Parsons(PSN) - 2025 Q2 - Quarterly Results

Executive Summary & Q2 2025 Financial Highlights CEO Commentary The CEO expressed satisfaction with Parsons' Q2 2025 results, highlighting strong revenue growth, margin expansion, and exceptional free cash flow, positioning the company for future growth through strategic acquisitions and robust backlogs - Delivered strong total and organic revenue growth, 40 basis points of margin expansion, and exceptional free cash flow[4] - Closed another strategic accretive acquisition[4] - Capitalizing on unprecedented global infrastructure spending and increasing demand for national security solutions aligned to Administration's priorities[5] - Strong execution, exceptional tailwinds in both segments, large total and funded backlog, and a strong pipeline of big opportunities position Parsons to outpace industry growth rates[5] Consolidated Financial Performance Parsons reported a 5% revenue decrease to $1.6 billion and a 9% organic decline in Q2 2025, with adjusted EBITDA margin expanding 40 basis points to 9.4% Q2 2025 vs Q2 2024 Consolidated Financial Performance | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Total Revenue | $1.6 billion | $1.67 billion | -5% | | Organic Revenue Growth | -9% | N/A | -9% | | Revenue (excl. confidential contract) | N/A | N/A | +13% | | Organic Revenue (excl. confidential contract) | N/A | N/A | +8% | | Operating Income | $96 million | $111 million | -14% | | Net Income | $55 million | $69 million | -20% | | GAAP Diluted EPS | $0.50 | $0.63 | -20.6% | | Adjusted EBITDA | $149 million | $150 million | -1% | | Adjusted EBITDA Margin | 9.4% | 9.0% | +40 bps | | Adjusted EPS | $0.78 | $0.84 | -7.1% | - Revenue decrease primarily due to a decrease in revenue on the company's confidential contract and increased investments in bid and proposal activity and critical hires[6] - Adjusted EBITDA margin increase was driven by improved program performance and accretive acquisitions[7] Key Operational Metrics Parsons maintained a 1.0x book-to-bill ratio for Q2 2025, with total backlog at $8.9 billion and funded backlog at a post-IPO high of $6.2 billion, and six-month operating cash flow increased 51% to $148 million Key Operational Metrics (Q2 2025) | Metric | Q2 2025 | Trailing Twelve-Months | | :-------------------------- | :---------- | :--------------------- | | Book-to-bill ratio | 1.0x | 1.0x | | Net Bookings | $1.5 billion | $6.7 billion | | Total Backlog | $8.9 billion | N/A | | Funded Backlog | $6.2 billion | N/A | - Funded backlog of $6.2 billion is at its highest level since the company's 2019 IPO[13] Cash Flow from Operating Activities (YoY Change) | Period | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Cash flow from operating activities (3 months) | $160 million | $161 million | -0.6% | | Cash flow from operating activities (6 months) | $148 million | $98 million | +51% | Segment Performance Analysis Federal Solutions Segment Federal Solutions revenue decreased 19% to $805 million in Q2 2025, with a 20% organic decline, and Adjusted EBITDA fell 35% to $67 million due to contract mix and investments Federal Solutions Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :---------------------- | :---------- | :---------- | :----------- | | Revenue | $805 million | $989 million | -19% | | Organic Revenue Growth | -20% | N/A | -20% | | Revenue (excl. confidential contract) | N/A | N/A | +11% | | Organic Revenue (excl. confidential contract) | N/A | N/A | +8% | | Confidential Contract Revenue | $106 million | N/A | N/A | | Adjusted EBITDA | $67 million | $103 million | -35% | | Adjusted EBITDA Margin | 8.3% | 10.4% | -2.1% (-210 bps) | - Revenue increases (excluding confidential contract) were driven by growth on existing contracts and new task order wins specifically in the cyber and intelligence and aviation markets[9] - Adjusted EBITDA decrease was driven primarily by contract mix and investments made in bid and proposal activity and key personnel on strategic pursuits[10] Critical Infrastructure Segment Critical Infrastructure revenue increased 14% to $779 million in Q2 2025, with 8% organic growth, and Adjusted EBITDA surged 73% to $82 million, expanding the margin to 10.5% Critical Infrastructure Segment Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :---------------------- | :---------- | :---------- | :----------- | | Revenue | $779 million | $682 million | +14% | | Organic Growth | +8% | N/A | N/A | | Adjusted EBITDA | $82 million | $47 million | +73% | | Adjusted EBITDA Margin | 10.5% | 7.0% | +3.5% (+350 bps) | - Revenue increase was driven by organic growth and inorganic revenue contributions from the company's BCC and TRS acquisitions, primarily from ramp-up of recent contract wins and growth on existing contracts in North America and the Middle East[11] - Adjusted EBITDA and margin increases were driven primarily by improved program performance, the ramp-up of recent awards, and growth and margin synergies from the BCC Engineering acquisition[12] Strategic Developments & Business Outlook Significant Contract Wins Parsons secured three single-award contracts each valued over $100 million in Q2 2025, including major projects for the US Army Corps of Engineers, Defense Threat Reduction Agency, and the Giant Mine remediation program - Won three single-award contracts worth more than $100 million each during the second quarter of 2025[15] - Awarded a $176 million single-award contract by the United States Army Corps of Engineers Norfolk District for a new Ammonium Nitrate Solution Tank Farm[17] - Awarded a $138 million task order under the Defense Threat Reduction Agency's contract vehicle for cyber operations, providing specialized cyber operations capabilities[17] - Received an additional $134 million to continue overseeing remediation projects on the Giant Mine program in Canada[17] Corporate Achievements & Acquisitions Parsons successfully acquired Chesapeake Technologies International (CTI) for $89 million, enhancing its all-domain technology solutions, and received significant industry recognition, including being named the top Program Management firm worldwide by Engineering News-Record and multiple Engineering Excellence Awards from ACEC - Announced and closed the acquisition of Chesapeake Technologies International (CTI), an all-domain technology solutions provider, for $89 million, consistent with Parsons' strategy of accretive acquisitions[16][17] - Recognized by Engineering News-Record as the top Program Management firm worldwide and ranked in the top three for Professional Services, Construction Management, and Program/Construction Management for Fee[16][17] - Honored with multiple 2025 Engineering Excellence Awards from the American Council of Engineering Companies (ACEC) for projects like the I-80/Gilman Street Interchange Improvement, Deer Creek Sanitary Tunnel, and I-270 North Design-Build Project[16][17][23] - Recognized as a VETS Indexes 5 Star Employer for its commitment to supporting military veterans[16][23] Fiscal Year 2025 Guidance Parsons increased its fiscal year 2025 guidance ranges for revenue, adjusted EBITDA, and cash flow from operations, reflecting strong second-quarter operating performance and the impact of the CTI acquisition Fiscal Year 2025 Guidance Update | Metric | Current FY 2025 Guidance | Prior FY 2025 Guidance | | :-------------------------------- | :----------------------- | :--------------------- | | Revenue | $6,480 million - $6,680 million | $6,450 million - $6,650 million | | Adjusted EBITDA (incl. noncontrolling interest) | $595 million - $635 million | $590 million - $630 million | | Cash Flow from Operating Activities | $400 million - $440 million | $380 million - $420 million | - Net income guidance is not presented due to volatility associated with interest, taxes, depreciation, amortization, and other matters affecting net income, including one-time and nonrecurring events and M&A impact[19] GAAP Financial Statements Consolidated Statements of Operations For Q2 2025, Parsons reported total revenue of $1.58 billion, a decrease from $1.67 billion in Q2 2024, with operating income declining to $95.66 million and net income attributable to Parsons Corporation decreasing to $55.23 million, resulting in a diluted EPS of $0.50 Consolidated Statements of Operations (Three Months Ended June 30) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Revenue | $1,584,323 | $1,670,467 | -5.1% | | Operating income | $95,661 | $111,422 | -14.1% | | Income before income tax expense | $89,179 | $103,134 | -13.6% | | Net income attributable to Parsons Corporation | $55,230 | $69,172 | -20.2% | | Diluted EPS | $0.50 | $0.63 | -20.6% | Consolidated Balance Sheets As of June 30, 2025, Parsons' total assets increased to $5.72 billion from $5.49 billion at December 31, 2024, driven by an increase in goodwill to $2.16 billion, while total liabilities rose to $3.10 billion primarily due to long-term debt, and total shareholders' equity increased to $2.62 billion Consolidated Balance Sheets (as of June 30, 2025 vs Dec 31, 2024) | Metric (in thousands) | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :-------------- | :------------- | :------- | | Total assets | $5,721,165 | $5,487,962 | +4.2% | | Goodwill | $2,161,939 | $2,082,680 | +3.8% | | Total current liabilities | $1,607,760 | $1,915,644 | -16.1% | | Long-term debt | $1,235,584 | $784,096 | +57.6% | | Total liabilities | $3,099,554 | $2,953,473 | +4.9% | | Total shareholders' equity | $2,621,611 | $2,534,489 | +3.4% | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased 51.3% to $148.01 million, while net cash used in investing activities significantly increased to $164.31 million due to acquisitions, and net cash used in financing activities was $29.19 million, a notable shift from the prior year Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric (in thousands) | H1 2025 | H1 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Net cash provided by operating activities | $148,014 | $97,807 | +51.3% | | Net cash used in investing activities | $(164,308) | $(88,715) | +85.2% | | Payments for acquisitions, net of cash acquired | $(117,858) | $(63) | Significant increase | | Net cash (used in) provided by financing activities | $(29,193) | $247,065 | Significant change | | Net increase (decrease) in cash | $(42,221) | $255,519 | Significant change | Non-GAAP Financial Measures & Reconciliations Non-GAAP Measures Overview Parsons provides Non-GAAP financial measures, including Adjusted Net Income, Adjusted EPS, EBITDA, and Adjusted EBITDA, to offer a comprehensive understanding of its performance by adjusting for non-core, non-operational, non-cash, or non-recurring items - Non-GAAP Measures (Adjusted Net Income, Adjusted EPS, EBITDA, Adjusted EBITDA) are provided to offer a meaningful understanding of Parsons' performance and ongoing business[35] - Adjustments are made for items not considered core to the business or non-operational, non-cash, or non-recurring, including amortization expenses, M&A transaction costs, restructuring, and software implementation costs[35] Adjusted EBITDA Reconciliation For Q2 2025, Adjusted EBITDA was $149.13 million, a slight decrease from Q2 2024, while for the six months ended June 30, 2025, Adjusted EBITDA increased to $297.91 million, with Federal Solutions decreasing and Critical Infrastructure significantly increasing Reconciliation of Net Income to Adjusted EBITDA (Three Months Ended June 30) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Net income attributable to Parsons Corporation | $55,230 | $69,172 | -20.2% | | Adjusted EBITDA | $149,131 | $150,230 | -0.7% | Reconciliation of Net Income to Adjusted EBITDA (Six Months Ended June 30) | Metric (in thousands) | H1 2025 | H1 2024 | Change (YoY) | | :-------------------------------- | :---------- | :---------- | :----------- | | Net income attributable to Parsons Corporation | $121,433 | $108,922 | +11.5% | | Adjusted EBITDA | $297,907 | $291,323 | +2.3% | - Federal Solutions Adjusted EBITDA (including noncontrolling interests) for Q2 2025 was $67.08 million, down from $102.82 million in Q2 2024. Critical Infrastructure Adjusted EBITDA (including noncontrolling interests) for Q2 2025 was $82.05 million, up from $47.41 million in Q2 2024[41] Adjusted Net Income and EPS Reconciliation For Q2 2025, Adjusted Net Income attributable to Parsons Corporation was $84.28 million, a decrease from Q2 2024, with Adjusted diluted EPS at $0.78, while for the six months ended June 30, 2025, Adjusted Net Income increased to $168.83 million and Adjusted diluted EPS increased to $1.56 Reconciliation of Adjusted Net Income and EPS (Three Months Ended June 30) | Metric (in thousands, except per share) | Q2 2025 | Q2 2024 | Change (YoY) | | :-------------------------------------- | :---------- | :---------- | :----------- | | Net income attributable to Parsons Corporation | $55,230 | $69,172 | -20.2% | | Adjusted net income attributable to Parsons Corporation | $84,278 | $90,039 | -6.4% | | Adjusted earnings per diluted share | $0.78 | $0.84 | -7.1% | Reconciliation of Adjusted Net Income and EPS (Six Months Ended June 30) | Metric (in thousands, except per share) | H1 2025 | H1 2024 | Change (YoY) | | :-------------------------------------- | :---------- | :---------- | :----------- | | Net income attributable to Parsons Corporation | $121,433 | $108,922 | +11.5% | | Adjusted net income attributable to Parsons Corporation | $168,826 | $164,846 | +2.4% | | Adjusted earnings per diluted share | $1.56 | $1.53 | +2.0% | General Information Conference Call Information Parsons hosted a conference call on August 6, 2025, to discuss its second-quarter 2025 financial results, with access to the webcast and a replay available through the Investor Relations section of the company's website - Parsons hosted a conference call on August 6, 2025, at 8:00 a.m. ET to discuss Q2 2025 financial results[20] - Webcast of the live conference call and a replay are available on the Investor Relations section of the company's website[20][21] About Parsons Corporation Parsons (NYSE: PSN) is a leading disruptive technology provider specializing in national security and global infrastructure markets, with capabilities spanning cyber and intelligence, space and missile defense, transportation, environmental remediation, urban development, and critical infrastructure protection - Parsons (NYSE: PSN) is a leading disruptive technology provider in the national security and global infrastructure markets[22] - Capabilities include cyber and intelligence, space and missile defense, transportation, environmental remediation, urban development, and critical infrastructure protection[22] Forward-Looking Statements This earnings release contains forward-looking statements subject to various uncertainties, risks, and factors that could cause actual results to differ materially from expectations, including impacts of COVID-19, government relationships, and competition, with no obligation to update unless required by federal securities laws - Forward-looking statements are based on current expectations, beliefs, and assumptions, and are inherently subject to uncertainties, risks, changes in circumstances, trends, and factors that are difficult to predict[24] - Numerous factors could cause actual future performance, results, and events to differ materially, including the impact of COVID-19, issues with government relationships, changes in governmental priorities, dependence on long-term government contracts, and the ability to compete effectively[24] - The company assumes no obligation to update any forward-looking statements made in this presentation that become untrue because of subsequent events, new information, or otherwise, except to the extent required under federal securities laws[25]