Q1 2021 ICF International Inc Earnings Call
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Thank you for joining the first quarter 2021, ICF earnings Conference call. We will begin shortly we appreciate your piece of patients. Please continue to standby once again, we thank you for joining our call today. Please standby we will begin shortly.
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Welcome to the first quarter of 2021, the 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 one on your Touchtone phone to register for a question.
Please note. This conference is being recorded on Tuesday may 4th 2021, and cannot be reproduced or rebroadcast without permission from the company.
And now I would like to turn the program over to Lynn Morgen of Advisory partners. Please go ahead.
Thank you Vanessa good afternoon, everyone and thank you for joining us to review Icf's first quarter of 2021 performance with US today from ICF are John Watson, President and CEO and Bettina Welsh CFO joining them just James Morgan Chief of business operations. During this conference call, we will make forward looking statements.
To assist you in understanding Hiseq management's expectations for our future performance. These statements are subject to a number of risks that could cause actual events and results could differ materially and I refer you to on May 4th 2021 press release and the SEC.
The SEC filings for discussions of those risks.
In addition, our statements during this call of based on our views as of today, we anticipate the future developments will cause our views to change. Please consider the information presented in that late in the it.
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 Watson to discuss first quarter 2021 performance John.
Thank you Lynn and thank you all for joining us today to review, our 2021 first quarter results and discuss our business outlook.
First quarter results represented an outstanding start to the year setting the stage for considerable growth in 2021 and.
Indeed, the outperformance led us to move our full year service revenue EBITDA and EPS expectations to the upper end of the ranges despite of being early in the year.
There are three key takeaways from our first quarter performance that I would like to point out.
First our qualifications positioning and contract vehicles in the high growth markets in both the government and commercial arenas drove substantial growth in service revenue.
This together with higher utilization and quarter specific margin benefits resulted in year on year increases in EBITDA and EPS the significantly outpaced revenue growth.
Second this was the third consecutive quarter of record contract awards for ICF, resulting in a twin of trailing 12 months of book to Bill of 144 times, which is the highest level of recent years and is overwhelmingly related to bid submitted prior to the body of administration, assuming office and lastly.
The greater clarity, we have on the budget administrations funding priorities. The more confident we are about ICF additional long term growth potential for 2022 and beyond.
First quarter revenue growth was led by strong results from our government and commercial energy businesses, which together accounted for 88% of total revenues.
Looking more closely at our first quarter results by client category the.
The increase in our government business was driven by a 13% increase in revenues from federal government clients led by it modernization digital transformation and public health work at key civilian agencies, including the department of Health and Human services. The Federal Communications Commission the department of state as well as the day.
The of Homeland security.
This was also a strong quarter for ICF contract wins on the federal market, particularly in it modernization public health and cyber security.
We continue to win new task orders and contract modifications to perform COVID-19 related response work, which brings the cumulative value of these awards totaled $45 million since the onset of the pandemic.
More than the dollars. However, these wins continuing the strength of our positioning for future work related to COVID-19 recovery and reinvention programs, which we expect will include the modernization of disease surveillance systems, and new initiatives to improve the country's readiness in the face of future Pandemics.
We are monitoring how the new administration is working to define and implement its policy and funding priorities.
Just looking at the body of the administration's one nine trillion of merits of rescue plan Act that has been passed by Congress, we see significant opportunities in our industrial market.
Notably at least 2 billion of has been allocated for federal agency.
And this includes $1 billion of new funding for the technology modernization fund to help complete modernization projects at federal agencies.
Additionally, $650 million specifically designated for the cyber security and infrastructure Security agency, which is a new client of ours.
Another $40 billion of zero to support childcare child care providers in head start.
<unk> currently provides services to headstart grantees in six of the 12 headstart regions across 40 states and the district of Columbia.
Other funding of includes 12 billion from food support the families and needs of nutrition programs $500 million to the CDC for data monetization and analytics and $9 billion for central tribal and federal safety net programs that sort of native communities.
These opportunities do not even includes the proposed two trillion American jobs plan.
For example of our project permitting and monitoring of infrastructure projects and our expertise the expertise of resilience mitigation and clean tech come into play nor of the fiscal 2022 budget proposal that includes the 16% increase for civilian agencies, including a 23% increase for our largest client.
The 41% increase at the department of Education of 21% increase at EPA and of 15% increase at HUD.
This gives you some idea of the magnitude of proposed federal spending over the next several years in areas in agencies, where ICF has strong qualifications relevant contract vehicles.
As we mentioned on our conference call last quarter, we are utilizing a portion of the savings. We have gained from the optimization of our real estate footprint and reduce travel and entertainment expenses to invest in people and technologies to expand our capabilities in these high growth markets.
In the local revenues declined by 6% in the first quarter, primarily due to lower pass through revenues from.
The disaster management continued business continues to track well and is expected to meet our expectations for double digit growth of 2021.
Last week, we announced a first quarter of $46 million award from the government of Puerto Rico's public private partnership authority that includes elements of ICF as previous work to provide FEMA funded projects formulation services to support long term disaster recovery from Hurricanes, Irma and Maria and hazard mitigation efforts to protect it.
The future disasters.
Of this contract includes an initial four months term through June 30 of this year plus two additional one year options to extend.
Additionally, during the first quarter, we ramped up existing mitigation contracts and added new clients in Oregon related to the wildfires in 2019, and 2020 and expanded work in Louisiana related to the winter power outages.
As noted in our earnings release revenues from International government clients increased substantially in the first quarter, primarily reflecting the sizable short term project, which we expect the wind down throughout this year.
The recent $11 million contract award to manage the EU climate plaque tact, that's placed ICF at the heart of the Commission's activities and provides the ICF with the high profile rule and stimulating climate action within the European Union.
We expect to see of returned to growth in revenue from non U S government clients in 2021, but not at the magnitude we saw on the first quarter.
Moving to a review of our commercial business commercial marketing services accounted for just under 10% of total revenues in this year's first quarter with the year on year decline tied to the impact of the pandemic on our portion of this business.
Closely manage the expenses in this area, while continuing to do great work for clients, which we were recognized for with awards from multiple campaigns in the first quarter.
I am pleased to report that we added several new clients of the first quarter across the health consumer product and financial sectors.
Adjusting for the completion of the large media buying related contract at the end of 2020, we expect revenues from commercial marketing clients of 2021 to be down slightly compared to last year.
Commercial energy markets had a great first quarter of 12% year on year, and representing 16, 5% of total revenues specifically.
Specifically revenues from our utility programs business, which includes energy efficiency electrification and festival load management programs increased at a high single digit rate, reflecting the startup of new contracts the expansion of existing contracts under extensions of awarded at the end of last year and the timing of performance related.
Incentive fees on several contracts.
At the same time, we saw significant demand for our energy Advisory service activities, which include financial and engineering due diligence services around the deployment and development of renewable resources and energy storage.
Additionally, in the first quarter, our environmental services business on new contracts with utilities, and renewable energy developers, including an additional contracted due in the environmental study for an east coast offshore wind project.
ICF leadership and expertise in energy related issues is broadly recognized in both the commercial and government markets.
As long term advisers to the U S Department of energy, we will call. It in real time to provide a detailed situation analysis at the time of the winter vortex the cost synergy blackout on Texas and surrounding states in February of this year.
ICF has also also supports the that's the vehicle programs at the federal and state levels and redesign of run several utility EV programs.
Our expertise of renewable energy and transmission issues energy efficiency climate science, the carbonization infrastructure resilience and client climate adaptation aligns well with the by the administration's priorities and create significant long term growth opportunity for both Icf's commercial and government energy business.
And a multitude of areas.
The summarized this was an excellent quarter for ICF continuing the positive momentum we experienced at the end of last year and supporting our expectations for strong growth in 2021.
We achieved record contract sales of $596 million of 67% year on year, and our business development pipeline was over $6 billion at the end of the first quarter.
With that I'll now turn the call over to the <unk>, our CFO from our financial review Bettina.
Thank you John.
Afternoon, everyone I will provide a more detailed look at our first quarter 2021 results, which exceeded our initial projections.
First quarter 2021, total revenue was up five 6% of $378 5 million driven by strong performance of our government and commercial energy businesses, which increased 13% and 12% respectively.
We're especially pleased with service revenue growth of nine 5% year over year, which we see is the better indicator of our trends in our business as it represents the work done by ICF employees.
Pass through revenue accounted for 26, 1% of total revenue.
<unk> to 28, 7% in last year's first quarter.
Gross profit increased 14, 7% year on year to $146 4 million.
Gross margin on total revenue expanded by 310 basis points to 38, 7% and gross margin on service revenue grew 240 basis points to 52, 4%.
Gross margin benefited from strong service revenue growth and lower fringe costs.
Additionally, there was a significant quarter specific benefit primarily from the timing of several recently awarded fixed price of energy efficiency contract on which certain program costs will be incurred in the upcoming quarters.
And the timing of energy efficiency incentive fees on several contracts.
Indirect and selling expenses were $110 million compared to $103 3 million in the year ago quarter. However.
However, as a percentage of service revenue indirect selling expenses declined 110 basis points to 39, 3% compared to 44% in last year's first quarter.
EBITDA was $36 4 million.
The $49, 5% above last year's $24 4 million.
Inclusive of $1 3 million and facility closure and severance costs.
Excluding special charges adjusted EBITDA was $37 7 million compared to $28 million of last year's first quarter.
Adjusted EBITDA margin on service revenue expanded 260 basis points to 13, 5%, thanks to higher revenue favorable mix and the timing of contract award and incentive fees I mentioned earlier.
Operating income of $28 1 million increased 72, 4% from $16 3 million reported in the first quarter of 2020.
Our tax rate was 26, 7% in line with our expectations.
This compared to 18, 3% in the first quarter of 2020.
Net income for the quarter was $18 4 million or <unk> 96 per diluted share inclusive of <unk> <unk> of tax effected special charges.
This compares to $10 6 million or <unk> 55 per diluted share in the first quarter of 2020 inclusive of 16 of tax effected special charges.
On a non-GAAP basic excluding the impact of special charges and amortization.
<unk> were $1 13.
Up 36% from last year's 83.
Moving to the cash flow statement and balance sheet. We are pleased with our positive operating cash flow of $5 million.
Bear to use of operating cash flow of $15 $2 million in the comparable period of 2020, which is more typical of our first quarter seasonality the.
The upside was a function of the higher net income and the timing of accounts payable.
Capital expenditures in March were $3 6 million compared to $4 7 million in the prior year.
Day sales outstanding for the first quarter were 80 days compared to 88 days in the similar period last year.
Our net leverage ratio at the end of March improved to three eight times compared to $2 47 times at the end of 2020.
As for our capital allocation moving forward, we will continue to prioritize organic growth acquisitions and debt reduction as well as funding our dividend and doing share buyback to offset dilution.
Speaking of share repurchases and dividends in the first quarter, we repurchased 151000.
200 shares for $12 8 million to offset the dilution of our employee incentive program.
Also today, we declared a quarterly cash dividend of <unk> 14 per share payable on July 14, 2021, the shareholders.
Of record on unit 11th 2021.
Given the very strong performance, we had in Q1, we are expecting less seasonality and even more and more evenly distributed revenue and earnings this year than in the past.
For modeling purposes the.
Following metrics remain our expectations for 2021.
Depreciation and amortization expense is expected to be in the range of 25 to $21 5 million for the four year of 2021.
Amortization of intangibles should be in the range of 11, 8% to $12 2 million.
Full year interest expense should range from 11 million to $12 million.
Full year tax rate will be no greater than 27%.
We expect fully diluted weighted average share count of approximately $19 1 million for 2021 and.
On capital expenditures are anticipated to be between 20 and $22 million.
We also reaffirm our operating cash flow expectations of approximately of $100 million.
With that I will turn the call back to John for his closing remarks.
As I mentioned at the outset of this call our outstanding first quarter performance has led us to move our expectations for full year service revenue EBITDA and EPS to the upper end of the initial range as we provided at the time of our fourth quarter 2020 earnings release, and we are reaffirming our guidance for total revenue growth and on.
<unk> cash flow the.
Approximately 55% of our 2020 service revenue represented Icf's work in key growth areas, namely it modernization public health disaster management utility programs, along with climate environment and infrastructure consulting all of which are closely in line with the priorities of the new administration.
Taken together, we expect the growth rate in these areas to be 10% of more over the next several years.
We are well on our way to achieving this objective for 2021, and we are making the requisite investments to capture the organic growth opportunities on the horizon.
Additionally, we have the financial resources to pursue acquisitions that can further.
And our addressable market.
At ICF much of our business is in service areas that enable us to create positive impacts and in fact in 2020 over 85% of our total revenues were derived from our two largest markets, namely energy environment, and infrastructure and health and social programs areas, which benefits society at.
At the same time ICF has prioritized being a good corporate citizen remaining carbon neutral for the last 15 years and embracing diversity, social justice and equal pay the.
This has attracted likeminded people who've shown of shared commitment to environmental and social issues and have a passion for their work Inc.
Crude you to access on most recent corporate citizenship report to learn more about ICF addresses ESG responsibilities.
And with that operator, now I'd like to open the call to questions.
And thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone.
I wish to be removed from the queue. Please press the pound fine or the hash key if youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone.
And we have our first question from Tobey Sommer with <unk> Securities. Please go ahead.
Thank you.
I was hoping to get your perspective on the growth in the sort of compliment of the business. The non 55% that you say is going to grow double digits for a number of years.
How should we think about the growth there.
Some of those businesses were impacted cyclically and maybe can bounce back so quickly as well could you give us some color.
I think our assumption Tobey generally as we look forward as you know the 55% that are on the key growth markets I think we.
We certainly see 10% and beyond growth there on as we continue to look out given the by the administration priorities.
We get more excited about those opportunities.
Over time I think the.
The rest of the debt of 45 of the percent of the business.
I think we're generally thinking kind of flat to low single digit growth as.
As we look forward.
With those businesses.
I think that's how we're we're generally looking at those over the longer term.
Okay.
Thank you and the.
The budget that the by the administration proposed as well as.
The infrastructure related bill.
If those are passed and let's pick a day lets say it happened today.
When would the influence of <unk>.
Of those appropriations start to flow through most likely in the contracts and then eventually into the income statement of the company.
Yes, I think generally once the budget is passed an infrastructure Bill is passed I would say.
The six months I mean realistically I don't think these the infrastructure bill is going to be passed until I mean, what I'd revenue I'm sure III to say pick up towards the later on the summer of the end of the summer obviously the budget would start on October one so I think it's unusual.
The unusual for the government to have a bunch of the place right on time, but I think if those fall into place of three to six months I think infrastructure money could potentially move more quickly.
So I think the way you should think about the budget and the infrastructure Bill is thats really.
If that plays out positively very significant upside for us in 2022.
And beyond I think our guidance for this year, obviously doesn't assume any material impacts there.
I do think the the stimulus bill that bite of the past provides.
So some opportunity for us but.
Obviously over the last three quarters, we've had very significant sales very strong book to bill.
All of predated the the boarder administration of set us up well already for very strong growth.
As we look forward.
Could you talk about the.
The M&A and what the the pipe.
Pipeline looks like.
Your appetite and areas of interest.
Sure So I would say that.
As you know I mean, I think M&A has been a key element of our strategy over.
For many years over the last 15 years of sweep we've been public I think we've.
Our growth has been robust about half of it's been organic half of that's been inorganic.
Certainly costs the out of the market looking to add skills and capabilities either on the demand side of the implementation side of that could help us grow our business I think we've talked about the fact that were the focus particularly on the federal side around it modernization.
Digital transformation in the federal Arena.
Public health and the photo of arena, certainly looking at opportunities in the.
The energy commercial energy arena, but I would say the market right now is.
The active have become quite active we're seeing a lot of.
Potential deal of strong deal flow at the <unk>.
Pricing is quite frothy.
I think.
Obviously.
This range of low because of concerns about the capital gains rate here before the end of the year and so of the deal flow has certainly picked up and so there's certainly a lot of.
Opportunity out there as you know I think we know.
We're obviously focused on funding companies in the markets I just mentioned that.
A good strategic fit of good cultural fit we want high quality companies, where we really see on the synergistic revenue and if we can find those companies we have found even with.
The strong valuations that.
If you can really go get that synergistic revenue. It can it can make the make the deals on very attractive and very very good for launch of growth I think the ITG acquisition was a great example of the last year for us and so.
So we're out of the market and we're looking as you know we've.
ITG a year ago, we levered up.
Our net leverage ratio is down to about 2.5.
Five of two six I think by year end, if we don't do a deal it will be under two and so we certainly have the capacity here on the.
The acquisition from looking forward.
Last question from me is what would gross margins on a normalized.
<unk> have been if there weren't some of the.
The items that you called out.
So I'm going to look at the TNF.
Listen good question, absolutely now we're real pleased with our gross margin this quarter for sure, but I would say that there is probably the upside is approximately 200 basis points of the gross margin related to the timing of the fixed price of awards on the several energy efficiency contracts and the timing of the energy incentive award.
So hopefully that gives you a good sense there.
Thank you.
And thank you we have our next question from Sam England with Bahrenburg. Please go ahead.
Hi, guys, it's Alex from full force.
My first questions.
So you commented previously that Youll walk with the agencies on pandemic response could exceed your work that you did on.
HIV and AIDS, you sort of come from illness.
I think the sort of the potential for the out of I think as we've talked about on.
On the HIV AIDS front for NIH, we've run a clearinghouse in the website.
Yes.
Focused on providing the latest treatment offers options and sharing information to healthcare providers.
And physicians I think we've I think we announced several quarters ago that we had.
<unk> begun efforts on a similar website.
On the COVID-19 front, and so I do think as we look down the road once we get past immediate response and we look.
Down the road to the longer term.
The response of recovery from COVID-19.
There could be quite sizable opportunities for us and.
And I think we are.
We're following those carefully I think thats more of a second half of this year and then.
And the 2022 and beyond type of opportunities, but I think theres the potential for those opportunities to be quite sizable.
Okay great.
Given the strong performance in Q1.
Are you guys thinking about hiring for the rest of the year.
I think obviously.
We're a people business of its all about the grey matter between the two years of our employees and so with service revenue growing nine 5% in the first quarter of where obviously.
Need to be adding staff and aggressively adding staff of <unk>.
We're out of the market place, we're leaning forward on the recruiting front I mean, I think it's going to be critical I think as I've said on the path as our revenue grows from.
Our revenue growth, 10%, we need to be adding 859% additional staff, we're always trying to leverage.
<unk>.
Raise the utilization.
Over time, but.
The people business, we need to be out there recruiting and we're working quite hard on that for sure.
Okay, great. Thanks, guys.
And thank you. Our next question comes from Joseph <unk> with Canaccord.
Please go ahead, Sir your line is open.
Hi, guys good afternoon.
Bob just wanted to kind of circle back on some questions I've kind of asked in the past relative to number one kind of what youre seeing in average deal size now and the.
The quarter on bookings, especially on the federal side and with strength.
Strength in the business you have some commentary on your bid and proposal pipeline, perhaps the bid.
The larger contract and then specifically, perhaps on it modernization of what Youre seeing there. Thanks.
Yeah sure. So I think as we've talked about in the past Joe I think you hit on some of the key areas I mean, I think generally on the it modernization front I think one of the attractions for us of that market and the the basis for doing the <unk>.
The <unk> acquisition is that as the market, where you can see quite significant contract opportunities.
As we've talked about it as ICF growth of $1 $5 billion company, and we're going to double or get them income of $3 billion company down the road, we need to be winning larger sized deal and certainly on the monetization front.
You can find $100 million $250 million deals and our client sets around the it modernization and so certainly part of that strategy is to identify and take down put in capture and when the larger deals on it modernization I would say similarly on some of our program areas.
HHS around <unk>.
Public health and education of human services again, we are focused on.
Larger opportunities and trying to kind of go to the next level in terms of taking down the larger deals on as part of that.
We've been investing quite significantly and opening our capture capability.
And the hiring people who have experience with it.
And taking us down the kind of deals.
And can kind of help.
Help us on this journey and so that is certainly part of our strategy and I think.
We continue to make progress in building that pipeline both on the federal space of I'll also say that we.
We continue to see sizeable deal opportunities and the promotion of energy Arena.
Around the.
On the energy efficiency programs, and certainly put significant capture resources into those two and then also disaster recovery there.
I think as you know we've.
We've won quite sizable contracts over time.
We've obviously been of capture for some time on on.
Some of the mitigation opportunities, particularly in Puerto Rico that could be quite sizable and so.
So that's a lot with the way of saying, it's a key part of our strategy and we are investing a significant amount of business development right now capture proposals marketing and just writing more proposals I mean, I think it's it's a unique time for US we have these growth drivers.
And.
My view is we have the bid everything that fit our sweet spot and so we have to invest the resources.
To do this you can't let these kind of opportunities passerby.
Alright, Thats helpful. Jon So it does sound like Theyre going to perhaps the more I mean I know the company is growing at obviously, you'll get more of the company growth.
At the margin maybe it sounds like maybe there's a little bit of it Bob.
On the proposal activity on top of that.
With that.
This is where we can find these much larger deals Joe we are working hard to put those on capture and as you know I mean, if youre going to take down those kind of yields you have to be in capture.
A couple of years in advance.
You cant start work on those deals three months before the Rob.
Hey, just thinking about some of those I know the medicine.
Some of the mitigation of more.
Can you say a lot of the newer larger of things that youre looking on our the although.
Of those re competes with the incumbent or is that kind of brand new work.
Emerging.
The leading edge growth area.
Or the the combination.
I think it's the population of both I mean, I think we're obviously looking to add new opportunities to the pipeline at scale.
And that's certainly been the focus as we invest more and bring in new talent.
But you know there is always a.
Our contracts tend to be $4 million to $5 million four to five years on length. So every year, you've got a set of recompete and you've got to take those seriously and do the capture too but.
Again, I think we're.
As we invest more I think you should think of it as we're investing more to pursue the to pursue more newer opportunities and the growth markets that were.
We're in.
Got it.
The other question.
Going back part of the.
The other part of the book.
The net.
I might of been particularly called out what you're expecting there.
All of that.
By the way perhaps.
We are opening the Oreo.
Some of the clients. Thanks, a lot on great quarter.
Thank you I would say on the marketing services front of the commercial marketing services I think we generally expect it to be flat for the year.
Obviously.
As we.
Obviously through the first quarter of a.
A year ago. The comp was still is still challenging in the first quarter given it was mostly pre pandemic, but I think as we look forward, we aren't assuming a significant rebound in the commercial marketing business. This year I think several of the protocols that have been impacted hospitality travel and tourism.
We've generally assumed the late third quarter of fourth quarter improvement.
The improvement will come those will rebound.
With the.
With the.
The end of the pandemic and the economy, improving we haven't assumed that this year and the commencement of I'd also note that when you look at the the.
The total growth in the.
Of course marketing business, we did have a large media buying.
The contract last year with the client it ended and so I think when you take that out we're expecting generally flat of revenue but.
So thats the commercial marketing I think in Europe in a similar way of the commercial marketing services, we do for the European Commission.
That business, we generally in Europe, we are seeing a rebound and expect growth this year, but.
So we're generally being conservative there in terms of when Europe will open up.
In terms of the marketing and face to face meetings as you know they've.
Their vaccination rates have not been as high as other countries.
So that's generally how we're thinking about it.
Yeah.
Thanks, very much John.
And thank you. Our next question is from Andrew Nicholas with William Blair. Please go ahead, Sir your line is open.
Hi, good afternoon, everyone. The essentially Trevor Romeo on for Andrew.
Thanks for taking our questions.
Firstly, just a question on your expectation for kind of hitting the high end of your of your <unk>.
Guidance ranges is that.
More of an increased expectation for the balance of the year or kind of just a reflection of the outperformance in the first quarter and kind of related to that if you do end up outperforming guidance from the full year would.
Would you expect that to come from more continued strength on the strong areas like it modernization and energy or more of kind of an accelerating rebound in some of the softer areas like marketing.
I think that.
The fact that we've kind of to the upper end of the guidance range.
I think is largely reflective of the first quarter performance, having said that I mean, we have very strong momentum in.
I do think if obviously, it's still early in the year, but I think if we were going to.
Rich.
If in the if in the long run we were to exceed for the year of where to exceed our guidance I think it would come into growth areas I mean I think.
We are not assuming a significant.
I just said on the kind of marketing services front, certainly we're not assuming a significant improvement there but.
So for the rest of the year and so I think we've had a very strong first quarter. We're confident that that's the upper end of the range.
It's still early in the year.
And.
But these are robust growth markets and we're hopeful to.
Continue to execute as we go throughout the year.
Okay, great. Thanks, that's helpful and then.
Just I guess.
Some of the detail you provided on the new contract Youre awarded in Puerto Rico.
We're just kind of curious what do you see additional opportunities there for disaster recovery in that market and then it's.
So the timing of any potential award decisions going forward.
Sure so.
So in addition to the contract we won in the first quarter to support the theme of FEMA funded public infrastructure work of Theres. Several proposals. We're we're awaiting award on.
In Puerto Rico on the number.
Housing front.
I think there's at least two contracts on aware of that.
Leading award on the to provide upside.
I've mentioned, the mitigation contract or Rfps, the RFP that we expect to be forthcoming here certainly in the first half of the year of Puerto Rico as we've discussed on a number of times on these calls.
$10 billion of mitigation funding.
They have received approval from the.
For the airplane on.
Under those under the funding so I think there will be rfps forthcoming and will certainly bid dose and so I think there is.
The fair amount of opportunity for us in Puerto Rico still to come and we're going to be there for the long run.
I think we've also talked about more generally.
The SaaS to recovery I mean, obviously, it's partially dependent on the.
Frequency and severity of storms, each year, which I think the data shows are certainly increasing.
But the mitigation funding of new bucket and I think that will continue to be funded by the the.
By the administration and for both from.
What's under HUD programs in FEMA programs.
We're a market leader there I think we've talked about we won four of five state level of contracts on mitigation of the last year.
And so.
Again, I think we see we see disaster recovery so.
The long term growth driver here.
It's certainly going to be of double digit growth driver force this year and I think.
Yes.
We have long term confidence on the growth of that business.
Alright, great. Thank you John I appreciate it.
Yes.
Thank you as a reminder, if you have a question. Please press Star then one to enter the queue and we have our next question from Marc Riddick with Sidoti.
Hi, good afternoon.
Okay.
So I was wondering if you could talk a little bit about the cadence of how things developed throughout the quarter on into the more recent timeframe and talk about maybe some of the things that have given greater power.
<unk> conviction around what youre seeing from the new administration that sort.
The.
Sort of the supports your level of confidence.
What should be the come.
Yeah, well I mean, I think I think I touched on many of those in the remarks, but.
But it's a good question I mean, I think obviously the.
For the last several years we've talked.
About four of the key growth drivers of it modernization of public health disaster recovery and utilities and I think.
And of those growth drivers for some of the last couple of years. The Trump administration I think they will remain strong growth drivers.
In an abundant administration I think in addition, based on just what we've seen in terms of this.
Policy priorities and his initial budget proposals.
I see obviously climate change in and kind of.
Resilience is.
As an area of focus for the bottom illustration I mean, the recommitted to the Paris of course, the first day on office.
Dave.
Put in place several of executive orders he just had a.
On the meeting of 45 countries on climate change that the white house of week or two ago.
Any question that they're going to move out and take steps to address climate change we have the largest one of the largest climate change consulting practices from the world.
That will that will certainly be very beneficial for us and then obviously I think given the American jobs plan with the focus on infrastructure.
I talked about in my remarks, we do environmental.
Work on the front end of traditional infrastructure roads bridges rail.
Sure.
And also on clean technology, and some of the broader deficits definitions of infrastructure of the button.
And so embraced.
And then as budgets as proposed budgets for civilian agencies are up significantly.
On.
For 2022, and obviously those are the proposed budgets as the proposed infrastructure bill but.
If only a portion of that becomes reality that will be very very good for ICF and so so I think thats I.
I think that's what's giving me a lot of confidence in terms of the by the administration.
And then I was wondering if you could bring us up to date on what you're seeing with the.
Specifically with California around the outsourcing.
Outsourcing effort in and of.
Dave maybe you gave an update on this at the end of the year.
On a if there is a little further.
The information there and this flows of what we might see as far as timing on actual work being done there and then of one last follow up after that.
Sure. So I think we remain quite focused on energy efficiency opportunities to California, I think in the fourth.
Fourth quarter call. We said, we'd won I think north of 16, the perhaps $65 million of.
Of contracts on energy efficiency last year, I think we have a robust pipeline I would hope we would win.
A similar.
Those kinds of numbers could be accomplished again.
This year I think there is those kinds of opportunities out there and so on.
We're quite focused on the.
California market I think we are.
I will say in the first quarter.
Did win a significant number of <unk>.
New energy efficiency contracts and got.
Plus ups on our existing contracts one recompete.
The work came more quickly than we expected I think the team spoke to how some of those contracts of <unk> gross margin in Q1, I would say I'm not willing to call. It.
Definitive trend, but I think.
Again I think of.
The energy efficiency will be of central aspect of addressing climate change going forward and so the by the administration.
It's successful or undertake steps to address that issue. It will provide additional impetus to grow our energy efficiency business and so so anyway, we remain quite focused on California.
Quite a bit.
But remain optimistic about the energy efficiency market channel.
Okay, Great and then one last thing from me I wanted to just go over where you see things disclose leverage levels I think.
As far the comfort level, and then of what we might see throughout the course of the year is to use of cash. Thanks.
Yes, I'll say a few words on all of that patina of get into all of the details of the leverage net leverage ratio I mean, I think generally as I.
Think of answered <unk> question, I mean, we have a history of.
No.
Acquisitions are a key part of our strategy every two to three years historically, we've levered up we used the strong cash flow to pay that down.
I think generally.
We're quite comfortable when we do it leveraging up into the 353 75.
On leverage ratio range of the paying it down over the.
The next several years on which we've certainly done with ITG I think we've had very strong cash flow here. So.
I think that remains a part of our strategy do you just want to talk about share of attrition over the last year, we'll share that.
Absolutely. So if you recall when we levered up with ITG was certainly in the over three and a half.
But by the end of the year, we brought that down to 247 and we just described in the script that down to $2. Three eight we project by the end of the year of should we not.
On purchase company to continue to buy down our debt and get down to about a $1 65.
Ratio.
Clearly, we're maintaining our powder for M&A and the.
The primary objective as we in the meantime, we will continue to pay down the debt.
Much appreciate it thank you very much.
Thanks.
Thank you we have no further questions in queue I will now turn the call over to John Watson for closing remarks.
Okay, well. Thank you for participating on today's call. We look forward to meeting with you at upcoming events. Thank you.
And thank you ladies and gentlemen, this concludes our conference. We thank you for participating you may now disconnect.
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