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ICF International, Inc. (ICFI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered mixed results: Non-GAAP EPS of $1.66 beat Wall Street consensus ($1.58), while revenue of $476.2M missed ($482.8M). Adjusted EBITDA margin expanded to 11.1% on favorable mix and reduced pass-through costs ; estimates marked with * (Values retrieved from S&P Global).*
  • Management maintained the FY25 guidance framework but improved the outlook: they no longer foresee revenues declining by as much as 10% vs 2024, expect adjusted EBITDA margins similar to 2024, and see GAAP and Non-GAAP EPS at the higher end of the range .
  • Commercial energy remained the growth engine (+27.4% YoY; 88.3% of commercial revenue), offsetting federal weakness; book-to-bill was 1.30 with $621M awards and pipeline of $9.2B .
  • Federal revenue fell sharply YoY and sequentially (Q2 federal $204.7M, -25.2% YoY; -14.6% QoQ), but cancellations flattened (+$2M since May to $117M), and procurement “green shoots” emerged into Q3 seasonality .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA margin expanded ~20 bps YoY to 11.1% on higher-margin commercial mix and 15.5% reduction in subcontractor/other direct costs; fixed price + T&M contracts rose to 93% of revenue vs 88% last year. “Margins continue to benefit from favorable mix” .
  • Robust commercial energy growth: “Revenues from commercial energy clients increased 27% year-on-year… reflecting robust demand from utility clients for energy efficiency, flexible load management, electrification and grid resilience.” .
  • Awards momentum and cash generation: $621M awards (book-to-bill 1.30), backlog $3.4B (54% funded), operating cash flow $52M, debt reduced by ~$40M in Q2 .

What Went Wrong

  • Federal revenue decline: $204.7M (-25.2% YoY; -14.6% QoQ) on funding curtailments and slower project/procurement activity; total revenue down 7.0% YoY to $476.2M .
  • International government ramp slower than expected; state/local stable but not a growth driver in the quarter (state/local $85.6M; international $29.3M) .
  • EBITDA down YoY (EBITDA $53.1M vs $55.6M last year) and GAAP EPS down ($1.28 vs $1.36), despite margin improvement; interest expense up on higher debt balances (AEG acquisition, buybacks, working capital) .

Financial Results

Summary (YoY, QoQ, margins vs prior periods)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M)$496.3 $487.6 $476.2
GAAP Diluted EPS ($)$1.30 $1.44 $1.28
Non-GAAP EPS ($)$1.87 $1.94 $1.66
Operating Margin (%)7.3% 7.9% 8.4%
EBITDA ($M)$50.8 $52.1 $53.1
Adjusted EBITDA ($M)$56.3 $55.2 $52.9
Adjusted EBITDA Margin (%)11.3% 11.3% 11.1%
Subcontractor & Other Direct Costs (% of revenue)25.4% 22.7% 23.6%

Notes: Q2 gross margin was 37.3% (+160 bps YoY), driven by mix and pass-through reduction .

Actual vs S&P Global Consensus

MetricQ4 2024Q1 2025Q2 2025
Revenue ($M) Actual$496.3 $487.6 $476.2
Revenue ($M) Consensus Mean$494.2*$487.3*$482.8*
EPS (Non-GAAP/Normalized) Actual ($)$1.87 $1.94 $1.66
EPS Consensus Mean ($)$1.86*$1.73*$1.58*
EBITDA ($M) Actual$50.8 $52.1 $53.1
EBITDA Consensus Mean ($M)$57.8*$54.0*$51.4*

Disclaimers: *Values retrieved from S&P Global.

Revenue by Client Type ($M)

Client TypeQ1 2025Q2 2025
U.S. Federal Government$239.6 $204.7
U.S. State & Local Government$76.9 $85.6
International Government$27.1 $29.3
Total Government$343.6 $319.6
Commercial (Total)$144.1 $156.6

Revenue Mix by Client Type (% of total)

Client TypeQ4 2024Q1 2025Q2 2025
U.S. Federal Government52% 49% 43%
U.S. State & Local Government15% 16% 18%
International Government6% 5% 6%
Commercial27% 30% 33%

Commercial Energy KPIs

MetricQ1 2025Q2 2025
Commercial Revenue ($M)$144.1 $156.6
Energy Markets (% of Commercial)87.3% 88.3%
Energy Markets YoY Growth (%)21.0% 27.4%

Operating KPIs and Balance Sheet

KPIQ1 2025Q2 2025
Backlog ($B)$3.4 $3.4
Funded Backlog ($B)$1.9 (56%) $1.8 (54%)
Book-to-Bill (Quarter)0.96 1.30
Pipeline ($B)$10.5 $9.2
Operating Cash Flow ($M)-$33.0 (seasonal) $52.0
Long-Term Debt ($M)$502.0 $462.3
Days Sales Outstanding (Days)81 80
Dividend per Share$0.14 (declared) $0.14 (declared)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues (vs 2024)FY 2025Flat to down 10% No longer foresee decline as much as 10% Raised floor (less downside)
Adjusted EBITDA MarginFY 2025Similar to 2024 Similar to 2024 Maintained
GAAP EPSFY 2025Flat to down 10% vs 2024 Likely at higher end of framework Upward bias
Non-GAAP EPSFY 2025Flat to down 10% vs 2024 Likely at higher end of framework Upward bias
Operating Cash FlowFY 2025~ $150M ~ $150M Maintained
Depreciation & Amortization (D&A)FY 2025$21–$23M (dep.) $21–$23M (dep.) Maintained
Amortization of IntangiblesFY 2025$35–$37M $35–$37M Maintained
Interest ExpenseFY 2025$30–$32M $30–$32M Maintained
Tax RateFY 2025~18.5% ~18.5% Maintained
CapexFY 2025$26–$28M $26–$28M Maintained
Diluted Share CountFY 2025~18.6M ~18.6M Maintained
DividendQuarterly$0.14 declared $0.14 declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Commercial Energy DemandQ4: strong demand; energy markets +22.6% YoY . Q1: +21% YoY; 87% of commercial revenue; expanding into electrification, flexible load; AEG integration .+27.4% YoY; 88.3% of commercial; data center load a long-term driver .Improving
Federal Procurement & CancellationsQ1: ~$115M 2025 revenues impacted; awards/activations slowed; guidance assumed 5–10% decline for IT modernization .Cancellations at $117M (+$2M); “pickup” in modifications and RFPs; expect stronger Q3 sales season .Stabilizing
International Government RampQ1: EU/UK wins beginning to ramp .Slow ramp in Q2; more task orders late in quarter .Modest improvement
State & Local / Disaster ManagementQ1: stable; pipeline across wildfires/hurricanes .~45% of S&L category; funding intact; preparing for potential state-led shifts in FEMA role .Stable
AI Initiatives (ICF Fathom)Q1: building AI capabilities for outcome-based federal contracts .Launching ICF Fathom, production-ready AI agents for federal missions; early client interest .Accelerating

Management Commentary

  • “Second quarter results were in line with our expectations, demonstrating the benefits of our diversified client base… and deep domain expertise” — John Wasson, CEO .
  • “Adjusted EBITDA margin expanded… reflecting the increased mix of higher-margin commercial energy revenues and a 15.5% reduction in subcontractor and other direct costs… fixed price and T&M contracts… 93%” .
  • “We are maintaining the guidance framework… we do not foresee full year 2025 revenues declining by as much as 10%… GAAP and Non-GAAP EPS likely to be at the higher end” .
  • “We are introducing ICF Fathom, a new suite of tailored artificial intelligence solutions… built on a proprietary platform… to automate complex tasks, support informed decision-making, reduce waste, and boost productivity” .
  • CFO: “Operating cash flow in the second quarter was $52M… debt reduced by approximately $40M… adjusted leverage 2.1x… expect ~50% debt fixed by year-end” .

Q&A Highlights

  • Backlog mix and activation: Federal comprises “about half” the backlog; activation cadence normalizing as agencies set priorities; Q3 expected to be seasonally strongest sales quarter .
  • Federal procurement environment: “Pickup in modifications and plus-ups” and green shoots in IT modernization; broader program management still challenged; 2026 expected return to growth in federal technology .
  • Disaster management/FEMA: No discernible decrease in federal DR funding; preparing for potential state-led shifts; pipeline remains solid .
  • AI rollout (Fathom): Competitive advantages via agentic AI; rapid prototyping enabling quicker value demonstration; early client interest .
  • Acquisition focus: Near-term focus on commercial energy tuck-ins for scale/geography; unlikely federal acquisitions given uncertainty .

Estimates Context

  • Q2 2025 comparison: EPS beat ($1.66 vs $1.58*), revenue miss ($476.2M vs $482.8M*), EBITDA beat ($53.1M vs $51.4M*). Mix shift and reduced pass-through costs drove the EPS/EBITDA beat despite revenue pressure ; consensus values marked with * (Values retrieved from S&P Global).*
  • Multi-quarter pattern: Q1 beat EPS ($1.94 vs $1.73*); Q4 2024 slightly above EPS consensus ($1.87 vs $1.86*). Continued margin resilience suggests potential upward EPS revisions, while federal revenue uncertainty may cap revenue estimates ; consensus values marked with * (Values retrieved from S&P Global).*

Key Takeaways for Investors

  • Margin resilience is intact: Operating margin rose to 8.4% and adjusted EBITDA margin held ~11%, supported by higher direct labor mix and contract structure (93% fixed/T&M), which should underpin EPS even amid federal softness .
  • Commercial energy is the secular driver: Data center load growth and utility programs (EE, electrification, flexible load) are expanding; energy markets were 88.3% of commercial revenue and grew 27.4% YoY .
  • Federal risk stabilizing: Cancellations plateaued (+$2M since May to $117M); procurement activity and modifications are picking up, setting Q3 for stronger sales; 2026 federal tech expected to return to growth .
  • Cash and de-leveraging: $52M operating cash flow in Q2 and ~$40M debt reduction highlight strong cash generation; long-term debt down to $462.3M; leverage targeted lower by year-end .
  • Guidance bias upward on EPS: Management sees EPS at the high end of FY25 framework and reduces the revenue downside floor (<-10%), indicating potential estimate upgrades for profitability .
  • AI catalyst: Launch of ICF Fathom positions ICF for outcome-based, fixed-price federal IT modernization aligned with administrative priorities—potential bid and win-rate enhancer into 2026 .
  • Trading implications: Near term, stock likely reacts to EPS beat vs revenue miss and improved FY25 outlook; medium term, watch federal RFP cadence in Q3, commercial energy awards momentum, and AI-driven IT modernization wins .

Additional Details: Non-GAAP Adjustments (Q2 2025)

  • Non-GAAP EPS adds back amortization of acquired intangibles (+$0.50), adjusts for tax effects (-$0.10), and facility-related adjustments (-$0.02), among other smaller items, reconciling GAAP $1.28 to Non-GAAP $1.66 .

Dividend

  • Declared $0.14 per share, payable Oct 10, 2025; record date Sep 5, 2025 .