ICF International, Inc.

Previous wording

Failure of the presidential administration and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;

Current wording

Failure of the Administration and Congress to agree on spending priorities, which may result in temporary shutdowns of non-essential federal functions, including our work to support such functions;

Previous wording

Results of routine and non-routine government audits and investigations;

Current wording

Results of routine and non-routine government audits and investigations, including the unpredictability of the Administration’s executive orders and actions of the newly formed Department of Government Efficiency (“DOGE”);

Previous wording

We believe that, in the long-term, demand for our services will continue to grow as government, industry, and other stakeholders seek to address critical long-term societal and natural resource issues due to heightened concerns about the environment and use of clean energy and energy efficiency; health promotion, treatment, and cost control; the means by which public health can be improved effectively on a cross-jurisdiction basis; natural disaster recovery and rebuild efforts; and ongoing homeland security threats.

Current wording

We believe that, in the long-term, demand for our services will continue to grow as government, industry, and other stakeholders seek to address critical long-term societal and natural resource issues due to heightened concerns about the environment and use of clean energy and energy efficiency; health promotion, treatment, and cost control; the means by which healthcare can be delivered effectively on a cross-jurisdiction basis; natural disaster relief and rebuild efforts; and ongoing homeland security threats. In the wake of the major hurricanes that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, and the impact of wildfires in Hawaii, Oregon, and southern California, the affected areas remain in various stages of evacuation, relief, and recovery efforts. We believe our prior and current experience with disaster relief and rebuild efforts, including after hurricanes Katrina and Rita and Superstorm Sandy, and the wildfires in Oregon, put us in a favorable position to continue to provide recovery and housing assistance, and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments and agencies, state, territorial, and local jurisdictions, and regional agencies.

Previous wording

We also see significant opportunity to further leverage our digital and client engagement capabilities across our client base. Our future results will depend on the success of our strategy to enhance our client relationships and seek larger engagements that span the entire program life cycle, and to complete and successfully integrate additional strategic acquisitions. We will continue to focus on building scale in our vertical and horizontal domain expertise, developing business with our existing clients as well as new customers, and replicating our business model in selective geographies. In doing so, we will continue to evaluate strategic acquisition opportunities that enhance our subject matter knowledge, broaden our service offerings, and/or provide scale in specific geographies.

Current wording

Our future results will depend on the success of our strategy to enhance our client relationships and seek larger engagements that span the entire program life cycle, and to complete and successfully integrate additional strategic acquisitions. We will continue to focus on building scale in our vertical and horizontal domain expertise, developing business with our existing clients as well as new customers, and replicating our business model in selective geographies. In doing so, we will continue to evaluate strategic acquisition opportunities that enhance our subject matter knowledge, broaden our service offerings, gain access to or expand customer relationships, and/or provide scale in specific geographies.

Previous wording

Although we continue to see favorable long-term market opportunities, there are certain business challenges facing all government service providers. Administrative and legislative actions by the federal government to address changing priorities or in response to the budget deficit and/or debt ceiling could have a negative impact on our business, which may result in a reduction to our revenue and profit and adversely affect cash flow. Similarly, the very nature of opportunities arising out of disaster recovery means they can involve unusual challenges. Factors such as the overall stress on communities and people affected by disaster recovery situations, political complexities and challenges among involved government agencies, and a higher-than-normal risk of audits and investigations may result in a reduction to our revenue and profit and adversely affect cash flow. However, we believe we are well positioned to provide a broad range of services in support of initiatives that will continue to be priorities to the federal government, as well as to state and local and international governments and commercial clients.

Current wording

Although we continue to see favorable long-term market opportunities, there are certain business challenges facing all government service providers. The very nature of opportunities arising out of disaster recovery means they can involve unusual challenges. Factors such as the overall stress on communities and people affected by disaster recovery situations, political complexities, challenges among involved government agencies, and a higher-than-normal risk of audits and investigations may result in a reduction to our revenue and profit and adversely affect cash flow; however, we believe we are well positioned to provide a broad range of services in support of initiatives that will continue to be priorities to the federal government, as well as to state and local and international governments and commercial clients.

Previous wording

Revenue. The increase in revenue was driven by $11.2 million, $2.7 million, and $2.3 million from our commercial, U.S. federal government, and U.S. state and local government clients, respectively, offset by a decrease of $0.7 million from our international government clients. Our revenue from client markets was impacted in varying amounts by our exit from the commercial marketing business during 2023. The following were changes in revenue from our various client markets:

Current wording

Revenue. The decrease in revenue was driven by a decrease of $34.6 million from our U.S. federal government clients primarily as a result of terminated contracts in the first quarter of 2025 due to the Administration’s changing priorities and the actions of DOGE, as well as the disruption of the typical U.S. federal government procurement cycle. This decline was offset by increases of $26.0 million and $1.8 million from our commercial and international government clients, respectively. The following were changes in revenue from our various client markets:

Previous wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $31.3 million, or 15.3%, driven primarily by increases of $22.3 million, $8.3 million, and $0.8 million from commercial, U.S. federal government, and U.S. state and local government clients, respectively.

Current wording

Energy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $13.9 million, or 6.2%, driven primarily by increases of $21.9 million and $0.9 million from our commercial and international government clients, respectively, offset by decreases of $6.8 million and $2.1 million from our U.S. federal government and U.S. state and local government clients, respectively.

Previous wording

Health and Social Programs client market revenues decreased $35.8 million, or 5.8%, in 2024 compared to 2023. This was driven by a decrease in subcontractor pass-throughs on several of our U.S. federal contracts and our exit from the commercial marketing business during 2023, resulting in decreases of $32.7 million and $13.9 million from U.S. federal government and commercial clients, respectively, offset by increases of $5.8 million and $5.1 million from U.S. state and local government and international government clients, respectively.

Current wording

Health and Social Programs client market revenues decreased $21.9 million, or 11.5%, driven primarily by a decrease of $24.6 million from our U.S. federal government clients, slightly offset by increases of $1.8 million and $0.8 million from our U.S. state and local government and commercial clients, respectively.

Previous wording

Revenue for the three months ended September 30, 2024 includes subcontractor and other direct costs, which decreased $8.5 million, or 6.3%, from the third quarter of 2023 and totaled $127.6 million and $136.1 million for the three months ended September 30, 2024 and 2023, respectively, and the margin on such costs.

Current wording

Revenue for the three months ended March 31, 2025 includes subcontractor and other direct costs, which decreased $9.9 million, or 8.2%, from the first quarter of 2024 and totaled $110.6 million and $120.5 million for the three months ended March 31, 2025 and 2024, respectively, and the margin on such costs.

Previous wording

Direct Costs. The increase of $1.5 million in direct costs was driven by an increase in direct labor and related fringe benefit costs which reflected the growth in the business, offset by a decrease in subcontractor and other direct costs as well as our exit from the commercial marketing and events business during 2023. For the three months ended September 30, 2024 and 2023, direct labor and related fringe benefit costs as a percentage of direct costs were 60.8% and 57.9%, respectively, and subcontractor and other direct costs as a percentage of direct costs were 39.2% and 42.1%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 38.2% and 37.4%, respectively, and subcontractor and other direct costs were 24.7% and 27.1%, respectively, for the three months ended September 30, 2024 and 2023. Total direct costs as a percentage of revenue were 62.9% for the three months ended September 30, 2024, compared to 64.5% for the three months ended September 30, 2023.

Current wording

Direct Costs. The decrease of $8.0 million in direct costs was driven by a reduction in subcontractor and other direct costs, slightly offset by an increase in direct labor and related fringe benefit costs. For the three months ended March 31, 2025 and 2024, direct labor and related fringe benefit costs as a percentage of direct costs were 63.4% and 61.2%, respectively, and subcontractor and other direct costs as a percentage of direct costs were 36.6% and 38.8%, respectively. As a percentage of revenue, direct labor and related fringe benefit costs were 39.4% and 38.4%, respectively, and subcontractor and other direct costs were 22.7% and 24.4%, respectively, for the three months ended March 31, 2025 and 2024. Total direct costs as a percentage of revenue were 62.0% for the three months ended March 31, 2025, compared to 62.8% for the three months ended March 31, 2024.

Previous wording

Indirect and selling expenses. For the three months ended September 30, 2024, our indirect and selling expenses increased by $1.3 million, or 1.0%, compared to the prior year, primarily from general and administrative costs. As a result, our indirect and selling expenses as a percentage of revenue decreased to 25.7% for the three months ended September 30, 2024 from 26.2% for the three months ended September 30, 2023.

Current wording

Indirect and selling expenses. For the three months ended March 31, 2025, our indirect and selling expenses increased by $2.8 million, or 2.2%, compared to the prior year, as a result of an increase of $3.2 million in indirect labor and related fringe benefit costs, due in part to the impact of severance in the current period, which was offset by a decrease of $0.5 million in general and administrative costs. As a result, our indirect and selling expenses as a percentage of revenue increased to 27.0% for the three months ended March 31, 2025 from 26.1% for the three months ended March 31, 2024.

Previous wording

Interest, net. The decrease of $3.4 million in interest, net, was primarily from a decrease of our average debt balance to $462.9 million for the three months ended September 30, 2024, compared to $621.1 million for the same period in 2023. The decrease in our average debt balance was due, in part, to collection of receivables, decrease in our interest rates, as well as an increase in utilization of our Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank, Ltd. (“MUFG”). Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $1.7 million compared to $2.1 million for the same period in 2023. Inclusive of the impact of the swap agreements, our interest expense for the three months ended September 30, 2024 was $6.2 million compared to $8.8 million for the same period in 2023 and our interest rate inclusive of the swap agreements was 5.3% for the three months ended September 30, 2024 compared to 5.5% for 2023.

Current wording

Interest, net. The decrease of $0.9 million in interest, net, was primarily from a decrease of our interest rates. Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt reduced our interest expense by $0.7 million for the three months ended March 31, 2025 compared to $1.7 million for the same period in 2024. Inclusive of the impact of the swap agreements, our interest expense for the three months ended March 31, 2025 was $6.6 million compared to $7.2 million for the same period in 2024 and our interest rate inclusive of the swap agreements was 5.1% for the three months ended March 31, 2025 compared to 5.6% for 2024.

Previous wording

Other (expense) income. The change in other (expense) income of $3.6 million was primarily due to a pre-tax gain of $2.4 million recognized in the third quarter of 2023 and an impact of $1.5 million as a result of changes in foreign currency exchange rates.

Current wording

Other (expense) income. The change in other (expense) income was primarily due to a gain of $1.7 million recognized in the first quarter of 2024 related to the divestiture of our commercial marketing business and losses on foreign currency rate in the first quarter of 2025.

Previous wording

The following tables provide reconciliations of financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. to their most comparable U.S. GAAP measures (“non-GAAP”). While we believe that these non-GAAP financial measures provide additional information to investors and may be useful in evaluating our financial information and assessing ongoing trends to better understand our operations, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define similarly titled non-GAAP measures differently, thus limiting their use for comparability.

Current wording

The following tables provide reconciliations of financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. (“non-GAAP”) to their most comparable U.S. GAAP measures. While we believe that these non-GAAP financial measures provide additional information to investors and may be useful in evaluating our financial information and assessing ongoing trends to better understand our operations, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define similarly titled non-GAAP measures differently, thus limiting their use for comparability.

Previous wording

These are primarily third-party costs related to acquisitions and potential acquisitions, integration of acquisitions, and separation of discontinued businesses or divestitures.

Current wording

These are primarily third-party costs related to acquisitions and integration of acquisitions.

Previous wording

Pre-tax gain related to the 2023 divestiture of our U.S. commercial marketing business which include contingent gains realized in the first and the third quarter of 2024.

Current wording

Pre-tax gain related to the 2023 divestiture of our U.S. commercial marketing business which include contingent gains realized in the first quarter of 2024.

Previous wording

These are exit costs related to actual office closures (previously included in Adjusted EBITDA) and accelerated depreciation related to fixed assets for planned office closures.

Current wording

These are office closure charges previously included in Adjusted EBITDA and accelerated depreciation related to fixed assets for planned office closures.

Previous wording

Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 13.8% and 21.7% for the three months ended September 30, 2024 and 2023, respectively, and 20.0% and 23.5% for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 25.3% and 20.4% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Liquidity and Borrowing Capacity. In addition to cash and cash equivalents on hand and cash generated from operations, our primary source of liquidity is from our Credit Facility with a syndicate of multiple commercial banks, as described in “Note 5– Debt” in the “Notes to Consolidated Financial Statements” in this Quarterly Report. The Credit Facility requires that we remain in compliance with certain financial and non-financial covenants (as defined by the Credit Agreement, see our Annual Report for additional details). As of September 30, 2024, we were in compliance with the covenants and we had $588.2 million available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.

Current wording

Liquidity and Borrowing Capacity. In addition to cash and cash equivalents on hand and cash generated from operations, our primary source of liquidity is from our Credit Facility with a syndicate of multiple commercial banks, as described in “Note 5– Debt” in the “Notes to Consolidated Financial Statements” in this Quarterly Report. The Credit Facility requires that we remain in compliance with certain financial and non-financial covenants (as defined by the Credit Agreement, see “Note 10 – Long-Term Debt” in the “Notes to Consolidated Financial Statements” in our Annual Report for additional details). As of March 31, 2025, we were in compliance with the covenants and we had $448.4 million available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.

Previous wording

We have entered into floating-to-fixed interest rate swap agreements for a total notional value of $275.0 million to hedge a portion of our floating-rate Credit Facility. The swap agreements will expire in 2025 and 2028, respectively, and we may consider entering into additional swap agreements as these existing hedges expire. As of September 30, 2024, the percentage of our fixed-rate debt to floating-rate debt was 65%.

Current wording

We have entered into floating-to-fixed interest rate swap agreements for a total notional value of $175.0 million to hedge a portion of our floating-rate Credit Facility. The swap agreements will expire in 2028 and we may consider entering into additional swap agreements before these existing hedges expire. As of March 31, 2025, the percentage of our fixed-rate debt to floating-rate debt was 35%.

Previous wording

There are other conditions, such as the ongoing wars in Ukraine and the Middle East, that create uncertainty in the global economy, which in turn may impact, among other things, our ability to generate positive cash flows from operations and our ability to successfully execute and fund key initiatives. However, our current belief is that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ongoing operations, customary capital expenditures, quarterly cash dividends, share repurchases, and organic growth. Additionally, we continuously analyze our capital structure to ensure we have capital to fund future strategic acquisitions.

Current wording

There are other conditions, such as the ongoing wars in Ukraine and the Middle East and volatility in global trade (including the imposition of tariffs), that create uncertainty in the global economy, which in turn may impact, among other things, our ability to generate positive cash flows from operations and our ability to successfully execute and fund key initiatives. However, our current belief is that the combination of internally generated funds, available bank borrowing capacity, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund ongoing operations, customary capital expenditures, quarterly cash dividends, share repurchases, and organic growth. Additionally, we continuously analyze our capital structure to ensure we have capital to fund future strategic acquisitions.

Previous wording

We continuously monitor the state of the financial markets to assess the availability of borrowing capacity under the Credit Facility and the cost of additional capital from both debt and equity markets. At present, we believe we will be able to continue to access these markets at commercially reasonable terms and conditions if we need additional capital in the near term.

Current wording

We continuously monitor the state of the financial markets to assess the availability of borrowing capacity under the Credit Facility and the cost of additional capital from both debt and equity markets. At present, we believe we will be able to continue to access these markets on commercially reasonable terms and conditions if we need additional capital in the near term.

Previous wording

Dividends. We have historically paid quarterly cash dividends to our shareholders of record at $0.14 per share. Total dividend payments during the nine months ended September 30, 2024 were $7.9 million.

Current wording

Dividends. We have historically paid quarterly cash dividends to our stockholders of record at $0.14 per share. Total dividend payments during the three months ended March 31, 2025 were $2.6 million.

Previous wording

Cash Flow. The following table sets forth our sources and uses of cash for the nine months ended September 30, 2024 and 2023:

Current wording

Cash Flow. The following table sets forth our sources and uses of cash for the three months ended March 31, 2025 and 2024:

Previous wording

Cash used in investing activities increased by $10.2 million due to the timing of acquisitions and cash received in connection with the 2023 divestiture of our U.S. commercial marketing business.

Current wording

Cash used in investing activities decreased by $0.1 million due to a decrease in capital expenditures offset by a decrease in cash proceeds from the divestiture of our U.S. commercial marketing business.