Parsons Corporation

Good morning and welcome to the Q3 2022 Parsons Corporation Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event has been recorded. I'll now extend the conference over to Dave Schuele. VP of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us today to discuss our third quarter 2022 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, Chair, President, and CEO, and Matt Opolis, CFO. Today, Kerry will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our third quarter financial results. 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 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 the comparable GAAP measures. And now we'll turn the call over to Carrie.

Thank you, Dave. Good morning, and welcome to Persons' third quarter 2022 earnings call. We delivered strong third quarter financial results with record revenue and record-adjusted EBITDA. During the quarter, we achieved year-over-year double-digit organic revenue growth in both business segments and grew adjusted EBITDA by 22% and contract awards by 21%. Operating cash flow increased by 59% year-over-year and by 28% for the first nine months of the year. We further strengthened our robust balance sheet, and our Exitor acquisition is making meaningful contributions to our results. Given our strong third quarter results, we are raising the midpoints of our 2022 revenue, adjusted EBITDA, and cash flow guidance ranges. During the third quarter, we generated total revenue growth of 19%. Our year-over-year organic revenue growth was 11%, including 13% within our critical infrastructure segment and 10% within our federal solution segment. These results were driven by sustained recruiting and retention, growing revenue on existing contracts, driving task orders to large single award contracts, and operating effectively in two well-funded and growing markets. Our ability to successfully deliver on our customers' missions has allowed us to continue to secure our repeats and win large strategic contracts in areas aligned with national security and global infrastructure priorities. During the third quarter, we achieved a book-to-bill ratio of 1.1 times on an enterprise basis and in both business segments. This is now the eighth consecutive quarter in which critical infrastructure's book-to-bill ratio has succeeded 1.0 times. During the third quarter, we were awarded the following notable contracts. A $121 million option year on our Combatant Command Cyber Mission Support Contract, where we provide offensive and defensive cyber operations and open source intelligence in support of joint all-domain operations. $121 million of new work under two contracts to support the development of two major industrial cities in the Middle East. On these GIGA projects, we only booked the first phase of each contract. $117 million of new project work under the FAA's technical support services contract to provide engineering, construction oversight, installation, and technical services. Over $70 million of the growth on this contract was funded under the Infrastructure Investment and Jobs Act. A $104 million Teams Next facilities lifecycle management repeat contract to provide advisory and technical services support to the Missile Defense Agency. A $75 million contract extension by a classified customer to provide comprehensive cyber vulnerability assessments for weapons systems. and a new $24 million task order for a military service branch to perform remedial investigations and feasibility studies where PFAS and other contaminant releases have occurred. Our persons emerging contaminant team has been aggressively pursuing opportunities and building market share with a total of over $40 million in PFAS contract wins in both our federal solutions and critical infrastructure segments over the last nine months. We also won prime positions on three multiple award IDIQ contracts. The first one is classified contract to provide offensive cyber operations with a $5 billion ceiling value over 10 years. The second IDIQ win is for the Defense Threat Reduction Agency's assessment, exercise, and modeling and simulation support contract with an $850 million ceiling over 10 years. And the third IDIQ contract is for the United States Army Engineering and Support Center with a $675 million ceiling over seven years. Under this contract, we will provide electronic security systems design and maintenance. A substantial amount of work on our contracts awarded during the quarter contain ESG-related work. In addition to the recent PFAS wins I highlighted earlier, One of the Middle East Giga projects I mentioned has a goal to ensure all residents and industries in the city are powered by 100% renewable energy. During my recent trip to the Middle East, I visited this site and met with customers and employees, and their environmental focus is impressive. This quarter, we also joined our LAX customer to celebrate the unveiling of their automated people mover vehicles, which sets a high standard for environmentally sustainable transportation, having shells made of recyclable materials and achieving zero emissions. We also continue to support numerous charities, including the Tragedy Assistance Program for Survivors, which increases advocacy and support for the families of our nation's fallen heroes. I am proud of the work Persons is doing to make positive impacts on our environment and society. Turning to our most recent acquisition, the Exator integration is going well. The revenue and profitability have been in line with our expectations, and they're exceeding their sales targets. We've retained and integrated key leadership, aligned research and development programs, and are leveraging synergies to pursue new work across both our segments. Given our robust cash flow, we ended the third quarter with a net leverage ratio of 1.6 times. Our low leverage and ample debt capacity will enable us to continue to make strategic investments in our creative acquisitions, research and development, and our people and culture. In summary, I am very pleased with our execution this quarter and throughout 2022 and remain optimistic about our future. We delivered record revenue and profitability, as well as excellent cash flow results. We continue to benefit from our strong leadership, performance execution, and our ability to win large strategic contracts. We operate in two complementary and growing markets, and our balanced portfolio is a differentiator for Parsons. In critical infrastructure, we're seeing budgets grow across the globe. which are aligned with our transportation, environmental remediation, water and wastewater treatment, and urban development markets. In our federal solutions segment, global tensions remain high and threats continue to evolve. Our portfolio of cyber, space, missile defense, and critical infrastructure protection aligns to the administration's recently released National Defense Strategy, Nuclear Posture Review, and Missile Defense Review, which focus on near-peer threats. Given our positive end market position in both segments, we will continue to invest in our people and technologies to drive future shareholder value. And with that, I'll turn the call over to Matt.