflect the administration's priorities. These include a significant increase in federal health budgets with mandatory spending to prepare for the next pandemic, focus on childcare indicated by a considerable increase in funding at the administration for children and families, and 65 billion in IT spending across civilian agencies all areas in which ICF has substantial domain expertise and cross-cutting implementation capabilities. We also experienced strong year-on-year growth of 14 percent in revenues from state and local government clients, which represented both our work in the disaster management arena and our climate, environmental, and infrastructure services. ICF continued to execute effectively on key disaster recovery contracts in Texas and Puerto Rico, as well on recent contracts and extensions related to more recent storms. Further, ICF currently is working on mitigation efforts for over 30 clients in 14 states, with first quarter winds in Washington, South Carolina, New York, Oregon, and Virginia, expanding our geographic footprint. The Department of Housing and Urban Development recently announced more than $2 billion in CDBG disaster recovery and mitigation funding for disasters that occurred during 2020 ICF is already doing disaster recovery work in seven of the 10 states receiving funding, and during Q1, we won several small-scale preliminary assignments related to planning for these awards. Also, we continue to provide our state and local clients with climate, environmental, and infrastructure advisory services. In Q1, we won additional work helping clients identify opportunities for securing climate resilience and clean energy funding available through the Infrastructure Investment and Jobs Act, and we were awarded new permitting assignments for energy infrastructure upgrades and development initiatives. Revenues from international government clients were lower year-on-year due to the completion of a short-term project with significant pass-through revenues that drove exceptional growth in this client category in 2021. Excluding that contract, revenues were slimmer to year-ago first quarter levels, even though our event work for the European Union has not fully recovered from pandemic impacts. We continue to win new multi-year contracts with a diverse array of European Commission and UK government clients in the areas of training and capacity building, research and evaluation, and communications that address a range of subject matters, including energy and climate, water, agricultural and food systems, education, human health, and social policy. Moving to our commercial client category, Revenues declined 6.7% year-on-year as commercial marketing services remained pressured by the impacts of the pandemic and the slower than expected recovery of our clients in the hospitality and travel industries. Marketing services represented approximately 7% of ICF's total first quarter revenues. We did gain traction and deliver growth in both aviation and utility consulting in Q1 by leveraging the deep engagement expertise in these businesses to win new contracts. Notably, aviation consulting continued its year-on-year progress, putting additional work with existing clients and adding new clients. The strong policy focus in both the U.S. and the European Union on decarbonization and sustainable aviation has been a business driver. The major growth area within our commercial business is energy markets, which accounted for 60 percent of first quarter commercial revenues. As expected, we saw mostly lower first quarter revenue comparisons, given the timing of the startup and wind down of various programs, as well as our exceptional 12% growth in the first quarter of 2021. In this year's first quarter, revenue from energy efficiency programs increased 1.3%, and energy markets advisory work was steady year on year, but the timing of projects in our environmental and infrastructure business caused lower first quarter comparisons in that client category. For the full year, we expect mid-single-digit revenue growth for our commercial energy markets business, with higher year-on-year comparisons in the second half. Currently, ICF is executing on more than 200 energy efficiency programs for 55 utilities nationwide, and the pipeline remains strong for energy efficiency, as well as our other core services to utilities, including beneficial electrification, flexible load management, and consulting. In fact, several utility clients have expanded their energy efficiency goals to include greenhouse gas reductions, and we recently won an implementation contract with a utility for the remote management of thermostats. Overall, there's been a noticeable uptick in demand for us to analyze more complex issues for utility clients, encompassing energy efficiency objectives, decarbonization goals, electric vehicle programs, and their impact on grid reliability. Additionally, as utility clients increasingly emphasize equity, disadvantaged communities, workforce development, there are increasing opportunities for us to leverage ICF's global expertise in human services. In the first quarter, ICF continued to win new environmental services work with utilities and renewable energy developers in the area of construction and compliance monitoring for energy infrastructure projects and the environmental studies for large offshore wind projects. Also, we rewarded several climate advisory contracts in the first quarter to work for large utilities and commercial clients on projects to ensure that energy systems are resilient to extreme weather, programs that support clean energy usage, and the development of climate action plans. To sum up, in the first quarter, we continued to expand our capabilities, backlog and pipeline in key growth areas, which we expect to progressively increase as a percentage of ICF service revenue in the periods ahead. supporting our expectations for substantial growth in 2022 and beyond. I'll turn the call over to Barry Broaddus, our CFO, for a financial review.