Q1 2024 ICF International Inc Earnings Call
Okay.
Operator: Welcome to the first quarter 2024 ICF earnings conference call. My name is Liz, and I will be your operator for today's call. At this time, all participants are in listen-only mode. Afterward, you will 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 1-1 on your touchtone phone. I will now turn the call over to Lynn Morgen of Advisory Partners. Lynn, you may begin.
Liz: Welcome to the first quarter 'twenty 'twenty four ICF earnings Conference call. My name is Liz and I will be your operator for today's call. At this time all participants are in listen only mode. Afterwards, you will be invited to participate in the question and answer session.
Liz: During the question and answer session. If you have a question. Please press Star then one one on your Touchtone phone I will now turn the call over to Lynn Morgen of Advisory Partners Lynn you may begin.
Lynn Morgen: Thank you, operator. Good morning, everyone, and thank you for joining us to review ICF's first quarter 2024 performance. With us today from ICF are John Wasson, Chair and CEO, and Barry Broadus, CFO. Joining them is James Morgan, Chief Operating Officer.
Lynn Morgen: Thank you operator, good afternoon. Good morning, everyone and thank you for joining us to review Icf's first quarter 2020 for performance with US today from ICF are John Watson Chair, and CEO and Barry Brotus CFO, joining that MS. James Morgan Chief operating officer during this conference call.
Lynn Morgen: During this conference call, we will make forward-looking statements to assist you in understanding ICF management's expectations about our future performance. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our May 2nd, 2024 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today.
Lynn Morgen: We'll make forward looking statements to assist you in understanding ICF management's expectations about our future performance. These statements are subject to a number of risks that could cause actual events and results to differ materially and I refer you to our may 2nd 2024 press release, and our SEC filings towards this.
Lynn Morgen: <unk> of those risks.
Lynn Morgen: In addition, our statements during this call are based on our views as of today.
Lynn Morgen: We anticipate that future developments will cause our views to change please consider the.
Lynn Morgen: 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 first quarter 2024 performance. John? Thank you, Lynn, and thank you all for joining us.
Lynn Morgen: The information presented in that light.
Lynn Morgen: Are they 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 the first quarter 'twenty 'twenty four performance John Thank you Lynn and thank you all for joining today's call to discuss our first quarter results and review.
John M. Wasson: Thank you, Lynn, and thank you all for joining today's call to discuss our first quarter results and review our business outlook. First quarter results represented an excellent start to 2024 and demonstrated ICF's positioning in key growth areas and the strength of our diversified business model. There are several takeaways worth highlighting.
John M. Wasson: Our business outlook.
John M. Wasson: First quarter results represented an excellent start to 2024 and demonstrate icf's positioning in key growth areas and the strength of our diversified business model.
John M. Wasson: Several of the takeaways worth highlighting.
John M. Wasson: First, revenue growth for the quarter was quite strong; excluding divestitures, revenues increased by 8.7% from last year's levels. Second, our margin profile continues to strengthen. Drivers such as revenue mix, high utilization, and reduced facility costs continue to contribute to the consistent margin expansion that we have achieved over the last several years. And third, our forward-looking metrics point to continued growth for ICF. At the end of the first quarter, our backlog was $3.6 billion, our trailing 12-month book-to-bill ratio was 1.23, and our business development pipeline was $9.7 billion.
John M. Wasson: First revenue growth for the quarter was quite strong.
John M. Wasson: Including divestitures revenues increased by eight 7% from last year's levels.
John M. Wasson: Second our margin profile continues to strengthen drivers such as revenue mix high utilization and reduced facility costs continued to contribute to the consistent margin expansion that we have achieved over the last several years.
John M. Wasson: And third our forward looking metrics point to continued growth for Ics at the end of the first quarter. Our backlog was $3 6 billion. Our trailing 12 month book to Bill ratio was 123, and our business development pipeline was $9 7 billion. This speaks to how well aligned our capabilities are with the current spending priorities.
John M. Wasson: This speaks to how well-aligned our capabilities are with the current spending priorities of our government and commercial clients. Taking a closer look at our first quarter revenue performance, ICF's work in the energy, environment, infrastructure, and disaster recovery client market again was a meaningful contributor to our first quarter growth. Revenues in this client market increased 20% year on year to account for 45% of first quarter revenue.
John M. Wasson: Our government and commercial clients.
John M. Wasson: Taking a closer look at our first quarter revenue performance.
John M. Wasson: Icf's work in the energy environment infrastructure and disaster recovery client market again, with a meaningful contributor to our first quarter gross revenues.
John M. Wasson: Revenues in this current market increased 20% year on year to account for 45% of first quarter revenues.
John M. Wasson: We are seeing very strong results across both our service offerings and our diversified client base. ICF brings together a complement of deep domain and implementation expertise across a broad platform of interconnected subject matter areas, including energy efficiency, decarbonization, electrification, environmental and climate impacts, and disaster recovery and mitigation. We combine our expertise with proven implementation skills around program management, environmental monitoring, and grid engineering services, supported by cutting-edge analytic tools and proprietary energy models that have become the industry standard. Thus, we are offering unique and very customizable services and solutions that are resonating with utility clients, renewable energy producers, and others on the commercial side.
John M. Wasson: We are seeing very strong results across across both our service offerings and our diversified client base.
John M. Wasson: Thanks, Jeff brings together a complement of deep domain and implementation expertise across a broad platform of interconnected subject matter areas, including energy efficiency, decarbonization electrification, environmental and climate impacts and disaster recovery and mitigation.
John M. Wasson: We combine our expertise with prudent implementation skills around program management, environmental monitoring and grid engineering services supported by cutting edge analytics tools and proprietary energy models that have become the industry standard.
John M. Wasson: We are offering unique and very customizable services and solutions, which are resonating with utility clients.
John M. Wasson: Energy producers and others on the commercial side, while we continue to provide our government clients with research policy and economic analysis program design analytics Grant management services disaster recovery work in climate impact analysis.
John M. Wasson: While we continue to provide our government clients with research, policy, and economic analysis, program design, analytics, grant management services, disaster recovery work, and climate impact analysis, highlights in this market in the first quarter were over 30% increase in revenues from utility programs, including energy efficiency work, reflecting continued expansion in both size and scope of programs. ICF is now serving over 75 utilities across the country.
John M. Wasson: I'd like to turn this market in the first quarter were over 30% increase in revenues from utility programs, including energy efficiency work.
John M. Wasson: Selecting continued expansion in both size and scope of programs.
John M. Wasson: CF is now serving over 75 utilities across the country across the country.
John M. Wasson: Notable contract wins in the quarter included $85 million of expanded energy efficiency work with a large utility holding company, and a new $18 million electrification project for a large Midwestern utility. Additionally, in conjunction with our disaster management team, ICF was tapped to support a Western states wildfire and natural disaster resiliency rebuild program, which provides incentives to help homeowners impacted by natural disasters rebuild all electric homes. We also saw strong double-digit growth in energy advisory revenues driven by increased demand for both our power and technical advisory work.
John M. Wasson: Notable contract wins in the quarter included $85 million of expanded energy efficiency work with the large utility holding company.
John M. Wasson: New $18 million electrification project for a large midwestern utility.
John M. Wasson: And in conjunction with our disaster management team ICF was tapped the support of Western States wildfire and natural disaster resiliency rebuild program, which provides incentives to help homeowners impacted by natural disasters.
John M. Wasson: <unk> all electric homes.
John M. Wasson: We also saw strong double digit growth in energy advisory revenues driven by increased demand for both our power and technical advisory work first.
John M. Wasson: First quarter contract awards included numerous grid engineering and analytics projects for utilities and developers. Additionally, revenues from our environment and planning services in the U.S. continued to show solid growth, representing continued strong demand for maneuverable developers, increased resilience work for utilities undergrounding power lines, and environmental infrastructure-related work for state clients on projects funded under the IIJA. Contract wins in the first quarter were from a combination of utilities, developers, and government clients for the full breadth of ICF's licensing, permitting, and compliance services.
John M. Wasson: First quarter contract awards included numerous great engineering and analytics projects for utilities and developers.
John M. Wasson: Revenues from our environment and planning services in the U S continued to show solid growth representing continued strong demand from renewable developers increased resilience work for utilities underground power lines and environmental infrastructure related work for state clients on projects funded under the J a.
John M. Wasson: Contract lengths in the first quarter were from a combination of utilities developers and government comments for the full breadth of Icf's licensing permitting and compliant services.
John M. Wasson: IRA and IIJA funds are also starting to flow at scale, including the Department of Energy's Grid Resilience and Innovation Partnership Program and its National Electrical Vehicle Infrastructure Program and EPA's Environmental Justice Award. Funding for state energy offices is now in the process of being released, and states and other recipients are beginning to issue solicitations for planning and program support.
John M. Wasson: Iran. Iga funds are also starting to fall at scale, including the department of Energy's grid resilience and innovation partnership program and its national electrical vehicle infrastructure program and EPA Environmental Justice Awards.
John M. Wasson: Funding for state energy offices is now in the process of being released and states and other recipients are beginning to issue solicitations for planning and program support.
John M. Wasson: We are actively monitoring opportunities to provide support at all levels, federal, state, and local, and commercial. Today, ICF has won contracts valued at approximately $125 million related to the IIJ and IRA, primarily from federal and state government clients. And our pipeline is about $200 million. This does not include all the related work that we are doing for commercial clients, where it's more difficult to tie our engagements to specific legislation. In the first quarter, our revenues from federal government clients increased 2.4% in line with expectations, primarily reflecting a $5 million reduction in past year revenues associated with large international public health contracts that we referred to last quarter. Revenues from federal government clients, excluding subcontractor and other direct costs, increased 5.4% in the quarter.
John M. Wasson: We are actively monitoring opportunities to provide support at all levels federal state and local and commercial today.
John M. Wasson: To date ICF has one contracts valued at approximately $125 million related to the Iga and IRA primarily from federal and state government clients and our pipeline is about $200 million.
John M. Wasson: This does not include other related work that we're doing for commercial clients, where it's more difficult to tire engagements to specific legislation.
John M. Wasson: In the first quarter, our revenues from federal government clients increased two 4% in line with expectations.
John M. Wasson: Reflecting the $5 million reduction in pass through revenues associated with large international public health contracts that we referred to last quarter revs.
John M. Wasson: Revenues from federal government clients, excluding subcontractor and other direct costs increased five 4% in the quarter.
John M. Wasson: Our two growth markets in the federal government client category are public health and IT modernization. With respect to public health, our contract wins at SAMHSA last year are now fully up and running, and we expanded our clinical decision support work at the Veterans Administration. Also, our business development pipeline in public health is quite strong. There is bipartisan support to address the nation's mental health crisis, and with increased budgets, we see significant opportunities to expand our work for SAMHSA.
John M. Wasson: Our two growth markets and the federal government client category, our public health it modernization let's.
John M. Wasson: With respect to public health or contract wins at Samsung last year are now fully up and running.
John M. Wasson: And we expanded our clinical decision support work at the Veterans administration.
John M. Wasson: Also our business development pipeline and public health is quite strong there is bipartisan support to address the nation's mental health crisis and with increased budgets, we see significant opportunities to expand our work for Samsung.
John M. Wasson: Also, recent funding for NIH and CDC is in specific areas that are relevant to ICF subject matter expertise and experience, including funding to end HIV and for cancer and Alzheimer's research. We continue to see a strong pipeline for global health security in low-middle-income countries where we have historically worked providing demographic and health surveys, nutrition surveys, and diagnostic tests. Global health security involves identifying and containing infectious disease threats wherever they occur in the world.
John M. Wasson: Also recent funding for NIH and CDC is in specific areas that are relevant ICF subject matter expertise and experience, including funding to end HIV <unk> cancer and Alzheimer's research.
John M. Wasson: We continue to see a strong pipeline for global health security and low middle income countries, where we have historically worked providing democratic demographic and health surveys nutrition surveys and diagnostic testing.
John M. Wasson: Global Health security involves identifying and continuing in festus disease threats wherever they occur in the world <unk> in USA Ids work on Monkey pox and <unk> are two of the most current examples.
John M. Wasson: CDC's and USAID's work on monkeypox and Ebola are two recent examples. Additionally, we continue to see strong, steady performance on our environmental health work at EPA, with a VPA recompete win for EPA's Office of Research and Development and task order wins to support EPA's Office of Pollution Prevention and Talks. As you know, the EPA issued the final National Primary Drinking Water Standards to protect Americans from exposure to PFAS substances in mid-April.
John M. Wasson: Additionally, we continue to see strong steady performance on our environmental Hauswirth at EPA with the BPA Recompete win for Epa's office of research and development and task order wins to support EPS officer pollution prevention and toxics.
John M. Wasson: As you know the EPA issued the final national primary drinking water standards to protect Americans from exposure to P. Fast substances in mid April.
John M. Wasson: ICF supported the scientific and regulatory analyses that informed the development of the new rule, setting maximum levels of these chemicals for the nation's drinking water supply. Our work continues as we staff EPA laboratory contracts through which samples are tested for PFAS substances.
John M. Wasson: You have supported the scientific and regulatory analysis are important development of the new rule setting maximum levels of these chemicals for the nation's drinking water supply.
John M. Wasson: Work continues as we staff EPA laboratory contracts, so which samples were tested for pizza substances.
Barry M. Broadus: IT modernization and digital transformation is another area of bipartisan support. In the first quarter, we continued to execute on programs to update workflows and infrastructure and optimize data usage across our civilian agency clients, and we continue to ramp up work on the $300 million in contracts we won in the second half of 2023. Additionally, we completed several important projects within the Department of Health and Human Services that advance research efforts and support public health, including the development of task forces to support the Medicare Diabetes Prevention Program, facilitate health equity data submission, and address vascular health.
John M. Wasson: It modernization and digital transformation is another area of bipartisan support.
John M. Wasson: In the first quarter, we continued to execute our programs update workflows and infrastructure and optimized data usage across our civilian agency clients and we continue to ramp up work on the $300 million of contracts. We won in the second half of 2023.
John M. Wasson: Additionally, we completed several important projects within the department of Health and Human services and advanced research efforts and support of hotels, including the development of dashboards to support the Medicare diabetes Prevention program facilitate health equity data submission and address vascular health.
Barry M. Broadus: Notably, in the first quarter, we combined ICF's domain expertise in energy with cutting-edge technology to stand up three unique grant management programs with varying levels of complexity for the Department of Energy to support millions of dollars in new IIJA and IRA funding across multiple rebate programs. This project, together with the close tie-in that our IT modernization capabilities have with our public health expertise, demonstrates ICF's unique ability to combine subject matter expertise with substantial IT capabilities to drive growth and positive outcomes for clients.
John M. Wasson: Notably in the first quarter, we combined icf's domain expertise in energy with cutting edge technology to stand up three unique grant management programs with <unk>.
John M. Wasson: Vary in complexity that was for the department of energy to support millions and millions of dollars in new.
John M. Wasson: And IRA fundings across multiple rebate programs.
John M. Wasson: This project together with the close time that our it modernization capabilities have with our public health expertise demonstrates icf's unique ability to combine subject matter expertise with substantial ITK abilities to drive growth and positive outcomes for clients.
Barry M. Broadus: We also have a strong active pipeline in this area, which includes a significant number of opportunities that reflect potential synergies between our open source capabilities and ICS policy-related experience. To sum up, this was another record quarter for ICF, which has set the stage for substantial organic growth for the company in 2024. Now I'll turn the call over to our CFO, Barry Broadus, for a finance review. Barry. Thank you, John, and good morning, everyone.
John M. Wasson: We also have a strong active pipeline in this area, which includes a significant number of opportunities that reflect potential synergies between our open source capabilities and icf's policy related experience.
CFO: Some of this was another record quarter for ICL, which has set the stage for substantial organic growth for the company in 2020 for now I'll turn it over the call to our CFO very broadest for a financial review Arie. Thank.
Barry M. Broadus: The year-on-year decrease was due, in part, to the divestiture of the commercial marketing business lines and lower pass-through revenues on certain U.S. government contracts. First quarter gross margins expanded 190 basis points to 37.2% of total revenue, benefiting from the timing of several recently awarded energy efficiency contracts, which are estimated to have pulled forward approximately 15 to 20 cents of EPS in the first quarter. Typically, these contracts tend to be more profitable during the startup phase of the program.
Barry M. Broadus: Thank you, John, and good morning everyone. I'm pleased to provide you with additional details on our 2024 first quarter financial performance. Total revenues were $494.4 million, up 2.3% compared to the first quarter of 2023. After adjusting for the divestiture of our commercial marketing business lines in 2023, revenues increased 8.7 percent, driven by robust growth from our commercial energy clients and solid growth from our government customers. Subcontractor and other direct costs totaled $120.5 million, or 24.4% of total revenue, down from 27.3% in the first quarter of 2023.
Arie: Thank you John and good morning, everyone. I am pleased to provide you with additional details on our 2024 first quarter financial performance.
Arie: Total revenues were $494 4 million up two 3% compared to the first quarter of 2023.
Arie: After adjusting for the divestiture of our commercial marketing business lines in 2023 revenues increased eight 7% driven by robust growth from our commercial energy clients and solid growth from our government customers.
Arie: Subcontractor and other direct costs totaled $125 million or 24, 4% of total revenue down from 27, 3% in the first quarter of 2023.
Arie: The year on year decrease was due in part to the divestiture of the commercial marketing business lines and lower pass through revenues on certain U S government contracts.
Arie: First quarter gross margins expanded 190 basis points to 37, 2% of total revenue benefiting from the timing of several recently awarded energy efficiency contracts, which are estimated that pulled forward approximately 15 to 20 cents of EPS in the first quarter. So typically these contracts tend to be more profitable during the startup phase of the pro.
Barry M. Broadus: As costs ramp up over time, margins will level out over the period of performance. In the second half of this year, we expect that margins from these contracts will be more closely in line with margins we typically see with our other energy efficiency programs. Indirect and selling expenses were 129.1 million, up 4.3% year on year, reflecting the expansion of the business and investments in our staff and various growth initiatives. We continue to realize higher utilization and benefit from our increased scale and reduced facility costs.
Barry M. Broadus: Graham.
Arie: As costs ramp up over time margins will level out over the period of performance.
Arie: The second half of this year, we expect that margins from these contracts to be more closely in line with margins, we typically see with our other energy efficiency programs.
Barry M. Broadus: Indirect and selling expenses were $129 1 million up four 3% year on year, reflecting the expansion of the business and investments in our staff and various growth initiatives.
Barry M. Broadus: We continue to realize higher utilization and benefit from our increased scale and reduce facility costs.
Barry M. Broadus: This, together with our favorable revenue mix and a quarter-specific upside from the energy efficiency contracts I mentioned earlier, drove a year-over-year 21.6% increase in EBITDA to $56.4 million and an 8.2% increase in adjusted EBITDA to $55.2 million. Interest expense of $8.2 million decreased from $9.5 million in the first quarter of 2023. Reflecting our lower average debt balances year to year, our tax rate was 20.4% as compared to 23.5% in the year-ago quarter, primarily due to tax credits and investing in equity compensation, which largely occurs in the first quarter of each year. For the full year, our tax rate guidance remains unchanged at 23.5%.
Barry M. Broadus: This together with our favorable revenue mix and a quarter specific upside from the energy efficiency contracts I mentioned earlier drove a year over year 21, 6% increase in EBITDA to $56 4 million and an eight 2% increase in adjusted EBITDA to $55 2 million.
Barry M. Broadus: Interest expense of $8 $2 million decrease from $9 5 million in the first quarter of 2023.
Barry M. Broadus: Reflecting our lower average debt balances year to year, our tax rate was 24% as compared to 23, 5% in the year ago quarter.
Barry M. Broadus: Primarily due to tax credits and the vesting of equity compensation, which largely occurs in the first quarter of each year.
Barry M. Broadus: For the full year, our tax rate guidance remains unchanged at 23, 5%.
Barry M. Broadus: Net income was $27.3 million, or $1.44 per diluted share, in the first quarter compared to $16.4 million, or $0.87 per diluted share, reported in the comparable period last year. Non-GAAP EPS was $1.77, an increase of 24.6% from the $1.42 per share reported in last year's first quarter. First quarter EPS benefits from the margin expansion, including the profit pull forward from our energy efficiency programs, as I previously mentioned, and the favorable impact of our lower year-on-year interest expense and tax rates, as well as greater efficiency in the business.
Barry M. Broadus: Net income was $27 3 million or $1 44 per diluted share in the first quarter compared to $16 4 million or <unk> 87 per diluted share.
Barry M. Broadus: <unk> in the comparable period last year.
Barry M. Broadus: non-GAAP EPS was $1 77, an increase of 24, 6% from $1 42 per share reported in last year's first quarter.
Barry M. Broadus: First quarter EPS benefited from the margin expansion, including the profit pull forward from our energy efficiency programs I previously mentioned.
Barry M. Broadus: And the favorable impact of our lower year on year interest expense and tax rates as well as greater efficiency in the business.
Barry M. Broadus: Shifting to cash flows in our balance sheet, in the first quarter, we used 10 million of operating cash for working capital needs, an improvement of 6.8 million as compared to the first quarter of last year. The use of operating cash flow is consistent with our typical first quarter seasonal working capital needs. Our days sales outstanding were 75 days compared to 71 days in last year's first quarter.
Barry M. Broadus: Shifting to cash flows and our balance sheet in the first quarter, we used $10 million of operating cash for working capital needs and improvement of $6 8 million as compared to the first quarter of last year.
Barry M. Broadus: The use of operating cash flow is consistent with our typical first quarter seasonal working capital needs. Our days sales outstanding were 75 days compared to 71 days in last year's first quarter.
Barry M. Broadus: Capital expenditures totaled $5.2 million, down from $6.4 million in last year's first quarter. At the end of March, our debt was $474.7 million, above the $430.4 million reported at the end of 2023. The sequential increase primarily reflects the first quarter seasonal use of cash for share repurchases and year-end bonuses. On a year-over-year basis, we reduced our debt by $123 million from $598 million at the end of last year's first quarter. Our adjusted net leverage ratio was 2.29 times at quarter end, compared to 3.09 times at the end of last year's first quarter.
Barry M. Broadus: Capital expenditures totaled $5 2 million down from $6 4 million in last year's first quarter.
Barry M. Broadus: At the end of March our debt was $474 $7 million above the $434 million reported at the end of 2023.
Barry M. Broadus: The sequential increase primarily reflects first quarter seasonal use of cash for share repurchases and year end bonuses.
Barry M. Broadus: On a year over year basis, we reduced our debt by $123 million from $598 million at the end of last year's first quarter.
Barry M. Broadus: Our adjusted net leverage ratio was two nine times at quarter end compared to 3.09 times at the end of last year's first quarter approximately.
Barry M. Broadus: Approximately 58% of our debt is currently at a fixed rate. We remain committed to a balanced approach to capital allocation. We continue to prioritize investment in organic growth initiatives, acquisitions, debt reduction, share repurchases to offset the delusion of our employee incentive programs, and quarterly dividends. Today, we announce a quarterly cash dividend of 14 cents per share, payable on July 12, 2024, to shareholders of record on June 7, 2024. Now, to help you with your financial models, our guidance from our last call remains unchanged.
Barry M. Broadus: Approximately 58% of our debt is currently at a fixed rate.
Barry M. Broadus: We remain committed to a balanced approach to capital allocation, we continue to prioritize investment in organic growth initiatives acquisition.
Barry M. Broadus: Debt reduction.
Barry M. Broadus: Share repurchases to offset the dilution of our employee incentive programs and quarterly dividend.
Barry M. Broadus: Today, we announced a quarterly cash dividend of <unk> 14 per share payable on July 12, 2024 to shareholders of record on June seven 2024.
Barry M. Broadus: Now to help you with your financial models, our guidance from our last call remains unchanged. As a reminder, we expect to generate approximately 48% of our revenue guidance in the first half of the year.
Barry M. Broadus: As a reminder, we expect to generate approximately 48% of our revenue guidance in the first half of the year. Additionally, our depreciation and amortization expense is expected to range from $24 million to $26 million. Amortization of intangibles should be approximately $32 million to $33 million, and interest expense will range from $32 million to $34 million. Our full-year tax rate will be approximately 23.5 percent. We expect a fully diluted weighted average share count of approximately 19 million shares.
Barry M. Broadus: Our depreciation and amortization expense is expected to range from $24 million to $26 million.
Barry M. Broadus: Amortization of intangibles should be approximately $32 million to $33 million.
Barry M. Broadus: Interest expense will range from $32 million to $34 million, our full year tax rate will be approximately 23, 5%.
Barry M. Broadus: We expect fully diluted weighted average share count of approximately 19 million shares.
Barry M. Broadus: Our operating cash flow is expected to be $155 million, and our capital expenditures are anticipated to be between $25 and $28 million. And with that, I'll turn the call back over to John for his closing remarks.
Barry M. Broadus: Our operating cash flow is expected to be $155 million and our capital expenditures are anticipated to be between 25 and $28 million and with that I'll turn the call back over to John for his closing remarks.
John M. Wasson: Thanks Barry. We are very pleased with our results to date and the opportunities we see on the horizon. Our first quarter performance, together with strong backlog, book-to-bill, and pipeline metrics, provide excellent visibility that supports our full year 2020 guidance. We're pleased to reaffirm our expectation that 2024 organic revenues from continuing operations will range from $2.03 billion to $2.1 billion, representing year-on-year growth of 5.2% at the midpoint when compared to reported 2023, and 8.5% at the midpoint for continuing operations.
John: Thanks, Barry we are very pleased with our results to date and the opportunities we see on the horizon, our first quarter performance together with strong backlog book to Bill and pipeline metrics provide some visibility that supports our full year 2020 for guidance.
John M. Wasson: We're pleased to reaffirm our expectation that 2024 organic revenues from continuing operations will range from $2 3 billion to $2 1 billion representing year on year growth of five 2% at the midpoint when compared to reported 2023 and eight 5% at the midpoint on continuing operation.
John M. Wasson: EBITDA is expected to range from $220 million to $230 million, reflecting year-on-year growth of 14.2% at the mid-point. Our guidance range for GAP EPS is 525 to 555, excluding special charges, and for non-GAP EPS is 660 to 690.
John M. Wasson: EBITDA.
John M. Wasson: EBITDA is expected to range from $220 million to $230 million.
John M. Wasson: 15 year on year growth of 14, 2% at the midpoint.
John M. Wasson: Our guidance range for GAAP EPS is $5 25 to $5 55, excluding special charges and for non-GAAP EPS is $6 60 to $6 90.
John M. Wasson: The work that I described in today's business review involves helping clients address many of the most challenging issues of the day. We are proud to participate in this work and to have attracted a like-minded group of professionals who are committed to making a positive impact on society. And with that, operator, I would like to open the call to questions. Thank you. At this time, we will conduct the question and answer session.
John M. Wasson: The work that I described in today's business review involves helping clients address many of the most challenging issues of the day. We are proud to participate in this work and to have attracted unlike minded group of professionals, who are committed to making a positive impact on society.
John M. Wasson: And with that operator, I would like to open the call to questions.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from Sam Cuswim on William Blair. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced withdraw your question.
Operator: Weston Please press star one again, please standby, while we compile the Q&A roster.
Sam Cuswim: Our first question comes from Sam <unk>.
Sam Cuswim: William Blair.
Sam Cuswim: Your line is now open.
Sam Cuswim: Hey, good morning. Thanks for taking my questions here. I know you just mentioned you're still expecting 48% of full-year revenue to occur in the first half. Based on your first quarter, that implies sort of flat growth on the top line in the second quarter here, if we're using the midpoint of guidance. I guess I want to make sure I'm thinking about that in the right way, or maybe there's more optimism in hitting the upper range of guidance there.
Sam Cuswim: Hey, good morning, Thanks for taking my questions here.
Sam Cuswim: I know you just mentioned you're still expecting 48% of full year revenue to recur in the first half.
Sam Cuswim: Based on your first quarter that implies sort of flat growth on the top line in the second quarter here.
Sam Cuswim: But we're using the midpoint of guidance I guess I want to make sure I'm thinking about down the right way or maybe there is more optimism and hitting the upper range of guidance there.
John M. Wasson: Hey Sam, thanks for the question. Yeah, we think that, you know, revenues will certainly uptick in the second half of the year. We have, you know, great visibility into the revenue stream, and we think that, you know, we'll have continued strong growth as outlined in our guidance.
Speaker Change: Hey, Sam Thanks for the question.
Sam Cuswim: We think that.
Sam Cuswim: The revenues will certainly uptick in the second half of the year.
Sam Cuswim: We have.
Sam Cuswim: Great visibility into the revenue stream and we think that.
Sam Cuswim: We'll have continued strong growth.
Speaker Change: As outlined in our guidance.
Sam Cuswim: Got it, okay. Maybe I'm pivoting here.
Speaker Change: Got it okay.
Sam Cuswim: Maybe pivoting here I guess this question kind of relates Youre working commercial energy and renewables.
John M. Wasson: I guess this question kind of relates to your work in commercial energy and renewables. You know, we've heard about many of the difficulties clients are facing in that industry, such as interconnection, permitting, and just grid organization in general. I guess I'm wondering if you can help us understand how this impacts your business, if it's limiting some of the work you can finish, or maybe it's creating complexity that you can help solve. Just want to get your thoughts around that.
John M. Wasson: We've heard about many of the difficult to use clients are facing and that industry, such as interconnection permitting and just great organization in general I guess I'm wondering if you can help us understand how this impacts your business. If it's eliminating some of the work you can finish or maybe it's creating complexity that you can help solve.
John M. Wasson: I just want to get your thoughts around that.
Speaker Change: Yes, sure I mean, I think that.
John M. Wasson: We certainly work on Green.
John M. Wasson: Grid modernization grid interconnection.
John M. Wasson: Connection issues related to renewable energies and so I think those challenges in the industry, a recruiting opportunity Florida similar.
John M. Wasson: Rising utility clients.
John M. Wasson: And so that is certainly an area where we're supporting our clients and seeing opportunity. We continue to see significant opportunity around renewable power generation resources at the project level, both solar and wind, and are doing, you know, a significant amount of work for those clients. And that continues to be strong, and we're quite active in that. And so I would generally say the specific issues you mentioned; we're working with our clients intently to analyze and assess those issues and help solve them. And so it's, I think, generally been a net positive for us.
John M. Wasson: <unk>.
John M. Wasson: Power producers on those issues and so on.
John M. Wasson: That is certainly an area where we are.
John M. Wasson: Our clients and seeing opportunity, we continue to see significant opportunity.
John M. Wasson: Around.
John M. Wasson: Global power generation resources at the project level, both solar and wind.
John M. Wasson: And are doing a significant amount of work.
John M. Wasson: For those clients.
Speaker Change: Got that.
John M. Wasson: Seems to be strong and we're quite active on that and so.
John M. Wasson: So I would generally say the specific issues you mentioned.
John M. Wasson: We're working with our clients.
John M. Wasson: Intently to analyze and assess assistance and help.
John M. Wasson: All of them and so it's generally been a net positive for us.
Operator: Great. Thank you for the answers, guys. Please stand by for the next question.
Speaker Change: Great. Thank you for your answers guys.
Operator: Please standby for the next question.
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: The next question is from Tobey Sommer with Truist Securities. Your line is now open.
Operator: The next question is from Tobey Sommer with <unk> Securities. Your line is now open.
Jack Wilson: Yeah, good morning. This is Jack Wilson on behalf of Tobey.
Operator: Yes. Good morning. This is Jack Wilson on for Tobey, maybe just to kick it off can you maybe dig a little bit more into sort of what parts of the budget had been sort of most helpful. And if there are any sort of headwinds embedded in that.
Jack Wilson: Maybe just to kick it off, can you maybe dig a little bit more into sort of what parts of the budget have been sort of most helpful and if there are any sort of headwinds embedded in that? Other parts of the budget.
Jack Wilson: Other parts of the budget.
John M. Wasson: When you asked, Jack, did you mean the federal budget or was that what you meant? Yeah, yeah, the federal budget, please.
Speaker Change: You did ask Jackie you mean, the federal budget or.
John M. Wasson: Is that what you mean.
John M. Wasson: The budget release.
John M. Wasson: Yeah, you know, in the federal arena, I think we've got into high single-digit growth for the year. And in our federal markets, I think in our last call, we indicated we'd have low single-digit growth in the first half as we wrap up our new IT modernization work, and we expect our USAID work, which includes the capacity to ramp up, as we go forward in the year. And so we remain quite confident in the high level of that guidance.
John M. Wasson: Yes, I think that.
John M. Wasson: In the federal Arena.
John M. Wasson: <unk> guided to high single digit growth for the year in our federal markets I think in our last call. We indicated we would have low single digit growth in the first half as we ramp up our new it modernization work in.
John M. Wasson: We expect.
John M. Wasson: Our USA work, which includes C. The capacity as a wrap up.
John M. Wasson: As we go forward in the year and so we remain quite confident at the high level of that guidance I would say as we've discussed regularly on this call.
John M. Wasson: I would say, as we've discussed regularly on this call over the last couple years, the two major areas of growth for us are in public health and in IT modernization. And generally, the budgets there have been quite strong. They're bipartisan.
John M. Wasson: A couple of years, you know the two major areas of growth for us in.
John M. Wasson: In public health.
John M. Wasson: And is it modernization and generally the budget there has been quite strong there bipartisan.
John M. Wasson: You know, they've seen very strong budgets the last several years, and I think we're confident we'll see robust growth there this year. You know, also, obviously, these are very large agencies, and we have a small share. So we're also taking market share in these agencies. But generally, I think the budget situation in our key federal growth areas remains positive. And, you know, we're, as I say, we've guided the high single-digit growth of the year, and we're certainly confident in that.
John M. Wasson: The scene.
John M. Wasson: We've seen very strong budgets.
John M. Wasson: The last several years I think we're confident we'll see Rob.
John M. Wasson: The robust growth there.
John M. Wasson: For this year.
John M. Wasson: Also obviously these are very large agencies and we have a small share. So we're also taking market share.
John M. Wasson: But generally I think the.
John M. Wasson: The budget situation.
John M. Wasson: And our key federal growth areas.
John M. Wasson: It remains positive.
John M. Wasson: Sure.
John M. Wasson: As I said, we've guided to high single digit growth for the year.
Jack Wilson: Okay, thank you for that color there, and then maybe just as a follow-up, can we dig into the IRA a little bit more, maybe using a baseball analogy, could you sort of describe what inning you think we're in? And if it's possible to segment that between sort of the supply and demand sides of the equation, that would be helpful as well.
John M. Wasson: We're certainly confident none.
Speaker Change: Okay. Thank you for that color there and then maybe just a follow up can we dig into the IRI a little bit more maybe using a baseball analogy could you sort of describe what inning. You think we're in and it's possible segment that between sort of the supply and demand tightens the equation that would be helpful as well.
John M. Wasson: Well, I would say on the IRA. I think we're still in the early innings. It's still ramping up. We're seeing that funding has begun to flow. We're seeing it at the federal level. We're seeing it also getting to the state level. The states are turning around and starting to put out grants, and, you know, moving that money.
Jack Wilson: Well I would say on the.
John M. Wasson: Certainly on the IRS I think we're still in the early innings, it's still ramping up we're seeing.
John M. Wasson: Funding beginning has begun to flow we're seeing it at the federal level, we're seeing it.
John M. Wasson: So getting to the state level of states are turning around and starting to put out grants.
John M. Wasson: And.
John M. Wasson: Move that money.
John M. Wasson: And so I think we expect that to continue to ramp up for the next several years. And then from there, you know, I think that's, you know, five to ten-year money, and so it will be a long-term tailwind for us. And so I think we're in the early innings, you know, I don't know, the IRA, third inning, third or fourth inning, IIJ, you know, started a year, year and a half earlier. Maybe we're getting towards the middle innings there, but there's still a long tail of spend, you know, on the IIJ. And so it goes.
John M. Wasson: And so I think we expect that will continue to ramp up for the next several years and then from there I think lutz.
John M. Wasson: Five to 10 year money and so it will be a long term.
John M. Wasson: Tailwind for us and so I think we are in the early innings I don't know the IRS third inning third or fourth inning.
John M. Wasson: He started a year year and a half earlier.
John M. Wasson: We're getting towards the middle innings, there, but there's still a long tail of spend on the <unk>.
John M. Wasson: I think we think those will be tailwinds and continue to present material growth opportunities for us over the next five to 10 years, you know, in terms of, you know, supply and demand. I would say, if I focus on the IRA, I think it's certainly having an impact on both sides. I mean, obviously, tax credits are providing tremendous incentives around solar wind and hydrogen and carbon capture, improving the economics of those. You know, those are activities.
John M. Wasson: And so.
John M. Wasson: And I think we think those will be tailwind.
John M. Wasson: We'll continue to present material growth opportunities for us.
John M. Wasson: Over the next five to 10.
John M. Wasson: Years in terms of supply.
John M. Wasson: Supply and demand I mean, I think I will.
John M. Wasson: Sure.
John M. Wasson: Our focus on the IRI.
John M. Wasson: I think it's it certainly.
John M. Wasson: It certainly had an impact on both sides.
John M. Wasson: The tax credits are providing tremendous incentives.
John M. Wasson: Around solar and wind and hydrogen and carbon capture changing the improving economics of those.
John M. Wasson: Those activities and so.
John M. Wasson: We're seeing tremendous demand.
John M. Wasson: From that.
John M. Wasson: Also.
John M. Wasson: Funding available.
John M. Wasson: The demand side.
John M. Wasson: And we're.
John M. Wasson: Certainly supporting.
John M. Wasson: Federal state clients utility clients, who are.
John M. Wasson: I think prudent from that around on energy related demand programs and so we're seeing it on both sides.
John M. Wasson: And so we're seeing tremendous demand for that, and there's also funding available on the demand side. And we're certainly supporting federal, state clients, utility clients who are benefiting from that around energy-related demand programs. And so, you know, we're seeing it on both sides. I think it's particularly strong right now in the supply. Thank you very much.
John M. Wasson: It is particularly strong right now on the supply side.
John M. Wasson: Thank you very much.
Operator: As a reminder, if you'd like to ask a question, press star 1-1 on your telephone and wait for your name to be announced. Please stand by for the next question. Our next question comes from Marc Riddick on Sidoti. Your line is now open.
Speaker Change: As a reminder, if you'd like to ask a question press star one on your telephone and wait for your name to be announced.
Marc Frye Riddick: Please standby for the next question.
Operator: Our next question comes from Marc Riddick with Sidoti. Your line is now open.
Marc Frye Riddick: Hey, good morning.
Marc Frye Riddick: So I wanted to touch a little bit on how we're feeling about, what the potential acquisition pipeline might look like, and maybe your current appetite and views as to maybe what you're seeing out there and valuations relative to maybe the beginning of the year. It seems like, overall, M&A seems to be picking up a little bit. I was wondering if you had any thoughts or views or how that might've evolved throughout the year.
Marc Frye Riddick: Furthermore, hernan.
Marc Frye Riddick: So I wanted to touch a little bit on.
Marc Frye Riddick: How were feeling about.
Marc Frye Riddick: What the potential acquisition pipeline might look like and maybe your current appetite views as to maybe what youre seeing out there in valuations relative to maybe the beginning of the year. It seems like overall M&A seems to be picking up a little bit I was wondering if you had any thoughts or views or how that might have evolved throughout the year.
John M. Wasson: Maybe I'll say a couple words and let Barry speak to valuations. You know, I think that I wouldn't say we've seen a material shift in the M&A market in the last, you know, a couple quarters. As you well know, Marc, M&A has been a key part of our growth strategy over the years. We did our last material deal in July of 2022.
Speaker Change: Maybe I'll say, a couple words and I'll, let Barry speak to valuations I think.
John M. Wasson: I wouldn't say, we've seen a material shift in the M&A.
John M. Wasson: Market.
John M. Wasson: <unk>.
John M. Wasson: A couple of quarters.
John M. Wasson: At a high level as you well know Mark I mean, M&A has been a key part of our growth strategy over the years, yes.
John M. Wasson: We've obviously paid down a lot of debt, and we have capacity. I think we will remain in the market and continue to look at potential deals. Obviously, we're focused on areas around our key growth drivers, around public health, data, and analytics, and energy. The, you know, I would say the market is, you know, It hasn't changed in the last six months. You know, valuations are still a bit frothy. But Barry, do you want to get a little more color on that?
John M. Wasson: We did our last material deal in July of 2020, we've obviously paid down a lot of that we have capacity.
Barry: I think we so we remain in the market and continue to look at potential deals. Obviously, we are focused on areas around our key growth drivers. So.
Barry: Around public health data and analytics energy.
Barry: I would say the market is.
John M. Wasson: Yes.
Barry: That's not changed in the last six months valuations are still a bit frothy.
Barry: And but they are do you want to give a little more color on that.
Barry M. Broadus: Yeah. You know, as John mentioned, we are very active in the acquisition arena. We're continuing to look at different, you know, properties as they come through the pipeline. You know, from a valuation perspective, at this point, we thought that maybe the valuations may have taken down a little bit based on where we are with interest rates and kind of the equilibrium between the two.
Barry M. Broadus: As John mentioned.
Barry M. Broadus: We are very active in the acquisition arena, we're continuing to look at different.
Barry M. Broadus: Properties.
Barry M. Broadus: They come through the pipe.
Barry M. Broadus: I'd say from a valuation perspective.
Barry M. Broadus: At this point, we thought that maybe the valuations may have.
Barry M. Broadus: Should tick down a little bit based on where we are with interest rates.
Barry M. Broadus: Kind of the equilibrium between the two but we still think that we have.
Barry M. Broadus: But, you know, we still think that, you know, the valuations are still not that much changed from, you know, the previous six months or even longer than that. We have, as John mentioned, plenty of capacity. We've paid down a lot of debt. So, you know, we're certainly, you know, looking for that as we have in the past. You know, we certainly see the different markets that we play in.
Barry M. Broadus: Youll see that.
Barry M. Broadus: The valuations are still.
Barry M. Broadus: Not that much change from that.
Barry M. Broadus: The previous six months or even longer than that.
Barry M. Broadus: We have as John mentioned plenty of capacity, we've paid down a lot of that so we're certainly.
Barry M. Broadus: Looking for that as we've done in past we certainly.
Barry M. Broadus: And depending upon the market, you know, valuations will fluctuate a little bit between some of the hotter markets versus some of the others. But, you know, we are very active and continue to look for acquisitions.
Barry M. Broadus: See the different markets that.
Barry M. Broadus: We plan and depending upon the market and valuations will fluctuate a little bit between some of the hotter markets versus some of the others, but.
Speaker Change: We are.
Barry M. Broadus: Very active and continue to look for acquisitions.
Marc Frye Riddick: Great. And then I just have one quick follow up.
Speaker Change: Great and then I just have one quick follow up I'll, just kind of wondering with.
Marc Frye Riddick: Sort of shifting economic landscape, I guess or forecasting relative to maybe where we began the year are you seeing any changes in the pace in.
Marc Frye Riddick: Of Rfps or are there any particular client verticals that you're noticing any shift of behavior.
Speaker Change: But we haven't had a chance to talk about yet thanks.
Marc Frye Riddick: I was kind of wondering with the sort of shifting economic landscape, I guess, or forecasting relative to maybe where we began the year, are you seeing any changes in the pace of RFPs? Or are there any particular client verticals that you're noticing any shifts in behavior that we haven't had a chance to talk about yet? I mean, I would say on the government.
John M. Wasson: I mean, I would say on the government side, you know, we really haven't seen a shift. I think we continue to see opportunities here. The offer, you know, the RFP flow, and proposal flow is good. The pipeline is at or near a record. Our bookability is very strong.
Marc Frye Riddick: I mean, I would say on the government side.
John M. Wasson: Really haven't seen a shift.
John M. Wasson: I think we continue to see.
John M. Wasson: Opportunities here.
John M. Wasson: The RFP flows proposal flow is good.
John M. Wasson: That line is at or near record our book to Bill is very strong and so on the government side I think it's.
John M. Wasson: And so on the government side, I think it's, you know, business as usual. I would say in the energy sector, or I think the results speak for themselves. I mean, you know, we had north of 20% revenue growth in our energy, environment, infrastructure, and disaster recovery market, and our commercial energy business had 34.34% in the first quarter. I mean, we're seeing tremendous opportunity there. I think I've said before, you know, we have our five key group drivers, but the key road divers that are in the energy, environment, and infrastructure areas.
John M. Wasson: Business as usual I would say in the.
John M. Wasson: Energy.
John M. Wasson: Climate.
John M. Wasson: Arena or.
John M. Wasson: I think the results speak for themselves.
John M. Wasson: We had north of 20% revenue growth in our energy environment and infrastructure and disaster recovery market.
John M. Wasson: Our commercial energy business with 34, 34% in the first quarter I mean, we're seeing tremendous opportunity there.
John M. Wasson: I think I've said before we have our five key growth drivers.
John M. Wasson: The key growth drivers that are in the energy environment infrastructure area. Those three are certainly coming to the fore and <unk>.
John M. Wasson: Those three are certainly coming to the fore, and there's significant economic activity and significant opportunity, cross-commercial, federal government, state, and local, and international. So, you know, in that area, I would say that we're, you know... It's a, it's, it's accelerating. Excellent. Thank you.
John M. Wasson: Significant economic activity and significant opportunity.
John M. Wasson: Across commercial.
John M. Wasson: Federal government state and local and international.
John M. Wasson: So that area I would say that we are.
John M. Wasson: It's a.
John M. Wasson: It's accelerating.
Marc Frye Riddick: Excellent. Thank you very much.
Speaker Change: Excellent. Thank you very much.
John M. Wasson: This concludes the question and answer session. I would now like to turn it back to CEO John Wasson for closing remarks.
Marc Frye Riddick: This.
Marc Frye Riddick: The question and answer session I would now like to turn it back to CEO, John Watson for closing remarks.
John M. Wasson: Okay, great. Thanks for participating in today's call. We look forward to connecting with you all at upcoming conferences and events. Thank you.
John M. Wasson: Okay, great. Thank you for participating in today's call. We look forward to connecting with you all at upcoming conferences and events. Thank you.
Operator: Thank you for your participation in this conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you for your participation in this conference. This does conclude the program you may now disconnect.
Operator: Okay.
Operator: [music].
Operator: Hum.
Operator: Yes.
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: Sure.
Operator: Okay.
Operator: Thanks.