Following a major post-Katrina recovery program that redefined its portfolio, Fairfax-based ICF International has steadily grown its commercial work, allowing it to record strong sales even as other government services businesses struggle in the wake of federal spending cuts.
Last year, the 4,500-employee company reported profit of $34.9 million, up 28 percent from the prior year. The company’s sales increased nearly 10 percent to $840.8 million.
ICF focuses its businesses in three areas: energy, environment and transportation; health, education and social programs; and homeland security and defense. Though it would not identify its biggest contract, the client that provides the largest portion of its revenue is the Department of Health and Human Services.
From 2006 to 2009, the company relied heavily on a contract known as The Road Home, a program to help Louisianans affected by Hurricanes Rita and Katrina repair or rebuild their homes. In 2006, ICF won a three-year, $756 million contract (which was later expanded), and by 2007, the program accounted for 63 percent of its revenue.
The work also brought some negative attention. ICF was criticized for its management; among the detractors was the Louisiana legislature, which called for the contract to be canceled in late 2006. A company spokesman said last week that ICF was audited more than 40 times over the three-year term of the contract but the audits did not produce “a single material finding.”
While government work — federal, state and local — accounted for 92 percent of ICF’s revenue in 2007, the company has significantly lowered that figure, reaching 76 percent in 2011. At the same time, commercial work, at 6 percent in 2007, grew to 20 percent by 2011.
ICF is “one of the few stocks in our government services coverage that I like,” said George A. Price Jr., senior equity research analyst for information technology services at BB&T Capital Markets, which has relationships with a number of contractors, including ICF. “There’s a lot more there than just ... a government contractor, and that’s the big distinguishing factor.”
ICF is seeking to build on its commercial and international sales. Earlier this year, the contractor picked up London-based GHK Holdings, a consulting business with government and commercial clients.
GHK, which posted $30 million in sales in 2011, works on issues from the environment to education to transportation, and ICF said the acquisition would give it a larger footprint in Europe and Asia, where the combined company will have offices in Beijing, New Delhi, Singapore and elsewhere.
Late last year, ICF also bought Ironworks Consulting, a Web development firm with government and commercial clients and expected revenue of $57 million in 2011, to give it an entry into the commercial health information technology market as well as more expertise in digital and interactive media.
Sudhakar Kesavan, chairman and chief executive of ICF, said the business has always done commercial and government work. ICF, he said, is more focused on working in the areas where it has expertise than on who its customers are.
“We don’t really care who we work with as long as we understand the specific domains,” Kesavan said. “The fact is we are a consulting firm that understands these specific issues really well.”
Still, ICF is vulnerable to shrinking federal budgets, Price said.
“It’s not like they’re unscathed,” he said. “But more than anyone else, they’re saying, ‘Hey, what we can do is applicable to a much [larger market].’”