ICF International, Inc. (NASDAQ: ICFI) Q2 2025 Earnings | 08/01/2025

18 days ago

44:03

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Summary of ICF International Q2 2025 Earnings Call

Key Financial Highlights

Revenue: $476.2M (down 2.4% QoQ, 7% YoY), but stable sequentially and better than feared.
- Commercial/state/local/international revenue grew 13.8% YoY (now 57% of total), led by commercial energy (+27% YoY).
- Federal revenue declined 25.2% YoY due to contract cancellations/slow procurement; impact stabilized at $117M (only +$2M since Q1).
Profitability:
- Adjusted EBITDA margin expanded 20 bps YoY to 11.1% (favorable mix, cost controls).
- Gross margin up 160 bps to 37.3% (higher-margin commercial work, shift to fixed-price contracts).
Cash Flow & Balance Sheet:
- Operating cash flow: $52M in Q2 ($18.9M YTD); debt reduced by $40M (leverage ratio: 2.1x).
- Backlog: $3.4B (54% funded); pipeline: $9.2B.
2025 Guidance:
- Revenue decline less severe than feared (no longer expects -10% YoY floor).
- Adjusted EBITDA margin similar to 2024; EPS likely at higher end of prior range.

Business Segment Updates

Commercial Energy (27% YoY Growth):
- Utility demand surged for energy efficiency, grid resilience, and electrification programs.
- Data centers driving unprecedented load growth (ICF sees long-term tailwinds in NY, GA, IL).
- Energy advisory rebounding: Grid engineering, renewables M&A, and tax credit-driven projects.
State & Local (+1% YoY):
- Disaster recovery: Supporting 90+ programs (e.g., Puerto Rico, Texas); awaiting $11.9B CDBG-DR fund awards.
- Environmental services: States filling federal gaps in permitting/compliance (e.g., coal facility impact assessment).
Federal (-25.2% YoY):
- Stabilizing cancellations; procurement activity picking up (IT modernization leads).
- New AI offering ("ICF Fathom"): AI agents for federal workflows (e.g., grants management, cybersecurity).
International (+2% YoY):
- EU/UK contracts ramping; expect H2 acceleration.

Strategic Initiatives & Outlook

AI & Tech: Launched ICF Fathom for federal AI solutions; early client interest in automation/decision-support.
M&A Focus: Prioritizing commercial energy acquisitions (scale/geographic expansion); paused federal deals.
Federal Recovery: 2026 growth expected in IT modernization; health/public health pipelines improving.
Capital Allocation: Debt reduction, dividends ($0.14/share), and opportunistic buybacks.

Q&A Highlights

Federal Backlog ($3.4B): Half is federal; task order conversions improving but slower than historical norms.
Disaster Recovery: No FEMA funding cuts yet; states may take larger role long-term.
Data Centers: "Unprecedented" electricity demand to drive multi-year utility investment (ICF well-positioned).
Budget Flush Risk: Procurement staffing shortages could delay Q3 awards but expect strong seasonality.

About this video

ICF International, Inc. reported mixed second quarter 2025 results, with revenue decreasing 7% year-over-year to $476.2 million, reflecting a 2.4% decline from Q1 2025 as federal government revenues dropped significantly. Offsetting this, commercial, state, local government, and international sector revenues grew 13.8% to comprise 57% of total revenue, led by a robust 27% surge in commercial energy client sales. The company’s adjusted EBITDA margin improved by 20 basis points to 11.1%, while gross margin expanded 160 basis points to 37.3%, driven by a favorable business mix and ongoing cost discipline. Net income fell to $23.7 million, or $1.28 per diluted share, while non-GAAP EPS was $1.66—above analyst forecasts due to stronger earnings execution despite softer top-line results. Operating cash flow was strong at $52 million for the quarter, supporting further debt reduction of $40 million and lowering the adjusted leverage ratio to 2.1x. Bookings remained healthy with a $621 million Q2 contract awards tally, yielding a 1.3x book-to-bill ratio and an ending backlog of $3.4 billion, 54% of which is funded. The company declared a $0.14 per share quarterly dividend and reaffirmed its full-year 2025 guidance, maintaining a cautiously optimistic outlook for revenue and profit rebound in 2026. Management emphasized the positive performance of its commercial energy and utility-facing business as well as successful execution of cost management strategies and contract-winning momentum. ICF plans to continue investing in AI and digital transformation capabilities for future growth, while sustaining balanced capital allocation through dividends, debt management, and strategic repurchases. About Inside Ticker: For more expert analysis and real-time updates on ICF International, Inc. (NASDAQ: ICFI) and other market movers, follow Inside Ticker and visit http://www.insideticker.com/ for in-depth reports, financial insights, and the latest news on leading companies. #ICFInternational #ICFI #Q22025 #Earnings #FinancialResults #Revenue #NetIncome #EPS #CommercialEnergy #GovernmentContracts #Backlog #Bookings #DigitalTransformation #AI #CostManagement #Dividend #DebtReduction #CapitalAllocation #InsideTicker #2025Outlook

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