8-K
PARSONS CORP (PSN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2022
PARSONS CORPORATION
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 001-07782 | 95-3232481 |
|---|---|---|
| (State or Other Jurisdiction<br><br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br><br>Identification No.) |
| 5875 Trinity Parkway, #300,<br><br><br>Centreville, VA | 20120 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (703) 988-8500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $1 par value | PSN | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Result of Operations and Financial Condition |
|---|
On November 2, 2022, Parson Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2022 and certain other financial information. A copy of the press release is attached to this Form 8-K as Exhibit 99.1
| Item 9.01 | Financial Statements and Exhibits |
|---|
(d) Exhibits:
The following exhibit is furnished as part of this Report pursuant to Item 2.02
| 99.1 | Press Release Dated November 2, 2022, announcing the Company’s financial results for the quarter ended September 30, 2022. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
The information disclosed pursuant to Items 2.02 and 9.01 in this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for the purposes of Section 18 of the Securities Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information disclosed pursuant to Items 2.02 and 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, of the Securities Exchange Act of 1934, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Parsons Corporation | ||
|---|---|---|
| Date: November 2, 2022 | By: | /s/ Matthew M. Ofilos |
| Matthew M. Ofilos | ||
| Chief Financial Officer |
3
psn-ex991_6.htm
Exhibit 99.1
Parsons* third quarter 2022 earnings press release
Parsons Reports Strong Third Quarter 2022 Results
Q3 2022 Financial Highlights
| ▪ | Revenue increases 19% year-over-year to $1,134 million, includes organic growth of 11% |
|---|---|
| ▪ | Organic revenue growth driven by both segments: Critical Infrastructure 13% and Federal Solutions 10% |
| --- | --- |
| ▪ | Net income increases 53% to $30 million |
| --- | --- |
| ▪ | Adjusted EBITDA increases 22% to $103 million |
| --- | --- |
| ▪ | Cash flow from operations increases 59% year-over-year, and 28% for the first nine months of 2022 |
| --- | --- |
| ▪ | Book-to-bill ratio of 1.1x on contract awards growth of 21% |
| --- | --- |
| ▪ | Increasing midpoints of 2022 revenue, adjusted EBITDA, and cash flow guidance ranges |
| --- | --- |
CENTREVILLE, VA – November 2, 2022, Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2022.
CEO Commentary
“We delivered strong third quarter financial results, with record quarterly revenue and adjusted EBITDA,” said Carey Smith, chair, president, and chief executive officer. “We are executing against our strategy and benefiting from our portfolio that is well-aligned to important macroenvironment trends in two well-funded and growing markets. We will continue to invest in our people and technologies to drive future shareholder value.”
Third Quarter 2022 Results
Year-over-Year Comparisons (Q3 2022 vs. Q3 2021)
Total revenue for the third quarter of 2022 increased by $178 million, or 19%, to $1,134 million. This increase was primarily driven by organic growth of 11% due to the ramp-up of work on existing and new contracts and strong hiring. The company’s Xator acquisition contributed approximately $71 million of revenue in the third quarter of 2022. Operating income increased 61% to $64 million primarily due to strong revenue growth while managing costs, lower acquisition amortization expenses, and contributions from Xator. Net income increased 53% to $30 million. GAAP diluted earnings per share (EPS) attributable to Parsons was $0.27 in the third quarter of 2022, compared to $0.18 in the prior year period.
Adjusted EBITDA including noncontrolling interests for the third quarter of 2022 was $103 million, an 22% increase over the prior year period. Adjusted EBITDA margin was 9.1% in the third quarter of 2022, compared to 8.8% in the third quarter of 2021. Adjusted EPS was $0.48 in the third quarter of 2022, compared to $0.44 in the third quarter of 2021. The year-over-year adjusted EBITDA and adjusted EPS increases were driven primarily by strong operating leverage and contributions from Xator.
Segment Results
Federal Solutions Segment
Federal Solutions Year-over-Year Comparisons (Q3 2022 vs. Q3 2021)
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| Three Months Ended | Growth | Nine Months Ended | Growth | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | Dollars/<br><br><br>Percent | Percent | September 30, 2022 | September 30, 2021 | Dollars/<br><br><br>Percent | Percent | |||||||||||||||||
| Revenue | $ | 620,416 | $ | 499,291 | $ | 121,125 | 24 | % | $ | 1,649,601 | $ | 1,394,035 | $ | 255,566 | 18 | % | ||||||||
| Adjusted EBITDA | $ | 61,111 | $ | 46,559 | $ | 14,552 | 31 | % | $ | 151,560 | $ | 111,195 | $ | 40,365 | 36 | % | ||||||||
| Adjusted EBITDA margin | 9.9 | % | 9.3 | % | 0.6 | % | 6 | % | 9.2 | % | 8.0 | % | 1.2 | % | 15 | % |
Third quarter 2022 revenue increased $121 million, or 24%, compared to the prior year period due to organic growth of 10% and approximately $71 million from Xator. Organic revenue growth was primarily driven by increased activity on existing contracts and the ramp-up of recent contract awards.
Third quarter 2022 Federal Solutions adjusted EBITDA including noncontrolling interests increased by $15 million, or 31%. Adjusted EBITDA margin increased to 9.9% from 9.3% in the prior year period. These increases were driven primarily by strong revenue growth while continuing to control costs.
Critical Infrastructure Segment
Critical Infrastructure Year-over-Year Comparisons (Q3 2022 vs. Q3 2021)
| Three Months Ended | Growth | Nine Months Ended | Growth | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | Dollars/<br><br><br>Percent | Percent | September 30, 2022 | September 30, 2021 | Dollars/<br><br><br>Percent | Percent | |||||||||||||||||
| Revenue | $ | 513,954 | $ | 456,759 | $ | 57,195 | 13 | % | $ | 1,442,559 | $ | 1,316,068 | $ | 126,491 | 10 | % | ||||||||
| Adjusted EBITDA | $ | 41,576 | $ | 37,833 | $ | 3,743 | 10 | % | $ | 102,789 | $ | 107,623 | $ | (4,834 | ) | -4 | % | |||||||
| Adjusted EBITDA margin | 8.1 | % | 8.3 | % | -0.2 | % | -2 | % | 7.1 | % | 8.2 | % | -1.1 | % | -13 | % |
Third quarter 2022 Critical Infrastructure revenue increased $57 million, or 13% (all organic), compared to the prior year period primarily by increased activity on existing contracts, the ramp-up of recent contract awards, and increased worldwide hiring activity.
Third quarter 2022 adjusted EBITDA including noncontrolling interests increased by $4 million, or 10%, compared to the prior year period. Adjusted EBITDA margin decreased to 8.1% from 8.3% in the prior year period. The increase in adjusted EBITDA was driven by strong revenue growth, partially offset by lower equity in earnings.
Third Quarter 2022 Key Performance Indicators
| ▪ | Book-to-bill ratio (third quarter): 1.1x on net bookings of $1.3 billion |
|---|---|
| ▪ | Book-to-bill ratio (trailing twelve-months): 1.0x on net bookings of $4.0 billion. |
| --- | --- |
| ▪ | Total backlog: $8.2 billion. |
| --- | --- |
| ▪ | Cash flow from operating activities: Third quarter 2022: $123 million compared to $77 million in third quarter of 2021. For the nine months ended September 30, 2022, cash flow from operating activities was $148 million, compared to $116 million in the prior year period. |
| --- | --- |
| ▪ | Net Debt: Cash and cash equivalents were $148 million and total debt was $695 million. The company’s net debt to trailing twelve-month adjusted EBITDA leverage ratio at the end of the third quarter of 2022 was 1.6x. The company defines net debt as total debt less cash and cash equivalents. |
| --- | --- |
Significant Contract Wins
| parsons.com | ©Parsons Corporation. All Rights Reserved. 3 |
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Parsons continues to win large strategic single and multiple-award contracts in well-funded areas of national security and critical infrastructure importance.
| ▪ | Awarded a $121 million option year on our Combatant Commands Cyber Mission Support contract, where we provide offensive and defensive cyber operations, and open-source intelligence in support of joint all-domain operations. |
|---|---|
| ▪ | Awarded $120 million of new work under two contracts to support the development of two major industrial cities in the Middle East. On these giga-projects, we only booked the first phase of each contract. |
| --- | --- |
| ▪ | Awarded $117 million of new project work under the FAA’s Technical Support Services contract to provide engineering, construction oversight, installation, and technical services. Over $70 million of the growth on this contract was funded under the Infrastructure Investment and Jobs Act. |
| --- | --- |
| ▪ | Awarded a $104 million TEAMS Next Facilities Lifecycle Management re-compete contract to provide advisory and technical services support to the Missile Defense Agency. |
| --- | --- |
| ▪ | Award a $75 million contract extension by a classified customer to provide comprehensive cyber vulnerability assessments for weapons systems. |
| --- | --- |
| ▪ | Awarded a new $24 million dollar task order for a military service branch to perform remedial investigations and feasibility studies where PFAS and other contaminant releases have occurred. Our Parsons emerging contaminant team has been aggressively pursuing opportunities and building market share with a total of over $40 million in new contract wins over the last nine months. |
| --- | --- |
| ▪ | Awarded prime positions on three multiple-award IDIQ contacts. The first one is a classified contract to provide offensive cyber operations with a $5 billion ceiling value over 10 years. The second IDIQ win is for the Defense Threat Reduction Agency’s Assessment, Exercise, and Modeling and Simulation Support contract with a $850 million ceiling over 10 years. The third IDIQ is for the Huntsville U.S. Army Engineering and Support Center. This contract to provide electronic security systems design and maintenance has a $675 million ceiling value over seven years. |
| --- | --- |
Fiscal Year 2022 Guidance
The company is increasing the midpoints of its fiscal year 2022 revenue, adjusted EBITDA and cash flow guidance ranges to reflect its strong third quarter operating performance and its outlook for the remainder of the year. The table below summarizes the company’s fiscal year 2022 guidance.
| Current Fiscal Year<br><br><br>2022 Guidance | Prior Fiscal Year<br><br><br>2022 Guidance | |
|---|---|---|
| Revenue | $4.05 billion - $4.20 billion | $3.95 billion - $4.15 billion |
| Adjusted EBITDA including non-controlling interest | $340 million - $360 million | $330 million - $360 million |
| Cash Flow from Operating Activities | $255 million - $275 million | $240 million - $280 million |
Net income guidance is not presented as the company believes volatility associated with interest, taxes, depreciation, amortization and other matters affecting net income, including but not limited to one-time and nonrecurring events and impact of M&A, will preclude the company from providing accurate net income guidance for fiscal year 2022.
Conference Call Information
Parsons will host a conference call today, August 3, 2022, at 8:00 a.m. ET to discuss the financial results for its third quarter 2022.
| parsons.com | ©Parsons Corporation. All Rights Reserved. 4 |
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Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at www.Parsons.com. Listeners may also access a slide presentation on the website, which summarizes the company’s third quarter 2022 results. Listeners should go to the website 15 minutes before the live event to download and install any necessary audio software.
Listeners may also participate in the conference call by dialing +1 833-634-2602 (domestic) or +1 412-902-4114 (international). No passcode is required.
A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through August 10, 2022, at +1 877-344-7529 (domestic) or +1 412-317-0088 (international) and entering passcode 8040795.
About Parsons Corporation
Parsons (NYSE: PSN) is a leading disruptive technology provider in the national security and critical infrastructure markets, with capabilities across cybersecurity, missile defense, space, connected infrastructure, and smart cities. Please visit parsons.com and follow us on LinkedIn and Facebook to learn how we're making an impact.
Forward-Looking Statements
This Earnings Release and materials included therewith contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs, and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: the impact of COVID-19; any issue that compromises our relationships with the U.S. federal government or its agencies or other state, local or foreign governments or agencies; any issues that damage our professional reputation; changes in governmental priorities that shift expenditures away from agencies or programs that we support; our dependence on long-term government contracts, which are subject to the government’s budgetary approval process; the size of addressable markets and the amount of government spending on private contractors; failure by us or our employees to obtain and maintain necessary security clearances or certifications; failure to comply with numerous laws and regulations; changes in government procurement, contract or other practices or the adoption by governments of new laws, rules, regulations and programs in a manner adverse to us; the termination or nonrenewal of our government contracts, particularly our contracts with the U.S. government; our ability to compete effectively in the competitive bidding process and delays, contract terminations or cancellations caused by competitors’ protests of major contract awards received by us; our ability to generate revenue under certain of our contracts; any inability to attract, train or retain employees with the requisite skills, experience and security clearances; the loss of members of senior management or failure to develop new leaders; misconduct or other improper activities from our employees or subcontractors; our ability to realize the full value of our backlog and the timing of our receipt of revenue under contracts included in backlog; changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time and resources for our contracts; changes in estimates used in recognizing revenue; internal system or service failures and security breaches; and inherent uncertainties and potential adverse developments in legal proceedings including litigation, audits, reviews and
| parsons.com | ©Parsons Corporation. All Rights Reserved. 5 |
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investigations, which may result in material adverse judgments, settlements or other unfavorable outcomes. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors including under the caption “Risk Factors” in our Annual Report with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2021, on Form 10-K, filed on February 23, 2022, and our other filings with the Securities and Exchange Commission.
All forward-looking statements are based on currently available information and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statements made in this presentation that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.
| Media: | Investor Relations: |
|---|---|
| Bryce McDevitt | Dave Spille |
| Parsons Corporation | Parsons Corporation |
| (703) 851-4425 | (571) 655-8264 |
| Bryce.McDevitt@Parsons.com | Dave.Spille@Parsons.com |
| parsons.com | ©Parsons Corporation. All Rights Reserved. 6 |
| --- | --- |
PARSONS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
| Revenue | $ | 1,134,370 | $ | 956,050 | $ | 3,092,160 | $ | 2,710,103 | ||||
| Direct cost of contracts | 872,423 | 734,652 | 2,388,095 | 2,084,062 | ||||||||
| Equity in earnings of unconsolidated joint ventures | (974 | ) | 9,570 | 10,237 | 26,528 | |||||||
| Selling, general and administrative expenses | 196,960 | 191,231 | 581,969 | 566,991 | ||||||||
| Operating income | 64,013 | 39,737 | 132,333 | 85,578 | ||||||||
| Interest income | 382 | 65 | 618 | 315 | ||||||||
| Interest expense | (6,323 | ) | (4,052 | ) | (14,786 | ) | (13,503 | ) | ||||
| Other income (expense), net | (685 | ) | 184 | (304 | ) | (1,202 | ) | |||||
| Total other income (expense) | (6,626 | ) | (3,803 | ) | (14,472 | ) | (14,390 | ) | ||||
| Income before income tax expense | 57,387 | 35,934 | 117,861 | 71,188 | ||||||||
| Income tax expense | (13,792 | ) | (9,165 | ) | (27,643 | ) | (18,378 | ) | ||||
| Net income including noncontrolling interests | 43,595 | 26,769 | 90,218 | 52,810 | ||||||||
| Net income attributable to noncontrolling interests | (14,024 | ) | (7,411 | ) | (21,685 | ) | (17,711 | ) | ||||
| Net income attributable to Parsons Corporation | $ | 29,571 | $ | 19,358 | $ | 68,533 | $ | 35,099 | ||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.29 | $ | 0.19 | $ | 0.66 | $ | 0.34 | ||||
| Diluted | $ | 0.27 | $ | 0.18 | $ | 0.62 | $ | 0.33 |
Weighted average number shares used to compute basic and diluted EPS
(in thousands) (Unaudited)
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Basic weighted average number of shares outstanding | 103,608 | 102,478 | 103,684 | 102,464 | ||||
| Stock-based awards | 918 | 752 | 747 | 638 | ||||
| Convertible senior notes | 8,917 | 8,917 | 8,917 | 8,917 | ||||
| Diluted weighted average number of shares outstanding | 113,443 | 112,147 | 113,348 | 112,018 |
Net income available to shareholders used to compute diluted EPS as a result of adopting the if-converted method in connection with the Convertible Senior Notes
(in thousands) (Unaudited)
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Net income attributable to Parsons Corporation | 29,571 | 19,358 | 68,533 | 35,099 | ||||
| Convertible senior notes if-converted method interest adjustment | 545 | 534 | 1,627 | 1,593 | ||||
| Diluted net income attributable to Parsons Corporation | 30,116 | 19,892 | 70,160 | 36,692 | ||||
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PARSONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
| December 31, 2021 | ||||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents (including 62,544 and 78,514 Cash of consolidated joint ventures) | 147,539 | $ | 342,608 | |||
| Restricted cash and investments | - | 1,275 | ||||
| Accounts receivable, net (including 187,482 and 140,266 Accounts receivable of consolidated joint ventures, net) | 710,721 | 598,311 | ||||
| Contract assets (including 11,665 and 8,779 Contract assets of consolidated joint ventures) | 642,264 | 579,216 | ||||
| Prepaid expenses and other current assets (including 6,870 and 18,783 Prepaid expenses and other current assets of consolidated joint ventures) | 110,274 | 110,941 | ||||
| Total current assets | 1,610,798 | 1,632,351 | ||||
| Property and equipment, net (including 1,987 and 1,721 Property and equipment of consolidated joint ventures, net) | 94,518 | 104,196 | ||||
| Right of use assets, operating leases | 161,602 | 182,672 | ||||
| Goodwill | 1,661,107 | 1,412,690 | ||||
| Investments in and advances to unconsolidated joint ventures | 99,424 | 110,688 | ||||
| Intangible assets, net | 273,442 | 207,821 | ||||
| Deferred tax assets | 139,890 | 134,393 | ||||
| Other noncurrent assets | 54,209 | 46,129 | ||||
| Total assets | 4,094,990 | $ | 3,830,940 | |||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities: | ||||||
| Accounts payable (including 61,545 and 78,558 Accounts payable of consolidated joint ventures) | 200,847 | $ | 196,286 | |||
| Accrued expenses and other current liabilities (including 83,831 and 82,746 Accrued expenses and other current liabilities of consolidated joint ventures) | 682,677 | 599,089 | ||||
| Contract liabilities (including 18,376 and 14,333 Contract liabilities of consolidated joint ventures) | 197,749 | 171,671 | ||||
| Short-term lease liabilities, operating leases | 59,056 | 55,902 | ||||
| Income taxes payable | 9,150 | 7,836 | ||||
| Total current liabilities | 1,149,479 | 1,030,784 | ||||
| Long-term employee incentives | 15,637 | 15,997 | ||||
| Long-term debt | 694,718 | 591,922 | ||||
| Long-term lease liabilities, operating leases | 121,172 | 148,893 | ||||
| Deferred tax liabilities | 10,409 | 11,400 | ||||
| Other long-term liabilities | 98,483 | 94,832 | ||||
| Total liabilities | 2,089,898 | 1,893,828 | ||||
| Contingencies (Note 12) | ||||||
| Shareholders' equity: | ||||||
| Common stock, 1 par value; authorized 1,000,000,000 shares; 146,087,771 and 146,276,880 shares issued; 39,326,392 and 33,331,494 public shares outstanding; 64,144,230 and 70,328,237 ESOP shares outstanding | 146,088 | 146,277 | ||||
| Treasury stock, 42,617,149 shares at cost | (867,391 | ) | (867,391 | ) | ||
| Additional paid-in capital | 2,678,653 | 2,684,979 | ||||
| Retained earnings (accumulated deficit) | 15,008 | (53,529 | ) | |||
| Accumulated other comprehensive loss | (19,292 | ) | (9,568 | ) | ||
| Total Parsons Corporation shareholders' equity | 1,953,066 | 1,900,768 | ||||
| Noncontrolling interests | 52,026 | 36,344 | ||||
| Total shareholders' equity | 2,005,092 | 1,937,112 | ||||
| Total liabilities and shareholders' equity | 4,094,990 | $ | 3,830,940 |
All values are in US Dollars.
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PARSONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | ||||||
| Cash flows from operating activities: | |||||||
| Net income including noncontrolling interests | $ | 90,218 | $ | 52,810 | |||
| Adjustments to reconcile net income to net cash used in operating activities | |||||||
| Depreciation and amortization | 90,668 | 106,540 | |||||
| Amortization of debt issue costs | 1,959 | 2,173 | |||||
| (Gain) loss on disposal of property and equipment | (261 | ) | 357 | ||||
| Provision for doubtful accounts | (3 | ) | 8 | ||||
| Deferred taxes | (6,334 | ) | (4,369 | ) | |||
| Foreign currency transaction gains and losses | 3,502 | 3,107 | |||||
| Equity in earnings of unconsolidated joint ventures | (10,237 | ) | (26,528 | ) | |||
| Return on investments in unconsolidated joint ventures | 25,626 | 20,547 | |||||
| Stock-based compensation | 14,991 | 15,544 | |||||
| Contributions of treasury stock | 41,980 | 41,312 | |||||
| Changes in assets and liabilities, net of acquisitions and newly consolidated<br><br><br>joint ventures: | |||||||
| Accounts receivable | (90,913 | ) | 70,355 | ||||
| Contract assets | (62,861 | ) | 13,262 | ||||
| Prepaid expenses and other assets | 8,772 | (19,596 | ) | ||||
| Accounts payable | (918 | ) | (39,341 | ) | |||
| Accrued expenses and other current liabilities | 20,220 | (86,402 | ) | ||||
| Contract liabilities | 26,665 | (16,294 | ) | ||||
| Income taxes | 1,160 | (498 | ) | ||||
| Other long-term liabilities | (5,866 | ) | (17,273 | ) | |||
| Net cash provided by operating activities | 148,368 | 115,714 | |||||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (19,784 | ) | (12,803 | ) | |||
| Proceeds from sale of property and equipment | 573 | 1,049 | |||||
| Payments for acquisitions, net of cash acquired | (379,272 | ) | (197,672 | ) | |||
| Investments in unconsolidated joint ventures | (13,637 | ) | (36,102 | ) | |||
| Return of investments in unconsolidated joint ventures | 9,443 | 729 | |||||
| Proceeds from sales of investments in unconsolidated joint ventures | - | 14,335 | |||||
| Net cash used in investing activities | (402,677 | ) | (230,464 | ) | |||
| Cash flows from financing activities: | |||||||
| Proceeds from borrowings under credit agreement | 680,900 | - | |||||
| Repayments of borrowings under credit agreement | (579,700 | ) | (50,000 | ) | |||
| Payments for debt costs and credit agreement | (870 | ) | (1,937 | ) | |||
| Payments for acquired warrants | (11,243 | ) | - | ||||
| Contributions by noncontrolling interests | 8,299 | 1,688 | |||||
| Distributions to noncontrolling interests | (14,290 | ) | (37,246 | ) | |||
| Repurchases of common stock | (19,500 | ) | (8,701 | ) | |||
| Taxes paid on vested stock | (6,135 | ) | (2,242 | ) | |||
| Proceeds from issuance of common stock | 2,724 | 2,773 | |||||
| Net cash provided by (used in) financing activities | 60,185 | (95,665 | ) | ||||
| Effect of exchange rate changes | (2,220 | ) | (97 | ) | |||
| Net decrease in cash, cash equivalents, and restricted cash | (196,344 | ) | (210,512 | ) | |||
| Cash, cash equivalents and restricted cash: | |||||||
| Beginning of year | 343,883 | 487,215 | |||||
| End of period | $ | 147,539 | $ | 276,703 | |||
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Contract Awards
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Federal Solutions | $ | 685,599 | $ | 560,733 | $ | 1,535,041 | $ | 2,203,767 |
| Critical Infrastructure | 572,657 | 482,836 | 1,631,982 | 1,532,359 | ||||
| Total Awards | $ | 1,258,256 | $ | 1,043,569 | $ | 3,167,023 | $ | 3,736,126 |
Backlog
(in thousands)
| September 30, 2022 | September 30, 2021 | |||
|---|---|---|---|---|
| Federal Solutions: | ||||
| Funded | $ | 1,448,615 | $ | 1,471,631 |
| Unfunded | 3,656,421 | 4,149,903 | ||
| Total Federal Solutions | 5,105,036 | 5,621,534 | ||
| Critical Infrastructure: | ||||
| Funded | 3,066,325 | 2,893,008 | ||
| Unfunded | 57,628 | 69,997 | ||
| Total Critical Infrastructure | 3,123,953 | 2,963,005 | ||
| Total Backlog | $ | 8,228,989 | $ | 8,584,539 |
Book-To-Bill Ratio^1^:
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Federal Solutions | 1.1 | 1.1 | 0.9 | 1.6 | ||||
| Critical Infrastructure | 1.1 | 1.1 | 1.1 | 1.2 | ||||
| Overall | 1.1 | 1.1 | 1.0 | 1.4 |
Non-GAAP Financial Information
The tables under "Parsons Corporation Inc. Reconciliation of Non-GAAP Measures" present Adjusted Net Income attributable to Parsons Corporation, Adjusted Earnings per Share, Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Parsons has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions, costs associated with a loss or gain on the disposal or sale of property, plant
| ^1^ | Book-to-Bill ratio is calculated as total contract awards divided by total revenue for the period. |
|---|---|
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and equipment, restructuring and related expenses, costs associated with mergers and acquisitions, software implementation costs, legal and settlement costs, and other costs considered non-operational in nature. These items have been Adjusted because they are not considered core to the company’s business or otherwise not considered operational or because these charges are non-cash or non-recurring. The company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Parsons’s performance during the periods presented and the company’s ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.
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PARSONS CORPORATION
Non-GAAP Financial Information
Reconciliation of Net Income to Adjusted EBITDA
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Net income attributable to Parsons Corporation | $ | 29,571 | $ | 19,358 | $ | 68,533 | $ | 35,099 |
| Interest expense, net | 5,941 | 3,987 | 14,168 | 13,188 | ||||
| Income tax provision (benefit) | 13,792 | 9,165 | 27,643 | 18,378 | ||||
| Depreciation and amortization (a) | 29,578 | 37,232 | 90,668 | 106,540 | ||||
| Net income attributable to noncontrolling interests | 14,024 | 7,411 | 21,685 | 17,711 | ||||
| Equity-based compensation | 7,125 | 3,224 | 15,814 | 15,125 | ||||
| Transaction-related costs (b) | 2,563 | 2,537 | 14,486 | 9,269 | ||||
| Restructuring (c) | - | 357 | 213 | 507 | ||||
| Other (d) | 93 | 1,121 | 1,139 | 3,001 | ||||
| Adjusted EBITDA | $ | 102,687 | $ | 84,392 | $ | 254,349 | $ | 218,818 |
| (a) | Depreciation and amortization for the three and nine months ended September 30, 2022, is $25.3 million and $77.4 million, respectively, in the Federal Solutions Segment and $4.3 million and $13.3 million, respectively, in the Critical Infrastructure Segment. Depreciation and amortization for the three and nine months ended September 30, 2021, is $32.4 million and $92.6 million, respectively, in the Federal Solutions Segment and $4.8 million and $14.0 million, respectively, in the Critical Infrastructure Segment. | |||||||
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| (b) | Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention. | |||||||
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| (c) | Reflects costs associated with and related to our corporate restructuring initiatives. | |||||||
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| (d) | Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature. | |||||||
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PARSONS CORPORATION
Non-GAAP Financial Information
Computation of Adjusted EBITDA Attributable to Noncontrolling Interests
(in thousands)
| Three months ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||
| Federal Solutions Adjusted EBITDA attributable to Parsons Corporation | $ | 61,004 | $ | 46,481 | $ | 151,287 | $ | 110,963 |
| Federal Solutions Adjusted EBITDA attributable to noncontrolling interests | 107 | 78 | 273 | 232 | ||||
| Federal Solutions Adjusted EBITDA including noncontrolling interests | $ | 61,111 | $ | 46,559 | $ | 151,560 | $ | 111,195 |
| Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation | 27,545 | 30,371 | 81,020 | 89,845 | ||||
| Critical Infrastructure Adjusted EBITDA attributable to noncontrolling interests | 14,031 | 7,462 | 21,769 | 17,778 | ||||
| Critical Infrastructure Adjusted EBITDA including noncontrolling interests | $ | 41,576 | $ | 37,833 | $ | 102,789 | $ | 107,623 |
| Total Adjusted EBITDA including noncontrolling interests | $ | 102,687 | $ | 84,392 | $ | 254,349 | $ | 218,818 |
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PARSONS CORPORATION
Non-GAAP Financial Information
Reconciliation of Net Income Attributable to Parsons Corporation to Adjusted Net Income Attributable to Parsons Corporation
(in thousands, except per share information)
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||
| Net income attributable to Parsons Corporation | $ | 29,571 | $ | 19,358 | $ | 68,533 | $ | 35,099 | ||||
| Acquisition related intangible asset amortization | 19,071 | 27,039 | 58,875 | 76,048 | ||||||||
| Equity-based compensation | 7,125 | 3,224 | 15,814 | 15,125 | ||||||||
| Transaction-related costs (a) | 2,563 | 2,537 | 14,486 | 9,269 | ||||||||
| Restructuring (b) | - | 357 | 213 | 507 | ||||||||
| Other (c) | 93 | 1,121 | 1,139 | 3,001 | ||||||||
| Tax effect on adjustments | (8,361 | ) | (8,595 | ) | (23,887 | ) | (25,967 | ) | ||||
| Adjusted net income attributable to Parsons Corporation | 50,062 | 45,041 | 135,173 | 113,082 | ||||||||
| Adjusted earnings per share: | ||||||||||||
| Weighted-average number of basic shares outstanding | 103,608 | 102,478 | 103,684 | 102,464 | ||||||||
| Weighted-average number of diluted shares outstanding (d) | 104,526 | 103,230 | 104,431 | 103,101 | ||||||||
| Adjusted net income attributable to Parsons Corporation per basic share | $ | 0.48 | $ | 0.44 | $ | 1.30 | $ | 1.10 | ||||
| Adjusted net income attributable to Parsons Corporation per diluted share | $ | 0.48 | $ | 0.44 | $ | 1.29 | $ | 1.10 | ||||
| (a) | Reflects costs incurred in connection with acquisitions and other non-recurring transaction costs, primarily fees paid for professional services and employee retention. | |||||||||||
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| (b) | Reflects costs associated with and related to our corporate restructuring initiatives | |||||||||||
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| (c) | Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature. | |||||||||||
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| (d) | Excludes dilutive effect of convertible senior notes due to bond hedge. | |||||||||||
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