Parsons Q4 Earnings Call Highlights

Core Insights - Parsons reported a successful fiscal year 2025 with total revenue growth of 12% and organic revenue growth of 8% excluding a confidential contract, despite challenges from a government shutdown [1][4][7] - The company achieved a record adjusted EBITDA margin of 9.6% and 100% free cash flow conversion, surpassing three-year investor day targets set in March 2023 [2][3][7] Financial Performance - In Q4, revenue was below expectations but still increased by 11% year-over-year, with operating cash flow rising to $168 million, up 32% year-over-year [1] - For the full year, Parsons exceeded targets with a 52% increase in total revenue (over $2 billion) and a 73% increase in adjusted EBITDA [2] - Adjusted EBITDA for Q4 rose to $153 million, up 5%, with margin expanding to 9.6% [7] Segment Performance - Critical Infrastructure segment saw a 12% revenue increase in Q4, driven by 9% organic growth and acquisitions, with adjusted EBITDA increasing 87% year-over-year [8][10] - Federal Solutions segment faced headwinds from a confidential contract, with revenue declining 22% year-over-year including the contract, but grew 9% excluding it [10] Order and Backlog - Q4 contract awards totaled $1.5 billion, with a total backlog of $8.7 billion and a record funded backlog of $6.4 billion [5][12] - The company reported a $55 billion pipeline and a 61% win rate in 2025, with $11 billion of contract wins not yet booked [12] Capital Deployment and Acquisitions - Parsons completed three acquisitions in 2025 and repurchased approximately 1.8 million shares for $125 million [13][14] - The acquisition of Altamira Technologies Corporation for up to $375 million was highlighted, enhancing capabilities in the intelligence community [14] 2026 Outlook - For 2026, revenue is projected to be between $6.5 billion and $6.8 billion, with a forecasted $345 million revenue headwind from the confidential contract [16] - Adjusted EBITDA is expected to be between $615 million and $675 million, with a midpoint margin of about 9.7% [17]