Parsons(PSN) - 2024 Q2 - Quarterly Results

Executive Summary & Q2 2024 Highlights Parsons achieved record revenue, profitability, and cash flow in Q2 2024, driven by strong organic growth and strategic acquisitions CEO Commentary Parsons' CEO highlights the company's successful transformation into a high-value solutions provider, achieving record Q2 2024 financial results and strategic acquisitions - The company has transformed into a high-value solutions provider, differentiating itself through software and cutting-edge technology[4] - This quarter achieved record revenue, profitability, and cash flow, with industry-leading organic revenue growth in both business segments, increased contract wins, and more large contracts secured[4] - Achieved over 20% organic growth for the fifth consecutive quarter, with double-digit growth across all business segments and regions[4] - Announced a strategic acquisition aimed at expanding the customer base, strengthening offensive cyber warfare and electronic warfare capabilities, and adding new capabilities in counter-space radio frequency[4] Q2 2024 Financial Performance Overview Parsons reported significant Q2 2024 financial growth with total revenue up 23% to $1.7 billion, strong organic growth, and increased profitability Q2 2024 Key Financial Metrics (Year-over-Year) | Metric | Q2 2024 | Q2 2023 | YoY Change (USD) | Change Rate | Source | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1.7 billion | $1.356 billion | +$344 million | +23% | chunk_num: [5] | | Organic Growth | - | - | - | +22% | chunk_num: [5] | | Operating Income | $111 million | $76.444 million | +$34.556 million | +46% | chunk_num: [5, 27] | | Net Income | $69 million | $43.241 million | +$25.759 million | +60% | chunk_num: [5, 27] | | GAAP Diluted EPS | $0.63 | $0.38 | +$0.25 | +65.8% | chunk_num: [5, 27] | | Adjusted EBITDA (incl. noncontrolling interests) | $150 million | $118.306 million | +$31.924 million | +27% | chunk_num: [6, 38] | | Adjusted EBITDA Margin | 9.0% | 8.7% | +0.3% | +30 bps | chunk_num: [6] | | Adjusted EPS | $0.84 | $0.63 | +$0.21 | +33.3% | chunk_num: [6, 41] | Key Q2 2024 Achievements Parsons achieved record revenue, net income, adjusted EBITDA, and operating cash flow in Q2 2024, with strong organic growth and a strategic acquisition - Revenue reached $1.7 billion, a 23% year-over-year increase[7] - Strong organic revenue growth of 22%, marking five consecutive quarters of over 20% year-over-year growth[7] - Net income reached $69 million, a 60% year-over-year increase[7] - Adjusted EBITDA increased 27% to $150 million[7] - Operating cash flow increased by $138 million to $161 million; operating cash flow for the trailing twelve months reached $492 million, a 117% year-over-year increase[7] - Subsequent to Q2 2024, Parsons signed a definitive agreement to acquire BlackSignal Technologies[7] - Raised the guidance range for all financial metrics for fiscal year 2024[7] Segment Results Both Federal Solutions and Critical Infrastructure segments demonstrated strong revenue growth and improved profitability in Q2 2024 Federal Solutions Segment The Federal Solutions segment saw a 30% revenue increase to $989 million in Q2 2024, driven by 27% organic growth and acquisition contributions Federal Solutions Segment Q2 2024 Performance (Year-over-Year) | Metric | Q2 2024 (Million USD) | Q2 2023 (Million USD) | YoY Change (Million USD) | YoY Change (%) | Source | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $989 | $763 | +$226 | +30% | chunk_num: [8] | | Organic Growth | - | - | - | +27% | chunk_num: [8] | | Adjusted EBITDA | $103 | $86 | +$17 | +20% | chunk_num: [8] | | Adjusted EBITDA Margin | 10.4% | 11.2% | -0.8% | -7.1% | chunk_num: [8] | - Organic growth was primarily driven by accelerated execution of recent contract wins and growth in existing contracts, particularly strong in critical infrastructure protection and cybersecurity markets[8] - The decrease in Adjusted EBITDA margin was due to a $20 million non-recurring incentive fee recognized in Q2 2023; excluding these incentive fees, the Federal Solutions segment's Adjusted EBITDA margin would have increased by 160 basis points year-over-year[9] Critical Infrastructure Segment The Critical Infrastructure segment's Q2 2024 revenue grew 15% to $682 million, with adjusted EBITDA increasing 46% due to value-added projects Critical Infrastructure Segment Q2 2024 Performance (Year-over-Year) | Metric | Q2 2024 (Million USD) | Q2 2023 (Million USD) | YoY Change (Million USD) | YoY Change (%) | Source | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $682 | $594 | +$88 | +15% | chunk_num: [10] | | Adjusted EBITDA | $47 | $33 | +$15 | +46% | chunk_num: [10] | | Adjusted EBITDA Margin | 7.0% | 5.5% | +1.5% | +27% | chunk_num: [10] | - Organic growth was primarily driven by higher business volume in the company's Middle East and North American infrastructure portfolios[10] - Adjusted EBITDA growth was attributed to an increase in value-added projects and improved operational performance[11] Key Performance Indicators Parsons reported a 0.9x book-to-bill ratio for Q2 2024, a 1.0x trailing twelve-month ratio, and a total backlog of $8.8 billion, with strong operating cash flow Q2 2024 Key Performance Indicators | Metric | Value | Source | | :--- | :--- | :--- | | Book-to-Bill Ratio (Current Quarter) | 0.9x | chunk_num: [13] | | Net Bookings (Current Quarter) | $1.5 billion | chunk_num: [13] | | Book-to-Bill Ratio (Trailing Twelve Months) | 1.0x | chunk_num: [13] | | Net Bookings (Trailing Twelve Months) | $6.3 billion | chunk_num: [13] | | Total Backlog | $8.8 billion | chunk_num: [13] | | Operating Cash Flow (Q2 2024) | $161 million | chunk_num: [13] | | Operating Cash Flow (Q2 2023) | $23 million | chunk_num: [13] | | Operating Cash Flow (H1 2024) | $98 million | chunk_num: [13] | | Operating Cash Flow (H1 2023) | $14 million | chunk_num: [13] | Strategic Developments & Corporate Highlights Parsons secured significant contracts in national security and infrastructure, acquired BlackSignal Technologies, and received notable industry recognition Significant Contract Wins Parsons secured major contracts in missile defense, Saudi Arabian market expansion, GSA C5ISR, and Virginia DOT intelligent transportation systems - Awarded a $460 million option for missile defense system technical engineering, advisory, and management support, providing system engineering and integration services for national missile defense systems[16] - Secured over $160 million in contracts in Saudi Arabia, including a $41 million technical advisory contract, a $60 million scope addition to an existing contract, approximately $30 million for new resort and marina projects, and new work supporting Saudi developers[16] - Awarded a $110 million GSA C5ISR, exercises, operations, and information services contract option, providing scalable machine learning solutions for intelligence analysts and warfighters[16] - Secured a new $46 million contract for intelligent transportation system operations and maintenance from the Virginia Department of Transportation[16] - Subsequent to Q2, the company secured a three-year, $69 million Army family housing contract, strengthening its presence in Guam, Kwajalein, and Hawaii[16] Acquisition and Industry Recognition Parsons acquired BlackSignal Technologies for approximately $200 million to enhance cyber and electronic warfare capabilities, while also earning top industry accolades - Subsequent to Q2, Parsons signed a definitive agreement to acquire BlackSignal Technologies for approximately $200 million, a provider of next-generation digital signal processing, electronic warfare, and cybersecurity[16] - This acquisition will expand Parsons' customer base within the Department of Defense and intelligence community, significantly enhance its position in offensive cyber warfare and electronic warfare, and add new capabilities in counter-space radio frequency[16] - Ranked among the top three global firms for project management, construction management, and program/construction management services fees by Engineering News-Record in 2024[16][17] - Recognized by Forbes as one of the Best Employers for New Grads[22] - Received the Envision Platinum Award from the Institute for Sustainable Infrastructure for Sound Transit's Federal Way Link Extension project[22] - Awarded the Yukon Business Sustainability Award for the Faro Mine Remediation Project in Yukon, Canada[22] - Named Sustainable Consultancy of the Year at the 13th Dubai Sustainable Transport Awards[22] Fiscal Year 2024 Guidance Parsons raised its FY2024 guidance for revenue, adjusted EBITDA, and operating cash flow, reflecting strong Q2 performance and future outlook FY 2024 Guidance Update | Metric | Current FY 2024 Guidance | Previous FY 2024 Guidance | Source | | :--- | :--- | :--- | :--- | | Revenue | $6.35 billion - $6.55 billion | $6.1 billion - $6.4 billion | chunk_num: [19] | | Adjusted EBITDA (incl. noncontrolling interests) | $555 million - $595 million | $535 million - $575 million | chunk_num: [19] | | Operating Cash Flow | $395 million - $455 million | $380 million - $440 million | chunk_num: [19] | - The company did not provide net income guidance due to the volatility associated with interest, taxes, depreciation, amortization, and other items affecting net income, including but not limited to one-time and non-recurring events and M&A impacts, making it unable to provide accurate FY 2024 net income guidance[19] Company Information & Disclaimers This section provides an overview of Parsons Corporation, outlines forward-looking statement disclaimers, and details conference call and contact information About Parsons Corporation Parsons (NYSE: PSN) is a leading disruptive technology provider in national security and global infrastructure markets - Parsons is a leading disruptive technology provider in national security and global infrastructure markets[22][23] - Its capabilities span cyber and intelligence, space and missile defense, transportation, environmental remediation, urban development, and critical infrastructure protection[22][23] Forward-Looking Statements Forward-looking statements are based on current expectations and assumptions, subject to risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are based on current expectations, beliefs, and assumptions and are not guarantees of future performance[24] - Actual performance, results, and events may differ materially from those indicated in forward-looking statements due to various factors, including but not limited to COVID-19 impacts, government relations, reputation, changes in government spending, contract dependency, competition, employee recruitment and retention, management changes, internal system failures, and legal proceedings[24] - The company undertakes no obligation to update any forward-looking statements unless required by federal securities laws[25] Conference Call & Contact Information Parsons held a conference call on July 31, 2024, to discuss Q2 2024 results, with webcast replay available on its investor relations website - Parsons held a conference call on July 31, 2024, at 8:00 AM ET to discuss Q2 2024 financial results[20] - A webcast replay of the conference call is available on the company's investor relations website (https://investors.parsons.com) and will remain accessible for one year[20][21] - Media and investor relations contact information is provided: Bryce McDevitt (Media) and Dave Spille (Investor Relations)[26] Consolidated Financial Statements This section presents Parsons Corporation's unaudited consolidated statements of operations, balance sheets, and cash flows for Q2 2024 Consolidated Statements of Operations The unaudited consolidated statements of operations detail Parsons' revenue, operating income, net income, and EPS for the three and six months ended June 30, 2024 - For the three months ended June 30, 2024, consolidated statements of operations show revenue of $1,670,467 thousand, net income attributable to Parsons Corporation of $69,172 thousand, and diluted EPS of $0.63[27] - For the six months ended June 30, 2024, revenue was $3,206,143 thousand, net loss attributable to Parsons Corporation was ($38,183) thousand, and diluted loss per share was ($0.36), primarily impacted by loss on early extinguishment of debt[27] Consolidated Balance Sheets This section provides Parsons' consolidated balance sheets as of June 30, 2024, and December 31, 2023, detailing assets, liabilities, and equity - As of June 30, 2024, the company reported total assets of $5,238,730 thousand, total liabilities of $2,919,086 thousand, and total stockholders' equity of $2,319,644 thousand[30] - Compared to December 31, 2023, cash and cash equivalents increased from $272,943 thousand to $528,462 thousand, while long-term debt increased from $745,963 thousand to $1,247,306 thousand[30] Consolidated Statements of Cash Flows The unaudited consolidated statements of cash flows detail Parsons' cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 - For the six months ended June 30, 2024, net cash provided by operating activities was $97,807 thousand, net cash used in investing activities was ($88,715) thousand, and net cash provided by financing activities was $247,065 thousand[31] - Cash, cash equivalents, and restricted cash at the end of the period increased from $272,943 thousand at the beginning of the year to $528,462 thousand[31] Supplemental Financial Data This section provides additional financial details including contract awards, backlog, and book-to-bill ratios for Parsons' segments Contract Awards This section details Parsons' total contract awards for Federal Solutions and Critical Infrastructure segments for Q2 and H1 2024 Contract Awards (Thousand USD) | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | Source | | :--- | :--- | :--- | :--- | :--- | :--- | | Federal Solutions | $805,170 | $1,182,127 | $2,087,810 | $1,877,771 | chunk_num: [32] | | Critical Infrastructure | $694,894 | $749,035 | $1,494,563 | $1,435,620 | chunk_num: [32] | | Total Awards | $1,500,064 | $1,931,162 | $3,582,373 | $3,313,391 | chunk_num: [32] | Backlog This section presents Parsons' total backlog, including funded and unfunded portions, for both segments as of June 30, 2024, and 2023 Backlog (Thousand USD) | Segment | June 30, 2024 | June 30, 2023 | Source | | :--- | :--- | :--- | :--- | | Federal Solutions: | | | | | Funded | $1,736,698 | $1,506,235 | chunk_num: [33] | | Unfunded | $3,284,801 | $3,709,288 | chunk_num: [33] | | Total Federal Solutions | $5,021,499 | $5,215,523 | chunk_num: [33] | | Critical Infrastructure: | | | | | Funded | $3,754,225 | $3,615,955 | chunk_num: [33] | | Unfunded | $55,882 | $70,109 | chunk_num: [33] | | Total Critical Infrastructure | $3,810,107 | $3,686,064 | chunk_num: [33] | | Total Backlog | $8,831,606 | $8,901,587 | chunk_num: [33] | Book-to-Bill Ratio This section provides Parsons' book-to-bill ratios for its Federal Solutions and Critical Infrastructure segments, as well as the overall ratio for Q2 and H1 2024 Book-to-Bill Ratio | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | Source | | :--- | :--- | :--- | :--- | :--- | :--- | | Federal Solutions | 0.8 | 1.5 | 1.1 | 1.3 | chunk_num: [34] | | Critical Infrastructure | 1.0 | 1.3 | 1.1 | 1.3 | chunk_num: [34] | | Overall | 0.9 | 1.4 | 1.1 | 1.3 | chunk_num: [34] | - The book-to-bill ratio is calculated as total contract awards for the period divided by total revenue for the period[36] Non-GAAP Financial Reconciliations This section provides reconciliations for non-GAAP financial measures, explaining adjustments made for a clearer understanding of Parsons' performance Non-GAAP Measures Explanation Parsons provides non-GAAP measures like Adjusted Net Income and Adjusted EBITDA to offer insights into ongoing business performance, excluding certain non-operating costs - Non-GAAP measures are used to adjust for acquisition-related amortization expense, gain or loss on disposal of assets, restructuring and related costs, M&A costs, software implementation costs, legal and settlement costs, and other non-operating costs[35] - The company provides these non-GAAP measures because management believes they are important for understanding Parsons' performance and ongoing business during the reporting period[35] - Non-GAAP measures are not prepared in accordance with GAAP, may not be comparable to similar measures used by other companies, and should be considered as a supplement to, not a substitute for, GAAP financial measures[35] Reconciliation of Net Income (Loss) to Adjusted EBITDA This section reconciles Parsons' net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2024, detailing all adjustment items - For the three months ended June 30, 2024, net income attributable to Parsons Corporation was $69,172 thousand, and Adjusted EBITDA was $150,230 thousand[38] - For the six months ended June 30, 2024, net loss attributable to Parsons Corporation was ($38,183) thousand, and Adjusted EBITDA was $291,323 thousand[38] Computation of Adjusted EBITDA Attributable to Noncontrolling Interests This section details the computation of Adjusted EBITDA attributable to Parsons Corporation and noncontrolling interests for both segments - For the three months ended June 30, 2024, Adjusted EBITDA attributable to Parsons Corporation for the Federal Solutions segment was $102,781 thousand, and attributable to noncontrolling interests was $41 thousand[40] - For the three months ended June 30, 2024, Adjusted EBITDA attributable to Parsons Corporation for the Critical Infrastructure segment was $35,612 thousand, and attributable to noncontrolling interests was $11,796 thousand[40] - For the three months ended June 30, 2024, total Adjusted EBITDA including noncontrolling interests was $150,230 thousand[40] Reconciliation of Net Income (Loss) Attributable to Parsons Corporation to Adjusted Net Income Attributable to Parsons Corporation This section reconciles net income (loss) attributable to Parsons Corporation to adjusted net income and calculates adjusted diluted EPS for the periods ended June 30, 2024 - For the three months ended June 30, 2024, net income attributable to Parsons Corporation was $69,172 thousand, Adjusted Net Income was $90,039 thousand, and Adjusted Diluted EPS was $0.84[41] - For the six months ended June 30, 2024, net loss attributable to Parsons Corporation was ($38,183) thousand, Adjusted Net Income was $164,848 thousand, and Adjusted Diluted EPS was $1.53[41]