Parsons(US:PSN)2026-02-11 14:02Financial Data and Key Metrics Changes - In FY 2025, the company achieved a total revenue growth of 12% and an organic revenue growth of 8%, excluding a confidential contract [4][22] - Adjusted EBITDA expanded by 60 basis points to a record margin of 9.6%, building on a previous expansion of 50 basis points in 2024 [4][24] - Free cash flow conversion reached 100%, exceeding the high end of FY 2025 cash flow guidance [4][22] Business Line Data and Key Metrics Changes - Critical Infrastructure segment reported 10% organic growth, while Federal Solutions segment achieved 7% organic growth, both excluding the confidential contract [4] - In Q4, Critical Infrastructure revenue increased by 12% year-over-year, driven by organic growth of 9% and contributions from recent acquisitions [25] - Federal Solutions segment saw a 9% increase in revenue for Q4, with a 6% organic growth, but total revenue including the confidential contract decreased by 22% [27] Market Data and Key Metrics Changes - The company reported strong demand in both North America and Middle East markets, with double-digit revenue growth in both regions [16][19] - The backlog at the end of Q4 totaled $8.7 billion, with a funded backlog of $6.4 billion, representing the highest level since the IPO [31] Company Strategy and Development Direction - The company aims to achieve mid-single digit or better annual organic revenue growth supplemented by accretive acquisitions, targeting double-digit margins by 2028 [8][32] - The focus remains on integrated solutions to move up the value chain and win larger, more strategic programs [7][19] - The company is well-positioned to capitalize on unprecedented global infrastructure spending and a favorable federal budget environment [18][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a robust pipeline of opportunities and strong total and funded backlog [36][37] - The company anticipates a positive procurement environment in Federal Solutions, with expectations of achieving a book-to-bill ratio over 1.0 in H1 2026 [44][65] Other Important Information - The company completed three acquisitions in FY 2025 and has a strong balance sheet with a net debt leverage ratio of 1.3 times [29][30] - The acquisition of Applied Sciences Consulting and Altamira Technologies Corporation is expected to enhance the company's capabilities and market presence [14][15] Q&A Session Summary Question: Expectations for Critical Infrastructure margins - Management confirmed that legacy adjustments are behind them and expects continued margin expansion in Critical Infrastructure, with a focus on North America [40] Question: Order activity in Federal Solutions post-government shutdown - Management noted a positive trend in order activity and anticipates achieving a book-to-bill ratio over 1.0 in H1 2026 [44] Question: Addressable market for DroneArmor system - Management highlighted the unique capabilities of the DroneArmor solution and its potential applications across various federal departments [50] Question: Demand for mega projects in the Middle East - Management reported ongoing strong demand for major projects in the Middle East, particularly in Saudi Arabia, with a focus on key upcoming global events [54] Question: Federal Solutions revenue guidance adjustments - Management acknowledged previous revenue guidance revisions due to procurement delays and expressed confidence in a positive procurement environment moving forward [64] Question: Margin outlook and potential for upside - Management indicated that while there are headwinds from a confidential program, there are opportunities for margin expansion through product growth and accretive M&A [72]