ICF International's Q2 Earnings Call: Mixed Outlook with Growth Opportunities in Commercial and Non-Federal Segments

ICF International reported stable revenue with strong growth in commercial and non-federal government segments. However, federal revenues declined by 25.2% YoY. The company emphasized effective cost management and a robust book-to-bill ratio. Growth in energy and environment services was noted, while federal procurement delays and uncertainty in disaster management were identified as potential risks. Higher debt levels were attributed to acquisition activities and share repurchases. Guidance for 2025 remains unchanged.

ICF International (NASDAQ: ICFI) reported stable revenue for the second quarter of 2025, driven by strong growth in commercial and non-federal government segments. The company's total revenue for the quarter was $476.2 million, a 4.0% decrease from the same period in 2024, primarily due to a 14.6% sequential decline in revenues from federal government clients [1].

The company's commercial and non-federal government revenues increased significantly, with commercial energy clients showing a 27.4% year-over-year growth. This growth was attributed to increased demand for energy efficiency programs and grid optimization services [1]. Commercial revenue accounted for 32.9% of total revenue, up from 24.4% in the second quarter of 2024, reflecting the company's strong performance in this segment [1].

However, federal revenues declined by 25.2% year-over-year, impacting the company's overall revenue growth. The decline was primarily due to contract funding curtailments and a slower pace of project and procurement activity in the federal government business [1].

ICF International emphasized effective cost management and a robust book-to-bill ratio, which reached 1.30 in the second quarter. The company's Adjusted EBITDA margin expanded by approximately 20 basis points year-on-year, reflecting the increased mix of higher-margin commercial energy revenues and a 15.5% reduction in subcontractor and other direct costs [1].

The company's backlog and new business pipeline were strong, with a total backlog of $3.4 billion and a funded backlog of $1.8 billion, or approximately 54% of the total backlog. The total value of contracts awarded in the 2025 second quarter was $621 million [1].

ICF International's guidance for 2025 remains unchanged, with the company expecting a return to revenue and earnings growth in 2026. The company's diversified business model and agility have enabled it to navigate an evolving federal government business environment while driving strong growth in other areas of its portfolio [1].

References:
[1] ICF International, "ICF Reports Second Quarter 2025 Results," July 31, 2025, https://www.icf.com/news/2025/07/icf-reports-second-quarter-2025-results