Parsons Corporation

Good day and thank you for standing by. Welcome to the Parsons Corporation's second quarter 2026 earnings conference call. At this time, all participants are in 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 1 1 on your telephone. You will then hear an automated message advising that 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 will now hand the conference over to your first speaker today, David Spille, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and thank you for joining us today to discuss our second quarter 2026 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, Chair, President and CEO, and Matt Ofilos, CFO. Today, Carey will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our second quarter financial results, as well as a review of our 2026 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, including the risk factors described in our Form 10-K for fiscal year ended December 31, 2025 and other SEC filings. Please also refer to our earnings press release and presentation slides for additional forward-looking statement disclosures. 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. Please refer to the earnings press release and presentation slides for reconciliation of the non-GAAP financial measures. In addition, for the second quarter of 2026, management is presenting certain financial measures on a normalized basis to exclude the effect of certain portfolio shaping actions in a joint venture charge. Normalized financial measures are also not non-GAAP financial measures. and their earnings press release and presentation slides include reconciliations to the customary GAAP or non-GAAP presentation as applicable. And now we'll turn the call over to Carey.

Thank you, Dave. Good morning. Welcome to Persons' second quarter 2026 earnings call. During the second quarter, Persons demonstrated the robust demand for integrated solutions, discipline of our strategy, and the profitability and resilience in our core business and what remains a dynamic macro environment for both the U.S. federal government and the Middle East region. Both segments continue to post strong book-to-bill ratios and win strategic awards, with federal solutions bookings up 51% year-over-year. On a normalized basis, our core business delivered profitable organic growth in line with our expectations and strong adjusted EBITDA, particularly in critical infrastructure. The Middle East business maintained excellent performance with book to bill exceeding 1.0 times and 10% organic revenue growth, illustrating our strong alignment to regional spending priorities throughout the ongoing conflict. While we experienced strong demand for our high value offerings, we also took decisive actions related to projects that do not align with our strict profitability and risk criteria. Since our 2019 IPO, We've been focused on acquiring businesses that expand our capabilities and customer base while exiting those that do not support growth. These disciplined decisions strengthen our company for the long term. This quarter, adjusted EBITDA was impacted by $118 million of non-recurring events, including a $77 million charge on a remote contract and $41 million related to an extraordinary weather event and schedule delays. In our federal solutions segment, we took portfolio shaping actions to focus on profitable, sustainable growth. This resulted in $19 million gain from selling two advisory contracts and $77 million loss on two non-strategic remote contracts that are held for sale. The advisory contracts in our federal solutions segment, known as CETA, systems engineering and technical assistance contracts, provide independent advice to the government. This work created a potential organizational conflict of interest with our growing development work for an intelligence community customer. By divesting these contracts, we've enhanced our ability to focus on delivering critical national security space ground solutions at substantially higher margins. This is a clear case of exiting good work to win better work and our continued high value solutions evolution. We made the deliberate decision to exit two federal solutions programs in a remote location that no longer fit our risk profile. These programs face staffing and supply change challenges at increased costs and continuing to perform them would have required extensive subcontracting and disproportionate management attention. With a signed letter of intent in place and the customer indicating a willingness to support Novation subject to the customary approval process, We believe this action meaningfully reduces our exposure with the financial impact appropriately reflected in our current results. We expect to close in Q3 2026. This lets us focus our resources on higher growth, more profitable areas of the business. We continually review the performance of all our programs with a focus on execution, opportunities, risks, and financial results. These two contracts are not indicative of our consistently strong operational performance and high-value solutions portfolio in federal solutions. In addition to these portfolio actions, we recorded a $41 million charge in critical infrastructure on a joint venture project following an extraordinary weather event that disrupted productivity and schedule performance. In June, the region experienced historic rainfall at the highest level in over a century. These very unusual conditions and program delays reduced productivity and increased the cost to complete the project. Our team acted swiftly and responsibly by adding labor, equipment, and subcontractor resources to keep the program on schedule and meet our customer commitments. We've updated our estimate to complete, and that revised view is reflected in this quarter's results, and the program is expected to be 90% complete at year end. Importantly, Parsons is a non-managing partner in this joint venture, and since 2019, we have not pursued similar consortium projects. Matt and I will present today's financial results on a normalized basis without the portfolio actions in charge to provide a clear view of our core business performance. The reconciled financials are included in the PowerPoint presentation. In the second quarter, in line with expectations, total revenue rose 8% and organic revenue increased 3% excluding the confidential contract. Federal solutions grew by 11% and critical infrastructure by 5%. We delivered an adjusted EBITDA margin of 10.1%, powered by an 11.9% margin in critical infrastructure. This continued improvement in critical infrastructure margins underscores the strength of the backlog in new business as we deliver growth with favorable business mix. The 70 basis point margin increase builds on last year's 40 basis points. Bookings were outstanding across both segments this quarter with contract awards of 24% year-over-year resulting in an overall book-to-bill ratio of 1.2 times. Federal Solutions bookings increased by a robust 51% year-over-year delivering a 1.3 book-to-bill ratio. Critical infrastructure achieved 1.1 times representing the 23rd consecutive quarter at or above 1.0 times demonstrating sustained demand in the Middle East remained strong with a 1.1 times book to bill. Bookings in the first half of 2026 were very strong with federal solutions up 45% and book to bill ratios of 1.3 times for both Parsons and federal solutions and 1.2 times for critical infrastructure. This provides a solid foundation for accelerating growth in the second half of this year and demonstrates the strength and differentiation of our portfolio. The work we're winning is strategically important in well-funded areas. This quarter, persons won five contracts exceeding $100 million, including two for new work. For the first six months of 2026, we've won nine contracts over $100 million compared to seven in the first half of 2025 and five in the first half of 2024. Our technology leadership is a decisive competitive advantage in securing large-scale programs. Four of our $500 million wins this quarter incorporated artificial intelligence, a key differentiator for Parsons. In the last three quarters, we secured 13 contracts over $100 million with 10 involving advanced AI. With over 20 years in operational AI, we apply its areas including autonomous cyber, counter unmanned aircraft systems, electronic warfare, and smart mobility, supporting revenue growth and margin expansion. Our marquee wins this quarter underscore our strategic positioning and technology leadership. We received a two-year $514 million option under the Missile Defense Agency's Technical Engineering Advisory and Management Support Systems Engineering Contract, continuing our four decade partnership with MDA. The contract covers advanced engineering for the Integrated Missile Defense System, including work on Golden Dome, which contributes to additional growth. We booked $195 million during the second quarter. We secured $400 million in contract awards through two other transaction agreements, each with a three-year period of performance. These new OTAs reflect demand for our mission-critical defense and intelligence solutions and confidence in our ability to rapidly deliver. We booked $125 million on these contracts during the quarter. We were awarded a five-year, $245 million single award IDIQ contract from the United States Naval Research Laboratory with both repeat and new work. Under this contract, Parsons will enhance mission-critical software and cybersecurity for space and ground systems, and we booked $71 million on this contract during the second quarter. We were awarded a seven-year single-award IDIQ contract with a ceiling value of $184 million to support the Department of Navy's Intelligence Carry-On Program. This contract represents new work and supports rapid delivery of innovative capabilities to enhance speed and agility for the warfighter. We booked $26 million on this contract during the second quarter. We were awarded a $161 million contract to continue serving is the main construction manager for the Canadian Giant Mine Room Mediation Program. We booked the full amount of this contract during the second quarter. In the first quarter, we booked $250 million on the Joint Cyber Hunt Kit. This quarter, Cyber Command expressed their intent to increase the Joint Cyber Hunt Kit, or JCHK, contract selling to $750 million. This is a testament to our ability to deliver advanced deployable solutions at scale. Our effective M&A strategy has enabled us to win larger and more profitable programs across both segments, and I'd like to highlight a few recent examples. JCHK brought together person cyber operations experience with ceiling text advanced edge computing capabilities, including Agenic AI. Sealing Tech also played a role in securing the $184 million Navy Intelligence win this quarter. Similarly, the $400 million in OTA wins were led by Chesapeake Technologies. Black Signal enhanced Parsons classified capabilities, making us an approved contractor with greater access to highly classified projects and secure networks. The biometrics capabilities from Maxotor enabled the $392 million classified win we announced in the fourth quarter. We're capitalizing on all the mirror synergies in signals intelligence, space and missile defense, and foreign military equipment analysis. Recent critical infrastructure acquisition strengthened our transportation and water market position and expanded our customer presence. As a preferred supplier, we continue to buy differentiated companies to produce new integrated solutions for our customers. Alongside securing new strategic contracts, our acquisitions and internal investments have established a robust portfolio of mission-focused products. Today, products account for 10% of our federal business, and with their rapid growth, they're expected to bolster our bottom-line results. We offer both hardware and software products directly to customers or as components within broader company solutions. Parsons national security products and solutions provide operational advantage in cyber operations, electronic warfare, and tested environments and include the joint cyber hunt kit and T-REX threat emulation tools. We protect critical infrastructure, public venues, and transportation using advanced security and identity management. Drone Armor counters unmanned aircraft systems. Ares Next and Javelin deliver biometric identity management, and the Tactical Awareness Kit improves situational awareness for major recent sporting events. Our Orbit Exchange and GoCast space products enable resilient satellite operations. The INET Advanced Traffic Management Platform helps global transportation agencies enhance mobility, safety, and efficiency. Throughout our product portfolio, we leverage artificial intelligence to automate operations, optimize efficiency, and create personalized user experiences for faster and better solutions. This quarter, we earned top three global rankings from Engineering News Record for program management, professional services, and program construction management for fee. And we won two American Council of Engineering Companies Engineering Excellence Awards. The Canadian Institute of Steel Construction awarded us for infrastructure and we were named a VETS index's five-star employer for our support of veterans. Looking forward, we are very confident in Parson's future with a strong and synergistic position in federal solutions and critical infrastructure segments. Within federal solutions, we are closely aligned with the administration's priorities and are quick to deliver the speed, Agility and Advanced Solutions the Department of War requires. We're encouraged by the ongoing bipartisan momentum to increase U.S. defense spending. For fiscal year 2027, the administration's proposed a $1.15 trillion base defense budget representing more than 28% increase over 2026. Importantly, the proposed FY27 budget is closely aligned with Parson's core strengths in missile defense, Cyber, Space, Counter-Amand Aircraft Systems, Electronic Warfare, Facilities Modernization, and Joint All-Domain Command and Control. Our purpose-built portfolio has differentiated capabilities that help safeguard our nation and stay ahead of evolving threats. Strong demand continues in our critical infrastructure segment across North America and the Middle East. In North America, our emphasis on hard infrastructure such as roads and highways, bridges, airports, rail and transit, and intelligent transportation systems matches bipartisan priorities and aligns with the proposed Surface Transportation Reauthorization Bill. Notably, as of May 2026, only 44% of the Infrastructure Investment and Jobs Act funds have been spent. The Build America 250 Act proposes $580 billion of stable funding with the largest bridge investment to date. Both bills increase formula funding to 90% and permitting reforms help states advance major infrastructure projects and ensure sustained demand. Our Middle East business performed well in the second quarter, exceeding expectations despite geopolitical issues and affirming our brand strength and leadership. EMEA saw 10% organic revenue growth A 1.1 times book to bill ratio and strong profitability. Opportunities remain robust due to ongoing investments in transportation, urban development, and infrastructure for major events. All areas that align well with our core strengths. We expect increased investments in counter UAS, cyber defense, integrated air and missile defense, The Middle East continues to be an attractive growth market with strong demand and a promising pipeline. Entering the second half of the year, We expect growth driven by our backlog of $9.3 billion of which 71% is funded, excellent book to bill ratios in both segments, strong win rates, and $11 billion of contract awards not yet booked. We are adjusting our fiscal year 26 guidance for the portfolio actions and timing related items which Matt will discuss. This quarter, Parsons secured major contracts and made strategic moves that strengthened our competitiveness and long-term growth and profitability. Our diverse portfolio spans six end markets with growth rates ranging from mid-single digits to greater than 10%. With strong leadership, a talented 21,000-person workforce, and an innovation-driven approach, we are well positioned for sustainable growth and shareholder value. With that backdrop, Matt will provide more details on our second quarter financial results. Matt?