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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chair and Chief Executive Officer - John Wasson
• President - Anne Choate
• Chief Operating and Financial Officer - James C. Morgan

TAKEAWAYS

• Revenue -- $474.5 million, representing stable performance compared to $476.2 million in the second quarter of the prior year.
• Non-GAAP EPS -- $1.86, an increase of 12% year over year driven by improved profitability, lower interest expense, and a lower tax rate.
• International Government Revenue -- $39.5 million, growing 35.1% year over year as the company ramped up work on large contract awards from the European Union and UK.
• Commercial Client Revenue -- $166.0 million, rising 5.9% year over year and accounting for 35% of total second-quarter revenue.
• Federal Government Revenue -- $184.9 million, down 9.5% year over year due to 2025 contract cancellations but increasing 1.4% on a sequential basis.
• Adjusted EBITDA Margin -- 11.2%, a 10-basis-point expansion from last year reflecting a favorable business mix and effective cost management.
• Business Development Pipeline -- $9.3 billion, a 9% sequential increase from the $8.5 billion reported at the end of the first quarter.
• Technology Modernization Revenue -- approximately $92.5 million, with over 80% of this work performed under outcome-based fixed-price contracts.
• State and Local Government Revenue -- $84.0 million, a 1.9% decrease reflecting fewer major disasters and funding delays in disaster management services.
• Operating Cash Flow -- $99.7 million, including $43.0 million in restricted cash associated with utility energy efficiency programs.
• Core Operating Cash Flow -- $56.7 million when excluding restricted cash, compared to $50.4 million in the second quarter of 2025.
• Backlog -- $3.3 billion at quarter-end, with funded backlog representing approximately 50% of the total.
• Trailing 12-Month Book-to-Bill Ratio -- 1.09x, indicating healthy long-term demand despite a quarterly book-to-bill ratio of 0.85x.
• Share Repurchases -- 435,055 shares in the first half of 2026, which management reported as a record for a first-half period.
• Net Debt -- $403 million, a reduction from $457 million at the end of the prior-year second quarter.
• Days Sales Outstanding -- 72 days, down from 80 days in the previous year due to improved collections and increased advanced payments.
• Full Year 2026 Revenue Guidance -- $1.89 billion to $1.96 billion, with management stating more than 90% of the revenue required is already in backlog.
• Full Year 2026 Non-GAAP EPS Guidance -- $6.95 to $7.25, reaffirming the company's previous financial outlook.
• Full Year 2026 Operating Cash Flow Guidance -- $135 million to $150 million, exclusive of the impact of restricted cash.
• Interest Expense -- $6.8 million, down nearly 20% year over year due to a reduction in the company's average debt balance.
• 2027 Revenue Growth Target -- mid to high single digits, predicated on high-single-digit growth in non-federal markets and low-to-mid-single-digit growth in the federal arena.
• Dividend -- $0.14 per share, declared for payment on Oct. 9, 2026, to shareholders of record as of Sept. 4, 2026.

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RISKS

• Wasson noted that federal procurement delays impacted quarterly awards, stating, "Second quarter contract awards of $402 million were achieved despite delays in procurement decisions related to federal government proposals."
• Choate indicated that legal challenges to contract awards are increasing, stating, "Protests of large opportunities are also much more common."
• Choate acknowledged external constraints in the disaster management segment, noting that "Fewer major disasters and funding delays have constrained near term activity in this arena."

SUMMARY

Management for ICF International, Inc. (ICFI -0.34%) reported that the company's integrated business model supported stable performance, with non-federal client categories now accounting for 61% of total revenue. The company reported sequential expansion in its business development pipeline, driven by demand in commercial energy, technology modernization, and international government sectors. Management indicated that the federal government segment has stabilized following 2025 contract cancellations, with a return to year-over-year growth anticipated for the fourth quarter of 2026. Strategic focus remains on efficiency gains through internal AI implementation and the modernization of back-office infrastructure, including contract and vendor management systems.

• Choate highlighted growing demand for data center consulting, noting "greater developer demand for data centers and other large loads in need of assistance in citing decisions" involving grid capacity and interconnection position.
• Wasson expressed confidence in the international segment's trajectory, stating he is "confident in double digit revenue growth in international when we look forward to 2027."
• Management is utilizing energy expertise to support the state of California with real-time monitoring of refinery production and stocks to mitigate energy price variability.
• Choate stated, "Our federal business has stabilized," with sequential revenue growth expected to continue into the third quarter of 2026.
• Wasson confirmed the company remains disciplined regarding acquisitions, focusing on "tuck in transactions that provide capabilities with the potential to drive meaningful revenue synergies."
• Management reported that performance-based awards and fees in the commercial energy business are typically weighted toward the second half of the fiscal year.
• Since the end of the second quarter, the company has secured new contracts in excess of $200 million, including a $25 million task order for cybersecurity services with the Army Research Lab.

INDUSTRY GLOSSARY

• Hyperscalers: Large-scale cloud service providers that require massive data center infrastructure and specialized energy citing strategies.
• Book-to-bill ratio: A financial metric measuring the ratio of orders received to revenue recognized, used to gauge future growth potential.
• Fixed-price contracts: Agreements where the company receives a set fee for achieving specific outcomes, assuming more performance risk in exchange for higher potential margins.
• T&M (Time-and-materials) contracts: A contract type where the client pays based on the actual hours worked and materials used by the consultant.
• DSO (Days Sales Outstanding): A measure of the average number of days it takes a company to collect payment after a sale has been made.

Full Conference Call Transcript

Operator: Welcome to the Second Quarter 26 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 speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Lynn Morgen of Advisory Partners. Lynn, you may begin.

Lynn Morgen: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us to review ICF's second quarter 26 performance. With us today from ICF are John Wasson, Chair and CEO Anne Choate, President and James C. Morgan, Chief Operating and Financial Officer. 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 8/6/2026 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 Wasson, to discuss second quarter 26 performance. John?

John Wasson: Thank you, Lynn, and thank you all for joining us this afternoon to review our second quarter results and discuss our business outlook. Second quarter business trends in our markets were consistent with our expectations allowing us to deliver revenues in line with last year's second quarter while we continue to carefully manage costs and directed our resources towards expanding our pipeline of new business opportunities. Key takeaways from our second quarter results included a 6% increase in revenues from commercial clients, led by commercial energy efficiency and related utility program revenues that increased 6.7% year-on-year.

A sequential increase in revenues from federal government clients as we had anticipated, reflecting growth in our technology modernization work, a 35% increase in revenues from international government clients, as we ramped up work on the large contract awards secured in 2025 and earlier this year.

We maintained our strong margins with adjusted EBITDA margin of 11.2%, up 10 basis points from last year's second quarter Non GAAP EPS increased 12% driven by the profitability I just noted, and year-on-year tax interest and share count benefits Our trailing 12-month book to bill ratio was a healthy 1.09x And, since the end of the second quarter, we have been awarded contracts in excess of $200 million And, we ended the second quarter with a robust pipeline valued at $9.3 billion, a 9% sequential increase over the $8.5 billion reported at the end of this year's first quarter. In short, this was another quarter in which our diversified integrated business model made a positive difference in ICF's results.

Positioning us to achieve our guidance expectations for the full year. Revenues from our commercial, state and local and international clients accounted for 61% of our second-quarter revenues in keeping with our expectation that these client categories will represent over 60% of our 2026 revenues, up from 57% in 2025. The diversification within our client set provides us with both resilience and the ability to shift our resources to capture growth opportunities as markets evolve. Approximately 75% of our second-quarter contract wins were in these non federal client categories. As delays in procurement decisions constrained federal government awards.

We continue to invest in these non federal client categories, while at the same time pivoting to expand our presence in federal agencies that are benefiting from increased funding. Additionally, we are seeing greater opportunities to bring insights and capabilities from across client categories and domain expertise to help clients address complex challenges. For example, many of the issues facing today's energy market including low growth, grid reliability, transmission development, resilience affordability and energy security are being addressed simultaneously by commercial clients, regulators and other government agencies. The fact that we work with all these market participants gives us a broader perspective on emerging challenges and potential solutions providing significant competitive advantage to ICF.

Also, our work with state regulators and industry associations helps us to develop innovative approaches to transmission investment, and grid planning. It provides us with insights that we can directly apply to our energy advisory clients. Our work related to data centers leverages capabilities across planning, policy, financial and engineering disciplines as well as across our client categories. We provide assistance to states, counties and other local governments as they evaluate the economic and energy infrastructure and community impacts of data center development, which gives us valuable perspective on stakeholder concerns and public issues that we are able to bring to our hyperscaler developer and utility clients as they plan for and develop new projects.

And our deep energy expertise, including decades of support to the federal government and to commercial oil and gas companies regarding critical reserves, and potential disruptions, positioned us to support the state of California with real time monitoring of refinery production, energy imports, and stocks so the state can better take actions to address price variability. Finally, we are adapting AI enabled analytics and technical assistance solutions that we originally developed for federal government clients to support commercial and state and local government clients.

As I mentioned earlier, we ended the second quarter with a business development pipeline of $9.3 billion opportunities in the key long term growth markets we have identified namely commercial energy, technology modernization, and disaster management and related state and local government work, accounted for approximately $5.5 billion or 60% of that pipeline, supporting our expectation for continued growth in these markets. Summing up the quarter, we were pleased that our revenues were similar to last year's second quarter results, in advance of our return to year-on-year growth for 2026 and to positive quarterly revenue comparisons beginning next quarter.

We are also pleased with the way we have managed our cost structure, to maintain strong margin performance while then growing our substantial business development pipeline. Our year to date repurchases of over 435 thousand shares represent a first-half record for ICF. And a strong indication of the confidence that management and the board have in our company's long term prospects. We continue to review acquisition opportunities particularly in the commercial energy space, but we remain very disciplined. Our focus is primarily on tuck in transactions that provide capabilities with the potential to drive meaningful revenue synergies and will be accretive soon after completion.

Now I will turn the call over to our President, Anne Choate, to discuss our business performance. Anne?

Anne Choate: Good afternoon, everyone. I am pleased to present a business review of ICF second quarter results, which as John mentioned, set the stage for our return to year-on-year growth in the second half of this year starting in Q3. I am also happy to discuss how ICF's diversified integrated business model continues to differentiate us and provide us with a unique multidisciplinary viewpoint in solving complex problems for clients. In my remarks, I will walk through some specific examples of work in each of our client categories, starting with commercial energy. We continue to experience strong demand for ICF's utility programs which include energy efficiency, flexible load management, electrification, and battery storage programs.

Revenues from this part of the business increased 6.7% in the second quarter and represented approximately 82% of second-quarter commercial energy revenues. Our results in this area were driven by the continued success of our performance based programs, the expansion of existing engagements, and the start up of new projects. The addressable market for these services is large, and ICF is a recognized market leader with our share gains coming from excellent results we are delivering to clients introduction of new services and winning work away from competitors. Energy advisory work for commercial clients increased 2.5% in the quarter, reflecting the timing of client transaction activity, and increased 8.6% for the first-half.

Accounting for about 13% of first-half commercial energy revenues. Contributions from this part of our business tend to vary due to the timing of assignments and client transactions. As we look to Q3, we are expecting more robust M&A activity, which should drive our valuation and due diligence services. Additionally, we are seeing increased demand for our supply-strategy and market access assessments for natural gas. As well as greater developer demand for data centers and other large loads in need of assistance in citing decisions. These decisions reflect a complex suite, including grid capacity, interconnection and queue position, and proximity to future load growth. All areas where ICF's integrated advisory capabilities are particularly well positioned.

In addition, our energy advisory team is fielding requests from our energy advisory services from state and local governments as they also address citing challenges affordability concerns, economic development priorities, reliability, and growing energy demand. The remaining less than 5% of our commercial energy revenues represent environmental and planning work that we do for utility and other commercial clients. Lower quarterly revenue comparisons in this part of our business were due to the wind down of several wind energy projects that ended in last year's third quarter.

We expect improvement in this area of our business in the second half of this year given recent utility transmission line related awards, and our increasing support for power developers who are colocating data centers with renewable generation assets. To sum up commercial energy, the drivers underlying demand for this part of our business remain very strong. The combination of accelerating electricity demand and the need to modernize aging infrastructure is expanding the addressable market across nearly all of our energy offerings.

As these infrastructure investments are unlikely to satisfy the scale and timing of emerging grid needs, demand for cost effective community centric programmatic solutions such as energy efficiency, demand response, distributed energy resources, and flexible load management programs continues to grow. These are areas where ICF has significant scale and expertise and the economics of these solutions are becoming increasingly attractive as power and capacity costs rise. Commercial energy contract awards represented approximately 47% of ICF's second quarter contract awards and commercial energy opportunities accounted for more than $1.5 billion of our pipeline at the end of the quarter. Good indications of our future growth prospects. Next, I will move to our state and local portfolio.

Second quarter state and local government revenues were 1.9% below the comparable period last year, with disaster management and recovery services continuing to account for about 45% of this client category. ICF is a recognized leader in the development and implementation of disaster recovery and mitigation programs, and we currently support 75 active disaster recovery projects in 22 states and territories. Fewer major disasters and funding delays have constrained near term activity in this arena. But ICF continues to execute on substantial rebuilding and mitigation projects, which includes utilizing our environmental and climate expertise to advise state and local clients on optimal mitigation solutions.

We anticipate a direct opportunity for ICF as state and local governments look to increase their capability and capacity for both response and recovery, as well as preemptive disaster mitigation. In February, we announced the award of a comprehensive management services contract by the state of Florida. As expected, that contract is now serving as a platform for new opportunities including a $4 million funded contract to support the administration's approach to rural health transformation via state agencies. Also in Florida, we expect to see more opportunities for a state agricultural land preservation program we support that just earned appropriations of $425 million in funding for the 26-27 program budget year.

Additionally, we leveraged our state and local expertise in the disaster management arena to win a contract to provide grants management and compliance services to a commercial client. A Northeast utility, where we will support hundreds of millions of dollars in FEMA funding across multiple hazard mitigation projects designed to improve the utility's grid infrastructure, resilience and reliability. Energy, environmental, and disaster services have always comprised the majority of our state and local portfolio. As I mentioned, this year, we are actively expanding the offerings we provide to our state and local clients to include health expertise and advanced technology solutions.

State and local government opportunities represented approximately $1.3 billion of the total pipeline at the end of the second quarter, and we expect year-on-year revenue growth from this client category in the second half of the year. As we discussed on our last call, our international portfolio is showing growth. International government revenues increased 35% in the second quarter, reflecting the significant contracts that ICF has been awarded over the last 18 months by the European Union and UK clients. And it is continued to be strong across our international portfolio, as we have been winning key recompetes and securing net new contracts. That support growth for the next few years.

Lastly, I will talk about our work with US federal clients. Our federal business has stabilized. Second quarter revenues from federal government clients increased 1.4% sequentially, in line with our expectations after delivering 0.6% sequential growth in Q1. Moving forward, we are expecting Q3 to be another quarter of sequential revenue growth. Before returning to year-on-year growth in federal revenues in this year's fourth quarter. Procurement activity continues to improve, but award activity remains and varies from agency to agency. Protests of large opportunities are also much more common. Accordingly, we have adapted our go to market approach to increasingly focus on prototyping and demonstration of capabilities, both on contract and to secure new contracts.

Technology modernization represents about 1-half of our $185 million in revenues from federal government clients, and increased 4% sequentially in the second quarter. Over 80% of ICF's technology modernization work is performed under outcome based fixed price contracts. The preferred contract vehicles for government technology projects. Our federal agency clients remain focused on data, AI, speed, efficiency and automation. And continue to prioritize modernizing legacy systems and improving interoperability across the federal technology environment. Areas that are closely aligned with ICF's expertise. While primarily serving federal agency clients, we have deployed our technology capabilities across the company's client categories. As such, technology modernization represents $2.6 billion of our pipeline at the end of the second quarter.

With respect to our programmatic work for federal government clients, we continue to execute key contracts across our long standing client agencies. At the same time, we are making progress repositioning our federal portfolio toward areas aligned with administration priorities. For example, we are seeing growing opportunity as agencies look to move away from traditional labor intensive approaches and towards more data driven AI enabled customer engagement models. We believe ICF's combination of technology, data, and mission expertise positions us well to support this shift. And at both DHS and HHS, we are seeing increased engagement and pipeline activity related to these capabilities. On balance, we see significant opportunities for our integrated capabilities in the federal government arena.

In summary, second quarter business trends across all 4 of our client categories were aligned with our expectations. Our business unit leaders are collaborating across client categories with a winning mindset, and a commitment to assist clients with speed and agility. Now I will turn the call over to Chief Operating and Financial Officer, James C. Morgan.

James C. Morgan: Thank you, Anne, and good afternoon, everyone. I will provide additional details on our second quarter 26 results. From an overall perspective, as you have heard from both John and Anne, second quarter results were consistent with our expectations. Our non federal revenues increased just under 7% year-over-year and our federal government revenues increased sequentially in line with the expectations we provided on our last call. Additionally, we continue to execute various cost management initiatives that we have discussed on past calls. Including modernizing our infrastructure, specifically contract management system and our vendor management system. These ERP system implementations remain on track. And are expected to drive meaningful efficiency gains in our back office operations over time.

And we have a disciplined programmatic initiative to implement AI tools across our internal processes to drive further efficiencies. While a portion of these efficiency gains will be seen in our margin expansion, we will continue to reinvest in growth initiatives to ensure ICF is well positioned to capitalize on the opportunities we see in front of us. With these efficiency improvements and a favorable business mix derived from the greater contribution of commercial revenues, and a higher percentage of revenues tied to fixed-price and T&M contracts, we remain well positioned to achieve our target of 10 to 20 basis points adjusted EBITDA margin expansion for the full year. As well as over the longer term.

We have committed to this level of margin expansion over the last decade, during which we have averaged more than 10 basis points per year. And we have the confidence that we will continue to be able to deliver this on this commitment into the foreseeable future. Turning to second quarter results, Total revenue was $474.5 million stable with the $476.2 million reported in the second quarter of 25. Revenues from federal clients declined 9.5% year-on-year, given the difficult comparisons caused by the impact of contract cancellations that occurred in the first half of 25. Non federal revenues in the second quarter grew 6.6% year-over-year.

On a sequential basis, total revenues increased 8.5% from the $437.5 million reported in the first quarter of fiscal year 26. As revenues with commercial clients sequentially increased 13.6%, state and local grew 9.1%, international government revenues increased 24.2% sequentially, and federal revenues again improved sequentially consistent with our expectations. Subcontractor and other direct costs totaled $121.4 million and represented 25.6% of total revenues. up 23.6% from the prior year quarter. Reflecting higher pass throughs on certain non federal contracts. In spite of the 200-basis-point increase in subcontractor and other direct costs, our gross margin of 37.2% was similar to the 37.3% in the prior year.

Benefiting from the contribution of higher margin commercial revenues as well as a healthy contract mix. With fixed price and T and M contracts representing approximately 95% of revenues. Indirect and selling expenses totaled $123.3 million, representing 26% of total revenues. In line with the prior year. As I mentioned before, we are carefully managing our indirect spend while continuing to invest in our highest priority growth areas. Second quarter EBITDA was essentially flat year-over-year at $53.1 million Adjusted EBITDA rose 0.9% to $53.4 million and adjusted EBITDA margin expanded year over year-over-year by 10 basis points to 11.2%. Net interest expense declined nearly 20% to $6.8 million reflecting progress in reducing our average debt balance.

The second quarter tax rate was 17.8%, down from 21% in the second quarter of fiscal year 25. This year's second quarter benefited from various strategic planning tax-planning actions which drove a tax benefit of $0.09 to EPS on a GAAP basis and $0.11 to non-GAAP EPS relative to the second quarter's 23% tax rate guidance we shared during our last earnings call in May. We are still expecting our full year tax rate of approximately 20.5%, with the third quarter carrying the largest offsetting discretionary tax benefits. Net income in the second quarter was $20.9 million or $1.49 per diluted share, above the $23.7 million or $1.28 per diluted share reported in the prior year quarter.

Non GAAP EPS rose 12% year-over-year to $1.86 per share driven mainly by a lower tax rate, lower interest expense, and a reduced share count as well as improved EBITDA margins. Bottom line results are tracking well. And we continue to expect full year EPS to be within guidance range. Turning to the balance sheet and cash flows. Operating cash flow in the second quarter was approximately $99.7 million, a substantial increase from the $52 million generated in the prior year period. It is worth noting that the operating cash flow amounts include restricted cash that is mostly associated with energy efficiency programs for utilities.

For those utility programs, the cash is passed through and tied to incentive payments to utility customers. The timing of which can be uneven. Excluding this item, our core cash generation remains strong at $56.7 million for the quarter, as compared to $50.4 million in the prior year quarter. Excluding the potential impact of restricted cash, which is aligned with the basis for our initial guidance, we continue to expect full year operating cash flow of $135 million to $150 million Days sales outstanding were 72 days. Compared to 80 days in last year's second quarter. Driven mainly by improved collections and increases in advanced payments.

Capital expenditures totaled $5.7 million in the quarter, the same as the prior year quarter. We ended the quarter with net debt of $403 million down from $457 million at the end of last year's second quarter. With approximately 43% of the debt at a fixed rate. Our adjusted leverage ratio was 2.06x Absent any acquisitions, we expect our year end adjusted leverage ratio to be under 1.6x. The capital allocation, our priorities remain unchanged. Organic investment to drive growth and operating efficiencies, ongoing quarterly dividends, returning capital through opportunistic share repurchases, and evaluating acquisitions in our key growth markets. On that note, we repurchased approximately 435 thousand shares in the first half of this year.

As John discussed, we are actively evaluating acquisition opportunities with commercial energy as the primary focus. Today, we announced a quarterly dividend of $0.14 per share payable on 10/9/2026, to shareholders on record on 9/4/2026. We are pleased to again reaffirm the guidance we gave in February, for 2026 revenue and EPS to return to growth. Full year revenues are expected to range from $1.89 billion to $1.96 billion And as of today, more than 90% of the revenue is required to achieve our guidance for full year 2026 is already in backlog.

For EPS, we continue to forecast GAAP EPS of $5.95 to $6.25 and non GAAP EPS of $6.95 to $7.25 Now to help you with your financial models, please note the following for the full year 2026. With regard to the cadence of the remainder of the year, we would expect sequential revenue growth in each of the next 2 quarters accelerating at a faster pace in the fourth quarter than in the third.

Depreciation and amortization of intangibles are expected to continue to be between $22 million and $24 million Full year interest expense is now expected to be between $26 million and $28 million compared to the prior guidance of $27 million to $29 million We anticipate capital expenditures of $23 million to $25 million versus prior guidance of $24 million to $26 million We continue to expect operating cash flow of $135 million to $150 million for the full year exclusive of the impact of restricted cash, As I previously mentioned, we continue to expect the full year tax rate approximately 20.5% And lastly, we have lowered our full year weighted average share count guidance from 18.3 million shares to 18.2 million shares.

To reflect share repurchases in the first half. With that, I will turn the call back over to John for his closing remarks. John?

John Wasson: Thanks, James. We are pleased that 2026 is shaping up as we expected. We are looking ahead to a return to growth this year and an acceleration next year. Bringing us back to mid to high single digit growth in 2027. This could not be achieved without the ability and dedication shown by our professional staff and management teams who have effectively pivoted to capture revenue opportunities. While maintaining our margin levels. In many ways, the disruptions of 2025 have made ICF a stronger company, more diversified, more collaborative, more efficient, and more agile. We are enthusiastic about the opportunities ahead. And with that operator, I would please open the call to questions.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star-11 on your telephone and wait for your name to be announced. To withdraw your question, please press star-11 again. Our first question comes from the line of Timothy Mulrooney with William Blair. Your line is now open.

Tim Mulrooney: Yes. Good afternoon. Congrats on the solid execution here in the quarter. It sounds like the guidance is fully intact here. So I am going to ask some more targeted questions. The first 1's on your commercial energy business. It grew, you know, 4% in the second quarter. I think that implies a growth rate of about 3% in the first half. Think you need to grow more in the mid-teens range in the second half of the year to achieve your full year goal of at least 10% growth for the full year. I my question is, am I right about that math?

And can you walk us through the you know, the primary drivers that would help get you there?

John Wasson: Well, maybe I will start off, Timothy, and then I will let Anne and James weigh in. Generally your math is correct. We will have to grow mid-teens in the second half of the year. To achieve that goal. I think, as you noted, and as I think we indicated in our remarks, I think the way we will get there is first of all, we did have strong awards in the second quarter. But it is now announced in our release. You can see the list of projects there.

Second, we do have a set of projects that we, since that time we have been told we will be awarded but we are still in negotiations with those contracts and we have a robust pipeline of opportunities on the commercial energy front. So I think those 3 things are giving us confidence that we can achieve double digit growth required in the second half of the year. To get to our original guidance. I would also note that our performance awards and performance fees are typically back half loaded and so we will certainly benefit from those awards coming in to help drive additional revenue growth for the year.

So I think that is, at a high level, what we see getting us to that level of growth.

Anne Choate: Anne, do you want to add anything on? Well, maybe I will just mention that. So the energy advisory work, which you know is a smaller percentage, but an important percentage of our commercial energy work, that was a little bit slower in the second quarter. And that reflected delayed timing of certain of the technical advisory and the independent engineering services that we provide, which actually had the reason for that was the administration sunset date for some of the tax credits was July 4. That put several of the client there.

It put their focus on the immediate you know, initiating construction to hit that tax credit deadline, and so now that we are past that date, we have already seen signs that the planning and financing work that we do will proceed as expected for the rest of the year. So that is a piece of that. But otherwise, I agree with what John has said.

James C. Morgan: The pipeline is really strong. And to make this year, and I would just reiterate again the last 2 years, the 2 prior years in our energy business, grew mid-teens. For the year. And we have not seen a shift in the market and the trends driving that business. And so I think for us to return to mid-teens growth in our energy, commercial energy business in the second half of the year is achievable, and it is it is consistent certainly with the performance we have had the last several years in that market.

Tim Mulrooney: Okay. Thank you. that is a good point, John. And I appreciate all the color there, Anne. I also heard you say in your prepared remarks, to expect a pickup in M&A activity in the second half, maybe some other things too. So that is helpful color. Shifting gears really quickly to the backlog. Which was $3.3 billion. Down slightly sequentially from the first quarter We have seen backlog flat to up. The last couple of years as you move from the second from the first quarter to the second quarter. Can you talk about some of the factors here that impacted that slight decel into the second quarter? Is it still somewhat sluggish I guess, on the U.S.

Federal side? Or is it primarily a timing thing? Just trying to understand your expectations for book to bill as we move through the third quarter here.

James C. Morgan: Yeah. I guess I can I can speak to that a little bit? I would say as far as I mean, as we reported for the quarter this is James. For the quarter, our book to bill was 0.85, and where that was the main impact below 1 was in the federal space where, because we have mentioned we have had a little bit slower in the procurement cycle, but we are seeing signs where that is picking up and has been starting to pick up even subsequent to the end of Q2. So we are we are looking to have a healthier book to bill as we move into Q3.

Which will certainly look at driving the backlog up as we move forward. Beyond that. So from an overall perspective, if you look at what the impact is on backlog, quarter over quarter, it is more on the federal areas, probably the biggest area. Impact. Understood. Thanks, James. Thank you, everybody.

Operator: Thank you. Our next question comes from the line of Jason Tilchen with Canaccord Genuity. Your line is now open.

Jason Tilchen: Good afternoon, everyone. Thanks for taking my questions. Start in your outlook commentary referenced that same return to mid to high single digit growth in 2027 that you mentioned last quarter. Just hoping maybe with a little bit more you could expand on your expectations for next year a bit more and help frame some of the key puts and takes that could drive either upside or downside relative to that range? Thanks.

John Wasson: Sure. So I think, as you know, we do expect to return to mid- to high-single-digit growth next year. And I think the way we have discussed that in the past, I think, and what we continue to believe today is for the percent of the business that is non federal, we would expect to deliver high single digit to low double digit growth. In the federal arena, we would expect to achieve low to mid single digit growth And so then if you do the math on that, I think it will get you to mid to high single digit growth across the portfolio. And so I think that is how we are thinking about that for next year.

Jason Tilchen: Okay. Great. Thank you. And then just wanted to unpack that particularly strong international growth both from the quarter and really the award wins you have seen over the past 18 months or so. Just wondering if you could help dive into some of the underlying trends in those markets that are driving those wins and how confident you are that you will be able to continue here going forward?

Anne Choate: So I think I mentioned in my remarks that so we have won several of those contracts over the last say, 18 months or so. And it was a matter of sort of-- it took a while as a result of elections and some other things happening in Europe for those contracts to really hit their stride. But we now feel like they have hit their stride. We feel that the runway for those contracts and our positioning is really strong. In some cases, we are single award holder. In other cases, we are 1 of 2 or sort of at the top of a framework contract, sort of right of first refusal.

And so as a result, you are seeing the results of, I guess, of that long term business development effort. Materialize here. And we continue to expand that footprint, which so that is been that is the part that from a BD standpoint that is been exciting this year is using that as a launching off point for winning work with additional agencies sort of under the EU umbrella.

James C. Morgan: Yeah. This is James. I would just on top of that too. I mean, if you look at even going forward, certainly we are ramping those programs in the past, but also the pipeline of opportunities that we have in front of us is actually healthier now than even what it is been in the past. there is a multitude of opportunities coming out. So if we have the largest pipeline of opportunities for our international government business, beyond what we have had in the last ever. I mean, actually.

John Wasson: And I would say for I mean, you guys have seen the results for the first half. Of the year in terms of growth in international business. I think we expect similar growth results for the second half of the year. And based on the comments both Anne and James has made about the pipeline and the backlog, I am confident in double digit revenue growth in international when we look forward to 2027. Very helpful. Thank you very much.

Operator: Thank you. Our next question comes from the line of Tobey Sommer with Truist. Your line is now open.

Tobey Sommer: Thank you very much. Within your technology modernization business, what the trend has been like on contract size in the procurement environment in case of procurements and maybe if you could, as part of your answer, touching on this particular market, describe your experience with customers purchasing licenses and other things that historically have been passed through directly from OEMs. Thanks.

Anne Choate: Hi there. So I think that in terms of you had several parts. But I think that we have seen procurements picking up in that area. We have a very significant amount of a high fraction of our submitted bids where we are pending award. Relate to that technology modernization business. that is an area where, as we mentioned, you know, we have been pivoting in the federal space We have been using that those technology modernization services as a way to access new clients and new offices within client agencies. So that is been pretty successful. In terms of the size, I do not think we have seen a significant change in the average size of those deals.

As I mentioned, we have seen tremendous variability in terms of the time between knowing about an opportunity, seeing an RFI, or not seeing an RFI, going to a, you know, going to either a limited competition or an open competition, and then actually getting to award. And then in many cases when it is large, seeing a protest. And so I think that is that is the part of that sales cycle that, you know, that we are trying to navigate. But I think that it is pretty consistent for technology modernization across federal government right now. I am trying to think of your last question. The licenses with OEMs, can you say a little bit more about that?

Tobey Sommer: Yeah. there is been news, in the market about the government deciding to procure those sort of things directly from the OEMs rather than via an integrator. So I am wondering if that is something that you are having experience with or not at this juncture.

Anne Choate: I not that I am aware of. So I think that we are working in close partnership with our customers. And in some cases, for instance, their access to certain providers, they may They may want us to work in their cloud environment or something like that. But I am not aware of anything beyond that.

John Wasson: I would say we have not seen a material shift. As you know, Tobey, we work and have the capabilities to work across a low code, no code set of players. We are still seeing opportunities to support the federal government and partner across Salesforce, ServiceNow, Appian, also can deliver IT modernization capabilities and services on open source and do not think we have seen a fundamental shift in those markets or our relationships with those players to date on our IT modernization work.

James C. Morgan: Yeah, I guess I would also say too, I mean, the majority of the work we do is more labor based services. it is not passing through of license costs and things of that nature.

Tobey Sommer: Thank you. And, last question for me. On the capital deployment front. I think been may be looking to reengage and be more active since in the wake of the DOD experience and the business stabilizing and even kind of starting to grow. What are your expectations as you look at the back half of the year and into 2027 for growing the business inorganically.

John Wasson: I think as we have discussed in the past, I mean, I think, you know, we remain in the market looking for potential acquisitions that we think are good strategic fit, good cultural fit and meet our financial criteria. I think we will be very disciplined. I think as I said in my remarks, I think we are primarily focused in that arena in the commercial energy area. Would expect us to lean more to tuck in acquisitions as we think about the rest of this year. And generally, I think we have a balanced approach to capital allocation. We are investing for organic growth. I talked about the stock buybacks. We have been active there.

And we will continue to look to deploy it on the M and M&A front if we find the right opportunity. And so balance but discipline would be mine. Message.

James C. Morgan: Do not know, James, do you want to No, think that is right. We are fortunate enough that we certainly have capacity in our credit facility where we are not constrained, where we can continue to have that balance between investing organically and doing share buybacks, and then also the right opportunity comes across from an acquisition perspective to pursue that. So and certainly that is that is a focus in identifying and finding those opportunities. Thank you.

Operator: Thank you. Our next question comes from the line of Kevin Steinke with Barrington Research Associates. Your line is now open.

Kevin Steinke: Great. Thank you. In your prepared remarks, I believe you talked about on the federal programmatic side, shifting your focus from more labor intensive projects to more along the lines of helping your clients with AI enablement, efficiencies, etcetera. Correct me if I am wrong, but I think that is how I heard it. And I am just wondering, what that would do to kind of your business model in terms of project size or staffing levels or any other metrics So, Kevin, this is Anne.

Anne Choate: Thank you for asking because that I am hoping that is not how it came across. But what I did say was that we are looking to help the federal government in places where they federal government, these agencies, are looking to move away from their traditional sort of labor intensive approaches, like think of things like grant management, think of things like you know, data validation and things like that. Where they are trying to move from many, many federal staff and support doing these kinds of tasks.

We are trying to help them where you can tie systems together, you can have more data driven AI enabled customer engagement models that allow them to basically provide their to fulfill their mission, but in a more efficient sort of a streamlined way. And so that is where we have where we have been successful working with some of these agencies combining technology and data and mission expertise. You know, where you can and where you cannot find those streamlining efficiencies. that is been a sweet spot for us. Does that help?

Kevin Steinke: Yes. Yeah. Thank you for that color and that clarification. So I think you also, when talking about commercial energy, you mentioned 1 of the growth drivers is being the introduction of new services. And, you know, I do not know if there is been anything more recent on that front. Or if it is kind of been some of the other program management type services that you have discussed in the past contributing to growth.

Anne Choate: Well, no. I think, you know, we a couple years ago, and maybe it was only a year ago, we started talking about important large load and data centers are going to be. So obviously, that is been a place where you know, we have been introducing new services and new packages of services to address a kind of a new need. So, you know, for you know, as an example, for hyperscalers now we are helping clients evaluate the speed to power, what strategy solutions, should they use to get speed to power, assessing the alternative power and technologies. So they are navigating procurement and funding in new ways.

There are some that are trying to look to get the speed to power, in a renewable or a sustainable way, kind of depending on where they are. that is obviously a place where we can provide a lot of value. We also are supporting some of this community impact initiative, you know, to the extent they are trying to work to balance the need for increased electricity with the communities, we are helping to work with them to think about that strategy, those strategies. that is 1 example, or 1 suite of examples. But I could give you more.

Kevin Steinke: No. Think that is fine. Yeah. that is helpful. Leslie, I just wanted to ask a little more about international government. You talked about these large contracts maybe being a launching point for you to pursue work with other EU agencies. And just wondering how much of a focus international government is right now for growth investments, expansion of services, or you kind of feel like that you have the service footprint already in place that you need there.

Anne Choate: I think that we are you know, I think that the role that John's asked me to play does provide a little bit more connectivity. So for instance, our energy, our decarbonization, or whatever skill sets that we have here where we can augment skill sets that we have in our Europe and Asia, you know, business lines. I think that, you know, that connectivity is strong and has been strong, but it can, I think, it is even stronger now? I think that the business development engine that we have there is pretty tight and efficient.

And we have because of the work that we have done in the last couple of years, I think that our brand, our reputation is really strong, both in The UK and the areas where we work and also in the EU. So I guess the answer is absolutely, we are committed to it. Absolutely, we are supporting it. But I do not see that we are investing more necessarily in that direction.

John Wasson: Is there anything Right. I agree. I think it is a mean, it is a business is doing terrific. I do think that there is ways we can connect the capabilities in North America to Europe and find additional opportunity. And so we have a very strong fellow there running that business. And so it is a good business. I do not think we are it is not 1 of our key mean, the scale and size it is just not 1 of our key growth drivers, so it is not getting a disproportionate amount of investment. But we are certainly investing at levels as we have in past and we are seeing very nice results.

We will continue to do that. Okay. Great. Thank you.

Operator: Thank you. As a reminder, to ask a question, please press star-11 on your telephone and wait for your name to be announced. Our next question comes from the line of Marc Riddick with Sidoti. Your line is now open.

Marc Riddick: Hey, good afternoon. Hi. Hey, Marc. I wanted to touch a little bit on disaster recovery and mitigation, and maybe you could talk a little bit on the some of the commentary you had in either in prepared remarks or it was in or just in the press release as far as the you know, the fewer disasters and, funding delays that you are seeing. Maybe you could touch a little bit on some of the details around that and maybe the sources of that and then I just have a quick follow-up there.

John Wasson: Because you know I will start off, Anne. Okay. I will get that started. Yeah, We have been in the disaster business for quite some time. We are quite committed to that business. We were a market leader in that business. Think as Anne noted in her remarks, I mean, there is been fewer disasters recently that have limited the number of new opportunities. With a long term view, I do think this is a growth market. And there is optionality. Those of you who have known ICF for some time, we have had 3 or 4 periods in this firm when disaster recovery materially grew the company. In response to significant disasters.

So we remain quite committed, but there is we have had fewer disasters, but this is certainly optionality in my view versus significant growth. We look down the line, I think we have managed the business very well and are seeing opportunities in state and local markets. And we have also connected the dots. And I think some of the answer, Marc, talked about how we have connected it to utility work and other areas. So, I think we expect the business to grow and it will be optionality for very significant growth.

Anne Choate: The only thing I would say is that anybody who is looking at their phone at any point in the day probably thinks, what do you mean, there are less disasters? There are plenty of natural disasters that are on the news. I think the issue is that the of the size that really that John's talking about, those are the ones that have been few and far between. And so the size and the declaration that would then lead to the funding that would be a large scale disaster recovery program.

John Wasson: Right.

Anne Choate: Okay. Okay, I got you then.

Marc Riddick: And then I wanted to follow-up on just the timing of procurement decisions on the federal side and I think you made commentary as to that loosening up toward the end of the quarter, I guess, or going into going into the third quarter here. But I was wondering if you are seeing that as is that do you think that is something that is tied to, approaching the end of the federal year end, or is it sort of driven more by current project needs and or maybe what is what might loosen up that opportunity?

Anne Choate: I mean, my take is that it is so variable. Even within agencies, it is variable. there is you know, in some places you have contracting officers who understand they have a some sort of deadline, regulatory deadline, otherwise. And they are incentivized to get these to get the contracts moving even if they have been stalled. And in other places, might have that same driver, but you do not have enough contract staff to get the thing out the door. And that is where you sometimes see some mods. You know, people are just modding repeatedly.

They might also be modding because they are aware of work, are afraid of a protest, and so just to keep for continuity purposes, they mod and so that sets up delays. In other places we have seen, you know, a pickup and things moving more quickly. So it really is, I would argue, it is really variable by agency. I am looking at John and James to see if that is I agree.

John Wasson: I understand. that is right.

Marc Riddick: Great. And then, last thing for me, and maybe talk a little bit about some of the, the range of catalysts on the technology modernization side that you are seeing and whether they whether they differ, federal versus nonfederal or, you know, are you seeing any particular catalyst or needs that are sort of coming to the forefront that are driving folks to act as opposed to sort of, you know, standing on the sidelines and sort of weighing how some of these things sort of play out, whether it is an AI driven concern or cost driven or the like.

Anne Choate: In the federal space, I would say that the, you know, the drivers are much as what we have been talking about, probably not just us, but we have been discussing this, you know, desire for streamlining, desire for modernizing aging systems, the desire for more efficiency, also a desire on the part of the federal agencies to find ways to utilize AI you know, it is for efficiency purposes or whether it is for as part of this modernization activity. So I think that is all true.

I think that when we get involved in tech technology projects at a state and local level, often it is because there is a mission orientation, whether it is disaster or energy or underground storage tanks or whatever it is, and there is a technology system that is getting in the way of doing that mission oriented work, that is where we actually have a lot to offer because we can say, well, we can unstick that technology barrier to achieving your mission outcome. And so that is really where our sweet spot is. Outside of federal.

Marc Riddick: Well, I know it is been quite the journey to get to growth resumption and, you know, over the over the last few quarters and certainly encouraging to see their pacing there. So congratulations on that. Appreciate it. Thank you. Glad to see you too. A lot of hard work. Thank you.

Operator: This concludes the question and answer session. I would now like to turn it back to John Wasson for closing remarks.

John Wasson: Well, thanks, everyone, for participating in today's call. We look forward to seeing you at upcoming conferences and calls. So hope to see you all soon.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.