• Revenue: $487.6 million, a decline of 1.4% year over year.
• Commercial Revenue Growth: Increased 22.1%, accounting for 29.5% of total revenues.
• Commercial Energy Revenue: Increased 21% year over year.
• Adjusted EBITDA Margin: Expanded 10 basis points to 11.3%.
• Non-GAAP EPS: Increased 9.6% to $1.94.
• Net Income: $26.9 million, slightly below last year's $27.3 million.
• Gross Margin: Expanded 80 basis points to 38%.
• Interest Expense: Declined to $7.3 million from $8.2 million in the prior year.
• Tax Rate: 10.5% in the first quarter, with a full-year expectation of 18.5%.
• Backlog: $3.4 billion, with $1.9 billion funded.
• Net Debt: $499 million, up from $475 million in the prior year.
• Share Repurchases: 313,000 shares for $35 million.
• Operating Cash Flow: Consumed $33 million due to seasonal working capital needs.
• Capital Expenditures: $3.5 million, down from $5.2 million a year ago.

• Warning! GuruFocus has detected 2 Warning Sign with TRUP.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ICF International Inc (NASDAQ:ICFI) reported first-quarter revenues in line with expectations, demonstrating the strength of its diversified business model.
• Revenues from commercial energy clients increased by 21% year over year, driven by strong demand from utility clients.
• Adjusted EBITDA margin on total revenues expanded by 10 basis points to 11.3%, reflecting effective cost management.
• Non-GAAP EPS increased by almost 10%, outperforming first-quarter revenue comparisons.
• The integration of AEG, acquired in late 2024, was completed successfully, enhancing ICFI's capabilities in energy technology and advisory services.

Negative Points

• Revenues from federal clients declined by 12.6% compared to the previous year's first quarter, impacted by contract funding curtailments and a slower pace of new RFPs.
• Approximately $115 million of estimated 2025 revenues have been affected by stop work orders and contract terminations.
• The IT modernization business is expected to decline by 5% to 10% for the year due to delays in awards and procurement processes.
• First-quarter revenues declined by 1.4% year over year, attributed to one less workday and a decrease in US federal government pass-throughs.
• The backlog was adjusted to account for terminated federal government contracts, impacting it by approximately $375 million since the beginning of the year.

Q & A Highlights

Q: With the visibility into the business today, is it still your expectation that the second quarter will be the peak impact from federal government changes, or has your outlook changed? A: John Wasson, CEO: The federal environment remains fluid. We expect continued activity over the next several quarters, but Q2 and Q3 will likely see similar impacts as Q1, not significantly more.

Q: Can you update us on the termination of convenience figure, which was $276 million in February? A: Barry Broadus, CFO: The number is now about $375 million. This figure is spread over multiple years, not just this year, as contracts typically range from three to five years.

Q: What is your expectation for the IT modernization business this year, given the government's critical eye on software and IT contracts? A: John Wasson, CEO: We expect the IT modernization business to be down 5% to 10% this year due to delays in awards. We haven't seen material cuts in contracts, but the pace of new opportunities is slower.

Q: Does the guidance for the commercial energy business imply similar metrics for revenue and margins as seen in this quarter? A: John Wasson, CEO: Yes, commercial energy is expected to continue as an outstanding performer with strong margins. We anticipate similar growth throughout the year.

Q: Could you provide insight into the pace of award activity and how it compares to pre-administration changes? A: John Wasson, CEO: We've seen a pickup in activity, especially in modifications to existing contracts and recompetes. However, new opportunities are still lagging behind pre-administration levels.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.