ICF — Third Quarter 2026 Earnings Summary

Financial Performance

• Total revenue increased 1.1% year-over-year to $470.5 million for the quarter ended September 30, 2026, compared to $465.4 million in the prior year period.
• Net income was $31.7 million ($1.76 per diluted share), up from $23.8 million ($1.28 per share) in the prior year quarter.
• Non-GAAP EPS increased 18.6% to $1.98 per share.
• Gross margin expanded to 38.1%, up 50 basis points from 37.6% in the prior year period.
• Operating income rose 13.6% to $43.6 million, with operating margin expanding 100 basis points to 9.3% from 8.3%.
• Adjusted EBITDA was $54.2 million, representing an 11.5% margin, up 10 basis points year-over-year.
• Cash flows from operations were $35.2 million for the quarter; excluding restricted cash, operating cash flow was $45.5 million, up from $17.3 million in the prior year.
• For the first nine months of 2026, operating cash flow was $131.7 million; excluding restricted cash, it was $88.7 million, up from $30.2 million in the prior year.
• Subcontractor and other direct costs were 23.6% of total revenues, down from 24.2% in the prior year.
• The effective tax rate was 15.0%, down from 22.7% in the prior year quarter.
• Debt stood at $372.1 million as of September 30, 2026, down from $401.4 million as of December 31, 2025.

Guidance and Future Outlook

• Full-year 2026 revenue is expected to be similar to 2025 levels.
• Full-year 2026 GAAP EPS guidance is approximately $5.95, inclusive of $0.11 in special charges.
• Full-year 2026 Non-GAAP EPS guidance midpoint is maintained at $7.10, representing 4.9% year-over-year growth.
• Full-year 2026 operating cash flow is expected to range from $135 million to $150 million, excluding restricted cash.
• Commercial energy revenues are expected to increase at a low- to mid-single-digit rate for 2026.
• Management anticipates positive momentum heading into 2027 and views midterm election results as a tailwind.

Business Segments and Product Lines

• Revenue from federal government clients increased 3.4% sequentially; year-over-year revenue was 3.5% below the prior year due to contract cancellations and slower RFP pace in 2025.
• State and local government revenue grew 7.6% year-over-year to $87.9 million.
• International government revenue grew 12.0% year-over-year to $32.5 million.
• Commercial revenue was $158.8 million, up 1.5% year-over-year.
• Commercial energy revenues were similar to last year's levels, impacted by a fall-off in contract add-on activity and regulatory pressures on utilities.
• Energy advisory revenues increased 14.1% in the quarter and 10.5% year-to-date.
• Technology modernization represented approximately 50% of federal government revenues, with over 80% performed under fixed-price contracts.
• Disaster recovery work supported over 50 active programs in more than 20 states and territories.
• Fixed-price contracts accounted for 50.2% of third-quarter revenues, up from 48.7% in the prior year period.

Market and Competitive Landscape

• Contract awards totaled $746 million, up 4.5% year-over-year, resulting in a quarterly book-to-bill ratio of 1.59.
• Trailing twelve-month contract awards were $2.0 billion, with a book-to-bill ratio of 1.11.
• Over 60% of third-quarter awards represented new business.
• The business development pipeline stood at $8.2 billion at the end of the third quarter.
• Commercial energy opportunities represent more than $1.6 billion of the pipeline.
• Technology modernization opportunities represented approximately $2.4 billion of the pipeline.
• State and local government opportunities represented approximately $1.1 billion of the pipeline.
• ICF manages over 300 energy efficiency programs for 60 utilities in 28 states.

Risks and Challenges

• Commercial energy revenues were below expectations due to a sharp fall-off in contract add-on activity and political/regulatory pressure on utilities regarding affordable solutions.
• Disaster management market activity is constrained by funding delays and a slower pace of major events.
• Federal government revenue comparisons were impacted by contract cancellations in 2025 and a slower pace of new RFPs.
• Forward-looking statements cite risks including dependence on government contracts, potential budget delays, government shutdowns, policy changes, and the cyclical nature of the commercial economy.

Management Commentary and Tone

• CEO John Wasson stated the quarter demonstrated a return to year-on-year revenue growth, benefiting from a diversified and integrated business model.
• Management highlighted strong margin performance driven by efficient contract delivery and favorable contract mix.
• The tone indicated confidence in the underlying strength of the business, effective cost management, and a robust pipeline.
• Management noted the company is closely managing corporate costs while continuing to invest in technology and professional staff.

Other Key Points

• On November 5, 2026, ICF declared a quarterly cash dividend of $0.14 per share, payable on January 8, 2027, to shareholders of record on December 4, 2026.
• Total backlog was $3.5 billion at the end of the third quarter, with funded backlog at $1.8 billion (52% of total).
• Notable contract awards included a $77.8 million recompete with a federal health agency, two work orders totaling $70.9 million with Los Angeles County, and multiple contracts with federal national security and health agencies.
• Stock repurchases totaled $33.1 million for the first nine months of 2026.
• Dividends paid were $7.6 million for the first nine months of 2026.