Appreciate it. We're back at Cantor's Technology Conference with the Government and Technology and Space track. I'm Colin Canfield, Cantor's Government Technology Analyst and Space. Today we have John Wasson, Chief Executive Officer and Chair of ICF, as well as Dave Burke, SVP of Digital Modernization and Experience. Thank you for coming. Our pleasure. Thanks for having us. It's great to be here. Of course, of course. We assume that investors have all read the forward-looking statements. As a former IR, you know, gotta make sure that stuff's clear. Let's dig into it in terms of Q&A. Great. I think the key thing that people are focused on, right, is what are the efficiency impacts? If you can maybe talk about what are the latest government efficiency impacts on your business, how are those impacts tracking in the quarter, and how does that impact vary by end market exposure? Sure. Great question. I think for ICF, the primary impact has been in our programmatic work for the U.S. federal government. We work primarily for civilian clients, which account for about 25% of our total revenues in this programmatic area. We had our earnings call last week. We did note that we've seen about $90 million of revenue impacts so far on an annualized basis from contract terminations and from stop work orders in the U.S. federal arena, you know, primarily due to the efficiency and cost-cutting focus of DOGE and the new administration. Of that $90 million, the largest component for us has been about $50 million of contract terminations at USAID, the Agency for International Development, which has obviously been a focus in this administration. And then from there, we've seen a broad array of, of reductions across our civilian client base, you know, relatively small, about no more than $5 million per client, which is about 0.25% of our revenues. And so that's how we got to the $90 million of, of total impacts. We're a $2 billion company, so it's, you know, you know, about 4-4% of our revenues. And so, you know, and this programmatic area is the area that we expect to be most impacted by the new administration. And, we talked about it in our call. We did a detailed bottoms-up analysis of what we thought those impacts could be and, and gave what we consider very conservative guidance to try to set the bottom or set the floor of what those impacts might be, as we go forward for 2025, certainly. Got it. Got it. As we think about the building blocks around guidance this year, what do you think are the big moving pieces that investors should be tracking as we think about the year-on-year growth? Sure. You know, I would say, first of all, half our business is outside the U.S. federal market. That half is made up of commercial, state and local, and international clients. In that market, we are expecting at least 15% annualized growth for 2025. Last year, those markets delivered about 14% growth. You know, we think there's terrific long-term trends in those markets that can continue to drive that growth. As I mentioned, the commercial market is a part of that. About 25% of our business is in the commercial energy arena. We work for utility clients and power developers on a broad base of energy issues. We were up 26% in that business last year. That's being driven by the unprecedented demand for electricity and data centers, innovation and technology, and just general economic growth. We certainly see the growth, the long-term opportunities there being robust. We think we could continue to grow 25% as we look forward. About 15% of that 50% that's growing double-digit is in state and local. We're a leader in designing and implementing disaster recovery programs for state and local governments. I'm sure all of you are aware of the frequency and severity of weather events, wildfires, floods, is materially increasing over time. That's the key driver of that business. We're a leader in that. Our international business is about 5% of our revenues. We just announced we've won about $210 million of contracts, new contracts in Europe, which will set us up very nicely for growth. That's a long-winded way of saying half the business will be growing north of 15%. That leaves the half that's in federal. That's made of two components. About half of that half, so 25%, is in IT modernization and digital transformation. We're helping the government modernize some very antiquated systems. We have Dave Burke here who leads that business. I'll let him speak about that. And then the other 25% is in this programmatic area where we really expect to see the most significant impacts in terms of, you know, the efforts of the administration to reduce cost and improve efficiency. Got it. Got it. Maybe taking a side step there to loop in David. Sure. If you can talk a little bit about kind of what you're seeing with respect to kind of Fed IT efforts around, I like, Fed, Fed efficiency efforts around IT. I think that one of the key focus points and lack of visibility in the, in the general market has been, you know, the, the prospect that IT might see greater degrees of change. If you can maybe just articulate what you've seen so far in the IT modernization front and kind of what contracting officers are saying in terms of expectations of, of future, future growth. Yeah. I mean, I think longer term, so, you know, several quarters, we will, we'll actually see pretty substantial growth. I think that we're seeing, lots of interest in accelerating different things with AI implementations, whether that's through automation or trying to, you know, make these, I would call them light speed jumps from where the government currently is in its use of AI to sort of catching up to some of its more commercial peers. To do that requires a lot of, you know, basic level work still, right? Making sure that we've got things correctly in the cloud, that we're, you know, not, don't have data fragmented everywhere, that we're really understanding what's happening, right? So that, that market, I would say, is 100% intact. We're getting all sorts of indications that that will go. I think right now we're having a little bit of a lag because, you know, the incoming administration, not terribly unusual, has put a temporary pause on the procurement process, around 90 days. Some agencies have come out of that already as their cabinet secretaries have come into place and started their, you know, pushing their new views and policies. In other places, not as fast, right? There is some sluggishness in that part of the market. I think when we look, and obviously federal IT modernization is a huge space, right? There are parts that we've definitely seen efficiency go after, right? The more PMO-style contracts, reliability contracts, places where there might be multiple vendors doing similar sets of services where there can be a consolidation. I think we've gotten indications that, you know, that's gonna be the process going forward, looking for places where we can get shared services. And that's, you know, for us, where we sit at that hub. We're not in a lot of that legacy, PMO-style work. We're much more in the sort of building new systems, implementing different types of automation and AI. Got it. Got it. If we go back to, I think one of the key points that maybe investors have been able to hang on to is their congressional IT scorecard. Yep. Right? The FITARA scorecard. Not a great proxy, but it is one proxy. It is a proxy. Right, right. It's always the crystal ball of government services, and there's always adjacencies and the like. Maybe talk about kind of where we are with respect to, and to use baseball terminology, what inning we are with respect to our IT modernization journey and where ICF thinks they can kind of add key capabilities. Because if we've tracked the scorecard. Sure. The only thing that continues to lag significantly is cyber. Yep. I think, just stick with the baseball analogy. I think predominantly in, on the civilian side, I, you know, I think we're in the fourth and fifth inning, right? Progress has been made by and large, right? I think in defense, in the places we work in defense and intel, they're probably a little farther along. I think it's wildly uneven, right? You've got places where, you know, the federal government is close to on par, right. In some cases, and then in other places where we're still dealing with COBOL. I was joking with someone, we have not run into a floppy disk system in a while. That's good. You know, as far as where we can add value, I think the big thing that we focus on is we like to call multi-tech fluency, right? This is the idea that we're not locked into any particular system, any typical provider. We can do low code, no code. We can do open source. You know, we can do prem. We can do cloud. We can do cloud native. The reason for that is we're not interested in necessarily selling or doing a certain type of modernization. It's all about the mission outcome. What is the agency trying to do? What's a system that has to be modernized in order to get there, to deliver, whether it's a service or a data set or so on and so forth, right? For us, this in some ways, this disruption is accelerating a trend that's already existed in this space. It's put it a little bit on steroids. You know, disruption has a lot of potential for opportunity as sort of things get broken and need to be fixed and moving on to the next pieces. Got it. Got it. Maybe going back and tying together some of the comments [crosstalk] that you've made on this in terms of also what John has said, recognizing IT modernization is your specialty. People get typically very excited when you talk about AI and power management [crosstalk] and data center management. If you can talk about kind of what your expectations are for that type of work, and then maybe talking about how you think about your ability to, to cyber harden that. [crosstalk] Right? Add that on to for the federal customer and whether or not it's either AI data centers that provide for it or if [crosstalk] it's a federally provided program on the cyber side. [crosstalk] I mean, as far as, I mean, as far as hardening and security of those systems, you know, I think we're seeing indications of both a lessening of requirements, right? So maybe potentially some changes to the FedRAMP and opening up, particularly with DOGE. At the end of the day, everything that we do, anything that we touch, you know, we're gonna validate is secure to the highest standard regardless of whether or not that's the actual requirement. And that's simply because the exposure from either a data hack or a leak is just, it's huge. And we're dealing with public sector data. There's definitely opportunities for us. We use both internal and a partner ecosystem depending on what we're doing, right? So. Got it. Got it. Maybe tying that back to kind of how we think about the longer-term pipe, the high level of the business, you know, is it possible to kind of think about what are the maybe size and scope of your, your AI data center exposure or longer term, how you think about kind of the potential for that with ICF's perspective? You know, I think on, on the energy side of the business, we're not that engaged on the AI data center component of that business. I mean, I think we have skills and capabilities that we look to migrate. Mm-hmm. To be quite honest with you, we've built out this IT modernization business in the federal arena in the last five years, and we've seen so much opportunity. You know, we're just focused on taking full advantage of that. Even with, you know, changes we see going on with this administration and the shift in focus and the shift in spending, you know, I think we'd view 2025 as a transition as this administration kind of sets their strategy and their priorities for modernizing these systems, bringing in AI. A big focus also on leveraging software, you know, across the federal government. Instead of having every agency try to build out and modernize their systems and stove pipes and not leveraging the software. Mm-hmm. A real focus on that. You know, I think we've, and so that's been a real focus and we've had so much opportunity. Honestly, you know, our commercial energy business is much more, you know, focused on working with utilities on their operating their businesses, helping design and implement energy efficiency programs, flexible load management, grid modernization, more the core of that. I think over time we'll look for ways to bring our IT capabilities in, but I think that would probably require an acquisition or something of that nature. We're not a significant provider of technologies in the data center right now. Okay. The demand for energy in data centers is totally driving our broader, you know. Sure. Sure. Energy consulting business. Yeah. Got it. Okay. Maybe switching over to the margin side of the business, if you can kind of update us on what is the company's cost plus exposure? How does the team think about their ability to do more fixed price work and kind of what are the key risks? Sure. Yeah. Next question. You know, so for us, I think, you know, our portfolio of business in the federal arena is primarily civilian. So about 95% of our client base is civilian. You know, less than 5% is defense and intelligence. A little different flavor than some of our peer companies who tend to be much more concentrated on the defense side. With that portfolio, you know, less than 15% of our business is cost plus. It's just not as widely used in the civilian, you know, arena. Mm-hmm. About 45, you know, roughly round numbers, 45% of our business is fixed price. Forty, forty, forty, a little above 40 is T&M and the cost plus components coming down. Fixed price is growing kind of across the business, including in technology. We're great with that. You know, we make very nice margins on that front. The other thing that's happened, you know, with our business, you know, having the 25% commercial, you know, we make 25% higher margins on the commercial side of the business. Given that business is growing so rapidly, that's really giving us, as over the last several years, as the mix has grown. Mm-hmm. That's kind of driven, you know, higher earnings growth vis-à-vis the revenue growth. We do expect that will continue. I mean, this year again, with the government business kind of in a transition here with the new administration, you know, I think we've said that we will maintain our margins this year. Generally we've guided to 10-20 basis points of improvement on adjusted EBITDA or our gross revenue and have more than achieved that, beat that the last five or six years. I think this year, you know, we're gonna have to manage the cost structure carefully given the puts and takes in the business, but we think there's certainly upside on the margin in the long run. Got it. And then maybe tying in a little bit of kind of David's experience, if you can talk a little bit about kind of what are you viewing as the, we'll call it fastest growing or highest margin elements within the IT modernization portfolio. Sure. Yeah. I mean, I think for us, our fastest growing is definitely elements of AI implementation, right? I think, you know, everyone wants to talk about AI as if it's this universal one thing, right? It's obviously multifaceted, right? Particularly for us, you know, the potential greatest benefit for the government's gonna come from workflow automation. I know it's a very exciting topic. Everyone gets up in the morning and goes, "I really wanna talk about workflow automation." Things are done, you know, that's the majority of the government is processing data and services and, you know, whether it's issuing grants or other, other types of things or looking at rules and so on and so forth. To get to the sort of, you know, area where you really can leverage AI, we have to first get the automation inside these systems, some of which can be retrofitted, some of which have to be built from the ground up. For us, that's where we're seeing the greatest potential right now. You know, I think, you know, longer term, it will be starting to move the government towards engineering AI, understanding how those can be leveraged as, you know, they've made workforce cuts and then starting to populate back into new priorities. How do you build that capacity much, much faster than traditionally the government has seen over the last two decades? That'll be a place where we'll likely be able to play a combination of understanding what those agencies have to do, having that domain knowledge that has now left the organization, on the federal side, and then being able to leverage our human capital capabilities to find that right mesh. Got it. Got it. In terms of kind of, we think of the spread of the portfolio, maybe talking to kind of what are the highest margins that you look at? What are the lowest margins that you look at within those? Sure. Swim lanes? Yeah. I mean, lowest margin's gonna come from any of our kind of maintenance of old systems, right? So whether even if we're modernizing them, you know, that type of M&O work, or PMO style work, you know, is definitely gonna have lower margins. You know, we tend not to do a lot of work there. I think, you know, maybe our portfolio is 5-6%. The majority of it's gonna be in application development, new system development, low code, no code, and open source. Those are gonna be our, our spaces that. Okay. Make up the predominance and where we're getting the largest, largest returns. Got it. Got it. Turning over to government budgets, if you can maybe talk about kind of what you're tracking. I think this one's a little bit harder for investors to track, but what you're tracking within FedCiv, as well as what you're seeing with respect to the municipal level. I think government defense budgets have been relatively well covered. We have a good understanding that FY2025, you know, might be up versus expectation of cuts, and 2026 will certainly be up versus expectation of flatter cut, right? Right. The smaller budgets and the municipal budgets and the civil budgets have always been more difficult to track. If you can talk about kind of what you're seeing on the FedCiv side and then also what you're seeing on the municipal side, that might be helpful. Yeah. Sure. I think, I don't have a crystal ball on the CR, continuing resolution front, although I do think it's likely we'll see a CR here for the rest of the year. You know, I think that will play out this week. You know, and to your point, I mean, I think generally in the CR, civilian budgets are generally flat to down. Mm-hmm. You know, low single digit. And that's what I would expect for this year. Kind of what they end up being for 2026, I think it's gonna depend on where the focus on the cuts is. I mean, generally we haven't seen the cuts in the market we serve. And so my going in position is they'll be flattish to down slightly. But, you know, we'll have to see how the politics here play out. Mm-hmm. You know, in terms of our business on the state and local front and municipal front, actually most of our state and local business is kind of walled off from federal budget issues, you know, where they're flowing dollars down to the states or directly from state budgets. Our state and local business, one component is disaster recovery, where when those programs are funded, Congress does special appropriations after disasters, hurricanes, wildfires, and dedicates money to those recovery efforts and provides it to the states through special appropriations. The monies, you know, it's appropriated, has to be spent on this. It kind of walls it off. The other half of our business is doing kind of permitting, construction monitoring, environmental impact on large infrastructure projects. You know, pipelines, transmission lines, roads, bridges. Mm-hmm. A lot of that is funded through municipal bonds or through like the gas tax or other specific state taxes. You know, the 15% of our business that's dependent on state and local or, or for state and local clients, really most of it, very little of it's dependent on state budgets or municipal budgets. We feel like we're pretty walled off on that front. Got it. Yeah. Got a bit of a background here, but actually used to work for a buy-side municipal shop. Oh, you did? Okay. My client will have to do a buy-side municipal bond. Yeah. Yeah. We should talk about it. Yeah. Touch add warm taxes and the like. Yeah. Right. Yeah. Right. As we think about capital deployment, can you maybe consider your near-term priorities? Obviously, a lot of price dislocation. Sure. How you kind of value or how you think about share repurchases versus M&A? Yeah. You, I'd say a couple of things. One is, first of all, we've, we're a very strong cash flow company. We turn 100% of our net income into cash flow every year. Our leverage ratio's down to about 1.8 right now. We did do a small acquisition at the end of the year in the energy arena, Applied Energy Group, which brought additional energy efficiency, flexible load management, grid modernization capabilities into the company, about $35 million in revenue, which was a small tuck-in, but very strategic acquisitions. I would say in this environment right now, we reported we've been buying back stock, in our call last week. I think we bought 395,000 shares back since the election through the day to the call. I think we'll continue to look at that if we think the stock is undervalued. I think what we bought back speaks for itself on that front. You know, we do pay a small dividend. We'll continue to do that. We perhaps will do additional tuck-in acquisitions in the energy area if the right opportunity came along. Otherwise, we'll pay down debt. You know, I think in the federal arena, there's just too much dislocation and uncertainty to be buying anything in the federal space right now. I think we'll let a few quarters see what happens here throughout the rest of the year. Got it. Yeah. That's a fair, that's a fair dynamic to navigate. Right. Totally. I can imagine trying to formulate a. Yeah. Corporate development pipeline at the current moment. Yeah. Yeah. Sure. As you think about, just going back then, if we think about capabilities and gaps within your portfolio, maybe discussing kind of where you view the biggest gaps in your current portfolio on a company level and then maybe talking about it on a. Sure. Digital modernization level. You know, I think on the company level, I mean, I think we're always looking in the energy area, given the opportunities there, just for greater scale. You know, we have a, it's 25% of the company. Given the opportunity, if we could have greater geographic reach in some of the programs we run, we'd look at that. I think we're also looking to add kind of key capabilities in the grid modernization. You know, those are very specialized electrical engineering capabilities. We could do tuck in acquisitions there. I mean, honestly, the growth opportunities for us in the energy arena are just, you know, tremendous. A big part of it is just getting the people with the right skills into the company. Mm-hmm. You know, beyond that, I think disaster recovery, again, greater geographic reach. We've run some of the largest disaster recovery programs in the history of the United States. You know, we've had contracts at, you know, several hundred million dollars up to almost $1 billion in that area in the last 20 years. You have to have the geographic reach. Sure. You know, and then I would say I'll let you answer on the technology side, Dave. I mean, I think like every company will always take more folks who specialize in AI and data. You know, I think our challenge right now is making sure with the pace at which, you know, technology is changing, particularly on our engineering front, making sure we're making those right investments. Our biggest need is scale, right? We need more of what we have in order to service the market that's in front of us. I think that's, you know, our reality probably for the next couple quarters. Okay. As we kind of get around in 2026, maybe second half of 2026, where we're seeing where the administration has really placed its bets, that'll give us some more information on where else we need to go. You think that the, so second half '26, that timeline is kind of the expectation that by December year end of 2026, we get budget passed? Is that, is that kind of the right way to think about that? I hope before the end of 2026 'cause. Right. Right. Yeah. We'll see about that. Yeah. Yeah, I mean, I think we'll see, you know, as John said, whether we, you know, have a shutdown or not of some length. We'll probably get a CR to get us to September and then hopefully, you know, an actual budget for the next government fiscal year. I mean, that'll give us our first indications, right, of kind of what the priorities are and so on and so forth. You know, and I think also really, you know, we're, one of the things we track very carefully is what we're seeing at the cabinet level. Okay. You know, where are they making investments, where are they saying they're going to need extra support? Got it. Got it. The framework there to hone in on is not so much that you need the budget pass to get the visibility, but you just need the budget request. Need the budget request. That'll, that'll give us the indication we have to have that. Got it. Got it. In terms of your expectations on when, is that April, May? I've heard skinny budget, maybe March, April. We're in March now, so. I think somewhere in Q2. Okay. Got it. Yeah. Got it. Got it. Awesome. Awesome. Okay. Going back to kind of, I think one of the things we touched on before was kind of the level of, I just want to, like, I really want to chase down this AI data center because it seems like it's, as we think about the business, municipal's always been very interesting. Obviously, a long-term exposure, being focused to environmental cleanup is a, is a great business. The optionality within that of doing more AI data centers has always been kind of, I'd say, a pretty buzzy topic. Right. Maybe taking what you kind of talked about before, it not being a key exposure yet, you saying you could always use more AI people, but obviously the company has a lot of. Feels like an oxymoron, right? Yeah. AI for more people, more people for AI. Obviously the company has a significant legacy and power. As we think about the joint, you know, capabilities within that, how do you kind of think about, you know, what the long-term future of your business might look like with respect to the data center and power grid demands? You know, I think the thing, I mean, the first thing I would say is in the, in a lot of the work we do, kind of data and analytics and technology, and, and honestly, AI are playing an increasingly important role in the programs and the services we're providing. One of the areas that we work quite a bit is, you know, as, as the energy industry moves to this distributed future, you know, how do they manage their business and how do they manage the grid, you know, in that future? That is bringing in all kinds of new technology and new software along with the data analytics we provide. We are now part of an ecosystem that's trying to optimize the grid, leveraging technology, leveraging AI in the day-to-day management of this distributed, energy future. To your point on the data center aspect, I mean, we haven't focused on that. I think that's kind of the next place we turn. I think, you know, once we kind of get through this period here in the federal government for 2025, it's certainly something we're looking at. I do think it would require an acquisition for us to really get there at scale. I don't, Dave, do you? No, I agree. I mean, I think places where we're seeing, you know, success even in the last couple months, you know, I think one of the things that people don't think a lot about in the federal government is federal government processes an unbelievable amount of data. That might sound like an obvious statement, but, you know, take for example, you know, Medicare or Medicare payer data. Sure. Right? So, you know, government obviously wants to make sure it's making the right payments and wants to review that. It's only able to review about 8-10% of the actual payment data with a human being. There are these pockets where leveraging AI to rapidly process all that data to then flag, "Hey, of this, you know, 50,000 entries you've looked at, these are the 15 that come to the top priority that look fraudulent," right? Right now you might see that initial AI market is just capacity. Mm-hmm. Right? That ability to process so fast, so quickly, with a human in the loop to then go and validate. You know, we're seeing lots of potential probably for the next couple years in that space. To John's point, I think to get to data centers, we'd probably need some type of acquisition. Got it. Got it. Okay. And so maybe just picking apart that need for an acquisition to get into the AI data center business, you said kind of throughout this conversation, the need for scale, you know, maybe parsing a little bit further into that, kind of if you were thinking about doing scale or doing data AI center exposure, how do you think about that, those potential targets as either being standalone publics, standalone privates, or the carve-outs of kind of what we've seen so far? I think the last budget upcycle, at least in defense IT, was, you know, some public, public, but as we got to the tail end, it was more kind of carve-outs of, and kind of value unlock of, of the, we'll say verticals within large publics. Mm-hmm. Right. So as you think about that domain, you know, without tipping your hat and commenting too much on future M&A, but in terms of the flavor of something that you might desire, you know, how do you think about kind of the mix there? You know, I mean, I think so we've been public, coming up on 20 years. You know, I think in that time we've done 35 acquisitions. I mean, I think if we were going to do something in the energy arena, it would probably be private strategics. You know, and so I think we would, we would focus there. I don't rule anything out, but that's certainly been our history and I think where we'd, at least be the starting point. You know, I think, you know, as I say, I think in the, if I think about the next year to 18 months, I think we're much more likely to do, kind of energy-oriented deals in kind of the core areas, the core programmatic and business consulting areas we support before we left over to the technology side. I think, you know, as a starting point, that's how we think about it. Sure. Sure. Maybe in the last 180 seconds, John, in 20 seconds here, if there's anything that you think that we haven't covered. Key topics that. I just think I would come back to kind of what's the outlook here for ICF. I think that we, as I said, half our business is growing quite nicely in commercial, state, and local international. The other 25% of the business is in IT modernization, digital transformation, the federal arena. You know, we'll be down 5-10% given some of the changes going on in that market this year, but we expect to return to growth in that area for 2026. That kind of gives us 75% of the business growing as we go into next year. I think we'll continue to see challenges in the kind of programmatic aspects of our federal work, which is the last 25%. Net, net, I think we certainly return to mid-single digit or better growth next year given the portfolio. You know, we are quite focused on executing on that. Mid-single digit pointing to 25 or 26. 26. Got it. Yeah. Got it. Okay. Brilliant. Thank you so much for joining us. Thank you. Yeah. Great to see you. Of course. Thank you everybody for attending. Of course. Thank you.