PSN - Earnings call transcript Q3 2021

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Operator

Good day and thank you for standing by. Welcome to the Third Quarter 2021 Parsons Corporation Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will a question-and-answer session. [Operator Instructions] Please be advised that today’s conference may be recorded. like of the Investor now Dave over I’d Head Spille, Relations. Instructions] to conference hand to [Operator

Dave Spille

Thank you. financial Good the us that today morning provided Investor and thank discuss we our third you Relations our section quarter website. slides XXXX presentation results. of note to Please on for joining

substitute not reference that Carey. you these undertake Management to their statements. this over turn from XX-K our materially to factors of operational are any provide make GAAP On Today, our Parsons’ and obligation may discuss are Carey our guarantees the comparable today the Please now President third other call to forward-looking may in highlights, filings. regarding anticipated a release then of CEO; we will involve remind to risks future also Carey our such and press that We disclosure. future ended and will George described are of and non-GAAP a the to overview will during These results. due question-and-answer Form of SEC performance statements factors. that complete call trends company. performance, will fiscal non-GAAP with not and XX financial variety forward-looking during and an difficult will with XXXX also for corporate update results the and future make measures. risk year refer Smith, close forward-looking Actual forward-looking me session. December uncertainties to call predict. future We do measures and George projected caution CFO. quarter strategy for Ball, statement Management differ and statements We then call, earnings not events, are are the you for financial I anticipated measures financial a those in statements

Carey Smith

awards, we second We delivered want we of the had Dave. financial and good on to sequential as objectives, to margins supports backlog. of business contract critical Closed create including strong Persons’ revenue both company our We the worth Call. segments. to established welcome a quarter. than solid Quarter share program the third reported XXXX record And organic. you, growth which Reported Earnings record. X% million a X $XXX million, quarter, drive strategic everyone I at Won Achieved Thank with in performance implemented significant Delivered Third which acquisitions. X X% repurchase important a $XXX end shareholder value. more program, results. was

our I’m of executive with unit quarter. X the Presidents in announcement the activity strong business we also continue team leadership to experienced the strengthen new and We encouraged by hiring

confirming Finally, our XXXX all of we guidance are ranges.

immediate Infrastructure our drive on earnings we deliver and close on out our missions, programs, have priorities, critical last growth. customers’ legacy discussed call, Critical revenue organic As X

on of critical our terms upon XXX% validated we repeat customer’s award achievement excellent win by receive program delivering delivering further incentive and satisfaction XX% In fees. continue of and nearly This average rates year-to-date based missions, to scores our strong more is of execution. than customer

the as recognition for Management the by Project notable received year finalist the also program project Facility Processing Waste XXXX Salt Our of Institute.

as prior we much no priorities IPO, Although, top Critical pursue is I prime our complete take one quarter, XXXX we of programs Infrastructure in contain work performance, indicated which construction. our program last pride awarded legacy our as longer to such May

Critical the of Infrastructure reduced not calls, details project work legacy will write-downs, prior as profile progress the these completion Overall, several the our that program in oversight. which meaningful performance programs enhancing legacy risk had priming programs. moment. the We in and towards construction earnings by made of quarter, of discuss we’ve experienced discussed quarter X we During quarter, third on George a

chain, value we as demonstrated remain priority, the quarter hiring organic progress pleased solutions-integrator In larger third contracts. and to the growth report trajectory. of positive by prime of our sequential significant we winning terms during that on up achieved embedding our organic and focused I’m growth moving X%

that the Environmental, win Social the deterring the We administration’s tied large and are and or support to nation’s threats, commitment deals near-peer to and initiatives ESG infrastructure. continue to advance Governance

Base In segment, Solutions Parsons X of comes IDIQ $XXX for of times, that Infrastructure of the worth in awarded contracts both ratio X.X a During most ratio. achieved XX Parsons by achieved to Air classified were under design, to Engineers, United ESG trailing a contract of across overall hazardous X.X important to book-to-bill continents shows and quarter, $XXX underpins the and from another repeat for our won consecutive infrastructure, Also, for times. It’s This our contracts. QX We operate with after Solutions States Center develop as Radford win trailing treat and prototyping for Parsons of times. track our securing solutions. move waste solutions further streams remediation and were value, up integrator ceiling the trailing is history. also ability facility a with we a we a This Army systems third Ammunition And is Federal contract ratio integrate, both X quarter win had Plant. Army the a segment, our European times of also the a operations, over were recompete strategy. win highlighting awarded quarters, that value energetic book-to-bill We Parsons’ environmental a Federal to Forces. on $XXX XX-month worth an demonstrates in times procure, segments. we Corps quarter, and book-to-bill XX-month month $XXX African X.X reporting customer. million contract awarded enterprise This our critical more well Defense ratio the architecture in the record book-to-bill in single-award Space basis, hardware Air X.X will our Air which a lead industry quarterly the support which Missile than segment. delivery, resulting we single-award and with We ratio the contract record and We million support $XXX satellite were awarded million Critical have a during integration Systems with network and the million book-to-bill third team million in maintain an in X.X as chain. quarter a single This book-to-bill one

disruptor space We to be a market. the continue technology in

addition, Ministry In $XXX program Housing of management million for to contract housing. awarded Arabia’s affordable the with we Saudi services of provide development were

to I During my visit month, last see robust opportunity infrastructure East the pleased in growth was the that Middle exists.

dollar IDIQ ceiling have have million X and multi-billion million on between X contracts. each. Two ceiling award values, positions prime won also We values $XX $XXX multiple and

to approach a indicated and large do earnings we’ve on contract not be the entire book single-award prior As we we conservative in continue often to contract calls, bookings, our value.

under vehicles orders. addition, as specific only IDIQ awards win In we multiple-award we task book

our a last drive winning and report business, organic addition we In call, earnings on we’ve of revenue on hiring new hires, of focused recognized growth. our a business to CHRO. unit. several Officer, In to time, the leader amount hiring best talent our are significant new or Communities I including to retaining to growth Chief Since Infrastructure Connected Critical run made Human strategic additional Resource that

growth driving lead proven performer our Engineered promoted business unit. Solutions Federal to Systems organic in also our We

the months have our our new in attrition with changes CHRO time, of flat implemented In X our in line best hiring hiring during success the In has And August, our the quarter, average. market, billable in in increasing producing a addition, we by hiring the and of remained and both achieved and spite results notable years. October last yielded just competitive industry September in the hiring short retention. period encouraging in

external growth shareholder value. We and robust continue to sheet, which investments drive to balance increase maintain our internal our supports and

third closed Echo and our Solutions the we During quarter, acquisitions. Ridge BlackHorse strategic

Infrastructure alignment in cyber, terms well In win with we administration, we that Biden our without Solutions, transportation, wastewater and our Infrastructure, Critical trends. remediation, the priority emerging Bill. Within sustainable to with with or infrastructure with the to are CXISR, missile initiatives are segment, future water in segments of this Federal space to priorities contaminants. In and artificial solutions investments spending In markets, administration’s intelligence, ESG treatment, we defense increased will macro in aligned continue priorities. for environment from and of work and elimination areas the aligned United benefit both States environmental positioned strong expect remain

to secure resilient well offer our cybersecurity infrastructure credentials. and positioned are federal also given extensive We

in In reported the a addition, third growth, we we see objectives We the both against won Canada and markets. growing core in infrastructure of summary, achieved our Middle quarter. demand organic business strategic ESG hiring significant great national a mission our deliver solid revenue sequential strong made a and priorities retention, deal In East. to for continue and improvements both and security customers important in new margins to our success amount in accomplished tied

remain I excited As forward, I about outlook. very our look

are momentum We into recruiting remain seeing our financial drive to to key growing, made and segments retention confident $XXX areas talent into in well the business quarter. upgraded strides the our quarter wins with we George quarter in as move We across I’ll wins, XXXX we turn guidance will million third and the to achieve other We’ve positioned call and XXXX. as recompete both George? well and $X.X believe that, continue through With core are and ranges, solidified as unprofitable business our We’ve fourth organic new build our enduring the in billion segments. third notable classified in TEAMS, highlights. the growth. ability to to over discuss

George Ball

Carey. you, Thank

This growth and context performance of As of respect the my XXXX the sequential second were strong last significant indicated to with call quarter. contract comparison awards third to sequential activity. our earnings a hiring remarks Carey around our focus the by results the XXXX. comments I’ll revenue consistent half Today, highlighted with anticipated majority quarter on third to of within quarter in previous growth, increased

$X.X Infrastructure write-downs In delays we Critical quarter. earlier, legacy had by cost million million. stated equity revenue in $X.X in million. and schedule EBITDA and adjusted impacted One by third cases, both the by X the earnings, escalation. $X.X impacted As second we and EBITDA adjusted And program experienced

be remains by Although, towards made other we work and of are quarter progress these to completion meaningful projects. encouraged during the the more done,

XX%, Echo of and write-downs, X% third results. program higher associated XX% to contract acquisitions. with third were expenses acquisitions contracts XXXX volume increased and write-downs. quarter on from $XX and second The EBITDA of up revenue XXX million quarter Moving by from segments, existing now from a Echo last driven a by from was quarter, as of basis reduction well XXXX. I’ll points increases and quarter on million starting awards Ridge driven from by million existing X.X%. These awards BlackHorse the Adjusted and $XX second first higher our $XX increases of $XX EBITDA the existing contracts $XX contracts unchanged XX%, volume approximately as XXXX. to were revenue were of or awards the million of with legacy second acquisitions. operating primarily increase reduction recent million contract where Federal These relatively as quarter adjusted Solutions, as margin quarter in was increased our by and or SG&A at contract an net our business increase for driven and well excluding recent on represents X%, turn to recent third Ridge. revenue BlackHorse in the of volume on in higher quarter Total increased revenue the

Federal margin of well compared quarter those to and revenue contracts higher organically existing QX, as million of on as adjusted as recent driven to Excluding by EBITDA for XXXX Solutions quarter. contract and the of increased acquisitions points the XX% absence X.X%. write-downs impact quarter. increases second primarily were increased acquisitions, the $XX increased basis in adjusted XXX previous current the X% or volume EBITDA the These awards, in

now to Segment. Critical our Moving Infrastructure

from and increased Infrastructure of net million revenue by to by second contract increase XX%, X%, adjusted by quarter in Third or primarily quarter awards. increased second of revenue adjusted from in increased driven or write-downs, X.X%. higher write-downs and this primarily XXXX; This quarter was million, basis the Critical an EBITDA Critical EBITDA million by $XX volume. driven was reduction Infrastructure a $XX recent a increase $X million, XXXX. business in reduction XX $X the margin increase from points

Next, I’ll flow and discuss metrics. sheet cash balance

of was compared end the of XXXX. XX third XX Our at the to quarter end quarter the at net DSO days days, the second of

compared $XXX first strong third flow million operating Our flow of million Operating seasonally cash $XX quarter a totaled in XXXX. second quarter cash X flow months of following for cash totaled the XXXX the the period. million, of third Capital $XXX totaled to prior in year year expenditures quarter, period. the to million $X million $XXX $X the compared in million prior in

net adjusted ended strong. debt EBITDA remains with ratio to Our X.X of XX-month a balance leverage the times. trailing very quarter sheet We

In base. our to enhance customer deploying to our M&A addition and capital capabilities, for expand

a repurchase shareholder Directors value. drive authorized it to Our incremental program Board of recently $XXX share as million means

the repurchased approximately in million shares $X.X During of an this third we XXX,XXX authorization. price purchase quarter, connection for aggregate with

bookings X.X within Federal trailing for the reported at a times and Critical on basis our quarter. and both $X X.X. segments. XX-month Infrastructure basis, billion, enterprise ratio at On book-to-bill awards to times a ratio as Turning also of We X.X X.X a contract third representing book-to-bill with healthy Solutions at an

revenue. represent the over annual up than Our of $X.X the backlog totaled end XXXX quarter Total continues years the XXXX. to X% X quarter billion, from third the of of at quarter XX% and third more second of backlog

guidance. Now, let’s our to turn

provided over with assumptions We Carey. X this Key are guidance months XX financial are call outlook that, turn for the on And XXXX outlined with based on fourth August our in back our the our on to ranges I’ll connection Slide in year website. PowerPoint Investor reiterating located of our for our quarter. on X, Relations XXXX first presentation, all results today’s the and of

Carey Smith

quarter I’m XXXX. and both sequential book-to-bill through you, continued we Thank our performance believe fourth into George. accelerated hiring strengthened organic growth, leadership We strong and our the continue had pleased quarter move executive will third our segments, momentum business excellent with and in team. as

profitable into and We’re high-growth markets. positioned enduring

for during external our for balance you to investments in internal call progress fourth I updating Finally, February. we drive the to growth. now will future and sheet line our forward leverage quarter questions. look that, our will With earnings on we open

Operator

comes [Operator Instructions] Sheila Our Jefferies. Kahyaoglu with from question first

Sheila Kahyaoglu

quarter Good announced thank in morning, for new guys, contracts. of time. and a Carey, lot the lots and you of you wins the

up of contributes also think of but that maybe offsets, XXXX? might about project completions off? those these you to for we how much As new And if what’s could some that us wins, give moving be recompete,

Carey Smith

you Sure. for Sheila, thank the question.

since the they’re work, single-award orders which contracts, values, to task So, most the contracts you cover the it first, meaning of have immediate single-award that Four I’ll not is five drive ceiling are to. important.

added that expected So we’ve million. due basically that a to have the contract. additional customers contract contract, classified program is is performance for a one contract. been that the Radford And few to project an million performing is That’s program to a going The decades. ceiling, $XXX increased being $XXX the was

So integration over that project will X-year continuation expand doing the been is Systems Missile we’ve a efforts is performance. prototype Space Center. effort that The of expanding. and for that satellite But

rapidly to and The also hires fact, work work in of is we’ve Arabia, meet new the Saudi since performing XXXX that demand. every steady-state on we’re immediate week Housing hiring In been that work. Ministry is that’s follow to

Air And an be a GSA then Air the Base X reflect system bit that’s would really, be additional. little that that’s is a contract. So of fed the X of to the immediate outlier going work, one Defense,

to bring the we need vehicle. to So work

an hiring there, be And task very a orders go. order. additional from we’ll we’ve task October means achieved. initial inspired also have that It X by solid and I’m have lot that we to months XXXX. adding since best as our the really We

achieved. we’ve and says revenue we the what able is, from those start wins to So will achieve growth this to that realize that be

that other XXXX pretty one just didn’t be ones would the much As The was will Critical Solutions as any And control on job margin Facility. far talked had Salt Processing past in only Solutions behind the a job within program train this within in year, then, Infrastructure we’ve area, Federal within that large the that completions, the positive we area. one have are we end Federal Waste it. procurement bid didn’t that that us,

Sheila Kahyaoglu

And ask one Thank topics I’ll then, you. on maybe well. as

the pretty big X% to do date. a ramp think about year in margin about have fourth You margins to into X% the quarter? QX step-up How implied we from

Carey Smith

wins, the staffing we are we which say would the fourth the be that’s less to we’ll additional revenue I The first, quarter. have our there for addition obviously, minimal so helping, full just based be write-downs we’re the quarter. no continued acquisition, momentum And assessed, passthroughs I the of to Yeah, on will as expecting then, going again, into mentioned. new go BlackHorse have, that

Sheila Kahyaoglu

Great. Thank you.

Operator

Our Sommer question Truist next Securities. Tobey with comes from

Tobey Sommer

function start I up Could the by If I’d of supply-chain you. perspective. tight market issues? Thank quarter. follow-up give the is could And, bit and sort labor on more more that? asking color specifically, a a that of write-downs a little in appreciate you on the

Carey Smith

Certainly.

write-down program our impact a From seeing first, from X program XXXX. perspective, so in affect supply-chain, business. that Connected legacy a an one not So, the back Communities, we’re bid was in doesn’t

contract, actually We’re that the up performance point time. almost at XX% this during had complete. at program completion several of And achieved that milestones quarter. successfully will wind We key in

second one talked the The past have was partner. are the managing to additional help we that where we managing Solutions the oversight We’ve about Mobility provided on partner. not calls,

XX% completion on approaching that job. We’re

made, we bit by that encouraged do. of We’re the but have a to progress we’ve little work still

Tobey Sommer

learned partner there any you for forward inclined to that business a this terms of lessons be are less from or And situation? is bidding in of and development? specific ongoing a just your kind junior outlook Are

Carey Smith

lot lessons learned. We’ve had of a

all we bid philosophy. have changed back And pre-XXXX. programs bidding our I’ve that about So pre-XXXX, the talked were awarded

a XXXX. a we philosophy not changed So minority prefer partner, to We really partner. be our do back managing in

those that lines guidelines de-risked type we no and that putting bid won’t work. work company follow. the the in we We’re perform. of longer And will the are We’ve we of priming by place construction along

also that selective partners we work have won’t and with. We will we

is work strengths as work, are. pure well as where design which on our predominantly We’re focusing engineer owner’s

very have meetings. We program regular review

independent that dedicated place. a system we’ve put have estimating cost also into process We

rail transit, very decades margin contingency over then promoted, strengthened bid significant coming background And put below leader that XX% Connected don’t a needed. recent team, running take we smart a leader we to as changes leadership very necessary. business, that’s to been risk our and we EBITDA aviation, the Communities, Systems. and executive And a internal the had leader we so margins, board representation. background where I made company; into X industrial then, the operational of strong have bid finally, takes that anything full-time and leader, joint-venture major in our have the We Engineered strong is who mobility programs from that We also over hired couple

Tobey Sommer

question Could mandate in and how me. on I’d employees estimate when of employees vaccine you do lose? that the on mandate perspective Thanks. the Thank and for arrives, today vaccinated, love us are you. comment vaccine you Last a some give may color of some you questions your the proportion What numerical that perhaps on? percentage

Carey Smith

Certainly, obviously, lot a had focus on. this Tobey. scenario, In of we’ve

with you’re the was as covered the Order received are in or As contracts, not XXXXX employees come X December aware, the clip. with The given them. that to federal comply, on guidance that connection workplaces that to we White Monday applies a but with such employees from as contact employees share Executive working or for date well into House, it’s

due progress that beginning COVID, We’ve be Parsons it’s asked those employees vaccinated. contractors status, At they not from if vaccination or of the the we’ve it been So showing to also encouraging compliance have religious And accommodations towards that be employees, achieved. to requested their have very company can we’re upload to closely medical with at working reasons. a we so track who level.

And that it’s a also deeply help portfolio. question, to answer substantial fortunately, majority industry the shape latest on we that current guidance diversified have and us employees stay fortunate with associations and involved our management the vaccinated, specific released. the budget to are before your a guidance of We’re we’re in

under a at And apply Infrastructure order XX% our Critical you that are look as if the company. company, Middle Canada, of parts So business the to executive doesn’t federal would as contracts. be in that well and the that East, are employees our not about based

with you’ve as X our can work we results the hiring employees. proactively by doing also months. over our We’re our And to everything seen we’re increasing last

Operator

Gavin Parsons Our next comes with question from Sachs. Instructions] Goldman [Operator

Gavin Parsons

morning. Good

Carey Smith

Good morning, Gavin.

Gavin Parsons

revenues you’re this attributed that slower some to offset think of work, a organically declining new program I completion weren’t for segments, you the both the experiencing So, year. in the recent award delays able year, start maybe to

or ramp of what can delays? you update you to back can any give for maybe whether means revenue? So that award And still us get on that of an levels seeing XXXX whether not on up XXXX Thank the early you’re you. work, thoughts

Carey Smith

are a was ramp so the not that award last or that slower exception, award contracts, our forward. was we’ve of delays, X portion only hiring by it’s seeing the had that up achievement other our history. the really over be question moving our with seeing in Yeah, on would awards in the our of mean, I months, And small start of that, is delays. business Maryland. we’ve think, best a major for customer very I But month we demonstrated, had restricted again, revenue than a lot award this obviously are things Parsons’

plan, As doing talked putting on our far quarter we’re we operating right we as together release guidance the our at puts takes, and will fourth call. last the earnings in call. XXXX, about as And February now information the process all in of

Gavin Parsons

take Is task need on it that long hire Fair orders you you record the risk? how up What just execute to people? on backlog? on do about what’s to funded for enough. enough And ramp it maybe and the that? thinking getting ability to does then backlog, the it Is just

Carey Smith

and as discussed, in some I we backlog, hit programs, them the mix hiring. of have of on immediately a So its

you at commanders, largest an that XXXX got million the for that cyber contract late our one up Other quarter, basis. that use to We’ve was the this orders. in. $XXX it have rate like expect good example, X contract. contract, be great have to I task have annual value as so would do we run is the So the will FEDSIM a position to immediately X a that which and awarded ramp A ceiling hire, we combatant was steady ones, a on of now state we we won

the little of task kind as a a orders there’s lag get you of contract. So on placed bit

mentioned. So operations contracts otherwise, also hiring. about CXISR base and that it’s I that would to apply their exercises just But wins and other contract, hit information immediately, our our area defense all

Gavin Parsons

Okay. Thank you, Carey.

Carey Smith

Thank Gavin. you,

Operator

from question next Our Instructions] von Cowen. Rumohr [Operator Cai comes with

Cai von Rumohr

so the thanks for Yes, much question. taking

So have Do you’ve plans, executive Carey. any do I changes? some you level, the hiring might at done specific more mean, a for I hiring of plans but amount know, obviously, have you bluebird, you any more and fair have

Carey Smith

at don’t pleased. want I in to kind highlight just accomplishing of very our which Cai. I business, brought this the talent in the brand and No, We’ve time, companies significant really, what that reflects from the we into people on brought think I and tier-one marketplace. we’re

are relations, Presidents you the really ground of able in government across, be results new we VP of in head to a hit unit CHRO, of to new X showing a are the Communications, Executive also If running. business Finance, that a and new it, that’s Head going look fact, We’ve George. brought new an hired supporting

And So very our team. team this take that be will the forward. executive I’m pleased us leadership with will

Cai von Rumohr

Terrific, thank very bit secondly, talk could questions. you about little two a much. revenues, if And you

some wins are seasonal downtick given we likely for in you of could same that chance number ramp this that that of the different you up When mean, have, normally look have First, fourth should I be And where we quarter. Kwajalein? that your Antarctica with those are the the businesses in secondly, again? both time? Or to is pattern? a and

Carey Smith

Sure.

year. quarter in next that Kwajalein, on restarting the anticipate first of we So,

Antarctica be so, the program asphalt work that doing modernization we’ll refresh. undergoing a paving is restarts. as And

reprioritizing back budget outcome. projects services the stepping bid. want with. But saying capital do continue proceed to they’re projects the that they under we some they’re So our of We’ll and upon core other which Antarctica, based with

we’re working closely with them that effort. So on

As construction that downtick, seasonal used more business. to related largely was far as be to our

or started from to as benefit We’ve we’ve that hours. our some paid seeing we’re impact an employees of And as down time And off. wind that far company. billable also done allowed to has defer the business, that. that to we’ve less As something

Cai von Rumohr

Excellent. Thank you.

Carey Smith

Thank you.

Operator

all have for like I’d time remarks. to That’s call we the the today. to questions for Spille turn Dave back closing

Dave Spille

thank And joining you. us Thank you this morning. for

don’t and Have many great end If you today’s a day. And weeks. please me forward of to give a the speaking you questions, coming we’ll with to with have call any look call. hesitate we that, over

Operator

This concludes Thank call. today’s conference for you participating.

disconnect. You may now

Parsons (PSN) 3 Nov 212021 Q3 Earnings call transcript