Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Parsons Corporation Earnings Conference Call. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your host today, Mr. David Spille, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us today to discuss our fourth quarter and fiscal year 2020 financial results. Please note that we provided presentation slides on the Investor Relations section of our website. On the call with me today are Chuck Harrington, Chairman and CEO; Carey Smith, President and Chief Operating Officer; and George Ball, CFO. Today, Chuck will discuss execution against our corporate strategy, Carey will review our operational highlights, and then George will provide an overview of our fourth quarter financial results and 2021 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, 2020, and other SEC filings. Please refer to our earnings press release for Parsons' 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 their comparable GAAP measures. And now I will turn the call over to Chuck.

Thank you, Dave. Welcome to Parsons' Fourth Quarter and Fiscal Year 2020 Earnings Call. 2020 will be a year none of us will soon forget, between the global pandemic, political and social unrest, widespread cyber attacks, and an election that was unique to say the least. Our hearts go out to those who have suffered, and we all look forward to a brighter 2021. Parsons had a strong 2020 in spite of these events and ended the year with record adjusted EBITDA, record adjusted EBITDA margin, record cash flow, and a very strong balance sheet. We delivered adjusted EBITDA results within guidance and have now expanded margins by 180 basis points over the past two years. We also exceeded the high end of our cash flow guidance. We were, however, not completely immune from the items mentioned in my opening. In terms of revenue, we were less than one percentage point below the low end of our 2020 guidance range. We would have exceeded the high end of the range were it not for approximately $200 million of project-related COVID-19 headwinds. 60% of the COVID impacts were in our Federal Solutions segment, and the total COVID impact across both segments represented a 5% headwind to Parsons' total revenues. We maintained our solid backlog, which stands at two times our 2020 annual revenues, and we reported a book-to-bill of 1.1 times for the full year. For the fourth quarter, we reported exceptional cash flow and a 90 basis point year-over-year increase in adjusted EBITDA margin. However, our revenue results and adjusted EBITDA were below our expectations. Fourth quarter revenue decreased year-over-year, primarily as a result of $45 million from the aforementioned COVID headwinds and lower pass-through revenues. Additionally, our fourth quarter adjusted EBITDA was impacted by an $11 million write-down on an unconsolidated joint venture project in our Critical Infrastructure segment. Our Critical Infrastructure segment performed exceptionally well in Q4, producing record adjusted EBITDA and adjusted EBITDA margins prior to this write-down. On this project, Parsons is a minority partner. The managing partner updated the project estimate very late in the quarter, which resulted in the write-down. We don't take write-downs lightly, and we have mobilized additional oversight and resources to the project to improve go-forward execution. The Critical Infrastructure segment produced exceptional overall performance this quarter, including delivering the positive train control system for New Jersey Transit in advance of the federally mandated deadline in December, another great accomplishment for Team Parsons. We also received recognition for the Regina Bypass public-private partnership project, which is now in full operations. Carey will elaborate on our strong program execution in a few minutes. Business fundamentals remain strong as we continue to achieve healthy win rates and execute successfully in our broad and diversified portfolio of contracts. We reported a 17% year-over-year increase in contract awards in the quarter. Significant fourth quarter contract wins included a $1.2 billion passenger rail project in Edmonton, Canada, and a $2 billion COVID-19 testing and related solutions, multi-award IDIQ contract with the Department of Homeland Security. I will note that this award directly results from our DetectWise product. During the fourth quarter, we also continued our strategy to further penetrate high-end, high-growth markets with the acquisition of Braxton, a space technology company. In addition to impressive technical and leadership talent, Braxton brings a mix of proprietary government products. We are very excited to welcome the Braxton team to the Parsons family and fully integrating their capabilities with Parsons' own space capabilities to win larger contracts within our space and geospatial business. We are keenly focused on driving free cash flow and maintaining balance sheet flexibility to continue to support investments in organic growth and acquisitions. The Braxton acquisition and resulting low leverage further demonstrate this focus. Given our robust cash flow, we ended the fourth quarter with a net leverage ratio of approximately 0.3 times. Our low leverage and over $500 million of undrawn revolver capacity enable us to continue to make strategic investments, including accretive acquisitions, R&D and investments in our people and culture. As we have said on previous calls, a key aspect of Parsons' culture is our commitment to core values and to our employees. In recognition of these commitments, Parsons was once again recognized by Ethisphere for our ethics and integrity program. This represents the 12th consecutive year we have been named as one of the world's most ethical companies by the global leader in defining and advancing the standards of ethical business practices. Additionally, we were named by Forbes as one of the World's Best Employers. We are proud of these awards, and they speak volumes about the dedication of our people and our quest to deliver a better world. As indicated previously, we are holding a virtual Investor Day on March 11th. We will discuss at that time our forecast for continued revenue growth, margin expansion, and free cash flow generation at 100% of adjusted net income. In summary, we produced record adjusted EBITDA, margins, and cash flow while continuing to win large contracts and delivering on our programs. We maintained our healthy balance sheet after completing a strategic acquisition in a high-growth market, and we won several prestigious awards. With that, I will turn the call over to Carey to discuss our operational highlights.

Thank you, Chuck. We had a strong 2020 despite experiencing COVID impacts on three large federal solutions contracts, which we expect to contribute to accelerating growth in the future. Most importantly, I'm proud of our employees' continued focus on achieving mission success for our customers and delivering strong financial results with record adjusted EBITDA and cash flow. During the fourth quarter, we won significant contracts and posted our largest quarter book-to-bill ratio for critical infrastructure in two years at 1.3 times. In our Federal Solutions segment, we had a 0.9 times book-to-bill ratio in a seasonally soft quarter. We continue to win important other transaction agreement awards and completed the Braxton acquisition, which added key capabilities in the space domain. Notable contract wins in the fourth quarter included a 50/50 joint venture partnership on the $1.2 billion light rail transit project for Valley Line West in Edmonton, Alberta, Canada. Globally, Parsons is a leader in light rail transit and advanced train control systems, serving over 80 rail and transit customers. We were one of four awardees, out of over 700 bids submitted, on the $2 billion ceiling Multiple Award IDIQ, Department of Homeland Security COVID-19 program. Under this contract, we will provide flexible COVID testing solutions, leveraging our innovative DetectWise suite. Finally, we won the $80 million Tilos contract supporting government space operations customers. This contract provides access to new experimental space programs, and we will support next-generation early missile warning systems. For the full year, we won over $200 million of new other transaction agreement contracts, more than double the amount that we were awarded in 2019. Our Cyber & Intelligence business grew 15% in 2020, exceeding market growth rates. In the fourth quarter, we won strategic pursuits, including a classified sole source program with the Air Force, leveraging our enhanced visualization environment solution developed for the Army, providing cyber topology and actionable intelligence. This program aligns our cyber reconnaissance technologies with space-enabled cyber and focuses on regional threat areas. QRC Technologies had a strong fourth quarter in 2020, recording a 57% increase in revenue and a 73% increase in bookings compared to the same quarter in 2019. QRC also launched 5G-enabled products and a new radio frequency recording playback system with QRC-developed software-defined radios. Our Space and Geospatial Solutions market also continues its growth momentum. In mid-December, our space situational awareness solution provided a near real-time assessment of the Russian test launch of a direct ascent antisatellite missile. After a successful briefing to the Joint Chiefs of Staff, Space Command requested 24/7 space situational awareness support and the use of our software baseline. We also closed the Braxton acquisition, which will increase our space revenue by over 50% in 2021. Braxton's capabilities position Parsons to capitalize on the evolving space missions, including work for the United States Air Force to provide a standard, secure ground control system controlling satellite constellations. The Braxton integration is going well; we have retained key leadership, aligned our research and development programs, and submitted our first integrated proposal. Looking forward, our organic growth strategy aligns very well with the Biden administration's priorities. Threats from nation-state hackers and other adversaries continue to evolve as we saw in the recent attacks of SolarWinds and the latter infrastructure incident in Florida. Both of these events illustrate continued vulnerabilities in supply chains and critical infrastructure. Parsons’ focus on cyber, space, critical infrastructure, and supply chain security corresponds with the National Security needs as well as the Biden administration's plans for additional funding to protect America's networks and infrastructure against these sophisticated threats. We are also aligned with the Biden administration's focus on sustainability. Parsons is a leader in environmental remediation, smart grid deployment, renewable wind and solar projects, and LEED-certified transit systems. Parsons’ diversified portfolio is well positioned for smart, sustainable infrastructure priorities. In 2020, program performance remained exceptional as we increased our Federal Solutions awards fee average score to 97% on prime contracts and delivered the strongest critical infrastructure margins in the history of our company. We achieved the Federal Railroad Administration certification on time for the New Jersey Transit positive train control system. This effort involved commissioning 440 locomotives on all 12 statewide rail lines, spanning 376 route miles and delivering a system that improves the safety of rail transit and protects riders. In addition, we were recognized with the Gold Award for Infrastructure by the Canadian Council for Public-Private Partnerships for our work on the Regina Bypass project, which is the largest transportation infrastructure project in Saskatchewan’s history. With that, I will turn the call over to George to discuss our financial highlights.

Thank you, Carey. Today, I will organize my remarks into the following five key areas: the income statement, cash flow results, balance sheet, contract awards and 2021 guidance. As Chuck and Carey described, our 2020 performance was highlighted by our ongoing margin expansion, overall sound program performance and the benefits of reduced operating expenses, resulting in record adjusted EBITDA and associated margins. In addition, we also delivered record operating cash flow of $289 million. For the full year, total revenue declined by 1% and was impacted by the aforementioned COVID-19 headwinds. Excluding this impact, total revenue grew by 4%, of which 3% was organic. Federal Solutions growth, excluding COVID, was 8%, of which 6% was organic, and Critical Infrastructure revenue grew 1%, excluding COVID, all organic. Adjusted EBITDA margin for the year increased 50 basis points, driven by a 120 basis point expansion in Critical Infrastructure, primarily as a result of increased contract profitability. Federal Solutions' adjusted EBITDA margin decreased 20 basis points due to loss fees associated with the CARES Act and higher IG&A costs driven by increased allocations and public company costs. Regarding details of our fourth quarter financial results, total revenue for the fourth quarter decreased 7% from the prior year period. Excluding $45 million of adverse impact from COVID, total revenue and revenue for both segments decreased 3%. The primary driver of this total net revenue decline, excluding COVID, was a decrease in pass-through revenue and contract transitions. I should also note that fourth quarter 2019 was an all-time record high. Indirect G&A expenses decreased $8 million from the fourth quarter of 2019, driven by lower compensation costs related to pre-IPO equity-based programs. Fourth quarter 2020 adjusted EBITDA of $90 million increased $2 million from last year, and adjusted EBITDA margin increased 90 basis points to 9.4%. These increases were driven primarily by increased contract profitability, offset by the $11 million write-down on an unconsolidated joint venture that Chuck described in his earlier remarks. I will turn now to our operating segments, starting first with Federal Solutions, where fourth quarter revenue decreased by $46 million or 9% year-over-year. Excluding $32 million in COVID impact, total revenue decreased 3%, and 5% organically. These net decreases were driven by lower pass-through revenue and contract transitions, offset by $10 million of acquisition revenue. Federal Solutions adjusted EBITDA was relatively flat from the fourth quarter of 2019. However, our adjusted EBITDA margin increased 80 basis points to 9.3%, resulting from increased contract profitability. And now a few words regarding our Critical Infrastructure segment. Fourth quarter revenue decreased $27 million or 5% from the prior year period. This decrease was driven by $13 million from COVID impacts and lower volume on contracts with pass-through revenue. Critical Infrastructure adjusted EBITDA increased by $3 million or 6% year-over-year, and our adjusted EBITDA margin increased 100 basis points to 9.4%. These increases were primarily driven by increased overall contract profitability. Next, I will discuss cash flow and balance sheet metrics. Our net DSO at the end of the year was 64 days compared to 55 days at the end of 2019 and 69 days at the end of Q3 2020. Operating cash flow totaled $176 million for the quarter and $280 million for the year, driven by strong collections in both segments. We also benefited from income and payroll tax deferrals, totaling approximately $9 million and $35 million for the quarter and full year, respectively. As noted earlier by Chuck, our balance sheet remains very healthy. We ended the quarter with a net debt leverage ratio of 0.3 times and closed the quarter with more than $500 million of undrawn capacity on our revolver. Regarding awards, we reported a book-to-bill ratio of 1.1 times for both the fourth quarter and full year. Our backlog at the end of the fourth quarter totaled $8.1 billion, representing approximately two years of annual revenue. Now let's turn to our guidance. For 2021, we expect revenue to be between $3.85 billion and $4.05 billion. Our adjusted EBITDA is expected to be between $350 million and $375 million, with a margin of approximately 9.2% at the midpoint of our revenue and adjusted EBITDA guidance ranges. This represents margin expansion of approximately 50 basis points from 2020 and 230 basis points from 2018. Our cash flow from operating activities is expected to be between $280 million and $310 million. Free cash flow conversion is expected to remain above 100% of adjusted net income. From a timing perspective, as it relates to revenue and adjusted EBITDA, we expect the first quarter to be our lowest quarter of the year and follow last year's historical pattern of being down approximately 5% to 10% sequentially from Q4 2020, with a similar adjusted EBITDA margin as Q1 2020. From Q1 onward, we again expect sequential improvements through Q3 and then down sequentially in Q4. From a free cash flow perspective, we expect typical seasonality throughout the year with negative operating cash flow in Q1 and then sequential improvements as we move through the balance of the year. Other key assumptions in connection with our 2021 guidance are outlined on Slide 10 in today's PowerPoint presentation, located on our Investor Relations website. With that, I will turn the call back over to Chuck.

Thanks, George. To summarize, 2020 was another successful year producing record results for adjusted EBITDA, margins and cash flow despite headwinds, primarily from COVID. We also continue to successfully deliver on our customers' missions and execute our growth strategy while maintaining a strong balance sheet. As we look ahead, we expect 2021 to deliver modest revenue growth at the midpoint of our guidance range given continued impacts from COVID and pass-through revenue runoff. We also expect margins to incrementally expand and to continue to deliver strong free cash flow. We are excited about our future and confident in our broad and diversified portfolio, aligned with the Biden administration's priorities for national defense, infrastructure and environmental initiatives, and our focus on cost and cash yield a robust balance sheet for continued organic and M&A investments. Thank you. And now we will open the line for questions.

Our first question comes from Cai Von Rumohr with Cowen.

Yes. Thank you very much. So looking at your numbers, COVID impact was down in the fourth quarter from the third. So I assume it is going to be down in 2021. And as you know, 2021 revenue guide, I think, is below where most of the street is. So maybe you could give us some color on where is the COVID impact for both sectors assumed to be in 2021? What is the level of pass-throughs? And taking those two out, how come the numbers aren't stronger?

Thank you, Cai. Yes, we expect our COVID impact in 2021 to be about $100 million. And we also expect our low-margin pass-through revenues to be approximately another $100 million. This will be pretty much complete with the runoff of pass-through revenues. The third area we have is a series of contracts that are going through transitions. Some are transitioning out of the design phase and end up going to non-controlling interest. Others are going from the DevOps phase into implementation. So 2021 is a year of transition of a couple of large contracts that we expect to lead to much greater growth in 2022.

Great. Maybe you could give us some color on the contract transitions?

Yes. I will give a summary, and then I will have Carey give a bit more detail. But oftentimes, when we finish design and we move into execution, we have a fair amount of revenue in the design phase that doesn't show up as revenue as we go into execution phase; it ends up as non-controlling interest. So although our profits go up and our margins go up, we don't necessarily see the revenue associated with that. And ditto when we transitioned from a DevOps phase; there is a bit of a lag as you really start moving into the full implementation. Carey, would you like to give a little more color on that, please?

Sure. Just a couple of specific examples. We had a program called N.V., the Enhanced Visualization environment that transitioned to guideline. So basically, the development effort completed and it went into a sustainment mode. So that is lower revenues in the Federal segment. In the Critical Infrastructure segment, there are a few examples. We had a remediation effort in California that was canceled due to COVID. So that is completely gone away. And then we also had a few designs that we were completing, specifically Federal Way and Foothill are two good examples of those.

Very good. Thanks so much. I will let someone else go.

Thank you, Cai.

Our next question comes from Tobey Sommer with Truist Securities.

Thanks. I was wondering if you could comment on the company's opportunity within the DHS contract for IDIQ for $2 billion. Is it confined to DetectWise, or are there other skills and know-how that the company could compete for in task orders underneath that IDIQ?

Thank you, Tobey. It is a pretty broad scope associated with testing and so forth, associated with COVID. I suppose it could be even broader health-related issues, but it is much broader than just the DetectWise product. Carey, you might go into a bit more detail on the scope of that contract.

Sure. So DHS has 240,000 employees, and there are 14 component commands. All of those have access to the availability of this contract ceiling. Plus it can also be used for other government agencies. The scope is focused on two functional categories. One is for managed testing services. It is basically all-encompassing, where you take the test, process the test, provide the test kit, and give the support services. The second category is modular diagnostic test kits and testing services. In that case, we provide the test kits, process the results, but we do not collect the sample. The DHS components can select whichever of those functional categories they desire.

Thanks. Could you just for a second give us a little background on the historical frequency and magnitude of write-downs, so we can frame the one in the quarter? And maybe also comment on the proportion of Critical Infrastructure segment revenue where Parsons is in a subcontractor junior role and can be in this quarter's situation where you are informed of a change can occur?

Thank you, Tobey. Yes, this is a rare occurrence for us. We have a good track record in these projects. As you can imagine, we are all over this. The amount of revenues across Parsons that have some sort of construction orientation in them is around 10% of revenues. In this case, in accordance with GAAP, this anticipates performance through project completion for this job. But this is not something that we have on a regular occurrence for certain.

Okay. And then I had just a numbers question. Could you give us a little color on what you expect for free cash flow in 2021, and within that, if you could comment on expectation for DSO, that would be helpful?

Excellent. George, do you want to take the cash flow and DSO?

You know, our free cash flow would be essentially our operating cash flow, less CapEx at about 1% of revenue. From the standpoint of DSO, we would view ourselves going moderately lower in 2021.

Thank you very much.

Thank you, Toby.

Thank you, Tory.

Our next question comes from Gavin Parsons with Goldman Sachs.

Hey good morning. I appreciate the color on the transition year in response to Cai's question, but I wanted to ask about the Federal Solutions and the opportunity pipeline and the backlog. Given the backlog didn't really grow in 2020 if I strip out the Braxton acquisition. It sounds like you are bidding on a ton of new work, you are going after bigger contracts, you have expanded your addressable market through M&A. What are your expectations for bookings in 2021 that support an acceleration beyond, and how much visibility do you actually have on contract growth that we may not see reflected in your backlog right now?

Yes. Thank you, Gavin. So as we sit today, we at the end of Q4 have approximately $200 million in awarded, not booked. We have eight single-award $100 million contracts and 15 multiple-award contracts that we are awaiting adjudication at the end of Q4 2020. We have a very robust and solid pipeline. In fact, if we look throughout the year at our outstanding proposals awaiting adjudication, it continued to increase throughout the year and was about 6.7 billion at the end of Q4 2020 compared with 4.6 billion at the end of Q4 2019. So it is a very robust and growing pipeline in almost all of our markets.

Sure. Overall, we have a $37 billion pipeline. Federal is very strong. The items that Chuck mentioned, when you look at the awards greater than $100 million, out of the eight, five of those are in Federal. Out of the 15 multiple-award contracts, those are all in Federal. When you look in total, we have over 80 opportunities greater than $100 million that are in our pipeline. We also look at the amount of bids that we expect to submit in 2021. In 2020, we submitted about $12.4 billion. In 2021, we are looking at $24.9 billion.

Got it. That is helpful, thank you. And then on EBITDA margin guidance, the 9.2%, up 50 bps at the midpoint. Does that consider a 10% Federal Solutions margin, and if not, what is your new timeline for that? Do you still think you can get the total company to 10% next year?

Yes, thank you. The margin for Federal Solutions next year is below 10%. Again, part of that is the fact that we still have work that is being impacted by COVID. We remain committed to getting the unit to 10% through the methods we talked about previously, increasing our product sales, bidding on larger work, and continuing with our M&A of companies that have materially greater than 10% margins.

Thanks.

Our next question comes from Gregory Konrad with Jefferies.

Good morning. A couple of follow-up questions from the ones that I already asked. But you mentioned COVID impact is a $100 million in 2021. I think it was close to $200 million in 2020. That is not incremental and maybe what are some of the programs that step up and maybe get better and then do you fully expect to recapture that as we kind of move into 2022, assuming it is a more normalized environment?

Yes. Thank you, Greg, great question. As we look at the roughly $200 million of COVID impact we had in 2020, about $120 million of that hit our Federal Solutions business, predominantly on three large contracts where all or part of the expected work was deferred for future years. It doesn't come back in one year; it extends the length of our contract into the future. The FAA has started to come back, hence, why we have a lesser impact in 2021. The Antarctica work is not expected to remobilize until sometime in Q3 at the earliest, and also our work on Kwajalein Island. In Critical Infrastructure, we nominally had $80 million, predominantly a delay of vehicle inspection work. Those cars will all get inspected, so we expect that to get back to normal in 2021. We did have, as Carey mentioned, a neighborhood environmental remediation contract that was terminated. It was a low-margin contract. We expect that impact to be about $100 million as well as running off about $100 million of low-margin pass-through revenues, which should complete that aspect of our stated strategy. Does that answer your question, Greg?

Yes. That is very helpful. So I mean none of it goes away, and it gets a little bit better, but you are not fully back in 2021?

Correct.

And then the third part of the transition, you talked about design to execution revenue. I think there are probably a lot of programs or multiple pieces to that. But even just from a backlog perspective or an opportunity set, is there any numbers around that as we kind of think about these programs going into execution as kind of like the opportunity with this transition?

Yes. This is probably between $80 million and $100 million of work that is going through this transition phase. As we move into the sustainment phase, especially for some of our large cyber programs, now entering full implementation and it is a dynamic cyber environment. We expect to see growth there as we move into full implementation, and obviously, the products and tools usually get enhanced as well. As we enter the design phase of certain projects, we now go into that engineering support during construction, which is a multi-year support effort. These usually have a tail of at least two if not three or four years.

Thank you.

You are welcome.

Our next question comes from Joseph DeNardi with Stifel.

Hi, thanks, good morning. I appreciate the additional color you provided in the slides on the 2021 outlook. That was helpful. Chuck, can you just talk a little bit about what you are seeing maybe kind of from the business in terms of the change of administration, award flow changing priorities, that sort of thing?

Yes. Thank you, Joe. With any new administration, there is always a little bit of delay as they get people into the slots and try to get senate confirmations. We are not seeing anything unique; it is just the normal transition that goes on with a new administration. It is still early days, but we do see a lot of support around the items that are near and dear to our hearts of National Security. The new Secretary of Defense and the folks in the intelligence community and National Security are all people we know. They support important efforts, especially around cyber, as Carey mentioned, with the SolarWinds attack. This likely leads to more expenditures in the Federal Government on cyber, as well as commitments to missile defense and the C5ISR and driving more efficiency and execution, which typically means more platforms and software, as well as their focus on infrastructure and environmental services. There are no areas that we are focused on that we think are subject to any sort of defunding or curtailment. In fact, quite the opposite; we think it will remain or even potentially increase in some areas.

Okay. That is helpful. And then can you just remind us on GBSD? Where you all stand with that and whether that is a contributor to stronger growth in 2022?

Yes. As you recall, GBSD is not in our guidance. Last week, after a series of discussions with the Air Force, we were deemed that we did not have an OCI previously. In February, now, the Air Force determined that we indeed do have an OCI for the work we are doing for Northrop. Our work for the Defense Department involves sophisticated modeling, simulations, and systems engineering, with a 10-year contract comparing missile systems' efficiency. We stand committed to the customers we have, and we will honor that contract, but we will not be going forward on the GBSD team with Northrop Grumman.

Okay. Thank you.

You are welcome.

Our next question comes from Matt Sharpe with Morgan Stanley.

Chuck, George, Carey, good morning, and I hope everyone is well. Just on the revenue guidance, it looks like the company is up about, I think, 1% at the midpoint. I am just wondering how much is currently in backlog versus, say, how much you need to actually go out and win this year to hit your numbers and then any view of growth at a segment level would be helpful?

George that was addressed to you.

Okay. From the standpoint of the revenue component from backlog, it would be consistent with historic patterns. Our new wins would be nominally about 20%, skewed towards the Critical Infrastructure segment, less so in Federal.

Got it. And just one quick one on space following the Braxton deal. Carey, I know you mentioned spaces up and about 50% year-over-year. Can you maybe remind us where that puts the company on a percent basis overall and then maybe talk a little bit about growth expectations for the end market as well as growth expectations in revenue for Braxton, in particular in 2021?

Yes. So space has been our smallest market, but it is our fastest-growing market going forward. We are quite excited about the capabilities this adds, and again, at 50% more revenue, specifically, we are bringing in capabilities such as enterprise ground systems, which are standard interoperable systems that will support the Department of Defense as well as the intelligence community. We also have precision navigation and timing capabilities. If you think of GPS being jammed, we have the capability to provide a solution to work around that. We think our space market is very robust. I would also highlight our small satellite launch and integration program, where we are two for two on launches. We anticipate doing about two launches a year. Our next launch will be with a Landsat multi-manifest vehicle. This time we are going to have 18 small satellites that are launched on that mission.

Got it. And then any expectation for Braxton into 2021?

We are estimating about $131 million for Braxton in 2021.

Okay. And then just on a pro forma, what is that in terms of growth for Braxton year-over-year?

Yes, Carey. I would say it is about 10% to 15%.

Got it. Thank you.

And Matt, to put that in perspective, if you recall, we bought that obviously late in the year, and the revenue to Parsons for Braxton last year was about $10 million.

Got it. Thanks.

Our next question comes from Josh Sullivan with The Benchmark Company.

Hey good morning. Just one on COVID. Do you think you and the market are getting better at handling it? There are so many scenarios going forward. You gave some thoughts on the margin impact near-term, but what are your thoughts on the long-term impact to you in the market and just what has changed with COVID?

Yes. Great question. As we look at 2021, the two contracts that we have less control over are restarting our work in Kwajalein Island, which is really controlled by the Marshall Islands Government. They have confidence that it may be around when people are vaccinated, and kind of ditto in Antarctica. In terms of longer-term impacts of COVID, we, like every other company, have learned to do so much virtually that I anticipate a reduction in travel expenses going forward as we do more internal meetings, and in some cases, with customers who prefer virtual meetings over in-person. I mean, I think that will come back, but not to the way it was pre-COVID. The same is true for real estate; we have obviously learned how to do a lot more with less. I anticipate substantial reductions in real estate footprint going forward as our leases come up for renewal, and we will be renewing at significantly smaller footprints. We have learned to do better in that regard as well. Lastly, our customers seem to exhibit a shift in mindset that may have more permanence around how people interface with infrastructure—inter buildings, depart buildings, using more touchless technologies, which could lead to improved customer interface. There will probably be a lot more physical upgrades to especially mass transit systems, airport entry and departure areas, as well as large facilities, and there will also be software updates to accompany those changes.

Great. Thank you.

Our next question comes from Ronald Epstein with Bank of America.

Hey good morning, guys. We have seen a lot of services companies report this quarter, pretty much across the board, everybody has missed. And pretty much across the board, everybody is seeing the same thing. It almost feels like the markets changed, and nobody wants to admit it. Why is that thesis wrong?

Yes. I think it is interesting that we all probably are operating in different parts of the market, but there is no question COVID had a significant impact. For some of us, it was bigger than for others. I think what we will see is that as COVID diminishes and work restarts, things will come back. When you look at the underlying drivers of our markets, infrastructure, we all know is outdated. We have massive changes in terms of the number of electric vehicles and not far off autonomous vehicles. Infrastructure has to change; it can't just remain static. The world is also becoming a more dangerous place. So if you are in the area of defending our nation from cyber attacks, dealing with changes around hypersonics in the missile field, and negotiating a much more crowded nature of space—that will continue being driven by necessity that isn’t going to go away. I can't speak for other parts of the segment. Carey, I know you have some great perceptions here. Why don't you jump in on this?

Sure. I would say at the end of the year, there was a slight slowdown, particularly in the intelligence community awards. We expect that to pick back up in 2021. I also highlight that we haven't included a federal infrastructure bill in our forecast, and we think this represents tremendous upside with the Biden administration. Just to reiterate, on the environment, we are extremely well aligned to capitalize on that opportunity, particularly in areas like emerging contaminants. We are also involved with biofuels and do other work on clean energy.

Okay, good. Thank you.

Thank you, Ron.

Our next question comes from Louie Dipalma with William Blair.

Chuck, George, Carey and David good morning. You have noted the optimism regarding President Biden and his plans to revise transportation infrastructure here in the U.S. You also mentioned how you have relationships with over 80 transportation agencies, and you have a pretty strong partnership with Neology for Tolling Tech. I was wondering if there is any way you can, at high level, quantify how much of your revenue is related to transportation infrastructure and how you expect a Biden stimulus/transportation policies to play out over the next several years, impacting your revenue?

Yes. Thank you, Louie, it is a great question. If we look at our portfolio and infrastructure, the overwhelming majority of those revenues are associated with transportation. As a rough order of magnitude, I would say about three quarters. Historically, when considering infrastructure bills, the largest bill our nation has ever had funded transportation infrastructure at roughly $61 billion per year on average. If we look at what is being discussed in Congress, assuming a number of around $1.5 trillion, even at half a trillion over a five-year build—that is $100 billion a year, which would be a significant increase, making it the largest transportation infrastructure bill ever approved. If they consider a trillion or a trillion and a half and perhaps extend it to seven to 10 years, that offers more money per year. Larger programs where the largest economic benefits to the U.S. come from large programs typically take five to seven years to complete. Thus, the longer the program is in place, the larger the projects that are executed, aligning better with Parsons' strengths of handling large projects. Regarding our relationship with Neology and Tolling, Carey, you might want to shed light on that?

Sure. We are partnered with Neology. We have big bids coming up this year, specifically in Georgia as well as the New Jersey/New York area. We are very excited about that and the opportunities it may present. Relative to iNET, we have one of the most globally deployed traffic management systems, and our sensor networks monitor and manage traffic conditions that reduce congestion and travel times. This plays a large role in clean energy and sustainability going forward. We recently launched an intelligent intersection, which is generating a lot of opportunity because of COVID—which drastically altered traffic patterns.

You know Louie, another point to keep an eye on is that as electric vehicles become a significant part of the fleet, the gas tax has less of an impact on funding for infrastructure. It is worth paying attention to what is often discussed in Congress regarding vehicle miles traveled and the technology that might be required to gather that information and how that may be charged to the citizens using the infrastructure.

Great. You are also involved with New York City congestion tech deployment with TransCore, right? I would assume that project has been delayed due to COVID since it is the first congestion pricing program in New York City. However, over the long-term, do you expect that project to be resumed and further expansion of congestion tax deployment in other U.S. cities potentially with funding from an infrastructure bill?

Yes, that is correct, it was delayed a bit. London has been implementing this for some time. I don’t have a clear idea of where every city will end up with this, but it is the first example in the U.S.; thus, it is substantial. Carey, could you provide some additional details?

Yes. This is the first congestion pricing program in New York. It experienced slight delays but is now starting to regain momentum. Major American cities have expressed interest in implementing similar programs going forward into next year.

Thank you, Louie.

Our next question comes from Cai Von Rumohr with Cowen.

Yes. Thank you. So you mentioned that the big COVID impact is really in Federal Solutions is on Kwajalein and Antarctica. As I recall, aren't those all engineered systems?

Yes.

Correct?

Yes.

As I look at your guide, which is a little disappointing for 2021, pretty much all of the engineered systems could be down 100 million or so?

Well, the impact may be a little less than that, but you are in the ballpark.

Engineered Systems will be slightly up next year. The other three markets are up substantially, but Engineered Systems is slightly up.

The COVID impact to that unit should be about $90 million.

Okay. The point I'm making is that where you are missing is really in your more mundane work. Not to say that is totally mundane. Where you are still seeing growth is in space and cyber, those kinds of programs, is that correct next year?

Yes. And C5ISR part of our segment.

Right.

Yes.

Yes, thanks. Chuck, could you just talk about what you all intend to talk about at Investor Day? Maybe preview that for us a bit? Thank you.

You are looking for a teaser?

Right.

Yes. I will give an overview of our strategy and what we expect to see over the next three to four years and where we are going. Carey will talk about how that is operationalized and how that goes down into our segments. We will also show a few videos of some of our newest technology. We will have a couple of roundtables with our market leaders, both federal and critical infrastructure. We will have a Q&A with our market leaders to allow attendees to hear directly from our market leads how they view their markets, what excites them, and the future direction. George will cover the financials and discuss our multi-year guidance. Finally, we will wrap it up with a closing Q&A.

That is great. Thank you.

That is all the time we have for questions. I would like to turn the call back to Dave Spille for closing remarks.

Thank you, and thanks for joining us this morning. If you have any questions, please don't hesitate to give me a call. We look forward to speaking with many of you over the coming weeks. And with that, we will end the call. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.