Parsons Corporation

21 Parsons Corporation earnings conference call. At this time, all participants are in listen-only mode. After the presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star, then 1 on your telephone keypad. Please be advised, today's conference may be recorded. If you require operator assistance during the call, please press star, then 0. I'd now like to hand the conference over to David Spilly, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter and fiscal year 2021 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 Kerry Smith, President and CEO, and George Ball, CFO. Today, Kerry will discuss our corporate strategy and operational highlights and And then George will provide an overview of our fourth quarter financial results and review our 2022 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, 2021 and other SEC filings. Please refer to our earnings press release or 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 Carrie.

Thank you, Dave. I want to welcome everyone to Parson's fourth quarter and fiscal year 2021 earnings call. We had a strong finish to the year and achieved our fourth quarter and full year 2021 objectives as we delivered encouraging second half growth over the first half, maintained our hiring and retention momentum, won large strategic contract awards, and continue to be recognized for our ESG business performance. These accomplishments support our strategy to achieve top positions in high growth markets and move up the value chain as a solutions integrator. As a result of our strategic evolution from a services to a solutions company, our portfolio is well positioned in high growth markets, aligned with macro environment trends, and well balanced across infrastructure, defense, and intelligence. Our critical infrastructure segment is benefiting from increased spending on global infrastructure, including transportation, environmental remediation, and water and wastewater treatment. We also expect a gain from the United States infrastructure bill that was signed into law in mid-November. At the same time, our federal solution segment is providing crucial national security support to our customers in cyber, space, missile defense, and C5ISR in an increasingly tense geopolitical environment. And finally, we're establishing measured 2022 guidance that supports revenue growth of 4% and 20 basis points of adjusted EBITDA margin expansion at the midpoint. During the fourth quarter, we delivered on our stated objectives, including strong core program performance, large contract wins, and continued momentum in employee recruiting and retention. In addition, we were recognized as an employer of choice and for delivering projects with a positive impact on the environment and society. Our strong finish to the year enabled us to achieve second half revenue growth of 9% over the first half of the year with 7% organic growth. And to deliver results that were above the midpoint of all three guidance metrics we provided during our second quarter earnings call. In terms of program performance, we continue to receive high customer satisfaction scores based upon our strong program execution. This is further validated by delivering full-year repeat win rates of nearly 100% and achieving over 90% average incentive and award fees. Our ability to successfully deliver on our customers' missions is enabling us to win large strategic contracts in areas that are aligned with the Biden administration's infrastructure and national security priorities. During the fourth quarter, we achieved a book-to-bill ratio of 0.9 times on an enterprise basis, driven by a 1.3 times book-to-bill ratio in our critical infrastructure segment. On a trailing 12-month basis, our enterprise book-to-bill ratio is 1.25 times, with federal solutions at 1.3 times and critical infrastructure at 1.2 times. We are winning a significant amount of new business in both segments, which has positioned Parsons for growth in 2022 and beyond. During the fourth quarter, we were awarded a $2 billion contract, one of our largest contract wins ever, and two additional contracts worth approximately $100 million each. Our recently acquired businesses and our strong ESG portfolio have driven these material new awards. The $2 billion contract is for project and construction management at the Faro Mine in Yukon, Canada, which is one of the largest abandoned mine cleanup projects in the world. This contract leverages our ESG experience and environmental remediation into mind and reflects our commitment to projects that advance human health and safety, restore the environment, and maximize the socioeconomic benefits within the local community. This continues our care and maintenance work while expanding our scope to include implementation of the site remediation plan for more than 20 years. We were awarded $104 million single award IDIQ contract by an intelligence community customer to provide cybersecurity and computer network operations. We would not have been able to win this type of award without the acquisitions we have made and the technology capabilities we've built into our portfolio for the last four years. Blackhorse Solutions, one of the companies we acquired in the third quarter, was awarded expanded scope on a single award contract that we expect to have an approximate value of $100 million. On this contract, we will perform work for the Department of Defense, the intelligence community, and civilian organizations that span cybersecurity, electronic warfare, technical operations, readiness, and analytics. Again, this type of award reinforces how our growth investments in companies with capabilities to counter near-peer threats are resulting in tangible wins. We were awarded a prime position on a multiple award IDIQ contract during the fourth quarter with a ceiling value of $1.1 billion. This contract will support the Army Corps of Engineers to meet environmental and munitions response challenges. This is another great example of leveraging our ESG portfolio. Also, we won over $60 million of infrastructure contracts in key transportation areas that will receive future funding under the United States Infrastructure Bill, including rail and airport modernization and advanced traffic management systems. These wins leverage digital technologies from our acquisitions, such as data analytics and cybersecurity. Right after quarter closed, we were awarded a task order to provide testing solutions in response to the COVID-19 pandemic at the Department of Homeland Security Immigration and Customs Enforcement facilities across the United States. This award is a potential total ceiling value, including surge capacity, of more than $100 million. To win this contract, we leveraged capabilities from across both Carson segments in our DetectWise product offering. Collectively, these awards illustrate our ability to win as a differentiated solutions integrator and the power of our ESG portfolio. In addition to winning new business, we're encouraged by our continued recruiting and retention momentum. Hiring in the second half of 2021 increased 30% over the first half of the year, and this progress has continued into the new year. In addition, our overall attrition rate remains in line with industry averages. We feel our proactive management of the hiring and retention process is yielding positive results, and we will continue to focus on these areas in 2022. Adding to the ESG comments I made, we continue to build on our longstanding commitment to ESG by delivering projects that improve the mobility, safety, and quality of life for our citizens. During the quarter, our New York City RFK Bridge and our Leesburg-Virginia Battlefield Parkway Interchange projects received excellence in engineering awards for their positive contributions to the environment, safety, and society. In addition, our Gordie Howe International Bridge project won the highest possible distinction from the Institute for Sustainable Infrastructure for achieving sustainable development and environmental performance standards. Further, Persons was recognized by three different organizations for our commitment to the military and veteran community, including the 2021 Above and Beyond Award for creating a supportive work environment for members of the United States National Guard and Reserve. After the end of the fourth quarter, Persons received a perfect score on the Human Rights Campaign's Annual Corporate Equality Index. We're proud of our designation of one of the best places to work for LGBTQ plus equality. These recognitions exemplify our culture of inclusiveness and being an employer of choice. We had a strong finish to the year, and we expect this momentum to continue into 2022. As we enter the new year, we're focused on four priorities to drive growth and profitability. First, capturing new high-quality projects associated with increased global infrastructure spending. We are proactively engaging with the United States federal, state, and local authorities on a pipeline of projects we expect will receive prioritized funding. Canada is also investing in their future with multiple provinces raising funds to push infrastructure programs. And in the Middle East, oil price stability is enhancing infrastructure spending for new transportation systems and new industrial and entertainment cities like Neom and Qadiyah. Second, ramp up staffing on new business and task order wins. We will accomplish this by delivering mission-critical solutions for our customers and sustaining our recruiting and retention momentum to maximize contract ceiling values. Third, continuing to move up the solutions integration value chain by winning strategic, profitable work. Our focus is to enhance our positions in high-growth markets, including cyber, space, C5ISR, missile defense, transportation, environmental remediation, and water and wastewater treatment. The capabilities that we've added to our portfolio have provided us with additional strengths in these markets, which we will continue to aggressively leverage. We will also make more organic and inorganic investments to drive integrated end-to-end solutions that enable us to lead with technology differentiation and win large strategic programs. And our fourth priority is to complete the few remaining challenging legacy critical infrastructure projects. As we've indicated on prior earnings calls, we are making considerable progress on these programs. Ending these projects will be an important milestone and symbolic of how different Parsons is today compared with when we started transforming the company over four years ago. As you can likely tell, I am excited about our future. Over the last six months, we've done a tremendous amount of work to position Parsons for growth. We've solidified our base of business by winning all major repeat contracts, hired and promoted new executive leaders, made significant strides in recruiting, and closed two acquisitions that enhanced our cyber, electronic warfare, information operations, and position navigation and timing capabilities. We have momentum in two growing, enduring, and profitable segments, with total backlog of $8.3 billion and only 3% of our total revenue up for repeat in 2022. We have maintained strong win rates, and we have a $44 billion qualified pipeline, which will only grow as the infrastructure funding begins to flow. We're executing our value creation framework with a strong balance sheet that will enable us to make additional organic and M&A investments to drive growth and expand margins. We are confident in our ability to achieve the 2022 guidance ranges under the current macroeconomic outlook, and look forward to reporting on our progress throughout the year. With that, I'll turn the call over to George to discuss our fourth quarter financial highlights. George?