Welcome to the ICF International First Quarter 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Friday, May 3, 2013, and cannot be reproduced or rebroadcast without permission from the company. And now I would like to turn the program over to Douglas Beck, Senior Vice President, Corporate Development. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to review ICF's first quarter 2013 performance. With us today from ICF International are Sudhakar Kesavan, Chairman and CEO; John Wasson, President and COO; and James Morgan, CFO. During this conference call, we will make forward-looking statements to assist you in understanding ICF management's expectations about 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 May 3, 2013 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today. We anticipate that future developments will cause our views to change. Please consider the information presented in that light. We may, at some point, elect to update the forward-looking statements made today but specifically disclaim any obligation to do so. I will now turn the call over to our CEO, Sudhakar Kesavan, to discuss first quarter 2013. Sudhakar?

Thank you, Doug. Good morning, and thank you for participating in today's call to review ICF's first quarter performance and discuss our outlook for the remainder of 2013. First quarter results were in line with our expectations. Revenues increased 2.8% year-over-year and were flat on an organic basis. Service revenue, which represents revenues directly billed by ICF employees, was up 2.3% year-on-year and increased 0.5% organically. Consistent with the last several quarters, the strong year-on-year growth in our commercial revenues, which were up 14% this quarter, mitigated the softness in federal government spending. Importantly, while we continue to experience positive momentum in our energy efficiency work, which increased 10% in the first quarter year-on-year, other elements of our commercial business also performed well. The combination of the GHK acquisition and organic growth drove a substantial increase in revenues from our non-U.S. government business, which were $10.3 million, up from $4 million the last year at first quarter. About 3 quarters of the growth related to the full quarter benefit of our GHK acquisition, which only contributed to revenues for March in last year's first quarter. However, the remaining one quarter represented organic growth in areas where our greater international scale enabled us to win contracts that we could not successfully compete for before. State and local government revenues were down 19% compared to last year's first quarter. As we mentioned in the last quarter conference call, we have a large project that was in the public commentated in the first quarter, and we expect that this business would pick up in the second half of the year. In general, state and local work tends to be lumpy as it involves large projects that have available quarterly activity, which makes quarterly performance more difficult to project. Our U.S. federal government business…

Thank you, Sudhakar, and good morning. This was a typical quarter with respect to the dollar value of contract wins, the more complex when you look at the composition of our first quarter sales. As Sudhakar noted, commercial sales accounted for 53% of total awards, which was a record for us and speaks to the increasing importance of this client category as a future source of revenue. On U.S. government sales were up dramatically, and state and local sales also showed solid growth. These were a great offset to what we expected might be a soft quarter for federal government sales, given the continued uncertainty associated with sequestration. Therefore, we are pleased with this showing. There were several very important wins in our energy efficiency business this quarter, particularly in the commercial and industrial part of that market where we see significant growth opportunities. Here, we are leveraging the strong presence and reputation that we have developed in the residential energy efficiency arena to gain share of an addressable market that is even larger than the residential space. The C&I market is a more complex one because of the variety of structures and systems that must be addressed and requires a wider variety of engineering skills and technology tools to be effective. We have been systematically adding these capabilities and are demonstrating the ability to unseat incumbents, given our excellent track record. As seen in the fourth quarter, for example, we announced the $16 million 2-year contract with the Energy Trust of Oregon, which is not only a significant C&I win, but it was a takeaway from a well-established firm in the field. Our strength in marketing and in addressing customer service issues, plus the sophistication of our new operations center in Southern Virginia, were important reasons for ICF's win.…

Thanks, John. Good morning, everyone. I'm pleased to report on our first quarter 2013 financial results. Revenue for the first quarter of 2013 was $233.9 million, an increase of 2.8% compared to prior year. Excluding revenue from GHK for both periods, organic revenue growth was flat. Organic revenue from commercial clients increased by 13%, which offset the decline from U.S. federal government and state and local clients. Gross profit margin was 38.9% for the first quarter, up from 38.4% in the 2012 first quarter due to efficient contract management and receipt of energy efficiency contract incentives. This performance is in line with our comment on last quarter's conference call that gross margin would be within the 38% to 39% range during calendar year '13. Indirect and selling expenses as a percentage of revenues were 29.2%, slightly higher than the 28.9% in Q1 of last year. Our EBITDA margin was 9.8%, up from 9.5% in last year's first quarter and, as expected, was within our guidance range of 9.5% to 10.5%. Depreciation and amortization was $2.8 million, similar to fourth quarter levels and in line with our projections for the full year. The increase, as compared to last year's first quarter, is primarily due to a benefit from a change of the estimated useful lives of certain technology-related assets, which occurred during the first quarter of 2012, as well as an increase in capital expenditures over the past year. Amortization of purchased intangibles was $2.4 million in the first quarter of 2013, down from $3.5 million in the first quarter of last year. The decrease in year-over-year amortization expense was primarily due to the reduced amortization of intangible assets related to the acquisition of Ironworks and Macro. Operating income in the first quarter was $17.6 million, an increase of 7.8% over…

Thank you, James. We are pleased our first quarter performance was on track with our expeditions. These items are difficult to project within the current difficult environment. And based on our current portfolio of business, we reaffirm our guidance for full year 2013 for revenues of between $935 million and $975 million; EBITDA margin, 9.5% to 10%; and earnings per diluted share of $2 to $2.10. Operator, I would now like to open the call to questions.

[Operator Instructions] And we have our first question from Bill Loomis with Stifel, Nicolaus. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: Just looking at the -- if we look at the second quarter and I know you're not giving second quarter guidance, but you have some new wins that are ramping up and some year-over-year comps on the state and local side. Can you just help us figure out kind of the quarterly pattern when some of these new wins will really start to contribute kind of sequentially on the commercial side? And when the -- any upcoming drop-offs or anything unusual we should be looking for in the next 1 to 2 quarters, please?

I think, as I mentioned just as I was ending the talk, Will, seasonal patterns are a little bit more difficult to project. As you'll recall last year, our seasonal patterns were not exactly consistent with what we'd had in the prior years. So what I would think is, given that we have 2 extra days in Q2 and given that certain amount of our uptick in the first quarter was because of certain incentives due to energy efficiency projects, we think that Q2 is going to look very similar to Q1. So we -- at least based on our general sense, why don't I leave it at that? That's what we think it will be. So I think that, usually, we would tell you that Q2 will be better than Q1. Q2 will be better than Q2. And Q4 will go down. But this year, we think Q1 and Q2 will be pretty similar to each other. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: And just finally, on international, what was -- I know you gave the contribution from GHK. But what was the international growth organically in the quarter?

International growth, organically, I thought we said -- if you look at my conference call remarks, we were up from $4 million to $10.3 million. And 3/4 of that growth is related to the GHK acquisition, the acquisition growth. However, the remaining 1/4 represented organic growth in that. So 3/4 of the $6 million was acquisition and 1/4 was sort of organic. So that was basically what it was. William R. Loomis - Stifel, Nicolaus & Co., Inc., Research Division: So with these new wins you announced internationally, is that going to pick up? Does it -- that didn't contribute in the first quarter, did it?

Yes. I think -- we think that it will stay consistent going forward. I don't know if they're going to pick up, but we think that it was a reasonable mid-single-digit organic growth in the first quarter. And we think that, that's what we can continue -- we hope to continue to achieve. And then as we quicken, then we'll certainly let you know.

And our next question comes from Tobey Sommer with SunTrust.

My question is kind of a broader one, Sudhakar. The international business is showing some organic growth and you're adding acquisitions as well as winning some contracts. How do I think about the general trend in margins over kind of medium term or longer term, with that taking place and at the same time commercial becoming a bigger part of the mix?

The commercial business is certainly much bigger than the international business. We think that those margin are going to dominate, hopefully, as the commercial business grows larger. The international business is solid, growing, but the margins are similar to what we have in the traditional government business here. So at the moment, I'm more focused on the margin growth aspect based on the commercial business rather than the international business. The international business is good to have. It's a good diversification. It allows us to grow and is -- it's very similar in characteristics to our government business here. So I think that it's a diversification. I don't think it's a margin expansion necessarily. But the commercial business, certainly, both internationally and here, expands our margins. So we'll see how -- but we think that the commercial business margin expansion will dominate as we move forward.

And in -- what kind of size and opportunity does the health care and the kind of the payer side of -- with the blues represents relative in, maybe, size and compare it to the energy efficiency and utility work that you do?

No. I think that general commercial health care services market and selling market is quite large, we think. Even the non-IT side of it is very large. And now we also have IT capabilities, which potentially we can leverage. So I think it is perhaps bigger than the energy efficiency opportunity, significantly bigger. Because we think that it's such a large part of our economy and there's going to be so much change in that sector that, really, it's one of those prime areas of growth which we certainly hope to capitalize on going forward.

And my last question, I'll get back in the queue. Of the commercial business, how much is the energy efficiency and utility work? What does that represent of the roughly 30% you have in commercial?

It's about 1/.3.

And our next question comes from Tim McHugh with William Blair & Company. Timothy McHugh - William Blair & Company L.L.C., Research Division: First, I just want to ask how significant were the incentive fees that you referenced this quarter?

This is James. They were roughly about $1 million, and those were incentive fees that really had shifted a little bit out of Q4 of last year into Q1 of this year, so we anticipate that those would occur when we gave guidance previously. But it was roughly about $1 million. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then the energy efficiency, it sounds like you won some good contacts. The growth, while 10% is still great, it's less than you had been showing kind of the last year or 2. Are you just hitting the law of large numbers that we should start to expect a slower -- a slowdown in the growth rate of that business? Or was it just timing related as well? And you can grow faster than that even?

This is John Wasson. I think it was more timing related. I think we still believe we can grow healthy double digits. I think that one of the contracts we won is beginning to ramp up, but it will be larger than second half of the year. I think there are some of the contracts that we don't have in the pipeline or even capture that we think will be material for the second half of the year. And so I think it's more of a timing issue than it is an indication of large numbers. I don't think we've hit the large number problem or challenge yet. I think we still have ways to go. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then you talked about the second half of the year, the state and local trends or the project out in California, I guess, that infrastructure project that's in common period right now. Do you have any visibility that, that's actually going to start up in the second half? And, I guess, can you give a sense of is that included in the guidance? And how much of a swing factor is that?

It's certainly included in the guidance. I think that we're highly confident that project will pick up, I think, as we get late into the second quarter and will be strong in the second half of the year. We'll certainly play a key role in responding to the comments that will come in on that project and then we'll do further analysis. And so I think the increase from first half to second half is -- what's that number, James, about 40% increase?

Yes.

In the second year on that project. And so I think it's going to be a material increase and we have very clear visibility to it. I think that we're highly confident that will happen in the second half of the year. Timothy McHugh - William Blair & Company L.L.C., Research Division: Well, I'm sorry, I missed that number. Did you say a 40% increase?

On the project.

On the project. H1 to H2.

We know that there are thousands of comments so we were pretty busy this morning with those comments. Timothy McHugh - William Blair & Company L.L.C., Research Division: So it's not as much as moving past the comment period. You will do work on the comments coming in?

Yes.

Yes. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then just to clarify lastly, the sequester and, I guess, general government spending. You made the comment that you're seeing some project awards kind of move to the right. Is that the primary impact right now in kind of the awards of new projects? Or have you seen any impact to existing engagements kind of getting scaled back or the scope of existing work getting changed?

Yes, this is John Wasson. We really haven't seen any change in terms of additional projects getting scaled back or being descoped. It's -- the environment in the last quarter has been very similar to the environment over the last 3 to 4 quarters. So I would say there's been very little change in terms of the funding situation. I think some of the contract decision awards have moved to the right. But as I said, I think we still think that Q2 and Q3 will see a pickup in activity. We're also seeing some pickup on the RFP front here in the second quarter. So I think we do have confidence we'll see additional RFP and award activity here in the next couple of quarters. Timothy McHugh - William Blair & Company L.L.C., Research Division: Do you have any sense in terms of this, the dialogue, whether we're past kind of that the agency is making decisions around sequester? Or is that still a risk that it's too soon to know if you're going to see project scopes get changed?

Yes. I think it's -- that's a hard question, Tim. So I don't think we have clarity on that issue. I think our clients are still working through those issues and there's uncertainty on the client side. And so I think it's -- there's still uncertainty out there and there's a possibility we could see additional impacts, although I would say, again, for the last 3 or 4 quarters, we've seen a very similar environment and really no change in that environment.

Our next question comes from George Price with BB&T Capital Markets. George A. Price - BB&T Capital Markets, Research Division: I wanted to follow up just on a question on the sequester. I know a competitor recently talked about seeing some -- I think they characterized it as freezes on the civilian side, not an official cancellation but the client is essentially not spending. It sounds like you're not seeing that. I guess, have you heard of that in any areas and any of your civilian client base and, perhaps, where?

Yes. We really haven't seen freezes. Obviously, as you said, officially, we haven't received any freezes. I mean, we have 1 or 2 anecdotal stories about clients concerned about budgets. But really, again, I don't think we've seen any change in what we're hearing from the clients or changes in the environment because of the sequestration from the past several quarters. And so I really think there's been no change and there's been no new developments or no new commentary coming from our clients on the sequestration front the last quarter. George A. Price - BB&T Capital Markets, Research Division: Okay, okay. And, I guess, in terms of -- I'm maybe shifting over to the commercial side, can you talk about what the client demand outlook is like, particularly in your interactive business? And what did that business grow in the quarter?

George, this is Sudhakar. I think we talked about some clients we've added. What we will do is, as we did this past year, we'll give you growth rates at the end of the year. We're going to give you quarterly growth rates in these sub businesses we have in commercial other than energy efficiency. Energy efficiency is big enough that we will give you those rates. So I think that we are positive on the outlook on interactive. We think that we're adding a bunch of clients. It's doing well, but we're not going to give you a specific growth rate by quarter for those 5 areas we talked about in the commercial, other than energy efficiency. George A. Price - BB&T Capital Markets, Research Division: Okay. I guess, is it still -- in terms of growth through the years, it's still tracking to your expectations sort of low- to mid-teen kind of growth in general?

Yes. I think that basically, as you know, we talked about this. We have established what we call a marketing interactive and technology group within our technology management solutions group, which we have combined the Ironworks business together with all our interactive business we had plus our communications business. And that's nearly $140 million. So we just set that up. We think that they are -- they have some momentum, and they'll do well going forward. And it's sort of hard to explicitly not track how one part of the business is doing versus the other, given that we've gotten some scale in that business and we are hoping that we can leverage that scale and grow, just like we have in the other areas. George A. Price - BB&T Capital Markets, Research Division: But, I guess, just given the -- it doesn't sound like it, but just given the -- some of the broader macro uncertainty and business spending uncertainty that's out there, we've seen that in some areas not in others. But is it fair to say you haven't seen any demand impact from the spending in your interactive area from Macro uncertainty?

We don't see it. Now, again, we have in the overall Macro world, we have a small business in that. Even $140 million is also small. But we don't see any lack of opportunity. George A. Price - BB&T Capital Markets, Research Division: Okay, last question. Some companies have discussed potential impacts from the sequester on government payment timing and potential modest impacts to DSOs. Is that anything that you're seeing or hearing about?

No, this is James. We haven't seen any impacts from that and we've been able to maintain DSOs at 71, as I mentioned, which is kind of at the low end of the range that we expect between 70 and 75. And it's flat to what we had in Q4. So there's been no significant impacts at all from a payment perspective.

[Operator Instructions] Our next question comes from Edward Caso with Wells Fargo Securities.

It's Rick Eskelsen standing in for Ed. Just a question here on the civilian agencies and sequestration. Can you remind us how much of the work you do on client sites? And what impact there might be from civilian agency furloughs and if you're hearing about that from your clients?

Our percentage of work in client sites is small as compared to some of the other companies you generally compare us to. I think it's worth 10% to 15% also of our businesses on client sites. I don't hold with that number but that sort of gives you a magnitude. And so we believe that there'll be a minimal follow impact. Jim, do you want to add something?

Yes. I mean, I guess I would just say that we have, so far today, we haven't had any impacts with regard to our employees at client sites. I mean, there has been -- certainly, there has been customers asking what if scenarios, I think, we've had a couple of situations. But today, they seem to be -- there's nothing that's been concerning and even in any of the scenarios we've done, they've been fairly immaterial.

Okay. And then on the contract award decisions, you talked about seeing a pickup in Q2 and Q3. In terms of sort of the normal seasonality or very strong Q3, could it be even greater than normal because of maybe more sluggish or awards getting pushed to the right in Q1? Or more in line with a normal year?

I think it would could be greater. Because especially, because Q3, there will be some more certainty on the other budget situation also because the summer is when Congress is going to try and decide how they're going to move forward. So I think that you're right. They could be greater in Q3 than normal.

And then just the last one. On the energy efficiency market in the -- internationally, how important is sort of the work that you do here in the U.S. versus the bulked up that you've gotten from GHK? Sort of what -- talk a little bit about winning in the international space for energy efficiency?

I think GHK gave us scale for the client basically was confident that we have the people to do the work. Our work here in the U.S. gave us the qualification and experience to make sure that we respond to the RFP in a very effective, creative, innovative way. So combining those 2 is the reason we won the work in the U.K. So I think that we also have our work internationally, especially funded by -- on energy efficiency or climate issues, which are funded by development agencies both in the U.K. and here in the U.S. leverages our experience in the U.S. And we have a of a lot of experience on energy efficiency issues in Asia. So I think that it's is a combination of both. In the U.K., specifically, it was more our ability to demonstrate some confidence to the client that we have the scale and the -- and we are committed to working in the U.K. Originally, we had 15 to 20 people. Now we have 300 people. So now the client basically has even called us in and said that they would like us to do more work and there are a number of these departments want to diversify their vendor base because they're traditionally dependent on 1 or 2 vendors, which have not necessarily served -- which have not actually served them well. So we've had meetings with them, but they encouraged us to be another vendor. So we think we'll win our fair share of work and so we are optimistic about our growth in the U.K. even if the overall market in the U.K. may not be growing. So we think that there are good signs and we are well positioned, and in the U.K. certainly, our experience here helps. So am I answering your question?

And now we have a follow-up question from Tobey Sommer with SunTrust.

You referenced your Virginia center a couple of times. I was curious if you could give us an update for how many people you have there now and what the capability is, at least in place, to increase the staffing levels there.

Sure, this is John Wasson. So the Virginia center, I think in the energy space, the services we provide are call center services in support of these energy efficiency programs, and then we also do all the rebate processing for these programs. And so those resources are actually quite important because often, we're getting directly with the utilities customer, the homeowners or the industrial clients. And so they're very sensitive and very focused on that their customers are treated well. And so I think we've been able to demonstrate that we can provide very high-quality call center and rebate processing capabilities out of our Virginia center. I think at the end of 2012, we had about 227 FTEs working in that center. I think as our energy efficiency work continues to grow in some of the other survey work that we do for the federal government, we're hoping by the end of the year to be in the 350-person range. Ultimately, I think if you look down the road, 2 or 3 years, we can have 550 people in that center and we can work multiple shifts. We could operate that center on 2 or 3 shifts. So there's certainly additional capacity to handle more work out of that center as we go forward.

And then lastly, what is the interest rate you're currently paying on the debt? Is there an opportunity for you to perhaps refinance and lower that rate?

I would just say, with regard to the interest rate we're currently paying, I think we have a very good credit facility in place and I think our chances of lowering that rate, from where we are, I doubt that we'll be able to get a much better rate than where we currently are. So I'll leave it at that. I mean...

Sir, could you actually share the rate?

Yes. Yes, there's different scales depending on how much you're borrowing. But -- so it's more complex than just giving a simple rate, but roughly 1.5 points.

There are no further questions. I will now turn the call over to management for closing comments.

Thank you very much for joining us on the call and we look forward to seeing you for the second quarter call. Thank you.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.