UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO TO

Commission File Number: 001-33045

ICF International, Inc.

(Exact name of Registrant as Specified in its Charter)


Delaware			22-3661438
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
	~~(I.R.S. Employer~~	~~Identification No.)~~
1902 Reston Metro Plaza, RestonVA
~~9300 Lee Highway, Fairfax, VA~~		~~22031~~20190
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s telephone number, including area code: ~~(703)~~ (703) 934-3000

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock	ICFI	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	~~Accelerated filer~~	☐
~~Non-accelerated filer~~	☐		~~Smaller reporting company~~	☐
Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of April ~~29, 2022,~~28, 2023, there were ~~18,793,455~~18,788,082 shares outstanding of the registrant’s common stock.

ICF INTERNATIONAL, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q FOR THE

PERIOD ENDED MARCH 31, ~~2022~~2023

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		3
	3

Item 1.	Financial Statements	3
	3

	Consolidated Balance Sheets at March 31, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	3
	3

	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	4
	4

	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	5
	5

	Notes to Consolidated Financial Statements	6
	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	29

Item 4.	Controls and Procedures	29
		29

PART II. OTHER INFORMATION		30
	30

Item 1.	Legal Proceedings	30
	30

Item 1A.	Risk Factors	30
	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	30

Item 3.	Defaults Upon Senior Securities	30
	30

Item 4.	Mine Safety Disclosures	30
	30

Item 5.	Other Information	30
	30

Item 6.	Exhibits	31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

~~Item 1.~~

~~Financial Statements~~

ICF International, Inc. and Subsidiaries

CONSOLIDATED ~~BALANCE~~BALANCE SHEETS
(UNAUDITED)


(in thousands, except share and per share amounts)	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	7,392		$	8,254		$	5,364		$	11,257
Restricted cash - current		1,681			12,179
Restricted cash								3,572			1,711
Contract receivables, net		205,827			237,684			221,066			232,337
Contract assets		189,147			137,867			188,093			169,088
Prepaid expenses and other assets		41,176			42,354			28,341			40,709
Income tax receivable		8,288			10,825			8,420			11,616
Total Current Assets		453,511			449,163			454,856			466,718
Property and Equipment, net		62,886			52,053			85,445			85,402
Other Assets:
Goodwill		1,045,503			1,046,760			1,213,908			1,212,898
Other intangible assets, net		74,274			79,645			116,430			126,537
Operating lease - right-of-use assets		172,133			177,417			150,511			149,066
Other assets		49,416			44,496			51,280			51,637
Total Assets	$	1,857,723		$	1,849,534		$	2,072,430		$	2,092,258

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	10,000		$	10,000		$	26,000		$	23,250
Accounts payable		95,706			105,652			109,854			135,778
Contract liabilities		31,491			39,665			25,771			25,773
Operating lease liabilities - current		30,530			34,901			16,124			19,305
Finance lease liabilities - current								2,400			2,381
Accrued salaries and benefits		94,931			85,517			61,428			85,991
Accrued subcontractors and other direct costs		40,165			39,400			43,109			45,478
Accrued expenses and other current liabilities		41,388			61,496			67,089			78,036
Total Current Liabilities		344,211			376,631			351,775			415,992
Long-term Liabilities:
Long-term debt		449,776			411,605			571,979			533,084
Operating lease liabilities - non-current		189,857			191,805			189,331			182,251
Finance lease liabilities - non-current								15,508			16,116
Deferred income taxes		47,684			41,913			69,343			68,038
Other long-term liabilities		22,893			24,110			27,805			23,566
Total Liabilities		1,054,421			1,046,064			1,225,741			1,239,047

Commitments and Contingencies (Note 19)
Commitments and Contingencies (Note 17)

Stockholders’ Equity:
Preferred stock, par value $.001; 5,000,000 shares authorized; NaN issued		—			—
Common stock, par value $.001; 70,000,000 shares authorized; 23,679,411 and 23,535,671 shares issued at March 31, 2022 and December 31, 2021, respectively; 18,793,455 and 18,876,490 shares outstanding at March 31, 2022 and December 31, 2021, respectively		23			23
Preferred stock, par value $.001; 5,000,000 shares authorized; none issued								—			—
Common stock, par value $.001; 70,000,000 shares authorized; 23,919,338 and 23,771,596 shares issued at March 31, 2023 and December 31, 2022, respectively; 18,788,082 and 18,883,050 shares outstanding at March 31, 2023 and December 31, 2022, respectively								24			23
Additional paid-in capital		388,639			384,984			405,818			401,957
Retained earnings		664,532			649,298			716,795			703,030
Treasury stock, 4,885,956 and 4,659,181 shares at March 31, 2022 and December 31, 2021, respectively		(241,516	)		(219,800	)
Treasury stock, 5,131,256 and 4,906,209 shares at March 31, 2023 and December 31, 2022 respectively								(266,481	)		(243,666	)
Accumulated other comprehensive loss		(8,376	)		(11,035	)		(9,467	)		(8,133	)
Total Stockholders’ Equity		803,302			803,470			846,689			853,211
Total Liabilities and Stockholders’ Equity	$	1,857,723		$	1,849,534		$	2,072,430		$	2,092,258

The accompanying notes are an integral part of these consolidated financial statements.

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands, except per share amounts)	2022			2021			2023			2022
Revenue	$	413,468		$	378,478		$	483,282		$	413,468
Direct costs		258,158			232,082			312,565			258,158
Operating costs and expenses:
Indirect and selling expenses		117,452			109,982			123,733			117,452
Depreciation and amortization		4,838			5,270			6,309			4,838
Amortization of intangible assets		5,317			3,015			9,224			5,317
Total operating costs and expenses		127,607			118,267			139,266			127,607

Operating income		27,703			28,129			31,451			27,703
Interest expense		(2,697	)		(2,683	)
Interest, net								(9,457	)		(2,627	)
Other expense		(369	)		(417	)		(558	)		(439	)
Income before income taxes		24,637			25,029			21,436			24,637
Provision for income taxes		6,775			6,678			5,038			6,775
Net income	$	17,862		$	18,351		$	16,398		$	17,862

Earnings per Share:
Basic	$	0.95		$	0.97		$	0.87		$	0.95
Diluted	$	0.94		$	0.96		$	0.87		$	0.94

Weighted-average Shares:
Basic		18,795			18,885			18,779			18,795
Diluted		19,012			19,118			18,949			19,012

Cash dividends declared per common share	$	0.14		$	0.14		$	0.14		$	0.14

Other comprehensive income, net of tax		2,659			2,780
Other comprehensive (loss) income, net of tax								(1,334	)		2,659
Comprehensive income, net of tax	$	20,521		$	21,131		$	15,064		$	20,521

The accompanying notes are an integral part of these consolidated financial statements.

ICF International, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands)	2022			2021			2023			2022
Cash Flows from Operating Activities
Net income	$	17,862		$	18,351		$	16,398		$	17,862
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
(Recovery of) provision for credit losses		(170	)		5,334
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) credit losses								567			(170	)
Deferred income taxes		4,505			1,838			2,187			4,505
Non-cash equity compensation		3,563			3,275			3,750			3,563
Depreciation and amortization		10,154			8,285			15,533			10,154
Facilities consolidation reserve		(78	)		(75	)		—			(78	)
Amortization of debt issuance costs		154			155			326			154
Impairment of long-lived assets		—			303			894			—
Other adjustments, net		353			457			(827	)		353
Changes in operating assets and liabilities, net of the effects of acquisitions:
Net contract assets and liabilities		(59,689	)		(19,750	)		(18,716	)		(59,689	)
Contract receivables		31,473			2,531			10,929			31,473
Prepaid expenses and other assets		(11,708	)		2,016			15,353			(11,708	)
Operating lease assets and liabilities, net		(532	)		(1,143	)		1,016			(532	)
Accounts payable		(9,815	)		(354	)		(26,083	)		(9,815	)
Accrued salaries and benefits		9,513			4,715			(24,678	)		9,513
Accrued subcontractors and other direct costs		1,078			(33,466	)		(2,613	)		1,078
Accrued expenses and other current liabilities		(6,883	)		8,303			(14,688	)		(6,883	)
Income tax receivable and payable		2,621			3,924			3,192			2,621
Other liabilities		544			262			629			544
Net Cash (Used in) Provided by Operating Activities		(7,055	)		4,961
Net Cash Used in Operating Activities								(16,831	)		(7,055	)

Cash Flows from Investing Activities
Capital expenditures for property and equipment and capitalized software		(6,454	)		(3,595	)		(6,441	)		(6,454	)
Payments for business acquisitions, net of cash acquired								(459	)		—
Net Cash Used in Investing Activities								(6,900	)		(6,454	)

Cash Flows from Financing Activities
Advances from working capital facilities		329,690			185,755			334,995			329,690
Payments on working capital facilities		(291,662	)		(174,674	)		(293,640	)		(291,662	)
Other short-term borrowings								2,483			—
Receipt of restricted contract funds		4,301			451			2,916			4,301
Payment of restricted contract funds		(14,714	)		(27,081	)		(1,131	)		(14,714	)
Payments of principal portion of finance leases								(590	)		—
Proceeds from exercise of options		92			2,702			111			92
Dividends paid		(2,644	)		(2,642	)		(2,641	)		(2,644	)
Net payments for stock issuances and buybacks		(22,268	)		(17,104	)		(22,815	)		(22,268	)
Payments on business acquisition liabilities		(121	)		(682	)		—			(121	)
Net Cash Provided by (Used in) Financing Activities		2,674			(33,275	)
Net Cash Provided by Financing Activities								19,688			2,674
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		(525	)		745			11			(525	)

Decrease in Cash, Cash Equivalents, and Restricted Cash		(11,360	)		(31,164	)		(4,032	)		(11,360	)
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period		20,433			81,987			12,968			20,433
Cash, Cash Equivalents, and Restricted Cash, End of Period	$	9,073		$	50,823		$	8,936		$	9,073

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$	2,760		$	2,637		$	5,924		$	2,760
Income taxes	$	949		$	961		$	914		$	949
Non-cash investing and financing transactions:
Tenant improvements funded by lessor	$	10,843		$	—		$	—		$	10,843

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

(Unaudited)

(dollar amounts in tables in thousands, except share and per share data)

NOTE 1 -– BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ICF International, Inc. (“ICFI”) and its principal subsidiary, ICF Consulting Group, Inc. (“Consulting,” and together with ICFI, the “Company”), and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). Consulting is a wholly owned subsidiary of ICFI. ICFI is a holding company with no operations or assets other than its investment in the common stock of Consulting. All other subsidiaries of the Company are wholly owned by Consulting. ~~All significant~~Material intercompany transactions and balances have been eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions, ~~to government and commercial clients,~~ including management, marketing, technology, and policy consulting and implementation services, in the areas of energy, environment, infrastructure and ~~infrastructure;~~disaster recovery; health ~~education,~~ and social programs; ~~safety~~ and ~~security;~~security and ~~consumer and financial.~~other civilian/commercial. The Company offers a full range of services to ~~these~~ clients throughout the entire life cycle of a policy, program, project, or initiative, from research and analysis, ~~and~~ assessment, and advice to design and implementation of programs and technology-based solutions, and the provision of engagement services and programs.

The Company’s major ~~clients~~customers are U.S. federal government departments and ~~agencies, most significantly the Department of Health and Human Services, Department of State, and Department of Defense.~~agencies. The Company also serves U.S. state (including territories) and local government departments and agencies, international governments, and commercial clients worldwide. Commercial clients include airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, transportation, travel and hospitality firms, ~~non-profits/~~non-profit associations, manufacturing firms, retail chains, and distribution companies. The term “federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and local government” refers to U.S. state (including territories) and local governments, unless otherwise indicated.

The Company, incorporated in Delaware, is headquartered in ~~Fairfax,~~Reston, Virginia. The Company maintains additional offices throughout the world, including ~~over~~ more than 50 offices in the U.S. and U.S. territories and more than 20 offices in key markets outside the U.S., including offices in the United Kingdom, Belgium, ~~China,~~ India, and Canada.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Areas of the consolidated financial statements where estimates may have the most significant effect include contractual and regulatory reserves, valuation and lives of tangible and intangible assets, ~~contingent consideration related to business acquisitions,~~ impairment of goodwill and long-lived assets, accrued liabilities, revenue recognition (including estimates of variable considerations in determining the total contract price and allocation of performance obligations), the remaining costs to complete fixed-price contracts, bonus and other incentive compensation, stock-based compensation, reserves for tax benefits and valuation allowances on deferred tax assets, provisions for income taxes, collectability of receivables, and loss accruals for litigation. Actual results experienced by the Company may differ from management's estimates.

Interim Results

The unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These rules and regulations permit some of the information and footnote disclosures normally included in financial statements, prepared in accordance with U.S. GAAP, to be condensed or omitted. In management’s opinion, the unaudited consolidated financial statements contain all adjustments that are of a normal recurring nature, necessary for a fair presentation of the results of operations and financial position of the Company for the interim periods presented. The Company reports operating results and financial data in 1one operating segment and reporting unit. Operating results for the three months periods ended March 31, ~~2022~~2023 and ~~2021~~2022 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, ~~2021~~2022 and the notes thereto included in the Company’s Annual Report on Form 10-K, filed with the SEC on ~~February 25, 2022 (the “Annual Report”).~~March 1, 2023.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease ~~the~~accounting and financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The provisions of this ASU are elective and apply to all entities, subject to meeting certain criteria, that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ~~The Company~~Entities can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. Also, ~~the Company~~entities can elect various optional expedients that would allow it to continue to apply hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. This guidance was effective beginning on March 12, 2020 and ~~the Company~~entities may elect to apply the amendments prospectively through December 31, ~~2022. The Company is currently evaluating~~2022, the ~~impact~~sunset date. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the ~~transition~~Sunset Date of Topic 848 that extended the sunset date from ~~LIBOR~~December 31, 2022 to ~~alternative reference~~December 31, 2024.

As of March 31, 2023, the Company has one interest ~~rates~~rate swap contract with a variable interest rate that references LIBOR. The contract expires on August 31, 2023.

Reclassification

Certain immaterial amounts in the consolidated statements of comprehensive income have been reclassified to conform to the current year’s presentation. To be consistent with the current presentation of interest, net, the Company reclassified $0.1 million in interest income for the ~~current Credit Facility (see Note 7—Long-Term Debt) and the related interest rate hedges (see Note 9—Derivative Instruments and Hedging Activities) but does not expect a significant impact~~three months ended March 31, 2022 from “Other expense” to ~~its operating results, financial position, or cash flows.~~“Interest, net”.

NOTE 2 – RESTRICTED CASH

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets for the periods presented to the total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


	March 31, 2023				March 31, 2022
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	11,257	$	5,364	$	8,254	$	7,392
Restricted cash		1,711		3,572		12,179		1,681
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	12,968	$	8,936	$	20,433	$	9,073

March 31, 2022

March 31, 2021

Beginning

Ending

Beginning

Ending

Cash and cash equivalents

$
8,254

$
7,392

$
13,841

$
8,592

Restricted cash - current ⁽¹⁾

12,179

1,681

68,146

42,231

Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows

$
20,433

$
9,073

$
81,987

$
50,823

~~(1)~~

Under a contract with a customer that commenced in the fourth quarter of fiscal year 2020, the Company received advance payments to be used to pay providers of services to the customer, a separate third-party. The advanced payments are treated as restricted cash - current as the Company is required under the contract to distribute the advanced funds to the third-party providers of services or return the advanced funds to the customer. Because the Company receives the advance payments from the customer, which must be refunded to the customer or remitted to a third party, the cash receipts are treated as borrowings rather than receipts for the provision of goods or services. Therefore, these cash receipts are presented in the consolidated statements of cash flows as financing cash inflows, “Receipt of restricted contract funds” with the subsequent payments classified as financing cash outflows, “Payment of restricted contract funds.” See Note 6 – Accrued Expenses and Other Current Liabilities for the corresponding liability.

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following:


	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Billed and billable	$	211,827		$	245,425		$	227,589		$	238,449
Allowance for expected credit losses		(6,000	)		(7,741	)		(6,523	)		(6,112	)
Contract receivables, net	$	205,827		$	237,684		$	221,066		$	232,337

On December 23, 2022, the Company entered into a Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”) for the sale from time to time of certain eligible billed receivables. The purchase price of each receivable is equal to the net invoice amount minus a specified discount. The receivables are sold without recourse and the Company does not retain any ongoing financial interest in the transferred receivables other than providing servicing activities. The Company accounts for the transfers as sales under ASC 860, Transfers and Servicing, derecognizes the receivables from its consolidated balance sheets at the date of the sale, and includes the cash received from MUFG as part of cash flows from operating activities on its consolidated statement of cash flows.

During the three months ended March 31, 2023, the Company sold $28.6 million in billed receivables to MUFG. At March 31, 2023 and December 31, 2022, the Company had $13.2 million and $6.2 million, respectively, in cash collections from previously sold invoices to be remitted to MUFG which is included as part of “accrued expenses and other current liabilities” on the consolidated balance sheets.

NOTE 4 – ~~GOODWILL~~LEASES

~~The changes in the carrying amount of goodwill during the three-months period ended March 31, 2022 were as follows:~~

Balance as of December 31, 2021

$
1,046,760

Measurement period adjustments - ESAC acquisition

87

Measurement period adjustments - Creative Systems and Consulting acquisition

(1
)
Effect of foreign currency translation

(1,343
)
Balance as of March 31, 2022

$
1,045,503

~~NOTE 5 – LEASES~~

The Company has operating and finance leases for facilities and equipment which have remaining terms ranging from 1 to ~~17 years.~~ 16 years. The leases may include options to extend the lease periods for up to 5 years at rates approximating market rates and/or options to terminate the leases within 1 ~~year.~~ year. The leases may include a residual value guarantee or a responsibility to return the property to its original state of use. A limited number of leases contain provisions that provide for rental increases based on consumer price indices. The change in ~~rent expense~~lease cost resulting from changes in these indices ~~are~~is included within variable ~~rent.~~lease cost.

The Company’s lease cost is recognized on a straight-line basis over the lease term. Lease cost consists of the following:


	Three Months Ended
	March 31, 2023			March 31, 2022
Operating lease cost	$	6,489		$	9,502
Finance lease cost - amortization of right-of-use assets		494			—
Finance lease cost - interest		152			—
Short-term lease cost		149			133
Variable lease cost		55			20
Sublease income		(28	)		(10	)
Total lease cost	$	7,311		$	9,645

Three Months Ended

March 31, 2022

March 31, 2021

Operating lease cost

$
9,502

$
8,793

Short-term lease cost

133

131

Variable lease cost

20

10

Sublease income

(10
)

—

Total lease cost

$
9,645

$
8,934

Future minimum lease payments under non-cancellable operating and finance leases as of March 31, ~~2022~~2023 were as follows:


	Operating			Finance
March 31, 2024	$	18,582		$	2,967
March 31, 2025		28,674			2,967
March 31, 2026		26,939			2,967
March 31, 2027		23,322			2,967
March 31, 2028		17,024			2,967
Thereafter		139,443			5,192
Total future minimum lease payments		253,984			20,027
Less: Interest		(48,529	)		(2,119	)
Total lease liabilities	$	205,455		$	17,908

March 31, 2023

$
33,057

March 31, 2024

20,984

March 31, 2025

23,628

March 31, 2026

21,643

March 31, 2027

20,369

Thereafter

152,425

Total future minimum lease payments

272,106

Less: Interest

(51,719
)
Total operating lease liabilities

$
220,387

Operating lease liabilities - current

$
30,530

Operating lease liabilities - non-current

189,857

Total operating lease liabilities

$
220,387

Other information related to operating and finance leases is as follows:


	March 31, 2023			March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows for operating leases	$	4,982		$	10,110
Operating cash outflows for finance leases		152			—
Financing cash outflows for finance leases		590			—
Right-of-use assets obtained in exchange for operating lease liabilities	$	8,900		$	2,952
Weighted-average remaining lease term
Operating leases		11.6			11.5
Finance leases		6.8			—
Weighted-average discount rate
Operating leases		3.5	%		3.2	%
Finance leases		3.4	%		—

March 31, 2022

March 31, 2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
10,110

$
4,130

Right-of-use assets obtained in exchange for operating lease liabilities

$
2,952

$
142

Weighted-average remaining lease term - operating leases

11.5

5.8

Weighted-average discount rate - operating leases

3.2
%

3.4
%

NOTE 65 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, accrued expenses and other current liabilities consisted of the following:


	March 31, 2023		December 31, 2022
Deposits	$	22,792	$	32,384
Restricted contract funds		3,562		1,701
IT and software licensing costs		1,285		1,609
Taxes and insurance premiums		4,834		6,633
Facilities rental and lease exit costs		1,846		2,043
Interest		3,661		363
Professional services		2,958		3,617
Dividends		2,623		2,631
Cash collected not yet remitted to purchaser of billed receivables		13,225		6,164
Other accrued expenses and current liabilities		10,303		20,891
Total accrued expenses and other current liabilities	$	67,089	$	78,036

March 31, 2022

December 31, 2021

Deposits
$
21,162

$
21,088

Restricted contract funds

1,668

12,165

Accrued IT and software licensing costs

1,231

1,702

Accrued taxes and insurance premiums

3,632

5,267

Accrued facilities rental and lease exit costs

1,027

1,291

Accrued interest

171

212

Accrued professional services

2,363

3,068

Accrued dividends

2,627

2,643

Contingent and contractual liabilities from acquisitions

1,212

1,245

Interest rate swap liability - current

508

3,026

Forward contract agreements liability - current

182

—

Other accrued expenses and current liabilities

5,605

9,789

Total accrued expenses and other current liabilities
$
41,388

$
61,496

NOTE 76 – LONG-TERM DEBT

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, long-term debt consisted of:

March 31, 2022

December 31, 2021

Average
Interest Rate

Outstanding
Balance

Average
Interest Rate

Outstanding
Balance

Term Loan

$
180,000

$
182,500

Revolving Credit

281,583

241,055

Total before debt issuance costs

1.40%

461,583

1.65%

423,555

Unamortized debt issuance costs

(1,807
)

(1,950
)

$
459,776

$
421,605

Current portion of long-term debt

$
10,000

$
10,000

Long-term debt - non-current

449,776

411,605

$
459,776

$
421,605

~~On March 3, 2020, the Company entered into the First Amendment (the “First Amendment”) to the Fifth Amended and Restated Business Loan and Security Agreement with a group of~~ 10 ~~commercial banks (the “Credit Facility”). The First Amendment amended the Fifth Amended and Restated Business Loan and Security Agreement to, among other things,~~ ~~(i)~~ add a new term loan facility in the original principal amount of $200.0 million; (ii) increase the swing line commitment amount by $25.0 million to $75.0 million; (iii) extend the maturity date; and (iv) modify certain definitions and certain covenants. ~~As a result, the Credit Facility now consists of (i)~~ a term loan facility of $200.0 million; (ii) a revolving line of credit of up to $600.0 million with additional revolving credit commitments of up to $300.0 million, subject to lenders’ approval (the “Accordion”); and (iii) a sub-limit of $75.0 million for swing line loans. The Credit Facility matures on March 3, 2025.

The Company has the option to borrow funds under the Credit Facility at interest rates based on both LIBOR (1, 3, or 6-month rates) and the Base Rate (as defined herein), at its discretion, plus their applicable margins. Base Rates are fluctuating per annum rates of interest equal to the highest of (i) the Overnight Bank Funding Rate, plus 0.5%, (ii) the Prime Rate (as defined under the Credit Facility) and (iii) the daily LIBOR rate, plus a LIBOR margin between 1.00% and 2.00% based on its Leverage Ratio (as defined under the Credit Facility). The interest accrued based on LIBOR rates is to be paid on the last business day of the interest period (1, 3, or 6 months), while interest accrued based on the Base Rate is to be paid in quarterly installments. The Credit Facility also provides for letters of credit aggregating up to $60.0 million which reduce the funds available under the Credit Facility when issued. The unused portion of the Credit Facility is subject to a commitment fee between 0.13% and 0.25% per annum based on the Leverage Ratio.

The Credit Facility is collateralized by substantially all the assets of the Company and requires that the Company remain in compliance with certain financial and non-financial covenants. The financial covenants require, among other things, that the Company maintain at all times an Interest Coverage Ratio (as defined under the Credit Facility) of not less than 3.00 to 1.00 and a Leverage Ratio of not more than 4.00 to 1.00 (subject to a step-up to 4.25 to 1.0 for a four quarter period following permitted acquisitions as

~~defined under the Credit Facility)~~


	March 31, 2023				December 31, 2022
	Average Interest Rate	Outstanding Balance			Average Interest Rate	Outstanding Balance
Term Loan		$	285,000			$	288,750
Delayed-Draw Term Loan			220,000				220,000
Revolving Credit			97,721				52,616
Total before debt issuance costs	6.3%		602,721		3.3%		561,366
Unamortized debt issuance costs			(4,742	)			(5,032	)
Total		$	597,979			$	556,334

~~for each fiscal quarter.~~ As of March 31, 2022, the Company was in compliance with its covenants under the Credit Facility. The Credit Facility also has a conforming dividend covenant that allows the Company to pay dividends as long as it remains in compliance with the financial covenants set forth in the Credit Facility.

~~As of March 31, 2022,~~2023, the Company had ~~$461.6 million of long-term debt outstanding from the Credit Facility (including the~~unused delayed draw term loan ~~of $180.0~~facility $180.0 million ~~exclusive of unamortized debt issuance costs of $1.8 million),~~(available through May 6, 2023, with an additional six-month extension upon request by the Company) and unused borrowing capacity under the ~~$600.0~~$600.0 million revolving line of credit of ~~$315.1~~$499.6 millionunder the Credit Facility. The unused borrowing capacity is inclusive of 9 outstanding letters of credit totaling ~~$3.3~~$2.7 million. ~~Taking into account~~Considering the financial, performance-based limitations, available borrowing capacity ~~(excluding the Accordion and the term loan)~~ was $~~250.4~~403.5 million as of March 31, 2023. The average interest rate on borrowings under the Credit Facility was 6.3% for the three-months period ended March 31, 2023 and 3.3% for the twelve-months period ended December 31, 2022. Inclusive of the impact of floating-to-fixed interest rate swaps (see “Note 8 — Derivative Instruments and Hedging Activities”), the average interest rate was 5.5% for the three-months period ended March 31, 2023 and 3.7% for the twelve-months period ended December 31, 2022.

Future scheduled repayments of debt principal are as follows:


Payments due by	Term Loan		Delayed-Draw Term Loan		Revolving Credit		Total
March 31, 2024	$	15,000	$	11,000	$	—	$	26,000
March 31, 2025		15,000		11,000		—		26,000
March 31, 2026		22,500		16,500		—		39,000
March 31, 2027		22,500		16,500		—		39,000
May 6, 2027 (Maturity)		210,000		165,000		97,721		472,721
Total	$	285,000	$	220,000	$	97,721	$	602,721

Payments due by

Term Loan

Revolving Credit

Total

March 31, 2023

$
10,000

$
—

$
10,000

March 30, 2024

15,000

—

15,000

March 3, 2025 (Maturity)

155,000

281,583

436,583

Total

$
180,000

$
281,583

$
461,583

NOTE 87 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market, client type, and contract mix. Client markets provide insight into the breadth of the Company’s expertise. In classifying revenue by client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market. The Company also classifies revenue by the type of entity for which it does business, which is an indicator of the diversity of its client base. The Company attributes revenue generated as a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Disaggregation by contract mix provides insight in terms of the degree of performance risk that the Company has assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contracts for negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance ~~requirements~~requirements..

Changes in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 were driven primarily by an increase of $39.4 million and $6.2 million from U.S. federal government’s health, education, and social programs and energy, environment, and infrastructure client markets, respectively, $7.4 million and $0.5 million from U.S. state and local government’s health, education, and social programs and energy, environment, and infrastructure client markets, respectively, and $1.7 million from international government’s health, education, and social programs client market, offset by decreases of $11.1 million and $0.6 million from international government’s energy, environment, and infrastructure and safety and security client markets, respectively, $3.5 million, $2.6 million, and $1.2 million from commercial consumer and financial, energy, environment, and infrastructure, and health, education, and social programs client markets, respectively, and $1.2 million from U.S. federal government safety and security client market.

Three Months Ended March 31,

2022

2021

Dollars

Percent

Dollars

Percent

Client Markets:

Energy, environment, and infrastructure

$
156,644

38
%

$
163,582

43
%

Health, education, and social programs

205,532

50
%

158,268

42
%

Safety and security

29,400

7
%

31,198

8
%

Consumer and financial

21,892

5
%

25,430

7
%

Total

$
413,468

100
%

$
378,478

100
%

Three Months Ended March 31,

2022

2021

Dollars

Percent

Dollars

Percent

Client Type:

U.S. federal government

$
220,343

53
%

$
175,985

46
%

U.S. state and local government

64,833

16
%

56,878

15
%

International government

26,720

6
%

36,746

10
%

Total Government

311,896

75
%

269,609

71
%

Commercial

101,572

25
%

108,869

29
%

Total

$
413,468

100
%

$
378,478

100
%


	Three Months Ended March 31,
	2023					2022
	Dollars		Percent			Dollars		Percent
Client Markets:
Energy, environment, infrastructure, and disaster recovery	$	187,396		39	%	$	169,028		41	%
Health and social programs		203,698		42	%		156,057		38	%
Security and other civilian & commercial		92,188		19	%		88,383		21	%
Total	$	483,282		100	%	$	413,468		100	%


	Three Months Ended March 31,
	2023					2022
	Dollars		Percent			Dollars		Percent
Client Type:
U.S. federal government	$	267,742		55	%	$	219,044		53	%
U.S. state and local government		74,933		16	%		66,117		16	%
International government		20,669		4	%		27,377		7	%
Total Government		363,344		75	%		312,538		76	%
Commercial		119,938		25	%		100,930		24	%
Total	$	483,282		100	%	$	413,468		100	%


	Three Months Ended March 31,
	2023					2022
	Dollars		Percent			Dollars		Percent
Contract Mix:
Time-and-materials	$	200,990		42	%	$	164,968		40	%
Fixed price		219,016		45	%		184,012		44	%
Cost-based		63,276		13	%		64,488		16	%
Total	$	483,282		100	%	$	413,468		100	%

Three Months Ended March 31,

2022

2021

Dollars

Percent

Dollars

Percent

Contract Mix:

Time-and-materials

$
165,084

40
%

$
159,836

42
%

Fixed price

183,896

44
%

147,469

39
%

Cost-based

64,488

16
%

71,173

19
%

Total

$
413,468

100
%

$
378,478

100
%

Contract Balances:

Contract assets consist primarily of unbilled amounts resulting from long-term contracts when revenue recognized exceeds the amount billed often due to billing schedule timing. Contract liabilities result from advance payments received on a contract or from billings in excess of revenue recognized on long-term contracts due to billing schedule timing.

The following table summarizes the contract balances as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

March 31, 2022

December 31, 2021

$ Change

% Change

Contract assets

$
189,147

$
137,867

$
51,280

37.2
%
Contract liabilities

(31,491
)

(39,665
)

8,174

(20.6
%)
Net contract assets (liabilities)

$
157,656

$
98,202

$
59,454

60.5
%


	March 31, 2023			December 31, 2022
Contract assets	$	188,093		$	169,088
Contract liabilities		(25,771	)		(25,773	)
Net contract assets (liabilities)	$	162,322		$	143,315

The net contract assets (liabilities) as of March 31, ~~2022~~2023 increased by ~~$59.5~~$19.0 million as compared to December 31, ~~2021.~~2022. The increase in net contract assets (liabilities) is primarily due to the timing difference between the performance of services and billings to and payments from customers. There were no material changes to contract balances due to impairments or credit losses during the period. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$20.9~~$14.2 million and ~~$15.1~~$20.9 million in revenue related to the contract liabilities balance at December 31, 2022 and 2021, ~~and 2020,~~ respectively.

Performance Obligations:

The Company had ~~$1.1~~$1.4 billion in unfulfilled performance obligations as of March 31, ~~2022~~2023 which primarily ~~entail~~reflects the future delivery of services for which revenue will be recognized over time. The obligations relate to continued or additional services required on ~~non-cancelable~~ contracts, including those that are either non-cancellable or have substantive termination penalties, and were generally valued using an estimated cost-plus margin approach, with variable consideration being estimated at the most likely amount. The amounts exclude marketing offers, which are negotiated but unexercised contract options and indefinite delivery/indefinite quantity (IDIQ) and similar arrangements that provided a framework for customers to issue specific tasks, delivery, or purchase orders in the future. The Company expects to satisfy these performance obligations ~~on average,~~ in ~~one to~~ approximately two ~~years.~~years.

NOTE 9 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses interest rate swap ~~arrangements (the “Swaps”)~~agreements to manage or hedge its interest rate ~~risk.~~risk under the Credit Facility. Notwithstanding the terms of the ~~Swaps,~~swaps, the Company is ultimately obligated for all amounts due and payable under the Credit Facility. The ~~Company does not use such instruments for speculative or trading purposes.~~

~~The Company designated the Swaps as cash flow hedges. Derivative~~derivative instruments are recorded on the consolidated balance sheets at fair value. Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income (loss) ~~(“AOCI”)~~ and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged

transactions. Management intends that the Swaps remain effective and, on a quarterly basis, evaluates them to determine their effectiveness or ineffectiveness and records the change in fair value as an adjustment to other comprehensive income or loss. The Company does not use derivative instruments for speculative or trading purposes.

~~A summary of~~At March 31, 2023, the Company had floating-to-fixed interest rate ~~swap derivatives~~swaps (the “Swaps”) for an aggregate notional amount of $275.0 million, of which $100.0 million will mature on August 31, 2023, $100.0 million will mature on February 28, 2025, and $75.0 million will mature on February 28, 2028. The Company designated the Swaps as cash flow ~~hedges as of March 31, 2022 are as follows:~~hedges.

Dates of Effected Cash Flows
Date of Interest Rate Swap Agreement

Notional
Amount
($million)

Paid
Fixed
Interest
Rate%

Beginning

Ending
September 30, 2016 ⁽¹⁾

$
100.0

-

January 31, 2018

January 31, 2023
August 31, 2017

$
25.0

1.8475%

August 31, 2018

August 31, 2023
August 8, 2018

$
50.0

2.8540%

August 31, 2018

August 31, 2023
August 8, 2018

$
25.0

2.8510%

August 31, 2018

August 31, 2023
February 20, 2020

$
100.0

1.2940%

��
February 28, 2020

February 28, 2025

~~(1)~~

On December 1, 2016, the Company sold the interest rate hedge agreement. The fair value of the interest rate hedge, as of the date of the sale, was recorded in other comprehensive income, net of tax. The gain from the sale will be recognized into earnings when earnings are impacted by the cash flows of the previously hedged variable interest rate.

NOTE 10 9 – INCOME TAXES

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 23.5% and ~~2021 was 27.5% and 26.7%~~27.5%, respectively.

The Company is subject to federal income tax as well as taxes in various state, local and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company’s ~~2018~~2019 through ~~2020~~2021 tax years remain subject to examination by the Internal Revenue Service for federal tax purposes. Certain significant state, local and foreign tax returns also remain open under the applicable statute of limitations and, as such, are subject to examination for the tax years from ~~2017~~2018 to ~~2020.~~

~~The total amount of~~ ~~unrecognized tax benefits as of March 31, 2022 and~~ 2021 ~~was $0.5 million and $0.7 million, respectively, that would impact the effective tax rate if recognized.~~

The Company’s policy is not to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. The Company did 0t have any accrued penalty and interest at March 31, 2022 and 2021, respectively.

The Company has made no provision for deferred U.S. income taxes or additional foreign taxes on future unremitted earnings of its controlled foreign subsidiaries because the Company considers these earnings to be permanently invested.

Pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Company exercised the option to defer payment of the employer portion of the Social Security tax, with 50% to be repaid by December 31, 2021 and the remainder by December 31, 2022. The Company deferred payment of approximately $20.9 million of employer Social Security taxes during the year ended December 31, 2020 and repaid 50% during the third quarter of 2021. As of March 31, 2022 the remaining deferred payment is included in accrued salaries and benefits in the Company’s consolidated balance sheets.

NOTE 1110 – ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss as of March 31, ~~2022~~2023 and ~~2021~~2022 included the following:


	Three Months Ended March 31, 2023
	Foreign Currency Translation Adjustments			Gain on Sale of Interest Rate Hedge Agreement (1)			Change in Fair Value of Interest Rate Hedge Agreements (2)			Total
Accumulated other comprehensive (loss) income at December 31, 2022	$	(14,056	)	$	41		$	5,882		$	(8,133	)
Current period other comprehensive (loss) income:
Other comprehensive (loss) income before reclassifications		1,753			—			(2,532	)		(779	)
Amounts reclassified from accumulated other comprehensive (loss) income (3)		—			(60	)		(1,360	)		(1,420	)
Effect of taxes (4)		(192	)		19			1,038			865
Total current period other comprehensive (loss) income		1,561			(41	)		(2,854	)		(1,334	)
Accumulated other comprehensive (loss) income at March 31, 2023	$	(12,495	)	$	—		$	3,028		$	(9,467	)


	Three Months Ended March 31, 2022
	Foreign Currency Translation Adjustments			Gain on Sale of Interest Rate Hedge Agreement (1)			Change in Fair Value of Interest Rate Hedge Agreement (2)			Total
Accumulated other comprehensive (loss) income at December 31, 2021	$	(8,759	)	$	569		$	(2,845	)	$	(11,035	)
Current period other comprehensive (loss) income:
Other comprehensive (loss) income before reclassifications		(2,304	)		—			5,509			3,205
Amounts reclassified from accumulated other comprehensive (loss) income (3)		—			(180	)		902			722
Effect of taxes (4)		363			48			(1,679	)		(1,268	)
Total current period other comprehensive (loss) income		(1,941	)		(132	)		4,732			2,659
Accumulated other comprehensive (loss) income at March 31, 2022	$	(10,700	)	$	437		$	1,887		$	(8,376	)

Three Months Ended March 31, 2022

Foreign
Currency
Translation
Adjustments

Gain on Sale
of Interest
Rate Hedge
Agreement ⁽¹⁾

Change in
Fair Value of
Interest Rate
Hedge
Agreements ⁽²⁾

Total

Accumulated other comprehensive (loss) income at December 31, 2021

$
(8,759
)

$
569

$
(2,845
)

$
(11,035
)
Current period other comprehensive (loss) income:

Other comprehensive (loss) income before reclassifications

(2,304
)

—

5,509

3,205

Amounts reclassified from accumulated other comprehensive (loss) income ⁽³⁾

—

(180
)

902

722

Effect of taxes⁽⁴⁾

363

48

(1,679
)

(1,268
)
Total current period other comprehensive (loss) income

(1,941
)

(132
)

4,732

2,659

Accumulated other comprehensive (loss) income at March 31, 2022

$
(10,700
)

$
437

$
1,887

$
(8,376
)
(1)

Represents the unamortized value of an interest rate hedge agreement, designated as a cash flow hedge, which was sold on December 1, 2016. The fair value of the interest rate hedge agreement, at the date of the sale, was recorded in other comprehensive income, net of tax, and is being reclassified to interest expense when earnings are impacted by the hedged items and as interest payments are made on the Credit Facility from January 31, 2018 to January 31, 2023.

(2)

Represents the change in fair value of interest rate hedge agreements designated as cash flow hedges. The fair value of the interest rate hedge agreements was recorded in other comprehensive income, net of tax, and will be reclassified to earnings when earnings are impacted by the hedged items, as interest payments are made on the Credit Facility from August 31, 2018 to February 28, 2025 (see “Note 8 — Derivative Instruments and Hedging Activities”).

(3)

The Company expects to reclassify $4.8 million of net gains related to the Change in Fair Value of Interest Rate Hedge Agreement from accumulated other comprehensive loss into earnings during the next 12 months.

(4)

The Company’s effective tax rate for the three months ended March 31, 2023 and 2022 was 23.5% and 27.5%, respectively.

Three Months Ended March 31, 2021

Foreign
Currency
Translation
Adjustments

Gain on Sale
of Interest
Rate Hedge
Agreement ⁽¹⁾

Change in
Fair Value of
Interest Rate
Hedge
Agreement ⁽²⁾

Total

Accumulated other comprehensive (loss) income at December 31, 2020

$
(7,210
)

$
1,096

$
(7,992
)

$
(14,106
)
Current period other comprehensive income (loss):

Other comprehensive income before reclassifications

968

—

1,882

2,850

Amounts reclassified from accumulated other comprehensive (loss) income ⁽³⁾

—

(180
)

907

727

Effect of taxes⁽⁴⁾

(104
)

49

(742
)

(797
)
Total current period other comprehensive income (loss)

864

(131
)

2,047

2,780

Accumulated other comprehensive (loss) income at March 31, 2021

$
(6,346
)

$
965

$
(5,945
)

$
(11,326
)

~~(1)~~

~~(2)~~

Represents the change in fair value of interest rate hedge agreements designated as a cash flow hedges. The fair value of the interest rate hedge agreements was recorded in other comprehensive income, net of tax, and will be reclassified to earnings when earnings are impacted by the hedged items, as interest payments are made on the Credit Facility from August 31, 2018 to February 28, 2025 ~~(see Note 9—Derivative Instruments and Hedging Activities).~~

~~(3)~~

The Company expects to reclassify $0.6 million net gains related to the Gain on Sale of Interest Rate Hedge Agreement and $0.5 million net losses related to the Change in Fair Value of Interest Rate Hedge Agreement from accumulated other comprehensive loss into earnings during the next 12 months.

~~(4)~~

~~The Company’s effective tax rate for the three months ended March 31, 2022 and 2021 was 27.5% and 26.7%, respectively.~~

NOTE 1211 – STOCKHOLDERS’ EQUITY

Changes in stockholders’ equity for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are as follows:


	Three Months Ended March 31, 2023
	Common Stock					Additional Paid-in		Retained			Treasury Stock					Accumulated Other Comprehensive
	Shares			Amount		Capital		Earnings			Shares		Amount			Loss			Total
Balance at December 31, 2022		18,883		$	23	$	401,957	$	703,030			4,906	$	(243,666	)	$	(8,133	)	$	853,211
Net income		—			—		—		16,398			—		—			—			16,398
Other comprehensive loss		—			—		—		—			—		—			(1,334	)		(1,334	)
Equity compensation		—			—		3,750		—			—		—			—			3,750
Exercise of stock options		4			—		111		—			—		—			—			111
Issuance of shares pursuant to vesting of restricted stock units		126			1		—		—			—		—			—			1
Payments for stock buybacks		(225	)		—		—		—			225		(22,815	)		—			(22,815	)
Dividends declared		—			—		—		(2,633	)		—		—			—			(2,633	)
Balance at March 31, 2023		18,788		$	24	$	405,818	$	716,795			5,131	$	(266,481	)	$	(9,467	)	$	846,689


	Three Months Ended March 31, 2022
	Common Stock					Additional Paid-in		Retained			Treasury Stock					Accumulated Other Comprehensive
	Shares			Amount		Capital		Earnings			Shares		Amount			Loss			Total
Balance at December 31, 2021		18,876		$	23	$	384,984	$	649,298			4,659	$	(219,800	)	$	(11,035	)	$	803,470
Net income		—			—		—		17,862			—		—			—			17,862
Other comprehensive income		—			—		—		—			—		—			2,659			2,659
Equity compensation		—			—		3,563		—			—		—			—			3,563
Exercise of stock options		4			—		92		—			—		—			—			92
Issuance of shares pursuant to vesting of restricted stock units		140			—		—		—			—		—			—			—
Payments for stock buybacks		(227	)		—		—		—			227		(21,716	)		—			(21,716	)
Dividends declared		—			—		—		(2,628	)		—		—			—			(2,628	)
Balance at March 31, 2022		18,793		$	23	$	388,639	$	664,532			4,886	$	(241,516	)	$	(8,376	)	$	803,302

Three Months Ended March 31, 2022

Common Stock

Additional
Paid-in

Retained

Treasury Stock

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Earnings

Shares

Amount

Loss

Total

Balance at December 31, 2021

18,876

$
23

$
384,984

$
649,298

4,659

$
(219,800
)

$
(11,035
)

$
803,470

Net income

—

—

—

17,862

—

—

—

17,862

Other comprehensive income

—

—

—

—

—

—

2,659

2,659

Equity compensation

—

—

3,563

—

—

—

—

3,563

Exercise of stock options

—

—

92

—

—

—

—

92

Issuance of shares pursuant to vesting of restricted stock units

144

—

—

—

—

—

—

—

Net payments for stock issuances and buybacks

(227
)

—

—

—

227

(21,716
)

—

(21,716
)
Dividends declared

—

—

—

(2,628
)

—

—

—

(2,628
)
Balance at March 31, 2022

18,793

$
23

$
388,639

$
664,532

4,886

$
(241,516
)

$
(8,376
)

$
803,302

Three Months Ended March 31, 2021

Common Stock

Additional
Paid-in

Retained

Treasury Stock

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Earnings

Shares

Amount

Loss

Total

Balance at December 31, 2020

18,910

$
23

$
369,058

$
588,731

4,395

$
(196,745
)

$
(14,106
)

$
746,961

Net income

—

—

—

18,351

—

—

—

18,351

Other comprehensive loss

—

—

—

—

—

—

2,780

2,780

Equity compensation

—

—

3,275

—

—

—

—

3,275

Exercise of stock options

3

—

87

—

—

—

—

87

Issuance of shares pursuant to vesting of restricted stock units

153

—

—

—

—

—

—

—

Net payments for stock issuances and buybacks

(207
)

—

—

—

207

(17,580
)

—

(17,580
)
Dividends declared

—

—

—

(2,641
)

—

—

—

(2,641
)
Balance at March 31, 2021

18,859

$
23

$
372,420

$
604,441

4,602

$
(214,325
)

$
(11,326
)

$
751,233

NOTE 1312 – ACCOUNTING FOR STOCK-BASED COMPENSATION

On April 4, 2018, the Company’s board of directors (the “board”) approved the 2018 Omnibus Incentive Plan (the “2018 Omnibus Plan”), which was subsequently approved by the Company’s stockholders and became effective on May 31, 2018 (the “Effective Date”). The 2018 Omnibus Plan replaced the previous 2010 Omnibus Incentive Plan (the “Prior Plan”). The 2018 Omnibus Plan was amended on May 28, 2020 to increase the number of shares available for issuance.

The 2018 Omnibus Plan, as amended, allows the Company to grant 1,600,000 shares using stock options, stock appreciation rights, restricted stock, restricted stock units (“~~RSU”~~RSUs”), performance units and performance share awards (“~~PSA”~~PSAs”), cash-settled restricted stock units (“~~CSRSU”~~CSRSUs”), and other stock-based awards to all officers, key employees, and non-employee directors of the Company. Outstanding shares granted under the Prior Plan, totaling ~~26,120~~6,747 as of March 31, ~~2022,~~2023, remain subject to its terms and conditions, and 0no additional awards from the Prior Plan are to be made after the Effective Date. As of March 31, ~~2022,~~2023, the Company had approximately ~~789,147~~670,133 shares available for grant under the 2018 Omnibus Plan. CSRSUs have no impact on the shares available for grant under the Omnibus Plan, nor on the calculated shares used in earnings per share calculations.

During the three months ended March 31, ~~2022,~~2023, the Company granted to its employees ~~117,136~~76,498 shares in the form of RSUs with an average grant date fair value of ~~$91.79,~~$107.28, and the equivalent value of ~~56,718~~47,611 shares in the form of CSRSUs with an average grant date fair value of ~~$91.79.~~$107.28. During the three months ended March 31, ~~2022,~~2023, the Company also granted ~~35,705~~36,956 shares in the form of PSAs to its employees with a grant date fair value of ~~$93.97~~$115.67 per share. The RSUs, CSRSUs and PSAs granted are generally subject to service-based vesting conditions, with the PSAs also having performance-based vesting conditions. The performance conditions for the PSAs granted in ~~2022~~2023 have a performance period from January 1, ~~2022~~2023 through December 31, ~~2024~~2025 and performance conditions that are consistent with the PSAs granted in prior years.

The Company recognized stock-based compensation expense of ~~$4.6~~$5.9 million and ~~$6.1~~$4.6 million for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022. Unrecognized compensation expense of approximately ~~$19.7~~$19.7 million as of March 31, ~~2022~~2023 related to unsettled RSUs is expected to be recognized over a weighted-average period of ~~2.1~~2.3 ~~years~~. years. The unrecognized compensation expense related to CSRSUs totaled approximately ~~$9.3~~$12.8 million at March 31, ~~2022~~2023 and is expected to be recognized over a weighted-average period of ~~2.0~~2.2 ~~years~~. years. Unrecognized compensation expense related to PSAs of approximately ~~$6.3~~$7.1 million as of March 31, ~~2022~~2023 is expected to be recognized over a weighted-average period of ~~1.6~~1.8 ~~years~~. years.

~~NOTE 14 – BUSINESS COMBINATION~~13

On December 31, 2021, the Company acquired Creative Systems and Consulting, a premier provider of IT modernization and digital transformation solutions to federal agencies, for a cash purchase price of approximately $159.5 million, subject to working capital adjustments. The Company initially recorded working capital of $4.5 million and recognized fair value of the assets acquired and liabilities assumed and allocated $126.1 million to goodwill and $28.9 million to intangible assets. Intangible assets consist of $24.5 million in customer relationships, $3.7 million related to developed technology, $0.6 million related to trade names and trademarks, and $0.1 million related to non-compete agreements. The allocation of the total purchase price to the tangible and intangible assets and liabilities of Creative Systems and Consulting was based on management’s preliminary estimate of fair value, based on the best available information as of December 31, 2021 when the purchase price allocation was determined. The Company expects to complete the purchase accounting during the 2022 fiscal year as it finalizes the determination of both working capital, as well as its estimates of future cash flows underlying the valuation of customer-related intangible assets. The pro-forma impact of the acquisition is not material to the Company’s results of operations.

~~A prior acquisition’s purchase agreement included additional consideration in the form of warranty and indemnity hold back payments. As of March 31, 2022, 1 payment remains outstanding~~ for approximately $1.2 million, which is scheduled to be released in the fourth quarter of 2022 and is included in accrued expenses and other current liabilities. The remaining warranty and indemnity liability was recorded at its fair value at the date of the acquisition discounting the liability at 3.25%.

NOTE 1513 – EARNINGS PER SHARE

The Company’s earnings per share (“EPS”) is computed by dividing reported net income by the weighted-average number of shares outstanding. Diluted EPS considers the potential dilution that could occur if common stock equivalents of stock options, RSUs, and PSAs were exercised or converted into stock. PSAs are included in the computation of diluted shares only to the extent that the underlying performance ~~conditions~~conditions: (i) are satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related performance period and the result would be dilutive under the treasury stock method.

As of March 31, ~~2022,~~2023, the PSAs granted during the year ended December 31, ~~2020~~2021 met the related performance conditions for the initial performance period and were included in the calculation of diluted EPS. However, the PSAs granted during the year ended December 31, ~~2021~~2022 and during the three months ended March 31, ~~2022~~2023 have not yet completed their initial two-year performance period and therefore were excluded in the calculation of diluted EPS. For the three months ended March 31, 2023 and 2022, there were 10,199 and 53,819 weighted-average shares excluded from the calculation of EPS ~~because they were anti-dilutive. For the three months ended March 31, 2021, there were 10,327 weighted-average shares excluded~~ because they were anti-dilutive. The anti-dilutive shares in both years were associated with RSUs.

The dilutive effect of stock options, RSUs, and PSAs for each period reported is summarized below:


	Three Months Ended
	March 31,
	2023		2022
Net Income	$	16,398	$	17,862

Weighted-average number of basic shares outstanding during the period		18,779		18,795
Dilutive effect of stock options, RSUs, and performance shares		170		217
Weighted-average number of diluted shares outstanding during the period		18,949		19,012

Basic earnings per share	$	0.87	$	0.95
Diluted earnings per share	$	0.87	$	0.94

Three Months Ended

March 31,

2022

2021

Net Income

$
17,862

$
18,351

Weighted-average number of basic shares outstanding during the period

18,795

18,885

Dilutive effect of stock options, RSUs, and performance shares

217

233

Weighted-average number of diluted shares outstanding during the period

19,012

19,118

Basic earnings per share

$
0.95

$
0.97

Diluted earnings per share

$
0.94

$
0.96

NOTE 1614 – SHARE REPURCHASE PROGRAM

In September 2017, the board approved a share repurchase program that allows for share repurchases in the aggregate up to ~~$100.0~~$100.0 million under approved share repurchase plans pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of ~~1934.~~1934, as amended (the “Exchange Act”). In November 2021, the board amended and increased the previously-authorized aggregate repurchase limit ~~under the previous authorization of $100.0~~from $100.0 million to ~~$200.0~~$200.0 million. The Restated Credit ~~Facility~~Agreement permits ~~unlimited~~ share repurchases provided that the Company’s Consolidated Leverage Ratio, prior to and after giving effect to such repurchases, is 0.50 to 1.00 less than the then-applicable maximum Consolidated Leverage Ratio and subject to the Company having net liquidity of at least $100.0 million after giving effect to such repurchases. Notwithstanding the formula-based limit, the Company is permitted to make share repurchases up to $25.0 million per calendar year provided that it was not ~~greater than 3.50 to 1.00.~~in default.

Purchases under this program may be made from time to time at prevailing market prices in the open market ~~purchases~~ or in privately negotiated transactions pursuant to Rule 10b-18 under the Exchange Act and in accordance with applicable insider trading and other securities laws and regulations. The purchases are funded from existing cash balances and/or borrowings, and the repurchased shares are held in ~~treasury and used for general corporate purposes.~~treasury. The timing and extent to which the Company repurchases its shares will depend on market conditions and other corporate considerations atin the Company’s sole discretion.

During the fourth quarter of 2021, the board approved an updated Rule 10b5-1 plan element of the share repurchase program to repurchase a maximum of 165,000 shares, or a total of $20.0 million, under the current program starting on December 20, 2021 and ending no later than June 30, 2022. Under this approved plan, the Company repurchased 140,200 shares at an average price of $98.55 per share between January 1, 2022 and February 2, 2022. The repurchase plan was completed in the first quarter of 2022 with a total of 165,000 shares repurchased from December 20, 2021 to February 2, 2022 for a total of $16.3 million. The Company also used $3.1 million to repurchase an additional 36,175 shares in the open market during the first quarter of 2022 at an average price of $87.00 per share.

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company used ~~$17.0~~$18.1 million to repurchase ~~176,375~~180,000 shares and ~~$12.8~~$17.0 million to repurchase ~~151,200~~176,375 shares, respectively, under the share repurchase program. As of March 31, ~~2022, $111.9~~2023, $93.7 million of authorization remained available for share repurchases under the repurchase program.

NOTE 1715 – FAIR VALUE

Financial instruments measured at fair value on a recurring basis and their location within the accompanying consolidated balance sheets are as follows:


	March 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total		Location on Balance Sheet
Assets:
Interest rate swaps - current portion	$	—	$	4,843	$	—	$	4,843	Prepaid expenses and other assets
Forward contract agreements		—		23		—		23	Prepaid expenses and other assets
Interest rate swaps - long-term portion		—		1,998		—		1,998	Other assets
Deferred compensation investments in cash surrender life insurance		—		18,624		—		18,624	Other assets

Liabilities:
Interest rate swaps - long-term portion	$	—	$	2,732	$	—	$	2,732	Other long-term liabilities
Deferred compensation plan liabilities		—		18,874		—		18,874	Other long-term liabilities


	December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Location on Balance Sheet
Assets:
Interest rate swaps - current portion	$	—	$	5,051	$	—	$	5,051	Prepaid expenses and other assets
Interest rate swaps - long-term portion		—		2,950		—		2,950	Other assets
Deferred compensation investments in cash surrender life insurance		—		17,869		—		17,869	Other assets

Liabilities:
Deferred compensation plan liabilities	$	—	$	17,485	$	—	$	17,485	Other long-term liabilities

March 31, 2022

(in thousands)
Level 1

Level 2

Level 3

Total

Location on Balance Sheet
Assets:

Interest rate swaps - long-term portion
$
—

$
3,005

$
—

$
3,005

Other assets
Deferred compensation investments in cash surrender
life insurance

—

19,026

—

19,026

Other assets
Total
$
—

$
22,031

$
—

$
22,031

Liabilities:

Forward contract agreements
$
—

$
182

$
—

$
182

Accrued expenses and other current liabilities
Deferred compensation plan liabilities

—

19,748

—

19,748

Other long-term liabilities
Interest rate swaps - current portion

—

508

—

508

Accrued expenses and other current liabilities
Total
$
—

$
20,438

$
—

$
20,438

December 31, 2021

(in thousands)
Level 1

Level 2

Level 3

Total

Location on Balance Sheet
Assets:

Forward contract agreements
$
—

$
267

$
—

$
267

Prepaid expenses and other assets
Deferred compensation investments in cash surrender
life insurance

—

20,159

—

20,159

Other assets
Total
$
—

$
20,426

$
—

$
20,426

Liabilities:

Deferred compensation plan liabilities
$
—

$
20,129

$
—

$
20,129

Other long-term liabilities
Interest rate swaps - current portion

—

3,026

—

3,026

Accrued expenses and other current liabilities
Interest rate swaps - long-term portion

—

888

—

888

Other long-term liabilities
Total
$
—

$
24,043

$
—

$
24,043

NOTE 18 16 – SUBSEQUENT EVENTS

Dividend

On May ~~4, 2022,~~9, 2023, the board approved a ~~$0.14~~$0.14 per share cash dividend. The dividend will be paid on July 14, ~~2022~~2023 to shareholders of record as of the close of business on June ~~10, 2022.~~9, 2023.

NOTE 19 17 – COMMITMENTS AND CONTINGENCIES

Letters of Credit

At March 31, 2023, the Company had open standby letters of credit totaling $2.7 million. The open standby letters of credit reduce the Company’s unused borrowing capacity under the Credit Facility.

Litigation and Claims

The Company is involved in various legal matters and proceedings arising in the ordinary course of business. While these matters and proceedings cause it to incur costs, including, but not limited to, attorneys’ fees, the Company currently believes that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on its financial position, results of operations, or cash flows.

~~Road Home Contract~~15

On June 10, 2016, the Office of Community Development (the “OCD”) of the State of Louisiana filed a written administrative demand with the Louisiana Commissioner of Administration against ICF Emergency Management Services, L.L.C. (“ICF Emergency”), a subsidiary of the Company, in connection with ICF Emergency’s administration of the Road Home Program (“Program”). The Program contract was a ~~three-year, $912 million contract awarded to the Company in 2006. The Program ended, as scheduled, in 2009.~~

The Program was primarily intended to help homeowners and landlords of small rental properties affected by Hurricanes Rita and Katrina. In its administrative demand, the OCD sought approximately $200.8 million in alleged overpayments to the Program’s grant recipients, and separately supplemented the amount of recovery it sought in total to approximately $220.2 million. The State of Louisiana, through the Division of Administration, also filed suit in Louisiana state court on June 10, 2016. The State of Louisiana broadly alleges and sought recoupment for the same claim made in the administrative proceeding submission before the Louisiana Commissioner of Administration. On September 21, 2016, the Commissioner of the Division of Administration notified OCD and the Company of his decision to defer jurisdiction of the administrative demand filed by the OCD. In so doing, the Commissioner declined to reach a decision on the merits, stated that his deferral would not be deemed to grant or deny any portion of the OCD’s claim, and authorized the parties to proceed on the matter in the previously filed judicial proceeding. The Company continues to believe that this claim has no merit, intends to vigorously defend its position, and has therefore not recorded a liability as of March 31, 2022.

~~Executive Chair Retirement~~

On November 15, 2020, the Company’s former Executive Chair gave notice of his retirement effective December 31, 2020. In connection with his retirement, the former Executive Chair is entitled to receive compensation and benefits as provided in his employment agreement for a termination of employment on the basis of “good reason.” As of March 31, 2022, there were PSAs totaling 17,287 shares which were originally granted during 2020 to be satisfied through the normal course of the PSA equity award plan (see Note 13—Accounting for Stock-Based Compensation) and subject to adjustment from rTSR performance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

FORWARD-LOOKING STATEMENTS

Some of the statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”) constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” or similar words. You should read statements that contain these words carefully. The risk factors described in our filings with the Securities and Exchange Commission (the “SEC”), as well as any cautionary language in this Quarterly Report, provide examples of risks, uncertainties, and events that may cause actual results to differ materially from the expectations described in the forward-looking statements, including, but not limited to:

•

Our dependence on contracts with United States (“U.S.”) federal, state and local, and international governments, agencies and departments for the majority of our revenue;

•

Changes in federal government budgeting and spending priorities;

•

Failure by Congress or other governmental bodies to approve budgets and debt ceiling increases in a timely fashion and related reduction in government spending;

•

Failure of the presidential administration (the “Administration”) and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;

•

Results of routine and non-routine government audits and investigations;

•

Dependence of commercial work on certain sectors of the global economy that are highly cyclical;

•

Failure to realize the full amount of our backlog;

•

Risks inherent in being engaged in significant and complex disaster relief efforts and grants management programs involving multiple tiers of government in very stressful environments;

•

Risks resulting from expanding service offerings and client base;

•

Difficulties in identifying attractive acquisitions available at acceptable prices;

•

Acquisitions we undertake may present integration challenges, fail to perform as expected, increase our liabilities, and/or reduce our earnings;

•

Additional risks as a result of having international operations.

•

~~Our dependence on contracts with United States (“U.S.”) federal, state and local, and international governments, agencies and departments for the majority of our revenue;~~

•

~~Changes in federal government budgeting and spending priorities;~~

•

~~Failure by Congress or other governmental bodies to approve budgets and debt ceiling increases in a timely fashion and related reduction in government spending;~~

•

~~Failure of the Administration and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;~~

•

Effects of the novel coronavirus disease (“COVID-19”), or any other future pandemic, and related national, state and local government actions and reactions on the health of our staff and that of our clients, the continuity of our and our clients’ operations, our results of operations and our outlook;

•

~~Results of routine and non-routine government audits and investigations;~~

•

~~Dependence of commercial work on certain sectors of the global economy that are highly cyclical;~~

•

~~Failure to realize the full amount of our backlog;~~

•

~~Risks inherent in being engaged in significant and complex disaster relief efforts~~ ~~and grants management programs~~ ~~involving multiple tiers of government in very stressful environments;~~

•

~~Difficulties in integrating acquisitions;~~

•

~~Risks resulting from expanding service offerings and client base;~~

•

~~Acquisitions we undertake may present integration challenges, fail to perform as expected, increase our liabilities, and/or reduce our earnings;~~

•

~~The lawsuit filed by the State of Louisiana seeking approximately $220.2 million in alleged overpayments from the Road Home contract; and~~

•

~~Additional risks as a result of having international operations.~~

Our forward-looking statements are based on the beliefs and assumptions of our management and the information available to our management at the time these disclosures were prepared. Although we believe the expectations reflected in these statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. We undertake no obligation to update these forward-looking statements, even if our situation changes in the future.

The terms “we,” “our,” “us,” and “the Company,” as used throughout this Quarterly Report, refer to ICF International, Inc. and its subsidiaries, unless otherwise indicated. The term “federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and local government” refers to U.S. state and local governments and the governments of U.S. territories. The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, and liquidity and capital resources. You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022, filed with the SEC on ~~February 25, 2022~~March 1, 2023 (our “Annual Report”).

1816

OVERVIEW AND OUTLOOK

We provide professional services and technology-based solutions, ~~to government and commercial clients,~~ including management, marketing, technology, and policy consulting and implementation services. We help our clients conceive, develop, implement, and improve solutions that address complex business, natural resource, social, technological, and public safety issues. Our services primarily support clients that operate in ~~four~~three key markets:

•

Energy, Environment, Infrastructure, and Disaster Recovery;

•

Health and Social Programs;

•

Security and Other Civilian & Commercial

•

~~Energy, Environment, and Infrastructure;~~

•

~~Health, Education, and Social Programs;~~

•

~~Safety and Security; and~~

•

~~Consumer and Financial.~~

We provide services to our diverse client base that deliver value throughout the entire life cycle of a policy, program, project,, or initiative. Our primary services include:

•

Advisory Services;

•

Program Implementation Services;

•

Analytics Services;

•

Digital Services; and

•

Engagement Services.

•

~~Advisory Services;~~

•

~~Program Implementation Services;~~

•

~~Analytics Services;~~

•

~~Digital Services; and~~

•

~~Engagement Services.~~

Our clients utilize our services because we combine diverse institutional knowledge and experience with the deep subject matter expertise of our highly educated staff, which we deploy in multi-disciplinary teams. We believe that our domain expertise and the program knowledge developed from our research and ~~analytic,~~analytics, and assessment and advisory engagements further position us to provide a full suite of services.

We report operating results and financial data as a single segment based on the consolidated information used by our chief operating decision-maker in evaluating the financial performance of our business and allocating resources. Our single segment represents our core business: professional services ~~for government and commercial~~to our broad array of clients. Although we describe our multiple service offerings to clients that operate in ~~four~~three markets to provide a better understanding of the scope and scale of our business, we do not manage our business or allocate our resources based on those service offerings or client markets. Rather, on a project-by-project basis, we assemble the best team from throughout the enterprise to deliver highly customized solutions that are tailored to meet the needs of each client.

~~Notwithstanding the near-term impact of COVID-19 and its variants, we~~We believe that, in the long-term, demand for our services will continue to grow as government, industry, and other stakeholders seek to address critical long-term societal and natural resource issues due to heightened concerns about the environment and use of clean energy and energy efficiency; health promotion, treatment, and cost control; the means by which ~~healthcare~~public health can be ~~delivered~~improved effectively on a cross-jurisdiction basis; natural disaster ~~relief~~recovery and rebuild efforts; and ongoing homeland security threats. In the wake of the major hurricanes (Harvey, Ida, Irma, Maria, Laura, and Michael) that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, the affected areas remain in various stages of relief and recovery efforts. We believe our prior and current experience with disaster relief and rebuild efforts, including those from Hurricanes Katrina and Rita and Superstorm Sandy, put us in a favorable position to continue to provide recovery and housing assistance, and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments and agencies, state, territorial and local jurisdictions, and regional agencies.

We also see significant opportunity to further leverage our digital and client engagement capabilities across our ~~commercial and government~~ client base. Our future results will depend on the success of our strategy to enhance our client relationships and seek larger engagements that span the entire program life cycle, and to complete and successfully integrate additional strategic acquisitions. We will continue to focus on building scale in our vertical and horizontal domain expertise, developing business with ~~both~~ our existing ~~government and commercial~~ clients as well as new customers, and replicating our business model in selective geographies. In doing so, we will continue to evaluate strategic acquisition opportunities ~~such as our recent acquisitions of ITG in 2020 and ESAC and Creative Systems and Consulting in 2021,~~ that enhance our subject matter knowledge, broaden our service offerings, and/or provide scale in specific geographies.

Although we continue to see favorable long-term market opportunities, there are certain business challenges facing all government service providers. Administrative and legislative actions by the federal government to address changing priorities or in response to the budget deficit and/or debt ceiling could have a negative impact on our business, which may result in a reduction to our revenue and profit and adversely affect cash flow. Similarly, the very nature of opportunities arising out of disaster recovery ~~mean~~means they can involve unusual challenges. Factors such as the overall stress on communities and people affected by disaster recovery situations, political complexities and challenges among involved government agencies, and a higher-than-normal risk of audits and investigations may

result in a reduction to our revenue and profit and adversely affect cash flow. However, we believe we are well positioned to provide a broad range of services in support of initiatives that will continue to be priorities to the federal government, as well as to state and local and international governments and commercial clients. We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ~~on-going~~ongoing operations, potential acquisitions, customary capital expenditures, and other working capital requirements.

~~Impact~~17

Energy, Environment, Infrastructure, and Disaster Recovery

For decades, we have advised our clients on energy and environmental issues, including the impact of human activity on natural resources, and have helped develop solutions for infrastructure-related challenges. In addition to addressing government policy and regulation in these areas, our work focuses on industries that are affected by these policies and regulations, particularly in those industries most heavily involved in the use and delivery of energy. Significant factors affecting suppliers, users, and regulators of energy are driving private and public sector demand for professional services firms, including:

•

Changing power markets, increasingly diverse sources of supply including distributed energy resources and an increased demand for more carbon-free sources of energy and/or energy storage;

•

The changing role of the ~~COVID-19 Pandemic~~

~~On March 11, 2020,~~U.S. in the ~~World Health Organization characterized~~world’s energy markets;

•

Ongoing efforts to upgrade energy infrastructure to meet new power, transmission, environmental, and cybersecurity requirements and to enable more distributed forms of generation;

•

Changing public policy, regulations, and incentives (including those established by the ~~novel strain~~Inflation Reduction Act) surrounding the modernization of ~~coronavirus disease COVID-19~~and investment in an upgraded energy infrastructure, including new business models that may accompany those changes;

•

The need to manage energy demand and increase efficient energy use in an era of environmental concerns, especially regarding carbon and other emissions; and

•

The disruption of global energy markets and supplies, involving natural gas in particular, that have emerged as a ~~global pandemic. There~~result of the invasion of Ukraine by Russia.

We assist energy enterprises worldwide in their efforts to analyze, develop, and implement strategies related to their business operations and the interrelationships of those operations with the environment and applicable government regulations. We utilize our policy expertise, deep industry knowledge, and proprietary modeling tools to advise government and commercial clients on key topics related to electric power, traditional fuels, and renewable sources of energy. Our areas of expertise include power market analysis and modeling, transmissions analysis, flexible load and distribution system management, electric system reliability standards, energy asset valuation and due diligence, regulatory and litigation support, fuels market analysis, air regulatory strategy, and renewable energy and green power project implementation.

We also assist commercial and government clients in designing, implementing, and evaluating demand side management programs, both for residential and for commercial and industrial sectors. Utility companies must balance the changing demand for energy with a price-sensitive, environmentally conscious consumer base. We help utilities meet these needs, guiding them through the entire life cycle of energy efficiency and related demand side management and electrification programs, including policy and planning, determining technical requirements, and program implementation and improvement.

Carbon emissions have been an important focus of federal government regulation, international governments, many state and local governments, and multinational corporations around the world. Reducing or offsetting greenhouse gas (“GHG”) emissions continues to be ~~significant uncertainty as~~the subject of both public and private sector interest, and the regulatory landscape in this area is still evolving. The need to address carbon and other harmful emissions has significantly changed the way the world’s governments and industries interact and continues to be one of the drivers of interest in energy efficiency. Moreover, how government and business adapt to the effects of ~~this pandemic~~climate change continues to be of global importance. We support governments at the federal and state and local level, including providing comprehensive support to the National Science and Technology Council’s Global Change Research Program. Additionally, we support ministries and agencies of the government of the United Kingdom (the “U.K.”) and the European Commission (the “E.C.”), as well as commercial clients, on these and related issues.

We believe that demand for our services will continue to grow as government, industry, and other stakeholders seek to provide natural disaster recovery and rebuilding. In the wake of the major hurricanes (Ian, Harvey, Ida, Irma, Maria, Laura and Michael) that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, the affected areas remain in various stages of relief and recovery efforts. Our prior experience with disaster relief and rebuild efforts, including after hurricanes Katrina and Rita and Superstorm Sandy, puts us in a favorable position to provide recovery and housing assistance, and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments and agencies, state, territorial and local jurisdictions, and regional agencies. We support ongoing disaster recovery and mitigation efforts in a variety of US states, territories, and local jurisdictions that have been affected by natural disasters including but not limited to hurricanes.

We also have decades of experience in designing, evaluating, and implementing environmental policies and environmental compliance programs for energy, transportation (including aviation), and other infrastructure projects. A number of key issues are driving increased demand for the services we provide in these areas, including:

•

Increased focus on the ~~global economy, which may impact, among other things, our operations, balance sheet, results~~proper stewardship of ~~operations or cash flows. Adverse~~natural resources;

•

Changing precipitation patterns and drought that is affecting water infrastructure and availability;

•

Aging water, energy, and transportation infrastructure, particularly in the U.S.;

•

The increasing exposure of infrastructure to damage and interference by severe weather events ~~such as health-related concerns about working~~influenced by a changing climate, and therefore the need to become more resilient to those effects;

•

Past under-investment in ~~our offices or our client’s offices,~~transportation infrastructure that was recently the ~~inability to travel,~~center of the ~~potential impact~~Infrastructure Investment and Jobs Act passed by Congress and signed by the President on ~~our employees, clients, subcontractors~~November 15, 2021;

•

Economic and other suppliers and business partners, a slow-down in customer decision-making that affects procurement cycles, a reprioritization of client spending, and other matters affecting the general work and business environment have harmed, and could continue to harm, our business and delaypolicy incentives for the implementation of carbon-free energy sources that were the centerpiece of the Inflation Reduction Act passed by Congress and signed by the President on August 16, 2022;

•

The increasing demand for businesses to respond to climate change and similar “ESG” priorities being championed not only by the public sector, but also by investors, financing sources, business organizations, ratings agencies, and proxy advisory firms; and

•

Changing patterns of economic development that require transportation systems and energy infrastructure to adapt to new patterns of demand.

By leveraging our interdisciplinary skills, which range from finance and economics to earth and life sciences, information technology, and program management, we are able to provide a wide range of services that include complex environmental impact assessments, environmental management information systems, air quality assessments, program evaluation, transportation and aviation planning and operational improvement, strategic communications, and regulatory reinvention. Our acquisition of Blanton & Associates (“Blanton”) in September 2022 added to these skills and expanded our geographic reach. We help clients deal specifically with the interrelated environmental, business, ~~strategy.~~ and social implications of issues surrounding all transportation modes and infrastructure. From the environmental management of complex infrastructure engagements to strategic and operational concerns of airlines and airports, our solutions draw upon our expertise and institutional knowledge in transportation, urban and land use planning, industry management practices, financial analysis, environmental sciences, and economics.

Health, and Social Programs

We ~~cannot fully anticipate all the ways in which the current global health crisis, economic disruption, and financial market conditions could adversely impact~~also apply our ~~business~~expertise across our full suite of services in the ~~future. The long duration~~areas of health, and social programs. We believe that a confluence of factors will drive an increased need for public and private focus on these areas, including, among others:

•

Weaknesses in our public health and healthcare delivery systems exposed by COVID-19;

•

Expanded healthcare services to underserved portions of the ~~pandemic,~~population;

•

Rising healthcare expenditures, which require the ~~advent of new strains~~evaluation of the ~~virus,~~effectiveness and ~~challenges faced~~efficiency of current and new programs;

•

Rampant substance abuse and widespread social and health impacts of the opioid abuse epidemic;

•

The emphasis on improving the effectiveness of the U.S. and other countries’ educational systems;

•

The perceived declining performance of the U.S. educational system compared to other countries;

•

The need to digitally transform and modernize the technology infrastructure underpinning government operations;

•

The need for greater transparency and accountability of public sector programs;

•

A continued high need for social support systems, in part due to an aging population, and the interrelated nature of health, housing, transportation, employment, and other social issues;

•

A changing regulatory environment; and

•

Military personnel returning home from active duty with health and social service needs.

We believe we are well positioned to provide our services to help our clients develop and manage effective programs in the ~~vaccination~~areas of ~~eligible individuals, continue to create uncertainty,~~health, education, and ~~could have an adverse effect on our business, financial position, results~~social programs at the international, regional, national, and local levels. Our subject matter expertise includes public health, biomedical research, healthcare quality, mental health, international health and development, health communications and associated interactive technologies, education, child and family welfare needs, housing and communities, and substance abuse. Our combination of ~~operations and/or cash flows.~~

~~We are primarily a service business,~~domain knowledge and our ~~staffing,~~experience in information technology-based applications provides us with strong capabilities in health and ~~that~~social programs informatics and analytics, which we believe will be of increasing importance as the need to manage information grows. We partner with our ~~subcontractors, has been maintained, substantially on a work from home basis, fortunately with little COVID-19 illness among our staff. To date, we have experienced continuity~~clients in the ~~majority~~government and commercial sectors to increase their knowledge base, support program development, enhance program operations, evaluate program results, and improve program effectiveness.

In the area of ~~our work for our government clients, which accounted for approximately 75% of our revenues for~~federal health, we support many agencies and programs within the three months ended March 31, 2022. There have been postponements of events and challenges around project work requiring travel and personal contact to perform services under the contracts, but overall, our government clients have continued to require our services. There has also been additional demand from federal agencies such as the Center for Disease Control and Prevention, theU.S. Department of Health and Human Services (“HHS”), including the National Institutes of Health (the “NIH”), the Centers for Disease Control and Prevention (the “CDC”), and the ~~Federal Emergency Management Agency,~~Centers for Medicare and Medicaid Services (“CMS”) by conducting primary data collection and analyses, assisting in designing, delivering and evaluating programs, managing technical assistance centers, providing instructional systems, developing information technology applications, and managing information clearinghouse operations. Our 2021 acquisition of ESAC brought a strong team with deep expertise in bioinformatics to further extend our capabilities in this arena. Our 2022 acquisition of SemanticBits, LLC (“SemanticBits”) brought substantial expertise in technology applications used in CMS to oversee healthcare quality. Increasingly, we provide multichannel communications and messaging for public health programs. We also provide training and technical assistance for early care and educational programs (such as Head Start), and health and demographic surveys in developing countries for the U.S. Department of State (the “DoS”). In the area of social programs, we provide extensive training, technical assistance, and program analysis and support services for a number of the housing programs of the U.S. Department of Housing and Urban Development (“HUD”) and state, territorial, and local governments. In addition, we provide research, program design, evaluation, and training for educational initiatives at the federal and state level. We provide similar services to a variety of U.K. ministries, as well as several Directorates-General of the European Commission.

Security and Other Civilian & Commercial

We serve a number of other important government missions and commercial markets. These government missions range from Security (e.g., the Departments of Defense, Homeland Security, and Justice) to a variety of other civilian government departments and agencies; commercial markets include those we serve with our commercial marketing and communications services.

Security programs continue to be a critical priority of the federal government, state and local governments, international governments (especially in Europe), and ~~international~~in the commercial sector. We believe we are positioned to meet the following key safety concerns:

•

Vulnerability of critical infrastructure to cyber and terrorist threats;

•

Increasing risks to enterprises’ reputations in the wake of a cyber-attack;

•

Broadened homeland security concerns that include areas such as health, food, energy, water, and transportation;

•

Reassessment of the emergency management functions of homeland security in the face of natural disasters;

•

Safety issues around crime and at-risk behavior;

•

Increased dependence on private sector personnel and organizations in emergency response;

•

The need to ensure that critical functions and sectors are resilient and able to recover quickly after attacks or disasters in either the physical or cyber realms; and

•

The challenges resulting from changing global demographics.

These security concerns create demand for government ~~agencies.~~programs that can identify, prevent, and mitigate key cybersecurity issues and the societal issues they cause.

OfIn addition, the ~~remaining 25%~~U.S. Department of ~~our total revenue~~Defense (“DoD”) is undergoing major transformations in its approach to strategies, processes, organizational structures, and business practices due to several complex, long-term factors, including:

•

The changing nature of global security threats, including cybersecurity threats;

•

Family issues associated with globally deployed armed forces;

•

The increasing use of commercial cloud computing infrastructure and services to support the DoD enterprise; and

•

The increasing need for real-time information sharing and the ~~three months ended March 31, 2022,~~global nature of conflict arenas.

We provide key services to DoD, the ~~majority was generated from commercial energy markets~~U.S. Department of Homeland Security (“DHS”), the U.S. Department of Justice (“DoJ”), and analogous Directorates-General at the European Commission. We support DoD by providing high-end strategic planning, analysis, and technology-based solutions around cybersecurity. We also provide the defense sector with critical infrastructure protection, environmental management, human capital assessment, military community research, and technology-enabled solutions.

At the DHS, we assist in shaping and managing critical programs to ensure the safety of communities, developing critical infrastructure protection plans and processes, establishing goals and capabilities for national preparedness at all levels of government in the U.S., and managing the national program to test radiological emergency preparedness at the state and local government levels in communities adjacent to nuclear power facilities. At the DoJ, we provide technical and communications assistance to programs that help victims of crime and at-risk youths. At the E.C., we provide support and analytical services related to justice and home affairs issues within the European context.

Other large Federal departments and agencies, such as USDA and Treasury, also face important challenges that motivate them to transform their business processes and to modernize the associated technology systems. ICF supports these organizations with a variety of technology and program support services.

In the area of commercial marketing ~~services. In commercial energy, where~~and communications, some of the long-term market factors that we ~~work primarily~~believe will have an impact on our clients include:

•

Increased use of interactive digital technologies to link organizations with consumers and other stakeholders in more varied and personalized ways, and less reliance on traditional print and television marketing;

•

Changing industry structures in marketing and advertising services;

•

The desire for ~~utility clients, we have experienced trends similar to those with our government clients, although some aspects~~greater return on marketing investments; and

•

The continued elevation of ~~energy efficiency programs have been altered to reduce direct interaction with consumers. The commercial marketing services includes public event~~data analytics as a business management and marketing tool, as well as the concomitant growth of concerns about, and regulation of, data capture and exploitation for marketing and other private and public sector purposes.

We combine our expertise in strategic communications, marketing and creative services, and public relations with our strengths in interactive and mobile technologies to help companies develop stronger relationships and engage with their customers and stakeholders across all channels, whether via traditional or digital media, to drive better operating results. We took steps in 2022 to exit our traditional advertising and marketing platform technology ~~which was impacted based~~business lines and refocus on the ~~deferral~~core services of business transformation, loyalty, and integrated communications across several key verticals. Target customer areas include airlines, airports, electric and gas utilities, health care companies, transportation, travel, and hospitality firms.

Across all of the areas described above we assist our clients in their growing efforts to ensure equity in their program operations, whether it is with an environmental justice or cancellation of marketing events. Some of our commercial clients perform work in travel-related markets and have been severely impacted by the COVID-19 pandemic and the restriction upon travel worldwide. As a ~~result, we continue to monitor that business area closely. These elements of commercial marketing services represented 7% of our total company-wide revenues for the three months ended March 31, 2022.~~

We are monitoring the evolving situation related to the COVID-19 pandemic and continue to work with our stakeholders to assess further possible implications to our business and to take actions in an effort to mitigate adverse consequences. To protect employee health and safety while COVID-19 remains a threat, we plan to continue to deliver a majority of our services to clients remotely until we are ready for a transition to an in-office environment. We started our phased return to in-office work in the U.K. and China on a reduced capacity during the third quarter of 2021 and formally re-opened our offices in North America starting on April 25, 2022. Additionally, in response to President Biden’s Executive Order 14042, which requires federal contractors to be vaccinated against COVID-19 by December 8, 2021 and later amended to January 4, 2022, we implemented a requirement for our U.S. employees to be fully vaccinatedequity focus, or ~~receive an approved exemption/accommodation by November 30, 2021 regardless of employment type or work location—remote, hybrid, or on-site.~~

In 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed; it contained a provision that allows federal contractors to seek specified reimbursement for certain employees who are unable to perform their contract requirements due to government restrictions. We deferred payment of approximately $20.9 million of employer Social Security taxes during the twelve months ended December 31, 2020, of which 50% has been repaid as of December 31, 2021 and the remaining 50% is expected to be repaid by the deadline of December 31, 2022.

As part of management actions to counter the impact of COVID-19, we have aligned our costs with anticipated revenues. In the U.S. and in our international operations, we used staff reductions, furloughs, andsome other temporary wage reduction programs in response to the pandemic during 2020. However, we did not have as many staff reductions, furloughs, or wage reductions as a result of COVID-19 after 2020. During 2020, we also participated in three international government subsidy programs whose objective is to encourage eligible companies to keep employeesperspective depending on the ~~payroll during the COVID-19 pandemic. We minimally participated in two subsidy programs during the first quarter of 2021 but did not participate in such programs subsequently.~~program being delivered.

Employees and Offices:

We have approximately ~~8,000~~9,000 full and part-time employees around the globe, including many recognized as thought leaders in their respective fields. We serve clients globally from our headquarters in the Washington, D.C. metropolitan area, our ~~more than~~ 50 regional offices throughout the U.S. and more than 20 offices in key regions outside the U.S., including offices in the ~~United Kingdom,~~U.K., Belgium, ~~China,~~ India and Canada.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion of our financial condition and results of operations is based on our consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make certain estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and our application of critical accounting policies, including revenue recognition, impairment of goodwill and other intangible assets, and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, our reported results could be materially affected. Actual results may differ significantly from our estimates under different assumptions or conditions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 2 –Summary of Significant Accounting Policies” in our Annual Report and “Note 1—1 – Basis of Presentation and Nature of Operations” in the “Notes to Consolidated Financial Statements” in this Quarterly Report for further discussions of our significant accounting policies and estimates.

We periodically evaluate our critical accounting policies and estimates based on changes in U.S. GAAP and the current environment that may have an effect on our financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting standards are discussed in “Note 1—1 – Basis of Presentation and Nature of ~~Operations~~—Operations—Recent Accounting Pronouncements” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

SELECTED KEY METRICS

In order to evaluate operations, we track revenue by key metrics that provide useful information about the nature of our operations. Client markets provide insight into the breadth of our expertise. Client type is an indicator of the diversity of our client base. Revenue by contract mix provides insight in terms of the degree of performance risk that we have assumed. Significant variances in the key metrics are discussed under the revenue section of the results of operations. For further discussion see “Note 8—7 –Revenue Recognition” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

RESULTS OF OPERATIONS

Three Months Ended March 31, ~~2022~~2023 Compared to Three Months Ended March 31, ~~2021~~2022

The table below sets forth certain items from our unaudited consolidated statements of comprehensive income, the percentage of revenue for such items in the periods provided, and the period-over-period rate of change and percentage of revenue for the periods indicated.

												Year-to-Year Change
	Three Months Ended March 31,											Three Months Ended				Three Months Ended March 31,
	Dollars						Percentages					March 31, 2021 and 2022				Dollars						Percentages of Revenue						Year-to-Year Change
(dollars in thousands)	2022			2021			2022		2021			Dollars			Percent	2023			2022			2023			2022			Dollars			Percent
Revenue	$	413,468		$	378,478		100.0%			100.0	%	$	34,990		9.2%	$	483,282		$	413,468			100.0	%		100.0	%	$	69,814			16.9	%
Direct Costs		258,158			232,082		62.4%			61.3	%		26,076		11.2%		312,565			258,158			64.7	%		62.4	%		54,407			21.1	%
Operating Costs and Expenses:
Indirect and selling expenses		117,452			109,982		28.4%			29.1	%		7,470		6.8%		123,733			117,452			25.6	%		28.4	%		6,281			5.3	%
Depreciation and amortization		4,838			5,270		1.2%			1.4	%		(432	)	(8.2%)		6,309			4,838			1.3	%		1.2	%		1,471			30.4	%
Amortization of intangible assets		5,317			3,015		1.3%			0.8	%		2,302		76.4%		9,224			5,317			1.9	%		1.3	%		3,907			73.5	%
Total Operating Costs and Expenses		127,607			118,267		30.9%			31.3	%		9,340		7.9%		139,266			127,607			28.8	%		30.9	%		11,659			9.1	%
Operating Income		27,703			28,129		6.7%			7.4	%		(426	)	(1.5%)		31,451			27,703			6.5	%		6.7	%		3,748			13.5	%
Interest expense		(2,697	)		(2,683	)	(0.7%)			(0.7	%)		(14	)	0.5%
Interest expense, net																	(9,457	)		(2,627	)		(2.0	%)		(0.6	%)		(6,830	)		260.0	%
Other expense		(369	)		(417	)		—		—			48		(11.5%)		(558	)		(439	)		(0.1	%)		(0.1	%)		(119	)		27.1	%
Income before Income Taxes		24,637			25,029		6.0%			6.7	%		(392	)	(1.6%)		21,436			24,637			4.4	%		6.0	%		(3,201	)		(13.0	%)
Provision for Income Taxes		6,775			6,678		1.6%			1.8	%		97		1.5%		5,038			6,775			1.0	%		1.6	%		(1,737	)		(25.6	%)
Net Income	$	17,862		$	18,351		4.4%			4.9	%	$	(489	)	(2.7%)	$	16,398		$	17,862			3.4	%		4.4	%	$	(1,464	)		(8.2	%)

Revenue. Revenue for the three months ended March ~~31, 2022~~30, 2023 was ~~$413.5~~$483.3 million, compared to ~~$378.5~~$413.5 million for the three months ended March ~~31, 2021, representing~~30, 2022, an increase of ~~$35.0~~$69.8 million or ~~9.2%~~16.9%. The increase in revenue was ~~primarily from an increase of $39.4 million and $6.2 million from~~driven by our U.S. federal ~~government’s health, education,~~government and ~~social programs~~U.S. state and ~~energy, environment,~~local government clients, increases in our U.S. and ~~infrastructure~~international commercial clients, as well as the favorable impact of our acquisitions of SemanticBits and Blanton & Associates in third quarter of 2022. These gains were offset by decreases from our international government work.

The Energy, Environment, Infrastructure and Disaster Recovery client ~~markets, respectively, $7.4~~market increased $18.4 million or 10.9% over the same period last year and was driven by:

•

Increases in our U.S. based commercial and international commercial businesses which grew by $10.5 million and ~~$0.5~~$2.9 million, ~~from~~respectively;

•

Growth in our U.S. state and local ~~government’s health, education,~~government and ~~social programs~~U.S. government business which increased by $5.7 million and ~~energy, environment, and infrastructure client markets, respectively, and $1.7~~$2.9 million ~~from~~respectively;

•

Reduction of our international ~~government’s health, education,~~government business which decreased by $3.5 million.

The Health and ~~social programs~~Social Programs client market ~~offset~~increased $47.6 million or 30.5% over the same period last year and was driven by:

•

Growth in our U.S. government and U.S. state and local government businesses which increased by ~~decreases of $11.1~~$44.6 million and ~~$0.6~~$3.1 million, ~~from~~respectively;

•

Increases in our U.S. based commercial business which grew by $6.5 million;

•

Reductions in our international ~~government’s energy, environment,~~government and ~~infrastructure~~commercial businesses which decreased $5.9 million and ~~safety~~$0.7 million, respectively.

The Security and ~~security~~Other Civilian & Commercial client ~~markets, respectively, $3.5~~market increased $3.8 million ~~$2.6~~or 4.3% over the same period last year and was driven by:

•

Growth in our international government and U.S. government businesses which increased by $2.7 million and $1.2 million, ~~from~~respectively;

•

Increases in our international commercial ~~consumer and financial, energy, environment, and infrastructure, and health, education, and social programs client markets, respectively, and $1.2 million from~~business which grew by $1.7 million;

•

Reductions in our U.S. ~~federal government safety and security client market.~~commercial businesses which decreased $1.8 million.

Direct Costs. ~~Direct costs for the three months ended March 31, 2022 were $258.2 million compared to $232.1 million for the three months ended March 31, 2021, an~~The increase of ~~$26.1~~$54.4 million ~~or 11.2%. The increase~~ in direct costs was driven by increases of ~~$16.1~~$31.3 million in our direct labor and associated fringe benefit costs and ~~$10.0~~$23.1 million in our subcontractor and other direct costs,~~. The increases were attributable to additional work performed during~~ which was driven, in part, by the ~~three months ended March 31,~~acquisitions of SemanticBits and Blanton in the third quarter of 2022, ~~compared to~~as well as the ~~same period~~growth in ~~2021. Direct costs as a percent of revenue were 62.4% for~~ the three months ended March 31, 2022, compared to 61.3% for the three months ended March 31, 2021. Direct labor and associated fringe benefit costs as a percentage of revenue was 36.1% and 35.2% for the three months ended March 31, 2022 and 2021, respectively, and subcontractor and otherbusiness. Our direct ~~costs as a percentage of revenue was 26.3% and 26.1%, for the three months ended March 31, 2022 and 2021, respectively. Direct~~ labor and associated fringe benefit costs as a percentage of direct costs ~~was~~were 57.8% ~~and 57.4%~~ for each of the ~~three months~~three-month periods ended March 31, 2023 and 2022, ~~and 2021, respectively, and~~respectively. Our subcontractor and other direct costs as a percentage of direct costs was steady at 42.2% for each of the three-month periods ended March 31, 2023 and ~~42.6%~~2022, respectively. The increase in our direct costs was also due to additional work performed during the three months ended March 31, 2023 compared to the same period in 2022, partly due to our recent acquisitions previously noted. Our direct costs as a percent of revenue were 64.7% for the three months ended March 31, ~~2022 and 2021, respectively.~~

~~Indirect and selling expenses.~~ ~~Indirect and selling expenses~~2023, compared to 62.4% for the three months ended March 31, ~~2022 was $117.5 million compared to $110.0 million~~2022. Our direct labor and associated fringe benefit costs as a percentage of revenue were 37.4% and 36.1% for the three months ended March 31, ~~2021, an increase~~2023 and 2022, respectively, and our subcontractor and other direct costs as a percentage of ~~$7.5 million or 6.8%. The increase in indirect~~revenue were 27.3% and selling expenses was primarily due to an increase in indirect labor and associated fringe benefit costs of $9.1 million, offset by a decrease in general and administrative costs of $1.6 million. Indirect labor and associated fringe benefit costs increased due to higher headcounts. The decrease in general and administrative costs was due to a decrease in the provision for credit losses of $5.5 million that offset increases in expenses such as contract labor and professional fees of $0.9 million, software licenses of $0.8 million, insurance of $0.7 million, travel of $0.3 million, and recruiting of $0.3 million which were the major drivers26.3%, for the three months ended March 31, 2023 and 2022, respectively.

Indirect and selling expenses. For the three months ended March 31, 2023, our indirect and selling expenses increased $6.3 million, or 5.3%, compared to ~~2021. Indirect~~the prior year, primarily due to additional indirect labor and associated fringe costs of $3.8 million and to general and administrative costs of $2.5 million. The increase in our indirect labor and associated fringe costs was a result of additional headcount from our recent acquisitions in 2022 as well as additional labor resources to support our growth. The increase in our general and administrative costs were primarily from impairment of $0.9 million of intangible asset related to a prior acquisition, an increase of $0.9 million in travel expense, and additional credit losses of $0.7 million in 2023 compared to 2022. Although we saw our overall indirect and selling expenses increase in 2023, our indirect and selling expenses as a percent of revenue decreased to 25.6% for the three months ended March 31, 2023 compared to 28.4% for the three months ended March 31, 2022 ~~compared~~as we continue to ~~29.1% for~~implement efficiency measures and reduce our operating expenses while supporting our revenue growth.

Depreciation and amortization. The increase of $1.5 million in our depreciation and amortization was from $0.9 million of additional depreciation expense and $0.6 million of additional amortization expense resulting from additional capital expenditure in the three months ended March 31, ~~2021.~~

~~Depreciation and amortization~~. ~~Depreciation and amortization was $4.8 million for the three months ended March 31, 2022~~2023 as compared to ~~$5.3 million for the three months ended March 31, 2021. The decrease in depreciation and amortization is the result of certain assets becoming fully depreciated and amortized.~~2022.

Amortization of intangible assets. ~~Amortization~~The increase of amortization of intangible assets ~~for the three months ended March 31, 2022 was $5.3 million compared to $3.0 million for the three months ended March 31, 2021. The $2.3 million increase~~ was primarily due to the amortization of intangible assets acquired in our acquisitions of ~~ESAC~~SemanticBits and ~~Creative Systems and Consulting~~Blanton in the ~~fourth~~third quarter of ~~2021.~~2022.

Operating Income. ~~Operating~~Our operating income ~~was $27.7~~increased by $3.7 million for the three months ended March 31, ~~2022~~2023 compared to ~~$28.1~~the prior year due to higher gross profit offset by higher operating costs to support our growing operations.

Interest expense, net. The increase of $6.8 million in interest expense, net, was primarily due to higher average debt balance of $634.3 million during the three months ended March 31, 2023 as compared to $461.2 million during the same period in 2022, as a result of our acquisition activities. We utilize floating-to-fixed interest rate swap agreements (the “Swaps”) to hedge the variable interest portion of our debt. For the three months ended March 31, 2023, settlements of the Swaps provided a reduction of $1.4 million to our interest expense, net, compared to $0.9 million in additional interest for the same period in 2022. Our average interest rate on borrowings, inclusive of the impact of the Swaps, was 5.5% for the three months ended March 31, ~~2021, a decrease of $0.4 million or 1.5%. The decrease in operating income was due~~2023 compared to an increase in direct costs of $26.1 million, indirect and selling expenses of $7.5 million, and amortization of intangible assets by $2.3 million, offset by an increase in revenue of $35.0 million and a decrease of depreciation and amortization by $0.5 million. Operating income as a percentage of revenue was 6.7%2.1% for the three months ended March 31, ~~2022, compared to 7.4%~~2022.

Other expense. Other expense did not materially change for the three months ended March 31, ~~2021.~~

~~Interest expense.~~ Interest expense was $2.7 million for the three months ended March 31, 2022 and 2021. The comparable interest expense was due to our average interest rate for the three months ended March 31, 2022 of 1.4%2023 as compared to 1.9% for the same period in 2021 and our average debt balance of $461.2 million for the three months ended March 31, 2022 being higher than our average debt balance of $325.6 million for the three months ended March 31, 2021.2022.

~~Other expense.~~ ~~Other expense was flat at $0.4 million for the three months ended March 31, 2022 and 2021.~~

Provision for Income Taxes. ~~For the three months ended March 31, 2022, provision for income taxes was $6.8 million compared to $6.7 million for the three months ended March 31, 2021, an increase of $0.1 million or 1.5%. The~~Our effective income tax rate for the three months ended March 31, 2023 and 2022 was 23.5% and ~~2021 was~~ 27.5% ~~and 26.7%~~, respectively. The ~~increase~~decrease in the effective income tax rate was primarily due to the impact of windfall tax benefits relating to equity-based compensation that vested during the quarter and non-taxable income on insurance investments partially offset by non-deductible executive compensation ~~non-deductible losses on insurance assets,~~ and additional valuation allowance on ~~excess~~ foreign tax credits ~~compared with 2021.~~generated during the quarter.

NON-GAAP MEASURES

~~These~~The following tables provide reconciliations of financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. to their most comparable U.S. GAAP measures (“non-GAAP”) ~~to the most applicable U.S. GAAP measures.~~. While we believe that these non-GAAP financial measures provided additional information to investors and may be useful in evaluating our financial information, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define similarly titled non-GAAP measures differently and, accordingly, care should be exercised in understanding how we define these ~~measures.~~measures as similarly named measures are unlikely to be comparable across different companies.

Service Revenue

We compute Service ~~revenue represents~~Revenue as U.S. GAAP revenue less subcontractor and other direct costs (which include third-party materials and travel ~~expenses). Service revenue is not a recognized term under U.S. GAAP~~expenses, excluding any associated margins), which we believe represents the service we provide to our customer for directly contracting with and ~~should not be considered an alternative to revenue as a measure~~managing the activities of operating performance. This presentation of service revenue may not be comparable to other similarly titled measures used by other companies because other companies may use different methods to prepare similarly titled measures.subcontractors. We believe ~~service revenue~~Service Revenue is a useful measure to investors ~~since, as a consulting firm, a key source of our profit is revenue obtained from the~~that best represents services that we provide to ~~our~~ clients through our own employees. For the three months ended March 31, 2022, service revenue was $304.6 million compared to $279.6 million for the three months ended March 31, 2021, an increase of $25.0 million or 8.9%. Service revenue was 73.7% and 73.9% of total revenue for the three months ended March 31, 2022 and 2021.

The table below presents a reconciliation of U.S. GAAP revenue to ~~service revenue~~Service Revenue for the periods ~~indicated:~~indicated.


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands)	2022			2021			2023			2022
Revenue	$	413,468		$	378,478		$	483,282		$	413,468
Subcontractor and other direct costs		(108,898	)		(98,911	)		(131,978	)		(108,898	)
Service revenue	$	304,570		$	279,567
Service Revenue							$	351,304		$	304,570

EBITDA and Adjusted EBITDA

Earnings before interest, ~~and other income and/or expense,~~ tax, and depreciation and amortization (“EBITDA”) is a measure we use to evaluate operating performance. We believe EBITDA is useful in assessing ongoing trends and, as a result, may provide greater visibility in understanding our operations.

Adjusted EBITDA is EBITDA further adjusted to eliminate the impact of certain items that we do not consider to be indicative of the performance of our ongoing operations. We evaluate these adjustments on an individual basis based on both the quantitative and qualitative aspects of the item, including their size and nature, as well as whether or not we expect them to occur as part of our normal business on a regular basis. We believe that the adjustments applied in calculating ~~adjusted~~Adjusted EBITDA are reasonable and appropriate to provide additional information to investors.

EBITDA and adjusted EBITDA are not recognized terms under U.S. GAAP and should not be used as alternatives to net income as a measure of operating performance. This presentation of EBITDA and adjusted EBITDA may not be comparable to other similarly titled measures used by other companies because other companies may use different methods to prepare similarly titled measures. EBITDA and adjustedAdjusted EBITDA are not intended to be measures of free cash flow for management’s discretionary use as these measures do not include certain cash requirements such as interest payments, tax payments, capital expenditures and debt service.

The following table presents a reconciliation of net income to EBITDA and ~~adjusted~~Adjusted EBITDA for the periods indicated.


	Three Months Ended
	March 31,
(in thousands)	2023		2022
Net income	$	16,398	$	17,862
Interest, net		9,457		2,627
Provision for income taxes		5,038		6,775
Depreciation and amortization		15,533		10,155
EBITDA (1)		46,426		37,419
Impairment of long-lived assets (2)		894		—
Acquisition-related expenses (3)		803		1,319
Severance and other costs related to staff realignment (4)		2,495		1,226
Facilities consolidations and office closures (5)		359		—
Expenses related to the transfer to our new corporate headquarters (6)		—		1,882
Total Adjustments		4,551		4,427
Adjusted EBITDA	$	50,977	$	41,846

Three Months Ended

March 31,

(in thousands)

2022

2021

Net income

$
17,862

$
18,351

Other expense

369

417

Interest expense

2,697

2,683

Provision for income taxes

6,775

6,678

Depreciation and amortization

10,155

8,285

EBITDA

37,858

36,414

Adjustment related to impairment of long-lived assets ⁽¹⁾

—

303

Special charges related to acquisitions ⁽²⁾

1,319

95

Special charges related to severance for staff realignment ⁽³⁾

1,226

491

Special charges related to facilities consolidations and office closures ⁽⁴⁾

—

200

Special charges related to the transfer to our new corporate headquarters ⁽⁵⁾

1,882

—

Special charges related to retirement of the Executive Chair ⁽⁶⁾

—

224

Total special charges and adjustments

4,427

1,313

Adjusted EBITDA

$
42,285

$
37,727

(1)

The calculation of EBITDA for the three months ended March 31, 2022 has been revised to conform to the current period calculation of EBITDA. Specifically, interest income of $0.1 million was reclassified from “Other expense” to “Interest, net” on the consolidated statements of comprehensive income.

~~(1)~~(2)

We recognized impairment expense of $0.9 million in the first quarter of 2023 related to impairment of an intangible asset related to a prior acquisition.

(3)

These costs consist primarily of consultants and other outside third-party costs and integration costs associated with our acquisitions and/or potential acquisitions.

(4)

These costs are mainly due to involuntary employee termination benefits for our officers, and/or groups of employees who have been notified that they will be terminated as part of a consolidation or reorganization.

(5)

These costs are exit costs associated with terminated leases or full office closures. The exit costs include charges incurred under a contractual obligation that existed as of the date of the accrual and for which we will (i) continue to pay until the contractual obligation is satisfied but with no economic benefit to us or (ii) we contractually terminated the obligation and ceased utilizing the facilities.

(6)

These costs represent incremental non-cash lease expense associated with a straight-line rent accrual during the “free rent” period in the lease for our new corporate headquarters in Reston, Virginia. We took possession of the new facility during the fourth quarter of 2021, while also maintaining and incurring lease costs for the former headquarters in Fairfax, Virginia. The transition to the new corporate headquarters was completed in the fourth quarter of 2022.

~~Adjustment related to impairment of long-lived assets: We recognized impairment expense of $0.3 million in the first quarter of 2021 related to impairment of a right-of-use lease asset.~~

~~(2)~~

~~Special charges related to acquisitions:~~ ~~These costs consist primarily of consultants and other outside third-party costs and integration costs associated with our acquisitions and/or potential acquisitions~~.

~~(3)~~

Special charges related to severance for staff realignment: These costs are mainly due to involuntary employee termination benefits for our officers, groups of employees who have been notified that they will be terminated as part of a consolidation or reorganization or, to the extent that the costs are not included in the previous two categories, involuntary employee termination benefits for employees who have been terminated as a result of COVID-19.

~~(4)~~

Special charges related to facilities consolidations and office closures: These costs are exit costs or gains associated with office lease contraction, terminated office leases, or full office closures. The exit costs include charges incurred under a contractual obligation that existed as of the date of the accrual and for which we will continue to pay until the contractual obligation is satisfied but with no economic benefit to us.

~~(5)~~

Special charges related to the transfer to our new corporate headquarters: These costs are additional rent as a result of us taking possession of our new corporate headquarters in Reston, Virginia, during the fourth quarter of 2021 while maintaining our current headquarters in Fairfax, Virginia. We intend to complete the transition to our new corporate headquarters by the end of 2022 when our Fairfax lease ends.

~~(6)~~

~~Special charges related to retirement of the former Executive Chair:~~ Our former Executive Chair retired effective December 31, 2020. These costs relate to unvested equity awards that, as a result of his employment agreement, the departing officer was able to maintain certain equity awards beyond the date of employment.

Non-GAAP Diluted Earnings per Share

Non-GAAP diluted earnings per share (“Non-GAAP Diluted EPS”) represents diluted ~~EPS~~U.S. GAAP earnings per share (“U.S. GAAP Diluted EPS”) excluding the impact of certain items such as impairment of intangible assets, acquisition expenses, severance for staff realignment, facility consolidations and office closures, and an adjustment related to the retirement of the former Executive Chair (which are also excluded from adjusted EBITDA, as described further above),noted above, as well as the impact of amortization of intangible assets related to our acquisitions and income tax ~~effects.~~effects of these exclusions. While these adjustments may be recurring and not infrequent or unusual, we do not consider these adjustments to be indicative of the performance of our ongoing operations. Non-GAAP diluted EPS is not a recognized term under U.S. GAAP and is not an alternative to basic or diluted EPS as a measure of performance. This presentation of non-GAAP diluted EPS may not be comparable to other similarly titled measures used by other companies because other companies may use different methods to prepare similarly titled measures. We believe that the supplemental adjustments applied in calculating ~~non-GAAP diluted~~Non-GAAP Diluted EPS are reasonable and appropriate to provide additional information to investors.

The following table presents a reconciliation of ~~diluted~~U.S. GAAP Diluted EPS to ~~non-GAAP diluted~~Non-GAAP Diluted EPS for the periods ~~indicated:~~ indicated.


	Three Months Ended
	March 31,
	2023			2022
U.S. GAAP Diluted EPS	$	0.87		$	0.94
Impairment of long-lived assets		0.04			—
Acquisition-related expenditures		0.04			0.07
Severance and other costs related to staff realignment		0.13			0.06
Facilities consolidations and office closures		0.02			—
Expenses related to the transfer to our new corporate headquarters		—			0.10
Amortization of intangibles		0.49			0.28
Income tax effects on amortization, special charges, and adjustments (1)		(0.17	)		(0.14	)
Non-GAAP Diluted EPS	$	1.42		$	1.31

Three Months Ended

March 31,

2022

2021

Diluted EPS

$
0.94

$
0.96

Adjustment related to impairment of long-lived assets

—

0.02

Special charges related to acquisitions

0.07

—

Special charges related to severance for staff realignment

0.06

0.03

Special charges related to facilities consolidations and office closures

—

0.01

Special charges related to the transfer to our new corporate headquarters

0.10

—

Special charges related to retirement of Executive Chair

—

0.01

Amortization of intangibles

0.28

0.16

Income tax effects on amortization, special charges, and adjustments ⁽¹⁾

(0.14
)

(0.06
)
Non-GAAP EPS

$
1.31

$
1.13

(1)

Income tax effects were calculated using the effective tax rate of 23.5% and 27.5% for the three months ended March 31, 2023 and 2022, respectively.

~~(1)~~

~~Income tax effects were calculated using an effective U.S. GAAP tax rate of 27.5% and 26.7% for the three months ended March 31, 2022 and 2021.~~

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Borrowing Capacity. Short-term liquidity requirements are created by our use of funds for working capital, capital expenditures, debt service, dividends, and share repurchases. We expect to meet these requirements through a combination of our cash and cash equivalents at hand, cash flow from operations, and borrowings. Our primary source of borrowings is from our Credit Facility with a syndicate of multiple commercial banks, as described in “Note 7—6 — Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Quarterly Report. As of March 31, ~~2022,~~2023, we had ~~$315.1~~$499.6 million, or ~~$250.4~~$403.5 million after taking into account the financial and performance-based limitations, available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program. ~~Should~~We believe that our cash balances, expected cash flows from operations, and access to our Credit Facility will be sufficient to meet our working capital needs, debt servicing commitments, share repurchase, and dividend payment requirements for the ~~need arise,~~next twelve months and beyond.

We have entered into floating-to-fixed interest rate swap agreements (the “Swaps”) for a total notional value of $275.0 million to hedge a portion of our floating rate Credit Facility. The Swaps expire in 2023, 2025, and 2028, respectively, and we ~~intend to further increase our borrowing capacity~~may consider entering into additional hedges as these existing hedges expire. For additional details on the Swaps, see “Note 8 — Derivative Instruments and Hedging Activities” in the ~~future~~“Notes to ~~provide us with adequate working capital to continue our ongoing operations.~~Consolidated Financial Statements” in this Quarterly Report.

In March 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic. Although we continue to face risks and uncertainties related to COVID-19 and its variants, to date we have not experienced any significant impacts on our liquidity and capital resources which remain available to us.

~~In addition to the continued COVID-19 pandemic, there~~There are other conditions, such as the ongoing war in Ukraine and the recent ~~rise~~increase in inflation, both in the U.S. ~~inflation,~~and globally, that create uncertainty in the global economy, which in turn may impact, among other things, our ability to generate positive cash flows from operations and our ability to successfully execute and fund key ~~initiatives in the near future.~~initiatives. However, our current belief is that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ~~on-going~~ongoing operations, customary capital expenditures and acquisitions, quarterly cash dividends, share repurchases and organic growth. Additionally, we continuously analyze our capital structure to ensure we have capital to fund future strategic acquisitions.

The recent closures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”) in March 2023 and First Republic Bank (”Republic”) in May 2023 have raised significant concerns about bank-specific risks, broader financial institution liquidity risks, and the stability of the banking system in the United States. We did not hold any of our funds in, or have any banking relationship with SVB, Signature, or Republic. To date, we have not experienced any issues with the banks where we do maintain our accounts or have other banking relationships. We hold our funds in large commercial banks and our intent is to maintain account balances at a reasonably low level to reduce our risk of loss from a sudden failure at any individual bank. Our Credit Facility is supported by a syndicate of multiple commercial banks, and each bank in the syndicate provides a pro rata percentage of our total available borrowings and commitments independently of the others. No member of the bank syndicate is responsible for providing more than fifteen percent of the total available borrowings and commitments.

We continue to monitor the state of the financial markets ~~on a regular basis~~ to assess the continuing availability of borrowing capacity under the Credit Facility and the cost of additional capital ~~resources~~ from both debt and equity ~~sources. We~~markets. At present, we believe ~~that~~ we will be able to continue to access these markets at commercially reasonable terms and conditions if ~~in the future,~~ we need additional ~~borrowings or capital.~~capital in the near term.

2526

Financial Condition. There were several changes in our consolidated balance sheet as of March 31, ~~2022~~2023 compared to the consolidated balance sheet as of December 31, ~~2021. The more significant~~2022. Significant changes are discussed below.

Cash and cash equivalents decreased to ~~$7.4~~$5.4 million as of March 31, ~~2022,~~2023, from ~~$8.3~~$11.3 million on December 31, ~~2021~~2022 and restricted cash ~~decreased~~increased to ~~$1.7~~$3.6 million as of March 31, ~~2022~~2023 from ~~$12.2~~$1.7 million on December 31, ~~2021.~~2022. These balances and the changes to the balances of cash and cash equivalents and restricted cash are further discussed in “Cash Flow” below and ~~discussed~~ in “Note 2—2 — Restricted Cash” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

Contract receivables, net of allowance for expected credit losses, as of March 31, ~~2022,~~2023, decreased to ~~$205.8~~$221.1 million from ~~$237.7~~$232.3 million on December 31, ~~2021, primarily~~2022 due to the timing of our billings and collection of ~~clients’~~client invoices. Contract receivables are a significant component of our working capital and may be favorably or unfavorably impacted by our collection efforts, including timing from new contract startups, and other short-term fluctuations related to the payment practices of our clients. We also utilize our MRPA with MUFG Bank, Ltd. to sell certain eligible billed receivables and sold $28.6 million in receivables during the first quarter of 2023. See “Note 3 — Contract Receivables, Net” in the “Notes to Consolidated Financial Statements” in this Quarterly Report

Contract assets and contract liabilities represent revenue in excess of billings and billings in excess of revenue, respectively, both of which generally arise from revenue recognition timing and contractually stipulated billing schedules or billing complexity. At March 31, ~~2022,~~2023, contract assets and contract liabilities were ~~$189.1~~$188.1 million and ~~$31.5~~$25.8 million, respectively, compared to ~~$137.9~~$169.1 million and ~~$39.7~~$25.8 million, respectively, at December 31, ~~2021.~~2022.

We evaluate our collections efforts using the days-sales-outstanding ratio (“DSO”), which we calculate by dividing total accounts receivable (contract receivables, net and contract assets, less contract liabilities), by revenue per day for the trailing 90-day period. Our DSO ~~was~~improved to 71 days at March 31, 2023, from 79 days ~~for the quarter ended~~at March 31, 2022, ~~compared~~due, in part, to ~~80 days for~~ the ~~quarter ended March 31, 2021. The DSO, excluding~~utilization of our MRPA and improved collection efforts. Excluding collections relating to the Puerto Rico disaster relief and rebuild efforts (which include unusually long invoice payment cycles due to complex customer reporting and billing ~~requirements and therefore slow to pay our invoices,~~requirements), DSO was 7468 days ~~for the quarter ended March 31, 2022 compared to 70 days for the quarter ended March 31, 2021.~~

Goodwill, as discussed in “Note 4—Goodwill” in the “Notes to Consolidated Financial Statements” in this Quarterly Report, decreased slightly mainly due to the impact of foreign currency translation. Other intangible assets decreased to $74.3 million at March 31, ~~2022 from $79.6 million on December~~2023 compared to 74 days at March 31, ~~2021 due to amortization of intangible assets related to prior acquisitions that we had made.~~2022.

~~The decrease in right-of-use assets and lease liabilities are primarily due to the amortization of right-of-use assets and operating lease liabilities through rent payments.~~

Accounts payable decreased to ~~$95.7 million~~$109.9 at March 31, ~~2022~~2023 from ~~$105.7~~$135.8 million at December 31, ~~2021,~~2022, and our accrued expenses totaled ~~$176.5~~$171.6 million at March 31, ~~2022~~2023 as compared to ~~$186.4~~$209.5 million at December 31, ~~2021.~~2022. The changes in our accounts payable and accrued expenses are primarily due to the timing of invoices from our vendors and subcontractors for services rendered and our subsequent payments of those invoices.

Long-term debt (exclusive of unamortized debt issuance costs) increased to ~~$461.6~~$602.7 million on March 31, ~~2022~~2023 from ~~$423.6~~$561.4 million on December 31, ~~2021,~~2022, primarily due to the net advance on our Credit Facility of ~~$38.0 million.~~$41.4 million to fund short-term working capital needs. The average debt balances on the Credit Facility for the three months ended March 31, 2023 and 2022 were $634.3 million and ~~2021 were~~ $461.2 million, and $325.6 million, respectively. The average interest rate on the Credit Facility, excluding any fees and unamortized debt issuance costs, for the three months ended March 31, 2022 and 2021 was 1.4% and 1.9%, respectively. We ~~generally utilize~~deploy cash flow from operations as our primary source of funding and ~~turn to~~utilize our Credit Facility to fund any temporary fluctuations, such as increases in contract receivables, reductions in accounts payable and accrued expenses, purchase of treasury stock, payment of declared dividends, additional capital expenditures, and to meet funding requirements for new acquisitions.

~~The decrease in accumulated other comprehensive loss of $2.7 million, net of taxes, was driven by~~ a change in unrealized gains of $5.5 million in the fair value of the interest rate hedging instruments, before taxes, and $0.9 million in previously unrealized net losses reclassified to comprehensive income related to hedging instruments, before taxes, ~~a $2.3 million~~ change, before taxes, in the value of certain foreign currencies relative to the U.S. dollar (primarily the British Pound, Euro and Canadian dollar), and $0.2 million in gains from the previous sale of an interest rate hedge reclassified to income. The net tax effects of the transactions totaled $1.2 million. See “Note 11—Accumulated Other Comprehensive Loss” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.cash requirements.

~~We have entered into floating-to-fixed interest rate swap~~ ~~agreements (the “Swaps”)~~Inflation with expiration dates through August 2023 and February 2025 for a total notional amount of $200.0 million in order to hedge a portion of our floating rate Credit Facility. As of March 31, 2022, the fair value of the Swaps was an unrealized loss of $0.5 million included current liabilities and $3.0 million unrealized gain included in non-current asset. ~~See “Note 9—Derivative Instruments and Hedging Activities” and “Note 17—Fair Value” in~~ the “Notes to Consolidated Financial Statements” in this Quarterly Report. On a quarterly basis, management evaluates the Swaps to determine their effectiveness and record the change in fair value of the Swaps as an adjustment to accumulated other comprehensive loss. Management intends that the Swaps remain effective.

We have explored various options for mitigating the risk associated with potential fluctuations in the foreign currencies in which we conduct transactions. We currently have forward contract agreements (“currency hedges”) in an amount proportionate to work anticipated to be performed under certain contracts in Europe. We recognize changes in the fair value of the currency hedges in our results of operations. We may increase the number, size, and scope of our currency hedges as we analyze options for mitigating our

~~foreign exchange and interest rate risk. The current impact of the foreign currency hedges to the consolidated financial statements is immaterial.~~

~~Inflation~~. Our business and results of operations have not been materially affected by inflation and changing prices during the period presented and we do not expect to be materially affected in the future due to the nature of our business as a provider of professional services with contracts that can be negotiated with new prices.

Share Repurchase Program. The objective of our share repurchase program has been to offset dilution resulting from our employee ~~stock compensation. Under~~incentive plan. Our share repurchase program is described in “Note 14 — Share Repurchase Program” in the ~~program, purchases could be made from time~~“Notes to ~~time at prevailing market prices~~Consolidated Financial Statements” in open market purchases or in privately negotiated transactions pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance with applicable insider trading and other securities laws and regulations.this Quarterly Report. The timing and extent to which we repurchase our shares will depend upon market conditions and other corporate considerations, as may be considered in our sole discretion. The purchases will be funded from our existing cash balances and/or borrowings, and the repurchased shares will be held in treasury and used for general corporate purposes. The Credit Facility permits share repurchases, provided the Company’s Leverage Ratio, prior to and after giving effect to such repurchases, is not greater than 3.50 to 1.00.treasury.

In September 2017, the Company’s board of directors (the “board”) approved a share repurchase program that authorizes share repurchases in the aggregate up to $100.0 million. In November 2021, the board approved an increase to the share repurchase program to a new limit of $200.0 million, inclusive of the prior limit. During the fourth quarter of 2021, the board approved an updated Rule 10b5-1 plan element of the share repurchase program to repurchase a maximum of 165,000 shares or a total of $20.0 million, whichever is reached first. The plan commenced on December 20, 2021 and ended during the first quarter of 2022 with a total of 165,000 shares repurchased from December 20, 2021 to February 2, 2022 for a total of $16.3 million.

During the three months ended March 31, ~~2022,~~2023, we repurchased ~~176,375~~180,000 shares under this program at an average price of ~~$96.18~~$100.70 per share. As of March 31, ~~2022, $111.9~~2023, $93.7 million remained available for share repurchases.

Dividends. We pay quarterly cash dividends to our shareholders of record at $0.14 per share. Total dividend payments during the three months ended March 31, 2023 were $2.6 million.

Cash dividends declared thus far in ~~2022~~2023 are as follows:

Dividend Declaration Date

Dividend Per Share

Record Date

Payment Date
February 23, 2022

$
0.14

March 25, 2022

April 13, 2022
May 4, 2022

$
0.14

June 10, 2022

July 14, 2022


Dividend Declaration Date	Dividend Per Share		Record Date	Payment Date
February 28, 2023	$	0.14	March 24, 2023	April 13, 2023
May 9, 2023	$	0.14	June 9, 2023	July 14, 2023

Cash Flow. We consider cash on deposit and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. The following table sets forth our sources and uses of cash for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended

March 31,

(in thousands)

2022

2021

Net Cash (Used in) Provided by Operating Activities

$
(7,055
)

$
4,961

Net Cash Used in Investing Activities

(6,454
)

(3,595
)
Net Cash Provided by (Used in) Financing Activities

2,674

(33,275
)
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

(525
)

745

Decrease in Cash, Cash Equivalents, and Restricted Cash

$
(11,360
)

$
(31,164
)


	Three Months Ended
	March 31,
(in thousands)	2023			2022
Net Cash Used in Operating Activities	$	(16,831	)	$	(7,055	)
Net Cash Used in Investing Activities		(6,900	)		(6,454	)
Net Cash Provided by Financing Activities		19,688			2,674
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash		11			(525	)
Decrease in Cash, Cash Equivalents, and Restricted Cash	$	(4,032	)	$	(11,360	)

Our operating cash flows are primarily affected by the overall profitability of our contracts, our ability to invoice and collect from our clients in a timely manner, and the timing of vendor and subcontractor payments in accordance with negotiated payment terms. We bill most of our clients on a monthly basis after services are rendered.

~~Operating~~Net cash used in operating activities ~~used $7.1~~increased by $9.8 million in cash for the three months ended March 31, 2022 compared to providing $5.0 million for the three months ended March 31, 2021, a change of $12.1 million. The decrease in cash flows from operations for the three months ended March 31, 2022 compared to the prior year was primarily due to ~~a net decrease~~an additional payroll cycle that increased the use of ~~$11.0~~cash by $25.2 million ~~in billings~~during the first quarter of 2023 and ~~collections~~the timing of ~~receivables in 2022 compared to the prior year.~~vendor payments, partially offset by higher proceeds from sale of receivables.

~~Investing activities used~~Net cash ~~of $6.5 million for the three months ended March 31, 2022, compared to $3.6 million for the three months ended March 31, 2021. Our cash flows~~ used in investing activities ~~during the three months ended March 31, 2022 were~~increased by $0.4 million primarily due to payments for ~~capital expenditures for property and equipment and capitalized software.~~prior business acquisitions.

~~Our~~Net cash provided by cash flows ~~provided by or used in~~from financing activities ~~consists primarily of debt and equity transactions. For the three months ended March 31, 2022, cash flows provided~~increased by ~~financing activities was $2.7 million, consisting of net advances and payments on our Credit Facility totaling $38.0 million, offset by~~ ~~net payments for stock issuances and buybacks of $22.3~~$17.0 million primarily ~~representing shares repurchased under our share repurchase program,~~due to net ~~receipts and~~lower cash payments ofagainst restricted contract funds of ~~$10.4~~$12.2 million and ~~payments of cash dividends totaling $2.6 million. For the three months ended March 31, 2021, cash flows used in financing activities was $33.3 million. The cash flow was primarily from~~ ~~net advances and payments on~~higher borrowing against our Credit Facility of $11.1 million and proceeds from exercise of options of $2.7 million, offset by net receipts and payments of restricted contract funds of $26.6 million, cash used for net payments for stock issuances and buybacks of $17.1 million, primarily representing shares repurchased under our share repurchase program, payments of cash dividends totaling $2.6 million, and ~~payment on business acquisition liabilities of $0.7~~$3.3 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

There have been no material changes in the disclosures discussed in the section entitled “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report.

Item 4. Controls and Procedures

~~Item 4.~~

~~Controls and Procedures~~

Disclosure Controls and Procedures and Internal Controls Over Financial Reporting. As of the period covered by this report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act. We performed the evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in our reports filed with the SEC under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There have been no significant changes in our internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f), during the periods covered by this Quarterly Report or, to our knowledge, in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on the Effectiveness of Controls. Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been or will be detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and may not be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Item 1.~~

~~Legal Proceedings~~

We are involved in various legal matters and proceedings arising in the ordinary course of business. While these matters and proceedings cause us to incur costs, including, but not limited to, attorneys’ fees, we currently believe that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on our financial position, results of operations, or cash flows.

Item 1A. Risk Factors

~~Item 1A.~~

~~Risk Factors~~

There have been no material changes in the risk factors discussed in the section entitled “Risk Factors” disclosed in Part I, Item 1A of our Annual Report.

The risks described in our Annual Report are not the only risks that we encounter. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Purchase of Equity Securities by Issuer. The following table summarizes our share repurchase activity for the three months ended March 31, ~~2022:~~2023:


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 - January 31		129,605	$	99.17		113,573	$	93,743,956
February 1 - February 28		66,427	$	103.20		66,427	$	93,743,956
March 1 - March 31		29,015	$	107.28		—	$	93,743,956
Total		225,047	$	101.40		180,000

Period

Total Number
of Shares
Purchased ⁽¹⁾⁽²⁾

Average Price
Paid per
Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans
or Programs ⁽³⁾

January 1 - January 31

147,032

$
99.26

129,765

$
115,991,949

February 1 - February 28

10,435

$
93.33

10,435

$
115,017,880

March 1 - March 31

69,308

$
88.71

36,175

$
111,869,762

Total

226,775

$
95.76

176,375

(1)

The total number of shares purchased of 225,047 includes shares repurchased pursuant to our share repurchase program described further in footnote (2) below, as well as shares purchased from employees to pay required withholding taxes related to the settlement of any restricted stock units in accordance with our applicable long-term incentive plan. During the three months ended March 31, 2023, we repurchased 180,000 shares under the stock repurchase program at an average price of $100.70 and 45,047 shares of common stock from employees in satisfaction of tax withholding obligations at an average price of $104.22 per share.

~~(1)~~

The total number of shares purchased of 226,775 includes shares repurchased pursuant to our share repurchase program described further in footnote (3) below, as well as shares purchased from employees to pay required withholding taxes related to the settlement of any restricted stock units in accordance with our applicable long-term incentive plan.

~~(2)~~

~~During the three months ended March 31, 2022, we repurchased 50,400 shares of common stock from employees in satisfaction of tax withholding obligations at an average price of $94.30per share.~~

(2)

The current share repurchase program authorizes share repurchases in the aggregate up to $200.0 million. The Restated Credit Agreement permits share repurchases, provided the Company’s Consolidated Leverage Ratio, prior to and after giving effect to such repurchases, is 0.50 to 1.00 less than the then applicable maximum Consolidated Leverage Ratio and subject to a net liquidity of $100.00 million. Additionally, we are permitted to make share repurchases up to $25 million per calendar year provided that we are not in default. For additional information on the share repurchase program, see “Note 14 — Share Repurchase Program” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

~~(3)~~

~~The current share repurchase program authorizes share repurchases in the aggregate up to $200.0 million.~~ Our existing Credit Facility allows share repurchases provided our Leverage Ratio (as defined under the Credit Facility), prior to and after giving effect to any repurchase, is not greater than 3.50 to 1.00~~. During the three months ended March 31, 2022, we repurchased~~ ~~176,375~~ shares under the stock repurchase program at an average price of $96.18. For additional information on the share repurchase program, see “Note 16 – Share Repurchase Program” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

Item 3. Defaults Upon Senior Securities

None.

~~Defaults Upon Senior Securities~~

~~None.~~

Item 4. Mine Safety Disclosures

~~Item 4.~~

~~Mine Safety Disclosures~~

Not applicable.

Item 5. Other Information

~~Other Information~~

~~None.~~

None.

Item 6. Exhibits

Exhibit

Number

~~Exhibits~~Exhibit

~~Exhibit~~ ~~Number~~		~~Exhibit~~

31.1
~~31.1~~		Certificate of the Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a). *

31.2		Certificate of the Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a). *

32.1		Certification of the Chief Executive ~~Chairman~~Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101		The following materials from the ICF International, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2022~~2023 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements.*
~~104~~
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Submitted electronically herewith.

SIGNATURES

~~Submitted electronically herewith.~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	ICF INTERNATIONAL, INC.

May ~~5, 2022~~10, 2023	By:	/s/ John Wasson
		John Wasson
		President and Chief Executive Officer
		(Principal Executive Officer)

May ~~5, 2022~~10, 2023	By:	/s/ Barry Broadus
		Barry Broadus
		Chief Financial Officer (Principal Financial Officer)

	March 31, 2022				March 31, 2021
	Beginning		Ending		Beginning		Ending
Cash and cash equivalents	$	8,254	$	7,392	$	13,841	$	8,592
Restricted cash - current ⁽¹⁾		12,179		1,681		68,146		42,231
Total of cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	20,433	$	9,073	$	81,987	$	50,823

Balance as of December 31, 2021	$	1,046,760
Measurement period adjustments - ESAC acquisition		87
Measurement period adjustments - Creative Systems and Consulting acquisition		(1	)
Effect of foreign currency translation		(1,343	)
Balance as of March 31, 2022	$	1,045,503

March 31, 2023	$	33,057
March 31, 2024		20,984
March 31, 2025		23,628
March 31, 2026		21,643
March 31, 2027		20,369
Thereafter		152,425
Total future minimum lease payments		272,106
Less: Interest		(51,719	)
Total operating lease liabilities	$	220,387

Operating lease liabilities - current	$	30,530
Operating lease liabilities - non-current		189,857
Total operating lease liabilities	$	220,387

	March 31, 2022			December 31, 2021			$ Change		% Change
Contract assets	$	189,147		$	137,867		$	51,280		37.2	%
Contract liabilities		(31,491	)		(39,665	)		8,174		(20.6	%)
Net contract assets (liabilities)	$	157,656		$	98,202		$	59,454		60.5	%

					Dates of Effected Cash Flows
Date of Interest Rate Swap Agreement	Notional Amount ($million)		Paid Fixed Interest Rate%		Beginning	Ending
September 30, 2016 ⁽¹⁾	$	100.0	-		January 31, 2018	January 31, 2023
August 31, 2017	$	25.0	1.8475%		August 31, 2018	August 31, 2023
August 8, 2018	$	50.0	2.8540%		August 31, 2018	August 31, 2023
August 8, 2018	$	25.0	2.8510%		August 31, 2018	August 31, 2023
February 20, 2020	$	100.0	1.2940%	��	February 28, 2020	February 28, 2025

	Three Months Ended March 31, 2021
	Foreign Currency Translation Adjustments			Gain on Sale of Interest Rate Hedge Agreement ⁽¹⁾			Change in Fair Value of Interest Rate Hedge Agreement ⁽²⁾			Total
Accumulated other comprehensive (loss) income at December 31, 2020	$	(7,210	)	$	1,096		$	(7,992	)	$	(14,106	)
Current period other comprehensive income (loss):
Other comprehensive income before reclassifications		968			—			1,882			2,850
Amounts reclassified from accumulated other comprehensive (loss) income ⁽³⁾		—			(180	)		907			727
Effect of taxes⁽⁴⁾		(104	)		49			(742	)		(797	)
Total current period other comprehensive income (loss)		864			(131	)		2,047			2,780
Accumulated other comprehensive (loss) income at March 31, 2021	$	(6,346	)	$	965		$	(5,945	)	$	(11,326	)

Period	Total Number of Shares Purchased ⁽¹⁾⁽²⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽³⁾
January 1 - January 31		147,032	$	99.26		129,765	$	115,991,949
February 1 - February 28		10,435	$	93.33		10,435	$	115,017,880
March 1 - March 31		69,308	$	88.71		36,175	$	111,869,762
Total		226,775	$	95.76		176,375