ICF International at Cantor Conference: Strategic Growth Amid Challenges

On Tuesday, 11 March 2025, ICF International (NASDAQ: ICFI) presented at the Cantor Fitzgerald Global Technology Conference, outlining its strategic direction amidst both challenges and opportunities. Despite revenue impacts due to federal contract terminations, ICF is optimistic about its growth prospects in commercial and international markets. The company is navigating a transitional period with a focus on IT modernization and strategic acquisitions.

Key Takeaways

• ICF anticipates over 15% growth in commercial, state, local, and international segments for 2025.
• The company faces a $90 million revenue impact from federal contract terminations, notably with USAID.
• ICF is prioritizing organic growth, strategic acquisitions, and share repurchases.
• The commercial sector generates 25% higher margins compared to federal business.
• New contracts worth $210 million have been awarded in Europe.

Financial Results

• ICF has experienced a $90 million revenue impact due to federal government efficiency initiatives.
• The USAID contract terminations account for $50 million of this impact.
• Despite these challenges, ICF expects at least 15% annualized growth in non-federal markets for 2025.
• The commercial energy sector saw 26% growth last year, highlighting its potential.
• Less than 15% of ICF’s business is cost-plus, with 45% fixed-price and over 40% time and materials contracts.
• ICF’s leverage ratio has decreased by about 1.8%.

Operational Updates

• ICF has secured $210 million in new contracts in Europe, emphasizing IT modernization and digital transformation.
• The company is focusing on multi-tech fluency and mission outcome-driven solutions.
• There is a strong emphasis on workflow automation and AI implementation within federal agencies.
• ICF is expanding its capabilities in distributed energy resource management.
• Federal IT procurement is sluggish due to the new administration’s transition, but ICF remains focused on efficiency.

Future Outlook

• ICF is targeting tuck-in acquisitions in the energy sector to enhance geographic reach and grid modernization.
• The company is investing in AI and data analytics capabilities to capitalize on emerging trends.
• ICF expects to return to mid-single-digit or better growth in 2026, driven by IT modernization and non-federal market performance.
• The company is monitoring federal budget requests to identify growth opportunities.
• Challenges include potential government shutdowns and programmatic federal work uncertainties.

Q&A Highlights

• Discussions focused on the impact of government efficiency programs on ICF.
• The company is exploring potential acquisition opportunities in private strategics.
• ICF is optimistic about progress in civilian IT modernization, with defense and intelligence sectors slightly ahead.

In conclusion, ICF International remains committed to growth through diversification and strategic investments, despite current challenges. For detailed insights, refer to the full transcript.

Full transcript - Cantor Fitzgerald Global Technology Conference:

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Appreciate it. So we’re back at Cantor’s Technology Conference with the Government and Technology and SpaceTrak.

I’m Todd Canfield, Cantor’s Government Technology Analyst and Space. And today, we have John Wasson, Chief Executive Officer and Chair of ICF as well as Dave Burkin, SVP of Digital Modernization and Experience. Thank you for coming.

John Wasson, Chief Executive Officer and Chair, ICF: Our pleasure. Thanks for having us. It’s great to be here.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Of course. Of course. So we assume that investors have all read the forward looking statements as a former IR. You know, got to make sure that stuff’s clear. So let’s dig into it in terms of Q and A.

John Wasson, Chief Executive Officer and Chair, ICF: Great.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: So I think the key thing that focus people are focused on, right, is what are the efficiency impacts? So 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?

John Wasson, Chief Executive Officer and Chair, ICF: Sure. So 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 $90,000,000 of revenue impacts so far on an annualized basis from contract terminations and from stop work orders in the U. S. Federal arena, primarily due to the efficiency and cost cutting of focus of DOSE and the new administration.

Of that $90,000,000 the largest component for us has been about $50,000,000 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 reductions across our civilian client base, relatively small about no more than $5,000,000 per client, which is about point 25% of our revenues. And so that’s how we got to the $90,000,000 of total impacts. We’re a $2,000,000,000 company, so it’s about 4%, four % of our revenues. And so and this programmatic area is the area that we expect to be most impacted by the new administration.

And we talked about in our call, we did a detailed bottoms up analysis of what we thought those impacts could be 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.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Got it. And so 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?

John Wasson, Chief Executive Officer and Chair, ICF: Well, sure. So I would say, first of all, half our business is outside The U. S. Federal market. So that half is made up of commercial, state and local and international clients.

And so in that market, we are expecting at least 15% annualized growth for 2025. Last year, those markets delivered about 14% growth. And 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. And so 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, and we’re a leader in that. And then our international business is about 5% of our revenues.

We just announced we’ve won about $210,000,000 of contracts, new contracts in Europe, which will set us up very nicely for growth. So 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. And so that’s made of two components. About half of that half, so 25% is in IT modernization and digital transformation.

And we’re helping the government modernize some very antiquated systems. We have Dave Birkin 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 the efforts of the administration to reduce costs and improve efficiency.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Got it. And maybe taking a side step there to loop in David. If you can talk a little bit about kind of what you’re seeing with respect to kind of fed IT efforts around like fed efficiency efforts around IT. I think one of the key focus points and lack of visibility in the general market has been, you know, the prospect that IT might take greater degrees of change.

So if you can maybe just articulate what you’ve seen so far in IT modernization front and kind of what contracting officers are saying in terms of expectations of future growth?

Dave Burkin, SVP of Digital Modernization and Experience, ICF: Yeah. I mean, I think longer term, so several quarters, 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 a % intact. We’re getting all sorts of indications that that will go. I think right now, we’re having a little bit of a of a lag because, you know, the incoming administration, not terribly unusual, has put a temporary pause on the procurement process around ninety days.

And some agencies have come out of that already as their cabinet secretaries have come into place and started their pushing their new views and policies. In other places, not as fast, right? And so there’s some sluggishness in that part of the market. I think when we look, 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 that’s going to 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.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Got it. And so if we 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 Fitarra scorecard, not a great proxy, but it is a one proxy.

Dave Burkin, SVP of Digital Modernization and Experience, ICF: It is a proxy.

John Wasson, Chief Executive Officer and Chair, ICF: Right. Right.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: It’s always like the crystal ball of government services and there’s always adjacencies and the like. So maybe talk about kind of where we are with respect to, and you 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, the only thing that continues to lag significantly is cyber.

Dave Burkin, SVP of Digital Modernization and Experience, ICF: Yes. So I think, just stick with the baseball analogy. I think predominantly in on the civilian side, I think we’re in the fourth, fifth inning, right? So there’s progress has been made by and large, right? I think in in defense and the places we work in defense and intel, they’re probably a little farther along.

But I think it’s it’s wildly uneven, right? So you’ve got places where, you know, the federal government is close to on par, right, in some cases and then other places where we’re still dealing with cobalt. And I was joking with someone, we have not run into a floppy disk system in a while. So that’s good. You know, as far as where we can add value, and I think the big thing that we focus on is we we like to call multi tech fluency.

Right? So this is 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. And 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. So what is the agency trying to do?

What’s the system that has to be modernized in order to get there, to deliver whether it’s a service or a dataset or so on and so forth. Right? And so for us, this in some ways, this disruption is accelerating a trend that’s already existed, in this space, and it’s it’s put it a little bit on steroids, but, you know, disruption has a lot of potential for for opportunity as as sort of things get broken and need to be fixed and and moving on to

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: the next pieces. Got it. Got it. And maybe going back and tying together some of the comments that you made on this in terms of also what John has said, recognizing IT modernization is your specialty. But people get typically very excited when we talk about AI and power management and data driven management.

So if you could 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 cyber harden that, right, and add that on for the federal customer and whether or not it’s either AI data centers that provide for it or if it’s a federally provided program on the cyber side.

John Wasson, Chief Executive Officer and Chair, ICF: Do you want to

Dave Burkin, SVP of Digital Modernization and Experience, ICF: I mean, as far as hardening and and security of those systems, you know, I think we’re seeing indications of 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 from either a data hack or a leak is just it’s huge when 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?

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: So Got it. Got it. And maybe tying that back to kind of how we think about the longer term pipe, the high level of the business. Is it possible to kind of think about what are the maybe size and scope of your AI data center exposure? Or longer term, how you think about kind of the potential for that with ICF’s?

John Wasson, Chief Executive Officer and Chair, ICF: I think 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. But to be quite honest with you, we’ve built out this IT modernization business in the February in the last five years, and we’ve seen so much opportunity. We’re just focused on taking full advantage of that. And even with changes we see going on with this administration and the shift in focus and the shift in spending, I think we view 25 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 across the federal government. So instead of having every agency try to build out and modernize their systems and stovepipes and not leveraging the software, we’ll focus on that. And so I think we’ve and so that’s been a real focus. We’ve had so much opportunity. Honestly, our commercial energy business is much more 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. Demand for energy in the data centers is totally driving our broader energy consulting business.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: 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 How does the team think about their ability to do more fixed price work? And kind of what are the big suits?

John Wasson, Chief Executive Officer and Chair, ICF: Sure. So for us, I think our portfolio of business in the Federal Reserve is primarily civilian. So about 95% of our client base is civilian, less than 5% is defense and intelligence. So a little different flavor than some of our peer companies who tend to be much more concentrated on-site. So with that portfolio, less than 15% of our business is cost plus.

It’s just not as widely used in the civilian arena. So about 45 roughly round numbers, 45% of our business is fixed price, 40%, forty %, forty %, a little above 40% is T and 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. We make very nice margins on that front.

And then the other thing that’s happened with our business, having the 25% commercial, we make 25% higher margins on the commercial side of the business. And so given that business is growing so rapidly, that’s really giving us over the last several years as the mix has grown, that’s kind of driven higher earnings growth vis a vis the revenue growth. And 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, I think we’ve said that we will maintain our margins this year. So but generally, we’ve guided to 10 to 20 bps of improvement on adjusted EBITDA to our gross revenue and have more than achieved that, beat that the last five or six years.

I think this year, we’re going to 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.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: 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?

Dave Burkin, SVP of Digital Modernization and Experience, ICF: Yes. I mean, I think for us, our fastest growing is definitely elements of AI implementation, Right? So, and I think, you know, everyone must talk about AI as if it’s this universal one thing. Right? It’s obviously multi multifaceted.

Right? So particularly for us, you know, the potential greatest benefit for the government is gonna come from workflow automation. And it’s a very exciting topic. Everyone gets up in the morning and goes, I really want to talk about workflow automation. But 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 types of things or looking at rules and so on and so forth.

So, 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. So 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 Engente dot 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 has the government has seen over the last two decades? That’ll be us 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.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Got it. And and and in terms of kind of when they get 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 swim lanes?

Dave Burkin, SVP of Digital Modernization and Experience, ICF: Yes. I mean, lowest margin is going to come from any of our kind of maintenance of old systems, right? So whether even if we’re modernizing them, that type of M and O work, or PMO style work, definitely going to have lower margins. Know, we tend not to do a lot of work there. I think, you know, maybe our portfolio is 5%, six %.

The majority of it’s going to be in application development, new system development, low code, no code, and open source. Those are going to be our our spaces that make up the predominance and where we’re getting the largest, largest returns.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: 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 FEDSIV, 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 FY ’twenty five might be up versus the expectation of cuts and ’twenty six will certainly be up versus expectation of ladder cut, right? Right. But the smaller budgets and the municipal budgets and the civil budgets have always been more difficult to track. So if you can talk about kind of what you’re seeing on the FEDSIVE side and then also what you’re seeing on the municipal side, that might be helpful.

John Wasson, Chief Executive Officer and Chair, ICF: Yes, sure. I think, well, I don’t have a crystal ball on the CR continuing residential front, although I do think it’s likely we’ll see a CR here for the rest of the year. I think that will play out this week. And to your point, I mean, I think generally in the CR, civilian budgets are generally flat to down low single digit. That’s what I would expect for this year.

Kind of what they end up being for ’26, I think, is going to 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 we’ll have to see how the politics here play out. 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 with our flowing dollars down the states or directly from state budgets, our state and local businesses.

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. So the money can’t it’s appropriated, has to be spent on this, so kind of walls it off. Then the other half of our business is doing kind of permitting, construction monitoring, environmental impact on large infrastructure projects, so pipelines, transmission lines, roads, bridges. A lot of that is funded through municipal bonds or through like the gas tax or other specific state taxes. And so the 15% of our business that’s dependent on state and local or for state and local clients, really most of it, very little bit is dependent on state budgets or municipal budgets.

So we feel like we’re pretty walled off on that front.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Yes. Got a bit of a background here, but actually used to work for a buy side municipal shop. So we’ll have to do a buy side

John Wasson, Chief Executive Officer and Chair, ICF: municipal fund.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Yes. We should talk about it. We should add more on tax

John Wasson, Chief Executive Officer and Chair, ICF: Yes, right.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: As we think about capital deployment, can you maybe consider your near term priorities? Obviously, a lot of price dislocation, how you kind of value or how you think about share repurchases versus M and A?

John Wasson, Chief Executive Officer and Chair, ICF: Yes. So I’d say a couple of things. One is, first of all, we’re a very strong cash flow company. We turn 100% of our net income into cash flow every year. Our leverage ratio is down 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 $35,000,000 of revenue, which is a small tuck in but very strategic acquisitions. I would say in this environment right now, we’re 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 date of the call. And I think we’ll continue to look at that if we think the stock is undervalued. And I think what we bought back speaks for itself on that front.

We’ll 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. I think in the federal arena, there’s just too much dislocation and uncertainty to be buying anything in the federal space right now.

So I think we’ll let a few quarters see what happens here throughout the rest of the year.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Yes, that’s a fair dynamic to navigate it.

John Wasson, Chief Executive Officer and Chair, ICF: Right, totally.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: I can imagine trying to formulate a corporate development pipeline at the current moment. So sure. As you think about so 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 digital modernization level?

John Wasson, Chief Executive Officer and Chair, ICF: 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. We have a it’s 25% of the company. But 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. 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 tremendous. And so a big part of it is just getting the people with the right skills into the company. 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.

We’ve had contracts that several hundred million dollars up to almost $1,000,000,000 in that area in the last twenty years. But again, you have to have the geographic reach. And so and then I would say I’ll let you answer on the technology side, Dave.

Dave Burkin, SVP of Digital Modernization and Experience, ICF: I mean, I think like every company, we’ll 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 technology is changing, particularly on our engineering front, making sure we’re making those right investments. But 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 our reality probably for the next couple of quarters.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: And then

Dave Burkin, SVP of Digital Modernization and Experience, ICF: as we kind of get around in ’twenty six, maybe second half of ’twenty six where we’re seeing where the administration has really placed its bets, that will give us some more information on where else we need to go.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: And you think that the so second half ’twenty six, that timeline is kind of the expectation that by December year end of twenty six, we get budget passed? Is that kind of the right way to think about that?

Dave Burkin, SVP of Digital Modernization and Experience, ICF: I hope before the end of twenty six

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: because Right. Right. Yeah. We’ll see about that.

Dave Burkin, SVP of Digital Modernization and Experience, ICF: Yeah. So, yeah, I mean, I think we’ll see, you know, as John John said, whether we, you know, have a shutdown or not of some 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. And I think also really, you know, one of the things we track very carefully is what we’re seeing at the cabinet level. Okay.

Where are they making investments? Where are they saying they’re going to need extra support.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Got it. So the framework there to hone in on is not so much that you need the budget passed to get the visibility, but you just need the budget request. Need the

Dave Burkin, SVP of Digital Modernization and Experience, ICF: budget request. That will get us the indication. Got it.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: And 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

Dave Burkin, SVP of Digital Modernization and Experience, ICF: I think somewhere in Q2.

John Wasson, Chief Executive Officer and Chair, ICF: Okay. Got it.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Awesome. Awesome. Okay. So then 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 center because it seems like it’s as we think about the business, Muni Civil has always been very interesting. Obviously, long term exposure being focused to environmental cleanup is a is a great business.

But the optionality within that of doing more AI data centers has always been kind of, I’d say, a pretty buzzy topic. Right. So 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 more. It feels like it’s

Dave Burkin, SVP of Digital Modernization and Experience, ICF: more, right? Yeah.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: AI for more people, more people for AI. But obviously, the company has a significant legacy in power. And so as we think about the joint capabilities within that, how do you kind of think about what the long term future of your business might look like with respect to the data center and power grid demands?

John Wasson, Chief Executive Officer and Chair, ICF: I think the thing I mean, the first thing I would say is in a lot of the work we do, kind of data and analytics and technology and honestly AI are playing an increasingly important role in in the programs and the services we’re providing. One of the areas that we work quite a bit is as the energy industry moves to this distributed future, how do they manage their business and how do they manage the grid in that future. And that’s bringing all kinds of new technology and new software along with the data analytics we provide. And so we’re now part of an ecosystem that’s trying to optimize the grid, leveraging technology, living AI in 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 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 will require an acquisition for us to really get there at scale. Dave, do you

Dave Burkin, SVP of Digital Modernization and Experience, ICF: No, I agree. I mean, I think places where we’re seeing success even in the last couple of months, and 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, Medicaid or Medicare payer data. 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 eight to 10% of the actual payment data with a human being. So 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? And so right now, you might see that initial AI market is, just capacity.

Mhmm. Right? That ability to process so fast, so quickly, with the human in the loop to then go and validate. Probably for the next couple of years in that space. But to John’s point, I think to get to the AI data centers, we’d probably need some type of acquisition.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: 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 that kind of throughout this conversation, the need for scale, 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’s those potential targets as either being stand alone publics, stand alone 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 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 the, we’ll say, verticals within large publics, right? So as you think about that domain, without tipping your hat and commenting too much on future M and A, but in terms of the flavor of something that you might desire, how do you think about kind of the mix there?

John Wasson, Chief Executive Officer and Chair, ICF: I mean, I think so we’ve been public coming up on twenty years. 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. And so I think 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. I think, as I say, I think and then if I think about the next year to eighteen months, I think we’re much more likely to do energy oriented deals in kind of the core areas, the core programmatic and and business consulting areas we support before we left over the technology side. But I think it’s a starting point. That’s how we think about it.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Sure. Sure. Maybe in the last one hundred and eighty seconds, Don, in twenty seconds here, if there’s anything that you think that we haven’t covered. So key topics

John Wasson, Chief Executive Officer and Chair, ICF: Look, 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. It will be down 5% to 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. So 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%. But net net, I think we certainly return to mid single digit or better growth next year given the portfolio. And so we’re quite focused on executing on that.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: And mid single digit pointing to 25% or 2626%.

John Wasson, Chief Executive Officer and Chair, ICF: Got it.

Todd Canfield, Cantor’s Government Technology Analyst and Space, Cantor: Got it. Okay. Brilliant. Thank you so much for joining us.

John Wasson, Chief Executive Officer and Chair, ICF: Well, thank you. Yes. Just a great to see everybody for attending. Of course. Thank you.

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