ICF — Second Quarter 2026 Earnings Summary

Financial Performance

• Total revenue for Q2 2026 was $474.5 million, down 0.4% year-over-year from $476.2 million in Q2 2025, but up 8.5% sequentially from $437.5 million in Q1 2026.
• Net income was $26.9 million, compared to $23.7 million in the prior year quarter; diluted GAAP EPS was $1.49, up 16.4% from $1.28.
• Non-GAAP EPS was $1.86, up 12.0% from $1.66 in the prior year quarter.
• Gross margin was 37.2%, a decrease of 10 basis points from the prior year period; subcontractor and other direct costs were 25.6% of revenue versus 23.6% in the prior year.
• Operating income was $39.9 million with an operating margin of 8.4%, consistent with the prior year's $40.0 million and 8.4% margin.
• EBITDA was $53.0 million, similar to the $53.1 million reported in the prior year quarter.
• Adjusted EBITDA was $53.4 million, representing an 11.2% margin on total revenues, up from 11.1% in the prior year.
• Cash flows from operations were $99.7 million, including $43.0 million in restricted cash; excluding restricted cash, operating cash flow was $56.7 million, up from $50.4 million in the prior year.
• Total backlog was $3.3 billion at quarter-end, with funded backlog exceeding $1.6 billion (approximately 50% of total).
• Debt stood at $406.2 million as of June 30, 2026, compared to $401.4 million as of December 31, 2025.

Guidance and Future Outlook

• ICF reaffirmed full-year 2026 revenue guidance of $1.89 billion to $1.96 billion.
• Full-year 2026 GAAP EPS guidance remains $5.95 to $6.25; Non-GAAP EPS guidance remains $6.95 to $7.25.
• Full-year 2026 operating cash flow guidance is $135 million to $150 million, excluding restricted cash.
• Management expects a return to year-on-year revenue growth in Q3 2026, with sequential growth in federal government revenues in Q3 and year-on-year growth in Q4.
• The company anticipates mid- to high-single-digit revenue growth in 2027.
• Approximately 90% of the revenue required to reach the midpoint of the full-year guidance range is already in backlog.

Business Segments and Product Lines

• Commercial revenue was $166.0 million, up 5.9% year-over-year, accounting for 35.0% of total revenue.
• Commercial energy revenues increased 6.7% year-over-year, representing 82% of commercial energy revenues and 87.1% of total commercial revenue.
• Federal government revenue was $184.9 million, down 9.5% year-over-year, though up 1.4% sequentially from Q1 2026; technology modernization represented approximately 50% of federal revenues.
• State and local government revenue was $84.0 million, down 1.9% year-over-year.
• International government revenue was $39.5 million, up 35.1% year-over-year.
• Contract awards for the quarter were $402 million, resulting in a quarterly book-to-bill ratio of 0.85 and a trailing twelve-month ratio of 1.09.
• The business development pipeline reached $9.3 billion at quarter-end, a 9% sequential increase.
• Commercial energy opportunities represented over $1.5 billion of the pipeline; technology modernization opportunities represented approximately $2.6 billion; state and local government opportunities represented approximately $1.3 billion.

Market and Competitive Landscape

• Commercial client revenues grew 5.9% year-over-year, driven by demand for energy efficiency, flexible load management, electrification, and battery storage programs.
• Federal government clients continue to prioritize modernizing legacy systems, data, AI, speed, efficiency, and automation.
• Over 80% of ICF's technology modernization work is performed under outcome-based, fixed-price contracts.
• The disaster recovery market is viewed as a long-term growth driver, though near-term activity was constrained by fewer major disasters and funding delays.
• ICF noted early signs of increased award decisions, having secured contracts exceeding $200 million since the end of the second quarter.

Risks and Challenges

• Federal government revenue comparisons were impacted by contract cancellations between February and May of the prior year and a slower pace of new RFPs during that period.
• Commercial energy year-on-year comparisons were affected by the wind-down of several wind energy projects in the prior year.
• Disaster recovery activity was constrained by fewer major disasters and funding delays.
• The company faces risks related to government budgeting, spending priorities, potential government shutdowns, and the realization of backlog.

Management Commentary and Tone

• CEO John Wasson stated that second-quarter business trends were in line with expectations, reflecting benefits of the integrated business model.
• Management highlighted strong margin performance driven by higher-margin commercial client revenues and disciplined cost management.
• The company expressed confidence in its long-term prospects, citing the resilience of its business model and the agility of its staff.
• Management noted that revenues from international government clients climbed 35% and federal government revenues improved sequentially.

Other Key Points

• ICF declared a quarterly cash dividend of $0.14 per share, payable on October 9, 2026, to shareholders of record on September 4, 2026.
• The company repurchased 217,542 shares in the second quarter, bringing first-half 2026 share repurchases to 435,055 shares.
• Notable commercial contract awards included new and recompete contracts with Entergy Louisiana, various Northeastern, Western, and Midwestern U.S. utilities, and a Mid-Atlantic energy efficiency nonprofit.
• Notable government contract awards included a $25.0 million subcontract with the Army Research Lab, a $19.6 million health agency subcontract, and various other federal and state contracts ranging from $7.0 million to $9.7 million.
• The effective tax rate for the quarter was 17.8%, down from 21.0% in the prior year quarter.