ICF International (ICFI) Q4 2008 earnings summary

Executive summary

• FY08 revenue fell 4.1% YoY as Road Home activity declined, while core business organic growth exceeded 20%; acquisitions also expanded capabilities and markets.

• Record new sales, $817.3M total backlog and a ~$1.66B pipeline supported growth prospects, though Road Home’s scheduled June 2009 conclusion created a major revenue replacement challenge.

Financial highlights

• FY08 revenue was $697.4M, down 4.1% YoY; the $194.6M reduction in Road Home revenue was partly offset by acquisitions and $50.9M growth in other contracts.

• Operating earnings were $53.0M vs. $70.5M; net income was $28.7M vs. $40.6M; diluted EPS was $1.88 vs. $2.72.

• Q4 revenue was $161.9M vs. $186.4M YoY; operating earnings were $14.7M vs. $17.4M and net earnings were $6.1M vs. $9.6M.

• Operating cash flow was $28.0M vs. $45.5M; investing used $61.7M, primarily for acquisitions and capital expenditures.

Outlook and guidance

• Road Home revenue was expected to decline substantially in 2009 as the contract wound down and was scheduled to end in June; funded backlog included $60.3M tied to the program.

• Growth priorities included replacing Road Home revenue through organic growth and acquisitions, growing implementation services, and pursuing higher-margin commercial and fixed-price/time-and-materials work.

• Management expected demand opportunities in energy and climate change, infrastructure, social programs, and defense, while noting economic and budget uncertainty could delay or reduce client spending.