Parsons(US:PSN)2025-08-06 10:37PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited consolidated financial statements for Q2 2025 show decreased quarterly revenue and operating income due to Federal Solutions volume, but increased six-month net income from reduced debt losses, with total assets and liabilities growing from acquisitions and debt refinancing activities Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $2,593,895 | $2,462,400 | | Goodwill | $2,161,939 | $2,082,680 | | Total assets | $5,721,165 | $5,487,962 | | Total current liabilities | $1,607,760 | $1,915,644 | | Long-term debt | $1,235,584 | $784,096 | | Total liabilities | $3,099,554 | $2,953,473 | | Total shareholders' equity | $2,621,611 | $2,534,489 | Consolidated Statements of Income Highlights (Unaudited) | (In thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,584,323 | $1,670,467 | $3,138,683 | $3,206,143 | | Operating income | $95,661 | $111,422 | $204,894 | $213,266 | | Net income attributable to Parsons | $55,230 | $69,172 | $121,433 | $108,922 | | Diluted EPS | $0.50 | $0.63 | $1.10 | $0.99 | Consolidated Statements of Cash Flows Highlights (Unaudited) | (In thousands) | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $148,014 | $97,807 | | Net cash used in investing activities | ($164,308) | ($88,715) | | Net cash (used in) provided by financing activities | ($29,193) | $247,065 | | Net (decrease) increase in cash | ($42,221) | $255,519 | Notes to Unaudited Consolidated Financial Statements Notes detail significant corporate activities including acquisitions, debt refinancing, an accounting change (ASU 2024-04) impacting prior-year debt losses, segment performance shifts, and post-quarter legal and contract termination events - The company completed four acquisitions: CTI for $89.2M, TRS for $36.6M, BCC for $233.5M, and BlackSignal for $203.7M, significantly expanding capabilities in both Federal Solutions and Critical Infrastructure segments414551 - In June 2025, the company refinanced its debt, replacing its existing facilities with a new $450M Term Loan and a $750M Revolving Credit Facility, and earlier in 2024, it issued $800M in new 2.625% Convertible Notes due 2029 and used proceeds to repurchase a portion of its 0.25% Convertible Notes due 20257998113 - The early adoption of ASU 2024-04 resulted in a significant restatement for the six months ended June 30, 2024, where a previously reported $211.0M loss on debt extinguishment was reversed and replaced with an $18.4M convertible debt repurchase loss, increasing previously reported net income35112173 Segment Revenue and Adjusted EBITDA (Q2 2025 vs Q2 2024) | (In thousands) | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Federal Solutions Revenue | $805,464 | $988,603 | (18.5%) | | Federal Solutions Adj. EBITDA | $67,072 | $102,781 | (34.7%) | | Critical Infrastructure Revenue | $778,859 | $681,864 | 14.2% | | Critical Infrastructure Adj. EBITDA | $66,193 | $35,612 | 85.9% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 5.2% YoY quarterly revenue decline to a significant volume reduction in a Federal Solutions confidential contract, partially offset by a 14.2% revenue increase in Critical Infrastructure, with backlog at $8.9 billion and SG&A rising due to acquisitions and strategic investments Key Metrics | (In thousands, except Book-to-Bill) | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Awards (year to date) | $3,272,551 | $3,582,373 | | Backlog | $8,943,038 | $8,831,606 | | Book-to-Bill (year to date) | 1.0 | 1.1 | - Federal Solutions Q2 revenue decreased by 18.5% YoY, primarily driven by reduced volume on a confidential contract, which was terminated for convenience on July 16, 2025, after the quarter ended252253 - Critical Infrastructure Q2 revenue increased by 14.2% YoY, consisting of 8% organic growth from existing contracts and new awards, plus contributions from recent business acquisitions257 - SG&A as a percentage of revenue increased from 13.4% to 15.9% YoY for the quarter, driven by acquisitions, increased bid and proposal activity, strategic hires, and a lower revenue base in the Federal Solutions segment239240 - Net DSO was 60 days at June 30, 2025, unchanged from the prior year, while working capital increased to $986.1 million from $546.8 million at year-end 2024267 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from its variable-rate Term Loan but mitigates foreign currency exchange risk through contractual provisions - The company is exposed to interest rate risk from its variable-rate debt, including a $450.0 million outstanding balance on its Term Loan as of June 30, 2025281283 - Foreign currency exchange rate risk is mitigated through contractual provisions that require client payments in currencies corresponding to the currency in which costs are incurred284 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 2025 - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective285 - No changes occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting286 PART II. OTHER INFORMATION Legal Proceedings The company refers to Note 12 for details on legal proceedings, including a False Claims Act case under appeal and a $102.5 million damages award against Alstom also under appeal, with management not expecting a material adverse effect - A False Claims Act lawsuit, in which the court granted Parsons' motion for summary judgment on March 19, 2025, is now under appeal by the relator127289 - A final judgment awarded Parsons approximately $102.5 million in damages against Alstom Signaling Operations LLC, with Alstom having filed a notice of appeal128289 Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Risk Factors disclosed in the Company's Form 10-K for the year ended December 31, 2024 have occurred290 Unregistered Sales of Equity Securities and Use of Proceeds The company details its stock repurchase program, with the Board increasing capacity to $250 million in March 2025, and approximately $210.0 million remaining available as of June 30, 2025 - In March 2025, the Board of Directors increased and reset the share repurchase capacity to $250 million291 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | April 1 to 30, 2025 | - | $- | $225,005,478 | | May 1 to 31, 2025 | - | $- | $225,005,478 | | June 1 to 30, 2025 | 218,785 | $68.56 | $210,005,603 | | Total | 218,785 | $68.56 | $210,005,603 | Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None296 Mine Safety Disclosures This item is not applicable to the company - Not Applicable297 Other Information Following the termination of a material confidential contract, the Board of Directors modified 2025 employee incentive plans and adopted amended insider trading policies - A material confidential contract with the Department of State was terminated for convenience on July 16, 2025298 - In response to the contract termination, the Board of Directors approved modifications to 2025 employee short-term and long-term incentive plans298 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL