ICF International, Inc.

Welcome to the fourth quarter and full year 2025 ICF earnings conference call. My name is Lauren Cannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I will now turn the call over to Lynn Morgan of Advisory Partners. Lynn, you may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to review ICF's fourth quarter and full year 2025 performance. With us today from ICF are John Wasson, chair and CEO, Barry Brodess, CFO, Joining them are James Morgan, Chief Operating Officer, and Ann Choate, President. During this conference call, we will make forward-looking statements to assist you in understanding ICF management's expectations about our future performance. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our February 26, 2026 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today. We anticipate that future developments will cause our views to change. Please consider the information presented in that light. We may at some point elect to update the forward-looking statements made today, but specifically disclaim any obligation to do so. I will now turn the call over to ICF's CEO, John Watson to discuss fourth quarter and full year 2025 performance. John?

Well, thank you, Lynn, and thank you all for joining today's call to review our fourth quarter and full year 2025 results and discuss our business outlook for 2026. Let me also welcome Ann Choate to her first earnings call as president of ICF. And with that, let me start by saying that our fourth quarter results were firmly within our guidance ranges and capped the year in which ICF demonstrated notable resilience amid challenging conditions in our federal government business. In fact, we delivered on what we said we would one year ago, and we are anticipating a return to revenue growth in 2026 that at the midpoint represents an over 10% year-on-year swing. To summarize, 2025 revenues were firmly within our guidance framework, despite the direct and indirect impacts of the six-week government shutdown, We maintained our full year adjusted EBITDA margins at 2024 levels, despite the 7.3% dip in revenues. Revenues from non-federal clients increased 14% to account for 57% of full year revenues, led by 24% growth in revenues from commercial energy clients, of which 15% represented organic growth. And ICF ended the year with a book-to-bill ratio of 1.19, a firm backlog of $3.4 billion, and a business development pipeline of $8.6 billion, all metrics that underpin our growth expectations for 2026. As I just highlighted, we saw robust demand for our services to commercial, state, and local and international government clients throughout 2025, benefiting from the investments we have made over the last several years to build out key growth areas and further diversify our business. In fact, we anticipate that this client set will achieve double-digit revenue growth again this year to account for more than 60% of our total revenues in 2026. The top performer in this grouping continued to be commercial energy, where client revenues reached just under 550 million and grew 23% in the fourth quarter and 24% in 2025. And we are expecting another year of double-digit growth in this client category in 2026 the primary growth driver continues to be sustained strong demand from our utility clients for our market leading energy efficiency flexible load management electrification and grid optimization programs which accounted for approximately 80 percent of our 2025 commercial energy revenues these are critical areas for utility clients as they address the tremendous projected growth in electricity demand the need for good resilience and affordable energy icf is the market leader in developing and implementing residential energy efficiency and related programs for utilities with a 35 percent market share we are continuing to gain market share in the commercial and industrial energy efficiency space approaching a 20 percent share of this part of the market our market growth is a direct result of the strong performance of our programs which consistently meet or exceed client objectives. As a consequence, we are winning our , benefiting from expanded scopes of work, and taking away contracts from other providers. Additionally, revenues from our commercial energy advisory work picked up in the second half as the regulatory environment became clear to developers and investors in the energy space. We saw higher demand for our grid engineering services, associated with accommodating data center loads as utilities expedite development of new substations icf's energy engineering capabilities expanded considerably with our acquisition of cmy in 2023 which strengthened our offerings in grid modernization and this is an area that we expect to build out further organically and potentially through tuck-in acquisitions we're also seeing additional demand from small modular nuclear reactor developers seeking DOE funding, market perspectives, and regulatory support, along with demand for policy work regarding SMRs from states and stakeholders. We also foresee work exploring the transmission impacts of upgrading existing nuclear facilities. Our work on renewables is expected to continue to grow in 2026, led by solar and battery storage, significant amount of renewable development has been safe harbored for investment tax credit purposes creating sustained demand for our services for at least the next two to three years also despite the reduced support for renewables by the new administration we see consistent private sector interest in renewable and storage development on non-federal lands this trend will continue through the advanced economics of these technologies and the need to meet the near term demands of rapid low growth. And keep in mind that when we refer to our commercial energy revenues of 550 million, this number does not include our energy-related work for federal, state and local, and international government clients, which amounted to approximately 60 million in 2025. In fact, our commercial energy clients very much value ICS public sector work as it gives us a broader perspective on emerging technologies, as well as regulatory and policy issues. Moving ahead to our state and local government clients, our revenues increased 4.3% in the fourth quarter, up 2.2% for the year. Our disaster recovery work accounted for approximately 45% of our 2025 state and local revenues and reflected our current support for over 80 active disaster recovery projects in 23 states and territories. ISAF is recognized as a market leader in the development and implementation of disaster recovery and mitigation programs. Just a few days ago, we announced that we were awarded a comprehensive management services contract by the state of Florida. This contract will enable us to compete for a wide variety of opportunities to help Florida improve and accelerate statewide program delivery and strengthen long-term infrastructure resilience. And we are very encouraged by this win. We continue to see HUD-funded procurement opportunities resulting from nearly 12 billion appropriation to enable long-term residential housing recovery from disaster declarations in 23 and 24 and are actively positioning to compete for these procurements. As has been widely reported, the future role of FEMA is under review. FEMA provides funding for the rebuilding of public infrastructure such as hospitals and schools following disasters And while this review has slowed the flow of funds, we believe funding will ultimately flow to state and local governments. Lastly, our international government revenues increased 12.8% in the fourth quarter and 7.6% for the year, reflecting a ramp up of contracts we won in late 2024 and early 2025 with the European Commission and the UK government. We expect to see greater growth in 2026 with a full ramp up of those contracts. Plus in January of this year, we announced two significant new contracts to design and deliver large scale communication campaigns across all 27 European Union member states. To sum up, we expect our revenues from non-federal clients to increase at a double digit rate this year and account for over 60% of our full year 2026 revenues. Let me now turn to the federal arena As you know, 2025 was a challenging year, but we are looking ahead to a much improved 2026 for ICF. Our revenues from federal government clients declined 25% year on year in 2025 as a result of contracts canceled between February and May of last year, the slowdown in new procurements, and the direct and indirect impacts of the six-week government shutdown. In terms of where we stand today, Our federal business is on much shorter footing than last year at this time. We were awarded approximately $1.1 billion in federal government contracts in 2025, representing about one half of our total contract wins for the year. And about half of that amount represented new business, including expanding the scope of current contracts. This is a good indication of ISAF's strong positioning in our federal markets. After last year's government shutdown ended, procurement activity picked up, and that momentum continued into 2026. We are seeing continued emphasis on efficiency, which we are well-positioned for, given that the vast majority of IT modernization work, which represents about one-half of our federal government revenues, is outcome-based and done under fixed price and time and materials contracts. And we are starting to see a shift toward federal agencies outsourcing more work, which is creating additional opportunities for us. I know investors are concerned about the potential for agentic AI tools, such as Cloud Code and Gemini and Codex, to eliminate the need for platform and service providers to play a central role in modernizing federal IT systems. Agentic coding tools can certainly speed up development, but they cannot replace the need for federal IT modernization. Here are three additional points to consider with respect to ICF. First, as I just noted, 90% of our IT modernization work is outcome-based. and our civilian agency clients require a lot of support in this area. Thus, if we can't complete certain projects in less time at lower cost thanks to ATENTA AI, we will utilize available funding to move on to the next project. In other words, reducing costs increases the amount of backlog we can tackle for a client. Second, there is funding. Federal government budgets for IT modernization are robust, and recent reports indicate that a significant majority of federal IT systems still need modernization. And third, it is all about what you're doing and not doing in this arena. ICF does not maintain legacy systems. We don't manage project management offices. We don't run federal call centers. And we have exited other areas that we expected to be commoditized due to AI. Rather, our work is in the higher end, higher margin areas like application development, cloud services, AI governance, automation, data curation, and system post-processing. So in summary, AI is an accelerator and a net positive for ICF, as we've already seen material improvement in our productivity, both in our client work and the internal management of our business. Looking across our federal government work more generally, we expect continued scrutiny around spending, but the market backdrop is much more stable than it was a year ago. And we see solid opportunities aligned with our core capabilities, particularly where agencies are modernizing systems, improving efficiency, and advancing mission-critical public health and or infrastructure priorities. In 2026, we expect revenues of federal clients to decline at a high single-digit rate. The first half of 2026 will be a difficult comp, as revenues in the first part of 2025 included federal government work that was canceled between March and May, I'm sorry, February and May of last year. On the plus side, we generally expect sequential improvement in federal revenues from the first quarter through the third quarter of 2026, returning to year-on-year growth by the fourth quarter. To sum up our federal work, we have a firm backlog of federal government contracts, a significant pipeline, and expect revenues from our IT modernization work to increase this year. In 2025, we did navigate difficult business conditions to emerge as a stronger company in many ways. We are more diversified, we're more efficient, and we're more agile. These advantages are positive catalysts for ICF in 2026 and beyond. We've demonstrated our confidence in ICF's long-term outlook by repurchasing approximately 564,000 shares of our common stock last year, of which about 220,000 were purchased in the fourth quarter. So with that, I'll turn it over to our CFO, Barry Broaddus, for his financial review.