ICF International, Inc.

(Unaudited)

(dollar amounts in tables in thousands, except share and per share data)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation

The accompanying consolidated financial statements are of ICF International, Inc. (“ICFI”) and its principal subsidiary, ICF Consulting Group, Inc. (“Consulting,” and together with ICFI, the “Company”), and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). Consulting is a wholly owned subsidiary of ICFI. ICFI is a holding company with no operations or assets other than its investment in the common stock of Consulting. All other subsidiaries of the Company are wholly owned by Consulting. Intercompany transactions and balances have been eliminated. The terms “federal” or “federal government” refer to the U.S. federal government, and “state and local” or “state and local government” refer to U.S. state (including territories) and local governments, unless otherwise indicated.

Software assets, which were previously included within “Property and equipment, net” and “Other assets”, have been reclassified and consolidated under “Other intangible assets, net.” To conform to the current year’s presentation, $1.6 million and $21.8 million, as of December 31, 2024, have been reclassified from “Property and equipment, net” and “Other assets” to “Other intangible assets, net,” respectively.

Previously separate financial statement line items “Depreciation and amortization” and “Amortization of intangible assets” have been combined under “Depreciation and amortization”.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amounts of revenue and expenses. Key estimates include those that are related to variable consideration on contracts with customers, costs to complete fixed-price contracts, bonus and other incentive compensation, reserves for tax benefits and valuation allowances on deferred tax assets, collectability of receivables, valuation and useful lives of acquired tangible and intangible assets, impairment of goodwill and long-lived assets, and contingencies. Actual results experienced by the Company may differ from management’s estimates.

Interim Results

The unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These rules and regulations permit some of the information and footnote disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, to be condensed or omitted. In management’s opinion, the unaudited consolidated financial statements contain all adjustments that are of a normal recurring nature, necessary for a fair presentation of the results of operations and financial position of the Company for the interim periods presented. The Company reports operating results and financial data inone operating segment and reporting unit. Operating results for the three-month period ended March 31, 2025 and 2024 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 31, 2024 and the notes thereto included in the Company’s Annual Report on Form 10-K.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes: Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires greater disaggregation of income tax rates and amounts paid by entities. ASU 2023-09 specifically requires all entities to disclose, on an annual basis, disaggregated domestic and foreign pre-tax income or loss from continuing operations and the disaggregated income tax expense or benefit by federal, state, and foreign components, and a tabular rate reconciliation, using both percentages and reporting currency amounts, of eight specific categories as well as any individual reconciling items that are equal to or greater than 5% of a threshold computed by multiplying pretax income or loss from continuing operations by the applicable federal rate. Additionally, the amendments also require disclosure of income taxes paid disaggregated by federal, state, and foreign jurisdictions as well as any individual jurisdictions over 5% of the total income taxes paid. ASU 2023-09 will be effective for the Company for the fiscal year ending December 31, 2025, with early adoption permitted. The amendments may be adopted on a prospective or retrospective basis. The Company is expected to adopt the provisions of ASU 2023-09 for the fiscal year ending December 31, 2025 and, with the exception of additional footnote disclosures, does not expect the adoption to have any impact on the consolidated financial statements.

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

In November 2024, the FASB issued ASU 2024-03: Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires additional disaggregation of certain costs and expenses. ASU 2024-03 specifically requires all public entities to disclose within a tabular format the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities in each relevant expense caption as well as certain amounts that are already required to be disclosed under current U.S. GAAP. ASU 2024-03 also requires public entities to disclose a qualitative description of the composition of any amounts in relevant expense captions that are not separately disaggregated and the amount and definition of the entity’s selling expenses. ASU 2024-03 will be effective for the Company for the 2027 fiscal year and interim periods within the 2028 fiscal year, with early adoption permitted. The amendments may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of the adoption of ASU 2024-03 and, with the exception of additional footnote disclosures, does not expect the adoption to have a material impact on the consolidated financial statements.

NOTE 2 – RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as of March 31, 2025 and 2024 to cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows for the three months ended March 31, 2025 and 2024:

Restricted cash represents is primarily related to the Company’s energy incentive business with public utility clients and include restricted cash from the acquisition of Applied Energy Group, Inc. (“AEG”).

NOTE 3 – CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following:

The Company sells certain billed contract receivables in accordance with its Master Receivables Purchase Agreement with MUFG Bank, Ltd. (“MUFG”). The following is a reconciliation of billed contract receivables sold to MUFG that were eligible and accounted for as sales under Accounting Standards Codification (“ASC”) 860, including billed contract receivables sold to MUFG and collected from customers on behalf of MUFG during thethree months ended March 31, 2025 and 2024, and the balance of billed contract receivables not collected from customers as of March 31, 2025 and 2024, respectively:

(1)

The beginning balances represent billed contract receivables that were previously sold and derecognized by the Company but had not been collected from customers as of January 1,2025 and 2024, respectively.

(2)

For thethree months ended March 31, 2025 and 2024, the Company recorded net inflows of$5.2 million and$3.6 million, respectively, in its cash flows from operating activities from the sale of billed contract receivables.

(3)

The ending balances represent billed contract receivables that were sold and derecognized by the Company but had not been collected from customers as of March 31, 2025 and 2024, respectively.

The following is a reconciliation of cash collections from customers of billed contract receivables previously sold to MUFG that were eligible and accounted for as sales under ASC 860, including collections from customers on behalf of MUFG of previously sold billed contract receivables and remittances of cash collections to MUFG during thethree months ended March 31, 2025 and 2024, and the balance of cash collected but not remitted to MUFG as of March 31, 2025 and 2024, respectively:

(1)

The beginning balances represent cash collected from customers on behalf of MUFG for billed contract receivables that were previously sold and derecognized by the Company but had not been remitted to MUFG as of January 1,2025 and 2024, respectively.

(2)

For thethree months ended March 31, 2025 and 2024, the Company recorded net inflows of$5.5 million and$3.9 million, respectively, in its cash flows from operating activities from the collection of billed contract receivables that were sold but not yet remitted to MUFG.

(3)

The ending balances are included as part of “Accrued expenses and other current liabilities” on the Company’s consolidated balance sheets.

The aggregate impact of the sale of billed contract receivables on the Company’s operating cash flows was$10.7 million and$7.5 million for the three months ended March 31, 2025 and 2024, respectively.

At March 31, 2025 and December 31, 2024, the amounts due to MUFG for cash collected and not yet remitted for billed contract receivables sold that did not qualify as sales under ASC 860 totaled$1.5 million and$7.9 million, respectively. These amounts are included as part of “Accrued expenses and other current liabilities” on the Company’s consolidated balance sheets.

NOTE 4 – LEASES

At March 31, 2025, the Company had operating and finance leases for facilities and equipment with remaining terms ranging from 1 to 14 years. Future minimum lease payments under non-cancellable operating and finance leases as of March 31, 2025 were as follows:

NOTE 5 – DEBT

At March 31, 2025 and December 31, 2024, debt consisted of:

As of March 31, 2025, the Company had$448.4 million of unused borrowing capacity under the $600.0 million revolving line of credit under a credit agreement with a group of lenders (the “Credit Facility”). The unused borrowing capacity is inclusive of outstanding letters of credit totaling$1.6 million. The average interest rate on borrowings under the Credit Facility was 5.7% for the three months ended March 31, 2025 and 6.6% for the twelve months ended December 31, 2024, respectively. Inclusive of the impact of floating-to-fixed interest rate swaps (see “Note 7– Derivative Instruments and Hedging Activities”), the average interest rate was 5.1% for the three months ended March 31, 2025 and 5.3% for the twelve months ended December 31, 2024, respectively.

Future scheduled repayments of debt principal are as follows:

NOTE 6 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients into categories that depict how the nature, amount, and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market, client type, and contract mix.

Contract Assets and Liabilities

Contract assets consist of unbilled receivables on contracts where revenue recognized exceeds the amount billed. Contract liabilities result from advance payments received on a contract or from billings in excess of revenue recognized.

The following table summarizes the contract assets and liabilities as of March 31, 2025 and December 31, 2024:

The increase in net contract assets (liabilities) is primarily due to the timing difference between the performance of services and billings to customers. During both the three months ended March 31, 2025 and 2024, the Company recognized$12.8 million in revenue related to the contract liabilities balance at December 31, 2024 and 2023, respectively.

Unfulfilled Performance Obligations

Unfulfilled performance obligations (“UPO”) were$0.9 billion and $1.3 billion as of March 31,2025 and December 31, 2024, respectively. The UPO of $0.9 billion reflects the impact of approximately $0.3 billion related to the termination-for-convenience notifications the Company received pursuant to the executive orders issued by the Administration or actions by DOGE during the three months ended March 31, 2025.

The Company expects to recognize the remaining UPO as revenue of approximately 53% by December 31,2025,78% by December 31,2026, and the remainder thereafter.

Subsequent to March 31, 2025 and through April 25, 2025, the Company received additional notices for termination-for-convenience. Had these termination-for-convenience occurred prior to March 31, 2025, the total UPO would have been reduced by approximately $12.0 million.

NOTE 7 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

At March 31, 2025, the Company had floating-to-fixed interest rate swap agreements for an aggregate notional amount of $175.0 million, of which $75.0 million will mature on February 28, 2028 and $100.0 million will mature on June 27, 2028. The Company has designated the swap agreements as cash flow hedges. See “Note 5– Debt” for details on the impact of the swap agreements on the Company’s interest rates. See “Note 13– Fair Value” for the fair value of these swaps.

NOTE 8– INCOME TAXES

A reconciliation of the Company’s statutory rate to the effective tax rate (the “ETR”) for thethree months ended March 31, 2025 and 2024 is as follows:

The decrease in the Company’s ETR was primarily due to an income tax benefit recognized in the first quarter of 2025 from tax planning implemented in connection with the “transitional rules” governing unrealized foreign exchange gains and losses derived from translation of the operations, assets and liabilities of non-U.S. qualified subsidiaries provided by recently finalized U.S. federal tax regulations under Internal Revenue Code Section 987 (“IRC 987”). The regulations under IRC 987 are effective for the Company for tax years beginning after December 31, 2024 and require computation of a pre-transition foreign currency gain or loss to be included in the determination of future taxable income or loss and an analysis of the various elections available to taxpayers. Based on the Company’s current analysis of the regulations and the available election to amortize its pre-2025 cumulative unrealized foreign exchange gains & losses impacting U.S. taxation of foreign earnings under Subpart F of the Internal Revenue Code, the Company recognized a non-cash deferred income tax benefit of $4.5 million related to its election to amortize its pre-transition foreign currency losses against taxable income overten years.

NOTE 9 – STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss as of March 31, 2025 and 2024 included the following:

(1)The Company reclassified $4.1 million of effect of taxes related to Foreign Currency Translation Adjustments from accumulated other comprehensive (loss) income into earnings in connection with IRC 987. See “Note 8 – Income Taxes”.

(2)The Company expects to reclassify approximately $0.1 million of unrealized losses related to the Change in Fair Value of Interest Rate Hedge Agreements from accumulated other comprehensive (loss) income into earnings during the next 12 months.

Share Repurchases

The Company repurchases shares under the $300.0 million share repurchase program authorized by the Company’s board of directors. In addition, the Company repurchases shares in connection with the vesting of restricted stock units (“RSUs”) and performance share awards (“PSAs”)granted to employees. Repurchases for thethree months ended March 31, 2025 and 2024 are as follows:

NOTE 10 – STOCK-BASED COMPENSATION

The Company’s 2018 Amended and Restated Omnibus Incentive Plan (the “2018 A&R Omnibus Plan”) allows the Company to grant up to 2,050,000 total shares of common stock to officers, key employees, and non-employee directors. As of March 31, 2025, the Company had approximately 794,760 shares available for grant under the 2018 A&R Omnibus Plan.

The following awards were granted during thethree months ended March 31, 2025 and 2024:

The total stock-based compensation expense was$4.0 million and$5.9 million for the three months ended March 31, 2025 and 2024, respectively. The unrecognized compensation expense at March 31, 2025 was$41.5 million, which is expected to vest over the next 2.1 years.

NOTE 11 – ACQUISITIONS AND DIVESTITURES

Acquisitions

Applied Energy Group, Inc.

On December 31, 2024, the Company completed the acquisition of AEGan energy technology and advisory services company, for$60.7 million in cash consideration before final net working capital adjustments. AEG provides a suite of integrated technology and advisory solutions to electric and gas utilities, state and local governments, and state energy offices nationwide which enhances the Company’s service offering and client footprint.

As part of the preliminary allocation of the purchase consideration, the Company recorded the following:

Net working capital includes restricted cash of $5.4 million, accounts receivable of $4.5 million, contract assets of $2.6 million, accrued expenses of $6.6 million, accounts payable of $1.3 million, and other assets and liabilities of $0.7 million.

The finalization of allocation is expected to be completed by the second quarter of 2025 and is currently open primarily for final net working capital adjustments.

The estimated useful lives of acquired intangible assets are as follows:

The Company revised customer-related intangibles from an initial estimate of $21.0 million to $20.0 million and estimated useful life from 9.0 years to 6.0 years as a result of new information received during the quarter ended March 31, 2025.

The goodwill is attributable to the workforce of AEG and expected synergies with the Company. Goodwill has an indefinite life and is deductible for income tax purposes. The pro-forma impact of the acquisition is not material to the Company’s results of operations.

NOTE 12 – EARNINGS PER SHARE

Earnings per share (“EPS”), including the dilutive effect of stock awards for each period reported is summarized below:

A total of 79,863 shares of restricted stock awards were excluded from the calculation of EPS for the three months ended March 31, 2025 because they were anti-dilutive. There were 10,901 shares excluded for thethree months ended March 31, 2024.

NOTE 13 – FAIR VALUE

Financial instruments measured at fair value on a recurring basis and their location within the accompanying consolidated balance sheets are as follows:

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Letters of Credit and Guarantees

The Company had open standby letters of credit totaling$1.6 million at both March 31, 2025 and December 31, 2024, respectively. Open standby letters of credit reduce the Company’s borrowing capacity under the Credit Facility.

At March 31, 2025 and December 31, 2024, the Company had$8.6 million and $8.2 million, respectively, of bank guarantees for facility leases and contract performance obligations.

Litigation and Claims

The Company is involved in various legal matters and proceedings arising in the ordinary course of business. While these matters and proceedings cause it to incur costs, including, but not limited to, attorneys’ fees, the Company currently believes that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on its financial position, results of operations, or cash flows.

NOTE 15– SEGMENT INFORMATION

The Company provides a broad array of professional services to its clients across several markets, primarily within the U.S. The Company operates as asingle reportable and operating segment because the chief operating decision maker (the “CODM”), which is the Chief Executive Officer, manages the business activities on a consolidated basis. Although the Company disaggregates revenue by client market and client type, it does not manage its business or allocate resources based on client market or type.

The CODM assesses segment performance based on consolidated net income as reported on the Company’s consolidated statements of comprehensive income. The CODM uses consolidated net income to evaluate the Company’s performance against budgets and decide whether to use the profits to invest in the business, pay down debt, repurchase stock, pay dividends, or fund acquisitions. Asset information provided to the CODM is not used for the purpose of making decisions and assessing performance of the Company.

The segment revenue, significant segment expenses, and segment profit are as follows:

(1) Other segment expense (income) includes interest income, foreign currency expense, and gains/losses on disposition of assets.