Welcome to the ICF International First Quarter 2014 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Wednesday, May 7, 2014, 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, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to review ICF's first quarter 2014 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 our future performance. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our May 7, 2014, 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 the first quarter 2014 performance. Sudhakar?

Thanks, Doug, and good afternoon, everyone, and thank you for participating in our review of ICF's first quarter results and business outlook. First quarter results represented a solid start to the year and demonstrated the benefit of the diversification strategy we have implemented over the last 3 years to build out our commercial and international businesses. Domestic commercial revenue grew 7.7% compared to last year's first quarter. International government revenues more than doubled. And together, commercial and international government growth more than offset lower U.S. federal government revenue. In the aggregate, commercial and international government revenues accounted for 37% of total revenue for the quarter, up from 33% in last year's first quarter. And as expected, our state and local business saw positive comparisons this quarter, primarily due to the ramp-up of disaster recovery work for the State of New Jersey and the ramp-up of the large West Coast infrastructure project, for which we managed the environmental assessment. As a result, our revenues from non-U.S. federal clients, that are comprised of work with commercial, international government and state and local clients, accounted for 47% of ICF's total first quarter 2014 revenue, up from 41% in last year's first quarter and about 50% higher than the 32% it represented 3 years ago. Our federal government business declined $9.5 million, 6.8% compared to last year's first quarter. A significant portion of the fall off was due to the severe weather on the U.S. East Coast, which resulted in 4 days of federal government office closings in the first quarter, including the well-documented ice storm in Atlanta, where we have more than 200 people working for the CDC. We estimate the dollar value of the lost revenues due to weather to be approximately $4 million to $5 million, largely related to our federal…

Thank you, Sudhakar, and good afternoon. Coming off a record year in 2013, sales for the first quarter were reasonably good and set the stage for continued progress in 2014. As Sudhakar noted, there were a number of positive developments in our commercial business, where sales, again, were strong this quarter, led by 2 energy efficiency contract awards. The first was a $16 million energy efficiency contract with a southeastern utility to continue our support for the broad suite of energy-efficient programs and technologies for single and multifamily homes and for the commercial and industrial sector as well. Second was a series of contracts valued at more than $9 million with another southeastern utility to continue supporting its residential and C&I programs in its territory. Both of these contracts included adding a new program to the scope and underscore ICF's leadership role in this market. We believe that ICF is the largest advisory and implementation firm in the residential part of the energy efficiency market and believe there is still significant room for growth in this market. At the same time, however, we are moving ahead to capture more business in the commercial and industrial part of the business, where we are still a smaller player and there is even more growth potential. Our commercial sales were well diversified across our major markets this quarter. The largest projects, more than 20 at over $0.5 million each, include a broad portfolio of digital interactive, commercial health, environmental management and research, energy efficiency and energy transitions work. Federal sales were more modest this quarter, but this followed an extremely strong fourth quarter, and we are still finding that despite a healthy pipeline, some agencies are still moving slower on the procurement side. Nevertheless, the top dozen wins covered all of our major…

Thanks, John. Good afternoon, everyone. As Sudhakar mentioned, we had a few special items that affected our results for the period. Major items were weather, acquisition-related costs associated with Mostra and CITYTECH, contract write-downs related to ECA and a reduction of a contingent liability associated with the ECA earnout. I will cover the financial impact of each of these items as I walk through the major elements of our income statement. We reported total revenue of $245.1 million or 4.8% above last year's first quarter. The revenue growth was primarily driven by the acquisition of Mostra and CITYTECH. Organic revenue, which is the total revenue excluding the acquisitions completed within the last 12 months, was essentially flat compared with the prior year. We estimate that severe weather during the quarter negatively impacted 2014 Q1 revenues by $4 million to $5 million, largely attributable to our federal government business. Thus, without the weather-related office closings in the Metropolitan D.C. area and Atlanta, we estimate revenues would have been between $249 million to $250 million. 2014 Q1 revenue gross profit margin was 37.3%. However, write-downs in contracts acquired as part of the ECA acquisition caused a nearly 70 basis point reduction in reported gross profit margin. Contract write-downs resulted from renegotiated contractual terms, revised estimates of the cost to complete work efforts. On an adjusted basis, the calendar year '14 Q1 gross margin would have been approximately 38% compared to 38.9% in Q1 of last year. Reported indirect and selling expenses for the first quarter were $69.6 million, up $1.4 million or 2% compared to the first quarter of 2013. The increase in indirect and selling expenses was primarily due to the addition of Mostra and CITYTECH, as well as the related acquisition costs. This increase was partially offset by the $2.8…

Thank you, James. On a trailing 12-month basis, our book-to-bill ratio was 1.17 at the end of the first quarter and our business development pipeline was a record $3.8 billion, up 29% year-on-year and 9% sequentially. These figures underpin our confidence that full year 2014 revenues will range from $1.025 billion to $1.065 billion. Likewise, we continue to expect earnings per diluted share to be in the range of $2.27 and $2.37 for the year, benefiting from progressive improvement in profitability, thanks to more favorable business mix and higher productivity. And as mentioned by James, operating cash flow is expected -- is projected to be in the $70 million to $80 million range for 2014. Operator, I would now like to open the call to questions.

[Operator Instructions] And our first question comes from Tim McHugh with William Blair & Company.

First, just wanted to ask on the energy efficiency side. Can you help me, I guess, kind of contrast the commercial energy efficiency growth rate of kind of 6% this quarter. It's a lot less than I think you've been doing, but yet your comments about the pipeline and backlog are very strong, at least that's my impression. So I guess, can you kind of contrast those things? And is the -- is there -- is it just becoming a bigger business that's slower growth now or is this just timing factors?

Thanks, Tim. It's John Wasson. I think it's timing factors. I think we remain confident that we'll see double-digit growth in our energy efficiency business. This year, the pipeline remained strong and robust. I think -- and we expect deals to be closed in Q2 and Q3 that will certainly allow -- give us the double-digit growth we expect. So I really think it's a timing issue. We remain quite confident in all the stuff [ph] in energy efficiency business.

And are these -- you mentioned the pipeline's rather large. Are these larger types of contracts or is it just a lot of smaller ones that you're still seeing out there?

I think it's a mix. I mean, there's a range of smaller to larger implementation contracts. I think that, as we talked about on prior calls, we're certainly pursuing a lot of new opportunities in the commercial and industrial space. And so we're seeing a good mix of medium to large -- small, medium and large contracts from the energy efficiency space.

Okay. And then on the weather-related impact with the government, is that revenue lost or I guess, how do we think about it on a full year basis? Would you expect the work that you would have been doing on those days when the office was closed to be made up or is it just you never quite make that up?

John Wasson, again. I would expect it to be largely made up. I think it's obviously early in the year, I would expect us to largely make that up.

Yes, I mean -- this is James, let me add to that. And if you look at the government offices were shut down in the D.C. area by 8 days or so. Our Atlanta offices were -- 4 days, I'm sorry, and Atlanta was impacted by roughly 6 to 8 days, depending on various pieces of the office. And so, overall, we're estimating that we've made up most of that impact, but we still think we had about 1.5 days or so of impact, and we're hoping to make up some of that through the remainder of the year.

We have our next question from Tobey Sommer with SunTrust.

This is actually Frank in for Tobey. Wanted to ask about the international government business. Can you give us a sense of the size and margins of that business that you're seeing some nice growth there?

Yes, I think the size is fairly substantial in the sense a lot of the work we do is for the European Commission and for the U.K. government. The size of the business is -- run rate is around $100 million or so a year. The business -- the communications business is slightly more profitable than the traditional U.S. government business, the 8% to 10% fee business, which is the U.S. government business. The communications business, so for example the Mostra business, is actually more profitable. The rest of the business is approximately the same profitability. So it's slightly better in the government business than the U.S. government business.

Okay. And what is the contribution to the pipeline from the recent acquisitions? Is that meaningful at all?

Yes, actually, it's substantial in the sense, the pipeline for our non-U.S. public work went up quite substantially over this past quarter. Mostra added almost $200 million in the pipeline. And we are quite rigorous about making sure that we QA/QC the pipeline before we add it. So there's lots of work which we can potentially pursue now with government type -- U.S. government-type clients, which is for visibility of revenue and earnings projects with the European Commission. And the added advantage of the European Commission is that they have budgets which go on for 7 years. They decide on 7-year segments. So we don't have the issues which we have here, which is there's some more uncertainty. So I think that -- just a good example of Mostra, but the amount they've added to the pipeline. So it's a very good strong revenue visibility business, and we think that the characteristics are very similar to the U.S. federal business.

Okay. And lastly, turnover was nice and low this quarter. What can you tell us about the hiring environment and finding good talent out there?

I think we've had this question before. I think that in our traditional areas, we are pretty successful in the health, energy, broadly speaking, areas. Clearly, in certain technology areas, there's always -- it's always going to be harder. But I think we have a company which, I think, attracts people because of our mission orientation, sort of, because we do things, we live by our values. And when I say that, I don't mean it in a -- I mean, really fiercely. There are a lot of individuals who join us from IT companies because of the fact that they like what we do, they like the fact that we are good citizens, they like the fact that we're environmentally conscious, that sort of thing. So I think that we traditionally find it -- we have worked a little harder to hire those kinds of people, but we have found a lot of people, and we've -- I've talked to them and they've said that it's always good to work on things where there is some -- even though they're working on the technology aspect, there is some good that we are doing. So it's tougher in the technology area. It's slightly easier because of the large footprint we have, in our health, energy infrastructure area.

[Operator Instructions] And our next question comes from Bill Loomis with Stifel.

Can you -- does the $0.51 to $0.52 EPS number that you -- when you add it back, does that also include taking out the benefit from the earnout reversal?

Yes, it's -- it does take that out also.

Okay. And then on ECA, why did -- what was the reasons? I mean, you talked about in terms of ECA, the higher contract costs. I guess they're integrating projects, where they're integrating Hybris software, just it cost more for you to do it. What happened there? Because I know it was a fairly recent, I guess a year ago, almost a year ago?

Right, yes. This is John Wasson. I think we had a handful of major e-commerce implementation projects for new clients that when we acquired ECA we're in a -- they were in the late stages of finalizing the requirements, or the early stages of coding these projects. And I think we knew there was risk around them. And I think that some of those risks turned out to -- came to fruition. I think as we discussed, we did structure the deal so that we had a modest upfront cash payment for ECA, and then tried to put all the risk on the sellers associated with the future revenues and profitability -- well, much of the risk on the sellers, both for the projects that we acquired and for the future sales. And so I think that we were pretty careful to capture this risk and manage the risk through the earnout. And so I think that's what we've tried to do.

And on the commercial health care business, can you give us a little more flavor on that in terms of the size and some of the -- what we should expect over the last year because you highlighted that as a key part?

Sure. The commercial health care business is growing very nicely. We'd give you the numbers though, but we give it to you once a year at the end of year, which okay, you'll be fine [ph]. Growing very nicely, it is a business around $15 million to $20 million growing at a very solid rate, and we are very pleased with that. And just like our, I think, the analog of our energy efficiency business, which was 4 years ago was a $10 million business and now is in the 3 digits, so I think that we have hoped that maybe this is another little rocket ship which we have which, hopefully, will continue to do well by us going forward. So that's what -- is that enough flavor, you think?

I guess it will have to do. And then on -- just looking at the commercial, excluding domestic commercial, so including international, obviously, that rate was 3% instead of 8%. What were the -- what was the biggest driver, if you can detail that for us?

Yes, 90% of our commercial business, just so you know, is domestic. But we do have these -- we do have some [indiscernible] infrastructure work, which is pretty lumpy, which is international and out of the Hong Kong office. And then we also have some aviation work, which -- they were doing a big project last year in the first quarter for a Middle East entity, which -- where there's no similar project this year. So it's just a lumpy thing, which didn't happen in those 2 cases. That's what reduced the -- where there was -- where they didn't have enough -- we didn't pull [ph] enough revenues in the international commercial arena.

And then just on that aviation work, did they complete that in first quarter of '13, so you're not going to compare that in the second quarter?

Yes, yes. First quarter '13.

Yes.

And we have no further questions at this time. I will now turn the call over to management for closing comments.

Thank you very much for participation in today's call. We look forward to speaking with you again after the release of the second quarter results. Thanks again.

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