Parsons Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter 2020 Parsons Corporation earnings conference call. At this time, all participant lines are in listen-only mode, so if you require operator assistance during the call, please press star, then zero. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, and then one. Please be advised that 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 fourth quarter and fiscal year 2020 financial results. Please note that we provide a presentation slides on the Investor Relations section of our website. On the call with me today are Chuck Harrington, Chairman and CEO, Kerry Smith, President and Chief Operating Officer, and George Ball, CFO. Today, Chuck will discuss execution against our corporate strategy. Kerry will review our operational highlights. and then George will provide an overview of our fourth quarter financial results and 2021 guidance. 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, 2020 and other SEC filings. Please refer to our earnings press release for Carson'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. Welcome to Parsons' fourth quarter and fiscal year 2020 earnings call. 2020 will be a year none of us will soon forget, between the global pandemic, political and social unrest, widespread cyber attacks, and an election that was unique, to say the least. Our hearts go out to those who have suffered, and we all look forward to a brighter 2021. Parsons had a strong 2020 in spite of these events and ended the year with record adjusted EBITDA, record adjusted EBITDA margin, record cash flow, and a very strong balance sheet. We delivered adjusted EBITDA results within guidance, and we've now expanded margins by 180 basis points over the past two years. We also exceeded the high end of our cash flow guidance. We were, however, not completely immune from the items mentioned in my opening. In terms of revenue, we were less than one percentage point below the low end of our 2020 guidance range, and we would have exceeded the high end of the range were it not for approximately $200 million of project-related COVID-19 headwinds. Sixty percent of the COVID impacts were in our federal solutions segment, and the total COVID impact across both segments represented a five percent headwind to Parson's total revenues. We maintained our solid backlog, which stands at two times our 2020 annual revenues, and we reported a book to bill of 1.1 times for the full year. For the fourth quarter, we reported exceptional cash flow and a 90 basis point year-over-year increase in adjusted EBITDA margin. However, our revenue results in adjusted EBITDA were below our expectations. Fourth quarter revenue decreased year over year, primarily as a result of $45 million from the aforementioned COVID headwinds and lower pass-through revenues. In addition, our fourth quarter adjusted EBITDA was impacted by an $11 million write-down on an unconsolidated joint venture project in our critical infrastructure segment. Our critical infrastructure segment performed exceptionally well in Q4, producing record adjusted EBITDA and adjusted EBITDA margins prior to this write-down. On this project, Parsons is a minority partner. The managing partner updated the project estimate very late in the quarter, which resulted in the write-down. We don't take write-downs lightly, and we've mobilized additional oversight and resources to the project to improve go-forward execution. The critical infrastructure segment produced exceptional overall performance this quarter, including delivering the positive train control system for New Jersey Transit in advance of the federally mandated deadline in December. Another great accomplishment for Team Parsons. We also received recognition for a Regina Bypass public-private partnership project, which is now in full operations. Kerry will elaborate on our strong program execution in a few minutes. Business fundamentals remain strong as we continue to achieve healthy win rates and execute successfully in our broad and diversified portfolio of contracts. We reported a 17% year-over-year increase in contract awards in the quarter. Significant fourth quarter contract wins included a $1.2 billion passenger rail project in Edmonton, Canada, and a $2 billion COVID-19 testing and related solutions multi-award IDIQ contract with the Department of Homeland Security. I'll note that this award directly results from our DetectWise product. During the fourth quarter, we also continued our strategy to further penetrate high-end, high-growth markets with the acquisition of Braxton, a space technology company. In addition to impressive technical and leadership talent, Braxton brings a mix of proprietary government products. We're very excited to welcome Braxton team to the Parsons family. and fully integrating their capabilities with Parsons' own space capabilities to win ever larger contracts within our space and geospatial business. We're keenly focused on driving free cash flow and maintaining balance sheet flexibility to continue to support investments in organic growth and acquisitions. The Braxton acquisition and resulting low leverage further demonstrate this focus. Given our robust cash flow, we ended the fourth quarter with a net leverage ratio of approximately 0.3 times. Our low leverage and over $500 million of undrawn revolver capacity enable us to continue to make strategic investments, including accretive acquisitions, R&D, and investments in our people and culture. As we've said on previous calls, a key aspect of Parsons' culture is our commitment to core values and to our employees. In recognition of these commitments, Parsons was once again recognized by Ethisphere for our ethics and integrity program. This represents the 12th consecutive year we've been named as one of the world's most ethical companies by the global leader in defining and advancing the standards of ethical business practices. Additionally, we were named by Forbes as one of the world's best employers. We're proud of these awards, and they speak volumes about the dedication of our people, in our quest to deliver a better world. As indicated previously, we're holding a virtual investor day on March 11th, and we'll discuss at that time our forecast for continued revenue growth, margin expansion, and free cash flow generation at 100% of adjusted net income. In summary, we produced record adjusted EBITDA, margins, and cash flow, while continuing to win large contracts and delivering on our programs. We maintained our healthy balance sheet after completing a strategic acquisition in a high-growth market, and we won several prestigious awards. With that, I'll turn the call over to Carrie to discuss our operational highlights. Carrie?