ICF International Q2 Earnings Call Highlights

Key Points

• Q2 revenue was essentially flat at $474.5 million, as 6.6% growth in non-federal markets offset a 9.5% decline in federal revenue. Adjusted EBITDA increased 0.9% to $53.4 million, while non-GAAP EPS rose 12% to $1.86.
• Growth is being driven by commercial energy and international operations: commercial revenue increased 6%, international government revenue jumped 35%, and the business-development pipeline expanded to $9.3 billion. Management expects federal and state/local revenue to return to year-over-year growth in the second half.
• ICF reaffirmed its 2026 guidance for revenue of $1.89 billion to $1.96 billion and non-GAAP EPS of $6.95 to $7.25. Cash generation improved, with core operating cash flow rising to $56.7 million and net debt declining to $403 million.

ICF International NASDAQ: ICFI reported second-quarter 2026 revenue that was essentially unchanged from a year earlier as growth in commercial, international and other non-federal markets offset a year-over-year decline in federal revenue. Management said the company remains on track to return to year-over-year revenue growth in the second half of 2026 and reaffirmed its full-year guidance.

Total second-quarter revenue was $474.5 million, compared with $476.2 million in the prior-year quarter. Adjusted EBITDA rose 0.9% to $53.4 million, while adjusted EBITDA margin expanded 10 basis points to 11.2%. Non-GAAP diluted earnings per share increased 12% to $1.86, supported by lower interest expense, a lower tax rate, a reduced share count and improved margins.

“Second quarter business trends in our markets were consistent with our expectations,” Chair and CEO John Wasson said, adding that the company managed costs while expanding its pipeline of new business opportunities.

Non-Federal Growth Offsets Federal Comparison

Non-federal revenue increased 6.6% year over year, while revenue from federal clients declined 9.5% from the prior-year quarter. Chief Operating and Financial Officer James Morgan said the federal decline reflected difficult comparisons related to contract cancellations in the first half of 2025.

Federal revenue did improve sequentially, rising 1.4% in the second quarter after an 8.6% sequential increase in the first quarter. Management expects another quarter of sequential federal growth in the third quarter and a return to year-over-year federal growth in the fourth quarter.

Commercial, state and local, and international clients represented 61% of second-quarter revenue. Wasson said the company expects those client groups to account for more than 60% of 2026 revenue, compared with 57% in 2025. About 75% of second-quarter contract wins came from non-federal categories, as federal procurement decisions remained delayed.

The company ended the quarter with a $9.3 billion business-development pipeline, up 9% sequentially from $8.5 billion at the end of the first quarter. Opportunities in commercial energy, technology modernization, disaster management and related state and local work represented about $5.5 billion, or 60%, of the pipeline. ICF also said it had received contract awards exceeding $200 million since the end of the second quarter.

Commercial Energy and International Work Drive Growth

Revenue from commercial clients rose 6% year over year, led by commercial energy-efficiency and related utility-program revenue, which increased 6.7%. President Anne Choate said those programs, including energy efficiency, flexible-load management, electrification and battery storage, accounted for approximately 82% of commercial-energy revenue in the quarter.

Commercial energy contract awards represented about 47% of total second-quarter awards, and commercial-energy opportunities exceeded $1.5 billion in the pipeline. Management expects commercial energy to accelerate in the second half, aided by new project starts, performance-based fees that are typically weighted toward the back half of the year, and anticipated increased activity in energy advisory services.

Choate said the company is seeing demand for work related to data-center development, including assessments of grid capacity, interconnection positions, future load growth and siting considerations. ICF also expects improvement in environmental and planning work during the second half, following recent utility transmission-related awards and increased support for developers co-locating data centers with renewable-generation assets.

International government revenue increased 35% year over year as ICF ramped work on contracts awarded by European Union and U.K. clients over the past 18 months. Choate said several contracts had moved beyond their initial mobilization phases, while the company continued to pursue additional EU opportunities. Wasson said he expects double-digit international revenue growth in 2027 based on backlog and pipeline activity.

Federal Modernization and State, Local Opportunities

Technology modernization accounted for roughly half of ICF’s $185 million in federal revenue and grew 4% sequentially. More than 80% of the company’s federal technology modernization work is performed under outcome-based fixed-price contracts, according to management.

ICF said federal clients continue to prioritize data, artificial intelligence, automation, interoperability and the modernization of legacy systems. However, Choate said procurement timing remains uneven across agencies, with large opportunities more frequently subject to protests and delays.

State and local government revenue declined 1.9% from the year-earlier period. Disaster management and recovery services represented about 45% of that portfolio. ICF currently supports 75 active disaster-recovery projects in 22 states and territories, but management said fewer large-scale disasters and funding delays constrained near-term activity.

The company expects state and local revenue to return to year-over-year growth in the second half. It cited opportunities stemming from a Florida management-services contract, including a $4 million funded contract tied to rural health transformation, as well as a Northeast utility engagement involving FEMA-funded hazard-mitigation projects.

Guidance Reaffirmed, Cash Flow Strengthens

ICF reaffirmed its 2026 outlook for revenue of $1.89 billion to $1.96 billion, GAAP EPS of $5.95 to $6.25, and non-GAAP EPS of $6.95 to $7.25. More than 90% of the revenue needed to meet the full-year outlook was already in backlog, Morgan said.

The company expects sequential revenue growth in both the third and fourth quarters, with faster growth in the fourth quarter. Wasson said ICF anticipates a return to mid-to-high single-digit companywide growth in 2027, driven by expected high-single-digit to low-double-digit growth in non-federal operations and low-to-mid-single-digit growth in federal operations.

Second-quarter operating cash flow was approximately $99.7 million, including restricted cash associated primarily with utility energy-efficiency programs. Excluding that item, core cash generation was $56.7 million, compared with $50.4 million a year earlier. Net debt was $403 million at quarter-end, down from $457 million a year earlier.

ICF repurchased approximately 435,000 shares in the first half of 2026 and declared a quarterly dividend of $0.14 per share, payable Oct. 9 to shareholders of record Sept. 4. Management said it continues to evaluate acquisitions, particularly tuck-in opportunities in commercial energy, while maintaining a disciplined approach to capital allocation.

About ICF International (NASDAQ:ICFI)

ICF International NASDAQ: ICFI, commonly known as ICF, is a global consulting and digital services provider specializing in the intersection of strategy, technology, and policy. The firm delivers integrated services and solutions to government and commercial clients in areas such as energy and environment, health and social programs, transportation, infrastructure, technology, and marketing and communications. ICF's offerings span strategic planning, data analytics, program evaluation, digital transformation, and implementation support.

Founded in 1969 and headquartered in Reston, Virginia, ICF has grown through both organic expansion and targeted acquisitions to broaden its capabilities and geographic reach.

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