ICF International Inc. (NASDAQ:ICFI) Q3 2018 Earnings Conference Call - Final Transcript
Nov 01, 2018 • 04:30 pm ET
Welcome to the ICF International Third Quarter 2018 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. During the presentation all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. (Operator Instructions) Please note this conference is being recorded on Thursday, November 1st, 2018, and cannot be reproduced or rebroadcast without permission from the company.
And now I would like to turn the program over to Lynn Morgen of AdvisIRy Partners. Please go ahead.
Thank you, Vanessa. Good afternoon, everyone, and thank you for joining us to review ICF's third quarter 2018 performance. With us today from ICF are Sudhakar Kesavan, Chairman and CEO; John Wasson, President and COO; and James Morgan, CFO.
(Forward Looking Cautionary Statements)
I will now turn over the call to ICF's CEO, Sudhakar Kesavan, to discuss third quarter 2018 performance. Sudhakar?
Thank you, Lynn, and thank you all for joining us this afternoon to review our third quarter results and discuss our business outlook.
This was another quarter of solid execution for ICF, with total revenues up 9.1% year-on-year, consistent with our expectations and putting us firmly on track to achieve our full year 2018 revenue and earnings guidance. Our results continue to benefit from the diversified revenue sources inherent in our business and the positive demand dynamics and align with ICF's domain expertise and implementation capabilities.
Third quarter revenue performance reflected substantial year-on-year increases in both state and local and international government work, which more than offset slightly lower revenues from federal government clients. Growth in state and local government was closely tied to our recent contract to provide disaster recovery assistance in Puerto Rico. And international government revenue growth represented continued execution of substantial backlog that we have built over the last several years.
Our large commercial businesses, energy markets and marketing services, are both up year-on-year, more than offsetting the wind down of several infrastructure and aviation consulting projects. Adjusted EBITDA margin on service revenue rebounded sequentially by 190 basis points to 13.8% while we continued our investments. These results, along with a lower tax rate, enabled us to convert this quarter's high single-digit revenue growth into substantial double-digit increases in diluted earnings per share and non-GAAP EPS.
The growth drivers that benefited our third quarter and year-to-date results have also set the stage for ICF's strong performance in 2019. First, we expect a significant pickup in federal government work next year. The dollar value of our year-to-date federal government contract wins is over 75% higher than the dollar amount of what we won all of last year, and our new business pipeline from federal work is robust, with additional contracts expected to be awarded in this year's fourth quarter.
We see opportunities across a broad range of our federal agency clients. Specifically, one, we see significant potential to leverage our public health expertise to win additional work at our largest federal client, the Department of Health