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II

ICF International, Inc. (ICFI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue declined to $465.4M and missed consensus, while non-GAAP EPS of $1.67 missed by ~$0.06; Adjusted EBITDA margin expanded 10 bps to 11.4% on favorable mix and cost control . Consensus: revenue $485.1M*, EPS $1.734* (Values retrieved from S&P Global).
  • Federal revenue fell 29.8% YoY on contract curtailments and slower RFPs, partially offset by 20.9% YoY growth in commercial revenue (energy +24.3%); book-to-bill improved to 1.53 with $714M awards; backlog rose to $3.5B .
  • Management maintained the 2025 guidance framework (flat to down ~10%), but trimmed operating cash flow to $125–$150M (from ~$150M) to reflect shutdown-related collections timing; Q4 YoY revenue and non-GAAP EPS declines expected to be similar to Q3 .
  • Government shutdown impact estimated at ~$8M revenue and ~$2.5M gross profit per month; leadership updates: CFO to retire in 2026; COO James Morgan to assume additional CFO role; $0.14 quarterly dividend declared .

What Went Well and What Went Wrong

  • What Went Well

    • Commercial energy remained a key growth engine: energy markets revenue up 24.3% YoY, comprising 89% of commercial; commercial revenue +20.9% YoY and 33.7% of total .
    • Margin execution amid revenue headwinds: adjusted EBITDA margin rose 10 bps to 11.4%, driven by higher-margin mix and cost management; fixed-price/T&M rose to 93% of revenue .
    • Strong demand and pipeline: $714M awards (book-to-bill 1.53); BD pipeline $8.4B supports 2026 growth outlook . CEO: “benefits of ICF’s diversified client base… and success of our business development activities” .

  • What Went Wrong

    • Federal softness: U.S. federal revenue down 29.8% YoY to $198.0M; management expected Q3 revenue to be ~$15M higher but cited delayed international ramp and pre-shutdown slowdowns in federal programmatic areas .
    • Shutdown drag and guidance adjustment: estimated impact ~$8M revenue and ~$2.5M gross profit in October alone; OCF guidance lowered to $125–$150M from ~$150M to reflect collections timing .
    • Tax rate headwind: effective tax rate rose to 22.7% vs. 13.8% in Q3’24, pressuring GAAP and non-GAAP EPS; non-GAAP EPS included a negative ~$0.04/share tax adjustment .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$487.6 $476.2 $465.4
GAAP Diluted EPS ($)$1.44 $1.28 $1.28
Non-GAAP EPS ($)$1.94 $1.66 $1.67
EBITDA ($M)$52.1 $53.1 $52.8
Adjusted EBITDA ($M)$55.2 $52.9 $53.2
Operating Margin (%)7.9% 8.4% 8.3%
Adjusted EBITDA Margin (%)11.3% 11.1% 11.4%
Net Income ($M)$26.9 $23.7 $23.8

Results vs. Consensus (quarterly)

MetricQ1 2025Q2 2025Q3 2025
Revenue – Actual vs. Consensus ($M)$487.6 vs. $487.3* $476.2 vs. $482.8* $465.4 vs. $485.1*
Primary EPS (Non-GAAP proxy) – Actual vs. Consensus ($)$1.94 vs. $1.73* $1.66 vs. $1.578* $1.67 vs. $1.734*
EBITDA – Actual vs. Consensus ($M)$52.1 vs. $54.0* $53.1 vs. $51.4* $52.8 vs. $55.3*
Values retrieved from S&P Global.

Segment/Client-Type Mix and Revenues

MetricQ1 2025Q2 2025Q3 2025
U.S. Federal Revenue ($M)$239.6 $204.7 $198.0
State & Local Revenue ($M)$76.9 $85.6 $81.7
International Gov’t Revenue ($M)$27.1 $29.3 $29.0
Commercial Revenue ($M)$144.1 $156.6 $156.6
Federal % of Total49% 43% 43%
State & Local %16% 18% 17%
International %5% 6% 6%
Commercial %30% 33% 34%

KPI/Backlog/BD

KPIQ1 2025Q2 2025Q3 2025
Contract Awards ($M)$467 $621 $714
Book-to-Bill (x)0.96 1.30 1.53
Backlog ($B)$3.4 $3.4 $3.5
Funded Backlog ($B / %)$1.9 / 56% $1.8 / 54% $1.9 / ~52%
BD Pipeline ($B)>$10 $9.2 $8.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues (YoY)FY 2025Flat to down ~10% vs. 2024 Maintained framework; Q4 YoY declines similar to Q3 Maintained
Non-GAAP EPSFY 2025Flat to down ~10% vs. 2024 Maintained framework; Q4 YoY declines similar to Q3 Maintained
Operating Cash Flow ($M)FY 2025~ $150 $125–$150 Lowered
D&A Expense ($M)FY 2025$21–$23 $20–$22 Lowered
Amortization of Intangibles ($M)FY 2025$35–$37 $35–$37 Maintained
Interest Expense ($M)FY 2025$30–$32 $30–$32 Maintained
Capex ($M)FY 2025$26–$28 $23–$25 Lowered
Tax Rate (%)FY 2025~18.5% ~18.5% Maintained
Share Count (Diluted, M)FY 2025~18.6 ~18.6 Maintained
Dividend ($/share)Ongoing$0.14 declared 7/31/25 $0.14 declared 10/30/25 (payable Jan 9, 2026) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
AI/Technology (ICF Fathom)Launched ICF Fathom; strong client interest; positioned for outcome-based fixed price “Growing client interest” in Fathom; initial contracts won; production-ready for federal use cases Improving
Federal procurement/shutdownContract terminations stabilized; expecting slower awards; framework excludes shutdown $8M/month revenue, $2.5M/month gross profit impact; expect Q4 YoY declines similar to Q3 if shutdown persists Worsening near-term
Commercial energy/data centersEnergy +21–27% YoY; utilities expanding DSM; data center load key driver Energy +24.3% YoY; management cites continued strong demand tied to AI/data center load Improving
International rampSlower-than-expected ramp but building task orders Ramp remains slower; full benefit now expected in 2026 Slower/Delayed
State & local/disaster management90+ programs in 20+ states; pipeline healthy 95 active programs in 22 states/territories; new awards in CA/OR/VA/MI Improving
M&A focusEnergy tuck-ins prioritized; federal unlikely near-term Focus on energy scale/geographies; leverage ~2.13x; dry powder for 2026 Preparing

Management Commentary

  • “Adjusted EBITDA margin expanded by 10 basis points to 11.4%… reflecting the increased contribution of higher-margin commercial energy revenues and the benefits of cost management initiatives… fixed price and time and materials contracts accounted for 93% of third quarter revenues” — John Wasson, CEO .
  • “We had expected third quarter revenues to be approximately $15 million higher than reported. This variance was primarily due to delays in the ramp-up of our recently won international government contracts… Another factor was the slowdown in federal government procurement and project activities” — John Wasson .
  • “In the month of October, we estimate that ICF’s revenue will be reduced by approximately $8 million and gross profit by approximately $2.5 million as a result of the current government shutdown” — John Wasson .
  • “Adjusted EBITDA margins expanded 10 basis points to 11.4%… Net interest expense… $7.9M… tax rate was 22.7%… capital expenditures… $5.5M… debt of $449M… adjusted leverage ratio was 2.13x” — Barry Broadus, CFO .

Q&A Highlights

  • Shutdown impact and trajectory: Management quantified monthly impact at ~$8M revenue and ~$2.5M gross profit; if extended through Q4, expect ~$25M revenue and ~$7.5M gross profit hit; much of foregone revenue historically “pushed to the right” and recouped over contract life .
  • Federal ramp divergence: IT modernization seeing fewer stop-work orders and continued proposal activity; programmatic public health/human services facing most shutdown impact and slower rebound .
  • 2026 outlook: Expect IT modernization (roughly half of federal) to return to growth in 2026; programmatic federal work likely not until 2027; non-federal (commercial/state/local/international) to continue double-digit growth .
  • M&A and capital allocation: Focused on energy sector opportunities with strategic/cultural fit; targeting leverage below 2.0x by year-end absent M&A; keeping “powder dry” for 2026 transactions .
  • Leadership and execution: CFO retirement announcement; COO James Morgan to take on CFO responsibilities; reinforces continuity and operational/financial discipline .

Estimates Context

  • Q3 2025: Revenue $465.4M vs. $485.1M consensus* (MISS); Non-GAAP/Primary EPS $1.67 vs. $1.734* (MISS); EBITDA $52.8M vs. $55.3M* (MISS) . Values retrieved from S&P Global.
  • Q2 2025: Revenue $476.2M vs. $482.8M* (MISS); Non-GAAP/Primary EPS $1.66 vs. $1.578* (BEAT); EBITDA $53.1M vs. $51.4M* (BEAT) . Values retrieved from S&P Global.
  • Q1 2025: Revenue $487.6M vs. $487.3M* (IN LINE/BEAT); Non-GAAP/Primary EPS $1.94 vs. $1.73* (BEAT); EBITDA $52.1M vs. $54.0M* (MISS) . Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix tailwinds continue: Non-federal growth (commercial energy +24% YoY in Q3) is expanding margins even as total revenue declines, supporting margin resilience into 2026 .
  • Near-term headwinds persist: Federal programmatic areas and shutdown dynamics weigh on revenue; management expects Q4 YoY declines similar to Q3 if shutdown persists .
  • Demand indicators solid: Book-to-bill 1.53, backlog up to $3.5B, and $8.4B pipeline underpin a 2026 growth reacceleration; watch for IT modernization wins and international ramp timing .
  • Cash flow guide trimmed on timing: 2025 OCF lowered to $125–$150M; shutdown resolution and collections cadence are catalysts for reacceleration toward the upper end of range .
  • Capital allocation flexibility in 2026: Leverage ~2.13x with goal to reduce further; prioritizing energy-sector M&A; dividend maintained at $0.14 .
  • Leadership continuity: Planned CFO transition to COO/CFO James Morgan supports execution through transition; watch operational discipline and M&A execution under new structure .
  • Trading setup: Stock likely sensitive to shutdown resolution, federal procurement cadence, and commercial energy momentum; beats/misses vs. S&P consensus suggest execution in non-federal can offset federal softness, but top-line beats require federal stabilization and international ramp .

Notes: All estimates marked with an asterisk (*) are Values retrieved from S&P Global.