ICF International, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Based on an evaluation under the supervision and with the participation of the Company’s management, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, were effective as of December 31, 2022 to provide reasonable assurance that information required to be disclosed in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control Over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined as of December 31, 2022 in Exchange Act Rules 13a-15(f) and 15d-15(f)). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2022. As permitted by the SEC rules, management’s assessment and conclusion on the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2022, excludes an assessment of the internal control over financial reporting of SemanticBits and Blanton, acquired on July 13, 2022 and September 1, 2022, respectively. SemanticBits and Blanton represent total assets, excluding goodwill and intangibles related to the acquisitions, and revenues constituting 1.2% and 3.8%, respectively, of the Company’s consolidated total assets and total revenues as of and for the year ended December 31, 2022. The Company’s independent registered public accounting firm, Grant Thornton LLP , has issued an audit report on the Company’s internal control over financial reporting, which appears herein. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP; (iii) that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Changes in Internal Control Over Financial Reporting. There were no material changes in our internal control over financial reporting during the last quarter of 2022, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Inherent Limitations Over Internal Controls. A control system, no matter how well designed and operated, can provide only reasonable (not absolute) 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 internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and may not be detected. Also, any evaluations of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. ITEM 9B. OTHE R INFORMATION None. 50 ITE M 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 51 PART III ITEM 10. DIRECTORS, EXECUTIVE OF FICERS AND CORPORATE GOVERNANCE The information required by this item will be included in our Proxy Statement for the 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”) and is incorporated herein by reference. ITEM 11. EXECUTI VE COMPENSATION The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOU NTANT FEES AND SERVICES The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference. 52 PAR T IV ITEM 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES (1) Financial Statements Page Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F- 1 Consolidated Balance Sheets as of December 31, 2022 and 2021 F- 4 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020 F- 5 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021, and 2020 F- 6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020 F- 7 Notes to Consolidated Financial Statements F- 8 (2) Financial Statement Schedules The financial statement schedules have been omitted since the required information is not applicable or included in the consolidated financial statements and accompanying notes included in this Form 10-K. (3) Exhibits The following exhibits are included with this report or incorporated herein by reference: Exhibit Number Exhibit 3.1 Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q, filed August 3, 2017). 3.2 Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K, filed June 2, 2017). 4.1 Specimen common stock certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Form S-1/A (File No. 333-134018), filed September 12, 2006). 4.2 See Exhibits 3.1 and 3.2 , above, for provisions of the Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of the Company defining the rights of holders of common stock of the Company. 4.3 Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 to the Company's Form 10-K, filed February 25, 2022). 10.1 2006 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Form S-1 (File No. 333-134018), filed May 11, 2006). + 10.2 ICF International, Inc. Nonqualified Deferred Compensation Plan, as amended and restated as of January 1, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K, filed March 1, 2013). + 10.3 ICF International, Inc. 2018 Omnibus Incentive Plan (Incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement for the 2018 Annual Meeting of Stockholders, filed April 20, 2018). + 10.4 Form of Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed June 1, 2018). + 10.5 Form of Non-Employee Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 27, 2018). + 10.6 Form of CEO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K, filed June 1, 2018). + 10.7 Form of COO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K, filed June 1, 2018). + 10.8 Form of General Performance Share Award Agreement under the 2018 Omnibus Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed June 1, 2018). + 53 10.9 Form of Cash-Settled Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 1, 2018). + 10.10 Restated Employment Agreement by and between the Company and Sudhakar Kesavan, dated December 29, 2008 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed December 30, 2008). + 10.11 Restated Severance Protection Agreement by and between the Company and Sudhakar Kesavan, dated December 29, 2008 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed December 30, 2008). + 10.12 Restated Severance Protection Agreement between John Wasson and ICF International, Inc. dated October 1, 2019 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed October 1, 2019). + 10.13 Amended Severance Letter Agreement by and between the Company and John Wasson, dated December 12, 2008 (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K, filed December 18, 2008). + 10.14 Employment Terms by and between the Company and James C. Morgan, dated June 8, 2012 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed August 6, 2012). + 10.15 Severance Benefit/Protection Agreement by and between the Company and James C. Morgan, dated June 8, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q, filed August 6, 2012). + 10.16 Severance Letter Agreement by and between the Company and Sergio J. Ostria, dated March 6, 2012 (Incorporated by reference to Exhibit 10.18 to the Company’s Form 10-K, filed on March 8, 2016). + 10.17 Amended and Restated Credit Agreement, dated May 6, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed May 6, 2022). 10.18 Deed of Lease by and between Hunters Branch Leasing, LLC and ICF Consulting Group, Inc., effective April 1, 2010 (Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-K, filed March 11, 2010). 10.19 Lease Agreement between ICF Consulting Group, Inc. and CRS Plaza II, LLC, dated as of October 24, 2019 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed October 30, 2019). 10.20 Equity Purchase Agreement between Incentive Technology Group, LLC, Project Lucky Holdings, LLC, Shadi Michelle Branch, Adam Branch, and ICF Incorporated, L.L.C., dated January 13, 2020 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A, filed January 14, 2020). 10.21 Equity Purchase Agreement by and among Creative Systems and Consulting, L.L.C., Project Apple Holdings, LLC, Vanitha Khera, Vishal Khera, and ICF Incorporated, L.L.C., dated December 13, 2021 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A, filed December 17, 2021). 10.22 Equity Purchase Agreement by and among ICF Incorporated, L.L.C., SemanticBits, LLC, Ramprakash Chilukuri, Vinay Kumar, and Ramprakash Chilukuri, as the Sellers’ Representative, dated June 8, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A, filed July 1, 2022). 21.0 Subsidiaries of the Registrant.* 23.1 Consent of Grant Thornton LLP.* 31.1 Certificate of the Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).* 31.2 Certificate of the Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a).* 32.1 Certifications of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 32.2 Certifications of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 54 101 The following materials from the ICF International, Inc. Annual Report on Form 10-K for the year ended December 31, 2022 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements. * 104 The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL * Submitted electronically herewith . + Indicates a management contract or compensatory plan or arrangement required to be filed as an exhibit. ITEM 16. FORM 10-K SUMMARY None. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. March 1, 2023 ICF INTERNATIONAL, INC. By: /s/ JOHN WASSON John Wasson Chair, President, and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ JOHN WASSON Chair, President, Chief Executive Officer, and Director (Principal Executive Officer) March 1, 2023 John Wasson /s/ BARRY BROADUS Chief Financial Officer (Principal Financial Officer and Interim Principal Accounting Officer) March 1, 2023 Barry Broadus /s/ MARILYN CROUTHER Director March 1, 2023 Marilyn Crouther /s/ SCOTT SALMIRS Director March 1, 2023 Scott Salmirs /s/ Dr. SRIKANT M. DATAR Director March 1, 2023 Dr. Srikant M. Datar /s/ CHERYL W. GRISÉ Director March 1, 2023 Cheryl W. Grisé /s/ MICHAEL J. VAN HANDEL Director March 1, 2023 Michael Van Handel /s/ RANDALL MEHL Director March 1, 2023 Randall Mehl /s/ Dr. MICHELLE A. WILLIAMS Director March 1, 2023 Dr. Michelle A. Williams 56 REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders ICF International, Inc. Board of Directors and Stockholders ICF International, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of ICF International, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2023 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – estimates-at-completion As described further in Note 2 to the consolidated financial statements, the Company generally recognizes revenue over time as control transfers to a client, based on the extent of progress towards satisfaction of the related performance obligation. On certain contracts in which costs incurred represents a reasonable measure of progress toward satisfaction of a performance obligation and transfer of control to a customer, revenue is recognized over time using a cost-input method (referred to as the cost-to-cost method). Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion (“EAC”). A performance obligation’s EAC includes all direct costs such as level of effort from internal staff and/or subcontractors and costs of materials needed to complete the tasks. The accounting for these contracts involves judgement, particularly as it relates to the process of estimating total costs for the performance obligation. We identified the estimates of total costs for the performance obligations that recognize revenue using the cost-to-cost method as a critical audit matter. The principal considerations for our determination that the use of estimates-at-completion in recognizing revenue is a critical audit matter are the significant management judgments involved in the initial creation and subsequent updates to the Company’s F- 1 estimates-at-completion and related profit recognized, which required challenging and subjective auditor judgment in the execution of our procedures. Our audit procedures in response to this matter included the following, among others. • We tested the design and operating effectiveness of controls related to management’s review of estimate-at-completion analyses and the significant assumptions underlying the estimated total costs to complete. • We tested management’s process for developing, revising and applying estimates-at-completion to a selection of contracts. Our testing included evaluating key inputs and assumptions by comparing them to underlying supporting documentation, contract documentation or other corroborating evidence, such as subcontractor agreements, customer correspondence and contractual milestones or other documentation that supports estimated costs. • We performed a lookback analysis of certain contracts completed during the year ended December 31, 2022 and compared the final estimated costs at completion to the estimate of costs throughout the contract life cycle to assess the Company’s ability to develop reasonable estimates. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2000. Arlington, Virginia March 1, 2023 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders ICF International, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of ICF International, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 1, 2023 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of SemanticBits, LLC and Blanton & Associates, wholly-owned subsidiaries, whose financial statements reflect total assets and revenues constituting 1.2% and 3.8% percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022. As indicated in Management’s Report, SemanticBits, LLC and Blanton & Associates were acquired during 2022. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of SemanticBits, LLC and Blanton & Associates. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Arlington, Virginia March 1, 2023 F- 3 ICF INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED B ALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2022 December 31, 2021 ASSETS Current Assets: Cash and cash equivalents $ 11,257 $ 8,254 Restricted cash 1,711 12,179 Contract receivables, net 232,337 237,684 Contract assets 169,088 137,867 Prepaid expenses and other assets 40,709 42,354 Income tax receivable 11,616 10,825 Total Current Assets 466,718 449,163 Property and Equipment, net 85,402 52,053 Other Assets: Goodwill 1,212,898 1,046,760 Other intangible assets, net 126,537 79,645 Operating lease - right-of-use assets 149,066 177,417 Other assets 51,637 44,496 Total Assets $ 2,092,258 $ 1,849,534 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 23,250 $ 10,000 Accounts payable 135,778 105,652 Contract liabilities 25,773 39,665 Operating lease liabilities - current 19,305 34,901 Finance lease liabilities - current 2,381 — Accrued salaries and benefits 85,991 85,517 Accrued subcontractors and other direct costs 45,478 39,400 Accrued expenses and other current liabilities 78,036 61,496 Total Current Liabilities 415,992 376,631 Long-term Liabilities: Long-term debt 533,084 411,605 Operating lease liabilities - non-current 182,251 191,805 Finance lease liabilities - non-current 16,116 — Deferred income taxes 68,038 41,913 Other long-term liabilities 23,566 24,110 Total Liabilities 1,239,047 1,046,064 Commitments and Contingencies (Note 20) Stockholders’ Equity: Preferred stock, par value $ .001 per share; 5,000,000 shares authorized; none issued — — Common stock, $ .001 par value; 70,000,000 shares authorized; 23,771,596 and 23,535,671 shares issued; and 18,883,050 and 18,876,490 shares outstanding at December 31, 2022 and 2021, respectively 23 23 Additional paid-in capital 401,957 384,984 Retained earnings 703,030 649,298 Treasury stock, 4,906,209 and 4,659,181 shares at December 31, 2022 and 2021, respectively ( 243,666 ) ( 219,800 ) Accumulated other comprehensive loss ( 8,133 ) ( 11,035 ) Total Stockholders’ Equity 853,211 803,470 Total Liabilities and Stockholders’ Equity $ 2,092,258 $ 1,849,534 The accompanying notes are an integral part of these statements. F- 4 ICF International, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income Years ended December 31, (in thousands, except per share amounts) 2022 2021 2020 Revenue $ 1,779,964 $ 1,553,048 $ 1,506,875 Direct costs 1,134,422 979,570 972,406 Operating costs and expenses: Indirect and selling expenses 486,863 430,572 411,612 Depreciation and amortization 21,482 19,478 20,399 Amortization of intangible assets 28,435 12,492 13,349 Total operating costs and expenses 536,780 462,542 445,360 Operating income 108,762 110,936 89,109 Interest, net ( 23,281 ) ( 9,984 ) ( 13,712 ) Other expense ( 1,501 ) ( 862 ) ( 724 ) Income before income taxes 83,980 100,090 74,673 Provision for income taxes 19,737 28,958 19,714 Net income $ 64,243 $ 71,132 $ 54,959 Earnings per share: Basic $ 3.41 $ 3.77 $ 2.92 Diluted $ 3.38 $ 3.72 $ 2.87 Weighted-average common shares outstanding: Basic 18,818 18,868 18,841 Diluted 19,033 19,124 19,135 Cash dividends declared per common share 0.56 0.56 0.56 Other comprehensive income (loss), net of tax 2,902 3,071 ( 1,962 ) Comprehensive income, net of tax $ 67,145 $ 74,203 $ 52,997 The accompanying notes are an integral part of these statements. F- 5 ICF International, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity Common Stock Additional Paid-in Retained Treasury Stock Accumulated Other Comprehensive (in thousands) Shares Amount Capital Earnings Shares Amount Loss Total Balance at January 1, 2020 18,868 $ 23 $ 346,795 $ 544,840 3,978 $ ( 164,963 ) $ ( 12,144 ) $ 714,551 Net income — — — 54,959 — — — 54,959 Other comprehensive loss — — — — — — ( 1,962 ) ( 1,962 ) Equity compensation — — 17,555 — — — — 17,555 Exercise of stock options 70 — 2,652 — — — — 2,652 Issuance of shares pursuant to employee stock purchase plan and vesting of restricted stock units 389 — 2,056 — — — — 2,056 Net payments for stock buybacks ( 417 ) — — — 417 ( 31,782 ) — ( 31,782 ) Cumulative-effect adjustments for adoption of accounting principle — — — ( 513 ) — — — ( 513 ) Dividends declared — — — ( 10,555 ) — — — ( 10,555 ) Balance at December 31, 2020 18,910 $ 23 $ 369,058 $ 588,731 $ 4,395 $ ( 196,745 ) $ ( 14,106 ) $ 746,961 Net income — — — 71,132 — — — 71,132 Other comprehensive income — — — — — — 3,071 3,071 Equity compensation — — 13,230 — — — — 13,230 Exercise of stock options 8 — 233 — — — — 233 Issuance of shares pursuant to employee stock purchase plan and vesting of restricted stock units 222 — 2,463 — — — — 2,463 Net payments for stock buybacks ( 264 ) — — — 264 ( 23,055 ) — ( 23,055 ) Dividends declared — — — ( 10,565 ) — — — ( 10,565 ) Balance at December 31, 2021 18,876 $ 23 $ 384,984 $ 649,298 4,659 $ ( 219,800 ) $ ( 11,035 ) $ 803,470 Net income — — — 64,243 — — — 64,243 Other comprehensive income — — — — — — 2,902 2,902 Equity compensation — — 13,171 — — — — 13,171 Exercise of stock options 19 — 602 — — — — 602 Issuance of shares pursuant to employee stock purchase plan and vesting of restricted stock units 235 — 3,200 — — — — 3,200 Net payments for stock buybacks ( 247 ) — — — 247 ( 23,866 ) — ( 23,866 ) Dividends declared — — — ( 10,511 ) — — — ( 10,511 ) Balance at December 31, 2022 18,883 $ 23 $ 401,957 $ 703,030 4,906 $ ( 243,666 ) $ ( 8,133 ) $ 853,211 The accompanying notes are an integral part of these statements. F- 6 ICF International, Inc. and Subsidiaries Consolidated Statem ents of Cash Flows Years ended December 31, (in thousands) 2022 2021 2020 Cash Flows from Operating Activities Net income $ 64,243 $ 71,132 $ 54,959 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 248 10,912 4,062 Deferred income taxes 7,428 8,816 ( 1,865 ) Non-cash equity compensation 13,171 13,230 17,555 Depreciation and amortization 49,917 31,970 33,748 Facilities consolidation reserve ( 317 ) ( 302 ) ( 288 ) Amortization of debt issuance costs 1,305 617 710 Impairment of long-lived assets 8,412 7,901 3,090 Other adjustments, net 1,283 1,099 964 Changes in operating assets and liabilities, net of the effect of acquisitions: Net contract assets and liabilities ( 41,634 ) 3,069 6,064 Contract receivables 19,732 ( 19,021 ) 54,384 Prepaid expenses and other assets ( 20,737 ) 4,529 ( 5,410 ) Operating lease assets and liabilities, net ( 1,466 ) ( 5,481 ) ( 2,307 ) Accounts payable 30,003 13,479 ( 51,177 ) Accrued salaries and benefits ( 3,337 ) ( 5,616 ) 26,810 Accrued subcontractors and other direct costs 6,965 ( 38,575 ) 32,544 Accrued expenses and other current liabilities 24,742 26,697 ( 18,198 ) Income tax receivable and payable ( 1,526 ) ( 12,802 ) 5,375 Other liabilities 3,774 ( 1,449 ) 12,125 Net Cash Provided by Operating Activities 162,206 110,205 173,145 Cash Flows from Investing Activities Capital expenditures for property and equipment and capitalized software ( 24,475 ) ( 19,932 ) ( 17,683 ) Payments for business acquisitions, net of cash acquired ( 237,280 ) ( 174,549 ) ( 253,265 ) Proceeds from working capital adjustments related to prior business acquisition 2,911 — — Net Cash Used in Investing Activities ( 258,844 ) ( 194,481 ) ( 270,948 ) Cash Flows from Financing Activities Advances from working capital facilities 1,583,936 881,037 1,020,451 Payments on working capital facilities ( 1,446,125 ) ( 773,264 ) ( 870,114 ) Payments on capital expenditure obligations — — ( 1,712 ) Receipt of restricted contract funds 15,721 264,214 65,694 Payment of restricted contract funds ( 25,959 ) ( 319,990 ) ( 106 ) Debt issuance costs ( 4,907 ) — ( 2,094 ) Proceeds from exercise of options 602 2,848 37 Dividends paid ( 10,547 ) ( 10,565 ) ( 10,551 ) Net payments for stockholder issuances and buybacks ( 21,218 ) ( 20,040 ) ( 29,726 ) Payments on business acquisition liabilities ( 1,132 ) ( 1,007 ) ( 1,924 ) Net Cash Provided by Financing Activities 90,371 23,233 169,955 Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash ( 1,198 ) ( 511 ) 3,353 (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash ( 7,465 ) ( 61,554 ) 75,505 Cash, Cash Equivalents, and Restricted Cash, Beginning of Period 20,433 81,987 6,482 Cash, Cash Equivalents, and Restricted Cash, End of Period $ 12,968 $ 20,433 $ 81,987 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 22,782 $ 10,331 $ 14,337 Income taxes $ 16,476 $ 34,132 $ 15,954 Non-cash investing and financing transactions: Share repurchases transacted but not settled and paid $ — $ 552 $ — Tenant improvements funded by lessor $ 20,253 $ — $ 3,124 Acquisition of property and equipment through finance lease $ 18,319 $ — $ — Exercise of options receivable from shareholders $ — $ — $ 2,615 The accompanying notes are an integral part of these statements. F- 7 ICF International, Inc. and Subsidiaries Notes to Consolidated Financial Statements (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 intercompany transactions and balances have been eliminated. Nature of Operations The Company provides professional services and technology-based solutions, including management, marketing, technology, and policy consulting and implementation services, in the areas of energy, environment, and infrastructure; health, education, and social programs; safety and security; and consumer and financial. The Company offers a full range of services to clients throughout the entire life cycle of a policy, program, project, or initiative, from research and analysis, 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 are U.S. federal government departments and agencies, most significantly the Department of Health and Human Services, Department of State, and Department of Defense. 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-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 Reston, Virginia. It maintains additional offices throughout the world, including 58 offices in the U.S. and U.S. territories and 24 offices in key markets outside the U.S., including offices in the United Kingdom (“U.K.”), Belgium, India, and Canada. 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 $ 0.3 million and $ 0.2 million in interest income for the years ended December 31, 2021 and 2020, respectively, from “Other expense” to “Interest, net”. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. Revenue Recognition The Company primarily provides services and technology-based solutions for clients that operate in a variety of markets and the solutions may span the entire program life cycle, from initial research and analysis to the design and implementation of solutions. The Company enters into agreements with clients that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services and solutions are transferred to the client. Except in certain narrowly defined situations, the Company’s agreements with its clients are written and revenue is generally not recognized on F- 8 oral or implied arrangements. The Company recognizes revenue based on the consideration specified in the applicable agreement and excludes from revenue amounts collected on behalf of third parties. Accordingly, sales and similar taxes which are collected on behalf of third parties are excluded from the transaction price. The Company evaluates whether two or more agreements should be accounted for as one single contract and whether combined or single agreements should be accounted for as more than one performance obligation. For most contracts, the client requires the Company to perform a number of tasks in providing an integrated output for which the client has contracted, and, hence, contracts of this type are tracked as having only one performance obligation since a substantial part of the Company’s promise is to ensure the individual tasks are incorporated into a combined output in accordance with contract requirements. When contracts are separated into multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised services underlying each performance obligation. The Company generally provides customized solutions in which the pricing is based on specific negotiations with each client, and, in these cases, the Company uses a cost-plus margin approach to estimate the standalone selling price of each performance obligation. Certain long-term contracts contain award fees, incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts are generally awarded at the completion of a contractually stipulated performance assessment period based on the achievement of performance metrics, program milestones or cost targets, and the amount awarded may be subject to client discretion. Variable consideration is estimated based on the most likely amount. Once the Company selects a method to estimate variable consideration, it applies that method consistently. Estimates of variable consideration will be constrained only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company evaluates contractual arrangements to determine whether revenue should be recognized on a gross versus net basis. The Company’s assessment is based on the nature of the promise to the client. In most cases, the Company itself agrees to provide specified services to the client as a principal and revenue is recognized on a gross basis. In certain instances, the Company acts as an agent and merely arranges for another party to provide services to the client and revenue is recognized on a net basis in reflection of the fact that the Company does not control the goods or services provided to the client by the other party. Long-term contracts typically contain billing terms that provide for invoicing monthly or upon completion of milestones, and payment on a net 30 -day basis. Therefore, the timing of billings and cash receipts may differ from the timing of revenue recognition resulting in either contract assets or contract liabilities. Exceptions to monthly billing terms are to ensure that the Company performs satisfactorily rather than representing a significant financing component. For cost-based contracts, the Company’s performance is evaluated during a contractually stipulated performance period and, while contract costs may be billed on a monthly basis, the Company is generally permitted to bill for incentive or award fees only after the completion of the performance assessment period, which may occur quarterly, semi-annually or annually, and after the client completes the performance assessment. Fixed-price contracts may provide for milestone billings based on the attainment of specific project objectives rather than for billing on a monthly basis. Moreover, contracts may require retention or hold backs that are paid at the end of the contract to ensure that the Company performs in accordance with requirements. The Company does not assess whether a contract contains a significant financing component if the Company expects, at contract inception, that the period between payment by the client and the transfer of promised services to the client will be one year or less. The Company generally recognizes revenue over time as control is transferred to a client, based on the extent of progress towards satisfaction of the performance obligation. The selection of the method used to measure progress requires judgment and is dependent, among other factors, on the contract type and the nature of the services provided. For time-and-materials contracts, the Company uses the right to invoice practical expedient to determine the revenue earned based on hours worked in contract performance at negotiated billing rates. Fixed-price level-of-effort contracts are substantially similar to time-and-materials contracts except that the Company is required to deliver a specified level of effort over a stated period of time. For these contracts, the Company determines the revenue earned using contract hours worked at negotiated bill rates as the Company delivers the contractually required workforce. For cost-based contracts, the Company recognizes revenue based on contract costs incurred, as the Company becomes contractually entitled to reimbursement of the contract costs, plus a most likely estimate of award or incentive fees earned on those costs even though final determination of fees earned occurs after the contractually-stipulated performance assessment period ends. F- 9 For fixed-price contracts, the Company uses the percentage-of-completion method to estimate the amount of revenue, based on the ratio of actual costs incurred to total estimated costs, provided that costs incurred (an input method) represents a reasonable measure of progress towards the satisfaction of a performance obligation and transfer of control to the customer. This method provides a faithful depiction of the transfer of value to the client when the Company is satisfying a performance obligation that entails integration of tasks for a combined output, which requires the Company to coordinate the work of employees, subcontractors and delivery of other contract costs. Contract costs that are not reflective of the Company’s progress toward satisfying a performance obligation are not included in the calculation of the measure of progress. When this method is used, the changes in estimated costs to complete the obligations result in adjustments to revenue on a cumulative catch-up basis, which causes the effect of revised estimates for prior periods to be recognized in the current period. Changes in these estimates may routinely occur over contract performance for a variety of reasons, which include: changes in contract scope; changes in contract cost estimates due to unanticipated cost growth or reassessments of risks impacting costs; changes in estimated incentive or award fees; or performing better or worse than previously estimated. In some fixed-price service contracts, the Company performs services of a recurring nature, such as maintenance and other services of a “stand ready” nature. For these contracts, the Company has the right to consideration in an amount that corresponds directly with the value that the client has received. Therefore, the Company records revenue on a time-elapsed basis to reflect the transfer of control to the client throughout the contract. Contracts may be modified to reflect changes in contract specifications and requirements, and these changes may create new enforceable rights and obligations. Modifications that are for services that are not distinct from the existing agreement due to the significant integration service that the Company provides are accounted for as part of an existing performance obligation. The effect of these modifications on the transaction price and the Company’s measure of progress in fulfilling the performance obligation to which they relate is recognized as an adjustment to revenue on a cumulative catch-up basis. Revenue from modifications that create new, distinct performance obligations is recognized based on the Company’s progress in fulfilling the requirements of the new obligations. For construction-type fixed-price contracts in which the estimated cost to perform exceeds the consideration to be received, the Company accrues for the entire estimated loss during the period in which the loss is determined by recording additional direct costs. For performance obligations that are satisfied over time, the Company recognizes the cost to fulfill contracts when incurred, unless the costs are within the scope of another topic in which case the guidance of that topic is applied. The Company evaluates incremental costs of obtaining a contract and, if they are recoverable from the client and relate to a specific future contract, they are deferred and recognized over contract performance or the estimated life of the customer relationship if renewals are expected. The Company expenses these costs when incurred if the amortization period is one year or less. Unfulfilled performance obligations represent amounts expected to be earned on contracts and do not include the value of negotiated, unexercised contract options, which are classified as marketing offers. Indefinite delivery/indefinite quantity and similar arrangements provide a framework for the client to issue specific tasks, delivery or purchase orders in the future and these arrangements are considered marketing offers until a specific order is executed. Revenue recognition entails the use of significant judgment, including, but not limited to, the following: evaluating agreements in terms of the number and nature of performance obligations; determining the appropriate method for measuring progress to satisfaction of obligations; determining if the Company is acting as a principal or an agent, and preparing estimates in terms of the amount of progress that the Company has made. For many fixed-price contracts, in particular, the Company estimates the proportion of total revenue earned using the ratio of contract costs incurred to total estimated contract costs, which requires the Company to prepare and, as necessary, revise estimates, as work progresses, of the total contract costs required to satisfy each respective performance obligation. Moreover, some of the Company’s contracts include variable consideration, which requires the Company to estimate and, as necessary, revise the most likely amounts that will be earned over the respective performance assessment periods. For these obligations, changes in estimates result in cumulative catch-up adjustments and may have a significant impact on earnings during a given period. The Company’s operating cycle for long-term contracts may be greater than one year and is measured by the average time between the inception and completion of those contracts. Contract-related assets and liabilities are classified as current assets and current liabilities. Significant balance sheet accounts related to the revenue recognition cycle are as follows: Contract receivables, net – Contract receivables represent amounts billed and due from clients in accordance with respective contractual terms. The amounts due are stated at their net realizable value. The Company estimates an allowance for estimated credit loss to reflect the amount of receivables that will not be collected. The Company considers a number of factors in estimating the amount of the allowance, including knowledge of a client’s financial condition, its historical collection experience, and other factors relevant to assessing the collectability of the receivables. The Company writes off specific contract receivables when such amounts are determined to be uncollectible. F- 10 Contract assets – Contract assets include unbilled amounts typically resulting from revenue recognized on long-term contracts when it exceeds the amounts billed. Contract assets include retainages until the Company has met the contract-stipulated requirements for payment. Contract assets are reported in a net position on a contract-by-contract basis each period even though individual contracts may contain multiple performance obligations. On a contract-by-contract basis, amounts do not exceed their net realizable value. Contract liabilities – Contract liabilities represent advance payments received and billings in excess of revenue recognized on contracts. Contact liabilities are reported in a net position on a contract by contract basis each period even though individual contracts may contain multiple performance obligations. Cash and Cash Equivalents The Company considers cash on deposit and all highly liquid investments with original maturities of three months or less when purchased to be cash and cash equivalents. Restricted Cash The Company has restricted cash representing amounts held in escrow accounts and/or not readily available due to contractual restrictions. Property and Equipment Property and equipment are carried at cost and are depreciated using the straight-line method over their estimated useful lives, which range from two to seven years . Leasehold improvements are amortized on a straight-line basis over the shorter of the economic life of the improvement or the related lease term. Goodwill and Other Intangible Assets The purchase price of an acquired business is allocated to the tangible assets and separately identifiable intangible assets acquired, less liabilities assumed, based on their respective fair values, with the excess recorded as goodwill. Goodwill represents the excess of the purchase consideration over the fair value of net assets of businesses acquired. Goodwill and intangible assets acquired in a business combination and deemed to have an indefinite useful life are not amortized, but instead are reviewed for impairment annually, or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are amortized over such lives and reviewed for impairment if impairment indicators arise. The Company performs its annual goodwill impairment test as of October 1 of each year. As its business is highly integrated and all of its components have similar economic characteristics, the Company has concluded it has one aggregated reporting unit at the consolidated entity level. The Company assesses goodwill at the reporting unit. If, after opting to complete a qualitative assessment, the Company determines that it is more likely than not that the estimated fair value of the reporting unit exceeded its carrying amount, it may conclude that no impairment exists. If the Company concludes otherwise, a goodwill impairment test is performed, which includes a comparison of the reporting unit’s fair value to the carrying amount and recognizing, as an impairment loss, the difference of the reporting unit’s fair value and the carrying amount of goodwill. The Company’s qualitative analysis as of October 1, 2022 included macroeconomic, industry and market specific considerations, financial performance indicators and measurements, and other factors. Based on this qualitative assessment, the Company determined that it is more likely than not that the fair value of its reporting unit exceeded its carrying amount, and thus an additional quantitative impairment test was not required to be performed. Therefore, based on management’s review, a goodwill impairment loss was not required for 2022. Historically, the Company has no t recorded any goodwill impairment losses. Long-Lived Assets The Company reviews its long-lived assets, including property and equipment, operating lease right-of-use (“ROU”) assets, and amortizable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the long-lived asset group may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the long-lived asset group being evaluated, a loss is recognized for any excess of the carrying amount over the fair value of the asset group. The Company recognized impairment expense, included in indirect and selling expenses, of $ 8.4 million, $ 7.9 million, and $ 3.1 million during the years ended December 31, 2022, 2021, and 2020, respectively, related to operating lease right-of-use assets and leasehold improvements. F- 11 Leases The Company uses leases to obtain use of a variety of different resources, including those for the use of facilities or property and equipment. The Company determines if an arrangement is a lease at inception and recognizes a right-of-use asset and lease obligation for all leases greater than twelve months based on the present value of the future minimum lease payments as of the commencement date, excluding any lease incentives and initial costs incurred to obtain the lease. Since most lease agreements do not provide an implicit rate, the Company uses its incremental borrowing rate as of the commencement date, based on publicly available yields adjusted for company-specific considerations and terms, in estimating the present value of future payments. Lease terms, for the purpose of determining each lease’s present value, include options to extend or terminate the lease if it is reasonably certain and economically reasonable that the Company will exercise that option. Lease costs from minimum lease payments are recognized on a straight-line basis over the lease term. The leases may contain both lease and non-lease components, which are generally accounted for separately. For office equipment leases (primarily copier leases), the Company elected to account for the lease and non-lease components as a single lease component and not recognize right-of-use assets and lease liabilities for leases with a term less than twelve months. Operating leases are included in operating lease right-of-use assets and operating lease liabilities (current and non-current) and finance leases are included in property and equipment, net and finance lease liabilities (current and non-current) on the consolidated balance sheets. Capitalized Software The Company capitalizes certain costs to develop enhancements and upgrades to internal-use software that are incurred subsequent to the preliminary project stage. Amortization expense is recorded on a straight-line basis over the expected economic life of the software, typically lasting three to five years . As of December 31, 2022, and 2021, capitalized software, net of accumulated amortization, totaled $ 19.0 million and $ 14.5 million , respectively, and is included as part of “other assets” on the consolidated balance sheets. Stock-based Compensation The Company recognizes stock-based compensation expense related to share-based payments to employees, including grants of employee stock options, restricted stock awards, restricted stock units (“RSUs”), and cash-settled restricted stock units (“CSRSUs”) on a straight-line basis over the requisite service period, which is generally the vesting period. The Company recognizes expense for performance-based share awards (“PSAs”), which have both performance and service conditions, on a straight-line basis over the three-year performance period. Non-employee director awards are granted annually for board-related services and therefore expensed over the service period. Stock-based compensation expense is based on the estimated fair value of the instruments on the grant date and the estimated number of shares the Company ultimately expects will vest. The Company estimates the rate of future forfeitures based on factors which include the historical forfeiture experience for each applicable employee class under the assumption that the rate of future forfeitures will be similar to that experienced in the past. In addition, the estimation of PSAs that will ultimately vest requires judgment based on the performance and market conditions that will be achieved over the performance period. Changes to these estimates are recorded as a cumulative adjustment in the period estimates are revised. The fair value of stock options, restricted stock awards, RSUs, PSAs, and non-employee director awards is estimated based on the fair value of a share of common stock at the grant date. The fair value of PSAs is estimated using a Monte Carlo simulation model. CSRSUs are settled only in cash payments. The cash payment is based on the fair value of the Company’s stock price at the vesting date, calculated by multiplying the number of CSRSUs vested by the Company’s closing stock price on the vesting date, subject to a maximum payment cap and a minimum payment floor. The Company treats these awards as liability-classified awards, and, therefore, accounts for them at fair value estimated based on the closing price of the Company’s stock at the reporting date. Derivative Instruments Derivative instruments include interest rate swaps and foreign currency hedge contracts. Derivative instruments designated as cash flow hedges are recorded on the consolidated balance sheets at fair value as of the reporting date and reclassified to earnings in the period that the hedged instruments affect earnings, and the effective portion of the hedge is recorded in other comprehensive income (loss), net of tax, on the consolidated statements of comprehensive income. Management reviews the effectiveness of the hedges on a quarterly basis. Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company evaluates its ability to benefit from all deferred tax assets and establishes valuation allowances for amounts it believes will more likely than not be unrealizable. For uncertain tax positions, the Company uses a more-likely-than-not recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-than-not recognition threshold are measured in order to determine the tax benefit recognized in the financial statements. Penalties, if probable and reasonably estimable, and interest expense related to uncertain tax positions are not recognized as a component of income tax expense but recorded separately in indirect expenses and interest expense, respectively. F- 12 Treasury Shares Treasury shares are accounted for under the cost method. Other Comprehensive Income (Loss) Other comprehensive income (loss) includes foreign currency translation adjustments arising from the use of differing exchange rates from period to period, the gain on the sale of an interest rate hedge agreement designated as a cash flow hedge, and the changes in fair value of interest rate agreements designated as cash flow hedges, net of taxes. The financial positions and results of operations of the Company’s foreign subsidiaries are based on the local currency as the functional currency and are translated to U.S. dollars for financial reporting purposes. Assets and liabilities of the subsidiaries are translated at the exchange rate in effect at each balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments are reported in accumulated other comprehensive loss included in stockholders’ equity in the Company’s consolidated balance sheets. Acquisition-Related Costs Costs related to acquisitions include professional fees for legal, financial, and other advisory services and are expensed in the period that they are incurred. Segment, Customer and Geographic Information The Company operates in one segment based on the consolidated information used by its chief operating decision-maker in evaluating the financial performance of its business and allocating resources. This single segment represents the Company’s core business, which is providing professional services. Although the Company disaggregates its revenue by client market areas and type, the Company does not manage its business or allocate resources based on client market or type. Approximately $ 980.4 million , $ 735.0 million , and $ 667.0 million of the Company’s revenue for the years 2022, 2021, and 2020, respectively, was derived under prime contracts and subcontracts with agencies and departments of the federal government representing 55 % , 47 % , and 44 % of total revenue, respectively. No other customer accounted for 10% or more of the Company’s revenue during the years ended 2022, 2021, and 2020. The Company provides services to U.S. and international clients, and revenue is attributed to a particular geographic area based on the administrative location of the client that awarded the contract. The Company’s revenue generated from international clients as a percentage of total revenue was approximately 8 % , 11 % , and 13 % for the years 2022, 2021, and 2020, respectively. At December 31, 2022 and 2021, long-lived assets held internationally were 7 % and 15 % of total long-lived assets, respectively. Risks and Uncertainties Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, derivative financial instruments, and contract receivables. The Company’s domestic bank accounts are insured up to $ 250,000 by the Federal Deposit Insurance Corporation. As of December 31, 2022, the Company had $ 5.2 million in its accounts that exceeded the insured limit. The majority of the Company’s cash transactions are processed through one U.S. commercial bank. Cash held domestically in excess of daily requirements is used to reduce any amounts outstanding under the Company’s Credit Facility. As of December 31, 2022 and 2021, the Company held approximately $ 8.4 million and $ 20.1 million , respectively, of cash and restricted cash in foreign bank accounts. The Company enters into derivative financial instruments with financial institutions that meet certain credit guidelines, and limits its risks by continuously monitoring the credit rating of the institutions. The Company’s receivables consist principally of amounts due from agencies and departments of the federal government, state and local governments, and international governments, as well as from commercial organizations. The credit risk, with respect to federal and other government clients, is limited due to the creditworthiness of the respective governmental entity. Amounts due for work performed as a subcontractor also represent limited credit risk when the client is performing as the prime contractor on a government contract due to the ultimate creditworthiness of the end client. Receivables from commercial clients generally pose a greater credit risk, and, as a result, are subject to ongoing monitoring. The Company extends credit in the normal course of operations and does not require collateral from its clients. The Company’s contracts with the federal government are subject to audit by agencies and departments of the federal government. Such audits determine, among other things, whether adjustments to invoices previously rendered are required under regulations as well as the underlying terms of each respective contract. F- 13 Recent Accounting Pronouncements Accounting Pronouncements 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 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. Entities can elect to not apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. Also, 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 entities may elect to apply the amendments prospectively through December 31, 2022, the sunset date. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 that extended the sunset date from December 31, 2022 to December 31, 2024. During the third quarter of 2022, the Company amended certain interest rate swap contracts to change the benchmark rate from LIBOR to term Secured Overnight Financing Rate (“SOFR”) based interest pricing conventions. Contemporaneously, the Company adopted ASU 2020-04 and elected to apply the optional expedient to consider the amended swap contracts as a continuation of the existing arrangements. The optional expedient did not result in a material impact on the Company’s operating results, financial position, or cash flows. As of December 31, 2022, the Company has one interest rate swap contract with a variable interest rate that references LIBOR. The contract expires on August 31, 2023. See Note 12 - Derivative Instruments and Hedging Activities. NOTE 3 - RESTRICTED CASH The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the consolidated balance sheets at December 31, 2022 and 2021 to the total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 Beginning Ending Beginning Ending Beginning Ending Cash and cash equivalents $ 8,254 $ 11,257 $ 13,841 $ 8,254 $ 6,482 $ 13,841 Restricted cash (1) 12,179 1,711 68,146 12,179 — 68,146 Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows $ 20,433 $ 12,968 $ 81,987 $ 20,433 $ 6,482 $ 81,987 (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 liabilities 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 9 - Accrued Expenses and Other Current Liabilities for the corresponding liability. NOTE 4 - CONTRACT RECEIVABLES, NET Contract receivables, net consisted of the following as of December 31: 2022 2021 Billed receivables $ 238,449 $ 245,425 Allowance for expected credit losses ( 6,112 ) ( 7,741 ) Contract receivables, net $ 232,337 $ 237,684 On December 23, 2022, the Company entered into a Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”) for the sale of certain eligible billed receivables from time to time. The purchase price of the receivables is equal to the net invoice amount minus a 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 F- 14 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 year ended December 31, 2022, the Company sold $ 10.0 million in billed receivables. For the year ended December 31, 2022, the discount on the sale of receivables under the MRPA totaled less than $ 0.1 million and is included as part of “indirect and selling expenses” on the consolidated statements of comprehensive income. NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31: 2022 2021 Leasehold improvements $ 58,131 $ 34,639 Software 17,926 24,363 Furniture and equipment 28,800 25,115 Computers 45,541 44,128 150,398 128,245 Accumulated depreciation and amortization ( 64,996 ) ( 76,192 ) Total property and equipment, net $ 85,402 $ 52,053 Depreciation and amortization expense for the years ended December 31, 2022, 2021, and 2020, was approximately $ 21.5 million , $ 19.5 million , and $ 20.4 million , respectively. NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The changes in the carrying amount of goodwill for the fiscal years ended December 31 were as follows: 2022 2021 Balance as of January 1, 2022 $ 1,046,760 $ 909,913 Goodwill resulting from business combination - ESAC 87 11,226 Goodwill resulting from business combination - Creative Systems and Consulting 1,939 126,118 Goodwill resulting from business combination - SemanticBits, LLC 159,677 — Goodwill resulting from business combination - Blanton & Associates 9,712 — Effect of foreign currency translation ( 5,277 ) ( 497 ) Balance as of December 31, 2022 $ 1,212,898 $ 1,046,760 Other Intangible Assets Intangible assets with definite lives are primarily amortized over periods ranging from approximately 1 to 10 years. The weighted-average period of amortization for all intangible assets, calculated as of December 31, 2022, is 6.9 years. The customer-related intangible assets, which consist of customer contracts, backlog, and non-contractual customer relationships, are being amortized based on estimated cash flows and respective estimated economic benefit of the assets. The weighted-average period of amortization of the customer-related intangibles calculated as of December 31, 2022 is 6.9 years. Intangible assets related to developed technology are being amortized on an accelerated basis over a weighted-average period, calculated as of December 31, 2022, of 9.2 years. Intangible assets with an indefinite life consist of a domain name. Other intangibles consisted of the following at December 31: 2022 Gross Carrying Value Accumulated Amortization Net Carrying Value Customer-related $ 240,591 $ ( 118,412 ) $ 122,179 Developed technology 4,480 ( 512 ) 3,968 Trade name 1,180 ( 884 ) 296 Total amortizable intangible assets 246,251 ( 119,808 ) 126,443 Intangible with indefinite life 94 — 94 Total other intangible assets $ 246,345 $ ( 119,808 ) $ 126,537 F- 15 2021 Gross Carrying Value Accumulated Amortization Net Carrying Value Customer-related $ 167,577 $ ( 92,494 ) $ 75,083 Developed technology 5,411 ( 944 ) 4,467 Total amortizable intangible assets 172,988 ( 93,438 ) 79,550 Intangible with indefinite life 95 — 95 Total other intangible assets $ 173,083 $ ( 93,438 ) $ 79,645 Aggregate amortization expense for the years ended December 31, 2022, 2021, and 2020, was approximately $ 28.4 million , $ 12.5 million , and $ 13.3 million , respectively. The estimated future amortization expense relating to intangible assets is as follows: Year ending December 31, 2023 $ 35,992 2024 35,068 2025 30,211 2026 16,607 2027 1,441 Thereafter 7,124 Total $ 126,443 NOTE 7 – LEASES The Company has operating and finance leases for facilities and equipment which have remaining terms ranging from 1 to 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 . 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 lease cost resulting from changes in these indices was included within variable lease cost. The Company’s lease cost is recognized on a straight-line basis over the lease term and is primarily included within indirect and selling expenses on the consolidated statements of comprehensive income. Lease cost consisted of the following: Year Ended December 31, 2022 2021 2020 Operating lease cost $ 37,889 $ 35,469 $ 37,874 Finance lease cost - amortization of right-of-use assets 598 — — Finance lease cost - interest 179 — — Short-term lease cost 509 453 1,421 Variable lease cost 146 43 53 Sublease income ( 92 ) — — Total lease cost $ 39,229 $ 35,965 $ 39,348 F- 16 Future minimum lease payments under non-cancellable operating and finance leases as of December 31, 2022 were as follows: Operating Finance December 31, 2023 $ 21,441 $ 2,967 December 31, 2024 26,863 2,967 December 31, 2025 24,790 2,967 December 31, 2026 21,389 2,967 December 31, 2027 15,294 2,967 Thereafter 138,885 5,933 Total future minimum lease payments 248,662 20,768 Less: Interest ( 47,106 ) ( 2,271 ) Total operating lease liabilities $ 201,556 $ 18,497 December 31, 2022 December 31, 2021 Operating lease liabilities - current $ 19,305 $ 34,901 Operating lease liabilities - non-current 182,251 191,805 Total operating lease liabilities $ 201,556 $ 226,706 Finance lease liabilities - current $ 2,381 $ — Finance lease liabilities - non-current 16,116 — Total finance lease liabilities $ 18,497 $ — Other information related to operating and finance leases is as follows: Year Ended December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 40,123 $ 28,932 Right-of-use assets obtained in exchange for new operating lease liabilities $ 13,906 $ 90,046 Property and equipment obtained in exchange for finance lease liabilities $ 18,319 — Weighted-average remaining lease term - operating leases Operating leases 11.7 11.4 Finance leases 7.0 — Weighted-average discount rate - operating leases Operating leases 3.3 % 3.2 % Finance leases 3.4 % — The change in operating lease right-of-use assets and lease liabilities are presented within cash flows from operating activities on the consolidated statements of cash flows. NOTE 8 - ACCRUED SALARIES AND BENEFITS Accrued salaries and benefits consisted of the following at December 31: 2022 2021 Bonuses, liability-classified awards, and commissions $ 26,930 $ 26,443 Salaries 31,142 25,397 Paid time off and leave 16,144 13,574 Social security tax deferral — 10,457 Medical 5,833 4,098 Payroll taxes and withholdings 1,363 1,022 Other 4,579 4,526 Total accrued salaries and benefits $ 85,991 $ 85,517 F- 17 NOTE 9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following at December 31: 2022 2021 Deposits $ 32,384 $ 21,088 Restricted contract funds 1,701 12,165 IT and software licensing costs 1,609 1,702 Taxes and insurance premiums 6,633 5,267 Facilities rental and lease exit costs 2,043 1,291 Interest 363 212 Professional services 3,617 3,068 Dividends 2,631 2,643 Contingent and contractual liabilities from acquisitions — 1,245 Interest rate swap liability - current — 3,026 Cash collected not yet remitted to purchaser of billed receivables 6,164 — Other accrued expenses and current liabilities 20,891 9,789 Total accrued expenses and other current liabilities $ 78,036 $ 61,496 NOTE 10 - LONG-TERM DEBT On May 6, 2022, the Company entered into the Restated Credit Agreement with a group of lenders with (a) PNC Bank, National Association as the Administrative Agent and (b) PNC Capital Markets LLC, BOFA Securities, Inc., TD Securities (USA) LLC, Wells Fargo Securities, LLC and Citizens Bank, N.A., as joint lead arrangers. The various facilities under the Restated Credit Agreement are referred to as the “Credit Facility”. The Restated Credit Agreement amended and restated the Company’s prior credit agreement (the “Existing Credit Agreement”) to, among other things: (a) maintain the existing $ 600 million revolving credit facility (together and inclusive of a $ 75 million swing line sublimit and $ 100 million sublimit for letters of credit); (b) increase the existing term loan facility from $ 200 million to $ 300 million; (c) provide for a new delayed draw term loan facility of $ 400 million; (d) maintain the existing incremental credit facility to make, subject to approval of the lenders making such loans, incremental term or revolving credit loan(s) in the aggregate principal amount of not more than $ 300 million; (e) increase the maximum Consolidated Leverage Ratio (as such term is defined in the Restated Credit Agreement) from 4.00 to 1.00 to 4.50 to 1.00 (with temporary increases to 5.00 to 1.00 for the three fiscal quarters following a "Material Permitted Acquisition", as such term is defined in the Restated Credit Agreement); (f) maintain the minimum Consolidated Interest Coverage Ratio (as such term is defined in the Restated Credit Agreement) of 3.00 to 1.00; (g) increase the foreign currency debt limit in Euro and Sterling Pounds from $ 30 million equivalent to $ 200 million equivalent; (h) modify LIBOR based interest pricing conventions with SOFR based interest pricing conventions; (i) extend the maturity date of the Credit Facility until May 6, 2027 ; (j) incorporate various provisions and conventions encouraged by the Loan Syndication and Trade Association; and (k) modify certain definitions and certain covenants. Under the Restated Credit Agreement, the Company may, at its discretion, borrow funds under the Credit Facility at interest rates based on both term SOFR (i.e., 1, 3, or 6-month rates) and the Base Rate (as defined herein), plus their applicable margins. The Base Rate is a fluctuating rate of interest equal to the highest of (a) the Overnight Bank Funding Rate (as defined in the Restated Credit Agreement), plus 0.5 %, (b) the Prime Rate (as defined in the Restated Credit Agreement) and (c) the Daily Simple SOFR Rate (as defined in the Restated Credit Agreement) plus 1 %, all as then adjusted to include the Applicable Margin (as defined in the Restated Credit Agreement) as then in effect (and as determined pursuant to the then-current Consolidated Leverage Ratio). The Credit Facility is collateralized by substantially all the assets of the Company and its material domestic subsidiaries and requires that the Company remain in compliance with certain financial and non-financial covenants including, but not limited to the Consolidated Leverage Ratio and the Consolidated Interest Coverage Ratio. As of December 31, 2022, the Company was in compliance with its covenants. The Credit Facility also includes other terms and conditions, covenants, and other provisions of the Restated Credit Agreement that are materially consistent with the Existing Credit Agreement. As of December 31, 2022 , the Company had $ 561.4 million of long-term debt outstanding from the Credit Facility, unused delayed draw term loan facility of $ 180.0 million (available through May 6, 2023, with an additional six-month extension upon request by the Company), and unused borrowing capacity of $ 545.4 million from the available $ 600.0 million revolving line of credit under the Credit Facility. The unused borrowing capacity is inclusive of six outstanding letters of credit totaling $ 2.0 million . Considering the financial, performance-based limitations, available borrowing capacity was $ 440.0 million as of December 31, 2022. F- 18 As of December 31, 2022 and 2021, long-term debt consisted of the following: December 31, 2022 December 31, 2021 Average Interest Rate Outstanding Balance Average Interest Rate Outstanding Balance Term Loan $ 288,750 $ 182,500 Delayed-Draw Term Loan 220,000 — Revolving Credit 52,616 241,055 Total before debt issuance costs 3.3 % 561,366 1.6 % 423,555 Unamortized debt issuance costs ( 5,032 ) ( 1,950 ) $ 556,334 $ 421,605 Current portion of long-term debt $ 23,250 $ 10,000 Long-term debt - non-current 533,084 411,605 Total $ 556,334 $ 421,605 Future scheduled repayments of term loan principal are as follows: Payments due by Term Loan Delayed-Draw Term Loan Revolving Credit Total December 31, 2023 $ 15,000 $ 8,250 $ — $ 23,250 December 31, 2024 15,000 11,000 — 26,000 December 31, 2025 20,625 15,125 — 35,750 December 31, 2026 22,500 16,500 — 39,000 December 31, 2027 215,625 169,125 52,616 437,366 Total $ 288,750 $ 220,000 $ 52,616 $ 561,366 Debt Issuance Cost The Company’s debt issuance costs are amortized over the term of indebtedness. The balance of net debt issuance costs at December 31, 2022 and 2021 are as follows: 2022 2021 Amortizable debt issuance costs $ 12,813 $ 8,751 Accumulated amortization ( 7,781 ) ( 6,801 ) Net debt issuance costs $ 5,032 $ 1,950 Amortization of debt issuance costs totaling $ 1.3 million , $ 0.6 million , and $ 0.7 million was recorded for each of the years ended December 31, 2022, 2021, and 2020 , respectively, and was included as part of interest expense. F- 19 NOTE 11 – 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 client 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 the market or type of the ultimate client. 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. Year ended December 31, 2022 2021 2020 Client Markets: Energy, environment, and infrastructure $ 664,996 $ 653,080 $ 609,358 Health, education, and social programs 906,081 677,736 677,454 Safety and security 129,357 115,659 120,599 Consumer and financial 79,530 106,573 99,464 Total $ 1,779,964 $ 1,553,048 $ 1,506,875 Year ended December 31, 2022 2021 2020 Client Type: U.S. federal government $ 980,406 $ 735,104 $ 666,968 U.S. state and local government 260,562 235,353 219,507 International government 102,808 139,237 93,581 Government 1,343,776 1,109,694 980,056 Commercial 436,188 443,354 526,819 Total $ 1,779,964 $ 1,553,048 $ 1,506,875 Year ended December 31, 2022 2021 2020 Contract Mix: Time-and-materials $ 713,581 $ 633,152 $ 732,365 Fixed-price 802,804 645,761 536,903 Cost-based 263,579 274,135 237,607 Total $ 1,779,964 $ 1,553,048 $ 1,506,875 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 December 31, 2022 and December 31, 2021: December 31, 2022 December 31, 2021 Change Contract assets $ 169,088 $ 137,867 $ 31,221 Contract liabilities ( 25,773 ) ( 39,665 ) 13,892 Net contract assets (liabilities) $ 143,315 $ 98,202 $ 45,113 F- 20 The net contract assets (liabilities) as of December 31, 2022 increased by $ 45.1 million as compared to December 31, 2021, 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 years ended December 31, 2022 and 2021, the Company recognized $ 27.4 million and $ 22.7 million in revenue related to the contract liabilities balance at December 31, 2021 and 2020 , respectively. Performance Obligations: The Company had $ 1.5 billion in unfulfilled performance obligations as of December 31, 2022 , which primarily reflects the future delivery of services for which revenue will be recognized over time. The unperformed obligations relate to continued or additional services required on contracts, including those that are either non-cancellable or those that are cancellable but the Company has determined to 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 in approximately two years . NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company uses interest rate swap arrangements (the “Swaps”) to manage or hedge its variable interest rate risk under the Credit Facility. Notwithstanding the terms of the 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 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. A summary of Swaps designated as cash flow hedges as of December 31, 2022 are as follows: 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 (2) $ 25.0 1.795 % August 31, 2018 August 31, 2023 August 8, 2018 (3) $ 50.0 2.736 % August 31, 2018 August 31, 2023 August 8, 2018 $ 25.0 2.851 % August 31, 2018 August 31, 2023 February 20, 2020 (4) $ 100.0 1.191 % 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. (2) On September 15, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 1.8475 % to a term SOFR fixed interest rate of 1.795 %. (3) On August 25, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 2.854 % to a term SOFR fixed interest rate of 2.736 %. (4) On August 25, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 1.294 % to a term SOFR fixed interest rate of 1.191 %. For the years ended December 31, 2022 and 2021, the effect of the Swaps on the Company’s financial statements are as follows: Cash Flow Hedging Derivatives Total Gain Recorded to AOCI Amount of (Gain) or Loss Reclassified from AOCI into Income 2022 2021 2022 2021 Interest Rate Swaps $ 11,445 $ 3,285 $ ( 248 ) $ 3,008 As of December 31, 2022 , the net amount of realized losses from the hedge agreements expected to be reclassified from AOCI into earnings within the next 12 months is $ 5.1 million . F- 21 NOTE 13 - INCOME TAXES The domestic and foreign components of income before provision for income taxes are as follows for the years ended December 31: 2022 2021 2020 Domestic $ 80,372 $ 97,884 $ 68,817 Foreign 3,608 2,206 5,856 Income before income taxes $ 83,980 $ 100,090 $ 74,673 Income tax expense consisted of the following for the years ended December 31: 2022 2021 2020 Current: Federal $ 8,413 $ 15,961 $ 14,645 State 2,686 3,494 5,198 Foreign 1,661 687 1,736 Total current 12,760 20,142 21,579 Deferred: Federal 4,264 4,724 ( 1,721 ) State 3,607 4,395 314 Foreign ( 894 ) ( 303 ) ( 458 ) Total deferred 6,977 8,816 ( 1,865 ) Income tax expense $ 19,737 $ 28,958 $ 19,714 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Deferred tax assets (liabilities) consisted of the following at December 31: 2022 2021 Deferred Tax Assets Allowance for expected credit losses $ 1,404 $ 1,825 Accrued paid time off 2,801 2,504 Foreign net operating loss (NOL) carryforward 229 91 State net operating loss (NOL) carryforward 502 522 Stock option compensation 1,586 1,680 Deferred rent 4,224 2,566 Deferred compensation 4,692 5,358 Foreign tax credits 7,236 6,677 State tax credits 384 1,081 Foreign exchange 4,532 4,014 Foreign deferred 875 727 Accrued bonus 5,696 5,303 Impairment 2,650 — Accrued liabilities and other 6,513 6,660 43,324 39,008 Less: Valuation Allowance ( 7,607 ) ( 7,048 ) Total Deferred Tax Assets 35,717 31,960 Deferred Tax Liabilities Retention ( 407 ) ( 637 ) Prepaid expenses ( 366 ) ( 726 ) Payroll taxes ( 697 ) ( 544 ) Unbilled revenue ( 409 ) ( 607 ) Depreciation ( 270 ) ( 1,920 ) Amortization ( 99,045 ) ( 68,194 ) Deferred gain and other ( 2,561 ) ( 1,245 ) Total Deferred Tax Liabilities ( 103,755 ) ( 73,873 ) Total Net Deferred Tax Liability $ ( 68,038 ) $ ( 41,913 ) F- 22 The Company measures certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 26.8 %. As of December 31, 2022, the cumulative foreign tax credit carryforward balance increased by approximately $ 0.6 million and the valuation allowance required increased by approximately $ 0.6 million. No additional income taxes have been provided for on any remaining undistributed foreign earnings not subject to the transition tax. No additional deferred income taxes have been provided for the $ 8.9 million of additional unfavorable outside basis differences inherent in these foreign entities as of December 31, 2022 because these amounts continue to be permanently reinvested in foreign operations. As of December 31, 2022, the Company had approximately $ 0.7 million of foreign operating loss carryforward for income taxes which may be carried forward indefinitely. As of December 31, 2022, the Company has NOL carryforwards for state income tax purposes of approximately $ 6.8 million , which expire in 2034 . The Company acquired these NOLs as a result of its purchase of a business in November 2014. Internal Revenue Code Section 382 imposes an annual limitation on the use of a corporation’s NOLs, tax credits and other carryovers after an “ownership change” occurs. Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change NOLs and credits. In general, the annual limitation is determined by multiplying the value of the corporation’s stock immediately before the ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Any unused portion of the annual limitation is available for use in future years until such NOLs are scheduled to expire (in general, NOLs may be carried forward 20 years). The Company established a valuation allowance of approximately $ 0.4 million against the portion of the deferred tax asset which it is more-likely-than-not that it will not be recoverable (e.g. expiration of the statute of limitations, etc.) As of December 31, 2022, the Company had gross state income tax credit carryforwards of approximately $ 0.4 million , which expire between 2024 and 2034 . A deferred tax asset of approximately $ 0.4 million , net of federal benefit, has been established related to these state income tax credit carryforwards as of December 31, 2022. The need to establish valuation allowances for deferred assets is based on a more-likely-than-not threshold that the benefit of such assets will be realized in future periods. Appropriate consideration has been given to all available evidence, including historical operating results, projections of taxable income, and tax planning alternatives. The Company concluded that a valuation allowance of $ 0.4 million was required for tax attributes related to specified state jurisdictions and an additional $ 7.2 million valuation allowance is required against our U.S. foreign tax credit carryforwards. The total amount of unrecognized tax benefits as of December 31, 2022 and 2021 was $ 0.1 million and $ 0.5 million, respectively, which includes $ 0.1 million and $ 0.5 million, respectively, of tax positions that, if recognized, would impact the effective rate. The unrecognized tax benefit reconciliation, excluding penalty and interest, is as follows: Unrecognized tax benefits at January 1, 2020 $ — Increase attributable to tax positions taken during a prior period 811 Unrecognized tax benefits at December 31, 2020 811 Decrease attributable to tax positions taken during the current period ( 361 ) Unrecognized tax benefits at December 31, 2021 450 Decrease attributable to tax positions taken during the current period ( 305 ) Unrecognized tax benefits at December 31, 2022 $ 145 The Company’s 2019 to 2021 tax years remain subject to examination by the Internal Revenue Service for federal tax purposes. Certain significant state and foreign tax jurisdictions are also either currently under examination or remain open under the statutes of limitation and subject to examination for the tax years from 2019 to 2021 . Although the Company believes it has adequately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater than the Company’s accrued position. Accordingly, additional provisions on federal, state and foreign income tax related matters could be recorded in the future as revised estimates are made or the underlying matters are effectively settled or otherwise resolved. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued. The Company believes it is reasonably possible that, during the next 12 months, the Company’s liability for uncertain tax positions may not change. F- 23 The Company’s provision for income taxes differs from the federal statutory rate. The differences between the statutory rate and the Company’s provision are as follows: 2022 2021 2020 Taxes at statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 5.8 % 5.6 % 5.6 % Foreign tax rate differential 0.1 % 0.1 % 0.3 % Executive compensation 2.2 % 2.1 % 2.4 % Other permanent differences 2.0 % ( 0.4 )% 0.1 % Prior year tax adjustments ( 1.1 )% 1.5 % ( 1.1 )% Deferred Impact of State Rate Change 0.6 % — — Worthless stock deduction ( 4.6 )% — — Unrecognized tax benefits ( 0.4 )% ( 0.5 )% 1.0 % Valuation allowance 0.7 % 1.3 % 1.6 % Equity-based compensation ( 1.3 )% ( 1.0 )% ( 3.8 )% Tax credits ( 1.5 )% ( 0.8 )% ( 0.7 )% Taxes at effective rate 23.5 % 28.9 % 26.4 % F- 24 NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME Accumulated other comprehensive loss included the following: Foreign Currency Translation Adjustments Gain on Sale of Interest Rate Hedge Agreement (1) Changes in Fair Value of Interest Rate Hedge Agreements (2)(5) Total Accumulated other comprehensive (loss) income at January 1, 2020 $ ( 10,995 ) $ 1,634 $ ( 2,783 ) $ ( 12,144 ) Current period other comprehensive income (loss): Other comprehensive income (loss) before reclassifications 4,141 — ( 9,867 ) ( 5,726 ) Amounts reclassified from accumulated other comprehensive (loss) income — ( 720 ) 2,751 2,031 Effect of taxes (3) ( 356 ) 182 1,907 1,733 Total current period other comprehensive income (loss) 3,785 ( 538 ) ( 5,209 ) ( 1,962 ) Accumulated other comprehensive (loss) income at December 31, 2020 ( 7,210 ) 1,096 ( 7,992 ) ( 14,106 ) Current period other comprehensive (loss) income: Other comprehensive (loss) income before reclassifications ( 1,676 ) — 3,285 1,609 Amounts reclassified from accumulated other comprehensive (loss) income — ( 720 ) 3,728 3,008 Effect of taxes (3) 127 193 ( 1,866 ) ( 1,546 ) Total current period other comprehensive (loss) income ( 1,549 ) ( 527 ) 5,147 3,071 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 ( 9,259 ) — 11,445 2,186 Amounts reclassified from accumulated other comprehensive (loss) income (4) — ( 720 ) 472 ( 248 ) Effect of taxes (3) 3,962 192 ( 3,190 ) 964 Total current period other comprehensive (loss) income ( 5,297 ) ( 528 ) 8,727 2,902 Accumulated other comprehensive (loss) income at December 31, 2022 $ ( 14,056 ) $ 41 $ 5,882 $ ( 8,133 ) (1) Represents the fair 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 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 January 31, 2018 to January 31, 2023. (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 additional details of the hedge agreements in Note 12 - Derivative Instruments and Hedging Activities. (3) The Company’s effective tax rate for the years ended December 31, 2022, 2021, and 2020 was 23.5 % , 28.9 % , and 26.4 % , respectively. (4) The Company expects to reclassify $ 0.1 million related to the Gain on Sale of Interest Rate Hedge Agreement, and $ 5.1 million in unrealized 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. (5) The fair value of the interest rate hedge agreements is included in other current and other long-term liabilities on the consolidated balance sheets. NOTE 15 - ACCOUNTING FOR STOCK-BASED COMPENSATION Stock Incentive Plans On April 4, 2018, the Company’s board of directors approved the 2018 Omnibus Incentive Plan (the “2018 Omnibus Plan”), which was subsequently approved by the stockholders and became effective on May 31, 2018 (the “Effective Date”). The 2018 F- 25 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 up to 1,600,000 shares using stock options, stock appreciation rights, restricted stock, RSUs, performance units and PSAs, cash-based awards, and other stock-based awards to all key officers, key employees, and non-employee directors of the Company. Outstanding shares granted under the Prior Plan, totaling 10,885 , as of December 31, 2022, remain subject to its terms and conditions, and additional awards from the Prior Plan are prohibited after the Effective Date. As of December 31, 2022, the Company had approximately 775,252 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 (“EPS”) calculations. Stock-based compensation expense is included as part of direct costs and indirect and selling expenses on the consolidated statements of comprehensive income. The total stock-based compensation expense for the years ended December 31, 2022, 2021, and 2020, the unrecognized compensation expense at December 31, 2022, and the weighted-average period to recognize the remaining unrecognized shares are as follows: Stock-Based Compensation Expense Recognized as of December 31, Unrecognized as of December 31, 2022 2021 2020 2022 Weighted Average Period to Recognize (years) Restricted Stock Units $ 9,300 $ 8,563 $ 11,895 $ 14,610 1.9 Cash-Settled Restricted Stock Units 5,709 8,251 7,015 9,532 1.7 Non-Employee Director Awards 1,087 937 755 460 0.4 Performance Shares 2,784 3,731 4,905 3,007 1.5 Total $ 18,880 $ 21,482 $ 24,570 $ 27,609 The assumptions of employment termination forfeiture rates used in the determination of fair value of stock awards during the 2022 calendar year were based on the Company’s historical average of actual forfeitures from the previous 10 years preceding the reporting period. The expected annualized forfeiture rates used during the 2022 calendar year varied from 0 % to 19.61 % , and the Company does not expect these termination rates to vary significantly in the future. Stock Options Option awards are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. There were no option awards granted during 2022, 2021, and 2020. The following table summarizes the changes in outstanding stock options: Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value Outstanding at January 1, 2020 108,128 $ 35.82 Exercised ( 69,901 ) $ 37.94 Granted — $ — Forfeited/Expired — $ — Outstanding at December 31, 2020 38,227 $ 31.93 Exercised ( 8,535 ) $ 27.17 Granted — $ — Forfeited/Expired — $ — Outstanding at December 31, 2021 29,692 $ 33.30 Exercised ( 18,807 ) $ 32.04 Granted — $ — Forfeited/Expired — $ — Outstanding at December 31, 2022 10,885 $ 35.49 $ 691,841 Vested plus expected to vest at December 31, 2022 10,885 $ 35.49 $ 691,841 Exercisable at December 31, 2022 10,885 $ 35.49 $ 691,841 F- 26 The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $ 99.05 as of December 31, 2022. The total intrinsic value of options exercised was $ 1.9 million , $ 0.8 million , and $ 5.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. All options have vested as of December 31, 2022, and the weighted-average remaining contractual term for options vested was 0.8 years and for exercisable options was 0.8 years. Information regarding stock options outstanding as of December 31, 2022 is summarized below: OPTIONS OUTSTANDING OPTIONS EXERCISABLE Range of Exercise Prices Number Outstanding As of December 31, 2022 Weighted Average Remaining Contractual Term Weighted Average Exercise Price Number Exercisable As of December 31, 2022 Weighted Average Exercise Price $ 27.03 to $ 27.03 4,138 0.2 $ 27.03 4,138 $ 27.03 $ 40.68 to $ 40.68 6,747 1.2 $ 40.68 6,747 $ 40.68 $ 27.03 to $ 40.68 10,885 0.8 $ 35.49 10,885 $ 35.49 Restricted Stock Units RSUs generally have a vesting term of three years . On vesting the employee is issued one share of stock for each RSU awarded. The fair value of shares vested was $ 10.8 million , $ 7.9 million , and $ 14.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. A summary of the Company’s RSUs is presented below. Number of Shares Weighted- Average Grant Date Fair Value Aggregate Intrinsic Value Non-vested RSUs at January 1, 2020 449,975 $ 62.48 Granted 170,411 $ 58.27 Vested ( 258,307 ) $ 54.73 Cancelled ( 56,680 ) $ 63.46 Non-vested RSUs at December 31, 2020 305,399 $ 66.51 Granted 132,757 $ 95.68 Vested ( 119,203 ) $ 66.46 Cancelled ( 15,117 ) $ 68.53 Non-vested RSUs at December 31, 2021 303,836 $ 79.17 Granted 148,361 $ 93.70 Vested ( 140,666 ) $ 76.53 Cancelled ( 26,705 ) $ 77.16 Non-vested RSUs at December 31, 2022 284,826 $ 88.23 $ 28,212,015 RSUs expected to vest in the future 250,604 $ 87.50 $ 24,822,356 The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $ 99.05 per share as of December 31, 2022. F- 27 Cash-Settled Restricted Stock Units CSRSUs generally have a vesting term of three years . The fair value of CSRSUs vested and settled in cash for the years ended December 31, 2022, 2021, and 2020 was $ 6.6 million , $ 8.7 million and $ 9.3 million , respectively. A summary of the Company’s CSRSUs is presented below. Number of Shares Weighted- Average Grant Date Fair Value Aggregate Intrinsic Value Non-vested CSRSUs at January 1, 2020 296,233 $ 58.83 Granted 134,259 $ 60.30 Vested ( 154,653 ) $ 49.44 Cancelled ( 34,358 ) $ 63.03 Non-vested CSRSUs at December 31, 2020 241,481 $ 65.06 Granted 52,246 $ 89.51 Vested ( 104,272 ) $ 63.96 Cancelled ( 23,195 ) $ 69.68 Non-vested CSRSUs at December 31, 2021 166,260 $ 72.79 Granted 115,024 $ 97.88 Vested ( 75,566 ) $ 73.20 Cancelled ( 17,299 ) $ 80.02 Non-vested CSRSUs at December 31, 2022 188,419 $ 87.28 $ 18,662,902 CSRSUs expected to vest in the future 161,193 $ 85.88 $ 15,966,125 The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $ 99.05 per share as of December 31, 2022. Non-Employee Director Awards Beginning on July 2, 2018, the Company granted awards of registered shares to its non-employee directors on an annual basis under the Omnibus Plan. A summary of the non-employee director awards is presented below: Number of Shares Weighted- Average Grant Date Fair Value Aggregate Intrinsic Value Non-vested RSUs at January 1, 2020 4,860 $ 73.94 Granted 12,541 $ 64.58 Vested ( 10,891 ) $ 68.82 Cancelled — $ — Non-vested RSUs at December 31, 2020 6,510 $ 64.47 Granted 11,186 $ 90.73 Vested ( 12,110 ) $ 76.61 Cancelled — $ — Non-vested RSUs at December 31, 2021 5,586 $ 90.73 Granted 11,399 $ 95.35 Vested ( 11,637 ) $ 93.39 Cancelled — $ — Non-vested RSUs at December 31, 2022 5,348 $ 94.79 $ 529,719 RSUs expected to vest in the future 5,348 $ 94.79 $ 529,719 The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $ 99.05 per share as of December 31, 2022. Performance Share Awards In 2015, the Company’s Board of Directors approved a performance-based share program (the “Program”) that provides for the issuance of PSAs to its senior management. Under the Program, the number of PSAs that the participant will receive depends on the Company’s achievement of two performance goals during two performance periods. The performance goals under the Program are F- 28 based on (i) the Company’s compounded annual growth rate in EPS during a two-year performance period (the “Initial Period”) and (ii) the Company’s cumulative total shareholder return relative to its peer group (“rTSR”) during a performance period from the first day of the performance period (typically January 1 of the year awarded) to the last day of the third year of the performance period (typically December 31). The PSAs will only be eligible to vest following the expiration of the three-year performance period. The actual shares vested will be subject to both continued employment by the Company (barring certain exceptions allowing for partial performance periods) and actual financial measures achieved. The final number of shares of common stock that will be issued to each participant at the end of the applicable performance period will be determined by multiplying the award by the product of two percentages: the first based on the Company’s EPS performance and the second based on the Company’s rTSR performance, subject to a minimum and maximum performance level. As of December 31, 2022 , shares granted during 2020, 2021, and 2022 are within year three , two , and one of the performance periods, respectively, and therefore have not fully vested. A total of 47,634 shares granted in 2019 vested during 2022 after meeting the performance goals. As of December 31, 2022, a total of 66,805 shares granted in 2020 and 2021 are expected to vest in the future based on estimated financial measures achieved in the Initial Period and rTSR performance. A summary of the Company’s PSAs is presented below. Number of Shares Weighted- Average Grant Date Fair Value Aggregate Intrinsic Value Non-vested PSAs at January 1, 2020 148,414 $ 60.67 Granted 87,314 $ 51.44 Vested ( 88,038 ) $ 38.81 Cancelled ( 5,569 ) $ 69.66 Non-vested PSAs at December 31, 2020 142,121 $ 68.19 Granted 54,216 $ 85.03 Vested ( 63,258 ) $ 65.05 Cancelled — $ — Non-vested PSAs at December 31, 2021 133,079 $ 76.54 Granted 38,412 $ 93.15 Vested ( 47,634 ) $ 82.38 Cancelled ( 3,170 ) $ 80.64 Non-vested PSAs at December 31, 2022 120,687 $ 79.42 $ 11,954,047 PSAs expected to vest in the future 66,805 $ 94.83 $ 6,617,006 The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $ 99.05 per share as of December 31, 2022 . The fair value of the awards is estimated on the grant date using a Monte Carlo simulation model due to the market condition for the rTSR component. The fair value assumptions using the Monte Carlo simulation model for awards granted in 2022, 2021, and 2020 were: 2022 2021 2020 Dividend Yield 0.6 % 0.6 % 1.0 % Historical Volatility 39.0 % 40.9 % 35.7 % Risk-Free Rate of Returns 2.1 % 0.3 % 0.4 % NOTE 16 – BUSINESS COMBINATIONS Blanton & Associates On September 1, 2022, the Company completed the acquisition of Blanton & Associates (“Blanton”), an environmental consulting, planning, and project management firm headquartered in Austin, Texas. Blanton brings proven domain expertise in environmental regulatory compliance and permitting for the transportation, renewable energy, water, and resource management sectors and adds technically strong and specialized staff in all aspects of environmental services to the Company. The Company recorded net working capital of $ 4.6 million and property and equipment of $ 0.2 million at their fair value at the acquisition date except for contract assets and contract liabilities which were measured in accordance with ASC 606, Revenue Recognition, deferred income tax liabilities of $ 3.0 million, and also allocated $ 9.7 million to goodwill and $ 11.4 million to intangible assets. Intangible assets consisted of $ 10.9 million related to existing customer relationships, $ 0.5 million related to contract backlog, and $ 0.1 million related to trade names and trademarks. The acquisition of Blanton is not material to the Company’s results of operations. SemanticBits, LLC F- 29 On July 13, 2022, the Company completed the acquisition of SemanticBits, LLC (“SemanticBits”), a 450-person Virginia limited liability company. SemanticBits is a premier partner to U.S. federal health agencies for mission-critical digital modernization solutions and provides a full suite of scalable digital modernization services using open-source frameworks, including end-to-end agile scale development capabilities, cloud-native solutions, data analytics and human-centered designs. The acquisition provides synergies and scalabilities to support federal agencies with advanced IT solutions, digital modernization, and health expertise to solve complex customer challenges. As a result of the acquisition, SemanticBits became a wholly owned subsidiary of the Company. The acquisition was accounted for as a business combination under ASC 805, Business Combination. The preliminary purchase price was $ 220.0 million in cash, subject to post-closing working capital adjustments, and was funded by the existing Credit Facility. The purchase price was initially allocated to the tangible and intangible assets acquired and liabilities assumed based on the fair value on the acquisition date, with the exception of contract assets and contract liabilities which were measured in accordance with ASC 606, Revenue Recognition. The Company also engaged an independent valuation firm to assist management in the allocation of the purchase price to goodwill and other acquired intangible assets. The purchase price allocation is summarized as follows: Contract receivables $ 12,699 Contract assets 6,071 Customer-related intangibles 62,967 Trade names and trademarks 1,120 Other current and non-current assets 407 Accrued salaries and benefits ( 3,998 ) Accrued expenses and other liabilities ( 6,244 ) Deferred tax liability ( 16,701 ) Net assets acquired 56,321 Goodwill 159,677 Purchase consideration $ 215,998 The Company allocated $ 63.0 million related to existing customer relationships and $ 1.1 million related to trade names and trademarks intangible assets, respectively, and $ 159.7 million to goodwill. Goodwill is reflective of the existing workforce of SemanticBits and the expected synergies created with the Company as part of the acquisition. The amortization periods for the amount allocated to customer-related intangible asset and trade names and trademarks are 4.0 years and 0.7 years from the acquisition date, respectively. The goodwill and intangible assets are not deductible for income tax purposes. Acquisition-related costs and integration costs totaled $ 4.3 million and are included as part of indirect and selling expenses in the Company’s consolidated statements of comprehensive income. The results of SemanticBits’ operations have been included in the Company’s consolidated financial statements from the date of its acquisition. For the year ended December 31, 2022, SemanticBits contributed revenues of $ 64.3 million and gross profit of $ 26.7 million. Computation of an earnings measure other than gross profit is impracticable due to SemanticBits’ operations and financial systems being integrated with those of the Company. The following unaudited condensed pro forma information presents combined financial information as if the acquisition of SemanticBits had been effective at January 1, 2021, the beginning of the 2021 fiscal year. As a result, fiscal year 2022 represents the pro forma results for year two of the acquisition. The pro forma information includes alignment of SemanticBits’ revenue recognition policy, corrections of employee-related expenses, and adjustments reflecting changes in the amortization of intangibles, acquisition-related costs, interest expense, and records income tax effects as if SemanticBits had been included in the Company’s results of operations. The pro forma information is not intended to reflect the actual combined results of operations that would have occurred if the acquisition was completed on January 1, 2021, nor is it indicative of future operating results after the acquisition date of July 13, 2022. (Unaudited) Year Ended (in thousands) 2022 2021 Revenue $ 1,856,399 $ 1,667,425 Net income 75,999 63,752 Creative Systems and Consulting On December 31, 2021 , the Company acquired Creative Systems, 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 of $ 2.9 million, for a final purchase price of $ 156.6 million. The Company recognized fair value of the assets acquired and liabilities assumed and allocated $ 128.1 million to goodwill and $ 28.9 million to intangible assets. Intangible assets consisted of $ 24.5 million in customer relationships, $ 3.7 million related to developed technology, $ 0.6 million related to trade names and F- 30 trademarks, and $ 0.1 million related to non-compete agreements. The customer-related and technology related intangibles are being amortized straight-line over 4 years and 10 years, respectively, from the date of acquisition, while trade names and trademarks and non-compete agreements will be amortized in less than one year from the acquisition date. Goodwill is reflective of the existing workforce at Creative Systems and the expected synergies created with the Company as a result of the acquisition. The pro-forma impact of the acquisition is not material to the Company’s results of operations. ESAC On November 1, 2021, the Company completed the acquisition of ESAC, one of the leading specialized providers of advanced health analytics, research data management and bioinformatics solutions to U.S. federal health agencies, for a cash purchase price of approximately $ 17.3 million, subject to working capital adjustments. In addition to working capital acquired of $ 2.6 million, the Company recognized fair value of the assets acquired and liabilities assumed and allocated of $ 11.3 million to goodwill and $ 3.4 million to intangible assets. Intangible assets included $ 3.1 million related to customer relationships and $ 0.3 million related to technology and other intangibles, and are amortized over 3 years and less than 1 year , respectively. The pro-forma impact of the acquisition is not material to the Company’s results of operations. NOTE 17 - EARNINGS PER SHARE The Company’s 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: (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 December 31, 2022, the PSAs granted during the year ended December 31, 2020 and 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, 2022 have not yet completed their initial two-year performance period and therefore were excluded in the calculation of diluted EPS. For the years ended December 31, 2022, 2021, and 2020, there were immaterial RSU shares that were excluded from the calculation of EPS because they were anti-dilutive. The dilutive effect of stock options, RSUs, and performance shares for each period reported is summarized below: 2022 2021 2020 Net Income $ 64,243 $ 71,132 $ 54,959 Weighted-average number of basic shares outstanding during the period 18,818 18,868 18,841 Dilutive effect of stock options, RSUs, and performance shares 215 256 294 Weighted-average number of diluted shares outstanding during the period 19,033 19,124 19,135 Basic earnings per share $ 3.41 $ 3.77 $ 2.92 Diluted earnings per share $ 3.38 $ 3.72 $ 2.87 NOTE 18 - 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 million under approved share repurchase plans pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. In November 2021, the board amended and increased the limit under the previous authorization of $ 100.0 million 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 $ 100.0 million. 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 in default. Purchases under this program may be made from time to time at prevailing market prices in 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. The timing and extent to which the Company repurchases its shares will depend on market conditions and other corporate considerations in the Company’s sole discretion. For the year ended December 31, 2022, the Company repurchased a combined 176,375 shares at an average price of $ 96.18 per share or a total cost of $ 17.0 million under this program. As of December 31, 2022, approximately $ 111.9 million remained available under the share repurchase plan. F- 31 NOTE 19 - FAIR VALUE The Company measures and reports certain financial assets and liabilities at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Generally, fair value is based on observable quoted market prices or derived from observable market data when such market prices or data are available. ASC 820 establishes a three-level hierarchy used to estimate fair value by which each level is categorized based on the priority of the inputs used to measure fair value: • Level 1: Quoted prices that are available in active markets for identical assets or liabilities; • Level 2: Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and inputs derived principally from or corroborated by observable market data by correlation or other means; and • Level 3: Uses inputs that are unobservable and require the Company to make certain assumptions and require significant estimation and judgment from management to use in pricing the fair value of the assets and liabilities. Certain financial instruments, including cash and cash equivalents, contract receivables, and accounts payable are carried at cost, which, due to their short maturities, approximates their fair values at December 31, 2022 and 2021. The carrying value of other long-term liabilities related to capital expenditure obligations approximates their fair value at December 31, 2022 and 2021 based on the current rates offered to the Company for similar instruments with comparable maturities (Level 2). The Company believes the carrying value of its Credit Facility at December 31, 2022 and 2021 approximates the estimated fair value for debt with similar terms, interest rates, and remaining maturities currently available to companies with similar credit ratings (Level 2). The Company applies the provisions of ASC 820 to its assets and liabilities that are required to be measured at fair value pursuant to other accounting standards, including assets and liabilities resulting from the Company’s nonqualified deferred compensation plan, interest rate swap agreement (see Note 12 – Derivative Instruments and Hedging Activities), and foreign currency forward contract agreements not eligible for hedge accounting. Financial instruments measured at fair value on a recurring basis and their location within the accompanying consolidated financial statements are as follows: 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 Total $ — $ 25,870 $ — $ 25,870 Liabilities: Deferred compensation plan liabilities $ — $ 17,485 $ — $ 17,485 Other long-term liabilities 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 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 F- 32 NOTE 20 - COMMITMENTS AND CONTINGENCIES Letters of Credit and Guarantees At December 31, 2022 and 2021, the Company was contingently liable under open standby letters of credit of $ 2.0 million and $ 3.3 million , respectively, and guarantees of $ 9.2 million and $ 9.8 million issued by its banks. The letters of credits and guarantees were primarily for the Company's facility leases and contract performance obligations in the U.S. and Belgium, respectively. The open standby letters of credit reduces 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 the Company’s financial position, results of operations, or cash flows. Road Home Contract 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. On February 17, 2023, the Company resolved all matters with the State of Louisiana related to the litigation and the Road Home program. The impact of this resolution was not material to the Company's consolidated financial statements. NOTE 21 - EMPLOYEE BENEFIT PLANS Retirement Savings Plan Effective June 30, 1999, the Company established the ICF Consulting Group Retirement Savings Plan (the “Retirement Savings Plan”). The Retirement Savings Plan is a defined contribution profit sharing plan with a cash or deferred arrangement under Section 401(k) of the Internal Revenue Code. Participants in the Retirement Savings Plan are able to elect to defer up to 70 % of their compensation, subject to statutory limitations, and are entitled to receive 100 % employer matching contributions for the first 3 % and 50 % for the next 2 % of their compensation. Contribution expense related to the Retirement Savings Plan for the years ended December 31, 2022, 2021, and 2020 was approximately $ 22.9 million , $ 19.0 million , and $ 18.1 million , respectively. Deferred Compensation Plan Certain key employees of the Company are eligible to defer a specified percentage of their cash compensation by having it contributed to a nonqualified deferred compensation plan. Eligible employees may elect to defer up to 80 % of their base salary and up to 100 % of performance bonuses, reduced by any amounts withheld for the payment of taxes or other deductions required by law. Participants are at all times 100 % vested in their account balances. The Company funds its deferred compensation liabilities by making cash contributions to a Rabbi Trust at the time the salary or bonus being deferred would otherwise be payable to the employee. The liability to plan participants is materially funded at all times and the plan does not have a material net impact on the Company’s results of operations. F- 33 Employee Stock Purchase Plan The Company has a 2006 Employee Stock Purchase Plan (“ESPP”) under which one million shares have been authorized for issuance. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions up to $ 25,000 per calendar year over six-month offering periods at a discount not to exceed 5 % of the market value on the date of each purchase period, and therefore the Company does not recognize compensation expense related to the ESPP. For the years ended December 31, 2022 and 2021, employees purchased a total of 34,844 and 27,310 shares at an average purchase price of $ 91.84 and $ 90.19 , respectively. At December 31, 2022 and 2021, there were 584,972 and 619,816 shares remaining available for future issuance. NOTE 22 - EXIT ACTIVITIES During the year ended December 31, 2022, the Company incurred charges related to: 1) the reduction and wind-down of certain non-core commercial marketing businesses, and 2) the reduction of facilities utilized by the remaining elements of the commercial marketing group. Specifically, these charges included the impairment of certain right-of-use operating leases and related assets associated with exited facilities of $ 8.2 million (see Note 2 - Summary of Significant Accounting Policies - Long-Lived Assets), $ 4.8 million in other facility costs, recorded within indirect and selling expenses, and retention and severance of $ 2.3 million primarily recorded within direct costs. During 2022, $ 1.3 million of retention and severance and none of facility costs were paid. NOTE 23 - SUBSEQUENT EVENTS Share Buyback Program On November 15, 2022, the Company’s board of directors authorized and approved a plan to repurchase up to 180,000 shares of the Company's common stock pursuant to Rule 10b5-1 (the “Plan”) of the current repurchase program. The Plan is effective January 3, 2023 through June 30, 2023. As of February 10, 2023, the Company bought 180,000 shares at a total cost of $ 18.1 million, or $ 100.70 per share, and completed the Plan. Hedging Activities Effective February 28, 2023, the Company entered into new floating-to-fixed interest rate swap agreements for an aggregate notional amount of $ 75.0 million. These new swaps mature on February 28, 2028 . Dividend On February 28, 2023 , the Company’s board of directors approved a $ 0.14 per share cash dividend. The dividend will be paid on April 13, 2023 to shareholders of record as of the close of business on March 24, 2023 . NOTE 24 - SUPPLEMENTAL INFORMATION Valuation and Qualifying Accounts Allowance for Credit Losses 2022 2021 2020 Balance at beginning of period $ 7,741 $ 7,616 $ 3,506 Provision for credit losses 248 10,912 4,062 Write-offs, net of recoveries ( 1,782 ) ( 10,723 ) ( 41 ) Effect of foreign currency translation ( 95 ) ( 64 ) 89 Balance at end of period $ 6,112 $ 7,741 $ 7,616 Income Tax Valuation Allowance 2022 2021 2020 Balance at beginning of period $ 7,048 $ 6,839 $ 5,374 Provision for income taxes - valuation allowance 559 209 1,465 Balance at end of period $ 7,607 $ 7,048 $ 6,839 F- 34