ICF International, Inc. Q2 FY2025 earnings call

• Key takeaways: Second quarter revenue stable, adjusted EBITDA margin up ~20 basis points, federal contract cancellations stable. - Business trends: Commercial clients up 25.2% led by energy; state and local govt up 1% with disaster management and climate services; international govt up 2% from recent contract wins; federal facing challenges but seeing procurement pickup. - Financials: Revenues $476.2M, down 2.4% q-o-q, down 7% y-o-y. Gross margin 37.3%, up 160 basis points. Adjusted EBITDA $52.9M, margin 11.1%, up 20 basis points. Backlog $3.4B, new business pipeline $9.2B.

Second quarter revenue was generally stable. Revenues from commercial, state and local government, and international government clients increased 13.8% aggregate and accounted for 57% of second quarter revenues. Commercial energy clients saw a 27% year-on-year increase. State and local government revenues increased 1%, with disaster management accounting for ~45% and climate services ~40% of the category. International government revenues increased 2% from recent contract wins. Federal government revenues declined 9.8% sequentially, a 25.2% reduction from last year's second quarter, impacted by contract cancellations ($117M as of July 31) and slower procurement activity. These segments' revenues are on track to increase approximately 15% in 2025, representing over 55% of total revenues.

Maintained 2025 guidance framework but outlook improved; not expecting full year revenues to decline by as much as 10% from 2024. Expect 2025 adjusted EBITDA margins similar to 2024, EPS at higher end of guidance. Anticipate federal to return to growth in 2026, underpinned by improving procurement momentum and skills/positioning.

• Federal government procurement slowdown and contract activation delays. - Uncertainty in disaster recovery funding shifts. - Valuation uncertainty in potential acquisitions in the market.

Q: Sam Kusswurm asked about backlog mix and federal contract timing.

A: Barry Broadus responded that federal government backlog is majority, and while new procurement slowed, contracts activated and work continued.

Q: Kevin Steinke inquired about federal activity pickup and 2025 revenue floor.

A: John Wasson stated federal tech area to return to growth in 2026 and 2025 revenue decline less than 10%.

Q: Marc Riddick asked about state and local activity, acquisition pipeline, and ICF Fathom.

A: John Wasson said state and local work ongoing, focus on energy acquisitions, and Fathom for federal AI support.

Q: Tobey Sommer (Henry) asked about procurement risk and data centers driving commercial energy.

A: John Wasson noted procurement risk exists but Q3 strong, and data centers drive long-term energy demand