Parsons Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2020 Parsons Corporation earnings conference call. At this time, all participant lines are in listen-only mode, so if you require operator assistance, please press star, then zero. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, then one. Please be advised today's conference may be recorded. I'd now like to hand the conference over to your host today, Mr. Dave Spilly, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us today to discuss our third quarter 2020 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Chuck Harrington, Chairman and CEO of George Ball, CFO, and Carrie Smith, President and Chief Operating Officer. Today, Chuck will discuss execution against our corporate strategy, George will provide an overview of our third quarter financial results, and then Carrie will review our operational highlights. We then will close with a question and answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year ended December 31, 2019 and other SEC filings. Please refer to our earnings press release for Parson's complete forward-looking statement disclosure. We do not undertake any obligation to update forward-looking statements. Management will also make reference to non-GAAP financial measures during this call. We remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. And now we'll turn the call over to Chuck.

Thank you, Dave. Good morning to everyone on the call, and welcome to Parson's third quarter 2020 earnings call on this eventful morning of continued vote counting. We had a great third quarter, and this was against a backdrop of challenging global macroeconomic conditions. We delivered record-adjusted EBITDA while also delivering outstanding cash flow. These accomplishments once again reflect the resiliency of our combined portfolio of federal solutions and critical infrastructure. After the end of the quarter, we announced the pending $300 million acquisition of Braxton Science and Technology Group, Braxton reinforces our strong position in a rapidly expanding space market. We're very excited about joining forces with Braxton. It further expands our cutting-edge space capabilities, our strong government space customer base, and expands our addressable market to include critical ground-based technology systems. This acquisition exceeds all of our quantitative and qualitative M&A thresholds. Now, I'll review a few of our third quarter financial highlights. We reported adjusted EBITDA of $101 million. This is an adjusted EBITDA margin of 10%, achieving on an interim basis one of our long-term financial targets announced during our IPO last year. We also generated $145 million of operational cash flow and ended the quarter with a 1.2 times book-to-bill ratio, driven by 1.5 times in federal solutions. We continue to execute on our goals of winning larger programs and additional OTA awards. We are also simultaneously delivering strong program performance for our customers. Exemplifying these points during the quarter, we won a $300 million contract with a classified customer, doubled our year-to-date OTA awards over last year, and continued to receive high customer satisfaction scores. The above reflects our strong contract performance, which drives margin expansion. We continue our disciplined balance sheet management and execution of our M&A strategy. We recently closed a $400 million convertible note, taking advantage of historically low pricing. Additionally, we protected shareholders by purchasing a hedging instrument that precludes potential dilution below a stock price of $66 per share. The incremental capital we raised in this transaction was very timely. It will enable us to fully fund our Braxton acquisition while leaving the financial flexibility for additional future M&A transactions. The acquisition of Braxton underscores our disciplined approach to M&A. We strive to acquire companies that operate in specific high priority and high growth markets. Our market strengths are aligned with national defense priorities of cyber security, geospatial and radio frequency intelligence, space, C5ISR and missile defense. These markets are enduring and expected to be insulated from budget cuts. Our core technologies of artificial intelligence, autonomous systems including counter hypersonics, cloud computing and IOT are also aligned with the nation's technology priorities. So Braxton is well aligned with Parsons and the nation's top investment priorities. We also like to acquire companies we've worked with in the past and have a strong reputation in the market and that benefit from our scale and broader set of capabilities. Braxton perfectly aligns with this aspect of our M&A strategy. We ensure M&A candidate companies have great technology, exceptional management teams, and are a strong fit with our agile, innovative, and disruptive culture. Braxton meets all of these objectives as well. Braxton also exceeds all of our major financial criteria with revenue growth and adjusted EBITDA margins above 10% respectively, and transaction is accretive. Braxton enhances our margin revenue growth profile and further strengthens our strategy to win large prime contracts within the DoD and intelligence communities. Braxton builds on our strong track record of successfully acquiring and integrating companies. It is consistent with our recent acquisitions of Polaris Alpha, OG Systems, and QRC Technologies. We look forward to welcoming their employees into Team Parsons. Carrie will elaborate further on the Braxton acquisition in a few minutes. In summary, we delivered on another strong and successful quarter. We reported record adjusted EBITDA and record EBITDA margins, delivering outstanding cash flow and achieved a strong book-to-bill ratio. Our operations team continues to be successful in winning large new contracts and OTA awards. Perhaps most importantly, we continue to deliver on our commitments to our customers. We started the fourth quarter by announcing a strategic space acquisition, and this acquisition will further enhance our position in this important and fast-growing market. With that, I'll turn the call over to our Chief Financial Officer, George Ball, to discuss our third quarter financial highlights. George? Thank you, Chuck, and good morning, everyone.