ICF International, Inc. Q1 FY2025 earnings call

• Commercial energy saw 21% y-o-y growth driven by utility energy efficiency, electrification, and customer engagement programs. The integration of AEG, acquired at the end of 2024, is progressing well.
• State and local government clients have a robust disaster recovery pipeline with opportunities in wildfires, hurricanes, etc. Climate environment and infrastructure services remain attractive due to increased large infrastructure projects.
• International government clients are executing task orders from recent contract wins with the EU and UK, leveraging technology solutions and AI capabilities.

First quarter revenues were $487.6 million, down 1.4% year-over-year. Revenues from commercial, state and local, and international government clients aggregate accounted for 51% of first quarter revenues, up from ~45% a year ago. Commercial clients' revenues increased 22.1% to account for 29.5% of total first quarter revenues, with commercial energy up 21% and representing 87% of the commercial client category. State and local government clients' revenues were stable year-on-year, with disaster management (45% of category) having lower pass-throughs but revenues less pass-throughs up 3%. International government clients' revenues increased 7.2%. Federal government clients' revenues declined 12.6% due to contract funding curtailments and slower RFPs.

2025 total revenues are forecasted to be flat to 10% down from 2024 levels. Adjusted EBITDA margins are expected to be comparable to 2024 levels. Q2 revenues are anticipated to be similar to Q1. Full year tax rate is expected to be in the range of 18.5%. Depreciation and amortization expense is expected to range from $21 million to $23 million, amortization of intangibles from $35 million to $37 million, interest expense from $30 million to $32 million, operating cash flow approximately $150 million, and capital expenditures approximately $26 million to $28 million.

• Federal government contract funding curtailments, leading to stop work orders and contract terminations. As of May 1, ~$115 million of 2025 revenues were affected. Uncertainty in the federal government business environment due to new administration directives and spending priorities.

Q: On guidance and DOGE impact, is Q2 still expected to be similar to Q1?

A: The environment in the federal arena remains fluid. Q2 is expected to be similar to Q1, not significantly more impactful from DOGE.

Q: Update on stop work orders?

A: The number is now about $375 million, which is over a long period and spread over multiple contract periods.

Q: Impact of DOGE on IT modernization business?

A: Expected 5% to 10% decline in 2025 due to delays in awards from DOGE's reviews of existing contracts.

Q: Outlook for state and local disaster recovery business?

A: Remains positive with a robust pipeline, including wildfire opportunities in California and hurricane-related opportunities later in the year, expected to be a growth market.