Q4 and Full Year 2021 ICF International Inc Earnings Call

February 24, 2022

Welcome to the Q4 and full year 2020 , One ICF earnings Conference call. My name is Cheryl 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. If you have a question. Please press Star then one on your Touchtone phone I will now turn the call over to Lynn Morgen of Advisory Partners Lynn you may begin.

Thank you operator, and good afternoon, everyone and thank you for joining us to review Icf's fourth quarter and full year 2021.

With us today from my CFO , John Watson, Chairman, and CEO and Bettina Welsh CFO , joining them is James Morgan Chief of business operations, and Barry <unk>, who will assume the CFO role at the end of this month.

During the 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 24th 2022 press release.

Our SEC filings for discussions of those risks in.

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's CEO , John Wasson to discuss fourth quarter and full year 2021 performance John .

Thank you Lynn and thank you all for participating in today's call to review, our fourth quarter and full year results and discuss our business outlook for 2022.

We capped a year of substantial growth in 2021 with strong fourth quarter operating results that align with our expectations and reflected the key growth drivers that we've identified in our markets.

Three key takeaways from our fourth quarter and full year performance. Our first we continued to show strong organic growth in service revenue, which was up six 4% for the full year the growth rate that was substantially higher than in 2020.

Year on year service revenue growth was driven by our work in it modernization and Digitization.

Black Hills disaster management utility consulting and our climate environment and infrastructure Advisory services.

Together and new revenue from these growth markets increased more than 10% from 2020 levels and accounted for roughly 65% of full year 2021 service revenue and we expect revenues from these areas in the aggregate to continue to grow by 10% or more in 2022 and beyond.

Second this was icf's second consecutive year of record contract Awards, we were awarded $2 25 billion in contracts in 2021 of.

<unk>, 15% year on year, bringing our 12 month book to Bill ratio to 145.

So approximately two thirds of the value of these awards represented new business. We believe is excellent metrics illustrate how well aligned icf's domain expertise and cross cutting implementation skills are with market demand.

Lastly, in the fourth quarter, we executed on our strategy of complementing organic growth with acquisitions in our key growth markets that build upon our current capabilities and provide revenue synergies.

The creative transaction has further expanded our it modernization and digital transformation qualifications and importantly, as brought substantial expertise in salesforce and Microsoft platforms. This app.

Adds to our industry, leading capabilities and service now in App in.

Thereby positioning ICF as a provider at scale of the most widely adopted low code no code platforms in the federal government.

Taking a closer look at our performance by client category. We continued to see very strong results from our U S Federal business.

Organic growth was nine 8% in the fourth quarter and 10, 2% for the full year.

Additionally, our contract awards in this area were substantial representing approximately 50% of our total full year awards with wins across a broad universe of federal agencies.

One of the fourth quarter awards, so I would like to highlight is a new five year contract with a value of more than $75 million with a U S. Federal agency to provide cyber security and resilience planning partnership engagement and communication services.

Not permitted to disclose the client's name this new contract fits with our strategic objective of winning larger implementation contracts and it brings together capabilities from across the firm, we believe that icf's ability to deliver multi disciplinary solutions for clients. That's been a key element of our success in winning new business and we will continue to be a differentiator.

For us going forward.

The passage of the infrastructure investment and jobs Act otherwise known as the bipartisan infrastructure law creates significant opportunities for new work for ICF, and providing advisory planning management technical assistance and environmental support to federal government clients as well as state and local and commercial clients.

The cost for the federal government to spend more than 550 billion over the next five years on a variety of infrastructure projects related to roads ports airports, but also includes major investment in the clean energy transition, including transmission clean energy sources and electrification of transport and buildings.

<unk> has contracts with all the federal agencies charged with dispensing these funds.

The bulk of the funds will be distributed in the form of grants to state and local governments and tribal entities and in certain cases to industry at the grantee level, there will be substantial opportunities for ICF to perform environmental permitting and analysis planning support and related services.

Additionally, we are encouraged by recent budget discussions and negotiations and are hopeful that Congress will pass a fiscal year 'twenty two budget in March our strong positioning in key federal markets that have bipartisan support, namely it modernization and Digitization and public health together with the opportunities from the infrastructure Bill gives us confidence in that.

Suggest to you of our federal business, even if we have to endure a one year CER this fiscal year.

Revenues from state and local government clients increased 19, 5% in the fourth quarter and six 5% for the full year.

Our disaster management work, which comprises one half the revenue base of this client category continue to pace in the fourth quarter we.

We executed on key disaster recovery contracts in Puerto Rico, and Texas, and one of the number of new contracts and extensions during the quarter related to hurricane Ida as well as we're connected to the Oregon wildfires and seasonal flooding in Louisiana.

With respect to mitigation ICF is now working on mitigation efforts over 25 clients in 13 states in the fourth quarter saw new wins in Florida, North Carolina, and New York.

Additionally, we continue to support our state and local government clients with environmental services.

These include a number of high profile water transportation and energy infrastructure projects.

Also we are seeing growing market demand for our advisory and implementation services around clean energy projects with funding in part coming from grants to states as part of the infrastructure and jobs Act I mentioned earlier.

Revenues from.

International government clients increased 45% in 2021, reflecting the benefit of a large short term project that was in a wind down phase at the end of last year, resulting in a nine 4% decline in fourth quarter revenues.

We won a significant number of contract awards in 2021, which leads us to expect growth in this client category in 2022 exclusive of this large project and assuming we see an uptick in activation of the marketing and communications work, we won last year.

Moving to the commercial client set the decline in the fourth quarter revenues was expected due to the completion of a large commercial marketing contract in the fourth quarter of 2020, which mostly involve low margin pass through revenues.

In addition to this difficult comparison, our commercial marketing services business continues to be pressured by the pandemic impact on clients in the travel and hospitality industries.

Within this challenging environment. Our team is doing excellent work for clients and winning industry Awards. We added several new health care service clients in 2021 and continue to successfully integrate the substantial engagement capabilities. We have in this business and the client programs across the company, which you will hear more about in a moment.

Our commercial aviation business continues to recover.

<unk> challenging conditions, we are winning new work and new clients and successfully combining our deep aviation expert expertise with sustainable travel and tourism.

Together commercial marketing into aviation consulting comprised approximately 10% of our total 2021 revenues.

The key growth area within our commercial market set as energy markets, which accounted for 62% of fourth quarter commercial revenues and 17% of total 2021 revenues.

This business continues to be a strong performer growing eight 1% in the quarter and eight 7% for the year.

We had robust energy efficiency contract wins in 2021, and we see growing market demand for our energy efficiency program and implementation services.

One word I'd like to call out is the key marketing win with the northeast utility, which we became their agency of record.

Providing engagement and marketing services to utilities has been an area of strong growth for us each of the past two years and our pipeline reflects growing opportunities as utilities consider how they communicate with customers and stakeholders to achieve their net zero commitments. These.

These wins and opportunities demonstrate how well we are integrating marketing services until Ics areas of deep domain expertise.

In addition, we continue to see growth in the electrification space as utilities focus on achievement of de carbonization commitments and his legislature and public service Commission's adopt increasingly supportive policies.

Utilities are increasingly emphasizing equity disadvantaged communities and workforce development, which allows ICF to bring together our substantial qualifications and the human services arena with our energy sector experience.

And of course, the infrastructure Act provides a broader range of opportunities across our government and commercial clients to provide advisory and planning support to assess climate risk and ensure that new infrastructure investments will improve climate resilience and achieve low carbon goals.

Breath of our commercial energy portfolio of services, a unique attribute of ICF and we see this as an area of substantial growth for us in the years ahead.

To sum up we are very pleased with our performance in 2021 as we exited the year, both our backlog and pipeline are at record yearend levels supporting our expectations for a year of strong growth in 2022.

Throughout the year, we continued to invest in people and technology, expanding our recruitment and retention activities to address industrywide staffing challenges.

We've also increased our business development investments. So we can take full advantage of the opportunities we see on the horizon.

Key growth markets, thereby allowing us to maximize organic growth over the next several years.

Before turning the call over to Bettina for a financial review I want to wish you the best in her future endeavors and thank her for the contributions. She has made to ICF Bettina will remain with ICF to early April to ensure a smooth transition as Barry bonus takes over as CFO at the end of February the Tina. Thanks.

Thank you John .

Been a great experience to work with the excellent team here at ICF and it is a pleasure to report on our strong results for the fourth quarter and full year.

Fourth quarter total revenue amounted to $388 million compared to $434 3 million in the year ago quarter.

As a reminder, the year ago figure included approximately $65 million of low margin pass through revenue associated with the completion of a contract for a single commercial marketing client.

This also explains the variation in pass through revenue, which was 29, 5% of total revenue in this years fourth quarter compared to 39, 6% in last year's fourth quarter.

<unk> as expected fourth quarter revenue was relatively stable with a $394 1 million reported in the third quarter of 2021.

Service revenue, which is more indicative of our business trends with also similar to third quarter levels and increased four 3% year on year to $273 4 million in the fourth quarter of 2021.

Gross profit was $141 3 million in the fourth quarter and up one 5% year over year.

Gross margin on service revenue was 51, 7% compared to 53, 1% in the year ago quarter.

Largely reflecting higher fringe costs as we emerge from the pandemic.

Indirect and selling expenses were $114 5 million, including $11 2 million in one time expenses associated with the early lease terminations and other facility related charges and M&A costs the loss.

<unk> component was $9 8 million related to facility charges, we incurred in 2020 and.

In 2021 fourth quarter, which represents the completion of the major portion of our program to realign our real estate footprint with the hybrid workplace environment, we envision for the future.

We will realize $4 million of incremental annual rent savings in 2022, which we will reinvest to drive and support future growth.

Adjusted EBITDA was $38 million in the fourth quarter and adjusted EBITDA margin on service revenue was 13, 9% driven by a favorable business mix higher utilization and lower facility related costs.

Together with certain continued pandemic related savings.

And last year's fourth quarter, adjusted EBITDA was $44 9 million and adjusted EBITDA margin on service revenue was 17, 1%, which reflected pandemic related lower SG&A and fringe benefits related primarily to healthcare and paid leave costs.

Operating income of $18 6 million was down from $21 8 million in the fourth quarter of 2020 for the same reasons as gross margin.

Our tax rate was 24, 4% compared to 28, 5% in the fourth quarter of 2020 due to adjustments to our tax provision.

In 2021 fourth quarter net income was $12 1 million or <unk> 63 per diluted share and includes 43 and tax effected special charges related to facilities and M&A costs.

2024th quarter net income was $12 8 million or <unk> 67 per diluted share inclusive of 56 tenths of tax effected special charges.

non-GAAP EPS was $1 19 per share compared to $1 36 per share reported in fourth quarter of 2020.

As I mentioned earlier last year benefited from lower expenses associated with the pandemic.

Now to recap our record 2021 full year results.

Service revenue increased six 4%.

111 billion and total revenue was up three 1% to 155 billion.

Adjusted EBITDA increased 11, 5%.

$159 6 million and adjusted EBITDA margin on service revenue was 14, 4%, which includes certain pandemic related cost savings that are not sustainable.

GAAP EPS was $3 72 up.

Up 29, 6%.

And non-GAAP EPS increased 15, 6% to $4 82.

Shifting to our cash flow statement and the balance sheet, our operating cash flow was $110 million in line with our expectations.

<unk> to $173 million in 2020.

As a reminder, last year's operating cash flow included approximately $50 million of accelerated collections.

Also under the cares act in 2020, we deferred $20 million of employer, social security tax liabilities to 2021 and 2022.

Dsos were 76 days in the fourth quarter of 2021 compared to 67 days in the year ago quarter, but last year benefited from an 11 day reduction due to the accelerated collections.

Our long term debt at year end, 2021 was $421 6 million, including the acquisition of creating systems and consulting and our net leverage ratio was 291.

In 2021, our capital expenditures were $19 9 million compared to $19 4 million in the prior year.

We continue to focus our capital allocation on investing for future growth through organic initiatives and acquisitions as well as utilizing our substantial cash flow for debt reduction share repurchases and dividend payments.

In 2021, we repurchased 197800 shares for a total outlay of $17 2 million to offset dilution of our employee incentive programs.

Yesterday, we declared a quarterly cash dividend of <unk> 14 per share payable on April 13th of 2022 to shareholders of record on March 25 2022.

I want to highlight the by the end of 2022, ICF will move to new headquarters and throughout the year, there will be an incremental $7 6 million of noncash rent expense on our P&L.

The accounting rules require us to amortize the rent abatements that began in November 2021 over the life of the lease.

This means that while we will not have cash outlay for rent from a P&L perspective, we will accrue these expenses.

We will exclude this from our adjusted metrics.

As we move into 2023, ICF will no longer have this double rent and we will have incremental savings in rent expense compared to what we paid in 2021.

Looking at the cadence of 2022, we expect results to be largely balanced between the first and second half with year on year growth in each quarter.

We expect double digit service revenue growth beginning in the second quarter.

I also want to share our expectations for certain 2022 financial metrics that will help with modeling.

Depreciation and amortization expense is expected to be in the range of $20 7 million to 20 to $22 7 million for the full year 2022.

Amortization of intangibles should be in the range of $18 5 million to $19 million.

Full year interest expense will range from $10 million to $12 million.

Full year tax rate will be approximately 28%.

We expect fully diluted weighted average share count of approximately $19 1 million for 2022.

And capital expenditures are anticipated to be between $33 million and $37 million, including approximately $15 million of expenses related to onetime leasehold improvement costs for the new headquarters.

Our 2022 operating cash flow is forecasted to be approximately $130 million.

With that I'd like to turn the call back to John for his closing remarks.

Thank you Bettina as you've seen in today's earnings release, we are expecting very strong performance for 2022, driven by high single digit organic growth in service revenue and the benefit of our accretive acquisition, which together support our guidance of double digit growth in both service revenue and total revenue.

Specifically, we expect service revenue for full year 2022 to range from one to two 5 billion to $1 275 billion representing year on year growth of over 12% at the midpoint.

Pass through revenues are anticipated at approximately 28% of total revenue in 2022, providing for total revenue of $1 7 billion to $1 76 billion each.

EBITDA is expected to range from $160 million to $172 million inclusive of continued organic investments in business development recruiting and retention and technology and is equivalent to 16% growth at the midpoint.

Adjusted EBITDA will reflect the noncash rent expense that <unk> mentioned in her remarks, bringing adjusted EBITDA based on our current visibility to $168 million to $180 million.

This would represent an adjusted EBITDA to service revenue margin of 13, 9% at the midpoint, which represents a 50 base basis point expansion from the 13, 4% we reported pre pandemic in 2019.

We are confident in our ability to progressively increase EBITDA margins over the next several years through a combination of excellent execution of our programs scale lower facility costs and other operating efficiencies.

GAAP EPS is projected at $4 15 to $4 45, and non-GAAP EPS is expected to range from $5 15 to $5 45, representing increases of approximately 15% and 10% respectively over 2021.

Operating cash flow is expected to be approximately $130 million in 2022 up 18% year on year.

As you know the great majority of ICF work involves helping clients address issues that are critical to society's well being.

Thus while were very pleased with our financial accomplishments in outlook. We're also very proud of the positive impact that icf's professionals, who are making on the world. We all live in.

We're also pleased to announce that we will hold our investor day on Wednesday May 25 in New York.

It will feature presentations and panels that will provide greater insight into the growth drivers ahead for ICF and gives you the opportunity to engage with our subject matter experts and those leading our technology and digital engagement capabilities.

Invitations will be sent out shortly please direct any questions to Lynn Morgen, we certainly hope to see you there.

And with that operator, we'll open it up for questions.

Thank you we will now begin the question and answer session.

Have a question. Please press Star then one on your Touchtone phone. If you are using a speaker phone.

To pick up your handset first before pressing any numbers. Once again, if you have a question. Please press Star then one on your Touchtone phone.

Our first question comes from Joseph <unk>.

Joseph <unk> from Canaccord. Your line is now open.

Hey, guys. Good afternoon good results.

Best of luck in your future endeavors welcome onboard Barry.

Let me just start with.

Sure.

<unk>.

High level question here on growth opportunities in.

Modernization with the most recent.

Acquisitions getting to be more material got good growth there you've got good growth opportunities in some of your other core government verticals and then.

Sure.

Your energy efficiency business is also doing well can you kind of give us some thoughts on rois on investment dollars and those areas are other key strategic buckets and how they may vary.

And where you might prioritize one over another and then I'll have a quick follow up.

Yes, I would say Joe you sort of did a nice job hitting our key growth drivers I think we've talked a length about the five key growth drivers within ICF.

I would say as a group as we've said consistently we've seen north of 10% growth.

Each of those five key growth drivers this year and we certainly expect that.

We can continue with that 10% of growth. So I think we are making significant investments in each of those areas and believe that that double digit growth is.

The sustainable and so I think the return on investments.

We're confident of significant returns on investments.

And each of those areas are making significant.

Investments given there theyre driving a double digit growth.

So difficult for me to kind of rank order.

Five I mean, I think there are five significant markets for us as we have said they make up 65% of our total.

Revenues in 2021.

And so.

That's what the investment focus is we do expect significant growth.

They are all contributing materially to our earnings growth too.

Okay Thats, great. Thanks, Sean and then just kind of drilling down a little more on it modernization and I know you've got acquisition related growth in there. This year, but do you expect that to continue to grow faster organically over time with.

With potentially better margins than some of your other key areas of growth. Thanks a lot.

Well I think as you know certainly Joe.

Growth, we experienced in the <unk>.

It modernization Digitization digital innovation Arena, I think we've consistently reported north of 15% organic growth in that market certainly with the ITG modernization we have.

There are significant revenue synergies, we're highly confident that we will.

With creative capture.

Significant revenue synergies also with that deal, particularly given their salesforce expertise and so I think that we certainly see that as well.

One of the highest growth markets.

For us we will continue to achieve north of 15% growth there and as we've talked about the margins in monetization or at the high end of federal.

<unk> so.

Certainly helps from a mixed perspective.

So.

We're quite pleased and quite confident on the monetization front in terms of the trajectory of that business and maintaining the maintaining that trajectory and I would say across all five of the key growth areas.

We are continuing to invest in.

In business development, we think the time is now to make those investments to really set ourselves up for significant organic growth here over the next several years and so we're.

Focused on making and executing on those investments and these five areas.

Great. Thanks, John Congrats on a good 21.

Thank you. Our next question comes from Tobey Sommer from curious Securities. Your line is now open.

Hey, good afternoon. This is Jasper bibb on for Tobey I wanted to ask about the margin guide and how we should think about the cadence of margins through the year I know historically <unk> is seasonally low that that wasn't the case last year, but you might have some pass through costs that might impact.

The slope of margins in any given quarter, so any color there would be great.

Jasper. Thanks. This is batina. Thanks for your question, we don't normally give.

Specific quarterly guidance, but as we said and I appreciate that.

While in general we see the back half of the year being slightly more positive than the front half of the year.

<unk>.

We will have.

Balanced margins as you will from <unk>.

Perspective throughout the throughout the year quarter over quarter, Yes, I mean, I think we've guided to 13, 9% adjusted.

<unk> service revenue I would expect that will be pretty consistent.

Throughout the year I wouldn't see a lot of variability quarter by quarter.

That's fair enough and then you announced some pretty sizeable recompete.

Actual energy space. This month, just given some of the ambitious targets to Stacy put out are you getting increased scope on this round of recompete or is there any opportunity to do so going forward.

I would say in general with our energy efficiency Recompete.

As those occur we generally do see increased scope and opportunities to grow our revenues.

With those re competes and so.

I think thats been a trend we've seen.

In the past and I would expect that to continue that will continue to grow grow the work as we as we went through it competes.

Okay got it last question for me you mentioned the lease savings in the prepared remarks.

Could you provide a bit more color on how you intend to manage the indirect cost structure going forward, maybe given the learnings from Covid.

And what that might mean for your margins over time.

I think as.

As we said I think we obviously we've had an effort over the last two years last year and this year too.

Rationalize our lease footprint.

To reflect the hybrid work environment that certainly we're going to be working in post pandemic and so.

We've been quite focused on.

We're thinking very carefully about the investments required on the facilities front.

And frankly, given that hybrid environment.

Taking the savings associated with with the need for less facility costs and reinvesting that.

In business development, which we're certainly doing now given the growth opportunities in front of us and frankly, we're also investing significantly in recruiting and human capital right now given.

What's going on in the labor markets and everything with that.

Great resignation I do think over time.

We are also committed to increasing our.

Our adjusted EBITDA to service revenue by 10% to 20 bps, a year and I think obviously the facility rationalization.

We will contribute to that over time.

So I would say that in addition to the facilities savings that we highlighted in our release.

The early termination charges. We took we also expect that we'll be able to.

Reduce our travel and entertainment expenses by about 25% in the long run post pandemic just by using virtual technologies in.

In managing our direct travel more effectively and so that's.

That's another aspect of it.

Careful cost management, we're using to help.

It helped drive the margins and allow us to invest going forward.

Okay I appreciate the detail. Thank you for taking the questions.

Thank you as a reminder, if you would like to ask a question. Please press Star then one on your Touchtone phone.

Our next question comes from Marc Riddick from Sidoti. Your line is now open.

Hi, good afternoon.

Hey, Mark how are you.

Good good thank.

Thank you very much for everything and certainly wish you the best going forward.

I did want to touch on some of the cost did you already answered which is great, but I did want to touch a little bit on maybe what youre seeing.

And if you sort of a general timeframe as to disaster related opportunities in the weather.

If there are some things that we might see.

That is sort of maybe Christopher.

Crystal ball of 2022, and then I have a quick follow up after that.

I think.

Well as we've discussed I mean disaster management again, it's one of our key five growth on our key growth markets.

I think as I said in the prepared remarks, we.

We continue to see nice growth in the air.

We certainly expect double digit north of 10% growth on the <unk>.

Disaster recovery markets.

'twenty two.

We're still looking at scale in Puerto Rico, both on traditional disaster recovery and in Texas.

On traditional disaster recovery and mitigation.

As I look down the road I mean, as we've talked about.

The severity and frequency of storms is only increasing and I think that trend is here to stay so.

It will be.

Ongoing opportunities there and then we've talked about mitigation being an increasingly important.

Source of funding.

On the disaster recovery.

I noted in my prepared remarks that we have.

We've won.

Projects across.

It doesn't have more states.

We are a market leader there and so.

So I think thats.

It's an important market for us there will be continued significant opportunity. There obviously it is dependent on.

When disasters occur in but with the mitigation funding.

Again that provides kind of a larger another large long term source of funding that isn't focused on responding to damage from disasters, but it's more about.

Taking steps to build resilience and to minimize damage for future storms. So that's also helping kind of smooth out our.

That revenue stream for us so it's not so episodic.

Great and then I was wondering if you can just a little bit on sort of just general views around.

The overall acquisition umbrella as far as what the pipeline looks like and certainly with creative I know generally you tend to.

Our focus on debt reduction following an acquisition and sort of wanted to get a sense of not just the pipeline that youre seeing but as far as near term appetite that we should be thinking about thanks.

Sure well I mean, I would say from a capital allocation perspective.

We have been and will continue to be primarily focused on investing in organic growth will also certainly continue to look for.

Acquisitions that we think are a good strategic fit and cultural fit.

For which we can.

Captured significant synergistic revenues.

Through combining with ICF, let's say in the M&A market I think it's still quite active there is a lot of.

Deal flow out there I think the pricing is still frothy I don't I wouldn't say, we've seen a material changes in.

And pricing.

Recently.

And I think we remain disciplined I think we've talked about are.

Our areas of focus on M&A I think they remain in the federal arena, it modernization and health.

And on the commercial side and energy around energy efficiency.

Distributed energy.

So we're looking at things in the market I mean, I think again, we'll be disciplined it has to be a good cultural fit a good strategic fit.

Well.

We always we always focus on.

No.

Revenue synergies.

We don't do turnarounds, we don't do fixer uppers.

That's not who we are and so we'll be disciplined.

But as I said I think that remains a key aspect of the strategy as pitino said in her remarks, our our net leverage ratio right now as I think about $2 nine one post creative we're obviously going to have strong cash flow again in 2022 and.

And so I think we have capacity.

To do something for the right deal came along in 2022.

And so we continue to look at but as I say it will continue to be disciplined.

Great. Thank you very much.

Yes.

Thank you we have no further questions in queue I will turn the call back to management for closing comments.

Okay, well thanks for participating in today's call. We look forward to engaging with you at upcoming virtual conferences and meetings and hope to see you all in New York for our Investor day. Thank you.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for your participation you may now disconnect.

Okay.

[music].

Okay.

[music].

Tim. Please press Star then one on your Touchtone phone I will now turn the call over to Lynn Morgen of Advisory partners. When you may begin.

Thank you operator, good afternoon, everyone and thank you for joining us to review Icf's fourth quarter and full year 2021.

With us today from ICF are John Watson, Chairman, and CEO and Bettina Welsh CFO , joining them is James Morgan Chief of business operations, and Barry Brotus, who will assume the CFO role at the end of this month.

Our SEC filings for discussions of those risks.

I will now turn the call over to Icf's CEO , John Watson to discuss fourth quarter and full year 2021 performance John .

Thank you Lynn and thank you all for participating in today's call to review, our fourth quarter and full year results and discuss our business outlook for 2022.

We capped a year of substantial growth in 2021 with strong fourth quarter operating results that align with our expectations and reflected the key growth drivers that we have identified in our markets.

<unk> takeaways from our fourth quarter and full year performance. Our first we continued to show strong organic growth in service revenue, which was up six 4% for the full year the growth rate that was substantially higher than in 2020.

Year on year service revenue growth was driven by our work in it modernization and Digitization.

Public health disaster management utility consulting and our climate environment and infrastructure Advisory services.

Together and new revenue from these growth markets increased more than 10% from 2020 levels.

Counted for roughly 65% of full year 2021 service revenue.

And we expect revenues from these areas in the aggregate to continue to grow by 10% or more in 2022 and beyond.

Second this was icf's second consecutive year of record contract awards.

We're awarded $2 $2 5 billion in contracts in 2021.

15% year on year, bringing our 12 month book to Bill ratio to 145.

The creative transaction as further expanded our it modernization and digital transformation qualifications and importantly, that's brought substantial expertise in salesforce and Microsoft platforms.

This adds to our industry, leading capabilities and service now in App in thereby positioning ICF as a provider at scale of the most widely adopted low code no code platforms in the federal government.

Taking a closer look at our performance by client category. We continued to see very strong results from our U S Federal business, where organic growth was nine 8% in the fourth quarter and 10, 2% for the full year. Additionally, our contract awards in this area were substantial representing approximately 50%.

<unk> of our total full year awards with wins across a broad universe of federal agencies.

But we're not permitted to disclose the client's name this new contract fits with our strategic objective of winning larger implementation contracts and it brings together capabilities from across the firm, we believe that ICF stability to deliver multi disciplinary solutions for clients. That's been a key element of our success in winning new business and will continue to be a differentiator.

<unk> for us going forward.

Yeah.

The passage of the infrastructure investment and jobs Act otherwise known as the bipartisan infrastructure law create significant opportunities for new work for ICF, and providing advisory planning management technical assistance and environmental support to federal government clients as well as state and local and commercial clients.

The cost for the federal government to spend more than 550 billion over the next five years on a variety of infrastructure projects related to roads ports and airports, but also includes major investment in the clean energy transition.

<unk> transmission clean energy sources, and electrification of transport and buildings CFS.

CFS contracts with all the federal agencies charged with expensing these funds.

The bulk of the funds will be distributed in the form of grants to state and local governments and tribal entities and in certain cases to industry.

At the guarantee level, there will be substantial opportunities for ICF to perform environmental permitting and analysis planning support and related services.

The growth trajectory of our federal business, even if we have to endure a one year CR this fiscal year.

Revenues from state and local government clients increased 19, 5% in the first fourth quarter and six 5% for the full year.

Our disaster management work, which comprises one half the revenue base of this client category continue to pace in the fourth quarter.

We executed on key disaster recovery contracts in Puerto Rico, and Texas and won a number of new contracts and extensions during the quarter related to hurricane Ida as well as we're connected to the Oregon wildfires and seasonal flooding in Louisiana.

With respect to mitigation ICF is now working on mitigation efforts over 25 clients in 13 states in the fourth quarter saw new wins in Florida, North Carolina, and New York.

Additionally, we continue to support our state and local government clients with environmental services. These include a number of high profile water transportation and energy infrastructure projects.

Also we are seeing growing market demand for advisory and implementation services around clean energy projects with funding in part coming from grants to states as part of the infrastructure and jobs Act I mentioned earlier.

Yeah.

Revenues from international government clients increased 45% in 2021, reflecting the benefit of a large short term project that was in a wind down phase at the end of last year, resulting in a nine 4% decline in fourth quarter revenues.

Moving to the commercial client said the decline in the fourth quarter revenues was expected due to the completion of a large commercial marketing contract in the fourth quarter of 2020, which mostly involve low margin pass through revenues.

In addition to this difficult comparison.

Marketing services business continues to be pressured by the pandemic impact on clients in the travel and hospitality industries.

Within this challenging environment. Our team is doing excellent work for clients and winning industry Awards.

<unk> added several new health care service clients in 2021 and continue to successfully integrate the substantial engagement capabilities. We have in this business and the client programs across the company, which you'll hear more about in a moment.

Our commercial aviation business continues to recover despite challenging conditions, we are winning new work and new clients and successfully combining our deep aviation expert expertise with sustainable travel and tourism.

Other commercial marketing into aviation consulting comprised approximately 10% of our total 2021 revenues.

The key growth area within our commercial market set as energy markets, which accounted for 62% of fourth quarter commercial revenues and 17% of total 2021 revenues.

This business continues to be a strong performer growing eight 1% in the quarter and eight 7% for the year.

We had robust energy efficiency contract wins in 2021, and we see growing market demand for our energy efficiency program and implementation services.

One word I'd like to call out as a key marketing win with our northeast utility, which we became their agency of record.

Until Ics areas of deep domain expertise.

Also utilities are increasingly emphasizing equity disadvantaged communities and workforce development, which allows ICF to bring together our substantial qualifications and the human services arena with our energy sector experience.

And of course, the infrastructure Act provides a broader range of opportunities across our government and commercial clients set to provide advisory and planning support to assess climate risk and ensure that new infrastructure investments improved climate resilience and achieve low carbon goals.

The breadth of our commercial energy portfolio of services, a unique attribute of ICF and we see this as an area of substantial growth for us in the years ahead.

Throughout the year, we continued to invest in people and technology, expanding our recruitment and retention activities to address industrywide staffing challenges.

We've also increased our business development investments so that we can take full advantage of the opportunities we see on the horizon and our key growth markets, thereby allowing us to maximize organic growth over the next several years.

Before turning the call over to Bettina for a financial review I want to wish to seek the best in her future endeavors and thank her for the contributions she has made to ICF.

Dana will remain with ICF to early April to ensure a smooth transition as Barry bolus takes over as CFO at the end of February with Tina. Thank.