ICFI 10-K & 10-Q changes, risk factors and insider trading

On an annual basis, Congress is required to approve appropriations bills that govern spending by each of the federal government agencies and departments we support. When Congress is, or Congress and the Administration are, unable to agree on budget priorities or specifics, and thus unable to pass annual appropriations bills on a timely basis, Congress typically enacts a continuing resolution. Continuing resolutions generally allow federal government agencies and departments to operate at spending levels based on the previous fiscal year. When agencies and departments operate on the basis of a continuing resolution, funding we expect to receive from clients for work we are already performing and for new initiatives may be delayed or canceled. Congress and the Administration have from time to time failed to agree on a continuing resolution, resulting in temporary shutdowns of non-essential federal government functions and our work on such functions. Failures by Congress and the Administration to enact appropriations bills in a timely manner can force federal government agencies and departments to shut down or to cancel, change, or delay the implementation of existing or new initiatives.initiatives, Such eventswhich may result in the loss of revenue and profit, or the deferral of revenue and profit to later periods. There is also the possibility that Congress will fail to raise the U.S. debt ceiling when necessary which, in addition to resulting in federal government shutdowns, could significantly impact the U.S. and global economy, affecting the discretionary spending decisions of our non-governmental clients and affecting the capital markets and our access to sources of liquidity on terms that are acceptable to us. TheWe have experienced delayed funding or shutdown of many parts of the federal government, including agencies, departments, programs, and projects we support, and such events in the future could have a substantial negative effect on our revenue, profit, and cash flows.

Budget compromises that may be needed for future fiscal years may continue to be extraordinarily difficult given the complicated grassroots political environment, a closely divided Congress, an increasing federal deficitdeficit, and debt load, and a challenged economy.load.

We derived approximately 43%, 54%, 55%, and 55% of our revenue in 2025, 2024, 2023, and 2022,2023, respectively, from contracts with federal government clients, and approximately 21%,24%, 21%, and 21% of our revenue from contracts with state and local governments and international governments in 2025, 2024, 2023, and 2022,2023, respectively. Expenditures by our federal government clients may be restricted or reduced by Administration or Congressional actions, by action of the Office of Management and Budget, or by action of individual agencies or departments, or by other actions from the DOGE advisory commission.departments. This may include impact to our revenue, profit, and cash flows as a result of changes by or changes in the priorities of the Administration. In addition, many state and local governments are not permitted to operate with budget deficits, and nearly all state and local governments face considerable challenges in balancing their budgets. Accordingly,Pursuant to the executive orders issued by the Administration and actions by the Department of Government Efficiency (“DOGE”), we received contract terminations and temporary stop-work orders primarily in the first and second quarters of 2025. We expect that, due to changing government budgeting and spending priorities, including necessary balancing of defense spending with civilian agency spending, and related disputes among Congress and the Administration, some of our government clients in the future may elect to terminate or issue stop-work orders with respect to our contracts or programs for which we perform services, delay payments due to us, eventually fail to pay what they owe us, and/or delay certain programs and projects. For some government clients, we may face a difficult choice: turn down (or stop) work due to budget uncertainty with the risk of damaging a valuable client relationship or perform work with the risk of not being paid in a timely fashion or perhaps at all. Federal, state and local government, and/or international government elections could also affect spending priorities and budgets at all levels of government. In addition, increased government deficits and debt, both domestic and international, may lead to reduced spending by agencies and departments on projects or programs we support.

As we develop new services, clientsclients, and practices, enter new lines of business, and focus more of our business on providing a full range of client solutions, the additional demands that such growth places on our management and staff, information and operational systems, and cash flow may adversely affect the quality of our work, our operating margins, and our operating results.

As part of our corporate strategy, we are attempting to leverage our advisory services to sell our full suite of services across the life cycle of a policy, program, project, or initiative and we are regularly searching for ways to provide new services to clients. In addition, we seek to extend our services to new clients, lines of business, and selectedselect geographic locations, including outside the U.S., and seekcapitalize outon new cross-border opportunities. As we focus more on our delivery of a full range of consulting services from advisory through implementation and attempt to develop new services, clients, practice areas, and lines of business, these efforts could be unsuccessful and adversely affect our results of operations.

We believe that one of the elements of our success is our position as a prime contractor under GSA Schedule contracts and other IDIQ contracts, and we believe this position is important to our ability to sell our services to federal government clients. However, these contract vehicles require us to compete for each delivery order and task order, rather than having a more predictable stream of activity during the term of a multi-year contract. In addition, we may spend considerable cost and managerial time and effort to preparepreparing bids and proposals for contracts, delivery orders or task orders that we may not win. We may be unable to continue to obtain revenue from such contracts at current levels, or in any amount, in the future. To the extent that federal government agencies and departments choose to employ GSA Schedule contracts and other IDIQ contracts encompassing activities for which we are not able to compete or provide services, we could lose business, which would negatively affect our revenue and profitability. There may also be changes in the manner in which the GSA approaches procurement under the various GSA Schedule contract vehicles and other IDIQ contracts that may impact our ability to pursue and obtain awards of new or recompete opportunities. Further, efforts to streamline procurement or reduce spending may cause agencies to delay, reduce, or cancel planned task orders (or shift work to other contract vehicles), increase the use of more price-competitive procurement approaches at the task-order level, or increase compliance and reporting requirements, which could reduce our revenue, compress margins, and increase our costs.

OurCertain contracts may contain provisions that allow our clients to terminate or modify these contracts at their convenience on short notice. IfWhen a client terminates one of our contracts for convenience, we will only bill the client for work completed prior to the termination, plus any commitments and settlement expenses that we may claim and the client agrees to pay, but not for any work not yet performed. In addition, many of our government contracts and task and delivery orders are incrementally funded as appropriated funds become available. The reduction or elimination of such funding can result in contract options not being exercised and further work on existing contracts and orders being curtailed. In any such event, we likely would have no right to seek lost fees or other damages. In addition, certainCertain contracts with international government clients may have more severe and/or different contract clauses than what we are accustomed to with federal and state and local government clients, such as penalties for any delay in performance. IfWe ahave clientexperienced wereclients toterminating terminate,contracts declineon short notices, declining to exercise options under, and/or curtailcurtailing further performance under one or more of our major contracts, and additional actions could adversely affect our revenue and operating results could be adversely affected.results.

We derive a portion of our revenue from contracts under which we act as a subcontractor or from “teaming” arrangements in which we and other contractors jointly bid on particular contracts, projects, or programs. As a subcontractor or team member, we often lack control over fulfillment of a contract. Poor performance on the contract, whether resulting from our performance or the performance of another contractor, could tarnish our reputation, result in a reduction of the amount of our work under, or termination of, that contract or other contracts, and cause us to not obtain future work, even when we perform as required. Moreover, our revenue, profitprofit, and operating results could be adversely affected if any prime contractor or teammate does not pay our invoices in a timely fashion, chooses to offer products or services of the type that we provide, teams with other companies to provide such products or services, or otherwise reduces its reliance upon us for such products or services.

As described elsewhere in this Form 10-K, we have three principal types of contracts with our clients: fixed-price, time-and-materialstime-and-materials, and cost-based. We derived 50%, 46%, 45%, and 45% of our total revenue from fixed-price contracts in 2025, 2024, 2023, and 2022,2023, respectively. The percentage of work we perform on a fixed-price basis may increase in the future based on changes to the procurement approach of our clients. Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur and, consequently, we realize a profit on fixed-price contracts only if we can control our costs and prevent cost overruns while meeting our contractual obligations.

Our commercial clients, which include clients outside the U.S., generated approximately 33%, 25%, 24%, and 24% of our revenue in 2025, 2024, 2023, and 2022,2023, respectively. This reliance on commercial clients presents certain risks and challenges. For example, our commercial work is heavily concentrated in industries which can be cyclical, such as: energy, air transportation,transportation and environmental services. Demand for our services from our commercial clients has historically declined when their industries have experienced downturns, and we expect a decline in demand for our services when these industries or their customer bases experience downturns in the future.

Federal government audits have been completed on our incurred contract costs only through 20192022 and 2023 for our NIH-cognizant indirect rates and through 2015 for our USAID-cognizant indirect rates, but audits for costs incurred on work performed since then have not yet been completed. In addition, non-audit reviews may still be conducted on all of our government contracts, even for periods before 2015.

We face a constant risk of cybersecurity threats, whether from (i) deliberate attacks or unintentional events, including computer viruses, attacks by computer hackers, malicious code, cyber and phishing attacks, and(ii) other electronic security breaches such as unauthorized access to our and our clients’ systems.systems, and (iii) emerging technologies, including AI, which pose increasingly harder-to-detect threats. Any of these could lead to disruptions in critical systems, unauthorized releases of confidential or otherwise protected information, and/or corruption of data. The so-called “insider threat,” the introduction of unauthorized data and changes into systems by employees and contractors, is an increasingly present risk to be managed.

As a federal government contractor, we face a heightened risk of a security breach or disruption with respect to personally identifiable, controlled unclassified information, classified,classified information, or otherwise protected data resulting from an attack by computer hackers, foreign governments, and/or cyber terrorists. Improper disclosure of this information could harm our reputation and affect our relationships with business partners, lead to legal exposure, or subject us to liability under laws, rules, and regulations that protect personal or other confidential data, resulting in increased costs or loss of revenue.

We have been the target of cyberattacks in the past and expect to continue to be a target in the future. As these security threats continue to evolve, including through the development and use of AI and other advanced machine learning, we may be required to devote additional resources to protect against, prevent, detect, and respond to cybersecurity attacks, system disruptions, and security breaches. Moreover, we also rely in part on third-party software and information technologyIT vendors to run our information systems. Any failure of these third-party systems, which are outside of our control but still impact us, could have similar adverse effects.

Impermissible use, misuse, or an improper disclosure of personal data or confidential information and breaches of, or disruptions to, our information technologyIT systems or those of our third-party providers, could adversely affect our business and could result in liability and harm to our reputation.

We and our vendors process increasingly large amounts of sensitive personal data (collectively, “Personal Data”) concerning our existing and potential employees, clients, client customers, vendors, or other third parties (collectively, “Data Subjects”), as well as handle confidential information on our clients’ behalf. Therefore, we must ensure that we, as well as our vendors, can comply and demonstrate compliance with the various countries’ and U.S. states’ privacy and data protection laws, rules, and regulations (collectively, “Privacy and Data Protection Laws”) in any location where we or our vendors process Data Subjects’ Personal Data. Privacy and Data Protection Laws often vary significantly, and the changes to existing laws and adoption of new, more rigorous laws occurs on an increasing basis. For example, the European Union’s (“E.U.”) General Data Protection Regulation (“GDPR”) requires us to meet stringent requirements regarding (i) our access, use, disclosure, transfer, protection, or other processing of Personal Data; and (ii) the ability of Data Subjects to exercise their related various rights such as to access, correct, or delete their Personal Data. The 2018 California Consumer Privacy Act (“CCPA”), which went into effect January 2020, imposes similar requirements. NewOver the last several years, many states have enacted new privacy lawslaws, inincluding Delaware, New Jersey, Maryland, New Hampshire, Tennessee, Minnesota, California, Colorado, Virginia, and otherVirginia. statesMore took effect in 2023, with othersare likely to follow. Several privacy bills have also been introduced in Congress. Key markets in the Asia-Pacific region have also recently adopted GDPR-like legislation, including China’s new Personal Information Protection Law. Failure to meet Privacy and Data Protection Law requirements could result in significant civil penalties (including fines up to 4% of annual worldwide revenue under the GDPR) as well as criminal penalties. Privacy and Data Protection Law requirements also confer a private right of action in some countries, including under the GDPR. We may incur substantial costs associated with protecting Personal Data and maintaining compliance with the various Privacy and Data Protection Laws, including restrictions on international data transfers, particularly in light of the increasing scrutiny by supervisory authorities. These costs could adversely affect our results of operations. In addition, any inability, real or perceived, to adequately address privacy and data protection concerns, or to comply with applicable Privacy and Data Protection Laws, policies, industry standards, or contractual obligations could result in additional cost and liability to us, damage our reputation, negatively impact our ability to win new contracts or process Personal Data in certain geolocations, and otherwise adversely affect our business.

Any interruption in our operations or any systems failures, including, but not limited to: (i) the inability of our staff to perform their work in a timely fashion, whether caused by limited access to and/or closure of our and/or our clients’ offices or otherwise; (ii) the failure of network, software, and/or hardware systems; and (iii) other interruptions and failures, whether caused by us, a third-party service provider, unauthorized intruders/ hackers, computer viruses, the use of emerging technologies such as AI, natural disasters,disasters or extreme weather events, power shortages, terrorist attacks, or otherwise, could cause loss of data and interruptions or delays in our business or that of our clients, or both. In addition, the failure or disruption of mail, communications and/or utilities could cause an interruption or suspension of our operations or otherwise harm our reputation or business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, revenue, profits, and operating results could be adversely affected.

The Board has authorized, declared and paid regular dividends each quarter since 2018. The declaration of any future dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to the discretion of the Board taking into account future earnings, cash flows, net income, dividend yield and other factors. Authorization of dividends by the Board is subject to adherence/compliance with our Credit Facility. The Board may, upon taking into consideration any of the foregoing or other relevant factors, decide to reduce the amount of, or not to declaredeclare, dividends in the future. To the extent that expectations by market participants regarding the potential payment, or amount, of any special or regular dividend prove to be incorrect, the price of our common stock may be materially and negatively affected and investors that bought shares of our common stock based on those expectations may suffer a loss on their investment.

In addition, the federal government and other governments with which we do business may change their procurement practices or requirements, or adopt new contracting laws, rules, or regulations that could (i) be costly to satisfysatisfy, or that could(ii) impair our ability to obtain new contracts and reduce our revenue and profit,profit (such as by curtailing the use of services firms or increasing the use of firms with a “preferred status,” such as small businesses.businesses), or (iii) impose restrictions or prohibitions on us which may impact our business or our ability to return capital to our shareholders (such as through dividends, share repurchases, or other similar actions).

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in Item 8.“Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions, such as statements of our plans, objectives, expectations, and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applying to all related forward-looking statements wherever they appear in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to our actual results differing materially from those anticipated include those discussed in Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This section of thethis Annual Report on Form 10-K generally discusses 20242025 and 20232024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 items and year-to-year comparisons between 2024 and 2023. Discussions of 2023 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023,2024, which was filed with the SEC on February 28, 2024,2025, and is incorporated by reference into this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our largest clients are U.S. federal government departments and agencies. Our federal government clients include every cabinet-level department, most significantly HHS, EPA,DoD, DoE, and DoS.DoT. Federal government clients generated approximately 43%, 54%, 55%, and 55% of our revenue in 2025, 2024, and 2023, respectively. The decrease in U.S. federal government revenue was primarily as a result of terminated contracts in 2025 due to the Administration’s changing priorities and 2022,the respectively.actions recommended by DOGE, as well as the disruption in the typical U.S. federal government procurement cycle. State and local government clients generated approximately 16%,17%, 16%, and 15%16% of our revenue in each of 2025, 2024, 2023, and 2022,2023, respectively. International government clients generated approximately 5%,7%, 5%, and 6%5% of our revenue in 2025, 2024, and 2023, and 2022, respectively.

We also serve a variety of commercial clients worldwide, including: airlines, airports, electric and gas utilities, health care companies, banks and other financial services companies, transportation, non-profits/associations, manufacturing firms, retail chains, and distribution companies. Our commercial clients, which include clients outside the U.S., generated approximately 33%, 25%, 24%, and 24% of our revenue in 2025, 2024, and 2023, and 2022, respectively. WeThe believeincrease thatin ourcommercial domainrevenue expertisewas andprimarily the program knowledge developed from our research and analytics, and assessment and advisory engagements further position usdue to providehigher acommercial fullenergy suitebusiness ofin services.2025.

A key element of our growth strategy is to pursue acquisitions. During the previous three fiscal years, we completed fourthe acquisitions summarized as follows:

We believe that the estimates, assumptions, and judgments involved in the accounting practices described below have the greatest potential impact on our financial statements and, therefore, consider them to be critical accounting policies. Significant accounting estimates are more fully described and discussed in “Note 2 - Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements”. of this Annual Report on Form 10-K.

For performance obligations requiring the delivery of a service or a product for a fixed price, we use the ratio of actual costs incurred to total estimated costs at completion (“EAC”) provided that costs incurred (an input method) represents a reasonable measure of progress towards the satisfaction of a performance obligation, in order to estimate the portion of total revenue earned. Contract costs that are not reflective of our progress toward satisfying a performance obligation are not included in the calculation of the measure of progress. We estimate the EAC by making certain assumptions and judgments such as the level of efforts from internal staff and/or subcontractors and cost of materials needed to complete the tasks. Our cost estimate is based on our prior experience and expertise in delivery of similar services, which allow us to make reasonable assumptions and estimates that are close to actual costs to complete the obligations; however, changes in the scope or complexity of work, availability of materials needed, or performance could cause a change in the EAC. We routinely review EACs for changes that could materially impact our measurement of progress toward completion of the performance obligations and adjust our revenue in the period that the changes occur. WhenFor aproduct-delivery contractcontracts EACin exceedswhich thetheir EACs exceed their contract value, we recognize the losslosses in the same period of determination. For the years ended December 31, 2025, 2024, 2023, and 2022,2023, our revenue from contracts in which we use EACs totaled $453.8 million, $479.7 million, and $310.1 million, and $287.4 million, respectively.

Our contracts may include variable considerations such as award fees and incentives that may increase or decrease the transaction price. The actual amounts are typically determined and awarded at the end of a performance period and the final awarded amount is based on achieving certain performance metrics, program milestones, or cost targets at the customer’s discretion. We estimate variable consideration primarily by using the most likely amount expected to be achievedmethod based on our prior history in providing the services to the customer or, if no history exists, we constrain the variable consideration until the initial determination by the customer.

Contract mixmix, which provides insight into the performance risks that we have assumed and, therefore, the predictability of our contract revenues and margins, varies from year to year due to numerous factors, including our business strategies and the procurement activities of our clients. Unless the context requires otherwise, we use the term “contracts” to refer to contracts and any task orders or delivery orders issued under a contract. There are three main types of contracts: time-and-materials contracts, fixed-price contracts, and cost-based contracts.

DecreasesRevenue. The decrease in revenue was driven by a reduction of $48.1$279.5 million from our U.S. federal government clients, primarily as a result of terminated contracts in 2025 due to the Administration’s changing priorities and $13.8the actions recommended by DOGE, as well as the disruption in the typical U.S. federal government procurement cycle. This decline was offset by increases of $117.2 million, $8.5 million, and $6.9 million from commercialour clients,commercial, respectively,international driven by lower pass-throughs from several U.S. federal contractsgovernment, and our exit from the commercial marketing business during 2023, offset by Increases of $6.3 million and $5.4 million from U.S. state and local government and international government clients, respectively.

DecreasesEnergy, Environment, Infrastructure, and Disaster Recovery client market revenues increased $44.7 million, or 4.8%, driven by increases of $34.8$106.8 million, $5.6 million, and $5.0 million from commercialour clients, driven by the divestiture of the commercial marketing and events business during fiscal year 2023, $1.4 million fromcommercial, international government clients,government, and $0.3 million from U.S. state and local government clients, respectively, offset by Ana increasedecrease of $19.6$72.7 million from our U.S. federal government clients.clients as described above.

Direct costs. The increasedecrease in direct costs was driven by additional direct labor and related fringe benefit costs of $44.9 million which reflected growth in the ongoing business, offset by a decrease of subcontractors and other direct costs of $27.9 million primarily as a result of ourterminated exitU.S. fromfederal thegovernment commercial marketing and events businesscontracts during 2023.2025. For the years ended December 31, 20242025 and 2023,2024, direct labor and related fringe benefit costs were 60.5%61.4% and 57.7%60.5% of total direct costs, respectively, and subcontractors and other direct costs were 39.5%38.6% and 42.3%39.5% of total direct costs, respectively. The total direct costs as a percentage of revenue was 63.5%62.8% for the year ended December 31, 20242025 compared to 64.4%63.5% for 2023.2024.

Indirect and selling expenses. The increasedecrease in indirect and selling expenses was due to additionala $8.9reduction of $21.8 million in general and administrative costs and $4.2 million in indirect labor and relatedassociated fringe benefit costs. The reduction in costs was a result of our cost-reduction and $4.4operational millionefficiency ininitiatives generalto andalign administrativeour costs.cost structure with current business conditions. As a percentage of total indirect and selling expenses, indirect labor and associated fringe costs were 71.0%73.9% and 71.1%,71.0%, respectively, and general and administrative costs were 29.0%26.1% and 28.9%,29.0%, respectively, for the years ended December 31, 20242025 and 2023.2024. As a percentage of revenue, indirect and selling expenses waswere 26.3% and 25.7% for the years ended December 31, 20242025 and 2023.2024, respectively.

AmortizationDepreciation ofand intangible assets.amortization. The decreaseincrease in amortization of intangible assets acquired in business combinations was primarily due to havingthe feweramortization of intangible assets primarilyacquired asin aour resultacquisition of AEG in the divestiturefourth quarter of our U.S. commercial marketing business in 2023.2024.

Interest, net. The decreaseincrease in interest, net was primarily due to our lowerhigher average debt balance of $513.3 million in 2025 compared to $474.0 million in 2024 compared to $613.5 million in 2023.2024. The average interest rate was 6.6%5.6% in 20242025 compared to 6.7%6.6% in 2023.2024. Interest from our debt facilities was $29.2 million for the year ended December 31, 2025, compared to $31.8 million for 2024. We utilize floating-to-fixed interest rate swap agreements to hedge the variable interest portion of our debt.debt, Ourwhich 2024decreased interest expenseby from$1.2 ourmillion debt was reduced byand $6.2 million fromfor the swapyears agreements,ended comparedDecember to31, $6.92025 millionand in2024, 2023.respectively. Our average interest rate inclusiveInclusive of the impact of the swap agreementsagreements, our interest rate was 5.4% and 5.3% for 2024years comparedended toDecember 5.6%31, for2025 2023.and 2024, respectively.

Provision for income taxes. The effective income tax rate for the years ended December 31, 20242025 and 20232024 was 20.2%18.2% and 14.4%,20.2%, respectively. The increasedecrease in provision for income taxes in 20242025 was primarily due to thetax favorablebenefits impactrelated to U.S. federal tax regulations promulgated under Section 987 of one-timethe Internal Revenue of 1986, as amended, which took effect in 2025 and which govern governing pre-transition period foreign exchange gains and losses derived from translation of operations, assets, and liabilities of non-U.S. qualified subsidiaries partially offset by valuations allowances established on certain equity-based compensation assets and excess foreign tax planning strategies implemented in 2023 which were not repeated in 2024.credits.

The following tables provide reconciliations of financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. (“non-GAAP”) to their most comparable U.S. GAAP measures (“non-GAAP”).measures. While we believe that these non-GAAP financial measures provide additional information to investors and may be useful in evaluating our financial information, they should be considered supplemental in nature and not as a substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define similarly titled non-GAAP measures differently and, accordingly, care should be exercised in understanding how we define these measures as similarly named measures are unlikely to be comparable across different companies.

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

These charges and adjustments are exitrelated coststo associateda withpreviously terminatedexited leasesleased orfacility full office closures thatwhich we either (i) will continue to pay until the contractual obligations are satisfied but with no economic benefit to us, or (ii) paid upon termination and cease-usethe closure of thecertain leasedinternational facilities.offices.

Includes pre-taxPre-tax gain fromrelated to the divestitures2023 divestiture of our U.S. commercial marketing business which includes contingent gains realized in the first and Canadianthird mobilequarters textof aggregation businesses.2024.

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

IncomeThe tax effects were calculated using the effective tax rate, adjusted for discrete items, if any,amortization of 20.2%,intangible 22.8%assets acquired from business combinations totaled $37.0 million, $33.0 million, and 28.0%$35.5 million for the years ended December 31, 2025, 2024, and 2023, and 2022, respectively.

Liquidity and Borrowing Capacity. Short-term liquidity requirements are created by our use of funds for working capital, capital expenditures, debt service, dividends, and share repurchases. We expect to meet these requirements through a combination of our cash and cash equivalents at hand, cash flow from operations, and borrowings. Our primary source of borrowings is from our Credit Facility, as described in “Note 108 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report on Form 10-K. As of December 31, 2024,2025, we had $541.1$550.0 million of unused borrowing capacity available under the Credit Facility to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program. Should the need arise, we intend to further increase our borrowing capacity in the future to provide us with adequate working capital to continue our ongoing operations.

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

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

At December 31, 2024,2025, our outstanding Credit Facility balance, net of unamortized debt issuance costs, was $411.7$401.4 million, which is expected to be refinanced prior to it becoming due upon maturity in 2027 upon maturity.2027. We borrow funds under the Credit Facility at interest rates based on both the SOFR (i.e., 1-,1, 3-,3, or 6-month rates) and a fluctuating Base Rate (see “Note 108 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report on Form 10-K). Assuming that our interest rate on the Credit Facility is the same as on December 31, 2024,2025, we anticipate our interest payments on the debt to be approximately $23.6$20.7 million in 2025, $23.6 millionannually in 2026,2026 and $6.2for millioneach inyear 2027 when our Credit Facility expires.thereafter. The estimates do not take into accountconsider future drawdowns and repayments on the debt or changes in the variable interest rate, and actual interest may be different.

As of December 31, 2024,2025, we have operating leases for facilities and equipment with remaining terms ranging from 1 to 1413 years. Our current and long-term operating lease liabilities of $176.7$158.7 million at December 31, 20242025 represent the present value of the minimum payments required under the non-cancellable leases, and the actual cash payments total $214.9$191.5 million. The operating lease payment obligations by year are further discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”. in this Annual Report on Form 10-K.

As of December 31, 2024,2025, we also have finance leases for equipment and furniture with lease payment obligations through 2029 as discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial Statements”. in this Annual Report on Form 10-K. The current and long-term finance lease liabilities at December 31, 20242025 of $13.9$11.3 million represent the present value of the minimum payments totaling $15.1$12.0 million.

CashNet cash provided by operating activities for the year ended December 31, 20242025 increaseddecreased by $19.2$29.7 million compared to 20232024 primarily due to the profitability of our contracts, our ability to invoice our customers and subsequent collection of cash, and the timing of vendor payments.

CashNet cash used in investing activities for the year ended December 31, 2025 was lower than 2024 increased by $71.1$53.3 million compared to 2023 primarily due to our acquisition of AEG during the 2024 fiscal year 2024.year.

WeThe used $86.9 million of cashchange in financing activities during the year ended December 31, 2024 compared to $152.6 million during 2023. The decrease innet cash used in financing activities was primarily due to reducedhigher net borrowings from our Creditdebt Facility, partially offset by an increasefacilities, in part to fund additional share repurchases during the 2025 fiscal year 2024.year.

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

DepreciationRevenue. and amortization. Depreciation and amortizationRevenue for the three months ended MarchJune 31,30, 2026 was $5.6$474.5 millionmillion, which was comparable to $5.3 million for the threesame monthsperiod ended March 31,in 2025. The following were changes in revenue from our various client markets:

The decrease of $1.9$1.6 million in amortization of intangible assets acquired in business combinations from $9.5$9.2 million for the three months ended MarchJune 31,30, 2025 to $7.6 million for the three months ended MarchJune 31,30, 2026 was primarily due to certain intangible assets previously acquired becoming fully amortized.

Interest, net. The decrease of $0.6$1.7 million in interest, net, was primarily due to lower average debt balance of $453.5$459.8 million for the three months ended MarchJune 31,30, 2026 compared to $514.3$542.2 million for the same period in 2025. Interest from debt facilities was $5.7 million for the three months ended MarchJune 31,30, 2026, compared to $7.3$7.8 million for the three months ended MarchJune 31,30, 2025. Use of floating-to-fixed interest rate swap agreements to hedge the variable interest portion of debt facilities resulted in an increase of interest by less than $0.1 million for the three months ended MarchJune 31,30, 2026 compared to a reduction of $0.7$0.2 million for the same period in 2025. The average interest rate for our debt facilities was 5.0%4.9% for the three months ended MarchJune 31,30, 2026 compared to 5.7% for the same period in 2025. Inclusive of the impact of the swap agreements, our interest rate was 5.1%5.0% for the three months ended MarchJune 31,30, 2026 compared to 5.1%5.6% for the same period in 2025.

Other expense. The decreasechange in other expense for the three months ended MarchJune 31,30, 2026 as compared to 2025 was primarily due to foreign currency expense in 2026 of $0.3 million compared to $1.0$1.6 million in 2025, partially offset by losses from disposal of assets of $0.5 million in 2026 associated with early exits from certain leased facilities.2025.

Provision for Income Taxes. Our effective income tax rate for the three months ended MarchJune 31,30, 2026 and 2025 was 25.1%17.8% and 10.5%,21.0%, respectively. AThe reconciliationdifference was primarily due to implementation of the Company’s statutory rate to the effectivestate tax rateplanning (thestrategies “ETR”)partially foroffset theby threevaluation monthsallowances endedon Marchequity-based 31,compensation 2026assets and 2025excess isforeign astax follows:credits.

Non-GAAP diluted earnings per share (“Non-GAAP Diluted EPS”) represents diluted U.S. GAAP earnings per share (“U.S. GAAP Diluted EPS”) excluding the impact of certainthe specific items noted above, amortization of acquired intangible assets, and the related income tax effects. While these adjustments may be recurring and not infrequent or unusual, we do not consider these adjustments to be indicative of the performance of our ongoing operations. We believe that the supplemental adjustments provide additional useful information to investors.

The amortization of intangible assets acquired from business combinations totaled $7.6 million and $9.5$9.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $15.2 million and $18.7 million for the six months ended June 30, 2026 and 2025, respectively.

Income tax effects were calculated using the effective tax rate, adjusted for certain discrete items, if any, of 25.1%17.8% and 10.5%21.0% for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and 21.1% and 23.1% for the six months ended June 30, 2026 and 2025, respectively.

Liquidity and Borrowing Capacity. In addition to cash and cash equivalents on hand and cash generated from operations, our primary source of liquidity is the Credit Facility with a syndicate of commercial banks, as described in “Note 5 – Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Quarterly Report. The Credit Facility requires that we remain in compliance with certain financial and non-financial covenants (as defined by the Credit Agreement, see “Note 85 -– Long-Term Debt” in the “Notes to Consolidated Financial Statements” in ourthis AnnualQuarterly Report for additional details). As of MarchJune 31,30, 2026, we remained in compliance with these covenants, and we had $512.4$586.4 million availableof unused borrowing capacity under the $600.0 million revolving line of credit and $400.0 million of unused delayed draw term loan facilities under the Credit Facility available to fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program. On April 10, 2026, we completed the refinancing of the Credit Facility, see “Note 15 - Subsequent Events” in the “Notes to Consolidated Financial Statements” in this Quarterly Report.

We have entered into floating-to-fixed interest rate swap agreements for a total notional value of $175.0 million to hedge a portion of our floating-rate debt under the Credit Facility. The interest rate swaps will expire in 2030, but we may consider entering into additional swap agreements prior to the expiration of these existing hedges. As of MarchJune 31,30, 2026, the percentage of our fixed-rate debt to total debt from ourthe Credit Facility was 40%.43%.

Dividends. We have historically paid quarterly cash dividends to our stockholders of record at $0.14 per share. Total dividend payments during the threesix months ended MarchJune 31,30, 2026 were $2.6$5.1 million.

Cash Flow. The following table sets forth our sources and uses of cash for the threesix months ended MarchJune 31,30, 2026 and 2025:

Net cash usedprovided by our operations during the six months ended June 30, 2026 increased by $77.7 million compared to the same period in operations decreased by $29.9 million,2025 primarily due to higherlower cashtaxes collectionsand frominterest customerspayments and timing of paymentcash ofadvances vendors.related to certain energy incentive programs.

Cash providedused byin financing activities decreasedfor the six months ended June 30, 2026 was higher than the same period in 2025 by $25.9$31.5 million primarily due to lower net borrowings fromand payment of costs related to the refinancing of our Credit Facility and short-term borrowings,Facility, partially offset by reduced share repurchases.