Parsons Delivers Strong Third Quarter Results; Momentum in Core Markets

CENTREVILLE, Va., Nov. 12, 2019 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2019.

CEO Commentary

"We reported solid third quarter results with record revenue and adjusted EBITDA and strong cash flow," said Chuck Harrington, Chairman and CEO of Parsons Corporation. "We are established in growing and enduring markets, and we continue to win large strategic contracts, including our largest single-award cyber program to date. Our year-to-date margin expansion is driven by selling more technology-led solutions, shaping our portfolio, acquiring higher margin businesses and solid execution. Today, we are also announcing the promotion of Carey Smith to President in addition to her current role as Chief Operating Officer. This promotion recognizes Carey's contributions to our transformation and adds additional functions under her leadership to enhance support to our customers and customer-facing teams. We are excited about our future and plan to leverage our business momentum, technology-driven solutions and robust balance sheet to drive future growth and shareholder value."

Third Quarter 2019 Results

Total revenue for the third quarter of 2019 increased $47 million to over $1 billion, a new company record. Operating income decreased $2 million in the third quarter of 2019 primarily due to an additional $15 million of increased acquisition-related intangible amortization expenses and transaction-related costs. Diluted earnings per share (EPS) attributable to Parsons increased 10% to $0.57 primarily due to the positive impact from elections made in connection with the filing of the Company's 2018 S-Corporation tax return during the third quarter, offset by the increased acquisition-related intangible amortization and transaction-related expenses noted above and additional shares issued in the Company's IPO.

Adjusted EBITDA for the third quarter of 2019 was $89 million, a 0.5% increase over the prior year period. Adjusted EBITDA margin decreased to 8.7% due to lower margins in the Company's Critical Infrastructure segment, offset by higher margins in the Federal Solutions segment.

Adjusted EBITDA attributable to Parsons for the third quarter of 2019 was $84 million, a 1% increase over the prior year's strong performance. Adjusted EPS decreased to $0.53, compared to $0.82 in the third quarter of 2018 primarily due to a higher income tax provision and additional shares issued in the Company's IPO.

Information about the Company's use of non-GAAP financial information is provided on page eleven and in the non-GAAP reconciliation tables included herein.

Segment Results

Federal Solutions Segment


                                     Three Months Ended                   
            
     Growth                
           
     Nine Months Ended                      
     
     Growth



                         September 28,                     September                        Dollars/     Percent                              September 28,                 September
                                                                 30,
                                                                                                                                                                       30,                           Dollars/                   Percent
                                  2018                           2019                                                                  2018                            2019
                                                                                            Percent                                                                                               Percent




     Revenue                            $
            443,725            $
       486,175                   $
         42,450                          10                                   $
         1,076,125             $
          1,387,484         $
      311,359     29
                                                                                                                                          %                                                                                                         %



      Adj. EBITDA
       including                                                                                                                          %                                                                                                         %
       noncontrolling
       interests                          $
            45,641             $
       50,445                    $
         4,804                          11                                     $
         101,266               $
          126,979          $
      25,713     25


      Adj. EBITDA margin
       including                                         %                      %                              %                          %                                                                                                 %       %
       noncontrolling
       interests                                      10.3                    10.4                             0.1                           1                                        9.4
          %                  9.2
          %               -0.3     -3



      Adj. EBITDA
       attributable to                                                                                                                    %                                                                                                         %
       Parsons Corp.                      $
            45,556             $
       50,359                    $
         4,803                          11                                     $
         101,052               $
          126,658          $
      25,606     25


      Adj. EBITDA margin
       attributable to                                   %                      %                              %                          %                                                                                                 %       %
       Parsons Corp.                                  10.3                    10.4                             0.1                           1                                        9.4
          %                  9.1
          %               -0.3     -3

Third quarter 2019 revenue increased $42 million, or 10%, compared to the prior year period. The increase was driven by $39 million from acquisitions and organic growth of 1%. Total revenue for the third quarter of 2018 included approximately $20 million of unusually high volume on two contracts. Excluding this increased activity, organic revenue would have increased by 5%.

Federal Solutions Adjusted EBITDA including noncontrolling interests and Adjusted EBITDA attributable to Parsons Corporation for the third quarter of 2019 both increased by $5 million, or 11%, compared to the prior year period. Adjusted EBITDA margin for both metrics increased to 10.4%, or by 10 basis points from the third quarter of 2018. The increases in Adjusted EBITDA margin were driven primarily by additional contract incentive fees and contributions from the Company's acquisitions, offset by increased bid and proposal costs and a greater allocation of corporate indirect general and administrative costs to the Company's Federal Solutions segment in-line with its growing share of the overall business.

Critical Infrastructure Segment


                                      Three Months Ended                                Growth                         Nine Months Ended                       
     
     Growth



                         September 28,                       September                         Dollars/      Percent                             September 28,                 September

                                                                       30,                                                                                                 30,                         Dollars/               Percent
                                  2018                                 2019                                                              2018                             2019
                                                                                               Percent                                                                                             Percent




     Revenue                            $
              532,432                $
      537,102                   $
         4,670                         1                                   $
        1,555,443              $
      1,529,940         $
      (25,503)   -2
                                                                                                                                            %
                                                                                                                                                                                                                                                   %



      Adj. EBITDA
       including
       noncontrolling                                                                                                                       %                                                                                                      %
       interests                          $
              42,923                 $
      38,545                 $
         (4,378)                      -10                                      $
        90,763                $
      110,240           $
      19,477    21


      Adj. EBITDA margin
       including                                           %                         %                             %                                                                         %                         %                   %
       noncontrolling                                                                                                                       %                                                                                                      %
       interests                                         8.1                        7.2                           -0.9                       -11                                               5.8                        7.2                  1.4    23



      Adj. EBITDA                         $
              38,006                 $
      33,976                 $
         (4,030)                      -11                                      $
        80,296                $
      102,177           $
      21,881    27
       attributable to
       Parsons Corp.                                                                                                                        %                                                                                                      %


      Adj. EBITDA margin                                 7.1                        6.3                           -0.8                       -11                                               5.2                        6.7                  1.5    29
       attributable to                                     %                         %                             %                                                                         %                         %                   %
       Parsons Corp.                                                                                                                        %                                                                                                      %

Third quarter 2019 revenue increased $5 million, or 1%, compared to the prior year period. The increase was due to growth on existing contracts.

Critical Infrastructure Adjusted EBITDA including noncontrolling interests for the third quarter of 2019 decreased $4 million, or -10%, compared to the prior year period. Adjusted EBITDA margin including noncontrolling interests decreased to 7.2%, or by 90 basis points from the third quarter of 2018. The decreases were primarily driven by lower equity in earnings from unconsolidated joint ventures, including the completion of a large joint venture program, and an increase in indirect general administrative costs, partially offset by an increase in project margins from higher margin new awards.

Critical Infrastructure Adjusted EBITDA attributable to Parsons Corporation for the third quarter of 2019 decreased $4 million, or -11%, compared to the prior year period. Adjusted EBITDA margin attributable to Parsons decreased to 6.3%, or by 80 basis points from the third quarter of 2018. The decreases were primarily driven by the same factors as noted above.

Third Quarter 2019 Key Performance Indicators

The Company continues to achieve a strong book-to-bill ratio and increase its backlog. Strong third quarter operating cash flow enabled the Company to repay the entire $140 million it borrowed under its revolving credit facility in connection with the $214 million acquisition of QRC technologies. The Company's operating cash flow and significant borrowing capacity will enable ongoing investments in its growth strategy.

    --  Book-to-bill ratio: 1.1x on net bookings of 1.1 billion. Trailing
        twelve-month: 1.2x on net bookings of $4.6 billion.
    --  Total backlog: $8.3 billion, a 4% increase over the third quarter of
        2018.
    --  Cash flow from operating activities: $179 million compared to $108
        million in the third quarter of 2018. For the nine months ended
        September 30, 2019: $131 million compared to $100 million in the prior
        year period.
    --  Debt: total and net debt were $249 million and $115 million,
        respectively. The Company's net debt to trailing twelve-month adjusted
        EBITDA leverage ratio at the end of the third quarter of 2019 was 0.4x.
        The Company defines net debt as total debt less cash and cash
        equivalents.

Recent Developments

    --  Announced Carey Smith's role and responsibilities expanded from Chief
        Operating Officer to President and Chief Operating Officer. This
        promotion was made in recognition of her success in leading the
        operations of Parsons' Federal Solutions and Critical Infrastructure
        business segments with a proven track record of organic and strategic
        growth. This role improves synergies among our two business segments and
        centralizes core operational functions.

Third Quarter 2019 Significant Contract Wins

Parsons continues to win large strategic contracts in growing and enduring markets. During the third quarter, the Company won six contracts over $100 million, including three single-award contracts and its largest ever cyber contract, and prime positions on three multiple-award IDIQ vehicles. Parsons also joined Northrop Grumman's Ground Based Strategic Deterrent (GBSD) team. The Company's strong customer relationships, rigorous capture processes, and investments in technology and people are driving success in winning new contracts and expanding existing contracts.

    --  Awarded the new $590 million Combatant Commands Cyber Mission Support
        contract by the U.S. General Services Administration. Under the
        contract, Parsons will support multi-domain operations across cyber,
        space, air, ground, and maritime -- researching, developing, testing,
        and evaluating tailored cyber solutions for cyberspace operations,
        advanced concepts and technologies, and integrating operational
        platforms. Our award of this contract was a result of the combined
        Parsons, Polaris Alpha, OGSystems and QRC Technologies acquisitions,
        unique mission understanding and a demonstrated ability to provide
        solutions that adapt at the pace of the evolving threat.
    --  Awarded a new $229 million contract by the U.S. Army Corps of Engineers
        to repair Bucholz Army Airfield, U.S. Army Kwajalein Atoll in the
        Republic of the Marshall Islands. This significant contract positions
        Parsons in the northern Pacific Rim for upcoming space and missile
        defense related projects.
    --  Awarded a $137 million contract modification for technology insertion
        and completing the testing and commissioning phase of the Department of
        Energy's Savannah River Salt Waste Processing Facility project.
    --  Announced that the Company joined the Northrop Grumman-led team pursuing
        the U.S. Air Force GBSD program. GBSD is a U.S. land-based
        intercontinental ballistic missile (ICBM) system that will replace
        Minuteman III missiles operated by the Air Force from 2028 onward.
    --  Selected by the Naval Information Warfare Systems Command as one of
        multiple awardees on the $968 million IDIQ contract to provide worldwide
        installation services for shore-based command, control, communications,
        computers, intelligence, surveillance and reconnaissance (C4ISR) and
        supporting systems.
    --  Selected by a classified customer as one of multiple awardees on a $750
        million IDIQ contract to provide support to national security missions.
    --  Selected by the Air Force as one of multiple awardees on the $427
        million Global Application Research, Development, Engineering and
        Maintenance IDIQ contract to perform research, development, prototyping,
        integration, testing, demonstration, deployment and maintenance of
        innovative technologies and concepts.

Corporate Social Responsibility Recognition

The Company's focus on corporate social responsibility initiatives is driving international recognition.

    --  Parsons, a widely recognized leader in occupational health, safety and
        environmental sustainability, was awarded the National Safety Council's
        prestigious Robert W. Campbell Award. The international award honors one
        company each year for achieving excellence through the integration of
        environment, health, and safety management into business operations.
    --  Parsons' Ontario, Canada team received a Certificate of Recognition from
        the Infrastructure Health and Safety Association after a comprehensive
        audit of its health and safety management system, which is the framework
        used to manage risks, establish controls, and minimize the incidence of
        injury and illness to employees.

Conference Call Information

Parsons will host a conference call today, November 12, 2019, at 8:00 a.m. ET to discuss the financial results for its third quarter 2019.

Listeners may access a webcast of the live conference call from the Investor Relations section of the Company's website at www.Parsons.com. Listeners also may access a slide presentation on the website, which summarizes the Company's third quarter 2019 results. Listeners should go to the website 15 minutes before the live event to download and install any necessary audio software.

Listeners may also participate in the conference call by dialing +1 (866) 211-3159 (domestic) or +1 (647) 689-6592 (international) and entering passcode 8757416.

A replay will be available on the Company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through November 19, 2019 at +1 (800) 585-8367 (domestic) or +1 (416) 621-4642 (international) and entering passcode 8757416.

About Parsons Corporation

Parsons is a leading disruptive technology provider for the future of global defense, intelligence and critical infrastructure with capabilities across cybersecurity, missile defense, space, connected infrastructure and smart cities. Please visit parsons.com, and follow us on LinkedIn and Facebook to learn how we're making an impact.

Forward-Looking Statements

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: any issue that compromises our relationships with the U.S. federal government or its agencies or other state, local or foreign governments or agencies; any issues that damage our professional reputation; changes in governmental priorities that shift expenditures away from agencies or programs that we support; our dependence on long-term government contracts, which are subject to the government's budgetary approval process; the size of our addressable markets and the amount of government spending on private contractors; failure by us or our employees to obtain and maintain necessary security clearances or certifications; failure to comply with numerous laws and regulations; changes in government procurement, contract or other practices or the adoption by governments of new laws, rules, regulations and programs in a manner adverse to us; the termination or nonrenewal of our government contracts, particularly our contracts with the U.S. federal government; our ability to compete effectively in the competitive bidding process and delays, contract terminations or cancellations caused by competitors' protests of major contract awards received by us; our ability to generate revenue under certain of our contracts; any inability to attract, train or retain employees with the requisite skills, experience and security clearances; the loss of members of senior management or failure to develop new leaders; misconduct or other improper activities from our employees or subcontractors; our ability to realize the full value of our backlog and the timing of our receipt of revenue under contracts included in backlog; changes in the mix of our contracts and our ability to accurately estimate or otherwise recover expenses, time and resources for our contracts; changes in estimates used in recognizing revenue; internal system or service failures and security breaches; and inherent uncertainties and potential adverse developments in legal proceedings, including litigation, audits, reviews and investigations, which may result in materially adverse judgments, settlements or other unfavorable outcomes. These factors are not exhaustive and additional factors could adversely affect our business and financial performance. For a discussion of additional factors that could materially adversely affect our business and financial performance, see the factors included under the caption "Risk Factors" in our Registration Statement on Form S-1 and our other filings with the Securities and Exchange Commission. All forward-looking statements are based on currently available information and speak only as of the date on which they are made. We assume no obligation to update any forward-looking statement made in this presentation that becomes untrue because of subsequent events, new information or otherwise, except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws.

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       Bryce McDevitt                          
     Dave Spille



       Parsons Corporation                     
     Parsons Corporation



       (703) 797-3001                          
     (571) 655-8264



       
                Bryce.McDevitt@Parsons.com 
     
                Dave.Spille@Parsons.com


                                                                               
              
                PARSONS CORPORATION

                                                                         
       
               UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                           
         
                (in thousands, except per share data)




                                              For the Three Months Ended                                                                 For the Nine Months Ended



                                     September 28,                              September                                                       September 28,              September
                                                                                       30,                                                                                         30,
                                              2018                                     2019                                                                2018                     2019




     Revenues                                       $
              976,157                                   $
              1,023,277                                   $
             2,631,568  $
            2,917,424


      Direct costs of contracts                                  783,018                                                 798,552                                              2,054,201            2,297,512


      Equity in earnings of
       unconsolidated joint ventures                              12,707                                                   7,274                                                 25,577               29,305


      Indirect, general and
       administrative expenses                                   150,733                                                 178,550                                                422,028              581,428



     Operating income                                            55,113                                                  53,449                                                180,916               67,789




     Interest income                                                351                                                     427                                                  2,358                1,129



     Interest expense                                           (5,940)                                                (4,909)                                              (14,475)            (19,577)


      Other income (expense), net                                    696                                                 (3,127)                                                   355              (1,580)


      Gain associated with claim on
       long-term contract                                                                                                                                                      74,578



      Total other income (expense)                               (4,893)                                                (7,609)                                                62,816             (20,028)



      Income before income tax
       provision                                                  50,220                                                  45,840                                                243,732               47,761


      Income tax benefit (provision)                             (4,154)                                                 15,453                                               (18,526)              67,063



      Net income including
       noncontrolling interests                                   46,066                                                  61,293                                                225,206              114,824


      Net income attributable to
       noncontrolling interests                                  (4,844)                                                (4,481)                                              (10,316)             (8,012)



      Net income attributable to
       Parsons Corporation                            $
              41,222                                      $
              56,812                                     $
             214,890    $
            106,812




     Earnings per share:


           Basic and diluted                            $
              0.52                                        $
              0.57                                        $
             2.66       $
            1.19



     
                Weighted average number shares used to compute basic and diluted EPS




                                                                       Three Months Ended                    Nine Months Ended



                                                            September 28,                        September                            September 28,                  September
                                                                                                         30,                                                     30,
                                                                     2018                 2019                2018                               2019



      Basic weighted average
       number of shares
       outstanding                                                            79,185,527       99,434,877                  80,702,032                 89,977,493


      Dilutive common share
       equivalents



      Diluted weighted
       average number of
       shares outstanding                                                     79,185,527       99,434,877                  80,702,032                 89,977,493


                                                                                                 
         
                PARSONS CORPORATION

                                                                                            
          
           UNAUDITED CONSOLIDATED BALANCE SHEETS

                                                                                          
          
           (in thousands, except share information)

                                                                                                     
         
                (Unaudited)




                                                                                                                                 December                         September

                                                                                                                                               31,                             30,
                                                                                                                                            2018                            2019




     
                Assets



     Current assets:


                                                           Cash and cash equivalents (including
                                                            $73,794 and $55,054 Cash of
                                                            consolidated joint ventures)                                                             $
       280,221                    $
          133,870


                                                           Restricted cash and investments                                                                    974                             12,592


                                                           Accounts receivable, net (including
                                                            $180,325 and $164,460 Accounts
                                                            receivable of consolidated joint
                                                            ventures, net)                                                                                623,286                            673,674


                                                           Contract assets (including $21,270
                                                            and $26,542 Contract assets of
                                                            consolidated joint ventures)                                                                  515,319                            583,670


                                                          Prepaid expenses and other current
                                                            assets (including $11,837 and $8,149
                                                            Prepaid expenses and other current
                                                            assets of consolidated joint
                                                            ventures)                                                                                      69,007                             70,455



                                                        
      Total current assets                                                                         1,488,807                          1,474,261





                                                           Property and equipment, net
                                                            (including $2,561 and $3,171
                                                            Property and equipment of
                                                            consolidated joint ventures, net)                                                              91,849                            109,238


                                                           Right of use assets, operating leases                                                                                            219,207


                                                        
      Goodwill                                                                                       736,938                          1,050,077


                                                           Investments in and advances to
                                                            unconsolidated joint ventures                                                                  63,560                             66,584


                                                        
      Intangible assets, net                                                                         179,519                            281,157


                                                        
      Deferred tax assets                                                                              5,680                            111,610


                                                        
      Other noncurrent assets                                                                         46,225                             50,510



                                                        
      Total assets                                                                            $
       2,612,578                  $
          3,362,644





                   Liabilities and Shareholders' Equity
                    (Deficit)



     Current liabilities:


                                                           Accounts payable (including $87,914
                                                            and $90,692 Accounts payable of
                                                            consolidated joint ventures)                                                             $
       226,345                    $
          226,563


                                                          Accrued expenses and other current
                                                            liabilities (including $73,209 and
                                                            $63,880 Accrued expenses and other
                                                            current liabilities of consolidated
                                                            joint ventures)                                                                               559,700                            639,650


                                                           Contract liabilities (including
                                                            $38,706 and $43,324 Contract
                                                            liabilities of consolidated joint
                                                            ventures)                                                                                     208,576                            231,032


                                                           Short-term lease liabilities,
                                                            operating leases                                                                                                                 49,074


                                                        
      Income taxes payable                                                                            11,540                              9,940



                                                        
      Total current liabilities                                                                    1,006,161                          1,156,259



                                                           Long-term employee incentives                                                                   41,913                             45,749


                                                           Deferred gain resulting from sale-
                                                            leaseback transactions                                                                         46,004


                                                        
      Long-term debt                                                                                 429,164                            249,306


                                                           Long-term lease liabilities,
                                                            operating leases                                                                                                                188,571


                                                        
      Deferred tax liabilities                                                                         6,240                              7,337


                                                           Other long-term liabilities                                                                    127,863                            120,971



                                                        
      Total liabilities                                                                            1,657,345                          1,768,193



      Commitments and contingencies (Note
       13)


                                                          Redeemable common stock held by
                                                            Employee Stock Ownership Plan
                                                            (ESOP), $1 par value; 78,172,809 and
                                                            78,138,602 shares outstanding,
                                                            recorded at redemption value                                                                1,876,309                          2,577,011


      Shareholders' equity (deficit):


                                                          Common stock, $1 par value;
                                                            authorized 1,000,000,000 shares;
                                                            125,097,684 and 146,393,959 shares
                                                            issued; 0 and 21,296,275 shares
                                                            outstanding                                                                                                                      21,296


                                                           Treasury stock, 46,918,140 and
                                                            46,959,082 shares at cost                                                                   (957,025)                         (957,844)


                                                        
      Additional paid-in capital                                                                                                         8,772


                                                           Retained earnings (accumulated
                                                            deficit)                                                                                       12,445                           (64,896)


                                                           Accumulated other comprehensive loss                                                          (22,957)                          (17,982)



                                                           Total Parsons Corporation
                                                            shareholders' equity (deficit)                                                              (967,537)                       (1,010,654)


                                                        
      Noncontrolling interests                                                                        46,461                             28,094



                                                           Total shareholders' equity (deficit)                                                         (921,076)                         (982,560)



                                                           Total liabilities, redeemable common
                                                            stock and shareholders' equity
                                                            (deficit)                                                                              $
       2,612,578                  $
          3,362,644


                                                                                   
        
                PARSONS CORPORATION

                                                                     
              
          UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                     
        
                (in thousands)




                                                                                                                            For the Nine Months Ended



                                                                                                                   September 28,                         September

                                                                                                                                                                     30,
                                                                                                                            2018                                   2019



     Cash flows from operating activities:


                                             Net income including noncontrolling
                                              interests                                                                              $
              225,206                 $
        114,824


                                             Adjustments to reconcile net income to
                                              net cash used in operating activities


                                           
     Depreciation and amortization                                                                        46,656                        92,692


                                           
     Amortization of deferred gain                                                                       (5,440)


                                             Amortization of debt issue costs                                                                        548                           802


                                             Gain associated with claim on long-term
                                              contract                                                                                         (129,674)


                                             Loss on disposal of property and
                                              equipment                                                                                               59                         1,045


                                             Provision for doubtful accounts                                                                       9,094                         (964)


                                           
     Deferred taxes                                                                                        1,281                     (105,161)


                                             Foreign currency transaction gains and
                                              losses                                                                                               2,007                         1,689


                                             Equity in earnings of unconsolidated
                                              joint ventures                                                                                    (25,577)                     (29,305)


                                             Return on investments in unconsolidated
                                              joint ventures                                                                                      31,728                        32,848


                                           
     Stock-based compensation                                                                                                           9,224


                                             Contributions of treasury stock                                                                      34,070                        36,779


                                             Changes in assets and liabilities, net of
                                              acquisitions and newly consolidated

                                           
        joint ventures:


                                           
     Accounts receivable                                                                                 384,216                      (31,726)


                                           
     Contract assets                                                                                   (527,768)                     (59,161)


                                             Prepaid expenses and current assets                                                                (13,028)                        2,980


                                           
     Accounts payable                                                                                     38,424                       (6,946)


                                             Accrued expenses and other current
                                              liabilities                                                                                          9,558                        40,186


                                           
     Billings in excess of costs                                                                       (151,892)


                                           
     Contract liabilities                                                                                168,579                        20,703


                                           
     Provision for contract losses                                                                      (13,992)


                                           
     Income taxes                                                                                          3,250                       (3,019)


                                           
     Other long-term liabilities                                                                          12,517                        13,138



                                             Net cash provided by operating activities                                                            99,822                       130,628



     Cash flows from investing activities:


                                           
     Capital expenditures                                                                               (19,436)                     (44,030)


                                             Proceeds from sale of property and
                                              equipment                                                                                              112                         2,824


                                             Payments for acquisitions, net of cash
                                              acquired                                                                                         (481,163)                    (495,690)


                                             Investments in unconsolidated joint
                                              ventures                                                                                           (4,276)                     (11,446)


                                             Return of investments in unconsolidated
                                              joint ventures                                                                                       1,126                         6,632



                                             Net cash used in investing activities                                                             (503,637)                    (541,710)



     Cash flows from financing activities:


                                           
     Proceeds from borrowings                                                                            260,000                       530,000


                                           
     Repayments of borrowings                                                                           (20,000)                    (710,000)


                                             Payments for debt costs and credit
                                              agreement                                                                                            (468)                        (286)


                                             Contributions by noncontrolling interests                                                            13,768                         8,999


                                             Distributions to noncontrolling interests                                                           (6,858)                     (35,378)


                                           
     Purchase of treasury stock                                                                         (73,308)                        (819)


                                           
     IPO proceeds, net                                                                                                                536,879


                                           
     Dividend paid                                                                                                                   (52,093)



                                             Net cash provided by financing activities                                                           173,134                       277,302



                                             Effect of exchange rate changes                                                                     (1,233)                        (953)



                                             Net decrease in cash, cash equivalents,
                                              and restricted cash                                                                              (231,914)                    (134,733)


                                             Cash, cash equivalents and restricted
                                              cash:


                                           
     Beginning of year                                                                                   446,144                       281,195



                                           
     End of period                                                                           $
              214,230                 $
        146,462



       
                
              Contract Awards (in thousands):

    ---



                                                                                        Three months ended                                    Nine Months Ended



                                                             September 28,                                 September                              September 28,                    September

                                                                                                                     30,                                                          30,
                                                                      2018                                           2019                2018                             2019



        Federal Solutions                                                    $
       671,615                                   $
       845,559                  $
        1,624,573      $
      2,076,928


        Critical Infrastructure                                                   552,034                                        289,665                        1,594,243          1,257,506




       Total Awards                                                       $
       1,223,649                                 $
       1,135,224                  $
        3,218,816      $
      3,334,434



       
                
               Backlog (in thousands):

    ---



                                                         September 28,                September

                                                                                                30,
                                                                  2018                          2019



        Federal Solutions:



       Funded                                                           $
       998,863                $
     1,214,919



       Unfunded                                                            3,838,046                   3,946,784



        Total Federal Solutions                                             4,836,909                   5,161,703



        Critical Infrastructure:



       Funded                                                              3,126,316                   3,050,525



       Unfunded                                                                                          38,286



        Total Critical
         Infrastructure                                                     3,126,316                   3,088,811




       Total Backlog                                                  $
       7,963,225                $
     8,250,514



       
                
              Book-To-Bill Ratio:

    ---



                                                      Three months ended Nine Months Ended



                                         
              
        September 28,       September      
     
     September 28,    September
                                                                                 30,                                  30,
                                                                    2018               2019                 2018           2019



        Federal Solutions

                                                                     1.5                1.7                  1.5            1.5


        Critical Infrastructure

                                                                     1.0                0.5                  1.0            0.8



       Overall

                                                                     1.3                1.1                  1.2            1.1

Non-GAAP Financial Information

The tables under "Parsons Corporation Inc. Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Parsons has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions of Williams Electric, Polaris Alpha and OGSystems, initial public offering transaction-related expenses, costs associated with a loss or gain on the disposal or sale of property, plant and equipment, restructuring and related expenses, costs associated with mergers and acquisitions, software implementation costs, legal and settlement costs, and other costs considered to non-operational in nature . These items have been Adjusted because they are not considered core to the Company's business or otherwise not considered operational or because these charges are non-cash or non-recurring. The Company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Parsons's performance during the periods presented and the Company's ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.


                                                                                   
             
                PARSONS CORPORATION

                                                                              
              
               Non-GAAP Financial Information

                                                                            
       
               Reconciliation of Net Income to Adjusted EBITDA

                                                                                      
             
                (in thousands)




                                                     Three Months Ended                                                                     Nine Months Ended



                                         September 28,                            September                                                    September 28,    September

                                                                                              30,                                                                             30,
                                                  2018                                        2019                                                        2018                 2019



      Net income attributable to Parsons
       Corporation                                       $
              41,222                                        $
              56,812                          $
              214,890  $
       106,812



     Interest expense, net                                           5,589                                                     4,482                                       12,117        18,448


      Income tax provision (benefit)                                  4,154                                                  (15,453)                                      18,526      (67,063)


      Depreciation and amortization(a)                               23,599                                                    31,027                                       46,656        92,692


      Net income attributable to
       noncontrolling interests                                       4,844                                                     4,481                                       10,316         8,012


      Litigation-related gains(b)                                                                                                                                      (129,674)


      Amortization of deferred gain
       resulting from sale-leaseback
       transactions(c)                                              (1,798)                                                                                              (5,440)


      Equity based compensation                                       5,049                                                   (1,657)                                      13,198        45,504


      Transaction-related costs(d)                                    2,456                                                     9,891                                        7,511        26,961



     Restructuring(e)                                                                                                           309                                                     2,880



     Other(f)                                                        3,449                                                     (902)                                       3,929         2,973




     Adjusted EBITDA                                    $
              88,564                                        $
              88,990                          $
              192,029  $
       237,219



               (a)               Depreciation and amortization for the
                                  three and nine months ended
                                  September 28, 2018 is $19.0 million
                                  and $32.6 million, respectively in
                                  the Federal Solutions Segment and
                                  $4.6 million and $14.0 million,
                                  respectively in the Critical
                                  Infrastructure Segment.
                                  Depreciation and amortization for
                                  the three and nine months ended
                                  September 30, 2019 is $26.0 million
                                  and $75.1 million, respectively in
                                  the Federal Solutions Segment and
                                  $5.0 million and $17.6 million,
                                  respectively in the Critical
                                  Infrastructure Segment.


               (b)               Reversal of an accrued liability,
                                  with $55.1 million recorded to
                                  revenue and $74.6 million recorded
                                  to other income ("gain associated
                                  with claim on long-term contract")
                                  in our results of operations,
                                  associated with a lawsuit against a
                                  joint venture in which the Company
                                  is the managing partner.  Please see
                                  "Note 14 - Commitments and
                                  Contingencies" in the Company's Form
                                  S-1/A filed on April 29, 2019, for
                                  a description of this matter, which
                                  was resolved in favor of the Company
                                  on June 13, 2018.


               (c)               Reflects recognized deferred gains
                                  related to sales-leaseback
                                  transactions.


               (d)               Reflects costs incurred in connection
                                  with acquisitions, initial public
                                  offering, and other non-recurring
                                  transaction costs, primarily fees
                                  paid for professional services and
                                  employee retention.


               (e)               Reflects costs associated with our
                                  corporate restructuring initiatives.


               (f)               Includes a combination of gain/loss
                                  related to sale of fixed assets,
                                  software implementation costs, and
                                  other individually insignificant
                                  items that are non-recurring in
                                  nature.


                                                                       
              
                PARSONS CORPORATION

                                                                 
              
                Non-GAAP Financial Information

                                                  
         
                Computation of Adjusted EBITDA Attributable to Noncontrolling Interests





      (in thousands)                                      Three months ended                                                                            Nine Months Ended



                                 September 28,                                                       September                                               September 28,                  September

                                                                                                                  30,                                                                      30,
                                          2018                                                                    2019                              2018                           2019



      Federal Solutions Adjusted
       EBITDA attributable to
       Parsons Corporation                     $
       45,556                                                                             $
        50,359                   $
       101,052      $
      126,658


      Federal Solutions Adjusted
       EBITDA attributable to
       noncontrolling interests                         85                                                                                       86                            214              321



      Federal Solutions Adjusted
       EBITDA including
       noncontrolling interests                $
       45,641                                                                             $
        50,445                   $
       101,266      $
      126,979





      Critical Infrastructure
       Adjusted EBITDA
       attributable to Parsons
       Corporation                                  38,006                                                                                   33,976                         80,296          102,177


      Critical Infrastructure
       Adjusted EBITDA
       attributable to
       noncontrolling interests                      4,917                                                                                    4,569                         10,467            8,063



      Critical Infrastructure
       Adjusted EBITDA including
       noncontrolling interests                $
       42,923                                                                             $
        38,545                    $
       90,763      $
      110,240





      Total Adjusted EBITDA
       including noncontrolling
       interests                               $
       88,564                                                                             $
        88,990                   $
       192,029      $
      237,219


                                                                                                        
              
                PARSONS CORPORATION

                                                                                                  
              
                Non-GAAP Financial Information

                                                        
           
               Reconciliation of Net Income Attributable to Parsons Corporation to Adjusted Net Income Attributable to Parsons Corporation

                                                                                          
              
                (in thousands, except share and per share data)




                                                                     Three Months Ended                                                                                                               Nine Months Ended



                                       September 28,                                                             September                                                                               September 28,                     September

                                                                                                                             30,                                                                                                       30,
                                                2018                                                                         2019                                                             2018                                    2019



      Net income attributable to
       Parsons Corporation                           $
           41,222                                                                             $
              56,812                                                 $
            214,890                $
            106,812


      Deferred Tax Asset
       Recognition(a)                                                                                                                                     (29,309)                                                                                         (85,672)


      Acquisition related intangible
       asset amortization                                     14,745                                                                                         22,143                                                            22,674                           64,438


      Litigation-related expenses(b)                                                                                                                                                                                      (129,674)


      Amortization of deferred gain
       resulting from sale-leaseback
       transactions(c)                                       (1,798)                                                                                                                                                        (5,440)


      Equity based compensation                                5,049                                                                                        (1,657)                                                           13,198                           45,504


      Transaction-related costs(d)                             2,456                                                                                          9,891                                                             7,511                           26,961



     Restructuring(e)                                                                                                                                         309                                                                                             2,880



     Other(f)                                                 3,449                                                                                          (902)                                                            3,929                            2,973


      Tax effect on adjustments                                (294)                                                                                       (5,025)                                                            1,144                         (23,091)



      Adjusted net income attributable
       to Parsons Corporation                                 64,829                                                                                         52,262                                                           128,232                          140,805



      Adjusted earnings per share:


      Weighted-average number of
       basic/diluted shares
       outstanding                                        79,185,527                                                                                     99,434,877                                                        80,702,032                       89,977,493



      Adjusted net income attributable
       to Parsons Corporation per
       basic/diluted share                             $
           0.82                                                                               $
              0.53                                                    $
            1.59                   $
            1.56



               (a)               Reflects the reversal of a deferred
                                  tax asset as a resulting of the
                                  Company converting from and S-
                                  Corporation to a C-Corporation.


               (b)               Reversal of an accrued liability,
                                  with $55.1 million recorded to
                                  revenue and $74.6 million recorded
                                  to other income ("gain associated
                                  with claim on long-term contract")
                                  in our results of operations,
                                  associated with a lawsuit against a
                                  joint venture in which the Company
                                  is the managing partner. Please see
                                  "Note 14 - Commitments and
                                  Contingencies" in the Company's Form
                                  S-1/A filed on April 29, 2019, for
                                  a description of this matter, which
                                  was resolved in favor of the Company
                                  on June 13, 2018.


               (c)               Reflects recognized deferred gains
                                  related to sales-leaseback
                                  transactions.


               (d)               Reflects costs incurred in connection
                                  with acquisitions, initial public
                                  offering, and other non-recurring
                                  transaction costs, primarily fees
                                  paid for professional services and
                                  employee retention.


               (e)               Reflects costs associated with our
                                  corporate restructuring initiatives.


               (f)               Includes a combination of gain/loss
                                  related to sale of fixed assets,
                                  software implementation costs, and
                                  other individually insignificant
                                  items that are non-recurring in
                                  nature.

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SOURCE Parsons Corporation