10-Q 1 icfi-20240331.htm 10-Q 10-Q
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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, 2024

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.)

 

 

 

1902 Reston Metro Plaza, Reston, VA

 

20190

(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

The NASDAQ Global Select Market

 

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 26, 2024, there were 18,736,579 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, 2024

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

 

 

Item 1.

Financial Statements

3

 

Consolidated Balance Sheets at March 31, 2024 (Unaudited) and December 31, 2023

3

 

Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2024 and 2023

4

 

 

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended March 31, 2024 and 2023

5

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023

6

 

Notes to Consolidated Financial Statements

7

 

 

Note 1 - Basis of Presentation

7

 

 

 

 

Note 2 - Restricted Cash

8

 

 

 

 

Note 3 - Contract Receivables, Net

8

 

 

 

 

Note 4 - Leases

9

 

 

 

 

Note 5 - Debt

10

 

 

 

 

Note 6 - Revenue Recognition

10

 

 

 

 

Note 7 - Derivative Instruments and Hedging Activities

11

 

 

 

 

Note 8 - Income Taxes

11

 

 

 

 

Note 9 - Stockholders' Equity

12

 

 

 

 

Note 10 - Stock-Based Compensation

13

 

 

 

 

Note 11 - Earnings Per Share

13

 

 

 

 

Note 12 - Fair Value

13

 

 

 

 

Note 13 - Commitments and Contingencies

14

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

 

Item 4.

Controls and Procedures

21

 

PART II. OTHER INFORMATION

22

 

Item 1.

Legal Proceedings

22

 

Item 1A.

Risk Factors

22

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

22

 

Item 3.

Defaults Upon Senior Securities

22

 

Item 4.

Mine Safety Disclosures

22

 

Item 5.

Other Information

23

 

Item 6.

Exhibits

24

 

 


 

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, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,683

 

 

$

6,361

 

Restricted cash

 

 

916

 

 

 

3,088

 

Contract receivables, net

 

 

202,246

 

 

 

205,484

 

Contract assets

 

 

230,412

 

 

 

201,832

 

Prepaid expenses and other assets

 

 

28,401

 

 

 

28,055

 

Income tax receivable

 

 

 

 

 

2,337

 

Total Current Assets

 

 

465,658

 

 

 

447,157

 

Property and Equipment, net

 

 

74,296

 

 

 

75,948

 

Other Assets:

 

 

 

 

 

 

Goodwill

 

 

1,219,031

 

 

 

1,219,476

 

Other intangible assets, net

 

 

86,613

 

 

 

94,904

 

Operating lease - right-of-use assets

 

 

128,356

 

 

 

132,807

 

Other assets

 

 

43,740

 

 

 

41,480

 

Total Assets

 

$

2,017,694

 

 

$

2,011,772

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

26,000

 

 

$

26,000

 

Accounts payable

 

 

119,285

 

 

 

134,503

 

Contract liabilities

 

 

22,099

 

 

 

21,997

 

Operating lease liabilities

 

 

20,889

 

 

 

20,409

 

Finance lease liabilities

 

 

2,545

 

 

 

2,522

 

Accrued salaries and benefits

 

 

70,176

 

 

 

88,021

 

Accrued subcontractors and other direct costs

 

 

48,707

 

 

 

45,645

 

Accrued expenses and other current liabilities

 

 

82,966

 

 

 

79,129

 

Total Current Liabilities

 

 

392,667

 

 

 

418,226

 

Long-term Liabilities:

 

 

 

 

 

 

Long-term debt

 

 

448,748

 

 

 

404,407

 

Operating lease liabilities - non-current

 

 

170,575

 

 

 

175,460

 

Finance lease liabilities - non-current

 

 

13,227

 

 

 

13,874

 

Deferred income taxes

 

 

21,975

 

 

 

26,175

 

Other long-term liabilities

 

 

54,353

 

 

 

56,045

 

Total Liabilities

 

 

1,101,545

 

 

 

1,094,187

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Preferred stock, par value $.001; 5,000,000 shares authorized; none issued

 

 

 

 

 

 

Common stock, par value $.001; 70,000,000 shares authorized; 24,110,071 and 23,982,132 shares issued at March 31, 2024 and December 31, 2023, respectively; 18,754,762 and 18,845,521 shares outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

24

 

 

 

24

 

Additional paid-in capital

 

 

425,160

 

 

 

421,502

 

Retained earnings

 

 

799,796

 

 

 

775,099

 

Treasury stock, 5,355,309 and 5,136,611 shares at March 31, 2024 and December 31, 2023, respectively

 

 

(297,630

)

 

 

(267,155

)

Accumulated other comprehensive loss

 

 

(11,201

)

 

 

(11,885

)

Total Stockholders’ Equity

 

 

916,149

 

 

 

917,585

 

Total Liabilities and Stockholders’ Equity

 

$

2,017,694

 

 

$

2,011,772

 

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)

 

2024

 

 

2023

 

Revenue

 

$

494,436

 

 

$

483,282

 

Direct Costs

 

 

310,533

 

 

 

312,565

 

Operating costs and expenses:

 

 

 

 

 

 

Indirect and selling expenses

 

 

129,094

 

 

 

123,733

 

Depreciation and amortization

 

 

5,574

 

 

 

6,309

 

Amortization of intangible assets

 

 

8,291

 

 

 

9,224

 

Total operating costs and expenses

 

 

142,959

 

 

 

139,266

 

Operating income

 

 

40,944

 

 

 

31,451

 

Interest, net

 

 

(8,238

)

 

 

(9,457

)

Other income (expense)

 

 

1,630

 

 

 

(558

)

Income before income taxes

 

 

34,336

 

 

 

21,436

 

Provision for income taxes

 

 

7,019

 

 

 

5,038

 

Net income

 

$

27,317

 

 

$

16,398

 

 

 

 

 

 

 

Earnings per Share:

 

 

 

 

 

 

Basic

 

$

1.46

 

 

$

0.87

 

Diluted

 

$

1.44

 

 

$

0.87

 

 

 

 

 

 

 

Weighted-average Shares:

 

 

 

 

 

 

Basic

 

 

18,757

 

 

 

18,779

 

Diluted

 

 

18,946

 

 

 

18,949

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.14

 

 

$

0.14

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

684

 

 

 

(1,334

)

Comprehensive income, net of tax

 

$

28,001

 

 

$

15,064

 

 

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

4


 

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Retained

 

 

Treasury Stock

 

 

Accumulated
Other
Comprehensive

 

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Total

 

Balance at January 1, 2024

 

 

18,846

 

 

 

24

 

 

 

421,502

 

 

 

775,099

 

 

 

5,136

 

 

 

(267,155

)

 

 

(11,885

)

 

$

917,585

 

 Net income

 

 

 

 

 

 

 

 

 

 

 

27,317

 

 

 

 

 

 

 

 

 

 

 

 

27,317

 

 Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

684

 

 

 

684

 

 Equity compensation

 

 

 

 

 

 

 

 

3,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,551

 

 Exercise of stock options

 

 

2

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 Issuance of shares pursuant to vesting of restricted stock units

 

 

125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Payments for share repurchases

 

 

(218

)

 

 

 

 

 

 

 

 

 

 

 

218

 

 

 

(30,475

)

 

 

 

 

 

(30,475

)

 Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(2,620

)

 

 

 

 

 

 

 

 

 

 

 

(2,620

)

Balance at March 31, 2024

 

 

18,755

 

 

$

24

 

 

$

425,160

 

 

$

799,796

 

 

 

5,354

 

 

$

(297,630

)

 

$

(11,201

)

 

$

916,149

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Retained

 

 

Treasury Stock

 

 

Accumulated
Other
Comprehensive

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Total

 

Balance at January 1, 2023

 

 

18,883

 

 

$

23

 

 

$

401,957

 

 

$

703,030

 

 

 

4,906

 

 

$

(243,666

)

 

$

(8,133

)

 

$

853,211

 

 Net income

 

 

 

 

 

 

 

 

 

 

 

16,398

 

 

 

 

 

 

 

 

 

 

 

 

16,398

 

 Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,334

)

 

 

(1,334

)

 Equity compensation

 

 

 

 

 

 

 

 

3,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,750

 

 Exercise of stock options

 

 

4

 

 

 

 

 

 

111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

111

 

 Issuance of shares pursuant to vesting of restricted stock units

 

 

126

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 Payments for share repurchases

 

 

(225

)

 

 

 

 

 

 

 

 

 

 

 

225

 

 

 

(22,815

)

 

 

 

 

 

(22,815

)

 Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(2,633

)

 

 

 

 

 

 

 

 

 

 

 

(2,633

)

Balance at March 31, 2023

 

 

18,788

 

 

$

24

 

 

$

405,818

 

 

$

716,795

 

 

 

5,131

 

 

$

(266,481

)

 

$

(9,467

)

 

$

846,689

 

 

 

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

5


 

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2024

 

 

2023

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net income

 

$

27,317

 

 

$

16,398

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Provision for credit losses

 

 

1,347

 

 

 

567

 

Deferred income taxes and unrecognized income tax benefits

 

 

(4,786

)

 

 

2,187

 

Non-cash equity compensation

 

 

3,551

 

 

 

3,750

 

Depreciation and amortization

 

 

13,865

 

 

 

15,533

 

Gain on divestiture of a business

 

 

(1,715

)

 

 

 

Other operating adjustments, net

 

 

46

 

 

 

393

 

Changes in operating assets and liabilities, net of the effects of acquisitions:

 

 

 

 

 

 

Net contract assets and liabilities

 

 

(29,024

)

 

 

(18,716

)

Contract receivables

 

 

1,604

 

 

 

10,929

 

Prepaid expenses and other assets

 

 

(192

)

 

 

15,353

 

Operating lease assets and liabilities, net

 

 

523

 

 

 

1,016

 

Accounts payable

 

 

(15,119

)

 

 

(26,083

)

Accrued salaries and benefits

 

 

(17,775

)

 

 

(24,678

)

Accrued subcontractors and other direct costs

 

 

3,303

 

 

 

(2,613

)

Accrued expenses and other current liabilities

 

 

(3,988

)

 

 

(14,688

)

Income tax receivable and payable

 

 

11,375

 

 

 

3,192

 

Other liabilities

 

 

(333

)

 

 

629

 

Net Cash Used in Operating Activities

 

 

(10,001

)

 

 

(16,831

)

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

Payments for purchase of property and equipment and capitalized software

 

 

(5,226

)

 

 

(6,441

)

Payments for business acquisitions, net of cash acquired

 

 

 

 

 

(459

)

Proceeds from divestiture of a business

 

 

1,715

 

 

 

 

Net Cash Used in Investing Activities

 

 

(3,511

)

 

 

(6,900

)

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

Advances from working capital facilities

 

 

355,877

 

 

 

334,995

 

Payments on working capital facilities

 

 

(311,813

)

 

 

(293,640

)

Proceeds from other short-term borrowings

 

 

24,356

 

 

 

2,483

 

Repayments of other short-term borrowings

 

 

(23,950

)

 

 

 

Receipt of restricted contract funds

 

 

1,261

 

 

 

2,916

 

Payment of restricted contract funds

 

 

(3,391

)

 

 

(1,131

)

Dividends paid

 

 

(2,636

)

 

 

(2,641

)

Net payments for stock issuances and share repurchases

 

 

(30,355

)

 

 

(22,815

)

Other financing, net

 

 

(516

)

 

 

(479

)

Net Cash Provided by Financing Activities

 

 

8,833

 

 

 

19,688

 

Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

 

 

(171

)

 

 

11

 

 

 

 

 

 

 

 

Decrease in Cash, Cash Equivalents, and Restricted Cash

 

 

(4,850

)

 

 

(4,032

)

Cash, Cash Equivalents, and Restricted Cash, Beginning of Period

 

 

9,449

 

 

 

12,968

 

Cash, Cash Equivalents, and Restricted Cash, End of Period

 

$

4,599

 

 

$

8,936

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

7,740

 

 

$

5,924

 

Income taxes

 

$

1,133

 

 

$

914

 

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

6


 

Notes to Consolidated Financial Statements

(Unaudited)

(Dollar amounts in tables in thousands, except share and per share data)

NOTE 1 – BASIS OF PRESENTATION

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. Intercompany transactions and balances have been eliminated. The terms “federal” or “federal government” refer to the U.S. federal government, and “state and local” or “state and local government” refer to U.S. state (including territories) and local governments, unless otherwise indicated.

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. Key estimates include estimates related to variable consideration on contracts with customers, costs to complete fixed-price contracts, bonus and other incentive compensation, reserves for tax benefits and valuation allowances on deferred tax assets, collectability of receivables, valuation and useful lives of acquired tangible and intangible assets, impairment of goodwill and long-lived assets, and contingencies. 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-month period ended March 31, 2024 and 2023 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, 2023 and the notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 28, 2024.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

 

Segment Reporting

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-07: Improvements to Reportable Segment Disclosures to update reportable segment disclosure requirements for public entities under the Accounting Standards Codification (“ASC”). ASU 2023-07 enhances the current segment reporting disclosures of Topic 280 by requiring disclosure of significant segment expenses that are regularly reviewed by the Chief Operating Decision Maker (the “CODM”), the amount and description of other segment items, and interim disclosures of reportable segment’s profit or loss and assets. ASU 2023-07 also requires public entities that have a single reportable segment to provide all of the disclosures required in Topic 280, as amended. ASU 2023-07 is effective for the Company for the fiscal year ending December 31, 2024 and interim periods within the 2025 fiscal year on a retrospective basis, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2023-07 but does not expect the adoption to have a material impact, if any, on the consolidated financial statements.

7


 

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires greater disaggregation of income tax rate and amounts paid by entities. ASU 2023-09 specifically requires all entities to disclose, on an annual basis, disaggregated domestic and foreign pre-tax income or loss from continuing operations and the disaggregated income tax expense or benefit by federal, state, and foreign components, and a tabular rate reconciliation, using both percentages and reporting currency amounts, of eight specific categories as well as any individual reconciling items that are equal to or greater than 5% of a threshold computed by multiplying pretax income or loss from continuing operations by the applicable federal rate. Additionally, the amendments also require disclosure of income taxes paid disaggregated by federal, state, and foreign jurisdictions as well as any individual jurisdictions over 5% of the total income taxes paid. ASU 2023-09 is effective for the Company for the fiscal year ending December 31, 2025, with early adoption permitted. The amendments may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of the adoption of ASU 2023-09 but does not expect the adoption to have a material impact, if any, on the 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 three months ended March 31, 2024 and 2023:

 

 

 

March 31, 2024

 

 

March 31, 2023

 

 

 

Beginning

 

 

Ending

 

 

Beginning

 

 

Ending

 

Cash and cash equivalents

 

$

6,361

 

 

$

3,683

 

 

$

11,257

 

 

$

5,364

 

Restricted cash

 

 

3,088

 

 

 

916

 

 

 

1,711

 

 

 

3,572

 

Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

 

$

9,449

 

 

$

4,599

 

 

$

12,968

 

 

$

8,936

 

 

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Billed and billable

 

$

208,930

 

 

$

210,919

 

Allowance for expected credit losses

 

 

(6,684

)

 

 

(5,435

)

Contract receivables, net

 

$

202,246

 

 

$

205,484

 

The Company sells certain billed receivables in accordance with its Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”). The receivables that are sold without recourse and where the Company does not retain any ongoing financial interest in the transferred receivables, other than providing servicing activities, are accounted for as sales under ASC 860, Transfers and Servicing (“ASC 860”). Consequently, these receivables are derecognized from the Company’s consolidated balance sheets at the date of the sale, and the cash received from MUFG is presented as part of cash flows from operating activities.

8


 

The following is the summary of the amount of ASC 860 eligible contract receivables sold to MUFG but not yet collected from the customers, as of March 31, 2024, and 2023, respectively:

 

 

As of and for the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Beginning balance

 

$

21,302

 

 

$

3,819

 

 Billed receivables sold during the period

 

 

133,398

 

 

 

28,635

 

 Collections from customers during the period

 

 

(129,824

)

 

 

(17,044

)

Ending balance (1)

 

$

24,876

 

 

$

15,410

 

(1)
For the three months ended March 31, 2024 and 2023, the Company recorded net inflows of $3.6 million and $11.6 million, respectively, in its cash flows from operating activities from the sale of billed receivables. The ending balance of $24.9 million and $15.4 million represent billed receivables that were sold and derecognized by the Company, but have not yet been collected from customers as of March 31, 2024 and 2023.

The following is a reconciliation of cash collections and remittances to MUFG for the sale of billed receivables as of and for the three months ended March 31, 2024 and 2023:

 

 

As of and for the Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Beginning balance

 

$

21,796

 

 

$

6,164

 

 Collections from customers during the period

 

 

129,824

 

 

 

17,044

 

 Remittances to MUFG during the period

 

 

(125,879

)

 

 

(9,983

)

Ending balance (1)

 

$

25,741

 

 

$

13,225

 

(1)
For the three months ended March 31, 2024 and 2023, the Company recorded net inflows of $3.9 million and $7.1 million, respectively, in its cash flows from operating activities from the collection of billed receivables that were sold but not yet remitted to MUFG. The liability balances from March 31, 2024 and 2023 of $25.7 million and $13.2 million, respectively, are included as part of “Accrued expenses and other current liabilities” on the Company’s consolidated balance sheets.

The Company services the receivables sold by collecting cash and remitting it to MUFG. The related servicing fee received from MUFG was immaterial.

The Company also sold certain receivables to MUFG that did not qualify as sales under ASC 860. Consequently, the cash received from and remitted back to MUFG is presented as cash from financing activities within “Proceeds from other short-term borrowings” and “Repayments of other short-term borrowings” on the Company’s consolidated statements of cash flows. At March 31, 2024 and December 31, 2023, the amounts due to MUFG for cash collected and not yet remitted for receivables sold that did not qualify as sales under ASC 860 totaled $7.3 million and $6.9 million, respectively. These amounts are included as part of “Accrued expenses and other current liabilities” on the Company’s consolidated balance sheets.

NOTE 4 – LEASES

The Company has operating and finance leases for facilities and equipment which have remaining terms ranging from 1 to 15 years. Future minimum lease payments under non-cancellable operating and finance leases as of March 31, 2024 were as follows:

 

 

 

Operating

 

 

Finance

 

March 31, 2025

 

$

26,611

 

 

$

3,041

 

March 31, 2026

 

 

25,415

 

 

 

3,041

 

March 31, 2027

 

 

22,121

 

 

 

3,041

 

March 30, 2028

 

 

17,427

 

 

 

3,040

 

March 31, 2029

 

 

15,288

 

 

 

2,966

 

Thereafter

 

 

127,991

 

 

 

2,225

 

Total future minimum lease payments

 

 

234,853

 

 

 

17,354

 

Less: Interest

 

 

(43,389

)

 

 

(1,582

)

Total lease liabilities

 

$

191,464

 

 

$

15,772

 

 

9


 

 

NOTE 5 – DEBT

At March 31, 2024 and December 31, 2023, debt consisted of:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

Average
Interest Rate

 

Outstanding
Balance

 

 

Average
Interest Rate

 

Outstanding
Balance

 

Term Loan

 

 

 

$

204,000

 

 

 

 

$

207,750

 

Delayed-Draw Term Loan

 

 

 

 

217,250

 

 

 

 

 

220,000

 

Revolving Credit

 

 

 

 

56,904

 

 

 

 

 

6,340

 

 Total before debt issuance costs

 

6.9%

 

 

478,154

 

 

6.7%

 

 

434,090

 

 Unamortized debt issuance costs

 

 

 

 

(3,406

)

 

 

 

 

(3,683

)

Total

 

 

 

$

474,748

 

 

 

 

$

430,407

 

As of March 31, 2024, the Company had $541.3 million of unused borrowing capacity under the $600.0 million revolving line of credit under a credit agreement with a group of lenders (the “Credit Facility”). The unused borrowing capacity is inclusive of outstanding letters of credit totaling $1.8 million. The average interest rate on borrowings under the Credit Facility was 6.9% for the three months ended March 31, 2024 and 6.7% for the twelve months ended December 31, 2023. Inclusive of the impact of floating-to-fixed interest rate swaps (see “Note 7 Derivative Instruments and Hedging Activities”), the average interest rate was 5.6% for the three months ended March 31, 2024 and for the twelve months ended December 31, 2023, respectively.

Future contractual repayments of debt principal are as follows:

 

Payments due by

 

Term Loan

 

 

Delayed-Draw Term Loan

 

 

Revolving Credit

 

 

Total

 

March 31, 2025

 

$

15,000

 

 

$

11,000

 

 

$

 

 

$

26,000

 

March 31, 2026

 

 

22,500

 

 

 

16,500

 

 

 

 

 

 

39,000

 

March 31, 2027

 

 

22,500

 

 

 

16,500

 

 

 

 

 

 

39,000

 

May 6, 2027 (Maturity)

 

 

144,000

 

 

 

173,250

 

 

 

56,904

 

 

 

374,154

 

 Total

 

$

204,000

 

 

$

217,250

 

 

$

56,904

 

 

$

478,154

 

 

NOTE 6 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients 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.

 

 

 

Three Months Ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

Dollars

 

 

Percent

 

 

Dollars

 

 

Percent

 

 

Client Markets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy, environment, infrastructure, and disaster recovery

 

$

224,689

 

 

 

45

%

 

$

187,218

 

 

 

39

%

 

Health and social programs

 

 

190,148

 

 

 

39

%

 

 

202,782

 

 

 

42

%

 

Security and other civilian & commercial

 

 

79,599

 

 

 

16

%

 

 

93,282

 

 

 

19

%

 

Total

 

$

494,436

 

 

 

100

%

 

$

483,282

 

 

 

100

%

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

Dollars

 

 

Percent

 

 

Dollars

 

 

Percent

 

 

Client Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

274,177

 

 

 

55

%

 

$

267,742

 

 

 

55

%

 

U.S. state and local government

 

 

76,905

 

 

 

16

%

 

 

75,242

 

 

 

16

%

 

International government

 

 

25,276

 

 

 

5

%

 

 

20,684

 

 

 

4

%

 

Total Government

 

 

376,358

 

 

 

76

%

 

 

363,668

 

 

 

75

%

 

Commercial

 

 

118,078

 

 

 

24

%

 

 

119,614

 

 

 

25

%

 

Total

 

$

494,436

 

 

 

100

%

 

$

483,282

 

 

 

100

%

 

 

10


 

 

 

 

Three Months Ended March 31,

 

 

 

 

2024

 

 

2023

 

 

 

 

Dollars

 

 

Percent

 

 

Dollars

 

 

Percent

 

 

Contract Mix: