Parsons Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2024 Parsons Corporation Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Dave Spiele, Senior Vice President, Investor Relations. Sir, please go ahead.

Thanks, Michelle. Good morning, and thank you for joining us today to discuss our third quarter 2024 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, President, and CEO, and Matt Opolis, CFO. Today, Carrie will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our third quarter financial results, as well as a review of our increased 2024 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, 2023 and other SEC filings, including the quarterly report filed with the Securities and Exchange Commission on October 30, 2024 on Form 10-Q for the quarter ended September 30, 2024. 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 reference 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 third quarter 2024 earnings call. We are very pleased with our third quarter and year-to-date performance as we delivered record Q3 results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow, and contract awards. We also achieved strong growth across the portfolio, delivering over 20% organic growth for the sixth consecutive quarter, while efficiently managing the business as bottom line growth continues to outpace our robust top line growth. In addition, we continue to leverage our strong balance sheet to invest in software and integrated solutions, as well as execute accretive acquisitions that either provide distinguished defense capabilities to counter near-peer threats or strengthen our engineering expertise and increase our geographical footprint in high-growth infrastructure markets. As a result of our strong operating performance in our Black Signal acquisition, we are raising our four-year revenue, adjusted EBITDA, and cash flow guidance ranges. Our record results reflect the hard work and dedication of the entire person's team to deliver on our customers' national security and infrastructure missions with the urgency and operational relevance required in today's fast-paced and dynamic environment. For the third quarter, we generated $1.8 billion in revenue for the first time in our company's history and delivered organic revenue growth of 26%. During the third quarter, We also deliver double-digit total revenue growth in both business segments, illustrating the strength of our portfolio. This is now the 11th consecutive quarterly record for revenue and 12th consecutive record quarterly for adjusted EBITDA. I will also note that for the third quarter and for the first nine months of 2024, total adjusted EBITDA growth exceeded revenue growth. In the third quarter, total revenue increased 28% while adjusted EBITDA grew by 31%. And for the first nine months of 2024, total revenue grew 27% and adjusted EBITDA increased 36%. By driving EBITDA growth faster than our robust revenue growth, our margins expanded 20 basis points in the third quarter and 60 basis points for the first nine months of the year. In addition, We had an exceptional quarter for operating cash flow and increased our trailing 12-month cash flow by more than 90% from the prior year period. Our strong free cash flow and balance sheet support our ability to continue to make internal investments and accretive acquisitions to strengthen our capabilities and drive long-term growth and margin expansion. These investments are enabling us to win larger and more profitable contracts, as well as new business across both segments and all six end markets. During the third quarter, we won four single award contracts over $100 million each and reported a book-to-bill ratio of 1.0 times, which represents a 24% increase in contact award activity over the prior year period. In addition, the critical infrastructure segment achieved a book-to-bill ratio of 1.0 or greater for the 16th consecutive quarter. In critical infrastructure during Q3, we were awarded strategic transportation and Middle East projects. In North America, we received a new award for the Georgia State Route 400 express lanes, where Parsons will serve as the lead designer. This $4.6 billion project will add new express lanes and use state-of-the-art traffic, incident management, and digital twin systems. Under the Infrastructure Investment and Jobs Act, Georgia is expected to receive at least $11 billion for roads and highways, bridges, public transportation, airports, and resilient infrastructure. We were awarded a new lead design contract for the Honolulu Authority for Rapid Transportation. On this $1.66 billion project, we are the lead designer for the city center, gateway, and stations. The scope of work includes the design of six rail stations and approximately three miles of elevated rail guideway and engineering services during construction. Over the past 16 months, we've won five of the largest North America transportation design projects in our company's history. The two wins this quarter, along with the recent Hudson River Tunnel Project, JFK International Airport Roadways, and Newark Bay Bridge wins, demonstrate the success we are having in the transportation market. These awards also show that federal, state, and local funding continues to flow at a healthy pace. Our momentum in the Middle East continues, as we achieved a book-to-bill ratio of 1.2 times in the third quarter. And we currently have the largest qualified pipeline in our company's history in both the Middle East and Saudi Arabia. In Saudi Arabia, we were awarded contracts valued at more than $200 million, including two large program management awards. In addition, third quarter headcount in both the Middle East and Saudi reached an all-time high and continues to grow. We are very excited about the future growth opportunities in the region and continue to invest to capitalize on this unique opportunity. In our federal solutions segment, We received option awards totaling $287 million with a confidential customer during the third quarter. We also booked an option period totaling $245 million on our general services administration contract. 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 were awarded $134 million of contracts in the Indo-Pacom region. We won a three-year $69 million contract on Kwajalein, the Marshall Islands, to provide Army family housing. We also were awarded $37 million in signals intelligence and cyber operations work. In addition, we received two contracts worth $28 million to perform advanced geophysical classification and unexploded ordnance work on Guam and upgrade utility monitoring and control systems. Parson's presence in Guam, Kwajalein, and Hawaii continues to strengthen and is aligned to the fiscal year 25 Pacific Deterrence Initiative of $9.9 billion for targeted investment to enhance force posture, infrastructure, presence, and readiness of the United States and its allies in the Indo-Pacific region. Finally, we booked an option period totaling $54 million on the Combatant Command's Cyber Mission Support Contract. This contract includes support of multi-domain operations across cyber, space, air, ground, and maritime. During the third quarter, we announced and closed our Black Signal Technologies acquisition in an accretive deal valued at $204 million. This company is a next-generation digital signal processing, electronic warfare, and cybersecurity provider built to counter near-peer threats. Black Signal expands persons' customer base across the Department of Defense and intelligence community and significantly strengthens persons' positioning within offensive cyber operations and electronic warfare, while adding new capabilities in the counter-space radio frequency domain. This strategic acquisition provides a strong, cleared workforce, 90% intellectual property-enabled offerings, 67% directed sole source work, and an expanded customer set, enabling immediate revenue synergies. After the third quarter ended, we entered into a definitive agreement to acquire BCC Engineering, one of the Southeast region's leading transportation engineering firms, in an all-cash transaction valued at $230 million. BCC is a full-service engineering firm that provides planning, design, and management services for transportation, civil, and structural engineering projects in Florida, Georgia, Texas, South Carolina, and Puerto Rico. This acquisition will strengthen our position as an infrastructure leader while expanding our reach in the southeastern United States. an area where the Infrastructure Investment and Jobs Act has provided approximately $100 billion in Federal Highway Administration formula funds for fiscal years 2022 through 2026. BCC was our top-ranked acquisition target for geographical expansion into the Florida market and will enable us to become the number one consultant in South Florida. BCC will also double our presence and resources working with the Georgia Department of Transportation. These two acquisitions are consistent with our strategy of completing preemptive accretive acquisitions of companies we know well and have revenue growth and adjusted EBITDA margins of 10% or more. We continue to have an active M&A pipeline in both segments. and we will use our strong balance sheet to complete accretive acquisitions that provide technology differentiation and drive both growth and margin expansion. In summary, our record performance so far this year demonstrates we are executing on our strategy to move up the value chain to drive exceptional revenue growth, margins, and cash flow. For the first nine months this year, we have achieved 25% organic revenue growth expanded margins by 60 basis points, and increased operating cash flow by 82% to $397 million. We continue to leverage our strong balance sheet and free cash flow to make internal investments and acquire strategic assets that differentiate our solutions through software and advanced technologies. We are capitalizing on the market tailwinds and unprecedented global infrastructure spend and the evolving geopolitical environment that is driving increased demand for our national security solutions. Given our strong operating performance and our outlook for the remainder of the year, we are raising all guidance metrics. With that, I'll turn the call over to Matt to provide more details on our third quarter financial results and our increased fiscal year 2024 guidance. Matt?