ICF International, Inc.

Welcome to the first quarter 2023 ICF earnings conference call. My name is Grace, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Afterwards, you'll be invited to participate in the question and answer session. During the question and answer session, you will have a question. Please press star and then 1-1 on your touchtone phone. I will now turn the call over to Lynn Morgan of Advisory Partners. Lynn, you may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us to review ICF's first quarter 2023 performance. With us today from ICF are John Wasson, Chair and CEO, and Barry Broaddus, CFO. Joining them is James Morgan, Chief Operating Officer. During this conference call, we will make 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 9th, 2023 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 over the call to ICF's CEO, John Watson, to discuss first quarter 2023 performance. John?

Well, thanks, Elaine, and good afternoon, everyone. Thank you for joining us to review ICF's first quarter results and discuss our outlook for 2023. Our strong first quarter results reflected ICF's expanded capabilities in the growth markets we have identified and have invested in, namely IT modernization, public health, disaster management, utility consulting, and climate, environment, and infrastructure services. These areas are priority spending for our clients, and in 2022 accounted for approximately 75% of revenue. Thanks to our deep domain expertise and increased scale, We expect these areas to continue to grow as a percentage of ICS revenue in 2023 and beyond. In terms of takeaways from our performance in the quarter, first, we reported over 15% growth in service revenue, and total revenue increased close to 17%, of which organic growth was north of 8%. Second, we achieved significant year-on-year margin expansion in the first quarter, primarily resulting from increased scale, higher utilization levels, and reduced facility costs. This margin expansion is aligned with our guidance of 15% adjusted EBITDA to service revenue margin for the full year. Third, we made the decision to exit a small non-core commercial UK event service line that was not contributing to profitability. While immaterial from a revenue perspective, it is indicative of our strategy to focus our investment dollars and human capital on areas that are or have the potential to dive growth and are synergistic with the rest of our service offerings. Fourth, this is another order of strong contract awards for ICF, up over 13% year-on-year and resulting in a trailing 12-month book-to-bill ratio of 1.3%. Also, our business development pipeline increased 16% sequentially after more than $400 million in contract wins, which speaks to the high level of bid and proposal activity we are experiencing, as well as the increased value of the contracts we're bidding on. Taken together, these accomplishments represent a strong start to the year and underscore our confidence in ICH performance in 2023 and beyond. Looking across our client categories, There are several highlights worth noting. Revenues from federal government clients increased over 22%, reflecting a combination of high single digital grant growth and the contribution from the semantic BITS acquisition, which we closed in July of last year. Our IT modernization and public health markets were key drivers of first quarter growth in this client category, reflecting strong spending trends amongst our civilian agency clients. Both areas have been seeing robust funding and bipartisan support. A recent Bloomberg analysis cited IT contract spending at federal agencies is forecasted to be a record of $78 billion for 2023, with about 40% of that spend taking place in the fourth quarter. Additionally, the analysis noted that civilian agency procurement is continuing a pattern of steady annual growth not seen since at least 2017. Federal agencies are prioritizing customer experience and digital services, along with data access and use, which are directly in our sweet spots. Innovation of SemanticBiz is complete. In the first quarter, we continue to win additional business from existing clients. Additionally, we are working together on many potential revenue synergies, primarily at the Centers for Medicare and Medicaid Services, an agency that SemanticBiz has served for many years. As mentioned previously, This was a strong quarter for our public health work. In the first quarter, we continued to execute on a number of contracts supporting federal agency efforts to address mental health, substance abuse, infectious disease, and global health security. We also worked on issues related to health equity, social determinants of health, and the future of the public health system. Adjacent to this work was the first quarter ramp up of a new contract to the Administration for Children and Families, Office of Refugee Resettlement, to assist arriving Afghan refugees in getting access to immigration and legal services. Additionally, we continue to experience demand from federal clients for ICF services with respect to the Infrastructure and Jobs Act. Under existing federal agency contracts, we've been tasked with more than 45 million in projects that support IICA activities, ICF is providing a range of support agencies, including digital modernization, technical assistance, and communications and management support for IIJA programs. Also, ICF is seeing considerable interest from states and other prospective IIJA funding recipients for a range of environmental support services, including planning and analytical services. Our pipeline of opportunities containing IIJA and Inflation Reduction Act, or IRA, related work continues to grow and is currently at approximately $250 million, up from $150 million at the end of 2022. This includes a modest amount of work related to the IRA, where we expect to see awards to support federal agencies' responsibilities under the Act late in the second half of this year. The first quarter, our revenues from state and local government clients increased 13.3% year-on-year. It's two key business areas, disaster management, environment, and infrastructure consulting that executed effectively on existing contracts and continue to win new work. In particular, we noted in our release the award of a new contract with a value of $25.9 million with the U.S. territory to support implementation of its new energy program that will provide eligible households with renewable energy installations in case of an extended power outage. Also, we continue to win smaller strategic resilience advisory work in new jurisdictions and with new clients in current geographies. We're currently arguing mitigation advisory work for 30 plus clients across 17 states and three territories, which enables us to build relationships in key markets and a position for downstream implementation and recovery work. There are significant synergies between our disaster recovery and mitigation work and the resilience and energy related work we do for state and local and commercial clients. In Q1, we continue to see these synergies pay off with good size wins with critical infrastructure clients in Oregon and California. This is a good segue to our commercial energy business, where revenues increased almost 19% in the quarter, with each component of this business posting strong, double-digit growth. Our commercial utility program revenue growth was driven by two large energy efficiency projects, the addition of several new marquee clients, as well as the expansion of projects for existing utility clients. We saw particular strength coming from our innovative offerings related to electrification and grid modernization, behavioral efficiency programs, and dynamic pricing. In energy advisory, experience strong demand for our services in the areas of decarbonizing energy markets. In particular, demand from renewable energy developers, whose business is supported by the IIJA and IRA. We recently introduced Energy Insight, ICS technology-enabled service, helping developers identify and analyze renewable project locations, and a new power price forecasting subscription service, and both have been met with favorable client response. Our environment and planning group grew substantially in the first quarter, led by energy sector-related projects, as well as the land acquisition and the general ramping up of environmental projects. Growth in energy projects was strong both for developers seeking to permit new onshore and offshore projects, and for utilities seeking environmental permits for large infrastructure, reliability, and resilience projects, such as the undergrounding of power lines. To sum up, the first quarter was a period of excellent execution for ICF, in which we made significant progress in key areas that support our full year 2023 guidance, as well as our longer-term financial targets. Now, I'll turn the call over to our CFO, Barry Broaddus, for a financial review. Barry?