ICF International, Inc. (NASDAQ: ICFI), a global consulting and technology services provider was recently awarded a $29 million contract by the New York State Department of Transportation (NYSDOT) to develop an equitable and accessible transportation mobility services program through technological innovations.

Anne Choate, ICF executive vice president for energy, environment and infrastructure, commented,

“With the rapid advancement of mobility options and elevated traveler expectations, NYSDOT needs a trusted partner who can provide the end-to-end planning, development and implementation services required to deliver a next-generation mobility services program. We look forward to continuing our successful 17+ year partnership with NYSDOT to evolve its programs and help ensure they provide safe, efficient, equitable transportation options for citizens.”

ICF International, Inc. (NASDAQ: ICFI)

Market Cap: $1.96B; Current Share Price: $104.03
Data by YCharts

The Company
At ICF, business analysts and policy specialists work together with digital strategists, data scientists and creatives to combine industry expertise with engagement capabilities to help organizations solve complex challenges.

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 four key markets –

ICF seems to be poised for growth based on the following factors:

1. Robust Acquisition Strategy:
   ICF has built scale in their vertical and horizontal domain expertise through strategic acquisitions which enhanced the Company’s subject matter knowledge, broadened their service offerings, and provided scale in specific geographies.

During the previous three fiscal years, ICF acquired a total of four companies including:

More recently, in September 2022, the Company acquired Blanton & Associates, Inc., an environmental consulting, planning and project management firm that supports a variety of infrastructure projects in key markets and is one of the most trusted partners to Texas state and local agencies.

Image Source: Company

Also of significance is the Company’s acquisition of SemanticBits in June 2022. SemanticBits is a premier partner to U.S. federal health agencies for mission-critical digital modernization solutions, and is expected to generate approximately $135 million in annual revenue in 2022. Approximately $115 million of that is expected to be recurring in 2023, reflecting the completion of several small business contracts. SemanticBits has a track record of double-digit revenue growth and is expected to generate EBITDA margins in the high teens as part of ICF.

Given these high-profile acquisitions, ICF is expected to display significant revenue growth over the next few years.

1. Multiple Catalysts for Long-Term Organic Growth:
   For the Company, 70% of service revenue in 2022 is expected to represent work in key growth areas of

Moreover, these areas are expected to grow 10% or more over the next several years.

So far as IT modernization / digital transformation is concerned, the Company has expertise in more than 30 tech platforms and is a recognized leader in the most widely used low-code / no-code and open-source platforms in the federal government. Moreover, the acquisitions of ITG, Creative Systems and SemanticBits have significantly expanded ICF’s qualifications.

In case of Public Health, ICF has contract vehicles in all federal agencies actively involved in preparations for the next pandemic. Additionally, HHS is ICF’s largest federal agency client, contributing 22% of total revenues, and there has been an 11% budget increase at HHS for FY22 – this is also expected to contribute significantly to ICF’s revenues in the future.

In the field of Disaster Management, ICF is currently running recovery programs in 20+ states and territories and expects continued growth as appropriated disaster recovery and mitigation funds are released.

As far as energy efficiency and utility consulting is concerned, Biden administration priorities such as goal of decarbonizing U.S. economy, 2021 Infrastructure Investment and Jobs Act and so on has created additional opportunities for ICF as it is one of the largest full-service climate consulting practices in the U.S., with additional expertise in adjacent services closely connected to climate and infrastructure.

Finally, the IIJA and the Inflation Reduction Act is expected to drive significant demand for the Company’s climate-related services across their federal and state and local government clients as well as from utilities, developers, banks and other market participants in 2023 and beyond. It is expected that the IIJA will expand ICF’s addressable market by approximately $1 billion to $2 billion a year beginning in 2023.

1. Outstanding Financial Performance:
   For Q3 FY22, the Company reported 22% YoY growth in service revenue, comprised of 7% organic growth and the contribution from recent acquisitions, 15.5% YoY growth in revenues from commercial energy clients, a 14.8% adjusted EBITDA-to-service revenue margin and record third quarter contract wins totaling $865 million, resulting in a book-to-bill of 1.85x for the quarter.

Image Source: Company

These metrics indicate ICF’s enhanced growth trajectory, which together with significantly increased backlog and robust business development pipeline signal continued strong growth in 2023 and beyond.

The financial results also underscore ICF’s ability to reach their long-term financial goals such as increasing EBITDA by roughly $100 million by 2024 from the $143 million reported in 2021, which implies a CAGR of approximately 19%.

The Company’s cash flow has also remained strong over the last several years – in fact, over the past six years, ICF has converted ~100% of net income (adjusted for non-cash items), while growing top line from $1.2B in 2016 to $1.6B in 2021 at a 5.6% CAGR (which required an investment in working capital).

Image Source: Company

The Company expects to achieve strong Operating Cash Flow in 2022 as well at~$140M, maintaining conversion trend of ~100%.

Image Source: Company

The Company’s ability to consistently improve revenue and net income, without compromising on cash flows indicates strong management capabilities, efficient operating systems and growing business opportunities. Hence, it seems that ICF is worth putting on every serious investor’s watchlist.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Reference:

https://www.sec.gov/ix?doc=/Archives/edgar/data/1362004/000156459022006889/icfi-10k_20211231.htm

https://investor.icf.com/static-files/e13de9bd-4aca-45f8-b171-a6e968f340a2

https://investor.icf.com/node/21206/pdf

https://www.sec.gov/ix?doc=/Archives/edgar/data/1362004/000095017022022033/icfi-20220930.htm

https://investor.icf.com/static-files/477b38e1-c27c-4bd3-87ac-0cae90697024

https://www.icf.com/news/2022/06/icf-to-acquire-semanticbits

https://investor.icf.com/static-files/477b38e1-c27c-4bd3-87ac-0cae90697024