NYSE:PSN Parsons Q3 2024 Earnings Report $67.17 +2.10 (+3.22%) As of 01:46 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Parsons EPS ResultsActual EPS$0.80Consensus EPS $0.73Beat/MissBeat by +$0.07One Year Ago EPSN/AParsons Revenue ResultsActual Revenue$1.81 billionExpected Revenue$1.63 billionBeat/MissBeat by +$184.50 millionYoY Revenue GrowthN/AParsons Announcement DetailsQuarterQ3 2024Date10/30/2024TimeN/AConference Call DateWednesday, October 30, 2024Conference Call Time8:00AM ETUpcoming EarningsParsons' Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Parsons Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 30, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2024 Parsons Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Call. Operator00:00:31Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Dave Spiele, Senior Vice President, Investor Relations. Sir, please go ahead. Speaker 100:00:47Thanks, Michelle. Good morning, and thank you for joining us today to discuss our Q3 2024 financial results. Please note that we provide the presentation slides on the Investor Relations section of our website. On the call with me today are Cary Smith, Chair, President and CEO and Matt Apollos, CFO. Today, Cary will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our Q3 financial results as well as a review of our increased 2024 guidance. Speaker 100:01:17We 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 ks for fiscal year ended December 31, 2023, and other SEC filings, including the quarterly report filed with the Securities and Exchange Commission on October 30, 2024 on Form 10 Q for the quarter ended September 30, 2024. Speaker 100:02:03Please 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 reference non GAAP financial measures during this call. We remind you that these non GAAP financial measures are not a substitute for the comparable GAAP measures. And now, I'll turn the call over to Keri. Speaker 200:02:25Thank you, Dave. Good morning, and welcome to Parsons' Q3 2024 earnings call. We are very pleased with our Q3 and year to date performance as we delivered record Q3 results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow and contract awards. We also achieved strong growth across the portfolio, delivering over 20% organic growth for the 6th consecutive quarter, while efficiently managing the business as bottom line growth continues to outpace our robust top line growth. In addition, we continue to leverage our strong balance sheet to invest in software and integrated solutions as well as execute accretive acquisitions that either provide distinguished defense capabilities to counter near peer threats or strengthen our engineering expertise and increase our geographical footprint in high growth infrastructure markets. Speaker 200:03:27As a result of our strong operating performance in our Black Signal acquisition, we are raising our full year revenue, adjusted EBITDA and cash flow guidance ranges. Our record results reflect the hard work and dedication of the entire Parsons team to deliver on our customers' national security and infrastructure missions with the urgency and operational relevance required in today's fast paced and dynamic environment. For the Q3, we generated $1,800,000,000 in revenue for the first time in our company's history and delivered organic revenue growth of 26%. During the Q3, we also delivered double digit total revenue growth in both business segments, illustrating the strength of our portfolio. This is now the 11th consecutive quarterly record for revenue and 12th consecutive record quarterly for adjusted EBITDA. Speaker 200:04:29I will also note that for the Q3 and for the 1st 9 months of 2024, total adjusted EBITDA growth exceeded revenue growth. In the Q3, total revenue increased 28%, while adjusted EBITDA grew by 31%. And for the 1st 9 months of 2024, total revenue grew 27% and adjusted EBITDA increased 36%. By driving EBITDA growth faster than our robust revenue growth, our margins expanded 20 basis points in the 3rd quarter and 60 basis points for the 1st 9 months of the year. In addition, we had an exceptional quarter for operating cash flow and increased our trailing 12 month cash flow by more than 90% from the prior year period. Speaker 200:05:18Our strong free cash flow and balance sheet support our ability to continue to make internal investments and accretive acquisitions to strengthen our capabilities and drive long term growth and margin expansion. These investments are enabling us to win larger and more profitable contracts as well as new business across both segments in all six end markets. During the Q3, we won 4 single award contracts over $100,000,000 each and reported a book to bill ratio of 1.0 times, which represents a 24% increase in contact award activity over the prior year period. In addition, the Critical Infrastructure segment achieved a book to bill ratio of 1.0 or greater for the 16th consecutive quarter. In Critical Infrastructure, during Q3, we were awarded strategic transportation and Middle East projects. Speaker 200:06:17In North America, we received a new award for the Georgia State Route 400 Express Lanes, where Parsons will serve as the lead designer. This $4,600,000,000 project will add new Express Lanes and use state of the art traffic, incident management and digital twin systems. Under the Infrastructure Investment and Jobs Act, Georgia is expected to receive at least $11,000,000,000 for roads and highways, bridges, public transportation, airports and resilient infrastructure. We were awarded a new lead design contract for the Honolulu Authority for Rapid Transportation. On this $1,660,000,000 project, we are the lead designer for the city center guideway and stations. Speaker 200:07:05The scope of work includes the design of 6 rail stations and approximately 3 miles of elevated rail guideway and engineering services during construction. Over the past 16 months, we've won 5 of the largest North America transportation design projects in our company's history. The two wins this quarter, along with the recent Hudson River Tunnel project, JFK International Airport Roadways and Newark Bay Bridge wins demonstrate the success we are having in the transportation market. These awards also show that federal, state and local funding continues to flow at a healthy pace. Our momentum in the Middle East continues as we achieved a book to bill ratio of 1.2 times in the 3rd quarter, and we currently have the largest qualified pipeline in our company's history in both the Middle East and Saudi Arabia. Speaker 200:08:03In Saudi Arabia, we were awarded contracts valued at more than $200,000,000 including 2 large program management awards. In addition, 3rd quarter headcount in both the Middle East and Saudi reached an all time high and continues to grow. We are very excited about the future growth opportunities in the region and continue to invest to capitalize on this unique opportunity. In our Federal Solutions segment, we received option awards totaling $287,000,000 with a confidential customer during the Q3. We also booked an option period totaling $245,000,000 on our General Services Administration contract. Speaker 200:08:48This contract supports the Department of Defense and its strategic partners in delivering global quick reaction capabilities, leveraging advanced technology solutions across the all domain battlespace. We were awarded $134,000,000 of contracts in the Indo Paypal region. We won a 3 year $69,000,000 contract on Kwajale in the Marshall Islands to provide Army Family Housing. We also were awarded $37,000,000 in signals intelligence and cyber operations work. In addition, we received 2 contracts worth $28,000,000 to perform advanced geophysical classification and unexploded ordnance work on Guam and upgrade utility monitoring and control systems. Speaker 200:09:36Parsons' presence in Guam, Kwajalein and Hawaii continues to strengthen and is aligned to the fiscal year 2025 Pacific Deterrence Initiative of $9,900,000,000 for targeted investment to enhance force posture, infrastructure, presence and readiness of the United States and its allies in the Indo Pacific region. Finally, we booked an auction period totaling $54,000,000 on the Combatant Command's Cyber Mission Support contract. This contract includes support of multi domain operations across cyber, space, air, ground and maritime. During the Q3, we announced and closed our Black Signal Technologies acquisition in an accretive deal valued at $204,000,000 This company is a next generation digital signal processing, electronic warfare and cybersecurity provider built to counter near peer threats. BlackSignal expands Persson's customer base across the Department of Defense and Intelligence community and significantly strengthens Persson's positioning within offensive cyber operations and electronic warfare, while adding new capabilities in the counter space radio frequency domain. Speaker 200:10:56This strategic acquisition provides a strong cleared workforce, 90 percent intellectual property enabled offerings, 67% directed sole source work and an expanded customer set enabling immediate revenue synergies. After the Q3 ended, we entered into a definitive agreement to acquire BCC Engineering, one of the Southeast region's leading transportation engineering firms in an all cash transaction valued at $230,000,000 BCC is a full service engineering firm that provides planning, design and management services for transportation, civil and structural engineering projects in Florida, Georgia, Texas, South Carolina and Puerto Rico. This acquisition will strengthen our position as an infrastructure leader, while expanding our reach in the Southeastern United States, an area where the Infrastructure Investment and Jobs Act has provided approximately $100,000,000,000 in Federal Highway Administration formula funds for fiscal years 2022 through 2026. BCC was our top ranked acquisition target for geographical expansion into the Florida market and will enable us to become the number one consultant in South Florida. BCC will also double our presence and resources working with the Georgia Department of Transportation. Speaker 200:12:27These two acquisitions are consistent with our strategy of completing preemptive accretive acquisitions of companies we know well and have revenue growth and adjusted EBITDA margins of 10% or more. We continue to have an active M and A pipeline in both segments and we will use our strong balance sheet to complete accretive acquisitions that provide technology differentiation and drive both growth and margin expansion. In summary, our record performance so far this year demonstrates we are executing on our strategy to move up the value chain to drive exceptional revenue growth, margins and cash flow. For the 1st 9 months this year, we have achieved 25% organic revenue growth, expanded margins by 60 basis points and increased operating cash flow by 82 percent to $397,000,000 We continue to leverage our strong balance sheet and free cash flow to make internal investments and acquire strategic assets that differentiate our solutions through software and advanced technologies. We are capitalizing on the market tailwinds and unprecedented global infrastructure spend and the evolving geopolitical environment that is driving increased demand for our national security solutions. Speaker 200:13:52Given our strong operating performance and our outlook for the remainder of Speaker 300:13:56the year, we are raising all guidance metrics. Speaker 200:14:00With that, I'll turn the call over to Matt to provide more details on our Q3 financial results and our increased fiscal year 2024 guidance. Matt? Speaker 400:14:10Thank you, Carrie. As Carrie indicated, our momentum continued through the Q3 of 2024 and was highlighted by record Q3 results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow and contract awards. We're very pleased with our results, particularly against tougher comparable periods given the significant growth realized in the second half of twenty twenty three. Our revenue growth remains strong across the portfolio with double digit growth in both segments. Turning to our results. Speaker 400:14:403rd quarter revenue of $1,800,000,000 increased $392,000,000 or 28% from the prior year period and was up 26% on an organic basis. For perspective, the significant growth was achieved off our record Q3 in 2023 where we grew $284,000,000 or 25%. Organic growth for the Q3 was driven by the ramp up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber intelligence markets. SG and A expenses for the Q3 were 13.6 percent of total revenue compared to 15.6% in the prior year period as we continue to focus on efficient growth across the portfolio while investing in the future through technology, business development and hiring and retention initiatives. On a year to date basis, SG and A as a percentage of revenue was 13.8% compared to 16% in 2023. Speaker 400:15:37Adjusted EBITDA of $167,000,000 increased $39,000,000 or 31%, and adjusted EBITDA margin expanded 20 basis points to 9.2%. These year over year increases were driven primarily by higher volume on margin accretive contracts and a deliberate focus on indirect cost management. As with revenue, our adjusted EBITDA growth was compared to a very strong Q3 in 2023 where we experienced growth of 24% over the prior year period. On a year to date basis, adjusted EBITDA margin at the Parsons level increased 60 basis points to 9.1% compared to 8.5% in 2023. I'll turn now to our operating segments, starting first with Federal Solutions, where 3rd quarter revenue increased by $325,000,000 or 42% from the Q3 of 2023. Speaker 400:16:28This increase was driven by organic growth of 39% and the contribution from our Sealing Tech and Black Signal acquisitions. Organic growth was driven primarily by the ramp up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber and intelligence markets. Federal Solutions adjusted EBITDA increased by $55,000,000 or 84% from the Q3 of 2023. Adjusted EBITDA margin increased 260 basis points to 10.9% from 8.3% in the prior year period. These increases were driven primarily by increased volume on accretive contracts, contributions from high margin acquisitions and improved program execution. Speaker 400:17:12Moving now to our Critical Infrastructure segment. 3rd quarter revenue increased 10% from the prior year period on both an organic and inorganic basis. Growth was driven by higher volume in both our North America and Middle East infrastructure portfolios. Critical infrastructure adjusted EBITDA decreased by $16,000,000 or 25% from the Q3 of 2023. Adjusted EBITDA margin decreased to 6.7 percent from 9.8 percent in the prior year period. Speaker 400:17:41The adjusted EBITDA decreases were driven by a write down on the legacy program that is expected to reach substantial completion in Q4 of 2024. On a pro form a basis, our CI adjusted EBITDA margin would have been 9.7%, excluding this $23,500,000 write down. Next, I'll discuss cash flow and balance sheet metrics. During the Q3 of 2024, we generated $299,000,000 of operating cash flow compared to $204,000,000 in Q3 of 2023. On a trailing 12 month basis, we generated a record $587,000,000 of operating cash flow, a 91% increase over the prior 12 month period. Speaker 400:18:21These increases were primarily driven by strong collections across the portfolio and improved profitability. During the Q3, net DSO declined year over year by 14 days to 51 days, a record low. Capital expenditures totaled $12,000,000 in the Q3 of 2024, which is relatively consistent with prior year period. CapEx continues to be well controlled and remains in line with our planned spend of less than 1% of annual revenue, while continuing to invest in strategic areas like expanding classified facilities and space technology to support future growth. Free cash conversion was 2 47% for the 3rd quarter and 139% on a trailing 12 month basis with an intentional focus on contract execution, settlement of legacy claims and improved cash management collections. Speaker 400:19:11Our balance sheet remains strong as we ended the Q3 with a net debt leverage ratio Speaker 300:19:16of Speaker 400:19:161.2x to include the impact of the all cash acquisition of BlackSignal. On a pro form a basis, net leverage would be 1.6x after the recently announced $230,000,000 all cash acquisition of BCC. Our strong cash flow is enabling us to continue to make strategic internal investments and accretive acquisitions to support our long term growth objectives. Turning to bookings. On a trailing 12 month basis, contract awards increased 13% and our book to bill ratio was 1.0x. Speaker 400:19:48In our Critical Infrastructure segment, we achieved a book to bill ratio of 1.1 in the 3rd quarter, marking the 16th consecutive quarter with a book to bill ratio of 1.0 or greater. 3rd quarter contract award activity increased 24% year over year to $1,800,000,000 for a book to bill ratio of 1.0x. With $8,800,000,000 of backlog, 66 percent of which is currently funded and $13,000,000,000 of awards not reflected in book to bill or backlog, we continue to have confidence in our ability to deliver growth. Now let's turn to our guidance. We're increasing our 2024 guidance ranges as a result of our record Q3 performance, BlackSignal acquisition and our favorable outlook for the remainder of the year. Speaker 400:20:32For 2024, we are increasing our revenue range by $250,000,000 at the midpoint to $6,600,000,000 to $6,800,000,000 This represents total revenue growth of 23% at the midpoint and 22% on an organic basis. Additionally, we are increasing our adjusted EBITDA range by $30,000,000 at the midpoint of the range. We now expect adjusted EBITDA to be between $590,000,000 $620,000,000 which represents 30% growth at the midpoint of the range and continues to exceed revenue growth. At the midpoint of our increased revenue and adjusted EBITDA ranges, we're increasing our margin outlook by 10 basis points to 9.0 percent, which is a 50 basis point improvement to fiscal 2023 results. We're also increasing our cash flow guidance. Speaker 400:21:19We now expect operating cash flow to be between $425,000,000 $465,000,000 At the midpoint of the guidance range, we expect free cash flow conversion to be approximately 100 percent of adjusted net income. Other key assumptions in connection with our 2024 guidance are outlined on Slide 11 in today's PowerPoint presentation located on our Investor Relations website. In summary, we've had an exceptional 1st 9 months of the year with great top and bottom line and cash flow results. We're putting the balance sheet to use after announcing 2 strategic acquisitions over the last 2 months, which we believe will further enhance our technology offerings, geographical footprint and support long term growth. Our execution has been strong across all business units and major geographies, and we are confident in our ability to achieve our increased 2024 guidance ranges. Speaker 400:22:08With that, I'll turn the call back to Keri. Speaker 200:22:10Thank you, Matt. In closing, I'm very pleased with our company's performance through the 1st 9 months of the year. Our operating results continue to exceed our expectations as we once again delivered record results across all guidance metrics. Our 19,000 employees are consistently executing and taking advantage of the strong tailwinds that are positively impacting both of our business segments. I am thankful to be leading such a great team and I expect our momentum to continue given our portfolio is well aligned to important macro environment trends in 2 well funded segments in 6 growing and enduring markets. Operator00:22:58Thank you. And the first question will come from Sheila Kahyaoglu with Jefferies. Your line is now open. Speaker 500:23:25Good morning, guys, and great quarter as always. If I could ask 2 questions, maybe first on the top line, just given the performance has been so stellar. The $13,000,000,000 unbooked pipeline is relatively unchanged, but still a very good book to bill of 1 times, which seems nearly impossible with your growth rate. How do we think about, as we enter 2025, what your growth rate could potentially look like? Speaker 200:23:51Thank you, Sheila, and good morning. So the top line has remained relatively flat on the awarded not booked. And the reason for that is that we booked 4 of our repeats between July 2021 January of 2023. So it kind of reached a peak because they were all greater than $2,000,000,000 each. What I think is important to look at is a combination of the $13,000,000,000 awarded not booked plus the $8,800,000,000 in backlog, which is up significantly over 2022. Speaker 200:24:22I would also recommend that the 66% of funded backlog and that's the amount that we expect to convert within the next 12 to 18 months is very strong and probably close to an industry high. Looking forward from a top line perspective, we anticipate being at mid single digits or better as we've indicated. Speaker 500:24:45Great. And if I could ask one more, if you don't mind. On CI, the margins, ex the charge were closer to 9% once again. This fluctuated quite a bit, Matt, over the past few quarters. What's the right way to think about the run rate margin once legacy programs are run off? Speaker 400:25:04Yes. Thanks, Sheila. I'd say we talk a lot about CI with the underlying business kind of performing in the 9% to 10% range. Long term goal, of course, is double digits. We have a path to get there, but it's kind of a slow trudge as we get through these programs, to your point. Speaker 400:25:20We were expecting kind of wrap up that program. We had a couple of week delay, which is not unexpected as you kind of get to the end of these programs. But the $23,000,000 charge within the quarter was a little bit of the schedule slip. And then as we get to close out and kind of negotiations with customer on close out, that was the biggest driver behind the charge. But generally speaking, we think that underlying margin for the backlog that we've recently booked and the work that we're really performing on is kind of north of 9%. Speaker 400:25:49So it's kind of just that a slope at which we can get there. I've kind of said 20 to 30 basis points per year of margin expansion. If you think about the federal business being kind of stable, you'd think 40 to 60 basis points from CI per year. So that's the way we're kind of looking at it, Sheila. Speaker 200:26:06I would also add, we're really excited to get rid of these legacy programs. These were jobs that were bid back in the 2010 to 2015 timeframe. As we entered the year, we only had 2 of these remaining. We wrapped one up in the Q1 and this last one, as Matt indicated, is just a couple of weeks away. We're 98% complete right now. Speaker 200:26:27So it's really exciting to have those in the rearview mirror because improved performance execution on the critical infrastructure side is going to be the biggest driver of margin expansion. Thank you. Thanks, Sheila. Thank you. Operator00:26:41And our next question comes from Andrew Wittmann with Baird. Your line is now open. Speaker 300:26:49Great. Good morning and thank you for taking my questions, Matt. I guess I wanted to just understand the quarter a little bit better here because I was reading some stuff in the queue that it seems like it relates to the CI equity and income charge. You've said on your comments here $23,500,000 write down. In the Q, it says $6,700,000 write down. Speaker 300:27:15And so I was hoping you just could bridge the gap. Maybe there were some positive write ups or closeouts that were offsets. Maybe can you just help explain some of the moving pieces so that we can understand that segment's performance a little bit better? Speaker 400:27:29Yes, sure. Good question, Andy. So we'll talk about equity and earnings first. So to your point, we did take a smaller obviously, the $23,500,000 was the outsized impact for the quarter. So that's why we kind of gave the pro form a off that. Speaker 400:27:41But additionally, the program that we had of supply chain risk last year, we've kind of been fighting our way through completing design and kind of a little bit of a schedule extension, some approvals around the Parsons design there has kind of extended out. So we did take a $6,000,000 charge within equity and earnings to your point. The $23,500,000 would roll through the CI operating results. It wouldn't be an equity and earnings. It would be in the normal op profit. Speaker 400:28:04So kind of combined to your point, maybe there you think about it as $30,000,000 worth of total impacts. There were some favorable adjustments as well to a smaller extent. But all in all, if I did a kind of a pro form a on both of those, excluding the 23.5, we'd go from 6.7 to 97. And then if we also excluded the 6.5, we'd probably be in the 10.5 range. But again, I think I would say some of the smaller ones, there's there'll be fluctuations in any given quarter. Speaker 300:28:34Got it. Yes. And again, including some of those positives, maybe some of those positives eat into that 6, and then we play this mental accounting game of what's in and what's out. But I appreciate the color on that one. And then just Kerry, it's just it's coming up a lot in investor conversations. Speaker 300:28:50You addressed it in your prepared remarks, but I think it's probably worth some airtime on the Middle East. Some of your competitors have slowed some of the scope there and have talked about being slow walked on some of the projects. Maybe you could just I mean, you talked about the growth there, you talked about the book to bill being in the Middle East being better than your segment average. But maybe if you could just talk about what you're seeing there and the confidence that you have and the work that you're on today continuing at full steam ahead, as well as the prospect of future wins there as you head through 2020 to backfill the good work that you're doing today. Speaker 200:29:27Sure. Thank you, Andy. I actually just returned from there, so it's perfect question for this time and Matt leaves to go there next week. So it was terrific to be on the ground and see firsthand the tremendous progress that we're making both in Saudi Arabia programs as well as in the UAE. Overall, the region is performing as expected. Speaker 200:29:47There's always going to be fluctuations from 1 quarter to another. But if you look at year to date, our Saudi business has grown 17%, and this is following a year in which the Middle East revenue grew last year 33%. We expect to have for the full year double digit growth within the Middle East as well as year to date. So they're meeting and exceeding all their key performance indicators as expected. We continue to win our fair share of work. Speaker 200:30:17We highlighted in the second quarter, we won over $160,000,000 in Saudi wins and we won more than $200,000,000 in the Q3. So our book to bill was 1.2 for the Middle East and 1.3 for Saudi. And again, this is part of the credit infrastructure group continuing to have 16 consecutive quarters of 1.0 book to bill or better. I'll also highlight that the funding is still on the uptick. So when you look at the ramp up, we don't even expect the funding in the Middle East to peak until about the 2030 to 2,032 timeframe. Speaker 200:30:53We're at an all time high this quarter for both the pipeline and for headcount. Saudi is going to be on the world stage many times coming up over the next decade. They're hosting major events like the Asian Winter Games in 2029. They've got the World Expo in 2,030 and they have the FIFA World Cup in 2,034. So a lot of these projects need to be done in time for those critical events. Speaker 200:31:17And infrastructure is going continue to get prioritized and receive significant funding in Saudi Arabia. I'd also highlight we're on pretty much all the premier programs over there, which is very exciting. I had the opportunity to visit Qadea once again, the world's largest entertainment city. We're working on Neon, Matt's going to be visiting that next week. We just were awarded a repeat for the King Salmon Parf. Speaker 200:31:41We're involved in King Abdullah Financial District. We're involved in Daria Gates. We're involved in Al Sadah. So almost every major contract over there Parsons is program manager and these projects continue to come. So we've got a really bright future. Speaker 200:31:56I would mention in addition to Saudi Arabia though, we've also seen growth in the UAE and Qatar. And that's basically on the back of other infrastructure investments. If you'll recall, there was this big storm event, which was very unfortunate this year. So Parsons is involved in a lot of stormwater drainage improvement programs in Dubai, Abu Dhabi and Qatar. And then we've seen a resurgence in the UAE property market that remains very robust and a lot of associated development since there's a lot of people that are moving into the country. Speaker 200:32:29And this doesn't even include an area that we're starting to look at, which is opportunities for the federal business defense in Saudi and in the UAE, because we do have such a great reputation. So bottom line, they're performing as commented on your various win rates. But Operator00:32:45maybe Speaker 300:32:57you could inform us what your win rate was in the quarter? You have it by segment, that's interesting as well, but just overall it'd be good to understand the character there. Speaker 200:33:08Yes, the win rate for the quarter is 70 4%, the win rate year to date is 75%. Speaker 300:33:15Thank you very much. Have a good day. Speaker 200:33:17Thank you. Operator00:33:20And our next question comes from Cai von Rumohr with T. B. Cowen. Your line is now open. Speaker 600:33:28Yes. Thanks so much and terrific quarter again. Your engineering portion of Federal Solutions grew 70% And you mentioned critical infrastructure protection. I mean, is that that one very large contract that you have with a confidential customer? Speaker 200:33:51Yes. So we're seeing growth on that contract, but we're also seeing growth in other areas. I would highlight industrial base modernization as an example, where we're doing a lot of the army ammunition plant work. We're also seeing some growth in the biometrics efforts that we have in place. And then we had the wins in the Endo PACOM region, particularly excited about the QuadruLoan win. Speaker 200:34:12We had been performing QuadruLoan airfield. We won the 1st QuadruLoan housing contract. Now we just won the 2nd QuadruLoan housing contract. And we won some additional work in trying to clean up the island of Guam so that the Missile Defense Agency come in and put equipment in for defensive Guam. So excited about our whole Engineered Systems business. Speaker 600:34:35So you've been doing great, but I think you mentioned at one point that the time the duration of engineering contracts can be a little bit shorter than normal Fed solution contracts. So is there any worry that particularly this one, critical infrastructure protection contract is very big, but it could sunset relatively quickly at some point or should it just continue on the relatively stable rate? Speaker 200:35:05Yes. I would say that's a great question. So where we're at on that contract, right now the first option period extends through February 2025. We do have a second option period that if it's exercised would run through February 2026. The customer did recently advise that even though we have very strong performance that they're considering whether or not they're going to exercise the second option period to extend it or otherwise repeat the contract. Speaker 200:35:34If they do re compete the contract, we intend to submit a proposal for the continued performance of the work. And I will note that we have an average of 95% re compete win rates, including 98% year to date re compete win rates. At present time though, there's no announced acquisition strategy and there's no draft or final RFP. So what this means, we had indicated that we expected our 2025 re compete percent to be around 10%, which is what we have in any given year. So I would say right now, we anticipate our recompete for 2025 to be somewhere in the range of 5% to 15%. Speaker 200:36:13And it's dependent on that contract plus one other contract that we continue to receive extensions. I mean, what I'm excited about as we look into next year, hopefully, we will be around the 10%, but the high end 15%. We've got a very strong recompete win rate. We continue to win extensive work off a higher base, 1.1 times book to bill year to date, continue to acquire more companies to this year, potentially 3. And we've had 6 quarters of greater than 20% organic growth. Speaker 200:36:45And our awards activity, as Matt highlighted, during his script, has increased 24% over the prior year period and 13% on a trailing 12 month off a higher base. So we have a lot of momentum in the business. Speaker 600:37:00Terrific. Great answer. Thanks so much. Speaker 200:37:03Thanks. Thanks, Scott. Operator00:37:06And our next question comes from Tobey Sommer with Truist. Your line is now open. Speaker 700:37:14Thanks. When we think about the guidance raise, could you break down the contribution from organic performance in acquisitions? And at this point, with the acquisitions already in hand, what is the acquired revenue that will fold into the P and L in 2025? Speaker 400:37:39Yes. So, Tobey, let me give you a kind of a so final 3 months of the quarter, total revenue growth at the midpoint is just under 13%, of which about 12% is organic, so relatively minor contribution within the Q4. When we look at next year, we expect FlatSignal will contribute just over $100,000,000 And then BCC, which is not in any guidance yet, would be an additional over $100,000,000 So you can probably think about $200,000,000 worth of inorganic, maybe a little bit lighter than that because we have BlackSignal for a few months this quarter this year. So I'd say somewhere, call it, the high 100s to low 200, but we can give more details in the later. So about $80,000,000 is from our Black $80,000,000 to $90,000,000 is BlackSignal and then BCC would be another $100,000,000 plus. Speaker 700:38:36Okay. Thank you. And then could you talk about what the outlook is for revenue synergies associated with BCC and Black Signal? Historically, you've acquired firms that are with whom you have a relationship, you've either worked or bid on things together or competing and sometimes had line of sight into near term opportunities? Speaker 200:39:03Yes. So I'll start with BlackSignals. I mentioned, they provide digital signal processing, electronic warfare and cybersecurity. When you look at their capabilities, they fit in very nicely with Parsons capabilities. We're both doing digital signal work, but we look at different parts of the electromagnetic spectrum and also for different customers. Speaker 200:39:22On the cybersecurity side, we're both involved in offensive. The legacy Persons was more historically on the Department of Defense side. BlackSignal is more on the intelligence community side. And then when you look at space, we see a lot of synergies to develop a space training range. BlackSignal is the hack asset market leader. Speaker 200:39:43They use on orbit digital twin technologies and they basically create a cyber war gaming platform for space systems. This complementary with a Parsons capability, a system that we have called T Rex, which is an emulator system. So we're combining those capabilities. As you noted, we do buy companies that we've worked with quite a bit. We've known BlackSignal for a long time and also they're legacy companies and it really fit in nice with us. Speaker 200:40:11We've already been able to capitalize on synergies, particularly on the GSA growth that I mentioned. BCC is very exciting. They will be adding about 450 employees to our business. We both have presence in Florida. We both have presence in Georgia as well as Texas, South Carolina. Speaker 200:40:30I would say they are much stronger in Florida and we're going to be consolidating the legacy Parsons Florida activities under them. Their headquarters is in Miami. They're involved in 4 areas. They do design services, they do construction engineering and inspection, design build and general engineering capabilities. Also, I mentioned during the script, but they doubled the amount of resources that we have work in the Georgia Department of Transportation. Speaker 200:40:57We're really excited about that, particularly with our recent win on the State Route 400 job, because there's a lot of big opportunities coming up within Georgia. I will note on BCC, they also have 50% fixed price, 50% time and material. So we anticipate that that's going to help us on the margin side as well in CI. Speaker 800:41:19Thank you very much. Speaker 200:41:21Thank you. Thanks, Tobey. Operator00:41:23And the next question comes from Alex Dwyer with KeyBanc Capital Markets. Your line is open. Speaker 900:41:32Hi, Carrie, Matt and Dave, good morning. Speaker 200:41:35Good morning, Alex. Speaker 900:41:36Good morning. So I think Parsons has now won 5 of the largest North American transportation projects in the history of the company over the past year or so. Can you talk about the pipeline of seeing more of these large transportation projects? Are you still seeing many more of these out there that could be awarded in the next year or so? And kind of what your capacity is to take more of these on? Speaker 200:42:05Yes. Thanks, Alex, for that question. We have won 5 of the largest. We had mentioned the Gateway project. That's the largest rail and transit project for the Hudson River Tunnel. Speaker 200:42:15It's the largest infrastructure project occurring in the United States, and we're really proud to be the program manager there. We were awarded the JFK Roads and Highways, those of you living in New York City will be happy that we're improving the area around the airport. And we were awarded the New York Bay Bridge, over $140,000,000 project for us. We are a world leader in bridge design, having designed over 4,500 bridges and particularly a leader in long span bridges. And then the 2 awards that we just highlighted this quarter with Hawaii HEART rail and transit system, which the next phase of that extension, as well as State Route 400 job. Speaker 200:42:55What we're particularly excited about is we've had 16 consecutive quarters of greater than 1 old book to bill and the IIJA is still on the ramp up. Recent data shows, there was out of the total $1,200,000,000,000 of funding, dollars 550,000,000,000 of that was new. And we're nearly 3 years into the 5 year law, actually May of this year was the halfway point. 40% of the IIJA funds have been announced and that covers 60,000 projects. So this leaves $720,000,000,000 yet to be allocated. Speaker 200:43:28And I would note that they're announced, that means they're captured from agency press releases, but that doesn't mean they're yet awarded, which is actual obligation. So we're still very much on the up ramp here. I would also indicate that state and local are contributing quite a bit of funding as well. Once they saw the certainty of the IIJA passage in November of 20 21, they started to contribute. As far as capacity, we're doing a terrific job hiring, terrific job retaining. Speaker 200:43:56We have our lowest retention rates that we've ever had within the North America Critical Infrastructure Business. So we're going to continue to pursue and win these large jobs throughout the United States, particularly focused on our Tier 1 states. Speaker 400:44:09And Alex, just to add some numbers to what Carey mentioned, I'm looking at kind of Q1 2023 about $17,000,000,000 worth of pipeline within infrastructure. Right now, we're almost at $21,000,000,000 So you're up about 23.5% over the 18 months. So really strong evidence of continued growth there. Speaker 900:44:30Got it. Okay. And then I guess just I wanted to ask about just the general hiring needs across the entire company as we think about the next 12 months. I guess like over this past year, has there been areas of the business where it's been more challenging to hire or less challenging to hire? And then just talk about where the business development teams are most focused on hiring for the next year plan? Speaker 200:44:56Yes. So I would say we've done a great job on both hiring and retention. The easiest area to hire will be the critical infrastructure business, Middle East. We actually hire from about 50 countries around the world today. And also critical infrastructure North America would be pretty easy. Speaker 200:45:12When you get to the federal side, part of the engineered systems, particularly the group that is not cleared is not very difficult to hire. So the highest bar is always going to be that cleared area of our portfolio. But again, I'm happy with what we've done there. From a retention perspective, we measure ourselves against PwC industry benchmarks. We are lower than the benchmarks, so we're doing better than industry average in both the federal and the credit core infrastructure segments. Speaker 200:45:39From a business development perspective, we're going to be focused, I'm going to say, in the same areas that we have been. Our 6 core end markets, all of which are growing between 5% to 12% compound annual growth rate and continuing to hire their both BD talent as well as performance execution talent to get ahead of winning these large jobs. Speaker 900:46:03Thank you. Speaker 200:46:04Thank you, Alex. Operator00:46:07And the next question comes from Josh Sullivan with The Benchmark Company. Your line is open. Speaker 1000:46:15Hey, good morning. Speaker 200:46:16Good morning. Good morning, Josh. Speaker 1000:46:18Hey, Carey, to your credit, you've been very deliberate in your willingness to invest in any geographic region, especially when growth wasn't obvious. But in your opening comments, you call it geographic expansion. Speaker 900:46:30So just curious what the Speaker 1000:46:31current philosophy on that global expansion is? Should we expect you're just looking in the same regions, which have been delivering? Or are there any new opportunities opening up that I'm thinking of Europe there? Speaker 200:46:43Yes. So I would say we have been very deliberate. We're fortunate that we're in the right places right now. If you look at the North America growth with the infrastructure bill, not peaking until the 'twenty seven timeframe. If you look at the Middle East, not peaking until the 2030, 2,032 timeframe. Speaker 200:47:00I would say, there is if I talk about any expansion within federal, we highlighted Endo Paypal. That's been a very big focus for us because we have a purpose built federal solutions company that we've put together to basically outpace near pair of threats. So the type of work that we're doing, whether it's on the Defense and Intelligence side, signals intelligence, electronic warfare, information operations, cybersecurity or it's on the engineered system side with environmental remediation and infrastructure builds, Indo Paycom is going to be a significant area of focus and expansion. And as I mentioned a little bit earlier, we're also going to start to look at opportunities in the Middle East because we have such a strong branding and such high win rates, we feel that we can take our federal portfolio there as well. Within critical infrastructure, we're going to stay laser focused on North America as well as the Middle East. Speaker 200:47:56We have a small presence in Europe. We do some rail and transit work in Marseilles and Paris, France. So we might see and also in the Netherlands. So we might see a little expansion off of that. But when you're in a position where your growth is so strong, we just really need to continue to focus and deliver. Speaker 900:48:14Great. And then kind of a Speaker 1000:48:16similar question on software capabilities that you mentioned. How are you approaching this? Obviously, it can be a difficult expansion, but also a very fruitful one. But we're seeing other partnerships announced like with Palantir and L3. Or should we think of your approach being more organic? Speaker 200:48:35Yes. So I would say we partner on a selective basis and to win certain pursuits. We have such a strong software base. It's really our key differentiator. And when we talk about kind of purpose building the Federal Solutions portfolio, it's all been about software. Speaker 200:48:52I think hardware is going to become more commoditized and it's really key areas like digital signal processing where we're one of the industry leaders. Artificial intelligence, again, where we've had a strong presence for the last couple of decades and we applied almost every program that we do. Software is going to be the nugget. In addition to federal, I highlighted a couple of areas within critical infrastructure, mostly our intelligent infrastructure transportation business and our advanced traffic management system work, our intelligent intersection as a service work, those are also heavily software driven. We use an agile approach. Speaker 200:49:27We have a DevSecOps secure capability, and we're going to continue to lean in on software. Speaker 1000:49:35Great. Thank you for the time. Speaker 200:49:37Thank you. Operator00:49:40And our next question comes from Louie DiPalma with William Blair. Your line is now open. Speaker 1100:49:49Carrie, Matt and Dave, good morning and congrats on the results. Speaker 200:49:55Thank you very much, Louis. Speaker 1100:49:58Carrie and Matt, investors often ask about the difference between your recent string of 20% plus organic growth and the long term guidance for mid single digit growth. And we were wondering, is there anything specific that would prevent this year's momentum and last year's momentum from continuing next year? Speaker 200:50:26Well, I did mention the one confidential contract we're awaiting to see if the customer is going to exercise the option here or if they're going to compete it. I think the key thing is for us making sure that we beat and raise and set guidance that's realistic. We anticipate as we go into next year, we'll probably have our usual runoff of programs in the amount of about $80,000,000 to $100,000,000 which is typical for us. Recompetes, as I mentioned, about 5% to 15%, but I would say continue doing what we're doing. We've got to get the high win rates as we've been able to deliver win and move up the value chain, bid and win larger jobs and continue to execute. Speaker 1100:51:11Great, Carrie. And at the AUSA conference, you showcased your digital twins software. And we were wondering, is this software being utilized for several of these recent large transportation infrastructure IIJA contracts such as the Newport Bay Bridge, JFK Airport, Hudson River Tunnel, Englewood project. And are you able to use this digital twin software for both federal solutions and infrastructure? Speaker 200:51:51Yes. So we are able to use digital twin capabilities for both federal and infrastructure and we share those capabilities across the portfolio. I would say our biggest application is with the Missile Defense Agency that we've been applying it. We have a framework that we've build out called Parsons Digital Engineering Framework and we've been applying it there for quite a while. We also now have digital twin capability on orbit with the Black Signal acquisition. Speaker 200:52:18On the infrastructure side of the house, we've been applying digital twins mostly to our airport projects. Speaker 1100:52:26Great. And following up on these transportation infrastructure projects, how should we think of the revenue trajectory and duration as it seems that these are fairly long term contracts? And also related, is the scope of work for these contracts significantly different from your legacy contracts that have featured write downs? And are there any risk for write downs for these types of IIJA contracts? Speaker 200:53:04Yes, let me take the second part first. We have de risked our portfolio starting when I took over as Chief Operating Officer in November 2018. And we've gone back to what I'm going to call our core roots. The core roots of the company is that we're a designer. We do program management and we do owner's engineer where we help the owner deliver the technical design. Speaker 200:53:25So we have stopped bidding those legacy programs back in the 2015 timeframe. That's why we're really happy this year to be wrapping up the last one of those. So the projects that we've won, the one in Hawaii, the rail and transit system and the State Route 400, we are the lead design subcontractor on both of those. Again, it's what Parsons has done for 80 years since the company was created. So no, we don't anticipate write downs like we've had on some of these legacy construction programs. Speaker 200:53:55When you look at our scope, because we are the designer, the majority of our work does get done early in the project. So if a project is 5 to 8 years, we'll be done in the very early parts of that project. Good example is JFK. We're nearly done with the design on that project that we won about 16 months ago. Speaker 1100:54:15Great. Thanks, everyone. Speaker 200:54:17Thanks, Louie. Thanks, Louie. Operator00:54:20And our next question comes from Noah Poponak with Goldman Sachs. Your line is open. Speaker 800:54:28Hey, good morning, everyone. Speaker 200:54:30Good morning, Noah. Speaker 800:54:33Carrie, it sounds like you're saying there are 2 contracts mainly that are creating that range that you're referencing of 5% to 15% for recompete next year. And you were talking about the one large confidential in the engineering business. Are you able to say what the second one is? Speaker 200:54:55The second one is a contract that we continue to receive extensions. Right now, we're extended through February. Those extensions may or may not continue indefinitely. We're waiting on some actions from the customer. Speaker 800:55:11Okay. Okay. And, Matt, what's in the 4th quarter margin by segment approximately just to get to the full year EBITDA range? Speaker 400:55:27Yes. So right now, no, we have federal, just call it kind of high-9s, low-10s and then CI in the low-7s. So think of that as kind of constant quarter over quarter and a federal kind of a little bit lower than where they've been. Speaker 800:55:43Okay. And maybe you could update us on what you're now expecting as the end timing of the remaining legacy work in CI? And maybe also just talk about how you would expect that to progress sequentially from here? Speaker 200:56:02Yes. So we really have just the one project, and we're expecting to meet with the customer within the next few weeks achieve substantial completion. Speaker 800:56:16Okay. So, Carrie, that had previously been expected inside of the Q3 and now it's expected in the Q4? Speaker 200:56:26That's correct. There were some additional systems that were added that we had to process. Speaker 800:56:34And I guess once that's complete, does the CI margin just kind of flip what it's been adjusted for charges? Or is there for some other reason some more gradual ramp to it? Speaker 400:56:50Yes. I'd say no. Our goal is, of course, to kind of get to the adjusted number, but Carrie and I are kind of cautious. Substantial completion has some kind of trail to it where we're negotiating with customers and kind of completing the job. So I would say kind of that 40 to 60 basis points per year should get us there within a couple of years. Speaker 400:57:09But generally speaking, the substantive write downs that we've had will be behind us with substantial completion. Speaker 200:57:16We've indicated 20 or 30 basis points at the Parsons level for our long term guidance. And as Matt mentioned, we're expecting that to come from the CI segment. Speaker 800:57:28Okay. Okay, great. Thank you so much. Thanks, Danielle. Speaker 200:57:32Thanks, Danielle. Operator00:57:34This is all the time that we do have for questions. I would like to turn the call back over to Dave Spiele for closing remarks. Speaker 100:57:42Thank you for joining us this morning. If you have any questions, please don't hesitate to give me a call. And we look forward to speaking with many of you over the coming weeks. And with that, we'll end today's call. Have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallParsons Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Parsons Earnings HeadlinesParsons Co. (NYSE:PSN) Receives $93.60 Consensus Price Target from AnalystsApril 24 at 1:45 AM | americanbankingnews.comCowboys' Micah Parsons Sounds Off On 'Worth' In Contract UpdateApril 24 at 12:48 AM | msn.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.April 24, 2025 | Stansberry Research (Ad)Cowboys' Micah Parsons Reveals Contract Holdout Plan for Training CampApril 24 at 12:48 AM | msn.comFor Micah Parsons, yesterday’s price is not today’s price. Neither is tomorrow’sApril 24 at 12:48 AM | msn.comMicah Parsons explains why he showed up to Cowboys' voluntary workouts despite no contract extensionApril 24 at 12:48 AM | msn.comSee More Parsons Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Parsons? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Parsons and other key companies, straight to your email. Email Address About ParsonsParsons (NYSE:PSN) provides integrated solutions and services in the defense, intelligence, and critical infrastructure markets in North America, the Middle East, and internationally. The company operates through Federal Solutions and Critical Infrastructure segments. The Federal Solutions segment provides critical technologies, such as cybersecurity; missile defense; intelligence; space launch and ground systems; space and weapon system resiliency; geospatial intelligence; signals intelligence; environmental remediation; border security, critical infrastructure protection; counter unmanned air systems; biometrics and bio surveillance solutions to U.S. Department of Defense, including military services; Missile Defense Agency, the Department of Energy; the Department of State; the Department of Homeland Security, and the Federal Aviation Administration. The Critical Infrastructure segment provides management, design, and engineering services, as well as offers leveraging sensor solutions. This segment develops digital solutions for next generation aviation, rail and transit, bridges, roads, and highways; and provides water and wastewater treatment systems; AI/ML, and digital twin and cyber systems integration services; planning, engineering, and management services for infrastructure, including bridges and tunnels, roads and highways, water and wastewater, and dams and reservoirs. Parsons Corporation was founded in 1944 and is headquartered in Chantilly, Virginia.View Parsons ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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There are 12 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2024 Parsons Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Call. Operator00:00:31Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Dave Spiele, Senior Vice President, Investor Relations. Sir, please go ahead. Speaker 100:00:47Thanks, Michelle. Good morning, and thank you for joining us today to discuss our Q3 2024 financial results. Please note that we provide the presentation slides on the Investor Relations section of our website. On the call with me today are Cary Smith, Chair, President and CEO and Matt Apollos, CFO. Today, Cary will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our Q3 financial results as well as a review of our increased 2024 guidance. Speaker 100:01:17We 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 ks for fiscal year ended December 31, 2023, and other SEC filings, including the quarterly report filed with the Securities and Exchange Commission on October 30, 2024 on Form 10 Q for the quarter ended September 30, 2024. Speaker 100:02:03Please 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 reference non GAAP financial measures during this call. We remind you that these non GAAP financial measures are not a substitute for the comparable GAAP measures. And now, I'll turn the call over to Keri. Speaker 200:02:25Thank you, Dave. Good morning, and welcome to Parsons' Q3 2024 earnings call. We are very pleased with our Q3 and year to date performance as we delivered record Q3 results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow and contract awards. We also achieved strong growth across the portfolio, delivering over 20% organic growth for the 6th consecutive quarter, while efficiently managing the business as bottom line growth continues to outpace our robust top line growth. In addition, we continue to leverage our strong balance sheet to invest in software and integrated solutions as well as execute accretive acquisitions that either provide distinguished defense capabilities to counter near peer threats or strengthen our engineering expertise and increase our geographical footprint in high growth infrastructure markets. Speaker 200:03:27As a result of our strong operating performance in our Black Signal acquisition, we are raising our full year revenue, adjusted EBITDA and cash flow guidance ranges. Our record results reflect the hard work and dedication of the entire Parsons team to deliver on our customers' national security and infrastructure missions with the urgency and operational relevance required in today's fast paced and dynamic environment. For the Q3, we generated $1,800,000,000 in revenue for the first time in our company's history and delivered organic revenue growth of 26%. During the Q3, we also delivered double digit total revenue growth in both business segments, illustrating the strength of our portfolio. This is now the 11th consecutive quarterly record for revenue and 12th consecutive record quarterly for adjusted EBITDA. Speaker 200:04:29I will also note that for the Q3 and for the 1st 9 months of 2024, total adjusted EBITDA growth exceeded revenue growth. In the Q3, total revenue increased 28%, while adjusted EBITDA grew by 31%. And for the 1st 9 months of 2024, total revenue grew 27% and adjusted EBITDA increased 36%. By driving EBITDA growth faster than our robust revenue growth, our margins expanded 20 basis points in the 3rd quarter and 60 basis points for the 1st 9 months of the year. In addition, we had an exceptional quarter for operating cash flow and increased our trailing 12 month cash flow by more than 90% from the prior year period. Speaker 200:05:18Our strong free cash flow and balance sheet support our ability to continue to make internal investments and accretive acquisitions to strengthen our capabilities and drive long term growth and margin expansion. These investments are enabling us to win larger and more profitable contracts as well as new business across both segments in all six end markets. During the Q3, we won 4 single award contracts over $100,000,000 each and reported a book to bill ratio of 1.0 times, which represents a 24% increase in contact award activity over the prior year period. In addition, the Critical Infrastructure segment achieved a book to bill ratio of 1.0 or greater for the 16th consecutive quarter. In Critical Infrastructure, during Q3, we were awarded strategic transportation and Middle East projects. Speaker 200:06:17In North America, we received a new award for the Georgia State Route 400 Express Lanes, where Parsons will serve as the lead designer. This $4,600,000,000 project will add new Express Lanes and use state of the art traffic, incident management and digital twin systems. Under the Infrastructure Investment and Jobs Act, Georgia is expected to receive at least $11,000,000,000 for roads and highways, bridges, public transportation, airports and resilient infrastructure. We were awarded a new lead design contract for the Honolulu Authority for Rapid Transportation. On this $1,660,000,000 project, we are the lead designer for the city center guideway and stations. Speaker 200:07:05The scope of work includes the design of 6 rail stations and approximately 3 miles of elevated rail guideway and engineering services during construction. Over the past 16 months, we've won 5 of the largest North America transportation design projects in our company's history. The two wins this quarter, along with the recent Hudson River Tunnel project, JFK International Airport Roadways and Newark Bay Bridge wins demonstrate the success we are having in the transportation market. These awards also show that federal, state and local funding continues to flow at a healthy pace. Our momentum in the Middle East continues as we achieved a book to bill ratio of 1.2 times in the 3rd quarter, and we currently have the largest qualified pipeline in our company's history in both the Middle East and Saudi Arabia. Speaker 200:08:03In Saudi Arabia, we were awarded contracts valued at more than $200,000,000 including 2 large program management awards. In addition, 3rd quarter headcount in both the Middle East and Saudi reached an all time high and continues to grow. We are very excited about the future growth opportunities in the region and continue to invest to capitalize on this unique opportunity. In our Federal Solutions segment, we received option awards totaling $287,000,000 with a confidential customer during the Q3. We also booked an option period totaling $245,000,000 on our General Services Administration contract. Speaker 200:08:48This contract supports the Department of Defense and its strategic partners in delivering global quick reaction capabilities, leveraging advanced technology solutions across the all domain battlespace. We were awarded $134,000,000 of contracts in the Indo Paypal region. We won a 3 year $69,000,000 contract on Kwajale in the Marshall Islands to provide Army Family Housing. We also were awarded $37,000,000 in signals intelligence and cyber operations work. In addition, we received 2 contracts worth $28,000,000 to perform advanced geophysical classification and unexploded ordnance work on Guam and upgrade utility monitoring and control systems. Speaker 200:09:36Parsons' presence in Guam, Kwajalein and Hawaii continues to strengthen and is aligned to the fiscal year 2025 Pacific Deterrence Initiative of $9,900,000,000 for targeted investment to enhance force posture, infrastructure, presence and readiness of the United States and its allies in the Indo Pacific region. Finally, we booked an auction period totaling $54,000,000 on the Combatant Command's Cyber Mission Support contract. This contract includes support of multi domain operations across cyber, space, air, ground and maritime. During the Q3, we announced and closed our Black Signal Technologies acquisition in an accretive deal valued at $204,000,000 This company is a next generation digital signal processing, electronic warfare and cybersecurity provider built to counter near peer threats. BlackSignal expands Persson's customer base across the Department of Defense and Intelligence community and significantly strengthens Persson's positioning within offensive cyber operations and electronic warfare, while adding new capabilities in the counter space radio frequency domain. Speaker 200:10:56This strategic acquisition provides a strong cleared workforce, 90 percent intellectual property enabled offerings, 67% directed sole source work and an expanded customer set enabling immediate revenue synergies. After the Q3 ended, we entered into a definitive agreement to acquire BCC Engineering, one of the Southeast region's leading transportation engineering firms in an all cash transaction valued at $230,000,000 BCC is a full service engineering firm that provides planning, design and management services for transportation, civil and structural engineering projects in Florida, Georgia, Texas, South Carolina and Puerto Rico. This acquisition will strengthen our position as an infrastructure leader, while expanding our reach in the Southeastern United States, an area where the Infrastructure Investment and Jobs Act has provided approximately $100,000,000,000 in Federal Highway Administration formula funds for fiscal years 2022 through 2026. BCC was our top ranked acquisition target for geographical expansion into the Florida market and will enable us to become the number one consultant in South Florida. BCC will also double our presence and resources working with the Georgia Department of Transportation. Speaker 200:12:27These two acquisitions are consistent with our strategy of completing preemptive accretive acquisitions of companies we know well and have revenue growth and adjusted EBITDA margins of 10% or more. We continue to have an active M and A pipeline in both segments and we will use our strong balance sheet to complete accretive acquisitions that provide technology differentiation and drive both growth and margin expansion. In summary, our record performance so far this year demonstrates we are executing on our strategy to move up the value chain to drive exceptional revenue growth, margins and cash flow. For the 1st 9 months this year, we have achieved 25% organic revenue growth, expanded margins by 60 basis points and increased operating cash flow by 82 percent to $397,000,000 We continue to leverage our strong balance sheet and free cash flow to make internal investments and acquire strategic assets that differentiate our solutions through software and advanced technologies. We are capitalizing on the market tailwinds and unprecedented global infrastructure spend and the evolving geopolitical environment that is driving increased demand for our national security solutions. Speaker 200:13:52Given our strong operating performance and our outlook for the remainder of Speaker 300:13:56the year, we are raising all guidance metrics. Speaker 200:14:00With that, I'll turn the call over to Matt to provide more details on our Q3 financial results and our increased fiscal year 2024 guidance. Matt? Speaker 400:14:10Thank you, Carrie. As Carrie indicated, our momentum continued through the Q3 of 2024 and was highlighted by record Q3 results for total revenue, organic revenue growth, net income, adjusted EBITDA, operating cash flow and contract awards. We're very pleased with our results, particularly against tougher comparable periods given the significant growth realized in the second half of twenty twenty three. Our revenue growth remains strong across the portfolio with double digit growth in both segments. Turning to our results. Speaker 400:14:403rd quarter revenue of $1,800,000,000 increased $392,000,000 or 28% from the prior year period and was up 26% on an organic basis. For perspective, the significant growth was achieved off our record Q3 in 2023 where we grew $284,000,000 or 25%. Organic growth for the Q3 was driven by the ramp up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber intelligence markets. SG and A expenses for the Q3 were 13.6 percent of total revenue compared to 15.6% in the prior year period as we continue to focus on efficient growth across the portfolio while investing in the future through technology, business development and hiring and retention initiatives. On a year to date basis, SG and A as a percentage of revenue was 13.8% compared to 16% in 2023. Speaker 400:15:37Adjusted EBITDA of $167,000,000 increased $39,000,000 or 31%, and adjusted EBITDA margin expanded 20 basis points to 9.2%. These year over year increases were driven primarily by higher volume on margin accretive contracts and a deliberate focus on indirect cost management. As with revenue, our adjusted EBITDA growth was compared to a very strong Q3 in 2023 where we experienced growth of 24% over the prior year period. On a year to date basis, adjusted EBITDA margin at the Parsons level increased 60 basis points to 9.1% compared to 8.5% in 2023. I'll turn now to our operating segments, starting first with Federal Solutions, where 3rd quarter revenue increased by $325,000,000 or 42% from the Q3 of 2023. Speaker 400:16:28This increase was driven by organic growth of 39% and the contribution from our Sealing Tech and Black Signal acquisitions. Organic growth was driven primarily by the ramp up of recent contract wins and growth on existing contracts in our critical infrastructure protection and cyber and intelligence markets. Federal Solutions adjusted EBITDA increased by $55,000,000 or 84% from the Q3 of 2023. Adjusted EBITDA margin increased 260 basis points to 10.9% from 8.3% in the prior year period. These increases were driven primarily by increased volume on accretive contracts, contributions from high margin acquisitions and improved program execution. Speaker 400:17:12Moving now to our Critical Infrastructure segment. 3rd quarter revenue increased 10% from the prior year period on both an organic and inorganic basis. Growth was driven by higher volume in both our North America and Middle East infrastructure portfolios. Critical infrastructure adjusted EBITDA decreased by $16,000,000 or 25% from the Q3 of 2023. Adjusted EBITDA margin decreased to 6.7 percent from 9.8 percent in the prior year period. Speaker 400:17:41The adjusted EBITDA decreases were driven by a write down on the legacy program that is expected to reach substantial completion in Q4 of 2024. On a pro form a basis, our CI adjusted EBITDA margin would have been 9.7%, excluding this $23,500,000 write down. Next, I'll discuss cash flow and balance sheet metrics. During the Q3 of 2024, we generated $299,000,000 of operating cash flow compared to $204,000,000 in Q3 of 2023. On a trailing 12 month basis, we generated a record $587,000,000 of operating cash flow, a 91% increase over the prior 12 month period. Speaker 400:18:21These increases were primarily driven by strong collections across the portfolio and improved profitability. During the Q3, net DSO declined year over year by 14 days to 51 days, a record low. Capital expenditures totaled $12,000,000 in the Q3 of 2024, which is relatively consistent with prior year period. CapEx continues to be well controlled and remains in line with our planned spend of less than 1% of annual revenue, while continuing to invest in strategic areas like expanding classified facilities and space technology to support future growth. Free cash conversion was 2 47% for the 3rd quarter and 139% on a trailing 12 month basis with an intentional focus on contract execution, settlement of legacy claims and improved cash management collections. Speaker 400:19:11Our balance sheet remains strong as we ended the Q3 with a net debt leverage ratio Speaker 300:19:16of Speaker 400:19:161.2x to include the impact of the all cash acquisition of BlackSignal. On a pro form a basis, net leverage would be 1.6x after the recently announced $230,000,000 all cash acquisition of BCC. Our strong cash flow is enabling us to continue to make strategic internal investments and accretive acquisitions to support our long term growth objectives. Turning to bookings. On a trailing 12 month basis, contract awards increased 13% and our book to bill ratio was 1.0x. Speaker 400:19:48In our Critical Infrastructure segment, we achieved a book to bill ratio of 1.1 in the 3rd quarter, marking the 16th consecutive quarter with a book to bill ratio of 1.0 or greater. 3rd quarter contract award activity increased 24% year over year to $1,800,000,000 for a book to bill ratio of 1.0x. With $8,800,000,000 of backlog, 66 percent of which is currently funded and $13,000,000,000 of awards not reflected in book to bill or backlog, we continue to have confidence in our ability to deliver growth. Now let's turn to our guidance. We're increasing our 2024 guidance ranges as a result of our record Q3 performance, BlackSignal acquisition and our favorable outlook for the remainder of the year. Speaker 400:20:32For 2024, we are increasing our revenue range by $250,000,000 at the midpoint to $6,600,000,000 to $6,800,000,000 This represents total revenue growth of 23% at the midpoint and 22% on an organic basis. Additionally, we are increasing our adjusted EBITDA range by $30,000,000 at the midpoint of the range. We now expect adjusted EBITDA to be between $590,000,000 $620,000,000 which represents 30% growth at the midpoint of the range and continues to exceed revenue growth. At the midpoint of our increased revenue and adjusted EBITDA ranges, we're increasing our margin outlook by 10 basis points to 9.0 percent, which is a 50 basis point improvement to fiscal 2023 results. We're also increasing our cash flow guidance. Speaker 400:21:19We now expect operating cash flow to be between $425,000,000 $465,000,000 At the midpoint of the guidance range, we expect free cash flow conversion to be approximately 100 percent of adjusted net income. Other key assumptions in connection with our 2024 guidance are outlined on Slide 11 in today's PowerPoint presentation located on our Investor Relations website. In summary, we've had an exceptional 1st 9 months of the year with great top and bottom line and cash flow results. We're putting the balance sheet to use after announcing 2 strategic acquisitions over the last 2 months, which we believe will further enhance our technology offerings, geographical footprint and support long term growth. Our execution has been strong across all business units and major geographies, and we are confident in our ability to achieve our increased 2024 guidance ranges. Speaker 400:22:08With that, I'll turn the call back to Keri. Speaker 200:22:10Thank you, Matt. In closing, I'm very pleased with our company's performance through the 1st 9 months of the year. Our operating results continue to exceed our expectations as we once again delivered record results across all guidance metrics. Our 19,000 employees are consistently executing and taking advantage of the strong tailwinds that are positively impacting both of our business segments. I am thankful to be leading such a great team and I expect our momentum to continue given our portfolio is well aligned to important macro environment trends in 2 well funded segments in 6 growing and enduring markets. Operator00:22:58Thank you. And the first question will come from Sheila Kahyaoglu with Jefferies. Your line is now open. Speaker 500:23:25Good morning, guys, and great quarter as always. If I could ask 2 questions, maybe first on the top line, just given the performance has been so stellar. The $13,000,000,000 unbooked pipeline is relatively unchanged, but still a very good book to bill of 1 times, which seems nearly impossible with your growth rate. How do we think about, as we enter 2025, what your growth rate could potentially look like? Speaker 200:23:51Thank you, Sheila, and good morning. So the top line has remained relatively flat on the awarded not booked. And the reason for that is that we booked 4 of our repeats between July 2021 January of 2023. So it kind of reached a peak because they were all greater than $2,000,000,000 each. What I think is important to look at is a combination of the $13,000,000,000 awarded not booked plus the $8,800,000,000 in backlog, which is up significantly over 2022. Speaker 200:24:22I would also recommend that the 66% of funded backlog and that's the amount that we expect to convert within the next 12 to 18 months is very strong and probably close to an industry high. Looking forward from a top line perspective, we anticipate being at mid single digits or better as we've indicated. Speaker 500:24:45Great. And if I could ask one more, if you don't mind. On CI, the margins, ex the charge were closer to 9% once again. This fluctuated quite a bit, Matt, over the past few quarters. What's the right way to think about the run rate margin once legacy programs are run off? Speaker 400:25:04Yes. Thanks, Sheila. I'd say we talk a lot about CI with the underlying business kind of performing in the 9% to 10% range. Long term goal, of course, is double digits. We have a path to get there, but it's kind of a slow trudge as we get through these programs, to your point. Speaker 400:25:20We were expecting kind of wrap up that program. We had a couple of week delay, which is not unexpected as you kind of get to the end of these programs. But the $23,000,000 charge within the quarter was a little bit of the schedule slip. And then as we get to close out and kind of negotiations with customer on close out, that was the biggest driver behind the charge. But generally speaking, we think that underlying margin for the backlog that we've recently booked and the work that we're really performing on is kind of north of 9%. Speaker 400:25:49So it's kind of just that a slope at which we can get there. I've kind of said 20 to 30 basis points per year of margin expansion. If you think about the federal business being kind of stable, you'd think 40 to 60 basis points from CI per year. So that's the way we're kind of looking at it, Sheila. Speaker 200:26:06I would also add, we're really excited to get rid of these legacy programs. These were jobs that were bid back in the 2010 to 2015 timeframe. As we entered the year, we only had 2 of these remaining. We wrapped one up in the Q1 and this last one, as Matt indicated, is just a couple of weeks away. We're 98% complete right now. Speaker 200:26:27So it's really exciting to have those in the rearview mirror because improved performance execution on the critical infrastructure side is going to be the biggest driver of margin expansion. Thank you. Thanks, Sheila. Thank you. Operator00:26:41And our next question comes from Andrew Wittmann with Baird. Your line is now open. Speaker 300:26:49Great. Good morning and thank you for taking my questions, Matt. I guess I wanted to just understand the quarter a little bit better here because I was reading some stuff in the queue that it seems like it relates to the CI equity and income charge. You've said on your comments here $23,500,000 write down. In the Q, it says $6,700,000 write down. Speaker 300:27:15And so I was hoping you just could bridge the gap. Maybe there were some positive write ups or closeouts that were offsets. Maybe can you just help explain some of the moving pieces so that we can understand that segment's performance a little bit better? Speaker 400:27:29Yes, sure. Good question, Andy. So we'll talk about equity and earnings first. So to your point, we did take a smaller obviously, the $23,500,000 was the outsized impact for the quarter. So that's why we kind of gave the pro form a off that. Speaker 400:27:41But additionally, the program that we had of supply chain risk last year, we've kind of been fighting our way through completing design and kind of a little bit of a schedule extension, some approvals around the Parsons design there has kind of extended out. So we did take a $6,000,000 charge within equity and earnings to your point. The $23,500,000 would roll through the CI operating results. It wouldn't be an equity and earnings. It would be in the normal op profit. Speaker 400:28:04So kind of combined to your point, maybe there you think about it as $30,000,000 worth of total impacts. There were some favorable adjustments as well to a smaller extent. But all in all, if I did a kind of a pro form a on both of those, excluding the 23.5, we'd go from 6.7 to 97. And then if we also excluded the 6.5, we'd probably be in the 10.5 range. But again, I think I would say some of the smaller ones, there's there'll be fluctuations in any given quarter. Speaker 300:28:34Got it. Yes. And again, including some of those positives, maybe some of those positives eat into that 6, and then we play this mental accounting game of what's in and what's out. But I appreciate the color on that one. And then just Kerry, it's just it's coming up a lot in investor conversations. Speaker 300:28:50You addressed it in your prepared remarks, but I think it's probably worth some airtime on the Middle East. Some of your competitors have slowed some of the scope there and have talked about being slow walked on some of the projects. Maybe you could just I mean, you talked about the growth there, you talked about the book to bill being in the Middle East being better than your segment average. But maybe if you could just talk about what you're seeing there and the confidence that you have and the work that you're on today continuing at full steam ahead, as well as the prospect of future wins there as you head through 2020 to backfill the good work that you're doing today. Speaker 200:29:27Sure. Thank you, Andy. I actually just returned from there, so it's perfect question for this time and Matt leaves to go there next week. So it was terrific to be on the ground and see firsthand the tremendous progress that we're making both in Saudi Arabia programs as well as in the UAE. Overall, the region is performing as expected. Speaker 200:29:47There's always going to be fluctuations from 1 quarter to another. But if you look at year to date, our Saudi business has grown 17%, and this is following a year in which the Middle East revenue grew last year 33%. We expect to have for the full year double digit growth within the Middle East as well as year to date. So they're meeting and exceeding all their key performance indicators as expected. We continue to win our fair share of work. Speaker 200:30:17We highlighted in the second quarter, we won over $160,000,000 in Saudi wins and we won more than $200,000,000 in the Q3. So our book to bill was 1.2 for the Middle East and 1.3 for Saudi. And again, this is part of the credit infrastructure group continuing to have 16 consecutive quarters of 1.0 book to bill or better. I'll also highlight that the funding is still on the uptick. So when you look at the ramp up, we don't even expect the funding in the Middle East to peak until about the 2030 to 2,032 timeframe. Speaker 200:30:53We're at an all time high this quarter for both the pipeline and for headcount. Saudi is going to be on the world stage many times coming up over the next decade. They're hosting major events like the Asian Winter Games in 2029. They've got the World Expo in 2,030 and they have the FIFA World Cup in 2,034. So a lot of these projects need to be done in time for those critical events. Speaker 200:31:17And infrastructure is going continue to get prioritized and receive significant funding in Saudi Arabia. I'd also highlight we're on pretty much all the premier programs over there, which is very exciting. I had the opportunity to visit Qadea once again, the world's largest entertainment city. We're working on Neon, Matt's going to be visiting that next week. We just were awarded a repeat for the King Salmon Parf. Speaker 200:31:41We're involved in King Abdullah Financial District. We're involved in Daria Gates. We're involved in Al Sadah. So almost every major contract over there Parsons is program manager and these projects continue to come. So we've got a really bright future. Speaker 200:31:56I would mention in addition to Saudi Arabia though, we've also seen growth in the UAE and Qatar. And that's basically on the back of other infrastructure investments. If you'll recall, there was this big storm event, which was very unfortunate this year. So Parsons is involved in a lot of stormwater drainage improvement programs in Dubai, Abu Dhabi and Qatar. And then we've seen a resurgence in the UAE property market that remains very robust and a lot of associated development since there's a lot of people that are moving into the country. Speaker 200:32:29And this doesn't even include an area that we're starting to look at, which is opportunities for the federal business defense in Saudi and in the UAE, because we do have such a great reputation. So bottom line, they're performing as commented on your various win rates. But Operator00:32:45maybe Speaker 300:32:57you could inform us what your win rate was in the quarter? You have it by segment, that's interesting as well, but just overall it'd be good to understand the character there. Speaker 200:33:08Yes, the win rate for the quarter is 70 4%, the win rate year to date is 75%. Speaker 300:33:15Thank you very much. Have a good day. Speaker 200:33:17Thank you. Operator00:33:20And our next question comes from Cai von Rumohr with T. B. Cowen. Your line is now open. Speaker 600:33:28Yes. Thanks so much and terrific quarter again. Your engineering portion of Federal Solutions grew 70% And you mentioned critical infrastructure protection. I mean, is that that one very large contract that you have with a confidential customer? Speaker 200:33:51Yes. So we're seeing growth on that contract, but we're also seeing growth in other areas. I would highlight industrial base modernization as an example, where we're doing a lot of the army ammunition plant work. We're also seeing some growth in the biometrics efforts that we have in place. And then we had the wins in the Endo PACOM region, particularly excited about the QuadruLoan win. Speaker 200:34:12We had been performing QuadruLoan airfield. We won the 1st QuadruLoan housing contract. Now we just won the 2nd QuadruLoan housing contract. And we won some additional work in trying to clean up the island of Guam so that the Missile Defense Agency come in and put equipment in for defensive Guam. So excited about our whole Engineered Systems business. Speaker 600:34:35So you've been doing great, but I think you mentioned at one point that the time the duration of engineering contracts can be a little bit shorter than normal Fed solution contracts. So is there any worry that particularly this one, critical infrastructure protection contract is very big, but it could sunset relatively quickly at some point or should it just continue on the relatively stable rate? Speaker 200:35:05Yes. I would say that's a great question. So where we're at on that contract, right now the first option period extends through February 2025. We do have a second option period that if it's exercised would run through February 2026. The customer did recently advise that even though we have very strong performance that they're considering whether or not they're going to exercise the second option period to extend it or otherwise repeat the contract. Speaker 200:35:34If they do re compete the contract, we intend to submit a proposal for the continued performance of the work. And I will note that we have an average of 95% re compete win rates, including 98% year to date re compete win rates. At present time though, there's no announced acquisition strategy and there's no draft or final RFP. So what this means, we had indicated that we expected our 2025 re compete percent to be around 10%, which is what we have in any given year. So I would say right now, we anticipate our recompete for 2025 to be somewhere in the range of 5% to 15%. Speaker 200:36:13And it's dependent on that contract plus one other contract that we continue to receive extensions. I mean, what I'm excited about as we look into next year, hopefully, we will be around the 10%, but the high end 15%. We've got a very strong recompete win rate. We continue to win extensive work off a higher base, 1.1 times book to bill year to date, continue to acquire more companies to this year, potentially 3. And we've had 6 quarters of greater than 20% organic growth. Speaker 200:36:45And our awards activity, as Matt highlighted, during his script, has increased 24% over the prior year period and 13% on a trailing 12 month off a higher base. So we have a lot of momentum in the business. Speaker 600:37:00Terrific. Great answer. Thanks so much. Speaker 200:37:03Thanks. Thanks, Scott. Operator00:37:06And our next question comes from Tobey Sommer with Truist. Your line is now open. Speaker 700:37:14Thanks. When we think about the guidance raise, could you break down the contribution from organic performance in acquisitions? And at this point, with the acquisitions already in hand, what is the acquired revenue that will fold into the P and L in 2025? Speaker 400:37:39Yes. So, Tobey, let me give you a kind of a so final 3 months of the quarter, total revenue growth at the midpoint is just under 13%, of which about 12% is organic, so relatively minor contribution within the Q4. When we look at next year, we expect FlatSignal will contribute just over $100,000,000 And then BCC, which is not in any guidance yet, would be an additional over $100,000,000 So you can probably think about $200,000,000 worth of inorganic, maybe a little bit lighter than that because we have BlackSignal for a few months this quarter this year. So I'd say somewhere, call it, the high 100s to low 200, but we can give more details in the later. So about $80,000,000 is from our Black $80,000,000 to $90,000,000 is BlackSignal and then BCC would be another $100,000,000 plus. Speaker 700:38:36Okay. Thank you. And then could you talk about what the outlook is for revenue synergies associated with BCC and Black Signal? Historically, you've acquired firms that are with whom you have a relationship, you've either worked or bid on things together or competing and sometimes had line of sight into near term opportunities? Speaker 200:39:03Yes. So I'll start with BlackSignals. I mentioned, they provide digital signal processing, electronic warfare and cybersecurity. When you look at their capabilities, they fit in very nicely with Parsons capabilities. We're both doing digital signal work, but we look at different parts of the electromagnetic spectrum and also for different customers. Speaker 200:39:22On the cybersecurity side, we're both involved in offensive. The legacy Persons was more historically on the Department of Defense side. BlackSignal is more on the intelligence community side. And then when you look at space, we see a lot of synergies to develop a space training range. BlackSignal is the hack asset market leader. Speaker 200:39:43They use on orbit digital twin technologies and they basically create a cyber war gaming platform for space systems. This complementary with a Parsons capability, a system that we have called T Rex, which is an emulator system. So we're combining those capabilities. As you noted, we do buy companies that we've worked with quite a bit. We've known BlackSignal for a long time and also they're legacy companies and it really fit in nice with us. Speaker 200:40:11We've already been able to capitalize on synergies, particularly on the GSA growth that I mentioned. BCC is very exciting. They will be adding about 450 employees to our business. We both have presence in Florida. We both have presence in Georgia as well as Texas, South Carolina. Speaker 200:40:30I would say they are much stronger in Florida and we're going to be consolidating the legacy Parsons Florida activities under them. Their headquarters is in Miami. They're involved in 4 areas. They do design services, they do construction engineering and inspection, design build and general engineering capabilities. Also, I mentioned during the script, but they doubled the amount of resources that we have work in the Georgia Department of Transportation. Speaker 200:40:57We're really excited about that, particularly with our recent win on the State Route 400 job, because there's a lot of big opportunities coming up within Georgia. I will note on BCC, they also have 50% fixed price, 50% time and material. So we anticipate that that's going to help us on the margin side as well in CI. Speaker 800:41:19Thank you very much. Speaker 200:41:21Thank you. Thanks, Tobey. Operator00:41:23And the next question comes from Alex Dwyer with KeyBanc Capital Markets. Your line is open. Speaker 900:41:32Hi, Carrie, Matt and Dave, good morning. Speaker 200:41:35Good morning, Alex. Speaker 900:41:36Good morning. So I think Parsons has now won 5 of the largest North American transportation projects in the history of the company over the past year or so. Can you talk about the pipeline of seeing more of these large transportation projects? Are you still seeing many more of these out there that could be awarded in the next year or so? And kind of what your capacity is to take more of these on? Speaker 200:42:05Yes. Thanks, Alex, for that question. We have won 5 of the largest. We had mentioned the Gateway project. That's the largest rail and transit project for the Hudson River Tunnel. Speaker 200:42:15It's the largest infrastructure project occurring in the United States, and we're really proud to be the program manager there. We were awarded the JFK Roads and Highways, those of you living in New York City will be happy that we're improving the area around the airport. And we were awarded the New York Bay Bridge, over $140,000,000 project for us. We are a world leader in bridge design, having designed over 4,500 bridges and particularly a leader in long span bridges. And then the 2 awards that we just highlighted this quarter with Hawaii HEART rail and transit system, which the next phase of that extension, as well as State Route 400 job. Speaker 200:42:55What we're particularly excited about is we've had 16 consecutive quarters of greater than 1 old book to bill and the IIJA is still on the ramp up. Recent data shows, there was out of the total $1,200,000,000,000 of funding, dollars 550,000,000,000 of that was new. And we're nearly 3 years into the 5 year law, actually May of this year was the halfway point. 40% of the IIJA funds have been announced and that covers 60,000 projects. So this leaves $720,000,000,000 yet to be allocated. Speaker 200:43:28And I would note that they're announced, that means they're captured from agency press releases, but that doesn't mean they're yet awarded, which is actual obligation. So we're still very much on the up ramp here. I would also indicate that state and local are contributing quite a bit of funding as well. Once they saw the certainty of the IIJA passage in November of 20 21, they started to contribute. As far as capacity, we're doing a terrific job hiring, terrific job retaining. Speaker 200:43:56We have our lowest retention rates that we've ever had within the North America Critical Infrastructure Business. So we're going to continue to pursue and win these large jobs throughout the United States, particularly focused on our Tier 1 states. Speaker 400:44:09And Alex, just to add some numbers to what Carey mentioned, I'm looking at kind of Q1 2023 about $17,000,000,000 worth of pipeline within infrastructure. Right now, we're almost at $21,000,000,000 So you're up about 23.5% over the 18 months. So really strong evidence of continued growth there. Speaker 900:44:30Got it. Okay. And then I guess just I wanted to ask about just the general hiring needs across the entire company as we think about the next 12 months. I guess like over this past year, has there been areas of the business where it's been more challenging to hire or less challenging to hire? And then just talk about where the business development teams are most focused on hiring for the next year plan? Speaker 200:44:56Yes. So I would say we've done a great job on both hiring and retention. The easiest area to hire will be the critical infrastructure business, Middle East. We actually hire from about 50 countries around the world today. And also critical infrastructure North America would be pretty easy. Speaker 200:45:12When you get to the federal side, part of the engineered systems, particularly the group that is not cleared is not very difficult to hire. So the highest bar is always going to be that cleared area of our portfolio. But again, I'm happy with what we've done there. From a retention perspective, we measure ourselves against PwC industry benchmarks. We are lower than the benchmarks, so we're doing better than industry average in both the federal and the credit core infrastructure segments. Speaker 200:45:39From a business development perspective, we're going to be focused, I'm going to say, in the same areas that we have been. Our 6 core end markets, all of which are growing between 5% to 12% compound annual growth rate and continuing to hire their both BD talent as well as performance execution talent to get ahead of winning these large jobs. Speaker 900:46:03Thank you. Speaker 200:46:04Thank you, Alex. Operator00:46:07And the next question comes from Josh Sullivan with The Benchmark Company. Your line is open. Speaker 1000:46:15Hey, good morning. Speaker 200:46:16Good morning. Good morning, Josh. Speaker 1000:46:18Hey, Carey, to your credit, you've been very deliberate in your willingness to invest in any geographic region, especially when growth wasn't obvious. But in your opening comments, you call it geographic expansion. Speaker 900:46:30So just curious what the Speaker 1000:46:31current philosophy on that global expansion is? Should we expect you're just looking in the same regions, which have been delivering? Or are there any new opportunities opening up that I'm thinking of Europe there? Speaker 200:46:43Yes. So I would say we have been very deliberate. We're fortunate that we're in the right places right now. If you look at the North America growth with the infrastructure bill, not peaking until the 'twenty seven timeframe. If you look at the Middle East, not peaking until the 2030, 2,032 timeframe. Speaker 200:47:00I would say, there is if I talk about any expansion within federal, we highlighted Endo Paypal. That's been a very big focus for us because we have a purpose built federal solutions company that we've put together to basically outpace near pair of threats. So the type of work that we're doing, whether it's on the Defense and Intelligence side, signals intelligence, electronic warfare, information operations, cybersecurity or it's on the engineered system side with environmental remediation and infrastructure builds, Indo Paycom is going to be a significant area of focus and expansion. And as I mentioned a little bit earlier, we're also going to start to look at opportunities in the Middle East because we have such a strong branding and such high win rates, we feel that we can take our federal portfolio there as well. Within critical infrastructure, we're going to stay laser focused on North America as well as the Middle East. Speaker 200:47:56We have a small presence in Europe. We do some rail and transit work in Marseilles and Paris, France. So we might see and also in the Netherlands. So we might see a little expansion off of that. But when you're in a position where your growth is so strong, we just really need to continue to focus and deliver. Speaker 900:48:14Great. And then kind of a Speaker 1000:48:16similar question on software capabilities that you mentioned. How are you approaching this? Obviously, it can be a difficult expansion, but also a very fruitful one. But we're seeing other partnerships announced like with Palantir and L3. Or should we think of your approach being more organic? Speaker 200:48:35Yes. So I would say we partner on a selective basis and to win certain pursuits. We have such a strong software base. It's really our key differentiator. And when we talk about kind of purpose building the Federal Solutions portfolio, it's all been about software. Speaker 200:48:52I think hardware is going to become more commoditized and it's really key areas like digital signal processing where we're one of the industry leaders. Artificial intelligence, again, where we've had a strong presence for the last couple of decades and we applied almost every program that we do. Software is going to be the nugget. In addition to federal, I highlighted a couple of areas within critical infrastructure, mostly our intelligent infrastructure transportation business and our advanced traffic management system work, our intelligent intersection as a service work, those are also heavily software driven. We use an agile approach. Speaker 200:49:27We have a DevSecOps secure capability, and we're going to continue to lean in on software. Speaker 1000:49:35Great. Thank you for the time. Speaker 200:49:37Thank you. Operator00:49:40And our next question comes from Louie DiPalma with William Blair. Your line is now open. Speaker 1100:49:49Carrie, Matt and Dave, good morning and congrats on the results. Speaker 200:49:55Thank you very much, Louis. Speaker 1100:49:58Carrie and Matt, investors often ask about the difference between your recent string of 20% plus organic growth and the long term guidance for mid single digit growth. And we were wondering, is there anything specific that would prevent this year's momentum and last year's momentum from continuing next year? Speaker 200:50:26Well, I did mention the one confidential contract we're awaiting to see if the customer is going to exercise the option here or if they're going to compete it. I think the key thing is for us making sure that we beat and raise and set guidance that's realistic. We anticipate as we go into next year, we'll probably have our usual runoff of programs in the amount of about $80,000,000 to $100,000,000 which is typical for us. Recompetes, as I mentioned, about 5% to 15%, but I would say continue doing what we're doing. We've got to get the high win rates as we've been able to deliver win and move up the value chain, bid and win larger jobs and continue to execute. Speaker 1100:51:11Great, Carrie. And at the AUSA conference, you showcased your digital twins software. And we were wondering, is this software being utilized for several of these recent large transportation infrastructure IIJA contracts such as the Newport Bay Bridge, JFK Airport, Hudson River Tunnel, Englewood project. And are you able to use this digital twin software for both federal solutions and infrastructure? Speaker 200:51:51Yes. So we are able to use digital twin capabilities for both federal and infrastructure and we share those capabilities across the portfolio. I would say our biggest application is with the Missile Defense Agency that we've been applying it. We have a framework that we've build out called Parsons Digital Engineering Framework and we've been applying it there for quite a while. We also now have digital twin capability on orbit with the Black Signal acquisition. Speaker 200:52:18On the infrastructure side of the house, we've been applying digital twins mostly to our airport projects. Speaker 1100:52:26Great. And following up on these transportation infrastructure projects, how should we think of the revenue trajectory and duration as it seems that these are fairly long term contracts? And also related, is the scope of work for these contracts significantly different from your legacy contracts that have featured write downs? And are there any risk for write downs for these types of IIJA contracts? Speaker 200:53:04Yes, let me take the second part first. We have de risked our portfolio starting when I took over as Chief Operating Officer in November 2018. And we've gone back to what I'm going to call our core roots. The core roots of the company is that we're a designer. We do program management and we do owner's engineer where we help the owner deliver the technical design. Speaker 200:53:25So we have stopped bidding those legacy programs back in the 2015 timeframe. That's why we're really happy this year to be wrapping up the last one of those. So the projects that we've won, the one in Hawaii, the rail and transit system and the State Route 400, we are the lead design subcontractor on both of those. Again, it's what Parsons has done for 80 years since the company was created. So no, we don't anticipate write downs like we've had on some of these legacy construction programs. Speaker 200:53:55When you look at our scope, because we are the designer, the majority of our work does get done early in the project. So if a project is 5 to 8 years, we'll be done in the very early parts of that project. Good example is JFK. We're nearly done with the design on that project that we won about 16 months ago. Speaker 1100:54:15Great. Thanks, everyone. Speaker 200:54:17Thanks, Louie. Thanks, Louie. Operator00:54:20And our next question comes from Noah Poponak with Goldman Sachs. Your line is open. Speaker 800:54:28Hey, good morning, everyone. Speaker 200:54:30Good morning, Noah. Speaker 800:54:33Carrie, it sounds like you're saying there are 2 contracts mainly that are creating that range that you're referencing of 5% to 15% for recompete next year. And you were talking about the one large confidential in the engineering business. Are you able to say what the second one is? Speaker 200:54:55The second one is a contract that we continue to receive extensions. Right now, we're extended through February. Those extensions may or may not continue indefinitely. We're waiting on some actions from the customer. Speaker 800:55:11Okay. Okay. And, Matt, what's in the 4th quarter margin by segment approximately just to get to the full year EBITDA range? Speaker 400:55:27Yes. So right now, no, we have federal, just call it kind of high-9s, low-10s and then CI in the low-7s. So think of that as kind of constant quarter over quarter and a federal kind of a little bit lower than where they've been. Speaker 800:55:43Okay. And maybe you could update us on what you're now expecting as the end timing of the remaining legacy work in CI? And maybe also just talk about how you would expect that to progress sequentially from here? Speaker 200:56:02Yes. So we really have just the one project, and we're expecting to meet with the customer within the next few weeks achieve substantial completion. Speaker 800:56:16Okay. So, Carrie, that had previously been expected inside of the Q3 and now it's expected in the Q4? Speaker 200:56:26That's correct. There were some additional systems that were added that we had to process. Speaker 800:56:34And I guess once that's complete, does the CI margin just kind of flip what it's been adjusted for charges? Or is there for some other reason some more gradual ramp to it? Speaker 400:56:50Yes. I'd say no. Our goal is, of course, to kind of get to the adjusted number, but Carrie and I are kind of cautious. Substantial completion has some kind of trail to it where we're negotiating with customers and kind of completing the job. So I would say kind of that 40 to 60 basis points per year should get us there within a couple of years. Speaker 400:57:09But generally speaking, the substantive write downs that we've had will be behind us with substantial completion. Speaker 200:57:16We've indicated 20 or 30 basis points at the Parsons level for our long term guidance. And as Matt mentioned, we're expecting that to come from the CI segment. Speaker 800:57:28Okay. Okay, great. Thank you so much. Thanks, Danielle. Speaker 200:57:32Thanks, Danielle. Operator00:57:34This is all the time that we do have for questions. I would like to turn the call back over to Dave Spiele for closing remarks. Speaker 100:57:42Thank you for joining us this morning. If you have any questions, please don't hesitate to give me a call. And we look forward to speaking with many of you over the coming weeks. And with that, we'll end today's call. Have a great day.Read morePowered by