Parsons Corporation

Good day and thank you for standing by. Welcome to the second quarter 2023 Parsons Corporation earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Dave Spilly, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us today to discuss our second quarter 2023 financial results. Please note that we provide the presentation slides on the Investor Relations section of our website. On the call with me today are Carrie Smith, Chair of President and CEO, and Matt Opelis, CFO. Today, Carrie will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our second quarter financial results and a review of our 2023 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 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, 2022 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 Parson's second quarter 2023 earnings call. I am very pleased with our results again this quarter. Our momentum continues as we delivered another record quarter with all-time highs for total revenue, organic revenue growth, adjusted EBITDA, contract awards, and total backlog. In the second quarter, we achieved organic revenue growth of over 20% in both business segments and won six contracts over 100 million, all company records. Our record growth was driven by winning key contracts in both segments, ramping up new contract work, growing revenue on existing contracts, and record employee hiring and improved retention. In addition, our successful M&A program is contributing to growth by enhancing our ability to win large strategic contracts with differentiated technical solutions. I will also note that for Q2 and the first half of 2023, total adjusted EBITDA growth exceeded revenue growth. In the second quarter, total revenue increased 34%, while adjusted EBITDA grew by 53%. And for the first half of 2023, total revenue grew 29% and adjusted EBITDA increased 38%. Our ability to drive adjusted EBITDA growth faster than our strong revenue growth demonstrates our focus on margin expansion. We have the right portfolio and the right team to continue to capitalize on unprecedented global infrastructure spending and the increasing demand for national security solutions, especially in high-priority growth markets such as cyber and intelligence, space, electronic warfare, information operations, and artificial intelligence, all of which address near-peer threats. These positive factors provide us with the confidence and visibility to raise our full year revenue, adjusted EBITDA, and cash flow guidance, which Matt will discuss in a few minutes. During the second quarter, we achieved a book-to-bill ratio of 1.4 times on an enterprise basis. These results were driven by a 95% year-over-year increase in contract awards. This is now the 11th consecutive quarter in which critical infrastructure's book-to-bill ratio has exceeded 1.0 times. Our robust bookings and record year-to-date win rates were driven by delivering on our customers' missions moving up the value chain by offering higher-end capabilities, developing differentiated technology solutions, and hiring and retaining a prestigious workforce. We were awarded six contracts that exceeded $100 million during the second quarter and one more just after the quarter ended. These large contracts span both business segments and provide increased visibility to our financial outlook. Significant second quarter contract wins included the Federal Aviation Administration's $1.8 billion ceiling value repeat contract to support their aviation system capital investment plan, of which we booked the three-year base period for $641 million. Parsons has been the prime contractor on this work for more than two decades, and we look forward to continuing to support this important customer. With the Infrastructure Investment and Jobs Act, the FAA has $5 billion of additional funding for facilities-related work. Also with this FAA win, we've secured all four of our major repeats of approximately $2 billion each, and these contracts span the next seven to 20 years. We were awarded a new five-year single award contract from the General Services Administration with a potential value of $1.2 billion, of which we booked the one year base period for $217 million. This contract supports the Department of Defense and its strategic partners in delivering global quick reaction capabilities, leveraging advanced technology solutions across the all domain battle space. We won a $170 million task order contract by the Defense Threat Reduction Agency under the assessments, exercises, modeling, and simulation support IDIQ vehicle. This contract contains new and existing work to provide vulnerability assessments, design reviews, and analysis that advances the Department of Defense and Defense Threat Reduction Agency's missions to counter and mitigate a broad spectrum of existing and emerging vulnerabilities and threats. We booked $34 million on this contract in the second quarter. We were awarded a new $130 million single award contract as lead designer for the Port Authority of New York and New Jersey to enhance infrastructure at the John F. Kennedy International Airport. The scope includes a new on-airport roadway transportation network, parking garage, pedestrian bridge, and utility upgrades. We booked this entire contract value in the second quarter. We were also awarded a new $127 million contract as subcontractor to a federal customer of which Parsons booked $25 million to deliver detection technology solutions. We were awarded a $109 million repeat contract from the United States Cyber Command to provide cyber capability, discovery, development, testing, and advanced analytics. We booked $52 million on this contract in the second quarter. This is our second consecutive win with the Cyber Command this year, and we're excited about our position supporting this critical customer's mission. Cyber Command is now gaining budget authority in recognition of their importance to national security. In addition to the six wins greater than $100 million each, we were awarded a new $93 million single award contract to complete project and design management for a major development in Saudi Arabia. We booked the entire value of this contract in the second quarter. And shortly after the quarter ended, the NASA repairs, operations, maintenance, and engineering contract was awarded to our prime contractor. Parsons' work share is $130 million. During the second quarter, we also closed on our acquisition of IPKeys Power Partners. This strategic acquisition expands Parsons' presence in two rapidly growing end markets, grid modernization and cyber resiliency for critical infrastructure. IPT enables Parsons to bring cybersecurity tools, technology, and market experience to utility operators to secure operations, optimize efficiency, and achieve grid resiliency. I'm very pleased with our M&A program. especially with the strong execution of our recent XTOR acquisition. Our acquisitions have enabled us to prime and win large contracts. Our strategic and selective approach to acquisitions has enabled us to move up the value chain and create differentiated positions in our six core end markets. We have an active M&A pipeline across both segments, and we will continue to use our strong balance sheet to complete additional accretive acquisitions that drive growth and margin expansion into our business. As part of our long-standing commitment to ESG, in April we released our 2023 ESG report detailing how we're making the world safer, healthier, and more sustainable. As part of this report, we announced that we already exceeded our 2025 target to reduce Scope 1 and 2 emissions by 20%. As a result, we published our commitment to set updated near and long-term targets for greenhouse gas emission reductions aligned with science-based target initiatives. During the quarter, we were recognized as a top employer for diversity by distinguished organizations, including Forbes, Women Engineering Magazine, and the Washington Business Journal. In addition, we were recognized by VETS indexes for our commitment to support veterans. As a result of our ESG commitment, we were upgraded by Institutional Shareholder Services, or ISS, to prime status. This label is awarded to companies for successfully managing sustainability-related risks and opportunities and achieving the best ESG scores among their peers. I'm also proud to share that Parsons was part of the team that helped the United States comply with the 1997 Chemical Weapons Convention Agreement. by destroying our country's last chemical weapon. The final sarin nerve agent-filled M55 rocket was destroyed on July 7th. I want to congratulate the hundreds of Parsons team members and the many partner personnel that supported this mission over the years, leading us to this monumental accomplishment. As a result of the major milestone achievement on this contract and one other chemical weapons destruction program this quarter, our federal solutions segment earned $20 million of one-time incentive fees, driving its adjusted EBITDA margin to over 11% for the quarter. Relative to our two legacy critical infrastructure programs, our margin was impacted by $28 million this quarter. While the write-downs are disappointing, we've made significant progress on both programs, bringing them to over 95% and 75% complete, with final completion dates expected in early Q4 2023 and late 2024 respectively. For the program that ends in 2024 during the second quarter, we demonstrate important progress against technical requirements. In summary, we had an excellent second quarter. I'm extremely proud of the hard work and performance of our talented employees. They have consistently delivered strong results over the last two years. In the second quarter, we achieved record total revenue, organic revenue growth, adjusted EBITDA, contract awards, and total backlog. We also reported a 1.4 times book-to-bill ratio by increasing contract awards by 95%. Additionally, we continued to execute on our strategic M&A program and plan to continue to leverage our balance sheet for additional accretive acquisitions. As I look forward, I'm extremely excited about our bright future. We are in six great markets with differentiated technology that are all simultaneously growing. We have an experienced management team that is delivering strong results and promoting a people-first culture, which is enabling us to be one of the organic growth leaders in both of our business segments. With that, I'll turn the call over to Matt to discuss our second quarter financial highlights. Matt?