Parsons Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Parsons' fourth quarter and fiscal year 2024 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 will 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 Spilly, Senior Vice President, Investor Relations. Please go ahead, sir.

Thanks, Michelle. Good morning, and thank you for joining us today to discuss our fourth quarter and fiscal year 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 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 fourth quarter and fiscal year financial results, as well as a review of our 2025 guidance and long-term growth targets. 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, 2024, 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 fiscal year 2024 and fourth quarter earnings call. Before I summarize our operating results, Matt and I want to express our deepest sympathies to everyone affected by the devastating California wildfires. Parsons was founded in Southern California over 80 years ago and has a significant presence there today, so the fires are impactful to our team and our communities. The safety and well-being of our employees is our top priority, and we continue to offer our assistance to help them move forward In parallel, we are committed to supporting the expeditious recovery and rebuild of Southern California. Moving to our fourth quarter and 2024 results, I want to thank our nearly 20,000 employees for their contributions to yet another exceptional year. Our team's strong execution and focus on our six growing end markets enables us to capitalize on the tailwinds that are positively impacting both our critical infrastructure and federal solution segments. Parsons is well positioned with a unique portfolio and two complimentary, high growth, enduring, and profitable business segments. Our federal portfolio is aligned to the new administration's priorities, including renewed and increased focus on missile defense, offensive cyber, electronic warfare, border security, and an emphasis on the Indo-Pacific region. We are an agile and innovative company that can deliver operationally relevant and differentiated solutions to protect our nation's security at a time when it is needed most. As a firm that has both government and commercial businesses, we have a proven track record of being able to move with speed and apply commercial business models. Additionally, our North America infrastructure portfolio includes transportation, environmental remediation, and water wastewater treatment, as well as capabilities to rebuild our communities, manage major events, and provide critical infrastructure protection, which positions us for our country's needs today and into the future. The United States and Middle East relations are strengthening, and as the premier program management consultant in the Middle East, we look forward to continuing our accelerated growth in the region. Turning to financial results, for both the fourth quarter and the full year, we achieved record results for total revenue, adjusted EBITDA, and contract awards. For the full year, we also had record adjusted EBITDA margin and operating cash flow since our IPO. We delivered organic revenue growth of 22% and adjusted EBITDA growth of 30% in fiscal year 2024. We now have delivered organic revenue growth of more than 20% and adjusted EBITDA growth of more than 30% for the second consecutive year, demonstrating our commitment to above-market growth and while efficiently managing the business to drive margin expansion. This disciplined and accretive growth enabled us to expand our adjusted EBITDA margin by 50 basis points in 2024. We ended the year with a strong balance sheet, which will enable us to continue to invest ahead of demand in high growth areas such as artificial intelligence, cyber, biometrics, counter unmanned air systems, signals intelligence, assured position navigation and timing, and PFAS, PFAS remediation. For the full year, we exceeded $6.7 billion in revenue for the first time Our organic revenue growth of 22% enabled us to continue to be an organic revenue growth leader in both of our business segments. Throughout the year, we delivered consistent results and now have reported double-digit organic growth in every quarter for the last two years. Winning and ramping up new business, delivering on-contract growth, and strong hiring and retention were drivers to achieving these outstanding results. For the full year, our record contract awards of $7 billion increased 17% over 2023, including over 15% growth in both segments, demonstrating the broad-based demand we are experiencing across our portfolio. This record contract award activity was driven by our overall win rates of 71%, the highest level our company has ever achieved. Our strategy is working. to move up the value chain and differentiate with advanced technology, software, and digital enablement. Our acquisitions have also played a key role in helping win new business. During the fourth quarter, record contract awards increased to $1.7 billion or 34%. This quarter, we won six single award contracts worth more than $100 million each. This brings our total to 15 contract wins worth more than $100 million for the full year, matching our quarterly and annual records from last year. I'm proud of our team's ability to win work spanning both business segments, all four business units, and all six core end markets. Significant fourth quarter contract wins included two new three-year contracts in Saudi Arabia, totaling over $275 million. The company booked the first option period on both awards for a value of $81 million in the fourth quarter of 2024. Once our customer is ready, we look forward to announcing these very strategic wins that further strengthen our position in the Middle East. We booked a portion of a second option year contract with a confidential customer for $242 million which runs through February 2026. However, a related program performed by others has recently been paused, which impacts our ability to complete the scope of our mission. Our confidential program is continuing, but at a reduced volume today, and the long-term continuation of our contract is contingent on the related work restarting. As developments occur, we will continue to be transparent and provide updates. We were awarded a new lead design contract for the Newark Air Train Replacement Program guideway and stations project. Parsons is a subcontractor on this $1.2 billion project. As the lead designer, we will be responsible for designing 2.5 miles of elevated guideway along with three new stations. We also were awarded an option period totaling $122 million by the Department of State, of which we booked $84 million. On this contract, Persons installs integrated security systems for 270 United States overseas diplomatic missions. Also includes counter-inmanned aircraft systems, biometrics, mass notification, and alarm enunciation systems. We were awarded an option year totaling $104 million on the company's General Services Administration, C5ISR, Exercise Operations and Information Services Contract, or CEOS. On this program, persons designs, develops, trains, and deploys scalable machine learning solutions to extract actionable intelligence from vast amounts of data and delivers it to intelligent analysts and warfighters. We were awarded a two-year follow-on cybersecurity contract valued at $96 million, of which we booked $78 million. On this contract, we provide a wide range of services focused on identifying, mitigating, and reducing cyber risks to ensure mission resilience and operational readiness. And finally, after the fourth quarter ended, we were awarded two more contracts exceeding $100 million. The first is a follow-on program and construction management contract in Dubai, valued at over $200 million. This win highlights the strength of our entire Middle East portfolio and the acceleration in our UAE business. The second contract is an additional $125 million ceiling value modification that was added to our Cyber Threat Hunt Forward program, which came to us through our ceiling tech acquisition. In 2024, we acquired two preeminent companies, one in our federal solutions segment and one in the critical infrastructure segment. The first acquisition, Black Signal, significantly strengthens Parsons' positioning within offensive cyber operations and electronic warfare, while adding new capabilities in the counter space radio frequency domain. Black Signal, which was built to counter near-peer threats, uses artificial intelligence and machine learning to create innovative signal processing techniques that detect and disrupt difficult-to-access adversary command and control systems. The second acquisition, BCC Engineering, which we completed in the fourth quarter, strengthens our position as an infrastructure leader in program management and design engineering and positions us as the number one consultant in South Florida and doubles our presence with the Georgia Department of Transportation. This is consistent with our strategy to expand our presence in high-growth regions. We are very happy with the performance and successful integration of both companies, and we have already realized revenue synergies with each. After the fourth quarter ended, we acquired TRS Group. TRS is an industry leader in PFAS, thermal, and holistic environmental remediation, having clean hazardous and toxic substances from soil, groundwater, and fire suppression systems for global clients. This $36 million acquisition enhances persons' environmental remediation capabilities in both of our operating segments and serves as a force multiplier for our industry-leading PFAS remediation solutions. Our Discipline M&A program has been very successful, and we will continue to acquire companies to enhance our capabilities, expand our customer base, and drive growth and margin expansion. We have a robust candidate pipeline and anticipate acquiring two to three companies in 2025. As noted in today's earnings press release, Parsons was named one of America's most trusted companies by Forbes, and our Kicking Horse Canyon project was awarded the prestigious 2024 Best Project Award in the Road Highway category by Engineering News Record. In summary, we are executing on our strategy and delivering our customers' missions as we continue to post record results and strong growth rates across all key financial metrics. We also significantly expanded margins and generated exceptional cash flow and contract awards. Finally, we closed two accretive acquisitions in 2024 that exceeded our strict financial metrics, fit Parsons' culture, and share our passion for delivering innovative solutions for the national security and critical infrastructure markets. As we enter 2025 and my fourth year as Parsons CEO, I am even more enthused about our future. We operate in six growing, enduring, and profitable end markets, and we have long-term tailwinds that span both segments. In critical infrastructure, global demand is strong in all major geographies where Parsons operates, the United States, Canada, and the Middle East, and is not expected to peak until the 2028 to 2030 timeframe. We continue to see increased worldwide infrastructure spending, given the benefits modern infrastructure provides, including helping countries grow economically, increasing productivity, creating jobs, and improving living standards. We are leveraging our core competencies in engineering design, program management, and owner's representative to win and deliver on large, complex programs. whether it's designing the world's largest entertainment center in the Middle East, serving as the delivery partner for the Hudson Tunnel project, the largest investment for a mass transit project in modern history, or being the lead designer on the $4.6 billion Georgia State Route 400 Express Lane project, implementing state-of-the-art traffic, incident management, and digital twin systems, Parsons is ready to deliver on our customers' missions. As an industry pioneer in applying digital transformation to infrastructure, we look forward to continuing to transform this industry and drive efficiencies. In our federal solutions segment, we are operating in a dynamic environment. Parsons will continue to take advantage of our speed and agility, commercial business mindset and operating models, and a national security business that is aligned with the new administration's priorities to improve efficiency, reduce cost, and most importantly, protect our nation. The threats to our nation have never been more concerning. Our purpose-built federal portfolio was engineered through internal research and development and accretive acquisitions to specifically address priority threat areas, including cyber, space, missile defense, electronic warfare, signals intelligence, and critical infrastructure protection solutions. Our focus remains on outpacing our nation's near-peer threats with differentiated solutions to support the new administration in defending our nation, war fighters, and intelligence communities to deter adversaries and protect our homeland. We have the right company, the right portfolio, and the right team at the right time to continue to drive results. With that, I'll turn the call over to Matt to provide more details on our 2024 financial results, 2025 guidance, and our long-term financial targets. Matt.