Earnings Call Transcript - PSN Q2 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the Second Quarter 2025 Parsons Corporation Earnings Conference Call. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I'd now like to turn the conference over to Dave Spille, Senior Vice President, Investor Relations. Please go ahead.

David Spille, Senior Vice President, Investor Relations

Thanks, Liz. Good morning, and thank you for joining us today to discuss our second quarter 2025 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 2025 guidance. We then will close with a question-and-answer session. Management may also make forward-looking statements during this 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 reflected in the forward-looking statements due to a variety of factors. These risk factors are described in our Form 10-K for the fiscal year ended December 31, 2024, 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'll turn the call over to Carey.

Carey A. Smith, Chair, President and CEO

Thank you, Dave. Good morning and welcome to Parsons' Second Quarter 2025 Earnings Call. We are pleased with our second quarter results as cash flow surpassed our expectations, and our revenue and adjusted EBITDA aligned with our guidance from June 2, 2025. When excluding the revenue effect from our confidential contract for Q2 2025 and Q2 2024, our total and organic revenue growth rates for the second quarter were 13% and 8%, respectively. This growth includes double-digit total revenue growth in three of our four business units, with the fourth unit growing 9% year-over-year. Additionally, we observed 8% organic growth in both segments of Parsons, showcasing the strength of our balanced portfolio, robust hiring and retention, and alignment with priority spending areas. During the second quarter, we achieved 40 basis points of margin expansion to reach a record 9.4%. Our cash flow from operations totaled $160 million, with a free cash flow conversion rate of 151% for the quarter and 125% over the trailing 12 months. We reported a book-to-bill ratio of 1.0x for both the quarter and trailing 12 months, maintaining our streak of having a ratio of 1.0x or better since our IPO in 2019. We are also raising our full-year revenue, adjusted EBITDA, and cash flow guidance ranges in light of our strong second quarter performance, the acquisition of Chesapeake Technology International, and our outlook for the rest of the year. In addition to strong financial results and program execution, we were recognized by Engineering News Record as the leading program manager firm globally. Parsons was also ranked #2 in professional services, #2 in construction management-program management for the field, and #3 in construction management, reflecting our strong reputation in complex program delivery. In the second quarter, we secured three contracts valued over $100 million, with two representing new work. Notable contracts include a $176 million design-build delivery services award from the U.S. Army Corps of Engineers for an Ammonium Nitrate Solution Tank Farm at the Holston Army Ammunition Plant, a new cyber contract from the Defense Threat Reduction Agency worth $138 million, and a $134 million follow-on contract for overseas remediation projects in Canada. Our Critical Infrastructure segment continues to excel, benefiting from our reputation and expertise amidst unprecedented infrastructure spending in North America and the Middle East. In the second quarter, total infrastructure revenue grew by 14%, with 8% organic growth. In North America, total revenue increased by 17%, with 7% organic growth, as we secured large new programs and improved execution on existing contracts while bolstering our workforce. Major project wins contributing to growth and expected to increase in the second half of 2025 include Georgia State Route 400, Newark AirTrain, Hawaii City Center rail and transit, Hudson River Tunnel, and the I-55 Bridge replacement. Excitingly, infrastructure spending from the IIJA is anticipated to peak in 2028, with discussions on the next Surface Transportation Reauthorization bill already underway. Our Middle East infrastructure business has also thrived, maintaining our status as the #1 program manager in the region. We've been active in the Middle East for over six decades, employing 7,000 individuals there and generating more than $1 billion in revenue in 2024. We expect revenue growth above 10% in 2025, representing our fourth consecutive year of double-digit organic growth. Demand for our services in master planning, design engineering, and program management remains strong, particularly as governments prepare for major events like the Asian Winter Games and World Cup. Additionally, we’ve expanded into defense, hospitality, and industrial manufacturing, capitalizing on significant investments in these sectors. Our recent participation in President Trump’s Middle East trip underscored our role as a leader in the region and alignment with government priorities. The recognition of our portfolio during key events highlighted our achievements, including awards for the King Salman International Airport project. Our revenue growth in the Middle East is expected to accelerate further this year as we ramp up hiring and contract execution, including projects like King Salman Park and the Riyadh Ring Roads program. Achieving book-to-bill ratios of 1.4x in critical infrastructure and 1.2x in North America during the first half of 2025 emphasizes our strong market position. In our Federal Solutions segment, we are energized by core business growth and large opportunity prospects in our pipeline, supported by increased defense funding from the recently passed reconciliation bill. Excluding the impact of our confidential contract, Federal Solutions experienced 11% total and 8% organic revenue growth in the second quarter, primarily due to heightened demand for aviation, cyber, and electronic warfare solutions. Our strong portfolio of single-award IDIQ contracts, including programs with the General Services Administration and Missile Defense Agency, positions us effectively to address emerging threats. The reconciliation bill's passage, which boosts defense spending by $150 billion, aligns with our focus on key budget items, including aviation modernization and missile defense. Additionally, funding from the reconciliation bill contributed to the FAA's new air traffic control system project, where we are positioned as a potential integrator contractor. The $25 billion Golden Dome initiative for Homeland Defense also aligns with our qualifications, having supported missile defense requirements for over four decades. We remain committed to modernization projects for major Army ammunition plants, stimulated by the reconciliation bill’s funding for munitions production. Our ongoing work in the INDOPACOM region and new task orders enhance our presence and capacity for future growth. We continue to strengthen our portfolio in border security, where our expertise supports various U.S. agencies and international programs. Exciting opportunities in our pipeline, strengthened by high win rates and strategic investments, ensure we are well-positioned for sustainable future growth. The acquisition of Chesapeake Technology International significantly enhances our multi-domain technology capabilities and our relationships with key customers. In conclusion, I am proud of our second quarter results, which demonstrate robust revenue growth and margin expansion, exceptional cash flow, and strategic acquisitions. Our diversified portfolio should enable consistent organic growth while positioning us for long-term success. Unprecedented global infrastructure spending is projected to continue for years, while our focus on defending against advanced threats and cyber security will be critical as tensions rise. We have a sizable backlog of nearly $9 billion, with significant future contract opportunities. Our strong operational positioning ensures that we can deliver value to shareholders while making a positive impact in our communities. I look forward to our bright future and appreciate the commitment of our over 20,000 employees. I will now hand it over to Matt for more details on our second quarter financial results.

Matthew M. Ofilos, CFO

Thank you, Carey. Q2 financials were highlighted by strong free cash flow, adjusted EBITDA margins, and total and organic revenue growth, excluding our confidential contract. In addition, we continue to leverage our balance sheet and completed another accretive acquisition in the strategic national security space that strengthens capabilities and customer relationships. Turning to the details of our second quarter results. Total revenue of $1.6 billion decreased 5% from the prior year period and was down 9% on an organic basis. Excluding our confidential contract, total revenue grew 13% and 8% on an organic basis, driven by growth in our transportation and cyber markets. SG&A expenses for the second quarter increased 13% from the prior year period. This increase was primarily driven by the inclusion of recent acquisitions and increased investments in bid and proposal activity and critical hires in support of our strong pipeline and large strategic pursuits aligned to the administration's priorities. Adjusted EBITDA of $149 million was comparable with the second quarter of 2024. However, adjusted EBITDA margin expanded by 40 basis points to 9.4%, a second quarter record. Our margin increase was driven by improved program performance and accretive acquisitions. I'll turn now to our operating segments, starting first with Federal Solutions, where second quarter total revenue decreased 19% from the prior year period and 20% on an organic basis. Excluding our confidential contract, Q2 Federal Solutions total revenue increased 8% and 8% on an organic basis. These increases were driven by growth on existing contracts and the ramp-up of new task order wins, specifically in the cyber, intelligence, and aviation markets. Our confidential contract generated $106 million of revenue in Q2 2025, in line with our expectations. At the beginning of the third quarter, this contract was terminated for convenience as anticipated. Federal Solutions adjusted EBITDA decreased 35% from the second quarter of 2024, and adjusted EBITDA margin decreased 210 basis points to 8.3% driven primarily by contract mix and investments made in bid proposal activity and key personnel on strategic pursuits. Moving now to our Critical Infrastructure segment. Second quarter revenue increased by $97 million or 14% from the second quarter of 2024. This increase was driven by organic growth of 8% and inorganic revenue contributions from our BCC and TRS acquisitions. Organic growth was primarily driven by the ramp-up of recent contract wins and growth on existing contracts in both North America and the Middle East. We are expecting growth to accelerate in the second half of the year as new and existing contracts ramp and strong hiring activity in the second quarter flows through to revenue. Critical Infrastructure adjusted EBITDA increased 73% from the second quarter of 2024, and adjusted EBITDA margin increased 350 basis points to 10.5%, a second quarter record for the segment. These increases were driven primarily by improved program performance, the ramp up on recent awards and acquisitions to include BCC, where we are seeing significant synergy benefits both to revenue and margins. Next, I'll discuss cash flow and balance sheet metrics. Our net DSO at the end of Q2 '25 was 60 days, consistent with the prior year period. During the second quarter of 2025, we generated $160 million of operating cash flow, which is also consistent with Q2 2024. On a trailing 12-month basis, we generated $574 million of operating cash flow which is a Q2 record and a 17% increase over the prior 12-month period. These increases were driven by strong collections in both segments and lower tax payments. Capital expenditures totaled $9 million in the second quarter of 2025 consistent with the prior year period. We expect CapEx to increase in the second half of the year in support of long-term growth, partially offset by reductions in facility square footage in several locations. For fiscal year 2025, CapEx is expected to remain in line with our planned spend of approximately 1% of annual revenue. At the end of Q2, free cash flow conversion was 125% on a trailing 12-month basis with an intentional focus on contract execution, settlement of legacy claims, and improved cash management and collections. Our balance sheet remains strong. Including the impact of our all-cash acquisition of CTI, we ended the second quarter with a net debt leverage ratio of 1.5x. During the second quarter, we repurchased approximately 219,000 shares at an average price of $68.56 for an aggregate purchase price of $15 million. On a year-to-date basis, we've repurchased approximately 643,000 shares at an average price of $62.22 for an aggregate purchase price of $40 million. Turning now to bookings. For the second quarter, we reported contract awards of $1.5 billion, representing a book-to-bill ratio of 1.0x on an enterprise basis, which continued our streak with a trailing 12-month book-to-bill ratio of 1.0x or greater in every quarter since our IPO. In Critical Infrastructure, we achieved a book-to-bill ratio of 1.1x, which is the 19th consecutive quarter with a book-to-bill ratio of 1.0x or greater. Federal Solutions reported a book-to-bill ratio of 0.8x. Our backlog at the end of the second quarter totaled $8.9 billion, a 1% increase over Q2 2024. Additionally, our funded backlog is the highest since our IPO at $6.2 billion, a 14% increase year-over-year. Next, I'll discuss updated guidance. We're increasing our revenue, adjusted EBITDA, and cash flow guidance ranges provided on June 2 to reflect our second quarter results, CTI acquisition, changes to tax laws, and our outlook for the remainder of the year. We expect total revenue to be between $6.48 billion and $6.68 billion. This guidance represents total revenue growth of 17% and 13% on an organic basis, excluding the confidential contract. Including this contract, total revenue is anticipated to decline 3% at the midpoint of the range and 6% on an organic basis. We expect growth to accelerate in the second half of the year as we ramp on recent contract wins, existing contracts expand, strong hiring and retention continue, and we realize the contributions from CTI. Adjusted EBITDA is now expected to be between $595 million and $635 million with a margin of 9.3% at the midpoint of our revenue and adjusted EBITDA guidance ranges. This represents adjusted EBITDA margin expansion of 30 basis points from 2024 and an 80 basis point increase since 2023. Operating cash flow is now expected to be between $400 million and $440 million, given strong Q2 performance and the cash tax benefit related to the reconciliation bill. Other key assumptions in connection with our 2025 guidance, including quarterly cadences, are outlined on Slide 11 in today's PowerPoint presentation located on the Investor Relations website. With that, I'll turn the call back over to Carey.

Carey A. Smith, Chair, President and CEO

Thank you, Matt. During the second quarter, we delivered significant growth in our core business, 40 basis points of margin expansion, exceptional cash flow, and free cash flow conversion. We completed a strategic acquisition while maintaining our strong balance sheet, which will enable us to make future accretive acquisitions. We're optimistic about our future, given our team's proven execution, the tailwinds we have in both segments, our large total and funded backlog, and the robust pipeline of large opportunities we have to pursue. With that, we'll now open the line for questions.

Operator, Operator

Our first question comes from Tobey Sommer with Truist.

Tobey O'Brien Sommer, Analyst

I wanted to ask about the opportunities in front of the company sort of over the near to medium term with respect to Golden Dome and the very large FAA procurement. Could you just discuss how you're pursuing those? And I know that we've heard that the FAA procurement is sort of fluid, they're soliciting a lot of advice, and it's not yet determined kind of how that path will proceed, but is there sort of an optimal way that that could proceed from your perspective?

Carey A. Smith, Chair, President and CEO

Yes. Thanks, Tobey. Appreciate the question. Thanks for joining the call today. We're very excited about the FAA program. We've fortunately supported the FAA for nearly 5 decades. We have excellent past performance. We've done a lot of the infrastructure and facilities work. We've put together a very strong team to pursue the FAA integration contract. What is going to be important in that contract is just making sure that you have a company that knows how to deliver. Parsons is the #1 program manager in the world per Engineering News-Record and we've partnered with IBM, a very strong technical partnership, and we feel that we're very well prepared to take on the single point of accountability, integration role and provide the FAA with a safe, resilient, reliable system that also transforms for the future. That's $12.5 billion of funding and the reconciliation bill. We're anticipating a request for solicitation sometime soon. They had hoped to make an award by the end of September, but that's really now dependent on the timing of the request for solicitation. Under Golden Dome, that's $25 billion of reconciliation funding and most of these, by the way, the FAA and Golden Dome are both projected to receive more in the future. On FAA, they indicated they need about $31.5 billion. And for Golden Dome, they've indicated they need about $175 billion for the total contract. Very similar to FAA, we're extremely well positioned for the Golden Dome. We've been supporting the Missile Defense Agency for 4 decades, providing system engineering and integration capabilities along with modeling, simulation, and analysis capabilities. We have a current contract vehicle worth $2.2 billion. On that vehicle, we still have $1 billion remaining, so that can be used to get Golden Dome kick-started right away. In addition to that, we also have non-kinetic capabilities, as I mentioned during the script, that we think are very novel and unique to counter threats in a non-kinetic way. I'd also highlight again under the bill because I'm really excited about the reconciliation bill and how well it aligns with our portfolio. The munitions budget of $21 billion will continue to expand beyond our current capacity that we have at Holston and Radford and then the Border Security funding of $160 billion is really going to leverage our decades of experience all over the globe in providing border security solutions.

Matthew M. Ofilos, CFO

Yes. So the only thing I would add, and Carey kind of commented on it, but on the existing IDIQ vehicles between those 2 areas with MDA and FAA, we have almost $3 billion worth of ceiling remaining. So it's a really great opportunities on both for us.

Tobey O'Brien Sommer, Analyst

If I could ask a follow-up. What's your expectation for the calendar 3Q which is seasonally the industry's strongest from a book-to-bill perspective? And this year, we've seen obligation action sort of lagging pretty significantly. Do you expect a bigger-than-normal seasonal catch-up for the industry and yourselves?

Carey A. Smith, Chair, President and CEO

I would say we're definitely expecting a more robust Q3. And that traditionally, as you point out, Tobey, is for the federal business, the strongest quarter. Within Critical Infrastructure, obviously, we've had 19 consecutive quarters greater than 1.0 book-to-bill. Orders can be lumpy. I always like myself to look at the revenue growth. I think where we've done a tremendous job in our federal business is driving task orders on to that $11 billion of unused ceiling that has been awarded to Parsons that we haven't yet put into bookings. I was glad this quarter on the federal business that we did see 2 new large awards move forward, the Holston and the defense threat reduction in cyber. But we are anticipating a 1.0x book-to-bill for the full year for both CTI and for federal and expect Q3 will be a stronger quarter.

Operator, Operator

Our next question comes from Andrew Wittmann with Baird.

Andrew John Wittmann, Analyst

I guess, Carey, I thought I would just check in here and get your comments on how the One Big Beautiful Bill, which obviously, you've articulated the aspects on the federal side. Can you talk about how it might impact your infrastructure side, particularly as it relates to the state and local budgets that are out there and how they might be affected if you're hearing anything from your customers on that side of the house of how the bill might impact them.

Carey A. Smith, Chair, President and CEO

Yes. So I think, Andrew, the biggest thing I'd say is we're aligned with the administration's and bipartisan priorities. There's going to be a shift from soft infrastructure areas like climate change, renewables, electrification over to hard infrastructure like roads, highways, bridges, and airports. Those are the areas where Parsons' portfolio is very well aligned. We are also super excited about the next 5-year Surface Transportation Reauthorization Bill kicking off. We expect additional funding to come through that bill. When you're looking at the current IIJA, not peaking until 2028, and a 6- to 8-year tail overlaying a new surface transportation bill, then adding a shift in funding from soft to hard-target infrastructure really benefits Parsons.

Andrew John Wittmann, Analyst

Got it. Okay. And then just my follow-up for Matt, easy one here. But just the guidance increase at least here on the income statement. It looks like it's mostly the contribution of the incremental acquisition that you did in the quarter. It looks like the income statement for the company for the quarter was mostly in line. Is that the correct way of thinking about the guidance increase? Or is there some other nuance there that we should be aware of?

Matthew M. Ofilos, CFO

Yes. CTI is a significant contributor, adding $30 million to revenues and $5 million to net income, with a slightly more aggressive impact on the bottom line due to the strong performance in the first half. Some of this is organic. On the cash flow side, it's primarily organic as well. The major impact came from the R&D tax credits, providing nearly $20 million in benefits from the reconciliation bill. This benefited cash flow, but both revenues and net income were largely attributed to CTI.

Operator, Operator

Our next question comes from Sheila Kahyaoglu with Jefferies.

Sheila Karin Kahyaoglu, Analyst

And thanks for mentioning Armenia in the script. I don't think I've heard that before. So I appreciate that. Maybe if we could just talk about the organic growth outlook a little bit more, Carey. How do you think about the puts and takes? It seems like we're down 1 point to 6% organic, given CTI contribution? How do we think about the second half contributors playing into that and the ramp-up?

Carey A. Smith, Chair, President and CEO

Yes. So excluding the confidential contract, we're going to grow 18% organic in the second half. And that breaks out, let's see, that would end up being...

Matthew M. Ofilos, CFO

About 13% within CI on an organic basis and then north of 20% on Fed. So really strong growth on both sides of the company.

Carey A. Smith, Chair, President and CEO

Yes. And let me kind of walk through the pieces for that because I think it's important to note that this is largely based on work that we've already won today. So when you look at what's going to accelerate in the second half, critical infrastructure in North America, Georgia State Route 400, Newark AirTrain, Hawaii rail and transit, Hudson River Tunnel, I-55, Middle East King Salman Park, Riyadh Ring Roads, Dubai Metro, King Salman International Airport, Engineered Systems, FAA, Holston Ammonium Nitrate, Defense Threat Reduction Red Team, United States Postal Service, and Defense and Intelligence, the Missile Defense Agency Teams Contract, GSA FedSIM, additional sealing tech product sales, Airbase Air Defense. I think what's important is we do have our July results, they were very favorable, and they're on track to achieve the back half acceleration. We also had in July record hiring within the Middle East. So quite excited. I think we've got industry-leading organic growth in both segments.

Sheila Karin Kahyaoglu, Analyst

What changed to cut the core by 1 point since your last update? And then my second question, if I can squeeze that into just on CI, the performance has been quite stellar 10.4% margins year-to-date. Just any update on the programs that previously faced supply chain challenges.

Matthew M. Ofilos, CFO

Yes, Sheila, I can start off with the 5% to 6%. Actually, it's really just rounding. It was 5.4%, went to 5.5%. So there's really nothing more behind that at the core. The organic revenue stayed constant. It's just the contribution from CTI changed the base. So just no implied delta on the organic. So Carey, you want to cover CI.

Carey A. Smith, Chair, President and CEO

Critical Infrastructure margins. So what's been good on Critical Infrastructure is really program execution. The team has done a very good job this year of just executing. We've always indicated that the long-term margins for critical infrastructure should be double digits, and that's what we're seeing. So I'd say continued program execution. We're seeing demand much greater than supply, both in North America and in the Middle East, double-digit growth within those and those margins long term that we would expect to deliver.

Operator, Operator

Our next question comes from Noah Poponak with Goldman Sachs.

Noah Poponak, Analyst

Matt, what's the second half Federal Solutions organic ex confidential that's now in the guidance? Because just looking at the slide you have that shows that confidential was still just over $100 million in the second quarter. If I take that out sequentially it looks like a bit of a lift to overcome that sequentially unless seasonality is in your favor? Or there's an acceleration kind of everywhere else?

Matthew M. Ofilos, CFO

Yes. No, you're right. No, Fed organic growth in the second half is expected to be just north of 20% so a little bit better than first half, which was closer to a high single, low double digit. And so we're seeing really strong growth on programs. We have some key deliveries of the FAA ramp that Carey talked about, MDA is growing. We have some product deliveries within the Sealing Tech acquisition we've done. So we see really strong demand across the portfolio on the federal side. But to your point, it is going to expand in the second half of the year.

Carey A. Smith, Chair, President and CEO

And also the new business wins we highlighted with Holston Defense Threat Reduction Agency. I go back to our July results are right in line with our plan.

Noah Poponak, Analyst

Yes, Carey, I guess, you've cited a number of specifics for the basis for that. But from a top-down perspective, I guess, how much risk is there just in the slower contracting environment that we're in to assume double the growth rate in that business in the back half versus the first half?

Carey A. Smith, Chair, President and CEO

So the most important thing is those are largely contracts that have already been awarded and we're ramping up, which we've been accelerating throughout the year. FAA is a real good example of that, for which we've seen strong outperformance over the last year. So I would say a lot of that is one. We also have the $11 billion of awarded not booked that is predominantly in the federal area. And we've done a great job of driving task orders over to that. The environment has been a little slower, but I'd say we're optimistic that it is starting to pick up. I look at the volume of proposals that we've been submitting, it's right in line with what we would expect. And it's great to see some of these big, large new awards come through this quarter.

Noah Poponak, Analyst

Okay. It sounds like you're indicating that July is aligning with that directional plan, even though it's just one month.

Carey A. Smith, Chair, President and CEO

That's correct. July results were favorable and demonstrate that we're on track to achieve the back half acceleration.

Noah Poponak, Analyst

Okay, great. I have one last question. The Federal Solutions margin has decreased. How much did confidential information contribute to that margin? Was there anything unusual in the quarter, and how do you see it progressing in the second half?

Matthew M. Ofilos, CFO

Yes. As you mentioned, the primary factor was the decrease in volume from our confidential contract, which fell by about $250 million year-over-year. Fixed-price contracts are beneficial, so this reduction negatively affected our margins. Additionally, there was extra spending related to BNP as we expanded our capture environment and made some strategic hires in anticipation of upcoming awards. These two factors were the main contributors to the Federal margin for the quarter. Looking ahead to the rest of the year, we anticipate Federal margins to be in the low 9% range, aiming to get closer to 9% for the total year. We expect some timing of incentive fees in the second half, along with product sales, and as you see revenue growth outpacing expenses, you should also see margins trend upward. Overall, we are content with where our investments are headed and our long-term outlook for Federal margins is positive.

Operator, Operator

Our next question comes from Mariana Perez Mora with Bank of America.

Samantha Stiroh, Analyst

This is Samantha Stiroh for Mariana. Regarding the FS margin, you mentioned strategic personnel hires. How has the hiring environment been, and what is your ability to move people within the company to these high-priority areas?

Carey A. Smith, Chair, President and CEO

Yes. Thanks for the question. The hiring environment has been very strong and also the retention. Our retention is the best that it's been since 2020. And we do have a great ability to hire. I think really as a result of our mission focus and our culture, people want to come to Parsons. Our ability to win with strong win rates of 72% this year, similar to what we've delivered in the last 2 years. We were winning these great new exciting projects. We do have an ability to move people around. We have kind of a common program management pool of people. We have an engineering design group of people. And I always like to highlight somebody who today works in internal audit that's a person that worked in federal or worked in critical infrastructure, worked in North America, and worked in the Middle East. So she's kind of been all over the company. And I think we do a great job of that and giving people new experiences and development opportunities.

Operator, Operator

Our next question comes from Gautam Khanna with TD Cowen.

Gautam J. Khanna, Analyst

I was wondering if you could elaborate on the unbooked backlog, if you will, I think it changed by $1 billion in the quarter. Maybe you touched on it and I missed it, but $12 billion worth...

Carey A. Smith, Chair, President and CEO

Yes, sure. So it's just over $11 billion now. We had about $600 million that was in for the confidential contract. So we obviously have removed that. Then we've done exactly as we indicated, which has driven task orders onto some of our IDIQ vehicles. So it came down slightly because of that. And that's, again, our full intention.

Gautam J. Khanna, Analyst

Okay. And maybe did you guys comment on what your outstanding bids are as of the end of the quarter?

Carey A. Smith, Chair, President and CEO

We have $6 billion of awaiting notice of award. We have a $55 billion pipeline.

Gautam J. Khanna, Analyst

Okay. And is there any risk of the second you mentioned you've booked a lot of the stuff already that gives you confidence in the second half ramp? But is there any sort of change in the funding environment, the funded backlog that you're seeing that raises any risk to that outlook? Or does that look well aligned at this point?

Carey A. Smith, Chair, President and CEO

Our funded backlog is the highest it's been at 70%. So very strong.

Matthew M. Ofilos, CFO

Yes. I would say funding is coming in line; cash is paying clean. So I'd say, all in all, we're looking pretty good, Gautam.

Operator, Operator

Our next question comes from Jonathan Siegmann with Stifel.

Jonathan Siegmann, Analyst

To elaborate on the ramp-up for the second half in Federal Solutions, I understand there may be some confusion regarding the backlog, which hasn't sequentially decreased but doesn't align with your expectations for higher growth. However, I see that your remaining performance obligations in Federal Solutions are at an all-time high, showing double-digit growth. This seems to reflect your confidence, but I wanted to clarify whether this is the correct interpretation or if there are any distortions caused by Chesapeake.

Matthew M. Ofilos, CFO

Yes. No real distortion from Chesapeake. I think you're right, between RUPO and funded backlog we see really strong next 12 to 18 months. I'd say that helps us build the confidence. We see timing on the awards, the ramps, and the milestone deliveries. There are a lot of things that are all helping us build confidence. Obviously, 20% is a sporty number, but we are fully committed and we're going to deliver.

Carey A. Smith, Chair, President and CEO

And again, our funded backlog is up 14%. So very strong.

Operator, Operator

Our next question comes from Louie DiPalma with William Blair.

Michael Louie D DiPalma, Analyst

Carey, you talked about the strong growth expected in the second half related to seven major U.S. infrastructure programs. For these programs, is the revenue trajectory expected to follow a bell curve? Will the peak funding for these programs be similar to the general peak funding for the IIJA? You mentioned that funding for the IIJA is expected to increase through 2028. Should we assume the revenue trajectory for these programs will follow that pattern?

Carey A. Smith, Chair, President and CEO

Yes. So it really varies. Let me just give you 2 specific examples. Georgia State Route 400, we're part of a public-private partnership. We are the design engineer. So what you'll see is most of our work at the very beginning of that project. Another example would be the Dubai Metro Blue Line. We're the program manager so in that instance, we will provide program management capabilities throughout that entire contract at a steady state. So it really depends on the type of work we're performing on each contract. Another example in the U.S., the Hudson River Tunnel, which is the largest rail transit infrastructure project in the U.S., we are the program manager on that. So we'll be on for that entire duration.

Michael Louie D DiPalma, Analyst

Okay. I guess as a whole for these programs, would there be difficult comps in 2028 or 2027 for the ones that are front-end loaded? Or how should we think about them collectively?

Carey A. Smith, Chair, President and CEO

Yes. No, because we continue to win new business. So 19 consecutive quarters greater than 1.0 book-to-bill. Projects are still coming out larger than we've seen in both North America and the Middle East, not even at a peak yet where the funding has been laid out of the IIJA and then adding a new surface transportation bill on top of that. Like I said, we'll continue to win projects. And again, very proud of the fact that we've moved up on the Engineering News-Record ratings to be #1 now on program management in the world.

Michael Louie D DiPalma, Analyst

Great, Carey. And for the confidential contract was there any breakup fee? Or should we assume 0 in revenue in the third quarter? Or how should we think about that?

Carey A. Smith, Chair, President and CEO

Yes. So for that contract, we did $181 million in Q1, $106 million in Q2, so $286 million, consistent with our guidance that we updated on June 2. We are in the process of negotiating a demobilization contract line item for the wind down of the project. It's not yet negotiated. But we expect it to be very scaled back and immaterial, less than 1% of revenue.

Michael Louie D DiPalma, Analyst

Okay. And is it possible, Matt, could you provide the quarterly for the confidential contract for the third quarter and fourth quarter of last year?

Matthew M. Ofilos, CFO

Yes. We faced some complexities with the customer due to the overall size of the contracts. I would say that Q2 was slightly larger than Q3, while Q4 was lower.

Michael Louie D DiPalma, Analyst

Great. And one final one. Earlier this week, Carey and Matt, you announced a satellite communications partnership with Globalstar to bring services to Europe. And what does that partnership entail? The reason I'm asking is as everybody on the call are aware, there has been significant GPS jamming attacks across Europe with the conflict. And so does your Globalstar partnership provide any types of alternative like position navigation and timing services to help alleviate those jamming attacks?

Carey A. Smith, Chair, President and CEO

Yes. Great question, Louie, and that's exactly what it does. We've partnered with Globalstar, we've got a very innovative solution that takes our proprietary software-defined satellite communications technology and integrates it with Globalstar's low earth orbit satellite constellation. We developed it specifically to target complex and congested areas as you're referring to in Ukraine. We think that this partnership is going to unlock previously impossible mission-critical solutions and provide unique responses for Assured PNT within radio frequency congested environments and also set a new standard for global communication services and complex and challenging operating conditions. We did deploy the system at 3 different locations across the theater. It is active within a conflict scenario, and we were very pleased with the performance results. We're now looking at how we expand that into INDOPACOM and other areas.

Michael Louie D DiPalma, Analyst

Excellent. So you can potentially bring it into other geographies as well?

Carey A. Smith, Chair, President and CEO

Yes.

Operator, Operator

That's all the time we have for questions today. I'd like to turn the call back to Dave Spille for closing remarks.

David Spille, Senior Vice President, Investor Relations

Thank you, and thanks again for joining this morning. If you have any questions, please don't hesitate to give me a call, and we look forward to catching up with you over the coming weeks. And with that, we'll end today's call. Have a great day.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.