ICF holds to stable outlook for infrastructure, Inflation Reduction Act spend

Investors are apparently curious about what the future funding environment looks like for infrastructure modernization projects and others stemming from the Inflation Reduction Act of 2022.

During ICF's fourth quarter and year-end earnings call Tuesday, chief executive John Wasson said the company is hearing those same questions on what a potentially different political climate means for that spending.

After all, this is a presidential election year in the midst of continued turbulence on Capitol Hill.

The $1.2 trillion Infrastructure and Jobs Act signed in 2021 had some bipartisan support and "unlikely to be pulled back" in Wasson's opinion, which he shared with analysts on the call. IIJA funding is "moving well and moving strongly" from federal and state agencies, he added.

On the Inflation Reduction Act front, much of the attention there appears to be on renewable energy and efforts to transition to clean energy. Wasson characterized the IRA activity as "full speed ahead" as well.

Projects stemming from the IRA also apparently have a slightly different financial model than those related to infrastructure. Wasson told analysts the majority of IRA funds go through tax credits.

"The tax credits on the IRA side have shifted the cost curves and are driving very significant investment in renewables and clean energy, and we're seeing that on the commercial side of the house," Wasson said. "There's a lot of focus on leveraging those funds and taking advantage of them both in the government and the private sector."

Along with climate and infrastructure, IT modernization and particularly that line of work supporting U.S. federal agencies represents one of a handful of growth drivers ICF has made core to its strategy.

Naturally, the ongoing wave of government client interest in artificial intelligence is part of that conversation ICF has with its customer base and within the company itself.

"We continue to take a hard look at approaches to use AI to improve the efficiency of our business development, our marketing, our proposal preparation to improve the productivity of our coders in the IT modernization and our IT business," Wasson said. "I think there are some real opportunities for productivity improvement there."

Fourth quarter revenue of $478.4 million was flat compared to last year's report, but up 4.9% after accounting for the divestiture of ICF's commercial marketing business. Profit of $53.9 million in the quarter represented a 46% year-over-year increase in EBITDA (earnings before interest, taxes, depreciation and amortization).

Full-year sales of $1.96 billion were up 10.3% compared to those reported for 2022, a rate that becomes 12.3% after adjusting for the divestiture.

The U.S. federal business posted revenue growth of 12% to $1.1 billion, which represented 55% of the overall top line. EBITDA increased 25.3% to $197 million.

ICF's initial financial outlook for 2024 has revenue in the range of $2.03 billion-to-$2.10 billion and EBITDA of $220 million-to-$230 million. Total backlog was $3.8 billion at the end of the year with $1.8 billion of it funded.