Parsons Delivers Strong Fourth Quarter and Full Year 2019 Results on Solid Revenue Growth
CENTREVILLE, Va., March 10, 2020 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the fourth quarter and year ended December 31, 2019.
CEO Commentary
"We had a strong finish to 2019 and ended the year with record revenue and profitability results, along with solid cash flow over the second half of the year," said Chuck Harrington, Chairman and CEO of Parsons Corporation. "We are delivering on the plan we outlined at the time of our IPO. We achieved strong organic revenue growth in our Federal Solutions business, produced significant margin expansion across the enterprise, invested in our people and technology, and leveraged our strong balance sheet to complete two strategic acquisitions. These acquisitions provided us with differentiated technology solutions and contributed to increased win rates and our ability to win larger prime contracts. We are excited about our future given our Federal Solutions portfolio is aligned with the National Defense Strategy and our Critical Infrastructure portfolio leverages our technology and operational expertise to deliver a smarter, safer, and more sustainable future."
Fourth Quarter 2019 Results
Total revenue for the fourth quarter of 2019 increased to $1 billion, a 12% increase over the prior year period and represents a new company record. Operating income was relatively equal to the fourth quarter of 2018 despite an additional $17 million of IPO-related long-term incentive compensation expenses and $9 million of increased acquisition-related intangible amortization expenses. Net income increased 84% over the prior year period to $14 million, and net income margin increased 50 basis points to 1.3%. Diluted earnings per share (EPS) attributable to Parsons was $0.14 in the fourth quarter of 2019 compared to $0.10 in the fourth quarter of 2018.
Adjusted EBITDA including noncontrolling interests for the fourth quarter of 2019 increased 62% over the prior year period to $88 million. Adjusted EBITDA margin increased 260 basis points to 8.5% due to higher margins in both business segments.
Adjusted EPS increased to $0.48, compared to $0.40 in the fourth quarter of 2018.
Fiscal Year 2019 Results
Total revenue for fiscal year 2019 increased to $4 billion, an 11% increase over fiscal year 2018 and represents a new company record. Operating income decreased $113 million in fiscal year 2019 primarily due to a portion of a non-recurring gain associated with a legal matter decided in the Company's favor in fiscal year 2018, additional IPO-related long-term incentive compensation expenses, acquisition-related intangible amortization expenses and transaction-related costs, offset by income from acquisitions and increased margins on existing contracts. Net income decreased 46% over the prior year to $121 million, and net income margin decreased 320 basis points to 3%. Diluted earnings per share (EPS) attributable to Parsons decreased to $1.30 primarily due to the same factors as described above, additional shares issued in the Company's IPO, and the remaining amount of income associated with the above mentioned legal matter. These factors were partially offset by income tax benefits associated with the establishment of $94 million of deferred tax assets during fiscal 2019 resulting from Parsons' conversion from an S-Corporation to a C-Corporation and increased margins on existing contracts.
Adjusted EBITDA including noncontrolling interests for fiscal year 2019 increased 32% over the prior year period to $325 million. Adjusted EBITDA margin increased 130 basis points to 8.2% due to higher margins in both business segments.
Adjusted EPS increased to $2.04, compared to $1.99 in fiscal year 2018.
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 Fiscal Year Ended
Growth
December December Dollars/ Percent December December Dollars/ Percent
31, 2018 31, 2019 Percent 31, 2018 31, 2019 Percent
Revenue $
402,882 $
500,423 $
97,541 24 $
1,479,007 $
1,887,907 $
408,900 28
% %
Adjusted $
21,029 $
42,563 $
21,534 102 $
122,295 $
169,542 $
47,247 39
EBITDA % %
Adjusted
EBITDA % % % % % % % %
margin 5.2 8.5 3.3 63 8.3 9.0 0.7 9
Fourth quarter 2019 revenue increased $98 million, or 24%, compared to the prior year period. The increase was driven by organic growth of 14% and $40 million from acquisitions.
Fourth quarter 2019 Federal Solutions Adjusted EBITDA including noncontrolling interests increased by $22 million, or 102%, compared to the prior year period. Adjusted EBITDA margin increased to 8.5%, or by 330 basis points from the fourth quarter of 2018. The increases were driven primarily by contributions from our acquisitions and higher margin growth on existing contracts.
Fiscal year 2019 revenue increased $409 million, or 28%, compared to the prior year period. The increase was driven by organic growth of 6% and $317 million from acquisitions.
Fiscal year 2019 Federal Solutions Adjusted EBITDA including noncontrolling interests increased by $47 million, or 39%, compared to fiscal year 2018. Adjusted EBITDA margin increased to 9.0%, or by 70 basis points from fiscal year 2018. The increases were driven primarily by business acquisitions, an increase in business volume on existing contracts, and higher profit margins driven by significant incentive fee recognition.
Critical Infrastructure Segment
Three Months Ended Growth Fiscal Year Ended
Growth
December December Dollars/ Percent December December Dollars/ Percent
31, 2018 31, 2019 31, 2018 31, 2019
Percent Percent
Revenue $
526,058 $
536,965 $
10,907 2 $
2,081,501 $
2,066,905 $
(14,596) -1
% %
Adjusted $
33,186 $
45,265 $
12,079 36 $
123,949 $
155,505 $
31,556 25
EBITDA
% %
Adjusted 6.3 8.4 2.1 34 6.0 7.5 1.6 26
EBITDA % % % % % %
margin % %
Fourth quarter 2019 revenue increased $11 million, or 2%, compared to the prior year period. The increase was driven primarily by growth on existing contracts.
Fourth quarter 2019 Critical Infrastructure Adjusted EBITDA including noncontrolling interests increased by $12 million, or 36%, compared to the prior year period. Adjusted EBITDA margin including noncontrolling interests increased to 8.4%, or by 210 basis points from the fourth quarter of 2018. These increases were driven primarily by improved contract performance execution and cost reductions.
Fiscal year 2019 revenue decreased by $15 million, or 1%, compared to the prior year period. The decrease was due to $55 million of revenue recorded in the second quarter of 2018 as a result of the aforementioned non-recurring legal matter decided in the Company's favor. Excluding the legal matter, revenue increased by 2% primarily due to growth on existing contracts.
Fiscal year 2019 Critical Infrastructure Adjusted EBITDA including noncontrolling interests increased by $32 million, or 25%, compared to fiscal year 2018. Adjusted EBITDA margin including noncontrolling interests increased to 7.5%, or by 160 basis points from fiscal year 2018. These increases were driven primarily by additional business volume, a decrease in IG&A, primarily due to cost reductions, and an increase in equity in earnings of unconsolidated joint ventures.
Fourth Quarter 2019 Key Performance Indicators
-- Book-to-bill ratio: 0.9x on net bookings of $903 million. Trailing
twelve-month: 1.1x on net bookings of $4.2 billion.
-- Total backlog: $8 billion, a 1% increase over the fourth quarter of
2018.
-- Cash flow from operating activities: Fourth quarter 2019 cash flow of
$90 million was less than anticipated, but the Company generated strong
cash flow of $269 million in the second half of 2019. For fiscal year
2019, cash flow from operating activities was $220 million compared to
$285 million in fiscal year 2018.
-- Debt: total and net debt were $249 million and $67 million,
respectively. The Company's net debt to trailing twelve-month adjusted
EBITDA leverage ratio at the end of the fourth quarter of 2019 was 0.2x.
The Company defines net debt as total debt less cash and cash
equivalents.
Fourth Quarter 2019 Significant Contract Wins
Parsons continued to gain momentum in the cyber market. One quarter after winning its largest single award cyber contract in its history, the Company was awarded four additional strategic cyber contracts. Parsons also was awarded two large Critical Infrastructure joint venture projects.
-- Awarded a $90 million cyber contract with a classified customer.
-- Awarded three additional cyber contracts valued at $77 million in total
for classified and unclassified federal customers to provide various
services including secure and resilient architecture development, secure
communications, cyber risk and threat assessment for the enhancement and
resiliency of weapon systems and special security capabilities required
in dynamic operational space missions.
-- As part of a joint venture (JV) team, Parsons was awarded an $805
million contract for the Glendora to Pomona segment of the Foothill Gold
Line light rail extension project that will benefit travelers across the
LA Metro service area. Parsons is a 25 percent joint-venture partner and
is providing design and construction management services.
-- As part of a JV team, Parsons was awarded a $194 million contract for
the 14-mile extension of the Greater Minneapolis, MN, LRT System.
Parsons is a 35 percent joint-venture partner and is providing design
and construction management services.
Environmental, Social and Governance (ESG) Initiatives
Corporate social responsibility is an integral part of Parsons' culture and reflects the Company's dedication to its core values and fulfilling its customers' missions. During the fourth quarter 2019, our employees continued to exemplify their passion and commitment to making the world a better place.
-- Parsons' employees participated in community service events that
benefited organizations such as Tragedy Assistance Program for Survivors
(TAPS), Special Operations Charity Network, Special Operations Warrior
Foundation, Girls Lead the Way, and numerous other charitable
organizations.
-- As the lead Designer for Georgia's Northwest Corridor project in
Atlanta, Parsons was part of the joint venture team that received the
prestigious National Award of Merit from the Design Build Institute of
America and the 2019 Global Roads Achievement Award from the
International Road Federation. The project has had a positive impact on
the community and region, reportedly reducing one-way commutes by as
much as 45 minutes, and in turn reducing carbon emissions and spurring
local economic growth through innovative advanced transportation
management systems.
-- The Regina Bypass, Saskatchewan's largest infrastructure project, opened
to traffic with a focus on improving safety, mobility, and reducing
carbon emissions and fuel consumption. The bypass also supports
continued growth of the Global Transportation Hub and alleviates issues
caused by population growth and congestion.
-- The Company recently sponsored a Parsons Technology Innovation Challenge
Showcase where high school students in the Washington, D.C. area were
mentored by Parsons Technical Fellows and awarded scholarships for
developing next generation ideas that make the world a better place.
Winning projects included a solution that automates healthcare records,
the development of a community water purification system, a virtual
reality swim training system, and the creation of a healthcare
marketplace. Parsons regularly hosts a variety of STEM (Science,
Technology, Engineering and Mathematics) programs to promote innovative
technology ideas from our future leaders.
Fiscal Year 2020 Guidance
The table below summarizes the company's fiscal year 2020 guidance.
Fiscal Year 2020 Guidance
Revenue
$3.95 billion - $4.05 billion
Adjusted EBITDA including
non-controlling interest
$330 million - $360 million
Cash Flow from Operating
Activities
$230 million - $250 million
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Net income guidance is not presented as the Company believes market volatility and the resulting potential for fluctuations in the Company's stock price and the related impact on the Company's equity-based compensation expense and net income will preclude the Company from providing accurate projections for fiscal year 2020.
Conference Call Information
Parsons will host a conference call today, March 10, 2020, at 8:00 a.m. ET to discuss the financial results for its fourth quarter 2019 and for the fiscal year ended December 31, 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 fourth quarter and fiscal year 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 +1 866-987-6581 (domestic) or +1 602-563-8686 (international) and entering passcode 5454538.
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 March 17, 2020 at +1 855-859-2056 (domestic) or +1 404-537-3406 (international) and entering passcode 5454538.
About Parsons Corporation
Parsons is a leading disruptive technology provider in the global defense, intelligence, and critical infrastructure markets, with capabilities across cybersecurity, missile defense, space, connected infrastructure, and smart cities. Please visit parsons.com, and follow us on LinkedIn and Facebook to learn how we're making an impact.
Forward-Looking Statements
This Earnings Release and materials included therewith contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our current expectations, beliefs and assumptions, and are not guarantees of future performance. Forward-looking statements are inherently subject to uncertainties, risks, changes in circumstances, trends and factors that are difficult to predict, many of which are outside of our control. Accordingly, actual performance, results and events may vary materially from those indicated in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future performance, results or events. Numerous factors could cause actual future performance, results and events to differ materially from those indicated in the forward-looking statements, including, among others: 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 Annual Report with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2019 on Form 10K to be filed on March 10, 2020, 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
CONSOLIDATED STATEMENTS OF OPERATIONS (Quarterly Data Unaudited)
(in thousands, except per share data)
Three Months Ended Fiscal Year Ended
December 31, December 31, December 31, December 31,
2018 2019 2018 2019
Revenue $
928,940 $
1,037,388 $
3,560,508 $
3,954,812
Direct cost of contracts 740,804 825,550 2,795,005 3,123,062
Equity in earnings of
unconsolidated joint ventures 11,338 12,416 36,915 41,721
Indirect, general and
administrative expenses 175,382 199,980 597,410 781,408
Operating income 24,092 24,274 205,008 92,063
Interest income 352 171 2,710 1,300
Interest expense (6,367) (4,152) (20,842) (23,729)
Other income (expense), net (2,006) (812) (1,651) (2,392)
(Interest and other expense) gain
associated with claim on long-
term contract 74,578
Total other (expense) income (8,021) (4,793) 54,795 (24,821)
Income before income tax expense 16,071 19,481 259,803 67,242
Income tax (expense) benefit (1,841) 2,823 (20,367) 69,886
Net (loss) income including
noncontrolling interests 14,230 22,304 239,436 137,128
Net income attributable to
noncontrolling interests (6,783) (8,582) (17,099) (16,594)
Net income attributable to Parsons
Corporation $
7,447 $
13,722 $
222,337 $
120,534
Earnings per share:
Basic $
0.10 $
0.14 $
2.78 $
1.30
Diluted $
0.10 $
0.14 $
2.78 $
1.30
Weighted average number shares used to compute basic and diluted EPS (Quarterly Data Unaudited) (in thousands)
Three Months Ended Fiscal Year Ended
December December December December
31, 2018 31, 2019 31, 2018 31, 2019
Basic weighted average number of
shares outstanding 77,949 99,742 80,014 92,419
Diluted weighted average number of
shares outstanding 77,949 100,084 80,014 92,753
PARSONS CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31. 2018 and December 31, 2019
(in thousands, except shares and par
value) 2018 2019
Assets
Current assets
Cash and cash equivalents (including
$73,794 and $51,171 Cash of consolidated
joint ventures) $
280,221 $
182,688
Restricted cash and investments 974 12,686
Accounts receivable, net (including
$180,325 and $166,355 Accounts receivable
of consolidated joint ventures, net) 623,286 671,492
Contract assets (including $21,270 and
$26,458 Contract assets of consolidated
joint ventures) 515,319 575,089
Prepaid expenses and other current assets
(including $11,837 and $11,182 Prepaid
expenses and other current assets of
consolidated joint ventures) 69,007 84,454
Total current assets 1,488,807 1,526,409
Property and equipment, net (including
$2,561 and $2,945 Property and equipment
of consolidated joint ventures, net) 91,849 122,751
Right of use assets, operating leases 233,415
Goodwill 736,938 1,047,425
Investments in and advances to
unconsolidated joint ventures 63,560 68,620
Intangible assets, net 179,519 259,858
Deferred tax assets 5,680 130,401
Other noncurrent assets 46,225 61,489
Total assets $
2,612,578 $
3,450,368
Liabilities, Redeemable Common Stock, and
Shareholder
'
s
Equity (Deficit)
Current liabilities
Accounts payable (including $87,914 and
$85,869 Accounts payable of consolidated
joint ventures) $
226,345 $
216,613
Accrued expenses and other current
liabilities (including $73,209 and
$74,857 Accrued expenses and other
current liabilities of consolidated joint
ventures) 559,700 639,863
Contract liabilities (including $38,706
and $32,638 Contract liabilities of
consolidated joint ventures) 208,576 230,681
Short-term lease liabilities, operating
leases 49,994
Income taxes payable 11,540 7,231
Total current liabilities 1,006,161 1,144,382
Long-term employee incentives 41,913 56,928
Deferred gain resulting from sale-
leaseback transactions 46,004
Long-term debt 429,164 249,353
Long-term lease liabilities, operating
leases 203,624
Deferred tax liabilities 6,240 9,621
Other long-term liabilities 127,863 125,704
Total liabilities 1,657,345 1,789,612
Contingencies (Note 15)
Redeemable common stock held by Employee
Stock Ownership Plan (ESOP), $1 par
value; 78,172,809 and 0 shares
outstanding, recorded at redemption value 1,876,309
Shareholders' equity (deficit)
Common stock, $1 par value; authorized
1,000,000,000 shares; 125,097,684 and
146,440,701 shares issued; 0 and
21,772,888; 0 and 78,896,806 shares and
ESOP shares outstanding 146,441
Treasury stock, 46,918,140 and 45,771,008
shares at cost (957,025) (934,240)
Additional paid-in capital 2,649,975
Retained earnings (accumulated deficit) 12,445 (218,025)
Accumulated other comprehensive income (22,957) (14,261)
Total Parsons Corporation shareholders'
equity (deficit) (967,537) 1,629,890
Noncontrolling interests 46,461 30,866
Total shareholders' equity (deficit) (921,076) 1,660,756
Total liabilities, redeemable common stock
and shareholders' equity (deficit) $
2,612,578 $
3,450,368
PARSONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 29, 2017, December 31, 2018 and December 31, 2019
(in thousands) 2017 2018 2019
Cash flows from operating activities
Net income including noncontrolling
interests $
111,537 $
239,436 $
137,128
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 35,198 69,869 125,700
Amortization of deferred gain (7,283) (7,253)
Amortization of debt issue costs 504 721 973
Gain associated with claim on long-
term contract (129,674)
Loss on disposal of property and
equipment 1,184 780 1,042
Provision for doubtful accounts 12,530 5,255 290
Deferred taxes 5,403 (1,422) (123,338)
Foreign currency transaction gains
and losses (5,121) 5,224 4,472
Equity in earnings of unconsolidated
joint ventures (40,086) (36,915) (41,721)
Return on investments in
unconsolidated joint ventures 33,377 35,192 51,077
Stock-based compensation 8,272
Contributions of treasury stock 40,553 45,161 53,644
Changes in assets and liabilities,
net of acquisitions and newly
consolidated joint
ventures
Accounts receivable (2,958) 461,304 (30,206)
Contract assets (480,090) (49,999)
Prepaid expenses and current assets (10,850) (23,668) (22,110)
Accounts payable 27,334 5,566 (17,123)
Accrued expenses and other current
liabilities 26,153 30,367 78,366
Billings in excess of costs 7,900 (150,873)
Contract liabilities 205,047 20,146
Provision for contract losses 19,431 (13,795)
Income taxes 2,518 3,911 (5,421)
Other long-term liabilities 7,705 20,491 29,048
Net cash provided by operating
activities 265,029 284,634 220,240
Cash flows from investing activities
Capital expenditures (27,939) (29,283) (67,597)
Proceeds from sale of property and
equipment 2,250 439 3,789
Payments for acquisitions, net of
cash acquired (25,737) (481,163) (494,826)
Investments in unconsolidated joint
ventures (3,502) (4,720) (24,579)
Return of investments in
unconsolidated joint ventures 1,967 11,432 12,410
Net cash used in investing activities (52,961) (503,295) (570,803)
Cash flows from financing activities
Proceeds from borrowings 260,000 597,200
Repayments of borrowings (80,000) (777,200)
Payments for debt costs and credit
agreement (1,949) (545) (286)
Contributions by noncontrolling
interests 7,481 20,656 10,093
Distributions to noncontrolling
interests (51,366) (18,886) (42,285)
Purchase of treasury stock (111,403) (125,814) (6,272)
IPO proceeds, net 536,879
Dividend paid (52,093)
Deferred payments for acquisitions (2,934)
Net cash (used in) provided by
financing activities (160,171) 55,411 266,036
Effect of exchange rate changes 1,235 (1,699) (1,294)
Net (decrease) increase in cash, cash
equivalents and restricted cash 53,132 (164,949) (85,821)
Cash, cash equivalents and restricted
cash
Beginning of year 393,012 446,144 281,195
End of year $
446,144 $
281,195 $
195,374
Cash paid during the year for
Interest $
12,905 $
16,805 $
23,254
Income taxes (net of refunds) 14,364 17,054 60,477
Contract Awards (in thousands):
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Fiscal Year Ended
December 31, 2018 December 31, 2019
Federal Solutions $
1,806,533 $
2,514,545
Critical Infrastructure 2,677,967 1,722,556
Total Awards $
4,484,500 $
4,237,101
Backlog (in thousands):
---
Fiscal Year Ended
December 31, 2018 December 31, 2019
Federal Solutions:
Funded $
964,626 $
1,153,041
Unfunded 3,523,376 3,882,289
Total Federal Solutions 4,488,002 5,035,330
Critical Infrastructure:
Funded 3,483,000 2,954,955
Unfunded 40,800
Total Critical
Infrastructure 3,483,000 2,995,755
Total Backlog $
7,971,002 $
8,031,085
Book-To-Bill Ratio:
---
Fiscal Year Ended
December 31, 2018 December 31, 2019
Federal Solutions 1.2 1.3
Critical Infrastructure 1.3 0.8
Overall 1.3 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 Fiscal Year Ended
December 31, December 31, December 31, December 31,
2018 2019 2018 2019
Net income attributable to Parsons
Corporation $
7,447 $
13,722 $
222,337 $
120,534
Interest expense, net 6,015 3,981 18,132 22,429
Income tax provision (benefit) 1,841 (2,823) 20,367 (69,886)
Depreciation and amortization (a) 23,213 33,008 69,869 125,700
Net income attributable to
noncontrolling interests 6,783 8,582 17,099 16,594
Litigation-related gains (b) (129,674)
Amortization of deferred gain
resulting from sale-leaseback
transactions (c) (1,813) (7,253)
Equity-based compensation (d) 3,289 20,240 16,487 65,744
Transaction-related costs (e) 5,431 7,392 12,942 34,353
Restructuring (f) 544 3,424
Other (g) 2,009 3,182 5,938 6,155
Adjusted EBITDA $
54,215 $
87,828 $
246,244 $
325,047
(a) Depreciation and amortization for the three
months and fiscal year ended December 31,
2018 is $18.4 million and $51.0 million,
respectively in the Federal Solutions
Segment and $4.8 million and $18.8 million,
respectively in the Critical Infrastructure
Segment. Depreciation and amortization for
the three months and fiscal year ended
December 31, 2019 is $27.9 million and
$103.0 million, respectively in the Federal
Solutions Segment and $5.1 million and $22.7
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. See "Management's Discussion and
Analysis of Financial Condition and Results
of Operations" in the Company's Annual
Report on Form 10-K to be filed on March
10, 2020 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 described in
"Note 10-Sale-Leasebacks" in the notes to
our consolidated financial statements in the
Company's Annual Report on Form 10-K to be
filed on March 10, 2020.
(d) Reflects equity-based compensation costs
primarily related to cash-settled awards.
See "Management's Discussion and Analysis of
Financial Condition and Results of
Operations" in the Company's Annual Report
on Form 10-K to be filed on March 10, 2020
for a further discussion of these awards.
(e) 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.
(f) Reflects costs associated with and related to
our corporate restructuring initiatives.
(g) 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 Fiscal Year Ended
December 31, December 31, December 31, December 31,
2018 2019 2018 2019
Federal Solutions Adjusted
EBITDA attributable to
Parsons Corporation $
20,934 $
42,442 $
121,986 $
169,100
Federal Solutions Adjusted
EBITDA attributable to
noncontrolling interests 95 121 309 442
Federal Solutions Adjusted
EBITDA including
noncontrolling interests $
21,029 $
42,563 $
122,295 $
169,542
Critical Infrastructure
Adjusted EBITDA
attributable to Parsons
Corporation 26,555 36,674 106,851 138,851
Critical Infrastructure
Adjusted EBITDA
attributable to
noncontrolling interests 6,631 8,591 17,098 16,654
Critical Infrastructure
Adjusted EBITDA including
noncontrolling interests $
33,186 $
45,265 $
123,949 $
155,505
Total Adjusted EBITDA
including noncontrolling
interests $
54,215 $
87,828 $
246,244 $
325,047
PARSONS CORPORATION
Non-GAAP Financial Information
Reconciliation of Net Income Attributable to Parsons Corporation to Adjusted Net Income Attributable to Parsons Corporation
(in thousands, except per share information)
Three Months Ended Fiscal Year Ended
December 31, December 31, December 31, December 31,
2018 2019 2018 2019
Net income attributable to
Parsons Corporation $
7,447 $
13,722 $
222,337 $
120,534
Deferred Tax Asset Recognition
(a) (8,206) (93,878)
Acquisition related intangible
asset amortization 14,734 23,820 37,408 88,258
Litigation-related expenses
(b) (129,674)
Amortization of deferred gain
resulting from sale-
leaseback transactions (c) (1,813) (7,253)
Equity-based compensation (d) 3,289 20,240 16,487 65,744
Transaction-related costs (e) 5,431 7,392 12,942 34,353
Restructuring (f) 544 3,424
Other (g) 2,009 3,182 5,938 6,155
Tax effect on adjustments (280) (12,299) 864 (35,390)
Adjusted net income
attributable to Parsons
Corporation 30,817 48,395 159,049 189,200
Adjusted earnings per share:
Weighted-average number of
basic shares outstanding 77,949 99,742 80,014 92,419
Weighted-average number of
diluted shares outstanding 77,949 100,084 80,014 92,753
Adjusted net income
attributable to Parsons
Corporation per basic share $
0.40 $
0.49 $
1.99 $
2.05
Adjusted net income
attributable to Parsons
Corporation per diluted share $
0.40 $
0.48 $
1.99 $
2.04
(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. See "Management's Discussion and
Analysis of Financial Condition and Results
of Operations" in the Company's Annual
Report on Form 10-K to be filed on March
10, 2020 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 described in
"Note 10-Sale-Leasebacks" in the notes to
our consolidated financial statements in the
Company's Annual Report on Form 10-K to be
filed on March 10, 2020.
(d) Reflects equity-based compensation costs
primarily related to cash-settled awards.
See "Management's Discussion and Analysis of
Financial Condition and Results of
Operations" in the Company's Annual Report
on Form 10-K to be filed on March 10, 2020
for a further discussion of these awards.
(e) 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.
(f) Reflects costs associated with and related to
our corporate restructuring initiatives.
(g) 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
