Financial Data and Key Metrics Changes - Third quarter revenues totaled $465.4 million, down from $517 million in the same quarter of 2024, and relatively stable compared to $476.2 million in the second quarter of 2025 [20] - Year-to-date revenues decreased by 6.2%, with revenues excluding subcontractor and other direct costs declining by 4.3% [20] - Adjusted EBITDA was $53.2 million, compared to $58.5 million in the previous year's third quarter, with adjusted EBITDA margins expanding by 10 basis points to 11.4% [24][26] - Net income totaled $23.8 million, or $1.28 per diluted share, down from $32.7 million, or $1.73 per diluted share in the third quarter of 2024 [26] Business Line Data and Key Metrics Changes - Revenues from commercial, state and local, and international clients increased by 13.8% year-on-year, led by a 24.3% increase in the commercial energy business [20][21] - Federal government revenues declined by 29.8% year-on-year, with a 3% sequential decline in the third quarter [5][21] - The commercial energy business represented 30% of third quarter revenues, up from 22% in the previous year [10] Market Data and Key Metrics Changes - Revenues from state and local government clients increased by 3.8% in the third quarter, primarily due to growth in technology work in disaster recovery [14] - International client revenues increased by 8% year-on-year, although the ramp-up of new contracts has been slower than anticipated [16][17] Company Strategy and Development Direction - The company is focused on maintaining margins despite reduced revenue, with a book-to-bill ratio of 1.53 for the third quarter, supporting a return to growth in 2026 [4][32] - The company is investing in organic growth, pursuing strategic acquisitions, and maintaining a disciplined approach to capital allocation [28][29] - The management is optimistic about the potential for growth in the commercial energy sector, despite challenges in the renewables area due to the current administration's policies [45] Management's Comments on Operating Environment and Future Outlook - Management expects the government shutdown to reduce revenues by approximately $8 million and gross profit by $2.5 million in October, with a total estimated impact of $25 million in revenues for the quarter [9][36] - The company remains confident in its ability to return to revenue and earnings growth in 2026, supported by a strong pipeline of opportunities and growth from non-federal clients [32][42] Other Important Information - The CFO announced retirement, with James Morgan taking on the additional role of CFO while continuing as COO [18][60] - The company has a backlog of $3.5 billion, with 52% funded, and a new business development pipeline of $8.4 billion [26] Q&A Session Summary Question: What is the expected decline in federal business for the fourth quarter? - Management did not provide a specific estimate but indicated that federal revenues would be down more than in the third quarter due to the government shutdown [34] Question: How is the government shutdown impacting project progress? - Some projects continue to progress without government interaction, but there are significant impacts on others, particularly in health and human services [36][39] Question: What are the growth expectations for the commercial energy business? - The commercial energy business is expected to continue strong growth, with double-digit growth anticipated next year [44][49] Question: What is the company's approach to acquisitions? - The company is focused on opportunities in the energy sector and disaster recovery, with a disciplined approach to capital allocation and debt repayment [51][53]

Core Insights - ICF has launched ICF Fathom™, a suite of tailored AI solutions for federal agencies aimed at accelerating results and improving efficiency [1][2] - The solution integrates seamlessly into existing systems and is designed to support a wide range of functions, enhancing productivity and decision-making [2][3] - ICF Fathom operates on an open, modular architecture, allowing agencies to adapt and scale at their own pace, ensuring immediate ROI [3][4] Company Overview - ICF is a leading global solutions and technology provider with approximately 9,000 employees, specializing in digital modernization and transformational solutions [6] - The company combines advanced analytics, industry expertise, and enterprise technologies to create agile solutions that meet dynamic end-user requirements [4][6] - ICF has a long history of working with public and private sector clients to navigate change and address complex challenges since its establishment in 1969 [6]

Financial Data and Key Metrics Changes - Second quarter revenue was $476.2 million, down 2.4% from the first quarter and a 7% decline year-over-year, or 4% when excluding subcontractor and other direct costs [20][21] - Adjusted EBITDA margin expanded by 20 basis points to 11.1%, reflecting gross margin expansion [24] - Net income was $23.7 million with diluted EPS of $1.28, compared to $25.6 million and diluted EPS of $1.36 in the previous year [25] Business Line Data and Key Metrics Changes - Revenues from commercial clients increased by 25.2% in the second quarter, driven by a 27% increase in commercial energy clients [8][21] - Revenues from state and local government clients increased by 1%, with disaster management accounting for about 45% of this client category [12] - Revenues from international government clients increased by 2%, while federal government revenues declined by 9.8% sequentially, representing a 25.2% reduction year-over-year [14][15] Market Data and Key Metrics Changes - Revenues from commercial, state and local government, and international government clients grew 13.8% and accounted for approximately 57% of total revenues, up from 47% a year ago [20] - The company expects revenues from commercial, state and local, and international government clients to increase approximately 15% this year [14] Company Strategy and Development Direction - The company is focused on expanding its capabilities in AI and other technologies while maintaining a balanced approach to capital allocation, including funding organic growth initiatives and pursuing strategic acquisitions [28] - The introduction of ICF Fathom, a suite of tailored AI solutions for federal agencies, is aimed at modernizing federal technology systems [19][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a more positive business outlook for 2025, supported by strong demand from commercial energy clients and a stable revenue outlook from state and local government clients [7][32] - The company does not foresee full-year revenues declining by as much as 10% from 2024 levels, indicating improved visibility and confidence in the business environment [30][46] Other Important Information - The company repurchased an additional $11 million shares during the first half of the year and announced a quarterly cash dividend of $0.14 per share [24][28] - Backlog at the end of the second quarter was $3.4 billion, with 54% of the backlog funded, reflecting stability and long-term visibility [25] Q&A Session Summary Question: Can you provide insights on the backlog and federal work mix? - Federal government backlog constitutes about half of the total backlog, with the remainder divided among state and local and commercial clients [34][35] Question: What improvements are being seen in federal government activity? - There has been a pickup in contract modifications and funding, particularly in IT modernization and complex program management [42][43] Question: How is the company viewing the state and local activity? - There has been no decrease in federal funding for FEMA programs, and the company is preparing for potential shifts in responsibilities to state and local governments [51][52] Question: What is the current acquisition pipeline like? - The company is focused on potential acquisitions in the commercial energy sector, while remaining cautious about federal acquisitions due to uncertainty [54][56] Question: What are the expectations for the procurement environment in the upcoming quarter? - The third quarter is expected to be strong for sales, although there are risks associated with staffing changes among contracting officers [61][62] Question: How is the growth in data centers impacting the commercial energy segment? - The demand for electricity associated with data centers is unprecedented, driving significant growth opportunities in the commercial energy sector [63][64]