Q2 2025 ICF International Inc Earnings Call
Welcome to the second quarter 2025 ICF earnings conference call. My name is Lauren Cannon and I will be your operator for today's call.
After the speaker's presentation, there will be a question-and-answer session.
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Please be advised that today's conference is being recorded.
Joining them is James Morgan, Chief Operating Officer.
during this conference call, we will make forward-looking statements to assist you in understanding icf's 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 July 31, 2025, press release and our SEC filings for the discussions of those risks.
In addition, our statements during this call are based on our reviews as of today. We anticipate that future developments will cause our outlook to change. Please consider the information presented in that light. You may at some point choose to update the forward-looking statements made today, but we specifically disclaim any obligation to do so.
I will now turn the call over to ICM. CEO John Watson to discuss second quarter 2025 performance.
John, thank you. Lynn, and thank you all for joining us today to review our second quarter results and discuss our business outlook. I am pleased to report that we executed effectively in the second quarter, with results benefiting from our diversified client base and demonstrating our agility in adapting to changing market conditions.
There were several key takeaways worth noting.
First second quarter Revenue was generally stable with first quarter levels in line with our expectations.
Revenue from our commercial state and local government and international government clients that increased 13.8% in the Aggregate and accounted for 57% of our second quarter of revenues.
Second within this client said, revenue from Commercial Energy, clients remained robust, increasing 27% year-on-year. Thanks to continued strong demand from our utility, clients for our Energy, Efficiency programs.
And ICS.
Management, electrification and grid resilience.
Third, we expanded our adjusted ibid dot margin by approximately 20 basis points year on year.
Able business mix and cost management initiatives.
And forth. We only experienced an additional $2 million impact on our 2025 revenues from contract cancellations in the U.S. federal market.
And in the past month, we began to see a pickup in federal procurement activity.
Taken together with our strong second quarter book to Bill ratio of 1.3. These factors give us confidence in a more positive business outlook for 2025.
Taking a closer look at 2025 business Trends revenues from commercial clients, increased 25.2% in the second quarter led by the 27% increase in commercial energy that I just mentioned.
This growth was driven by new and expanded Energy, Efficiency rectification, flexible load management and customer engagement programs for utility clients as they address rapid load growth.
I see if this is the market leader in designing, developing, and implementing residential energy efficiency programs, and we are progressively gaining share in the commercial energy efficiency market as well.
These Energy, Efficiency, programs will be sent to the core of our Commercial Energy work. And as a reminder, they are funded by a small S charge on rate. Payers studied by public service commissions and over 30 States.
Over the last 20 years icf's track record of meeting or exceeding Energy. Savings goals of our clients has enabled us to significantly increase our utility client base.
And as we've built out our capabilities, we have been able to considerably expand the scope of services. We provided these clients,
Allowing us to capture a larger share of a growing market.
We believe that the demand for Energy Efficiency and other demand side management. Programs will expand into more States and be relied upon even more in the coming years with the unprecedented demand for electricity associated with the construction of data centers.
We've already seen early signs of this in several States. I said this working in including New York, Georgia and Illinois.
Our energy advisory practice saw a sequential Revenue increase led by a recent increase in Grid, engineering projects, and new business wins in the second quarter and included. A broad range of activities including grid transformation, planning fuel, constraint analysis, price forecasting, renewals development and m&a support.
Additionally, we have seen an uptick in activity since passage of the 1, big beautiful Bill and anticipate an increase in development in m&a. Activities over the next 6 to 18 months. Now the regulatory uncertainty has been eliminated and developers seek to meet Safe Harbor deadlines associated with expiring tax credits for projects already underway.
These spring strong demand for environment and planning services for commercial clients. In the second quarter driven by growth and renewal in transmission permitting. And construction monitoring Wildlife restoration and new Awards in additional work areas.
This included a new project to increase mineral extraction by developing. The first ever environmental impact assessment for a coal facility associated with the January 2025 executive order, directing federal agencies to accelerate critical energy infrastructure projects
The current pace of our work for utility clients and energy developers together with the opportunities we see on the horizon, underpin our confidence that we will see sustained growth in commercial energy for the foreseeable future.
Revenues from state and local government clients are expected to increase by 1% in the quarter. Disaster management, which represents about 45% of this client category, is an area where ICF is currently supporting 90 disaster recovery programs in over 20 states and territories, with the largest programs located in Puerto Rico and Texas.
Late last year, we appropriated nearly $11.9 billion in CDP CDBG-DR funding to enable long-term recovery from disasters declared in 2023 and 2024. In January 2025, HUD released these funds to 46 states and localities.
We are actively positioned to compete for this work, and we expect decisions and additional procurements to take place in the second half of this year.
Additionally, in response to uncertainty with respect to the future role of FEMA, ICF has been actively developing an approach and delivery model to provide disaster recovery and support the state and local governments to create a responsibility shift from the federal to the state and local levels.
Growing opportunities for environmental business are arising from changing federal priorities and increasing state-based environmental initiatives.
As federal efficacy on environmental protection declines.
We are seeing many states increase their efforts to fill the gap.
Creating opportunities for ICF and state planning rule making stakeholder engagement permitting and compliance.
Moving to international government.
Reporter revenues increased 2%.
Representing a slow ramp-up of our recent sizable contract.
We were pleased to see a pickup in new task orders being issued under these contract vehicles towards the end of the quarter, which will benefit our revenues in the second half of this year as well as in 2026.
Despite the delayed activation of work in the international government Arena, ICF some revenues from commercial state and local government and international government clients are on track to increase approximately, 15% this year and we'll represent over 55% of our 2025 total revenues
Now, to our revenue from federal government clients, which declined at 9.8%, sequentially representing a 25.2% reduction from last year's. Second quarter.
As I mentioned earlier, the dollar amount of our total 2025 federal revenues that has been impacted by contract cancellations was made stable with our last report on May 1st of this year. As of today, July 31st, that number stood at $117 million—only $2 million more than we reported on May 1st.
This is not including the impact of the slower pace of the program.
Procurement activity that is also effective. Our federal revenue comparisons.
As we await final decisions on the reorganization of the Department of Health and Human Services, we continue to support our clients public health programs. For example, cdc's biosense syndrome and surveillance system and the national program of cancer. Registries likewise, we continue to build the database of substance abuse and mental health treatment facilities, helping families in crisis, find care.
And our scientists review, studies and results for inclusion and clinical trials.gov. So people needing treatment, might more easily find a clinical tile
Recently we've also begun to see new opportunities come out from the health resources and services Administration from NIH. The administration for children and families and CDC.
We believe our expertise in key areas such as nutrition, obesity, suicide prevention, cancer research, and the health risks associated with the use of pesticides, chemicals, and food additives are essential, as well as for future opportunities.
In IT modernization in the federal arena, while the pace of new opportunities in contracts and modifications has slowed this year,
second quarter, procurement activity, was up from T1 and that trend is expected to continue continually in Q3
This improving procurement momentum. Combined, with our skills of positioning gives us confidence that this portion of our federal business will return to growth in 2026.
ICF is well, positioned to respond to the needs of
and we will leave our differentiated.
The building agile flexible and lean engineering and product teams allows us to deliver value by quicker and more efficiently than competitors. And as the federal government continues to shift, it modernization procurements towards outcome based Contracting. That is deliverable based and, or fixed price.
ICF can easily adapt to these changes and support our clients in the transition. Approximately 80% of the work we currently perform in this area is done in Agile scrums and sprints, and at least half is under a fixed-price for outcome-based contracts.
Further to help address the pressure for federal agencies to modernize quickly, improve service delivery, and operate more efficiently, this month we are introducing ICF Fathom, a new suite of tailored artificial intelligence solutions and services designed specifically for federal agencies.
This is a production ready solution that can integrate seamlessly into existing systems at scale to unlock the full potential of AI to support Mission outcomes.
I see a fathom is built on proprietary platform and offers a suite of tailor Solutions and services and includes a set of intelligent.
AI agents that can be directly and securely embedded into existing workflows and infrastructures.
The Agents, automate complex tasks support, informed decision-making, reduce waste and boost productivity.
Cybersecurity, document processing, grants management, and regulatory analysis.
Our early discussions with clients have generated considerable interest in pilot programs, and we look forward to providing updates on our progress in the coming periods to sum up. We are pleased with our second core performance, as it was in line with our expectations, demonstrated sequential stability, and reflected its agility in managing through a dynamic environment.
Now, I'll turn the call over to our CFO Barry. Brought us to finance review.
Thank you, John. Good afternoon, everyone. I'm pleased to provide you with additional details on our second quarter of Finance performance. Revenues in the quarter were $476.2 million.
Down 2.4% from the first quarter. And the line with our expectations
From a year-over-year basis, total revenues declined 7%, or 4% when you exclude subcontractor and other direct costs.
Compared to the second quarter of 2024 revenues from our commercial state and local and international customers grew 13.8% and accounted for approximately 57% of total revenues up from 47%. A year ago.
This performance was led by revenues from our Commercial Energy clients, which increased 27% reflecting the robust demand from utility clients.
for our extensive domain expertise and
Implementation capabilities.
The continued strong growth in revenues from our non-federal government clients offset a significant portion of the 25.2% year-on-year decline in federal revenues, which is primarily due to contract funding adjustments and delays in federal program and procurement activities, as John mentioned in his remarks.
While the federal government business environment continues to evolve, our outlook for this client category has approved. Since our first quarter call, as we have not experienced a significant increase in contractor terminations and we have begun to see some positive movement with contract, modifications funding and pipeline opportunities more recently.
Our book, the bill for the quarter, was $1.3 billion, which included an uptick in federal sales, with the majority of the federal new wins generated from recompete and contract modifications.
Subcontractor and other direct costs declined 15.5% year-over-year and represented 23.6% of total revenues, down 240 basis points from the second quarter of 2024. This decline was primarily due to lower pass rates in the Federal Business. As a result, a higher percentage of our revenue was tied to ICF direct labor, which generates higher margins.
Our second quarter, gross margin expanded 160 basis points to 37.3% as compared to the second quarter of last year. This increase in gross margin was trivial to 3 main factors, First Direct labor, as a percentage of total. Direct billable costs increase by 270 basis points as compared to the same period last year as we continue to transition to a higher percentage of Revenue, being driven by direct labor. As I previously noted, additionally, the continued expansion of our higher margin Commercial Business account for approximately 1/3 of our second quarter revenues compared to 24% last year. And finally, we continue to see the favorable shift in our contract, mix as fixed price in tnm contracts. Now, represent approximately 93% of our total revenues up from 88% in the prior year quarter while our cost reversible contracts account for less than 7% of total revenues.
Indirect and selling expenses to clients were $123 million, representing 3.2% and 25.8% of total revenues. We are closely managing our indirect costs while continuing to selectively invest in growth markets, expanding our capabilities in AI and other technologies, and implementing more efficient and effective front and back office systems and tools. These investments will help us scale efficiently as revenues rebound.
Hippo is $53.1 million versus $55.6 million in the second quarter of 2024 while adjusted. But it was $52.9 million compared to $56 million in the prior year. In the second quarter, adjusted EBITDA margins expanded 20 basis points to 11.1%, reflecting our gross margin expansion.
Second quarter, net interest expense was 8.4 million compared to 7.7 million in the comparable period last year due to higher debt balance.
The higher debt balance was due in part to our acquisition of 8 and December of 2024. We also repurchased an additional 11 million shares during the first half of this year, as compared to the prior year, as well as funding seasonal, working capital needs. Mainly in the first quarter of this year, our tax rate was 21% below the 26.3% reported last year as we continue to realize benefits from our tax optimization efforts.
6 million includes DPS with dollar 36 and last year's second quarter.
Non-gaap EPS totaled, a166.
which was slightly below the $0.69 reported one year ago.
Backlog at the end of the second quarter was $3.4 billion, which incorporates, here today, contracts, cancellations, and other changes in the administration's priorities. Fifty-four percent of our backlog is funded, reflecting the stability and long-term visibility we have in the business.
At quarter end, our new business pipeline, remains healthy at 9.2 billion.
Operating cash flow in the second quarter was 52 million and 18.9 million on a year-to basis. Our second quarter results were represented in Improvement of approximately 85 million from the first quarter of 2025 this Improvement, reflects the continuing success of our cash management initiatives.
Day sales outstanding were 80 Days down to 1 de sequentially and capital expenditures were 9.2 million down from 10.4% prior year quarter.
Debt. At the end of the quarter was 462 million as we reduced our debt by approximately 40 million in the second quarter. This reflects our strong cash flow generation and supports our plan to meaningful that you reduce debt by year end and position. ICF. For future acquisition activity, approximately 38% of our debt is set at a fixed rate up to 35% in the first quarter of this year, we expect to continue to to, uh, improve on that fixed rate.
As a product, we expect approximately 50% of our debt will be fixed at a fixed rate by the end of the year. Our adjusted leverage ratio was 2.1 times at quarter end compared to 2.25 times at the end of the first quarter absent. Any acquisition activity we expect our leverage positions decreased by about a half a turn by year end.
We maintain our balance approach to Capital allocation position to paying down debt. We remain focused on funding organic growth initiatives, expanding our capabilities and service offerings. Especially those infused with AI pursuing, strategic Acquisitions, maintaining our quarterly dividend and executing opportunistic. Share repurchases alongside our standard buyback program designed to offset the solution from our employees stock programs. Today, we announced our quarterly cash dividend
In 14 cents per share, payable on October 10, 2025, to shareholders of record on September 5, 2025.
we are maintaining our prior expectations for the following metrics for full year 2025
Our depreciation and amortization expense is expected to range from 21 to 23 million.
Amortization of intangibles is expected to be 35 to 37 million. We anticipate the interest expense rates from 30 to 32 million. We continue to expect a full year. Operating cash flow to be approximately 150 million.
Capital expenditures are anticipated to be approximately $26 to $28 million for the full year. The tax rate is expected to be approximately 18.5%. We expect the fully diluted weighted average share count to be approximately 18.6 million shares.
Million shares. With that, I'll turn the call back over to John for his closing remarks.
Thanks, Barry. As we noted in our earnings release, the r maintaining the guidance framework for 2025 that we provided at the time of our fourth quarter 2024 earnings release but our this is Outlook has improved since then.
Based on our year-to-date results and current visibility.
We do not foresee fully your revenues.
This 1 by as much as 10% from 2024 levels, which was the floor indicated by our original guidance.
To continue to expect 2025 adjusted, even though margins are likely to be similar to those of 2024, and our GAAP and non-GAAP EPS are likely to be at the higher end of our guidance framework.
This guidance framework does not contemplate and extensive government shutdown. This year, Nora prolonged period of process and funding modifications to existing contracts or new procurements.
Increased confidence and ICS 2025 year-on-year comparison is underpinned by our expectation for continued robust demand from our commercial energy clients, stable revenues from state and local government clients, and the increasing ramp-up of recently awarded contracts by international government clients. This is together with the agility and resourcefulness that we have demonstrated to date in serving our federal government clients.
We are looking ahead to ICS's return to revenue and earnings growth in 2026, supported by continued growth from our non-federal government clients.
Improvement from portions of our federal government business and the continued support of our professional staff, who have shown tremendous commitment to ICF and to our clients, has been instrumental in helping us manage through challenging industry conditions.
With that operation operator, please open the call to questions.
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press Star 1, 1 on your telephone and wait for your name to be announced.
To withdraw your question. Please press star 1 1, again please, stand by while we compile the Q&A roster.
Our first question comes from the line of Sam custom with William, Blair. Your line is now open.
Hey, thanks for taking our questions here. Uh, I think I'll stick around more on the backlogs. My question is, um, you know, I believe your reference to having a backlog is $3.4 billion, which was down year-over-year but flat sequentially. In recent quarters, both before and after the creation of Doge, you referenced several large government contract wins that I believe are still in that backlog. Can you give us a sense of the mix of federal work in your backlog and how you're thinking about timing and visibility into those contracts?
Sure Sam. Uh, thanks for the question. Yeah, so from a backlog perspective, you know our, our federal uh government uh, backlog is um you know has the majority of the backlog.
And, you know, it is about, um, in a neighborhood of, of half the backlog, maybe a little bit more.
And then, you know, the rest is divided among the state, local, and commercial.
You know, client base.
Uh, okay. Um, uh, maybe another way to ask to, you know, we've been hearing that the federal government has been a bit slower to convert, uh, a word contracts, that, you know, have been funded, uh, into actual task orders. Uh, so the contract Awards look good, uh, the translation into actual work and revenue has has been a bit slower. I guess, is that something that you're also seeing it all on your end? Uh, kind of as we enter this this budget flush season uh the federal government's fourth quarter.
well, you know, I I would say that, you know, from a
A tournament, you know activity perspective. Yeah, I I would say that, you know,
The new procurement certainly has has slowed, you know, and we're just getting back on track with, you know, contract modifications, you know, additional funding, you know, extensions Etc, like that. I would say that, you know, with you know,
Those type of activities, you know, we're we're seeing, you know, what, I would consider a normal battle Rhythm, uh, you know, activations and and getting to work there. There have been some slowdowns, um, you know, as the various agencies, you know, you know, figure out what their priorities are and and get to work. But I, I would say that we haven't really seen a Slowdown, you know, once we get the contracts, um, you know, activated and online.
You know, to to do the work. Um,
you know, so
I've seen a significant drop off on that respect.
Great. Well, uh, we'll leave it there. I appreciate the color.
Thank you.
Our next question comes from the line of Kevin Stinky with Berrington Research Associates. Your line is now open.
Thank you. Uh, so you referenced a pickup in federal government activity in the last month or so. And also.
Um, expected improvements from parts of the federal government business in 2026. I just wondering if you could
Parts of, uh, the client set or, you know, program level where you're seeing the improvement, uh, the pickup and the, you know, the expected improvement, whether it be, you know, IT modernization, health, or elsewhere.
Sure. Kevin um, this is John so, you know, I guess I would just start by reading others who are pleased to see that. You know, the contract cancellations of flattened out here and we didn't really see a material increase their in Q2 across our federal clients. That I would say that certainly, you know, in Q2 here we've seen a pickup in um in you know, modifications and plus UPS on contracts. Um, and I would say we've seen those, you know, broadly across our clients. That certainly, I think the technology showed the first signs of that and it's been, you know, leading the way. But we've also seen a pick up
Across our program, the Complex Program Management, our domain is Consulting.
As we got leader in the Q2. And so we we have seen progress as I said with modifications and, and plus ups. And then on the awards, front on the RFP front.
I mean, again, I think the
Um, the technology area is modernization.
And certainly, uh, you know, shown more life and we're seeing more green shoots there. Um, and that, you know, that we saw that in that area first, um, although most recently, we've also seen a few green shoots, in our
Complex program management.
Opportunities. I think as we look to 2026.
Certain we would expect the federal technology area to return to growth.
Given.
You know, the priority this administration and the
The focus. Um,
On technology modernization and the use of AI.
And we would expect to return to growth in that business.
in 2026, you know, I think the
Complex program management in the domain of consulting has certainly been more challenged.
that it could perhaps take more longer there but we're certainly um,
You know, I'm optimistic about the future.
and have confidence that we can return to growth on the
the federal technology side next year.
Okay, thank you. And um,
As you talked about in the, the, your outlook section, you don't see, uh, fully your 2025, revenues declining. By as much as 10% from 2024, if it's, you know, just, I don't know if there's any more color, you can provide on
How much higher have you raised the floor there? You know, in terms of the potential decline, are we trending more towards the midpoint? Or, you know, I don't know if there's...
Again, any additional color, you could provide on that.
yeah, you know, I'd say that um well I guess
First, I remind you, I mean, when we, you know, obviously, when we gave our guidance, um,
February 2025 was a very dynamic month.
Environment. And, you know, we we obviously indicated at the bottom, end of the range was minus 10%.
Across the key financial metrics, that was really meant to be a floor, you know? I think we shared our analysis of the.
the maximum downside risk at that time, the federal Club
and I think we said it was a, you know, it was a, a floor and we really were
Setting it. So we did not have to come back to investors. They didn't here with a bigger number and so
No, I think based on the based on the visibility we have. And you know what we've seen here in Q2, um we certainly don't think we're going to decline by
As much as 10% from 2024 levels. I mean, I think it's a little too early for us to hone a specific number on that. And you know, it's Q2; there's still risk. We're waiting to see how the 2026 budget shakes out.
You know how the continuing resolution plays out. There's a lot of changes going on with the federal government here, man. So, you know, I think more to come in in future calls, I don't think I'm ready to
Give me a specific number. I think we'll certainly come in less than.
10% down. And as we said on the earnings side,
you know, I think we'll be at towards the high end of our range there given the
The strong growth in our Commercial Energy business, and the strong.
Cost management we've had. And so, um,
I think I'm going to leave it there in terms of
any more color on it.
Okay. Yeah, understood that makes sense. Thanks for taking the questions.
Thank you.
Our next question comes from the line of Mark, Riddick with sidoti, your line is now open.
Hey, good evening, everyone.
Wanted to touch a little bit on. Um, maybe you could share what you're seeing with uh, state and local activity specifically. Um, are we seeing are we beginning to see uh, any shifting of of, UH, responsibilities slash dollars from from federal? That's that's talked about as much. And if so maybe we could, uh, touch on maybe a few highlights or points to where you might be seeing that, whether that's in Services particular services or particular geographies where you're where you're beginning to see some some activity at uh along those lines.
you know, obviously there's been a lot of
Discussion. And
Discussion around the future role of FEMA and what the impacts of the FEMA's role would be on.
A future disaster recovery. And what the federal over state or local will be? Um, and let me just say unequivocally, I don't have a crystal ball.
But you know, where any of this is going to land, when they, I guess, I have a couple observations for you first, you know?
With all the speculation going on. Um,
And we have not seen a, a decrease in federal funding, certainly authorized for FEMA programs.
And you know, there hasn't been
um, a discernable decrease in the number of
Federal disaster, declaration approvals. Now, all the approvals are moving more slowly and
We did have one recent request in the state of Maryland.
We haven't seen a, in terms of the day-to-day operations, you know.
the disaster's on the way we haven't, we haven't seen a
shift.
In how how the work is, is being done. Um,
And so, you know, I think that um, and you know, there's the funding on this. I mean, you know, in the lame duck session at the end of 2024
you know, Congress did pass an additional
49 billion for the disaster relief fund. Um as part of the continuing resolution,
Um, for you know, storms in 23 and 24, you know, the disaster refund. And if you have a 14.77 dollar,
Um, balance right now. I talked about the cdbg Opportunity Center for the housing opportunities that are playing out.
And so, you know, I think that there will be opportunity for us there, um, you know, our business continues to, you know, quite active in the work we have.
and we're also, you know, preparing if if
There is a commission looking at this. If if in fact, more of the responsibilities pushed to the States, you know, I think we'll be in a good position to support them if I'm playing a larger leadership role. So, um,
and so, you know, I think
and so those discussions continue but you know the business day did Air Force right now 15 years and um
I think regardless of where it lands, there will be disasters and it will be disaster recovery and there will be funding for it.
and, you know, we will continue to
On the market leaders in that area.
Okay. And I was wondering, uh, shifting gears here. Maybe you could, uh, talk a little bit about the, the maybe what you're seeing as far as acquisition pipeline, that's that's out there available has that changed much since the beginning of the year, um, have have valuations and, you know, made any shifts and maybe sort of how you're feeling about what's out there today versus, you know, beginning of the year.
Well, you know, I would say that.
Is from an acquisition standpoint. First of all acquisitions is, you know, we
we've been inquisitive over the years and it's been a key element of our strategy and I think from a long perspective, it will remain that.
I think our Focus right now, you know, certainly
you know, we're
we're seeing tremendous growth in our Commercial Energy business.
um you know, remarkable leader in several aspects of what we do and I think we're taking a hard look at you know other firms that could bring
Potential acquisition targets, that could bring additional scale.
additional Geographic scope or client scope or would be
and if you know the next concentric circle out from the work, we do across
you know, to energy programs weaponization
If I speak consulting, environmental, and planning consulting for utilities. And so, we're taking a very hard look at that market. If the right opportunity came along, I think we've certainly sat down to seriously consider that. I think that market is experiencing.
I'm trying to change. There's a tremendous opportunity.
And I think more scale and more Geographic reach would be.
Very helpful to us. So I think that's our number 1 priority.
um, and we're we're we're out the market and we're looking um,
Federal.
I think we're unlikely to do anything in federal certainly this year.
Or early next year. There's still a lot of uncertainty certainly in the concepts. We serve
in terms of the budgets and, you know,
we're budgets and all that would land.
And, you know, procurement uncertainty, there's not a lot of activity.
Um, in the markets we're in.
And, you know, I think the valuations are, you know, uncertain and so I don't think we'll do anything in Federal in the near term. Um, um, you know, Disaster, Recovery. I think, again, I think there's a lot of uncertainty there. I do believe in the long run,
The frequency and severity of disasters is going to continue to increase.
and there will be funding, but
um, you know, but I think in the short run the, the uncertainty there is
Is pretty high. So that's a long-winded way. I think as we're pretty focused on.
On energy although it will certainly look at Disaster Recovery in other areas. Um,
if an interesting opportunity,
Great. And the last 1 for me, maybe you could you can swing back to, uh, your commentary here around uh, on Phantom. Maybe you could talk a little bit about the, um, maybe some of the competitive, uh, advantages and dynamics that you're looking at there that, uh, and and maybe tell us a little bit, uh, more about that roll out.
Sure. I mean, I think it's obviously, I think everyone on this call knows. I mean, this Administration is very focused on everything technology and then AI first approach to
to, um, you know, implementing technology in the federal government. Um, and so, you know, I think having Leading Edge, AI skills is absolutely, you have to have it, you know, they're very focused on
efficiency reducing waste Fraud and Abuse increasing automation.
And so, you know, the, the ICF fathom that I discussed is really, you know, our platform so that we can use genetic AI approaches to help modernize
Federal technology systems and to also develop an application to
support specific.
Areas that are critical to their to their mission in the port of what they do whether. Um, and so, you know, it's really because that's what we're really focused on. I think we've, um, would just again announcing it this week and they'll certainly be more
to come here in the in the coming weeks on it and we have been
Um we haven't gotten using this platform with several of our clients. I think it's it is allowing us to do rapid prototyping.
A very quickly.
In a natural way to, to demonstrate value very quickly. Um, you know, so the clients can get a, a very quick sense of what the power of AI could be in, in, in terms of their specific programs and and needs. Um, and so we're, we're pleased to to, uh, you know, finally get this launched and to be out of the market with it.
Great, thank you very much.
Thank you.
Our next question comes from the line of Toby summer with truist. Your line is now open.
hi, all its Henry on for to
Start on the procurement environment. Uh for this coming quarter. Do you guys see any risk? Uh, kind of on this this budget flush season from from lower Staffing levels for Contracting officers.
You know, I would say that um a couple of things here. First of all, I mean, I know you folks know, I mean, the third quarter is usually our strongest quarter for
Sales and you know, I would expect the third quarter will be seasonally. It's our best quarter and it seems the government fiscal year. I'm leaving. Certainly expect that to be the case this year, again, based on what we're seeing. I do think there is
To your point. There has been a lot of
um,
you know, folks retiring and and
and change of pure staff, and
Change, all the procurement front. And so I think there's risk there that, you know, that could
have some impact, I do think at the end of the day,
We?
still believe will have the third quarter will be a
quite a strong.
Of a sales quarter. But um,
but,
but,
but the, the question you question,
There is.
There is some risk there. I think the good news is we are seeing some pick up here, I mean we can see the rfps moving. Um, you know, we we can see new opportunities.
Entering the pipeline. So, um,
I have created some uncertainty.
That's it. Thanks for that caller and switching to the commercial energy side, you know, how how much do you see data centers, um, the growth there, you know, driving that, that, that segment growth kind of this year and maybe, you know, in some out years, um, you know, our, our utilities growth plans for data centers, kind of stabilizing now, or or do you see there was just forecast, kind of keep keep increasing.
I mean, I think that the the growth in electricity demand associated with
data centers in the next decade is unprecedented. I think I see.
of to put out a report looking at our views on what electricity demand is going to be in North America over the
through 2030 and I think 2050,
And I think it's an enormous step up, you know, enormous Step Up.
The demand for for how they're going to meet this load.
How it's going to be generated, it's going to be transmitted. You know, it's a transmission.
You know, how they're going to manage their businesses to meet it.
I mean it's pretty I'd say it's unprecedented and while it's certainly, the most significant driver. It's not the only driver. I think, with all this going on to meet this demand,
You know, the solution has to be, you know,
Every form of generation has to.
has to be maximized, you know, whether it's
you know, natural gas whether it
Um, you know, in the long run its nuclear its hydrogen it's it's Renewables. Its energy efficiency.
Um, you need all of above and you need it as as much as you can. And so, you know, I think in our view,
This is a long-term process. This is just going to be tremendous.
Opportunity in this sector because of that.
in addition to the data centers, you know, crypto require significant
Power generation to mine that you feel, you know, the economic growth.
And as part of this, the industry is also undergoing a change to a more distributed less centralized.
Structure which is also driving significant investment significantly change. So you know I think this is a
10 to 20 year, or more Challenge, and
It's going to create an enormous opportunity for...
survey, you know, in this industry.
Thank you.
I'm showing no further questions at this time. I would now like to turn it back to John Wasson for closing remarks.
Okay. Well thank you for participating in today's call. We look forward to connecting it upcoming conferences and events and have a good rest of the summer, the dog days of summer. Take Care. Thank you for your participation. In today's conference, this does conclude the program, you may now disconnect