ICF International at Canaccord Genuity: Navigating a Transition Year

On Wednesday, 13 August 2025, ICF International (NASDAQ:ICFI) presented at Canaccord Genuity’s 45th Annual Growth Conference, offering insights into its current challenges and future prospects. Despite facing reduced federal government spending impacting revenues, ICF highlighted growth in its non-federal sectors, particularly commercial energy and disaster recovery.

Key Takeaways

• ICF anticipates a mid-single-digit revenue decline in 2025 due to federal contract cancellations.
• Non-federal business sectors are projected to grow by approximately 15%.
• Commercial energy is experiencing robust growth, driven by data center power demand.
• ICF expects to maintain EBITDA margins, with improvements in future years.
• The company is focusing on IT modernization aligned with federal priorities.

Financial Results

• Revenue: Expected to decline mid-single digits in 2025 due to $117 million in contract cancellations.
• Non-Federal Business: Projected to grow by about 15% in 2025, with commercial energy leading at over 25%.
• EBITDA Margins: Predicted to remain flat in 2025, with potential increases of 10-20 basis points in subsequent years.

Operational Updates

• Sector Composition: Energy, environment, infrastructure, and disaster recovery make up 48% of revenue, while public health and social programs contribute 37%.
• Commercial Energy: Growth is driven by increased power demand from data centers and economic development.
• Disaster Recovery: Expanding to include more states, such as California and Oregon, due to rising storm frequency.
• IT Modernization: Focused on AI, agile development, and automation to meet federal government needs.
• Energy Efficiency: 75% of commercial energy business is dedicated to energy efficiency programs.

Future Outlook

• Non-Federal Business: Expected to maintain double-digit growth over the next five years, potentially comprising over 70% of total revenue.
• Commercial Energy: Anticipated to continue growing at a rate above 25%.
• IT Modernization: Projected to return to growth next year.
• Federal Business: Growth expected to resume with clearer policy direction from the current administration.
• Margin Improvement: Continued margin increases of 10-20 basis points annually are anticipated.

Q&A Highlights

• Renewable Energy and Sustainability: Utilities prioritize sustainability, with resource adequacy being a key concern.
• Nuclear Energy: ICF is involved in the restart of a nuclear plant in Michigan, with more activity expected.
• Disaster Recovery: Transitioning to state responsibility, leveraging strong state relationships.
• IT Modernization: Emphasis on aligning with federal priorities through AI and automation.

In conclusion, ICF International is navigating a transition year with strategic shifts towards non-federal growth areas. For detailed insights, refer to the full conference call transcript below.

Full transcript - Canaccord Genuity’s 45th Annual Growth Conference:

George Genericas, Sustainability Analyst, Canaccord Genuity: Good morning, everyone. I’m George Genericas, one of Canaccord Genuity’s sustainability analysts. Thank you for joining day two of our forty fifth annual growth conference here in Boston. We’re very excited to have ICF International with us here today. From the company, we have John Wasson, chair and CEO, Anne Choate, executive vice president of energy, environment, and infrastructure, and Lynn Morgan from investor relations.

So thank you so much to you both for joining us.

John Wasson, Chair and CEO, ICF International: Well, thank you. It’s always a great conference and really appreciate the time to speak with you. Thanks.

George Genericas, Sustainability Analyst, Canaccord Genuity: So maybe you can just start broadly with a profile of the company and also maybe what you recently reported in q two results.

John Wasson, Chair and CEO, ICF International: Sure. So ICF, we’re a professional services and technology services company, slightly under 2,000,000,000 of revenue, about 9,500 employees. We’ve been publicly traded on the Nasdaq for, I guess, coming up on our twentieth anniversary here soon. And so we serve a roster of commercial, state and local, international, and US federal clients. We do it in kind of two broad categories of client verticals.

The first, what I would call pillars, are work we do in energy, environment, infrastructure, and disaster recovery. That’s about 48% of the total company. I mean, then the second main pillar is in public health. And social programs, think that’s about 37% of the total company. So so public health and social programs, that includes education, housing, you know, various social programs to support the, primarily governments around the world.

We’re known for our deep domain expertise in those verticals. We have deep subject matter expertise that allows us to do front end advisory work for clients, so strategy and program design and policy and economic analysis. And then we can also help them implement those strategies in those programs. We have very deep technology capabilities, IT modernization, digital engagement, AI, complex program management, change management. And so with that four portfolio, it gives us very good each year, we start with over 70% of our revenues in some form of backlog, so we have very nice visibility.

About 30% of our our work is commercial. So with the commercial work, it’s higher margin. So as that’s growing more rapidly, we get earnings leverage, which we’re enjoying right now given all the work we do in the energy arena. And so historically, we’ve been a growth company, both organic and inorganic. We have very strong cash flow.

This year is a transition for year for us. About 55% of our business that’s in commercial, state and local international. We’re growing. We will grow and have been growing, including in our February results, about 15% in that piece of the business. So seeing very nice growth.

That is offsetting what I would consider to be a transition here with the US federal. You know, we’re, you know, we’re down with the shift in priorities and focus of this administration. I’m sure we’ll get into that. And so net net for the year, I think we’re expecting to be down about mid single digits on revenue. We’ll be closer to flat on earnings and expect to return to growth next year.

George Genericas, Sustainability Analyst, Canaccord Genuity: You mentioned on your recent call that your non federal business, I think you just mentioned it again, should grow approximately 15% this year. What are the components of that growth? What’s what’s driving it?

John Wasson, Chair and CEO, ICF International: Well, sure. I think, as I said, about a third of our business is in commercial energy. We do work primarily for utilities here in North America and power producers and leads that business. So And that third of the business, we’ve been growing north of 25% this year, and we grew 25% last year. That’s really being driven by, you know, the the significant increase in power demand associated with data centers, which I think is gonna be a long term trend here and is driving significant growth in that business.

So it’s the data centers. You know, obviously, crypto is also power intensive. It’s also economic development, obviously, helps on the growth side. And so we see that as a long term, growth driver. And as I said, we’ve been growing 25% the last couple years.

The other components of that 57% are state and local. We have about eight 18% of our work in state and local. The largest component of that business is disaster recovery. So we help state and local clients rebuild or repair, infrastructure homes after natural disasters. You know?

And I think if you look at the data, the frequency and severity of these storms is only increasing. And so I think we see continued opportunity there that will remain a growth area. And then the last component, about 6% international revenues. We’ve won some very large contracts here in the last several months with our European Union customers, UK government. I think set us up for 20% growth in that part of the business.

So so I think we’re quite bullish on the the outlook in that portion of portfolio.

George Genericas, Sustainability Analyst, Canaccord Genuity: I’d like to take a step back and understand because it’s so relevant for so many of the companies that we cover that sell services to the federal government. What exactly did you see happen in the beginning of the year and how has that situation sort of stabilized or even improved as we move through?

John Wasson, Chair and CEO, ICF International: Yeah. No. Think that so about 43 45% of our total business is with US federal. I think, you know, with this administration, as they came into office, they became they were very focused on, you know, cost effectiveness and reducing the spend in the federal government. You know, Doge was stood up.

And so with that, you know, we saw a significant contract cancellations, you know, at the end of the first quarter or into the early second quarter. You know, we had contracts at USAID, which ceased to exist, and we’ve seen cancellations in other parts of our civilian business. We have reported those numbers and so at the in our fourth quarter call in in late February, we indicated we’d had about a 100 and I’m sorry. $85,000,000 in 2025 revenue impacted by contact And first, yeah, around in our Yeah. Our fourth quarter call at the February.

Yeah. We’ve seen about $85,000,000 of cancellations by the February. We then did our first quarter call t in early May. We were up to about a 115, so we added another 30,000,000. We just did our call for q two in August.

We only added 2,000,000, so a 117,000,000. So, of total impacts, I think that’s I think we think the certainly, the energy is going out of the Doge effort and the kind of contract cancellation. I think we’ve we’ve seen what we’re gonna see. I I don’t think we’re expecting any more material contract cancellations. You should be hearing going forward is, you know, how when does this administration turns its turn its focus to what they wanna do from a policy and program perspective and what when they’re gonna start to build back some of the efforts in the client sets that we support.

George Genericas, Sustainability Analyst, Canaccord Genuity: Renewable energy, sustainability are incredibly important to our coverage. And I’m curious as to what you’re hearing from your clients as maybe the shift moves from federal government support to more state and local government support.

John Wasson, Chair and CEO, ICF International: Yeah. Aiden, do wanna

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: Sure. So, yeah, they’re important to our business as well. And so but I think that the, you know, the fact that the one big beautiful bill has passed actually has provided a little bit more clarity and a little less. The the I think that the the uncertainty that we were experiencing in the first half of the year both with respect to the m and a activity and also with respect to sort of the robustness of investments in in whether it was solar or wind or battery storage or whatever. And the extent to which the federal government was sort of, you know, turning away from sustainability, I think there’s been a question of, well, will will utilities continue to care about sustainability?

Will the state governments still continue to be interested? And I think we’re seeing very much what we saw in the first Trump administration where there is very there’s a there’s a leadership transition that’s taking place. I think that we’ve seen there’s more more understanding of, you know, what the tax credits will or will not be. But there’s also, I think, a strong forcing function understanding that we need all forms of power. We’re gonna need it new now or soon.

And so the things that are financially viable are gonna continue to move forward with or without those, you know, those credits. I think that the shift there’s a the portfolio itself is shifting, but I think there’s still a lot of of interest and and a lot of public sentiment that sustainable sustainability, however you wanna define it. And renewable energy has a very strong role to play there. And so we’re seeing it in states. We’re seeing it in the with the utilities.

So some of these utilities have come out and said, last year, they would have said sustainability was their number one topic. Now they’re saying resource adequacy or sort of providing, you know, to meet the demand is number one, but sustainability is still in the top three. So that’s interesting because, they could very well have turned away, but we’re not seeing that, especially so in Maryland, for instance, is one of the states where they’ve been really been out in front. They seem to be staying out front. And that’s not everyone knows California tends to lead.

New York tends to lead. But we’re seeing it in these other states as well.

George Genericas, Sustainability Analyst, Canaccord Genuity: Is there any impact to your business from this acceleration and interest at least in nuclear? Well,

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: we actually we were involved in the first restart of a nuclear plant in Michigan. That was but that was a Department of Energy funded project, and our job was to basically do the the projections for that, you know, to to look at whether that would be viable, what would the, you know, what would the if they were to invest in that, what would it, the return be? And I think that was successful. So we expect to see more of that. That was through the DOE loan program office.

And the DOE loan program office will continue their their interest in geothermal. So their interest has shifted from purely renewable with the exception of this nuclear restart, to a lot more geothermal, nuclear, gas restarts, etcetera.

John Wasson, Chair and CEO, ICF International: Yeah. And I think in the longer run, I mean, I do think we do a lot of generation planning for utilities and so as part of that, if they’re considering nuclear, we can certainly advise them on that and understand the market and the economics of that. We also do a lot of on the permitting side. And so could potentially support that. I do think you’re five to ten years away on Yeah.

You know, nuclear small modular reactors. But we certainly have skills and capabilities to inform utilities thinking on that. If they decide they’re gonna make an investment or potentially make an investment, we can advise them on that.

George Genericas, Sustainability Analyst, Canaccord Genuity: You also have a significant business in disaster recovery. Can you talk about what you’re seeing in terms of contract activity there?

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: Thank as John said, we are seeing, you know, continued frequent you know, an increased frequency, increased severity of the storms. There’s, you know, again, there’s a a fair amount of uncertainty in terms of how the federal government is gonna move forward in particular with FEMA and how they how they’d like to fund disaster recovery. But the shift to state responsibility has been you know, it’s it’s actually we’re well set up for that because we’ve been working with these states and territories for a very long time. The the extent to which the federal rules will be, you know, overseen by the federal government or whether they’ll be overseen and sort of implemented at the state or the territorial level. I think that we’re well set up for that.

In many cases, we worked with the federal government to design those rules, for instance, for HUD and and to some extent, FEMA. And so that the our ability to basically administer those programs in in line with expectations to avoid fraud, waste, and abuse. That’s why we’ve been hired in the past. We have not seen states turned away with the exception of Maryland. That’s the only one that’s been rejected in terms of a disaster declaration that was requested under the new administration.

Am right about that?

John Wasson, Chair and CEO, ICF International: Yeah. No.

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: That’s right. And so so, you know, there’s a lot of talk, lot of discussion about this, but they’re they’re continuing to declare disasters, and they’re going to have to continue to respond when those disasters take place. I think one of the things that’s beneficial for us is that we have been working we we we’ve spent a a lot of time in the last couple of years making sure that we diversified our disaster portfolio. And by that, I mean working in more states. So we’re working in 20 states where our disaster business was very concentrated before.

We’re very focused on expanding that so that we had more coverage and frankly, so that when you have disasters hit in states where we had not been doing disaster recovery, you know, previously that we’ve we’re already in there and we’ve been providing support to the the, you know, the agencies who will then be entrusted with responding. So, you know, there are examples of that in California, in Oregon, and other places where you’re seeing wildfires which is sort of a new flavor of disaster.

John Wasson, Chair and CEO, ICF International: Yeah. And I think the the nice thing about that business is typically when there’s a major natural disaster, you know, congress will pass a special appropriation with money dedicated to help with the, you know, with the rebuild, address the the impacts on your public infrastructure or homes. So it’s and it’s not being a dedicated stream of money. It can’t be reprogrammed someone somewhere else. And, you know, typically, it’s been passed on a bipartisan basis.

A lot of these disasters tend to happen in red states just given the the location of where they occur. And so and so, you know, given the severity and frequency of what we’re seeing, I think, you know, there will continue to be opportunity there.

George Genericas, Sustainability Analyst, Canaccord Genuity: I think you guided for your non government work to be about 55% of your revenue this year. How do you see that mix changing over the next several years? Should we expect that to continue to grow faster and become a bigger part of your overall business?

John Wasson, Chair and CEO, ICF International: Yeah. I think that so absolutely, you should expect that. I think, you know, our view is if we look out over the next five years, we’ll continue to have double digit growth in the in the commercial, state and local, and international component of the business. You know, we’ve we’ve been growing 15% or north of 15%. I mean, you know, I think we will maintain double digit growth.

So if you just do the mind experiment, well, if you grow 15% for five years, you’ll double that portion of the business. So we’ll go from 55% to, you know, 70 north of 70% of the business, which would be would be great. That’s the point of having our portfolio. You know, some things are up, some things are down. You know, we’ve always, since the founding of the company, had both public and private sector work.

And, you know, that percentage has moved up and down with the opportunities. And so but I think we certainly expect, you know, that the certainly that portion of the business will lead the way. And really commercial energy is what’s really going to lead the way here with kind of north of 25% growth. Maybe you want to say a few words about our energy efficiency business because that’s such a It huge can be helpful for people to understand how that’s funded.

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: When we talk about our energy business, about 75% of it is designing and running and implement implementing executing these energy efficiency programs. For the most part, ours are focused on residential and commercial. So some other folks are more focused on industrial energy efficiency. Our focus is really in the residential and the commercial. The type of work that we do is to so for instance, you may have in 30 or so, thirty thirty five states, there are small charges that are put onto customers’ bills, which you all get, that will say, you know, your this this amount is to cover these programs.

Those programs are a very cost effective way for the utility to manage load especially in peaks. And so the the Public Service Commission has endorsed these programs. Our job is to then go in there and run the program to meet the the goals of the program. The utility executives are held accountable for meeting those goals. The more the better we do at achieving the goals, the more likely that we’re gonna get follow on assignments.

Our recompete rate is very, very high. I think close to a 100%. And our and our our strategy, which we stated at an investor day several years ago, was that we were gonna do a lot, you know, put a lot of emphasis on trying to expand our our portfolios within particular utilities because running one program is one thing, but running a whole suite of programs, we have we are able to gain some scale. We actually, you know, obviously we can build more trust with the utility. We understand the customer base better.

And then that allows us to to get to a place where we can try out new things. So trial electrification, trial flexible load management programs, do work with customer behavioral programs. Again, utilities are sort of redefining their relationships with customers. And so as they do that, I think the effectiveness of our marketing, the effectiveness of our outreach is very important, more important than it was ten years ago. Because now the utilities are not the only game in town and they’re starting to realize that.

And so that relationship becomes really important. And so that’s been that’s been very good for us and that’s sort of what I’m one of our stated goals for for growing as of several years ago. And it’s allowed us to grow pretty quickly and to be effective in, you know, in competition. The other part outside of that 75 of the commercial energy business is really more about, you know, energy analytics, grid modernization, a lot of technical, you know, engineering due diligence, financial due diligence around, you know, energy development projects. And whether that’s for developers or whether it’s for utilities, you know, understanding capacity constraints, understanding what the op you know, how you would optimize your generation resources within a particular region, working to understand, interconnection queues, all of those kinds of of analytic assignments.

And then there’s also the permitting, which you, you know, I don’t think that our investors pay very much attention to. But we anytime they’re putting down any sort of linear infrastructure, whether it’s for transportation or for energy, there’s a lot of environmental work that needs to be done. We we do that work for utilities. And then there’s also the addition of CMY, which we we bought a year and a half ago, and that added some engineering capabilities that we did not have previously that are more about, like, the heart, you know, the the designing, you know, like a substation or know, working with a utility to understand, you know, how they’re gonna meet new capacity. So an integrated utility will come to us and have have us help them think about, so for instance, some of these data center corridors and how they’re gonna meet that demand.

George Genericas, Sustainability Analyst, Canaccord Genuity: Anyone listening that doesn’t realize that interconnection queues and permits are a massive bottleneck to everything in energy, yeah, it takes years and years and years to get these things going. Maybe to focus on IT.

John Wasson, Chair and CEO, ICF International: We’re here to help with that.

Anne Choate, Executive Vice President of Energy, Environment, and Infrastructure, ICF International: The more complicated it is, the better it

George Genericas, Sustainability Analyst, Canaccord Genuity: Our companies need help with that. I could tell you that. Okay. Good. So IT modernization seems to be a stated goal of the current administrations.

Maybe you can talk about a little bit what you’re seeing there and whether or not that could help blunt any negative impact that you’ve seen in the beginning of the year.

John Wasson, Chair and CEO, ICF International: Yeah. So sure. So, you know, as I said, our our our federal business is about 45% of our business. So half of that 45% is IT modernization. So we’re basically helping the federal government modernize ancient systems forty, fifty years old and bring them into this century.

And that’s been a bipartisan area of focus and spend over the last three or four administrations, including the first Trump administration. I will say this time around, I think they have a very clear view of how they wanna go about that, and they will make significant investments, but they’re gonna do it their way. And so their way is they’re gonna leave with AI. They want AI to be at the forefront. They want it to be done in an agile way with rapid prototyping on commercial platforms, not complicated federal procurement rules, you know, you know, driving the process.

And they wanna they want automation. They wanna eliminate waste, fraud, and abuse. So they have a very clear vision of that. The good news for us is our IT modernization business we’ve built out in the last ten years, and I think it’s very aligned with that. We’re leading with AI.

You know, we we do 80% of our work in an agile framework. The significant majority of our work is either fixed priced or performance based, meaning very specific, you know, definition of what you need to deliver, which aligns with this administration. We have expertise around waste, fraud and abuse. So we think there’s opportunity there. That business has been down five to 10% this year more because of all the Doge reviews and this administration resetting the priorities.

We haven’t had any contracts canceled. We do certainly expect to return to growth on that piece of the business next year. You know, because I do think in some ways we’re aligned in a, you know, in the sweet spot of what this administration to do in that business.

George Genericas, Sustainability Analyst, Canaccord Genuity: Can you hire any of the Doge folks? I hear that some of them are. Maybe to

John Wasson, Chair and CEO, ICF International: We’re always looking for good people. I

George Genericas, Sustainability Analyst, Canaccord Genuity: know you have some business with the department of health and human services.

John Wasson, Chair and CEO, ICF International: Can you

George Genericas, Sustainability Analyst, Canaccord Genuity: sort of talk about what’s happening there and the programmatic work cadence?

John Wasson, Chair and CEO, ICF International: Yeah, you know, I think so. The other half of our federal business is more programmatic, leveraging our domain expertise, basically designing and implementing complex programs the government is, you know, required to to run or implement by legislation or because of their mission. And so the Department of Health and Human Services is our largest client, about 22% of our revenues. So we’re running, we design and implement public health campaigns, programs for CDC and NIH on chronic diseases, combating opioid abuse, vaping, you know Childhood obesity. Childhood obesity, you know, and so so that’s a a portion of it.

You know, brought more broadly across the government, we’ve run programs like the head start program early childhood education. We ran the energy star programs for energy efficiency. We’ve run various housing programs. And so, you know, in that part of the business with the, you know, shift in priorities and emphasis in the Trump administration, know, you we’ve been down well, in HHS, we’re down north of 25% this year given the contract cancellations and the shift in focus. As I said, I think we’ve taken that hit here in the first half of the year, and the pace of cancellations has essentially stopped.

So I think we’ve reached the floor, and then the issue here is, you know, how does it rebound going forward? And I think, you know, that will you know, obviously, we need to see how the budgets play out. I do think this administration is gonna wanna have some programs and emphasis in the health area. I mean, Kennedy is out there talking about childhood diseases, chronic diseases, you know, food additives, pesticides, food. Those are all areas we could support.

I think they just need to decide what exactly is they wanna do, and there’ll be opportunity for us. But as I say, kinda with that, you know, given the we have 57 55% of business growing worth of 15. You know, technology modernization returns to growth next year. Even if we’re down 10 or 15% in that programmatic piece, we’ll still be growing next year. And so, you know, I think we we certainly have confidence we we can return to growth given, you know, the significant opportunity in a larger half of the larger component of the business.

George Genericas, Sustainability Analyst, Canaccord Genuity: So I think the message here is that ICF is a growth company and 2025 is just an outlier.

John Wasson, Chair and CEO, ICF International: We’d to say transition year. Yeah.

George Genericas, Sustainability Analyst, Canaccord Genuity: Maybe last question just sort of talk about the the margin trajectory. I think you guided for margins, EBITDA margin, say, flat this year. Maybe talk about the investments you’re making and how we should think about those margin improvements over the next couple of years.

John Wasson, Chair and CEO, ICF International: You know, so on the margin front, we did guide to to maintain our margins even with all the changes going on in the in the federal arena and cutbacks we’ve seen. We’re actually, I think, running I mean, in the second quarter, we were 20 bps ahead of our margins for last year. So I think part of that is the mix. We’re seeing very significant growth in the commercial energy. Our commercial business tends to be 25% more higher margin than our our public sector business.

You know, we also took steps to rightsize our our infrastructure this year given, you know, the shifts in the business. I think we got out in front of that. And so I think as we look forward, we would expect to continue to, you know, the margins continue to increase. You know, we we look at that from an adjusted EBITDA revenue perspective. We’ve been adding 10 to 20 bps for years.

I think we can certainly continue to do that as we go forward.

George Genericas, Sustainability Analyst, Canaccord Genuity: That’s a great place to stop. Thank you for joining

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