Parsons Delivers Strong First Quarter 2020 Revenue Growth
CEO Commentary
"I would like to send our deepest sympathies to all who have been affected by the COVID-19 pandemic. These are challenging times for everyone, and we will continue to put the safety and well-being of our employees, customers and partners first," said
First Quarter 2020 Results
Total revenue for the first quarter of 2020 increased 7% to
Adjusted EBITDA including noncontrolling interests for the first quarter of 2020 was
Adjusted EPS decreased to
Information about the Company's use of non-GAAP financial information is provided on page ten and in the non-GAAP reconciliation tables included herein.
Segment Results
Federal Solutions Segment |
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Three Months Ended |
Growth |
|||||||||||||||
March 31, |
March 31, |
Dollars/ Percent |
Percent |
|||||||||||||
Revenue |
$ |
477,571 |
$ |
422,812 |
$ |
54,759 |
13 |
% |
||||||||
Adjusted EBITDA |
$ |
31,709 |
$ |
40,725 |
$ |
(9,016) |
-22 |
% |
||||||||
Adjusted EBITDA margin |
6.6 |
% |
9.6 |
% |
-3.0 |
% |
-31 |
% |
First quarter 2020 revenue increased
First quarter 2020 Federal Solutions Adjusted EBITDA including noncontrolling interests decreased by
Critical Infrastructure Segment |
||||||||||||||||
Three Months Ended |
Growth |
|||||||||||||||
March 31, |
March 31, |
Dollars/ Percent |
Percent |
|||||||||||||
Revenue |
$ |
493,422 |
$ |
481,593 |
$ |
11,829 |
2 |
% |
||||||||
Adjusted EBITDA |
$ |
28,787 |
$ |
31,299 |
$ |
(2,512) |
-8 |
% |
||||||||
Adjusted EBITDA margin |
5.8 |
% |
6.5 |
% |
-0.7 |
% |
-10 |
% |
First quarter 2020 revenue increased
First quarter 2020 Critical Infrastructure Adjusted EBITDA including noncontrolling interests decreased by
First Quarter 2020 Key Performance Indicators
- Book-to-bill ratio: 1.0x on net bookings of
$966 million . Trailing twelve-month: 1.0x on net bookings of$4.0 billion . - Total backlog:
$7.8 billion , a 9% decrease over the first quarter of 2019. - Cash flow used in operating activities: First quarter 2020:
$119 million , compared to cash used in operating activities of$60 million in the first quarter of 2019. The outflow increase was primarily driven by costs related to previously disclosed pre-IPO long-term incentive compensation plans linked to the company's share price. - Debt: total and net debt were
$314 million and$195 million , respectively. The company's net debt to trailing twelve-month adjusted EBITDA leverage ratio at the end of the first quarter of 2020 was 0.6x. The company defines net debt as total debt less cash and cash equivalents.
First Quarter 2020 Significant Contract Wins
Parsons continued to win large single-award contracts in its Federal Solutions segment. In addition, the company, won a prime position on a significant multiple-award indefinite-delivery/indefinite-quantity (IDIQ) contact and a large joint venture project.
- Awarded a contract valued at approximately
$180 million for security work by a classified customer. - Awarded a
$109 million contract by theGeneral Services Administration's Special Programs Division to provide program, design and construction management services for a wide range of Federal Customers Nationwide. - Awarded a
$91 million contract with theAir Force research laboratory to perform functional onsite training, demonstrations, enhancements, modifications, integration, testing, and deployment of technologies. - Awarded classified contracts valued at approximately
$60 million to provide cyber, operational software development work, security assessment, and protection of systems and critical infrastructure worldwide.
Recent Additional Corporate Highlights
Parsons continues to be recognized for its Ethics and IT leadership. In addition, the company launched a touchless, biometrics sensing product suite and established a partnership with Adaptive Launch Solutions (ALS) to further its position within the Space market. Parsons also published its latest Corporate Social Responsibility (CSR) report, highlighting its initiatives to making the world a better place.
- Launched DetectWise™, a product suite that includes contactless, mobile health screening kiosks, modular testing and decontamination facilities to keep the public safe in high-traffic areas like airports, shopping malls, corporate buildings and sports stadiums. Parsons is re-inventing the personal screening process – leveraging innovative technologies, data analytics and artificial intelligence. Our scalable solutions will help ensure the economy remains stable and minimize future COVID or other virus events.
- Named by Ethisphere, a global leader in defining and advancing the standards of ethical business practices, as one of the 2020 World's Most Ethical Companies®. The company has been honored with this recognition for 11 consecutive years.
- Named to the CIO 100 list of the world's most innovative companies. The CIO 100 Award celebrates companies that are using IT in innovative ways to deliver business value, whether by creating competitive advantage, optimizing business processes, enabling growth or improving relationships with customers.
- Established a strategic partnership with ALS for launch and space system engineering, operations, and integration opportunities with the
U.S. government and commercial customers. - Parsons' Creative Services team was recognized by the
Association of Marketing & Communication professionals with seven Hermes awards. The awards include Platinum recognition for the company's Brand Refresh, Annual Report and Parsons.com and Gold level recognition for our 24 Foundation infographic, "Do More of What You Love" ESOP campaign, and National Cybersecurity Awareness Month infographic. The team also received an honorable mention for the Data Privacy Day infographic. These wins are a testament to the innovative talent and inspiration of Parsons' Creative Services team. - Published Parsons' 2020 CSR report titled "Believe in Better" on
April 22 ,Earth Day (located on Parsons.com). In addition to reporting on the company's environmental, social and governance (ESG) accomplishments, the report highlights the company's implementation of best practices and innovative approaches to creating value for stakeholders while enhancing the communities in which we live, work and play.
Fiscal Year 2020 Guidance
The company is reiterating the fiscal year 2020 guidance it issued on
Fiscal Year 2020 Guidance |
|
Revenue |
|
Adjusted EBITDA including non-controlling interest |
|
Cash Flow from Operating Activities |
|
Net income guidance is not presented as the company believes market volatility in its share price and the resulting 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,
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 first quarter 2020 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 5395648.
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
About
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
financial-news
Media: |
Investor Relations: |
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(703) 797-3001 |
(571) 655-8264 |
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||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||
(In thousands, except per share data) |
||||||||
(Unaudited) |
||||||||
For the Three Months Ended |
||||||||
|
March 31, 2019 |
|||||||
Revenue |
$ |
970,993 |
$ |
904,405 |
||||
Direct cost of contracts |
769,632 |
714,237 |
||||||
Equity in earnings of unconsolidated joint ventures |
6,114 |
10,397 |
||||||
Indirect, general and administrative expenses |
183,774 |
177,519 |
||||||
Operating income |
23,701 |
23,046 |
||||||
Interest income |
228 |
477 |
||||||
Interest expense |
(4,022) |
(8,292) |
||||||
Other income (expense), net |
(452) |
41 |
||||||
Total other income (expense) |
(4,246) |
(7,774) |
||||||
Income before income tax expense |
19,455 |
15,272 |
||||||
Income tax expense |
(5,084) |
(1,886) |
||||||
Net income including noncontrolling interests |
14,371 |
13,386 |
||||||
Net income attributable to noncontrolling interests |
(1,398) |
(3,645) |
||||||
Net income attributable to |
$ |
12,973 |
$ |
9,741 |
||||
Earnings per share: |
||||||||
Basic |
$ |
0.13 |
$ |
0.12 |
||||
Diluted |
$ |
0.13 |
$ |
0.12 |
Weighted average number shares used to compute basic and diluted EPS (in thousands) (Unaudited) |
||||||||
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Basic weighted average number of shares outstanding |
100,670 |
78,161 |
||||||
Dilutive common share equivalents |
230 |
- |
||||||
Diluted weighted average number of shares outstanding |
100,899 |
78,161 |
|
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(In thousands, except share information) |
|||||||||
(Unaudited) |
|||||||||
|
|
||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents (including |
$ |
119,299 |
$ |
182,688 |
|||||
Restricted cash and investments |
7,423 |
12,686 |
|||||||
Accounts receivable, net (including |
758,225 |
671,492 |
|||||||
Contract assets (including |
626,513 |
575,089 |
|||||||
Prepaid expenses and other current assets (including |
90,512 |
84,454 |
|||||||
Total current assets |
1,601,972 |
1,526,409 |
|||||||
Property and equipment, net (including |
124,600 |
122,751 |
|||||||
Right of use assets, operating leases |
231,269 |
233,415 |
|||||||
|
1,044,014 |
1,047,425 |
|||||||
Investments in and advances to unconsolidated joint ventures |
65,716 |
68,620 |
|||||||
Intangible assets, net |
237,028 |
259,858 |
|||||||
Deferred tax assets |
124,816 |
130,401 |
|||||||
Other noncurrent assets |
59,190 |
61,489 |
|||||||
Total assets |
$ |
3,488,605 |
$ |
3,450,368 |
|||||
Liabilities and Shareholders' Equity (Deficit) |
|||||||||
Current liabilities: |
|||||||||
Accounts payable (including |
$ |
235,381 |
$ |
216,613 |
|||||
Accrued expenses and other current liabilities (including |
625,729 |
639,863 |
|||||||
Contract liabilities (including |
241,178 |
230,681 |
|||||||
Short-term lease liabilities, operating leases |
47,217 |
49,994 |
|||||||
Income taxes payable |
1,819 |
7,231 |
|||||||
Total current liabilities |
1,151,324 |
1,144,382 |
|||||||
Long-term employee incentives |
21,458 |
56,928 |
|||||||
Long-term debt |
314,401 |
249,353 |
|||||||
Long-term lease liabilities, operating leases |
206,760 |
203,624 |
|||||||
Deferred tax liabilities |
9,234 |
9,621 |
|||||||
Other long-term liabilities |
118,049 |
125,704 |
|||||||
Total liabilities |
1,821,226 |
1,789,612 |
|||||||
Contingencies (Note 12) |
|||||||||
Shareholders' equity (deficit): |
|||||||||
Common stock, |
146,441 |
146,441 |
|||||||
|
(934,240) |
(934,240) |
|||||||
Additional paid-in capital |
2,652,227 |
2,649,975 |
|||||||
Accumulated deficit |
(206,052) |
(218,025) |
|||||||
Accumulated other comprehensive loss |
(23,114) |
(14,261) |
|||||||
|
1,635,262 |
1,629,890 |
|||||||
Noncontrolling interests |
32,117 |
30,866 |
|||||||
Total shareholders' equity |
1,667,379 |
1,660,756 |
|||||||
Total liabilities, redeemable common stock and shareholders' equity |
$ |
3,488,605 |
$ |
3,450,368 |
|
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||||
(In thousands) |
|||||||||
(Unaudited) |
|||||||||
For the Three Months Ended |
|||||||||
|
March 31, 2019 |
||||||||
Cash flows from operating activities: |
|||||||||
Net income including noncontrolling interests |
$ |
14,371 |
$ |
13,386 |
|||||
Adjustments to reconcile net income to net cash used in operating activities |
|||||||||
Depreciation and amortization |
32,409 |
30,591 |
|||||||
Amortization of debt issue costs |
173 |
244 |
|||||||
Gain on disposal of property and equipment |
(104) |
(27) |
|||||||
Provision for doubtful accounts |
- |
(279) |
|||||||
Deferred taxes |
5,514 |
1,486 |
|||||||
Foreign currency transaction gains and losses |
1,383 |
618 |
|||||||
Equity in earnings of unconsolidated joint ventures |
(6,114) |
(10,397) |
|||||||
Return on investments in unconsolidated joint ventures |
6,551 |
10,794 |
|||||||
Stock-based compensation |
2,252 |
- |
|||||||
Contributions of treasury stock |
14,871 |
12,250 |
|||||||
Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures: |
|||||||||
Accounts receivable |
(91,734) |
(17,135) |
|||||||
Contract assets |
(52,346) |
(46,984) |
|||||||
Prepaid expenses and current assets |
(3,766) |
(1,424) |
|||||||
Accounts payable |
19,788 |
(28,182) |
|||||||
Accrued expenses and other current liabilities |
(24,336) |
(24,023) |
|||||||
Contract liabilities |
11,416 |
14,884 |
|||||||
Income taxes |
(6,212) |
(3,645) |
|||||||
Other long-term liabilities |
(43,099) |
(12,265) |
|||||||
Net cash used in operating activities |
(118,983) |
(60,108) |
|||||||
Cash flows from investing activities: |
|||||||||
Capital expenditures |
(12,637) |
(11,041) |
|||||||
Proceeds from sale of property and equipment |
485 |
135 |
|||||||
Payments for acquisitions, net of cash acquired |
- |
(287,482) |
|||||||
Investments in unconsolidated joint ventures |
(50) |
(4,905) |
|||||||
Return of investments in unconsolidated joint ventures |
- |
2,234 |
|||||||
Net cash used in investing activities |
(12,202) |
(301,059) |
|||||||
Cash flows from financing activities: |
|||||||||
Proceeds from borrowings |
131,500 |
290,000 |
|||||||
Repayments of borrowings |
(66,500) |
(60,000) |
|||||||
Payments for debt costs and credit agreement |
- |
(286) |
|||||||
Contributions by noncontrolling interests |
221 |
708 |
|||||||
Distributions to noncontrolling interests |
(360) |
(18,986) |
|||||||
Purchase of treasury stock |
- |
(813) |
|||||||
Taxes paid on vested stock |
(1,149) |
- |
|||||||
Net cash provided by financing activities |
63,712 |
210,623 |
|||||||
Effect of exchange rate changes |
(1,179) |
(182) |
|||||||
Net decrease in cash, cash equivalents, and restricted cash |
(68,652) |
(150,726) |
|||||||
Cash, cash equivalents and restricted cash: |
|||||||||
Beginning of year |
195,374 |
281,195 |
|||||||
End of period |
$ |
126,722 |
$ |
130,469 |
Contract Awards (in thousands): |
||||||||
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Federal Solutions |
$ |
615,690 |
$ |
808,540 |
||||
Critical Infrastructure |
350,405 |
412,528 |
||||||
Total Awards |
$ |
966,095 |
$ |
1,221,068 |
Backlog (in thousands): |
||||||||
Fiscal Year Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Federal Solutions: |
||||||||
Funded |
$ |
1,659,309 |
$ |
1,028,207 |
||||
Unfunded |
3,395,617 |
4,083,388 |
||||||
Total Federal Solutions |
5,054,926 |
5,111,595 |
||||||
Critical Infrastructure: |
||||||||
Funded |
2,707,701 |
3,442,374 |
||||||
Unfunded |
38,553 |
- |
||||||
Total Critical Infrastructure |
2,746,254 |
3,442,374 |
||||||
Total Backlog |
$ |
7,801,180 |
$ |
8,553,969 |
Book-To- |
||||||||
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Federal Solutions |
1.3 |
1.9 |
||||||
Critical Infrastructure |
0.7 |
0.9 |
||||||
Overall |
1.0 |
1.4 |
Revenue by Business Line (Unaudited) |
||||||||||||||||
Effective |
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Three Months Ended |
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|
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Revenue |
||||||||||||||||
Space & Geospatial Solutions |
$ |
45,757 |
$ |
65,768 |
$ |
49,944 |
$ |
53,861 |
||||||||
Cyber & Intelligence |
72,549 |
80,489 |
91,854 |
104,193 |
||||||||||||
Engineered Systems |
145,618 |
167,276 |
180,172 |
175,203 |
||||||||||||
Missile Defense & C5ISR |
158,888 |
164,964 |
164,205 |
167,166 |
||||||||||||
Federal Solutions revenues |
422,812 |
478,497 |
486,175 |
500,423 |
||||||||||||
Mobility Solutions |
373,980 |
401,842 |
435,749 |
436,119 |
||||||||||||
Connected Communities |
107,613 |
109,403 |
101,353 |
100,846 |
||||||||||||
Critical Infrastructure revenues |
481,593 |
511,245 |
537,102 |
536,965 |
||||||||||||
Total Revenue |
$ |
904,405 |
$ |
989,742 |
$ |
1,023,277 |
$ |
1,037,388 |
Non-GAAP Financial Information
The tables under "
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||||||||
Non-GAAP Financial Information |
||||||||
Reconciliation of Net Income to Adjusted EBITDA |
||||||||
(in thousands) |
||||||||
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Net income attributable to |
$ |
12,973 |
$ |
9,741 |
||||
Interest expense, net |
3,794 |
7,815 |
||||||
Income tax provision (benefit) |
5,084 |
1,886 |
||||||
Depreciation and amortization (a) |
32,409 |
30,591 |
||||||
Net income attributable to noncontrolling interests |
1,398 |
3,645 |
||||||
Equity based compensation (b) |
(7,721) |
3,850 |
||||||
Transaction-related costs (c) |
12,011 |
9,355 |
||||||
Restructuring (d) |
(33) |
2,218 |
||||||
Other (e) |
581 |
2,923 |
||||||
Adjusted EBITDA |
$ |
60,496 |
$ |
72,024 |
(a) |
Depreciation and amortization for the three months ended |
(b) |
Reflects equity-based compensation costs primarily related to cash-settled awards. |
(c) |
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. |
(d) |
Reflects costs associated with and related to our corporate restructuring initiatives. |
(e) |
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. |
|
||||||||
Non-GAAP Financial Information |
||||||||
Computation of Adjusted EBITDA Attributable to Noncontrolling Interests |
||||||||
(in thousands) |
||||||||
Three months ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Federal Solutions Adjusted EBITDA attributable to |
$ |
31,617 |
$ |
40,599 |
||||
Federal Solutions Adjusted EBITDA attributable to noncontrolling interests |
92 |
126 |
||||||
Federal Solutions Adjusted EBITDA including noncontrolling interests |
$ |
31,709 |
$ |
40,725 |
||||
Critical Infrastructure Adjusted EBITDA attributable to |
27,357 |
27,676 |
||||||
Critical Infrastructure Adjusted EBITDA attributable to noncontrolling interests |
1,430 |
3,623 |
||||||
Critical Infrastructure Adjusted EBITDA including noncontrolling interests |
$ |
28,787 |
$ |
31,299 |
||||
Total Adjusted EBITDA including noncontrolling interests |
$ |
60,496 |
$ |
72,024 |
|
||||||||
Non-GAAP Financial Information |
||||||||
Reconciliation of Net Income Attributable to |
||||||||
(in thousands, except per share information) |
||||||||
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Net income attributable to |
$ |
12,973 |
$ |
9,741 |
||||
Acquisition related intangible asset amortization |
22,699 |
20,906 |
||||||
Equity based compensation (a) |
(7,721) |
3,850 |
||||||
Transaction-related costs (b) |
12,011 |
9,355 |
||||||
Restructuring (c) |
(33) |
2,218 |
||||||
Other (d) |
581 |
2,923 |
||||||
Tax effect on adjustments |
(7,568) |
(488) |
||||||
Adjusted net income attributable to |
32,942 |
48,505 |
||||||
Adjusted earnings per share: |
||||||||
Weighted-average number of basic shares outstanding |
100,670 |
78,161 |
||||||
Weighted-average number of diluted shares outstanding |
100,899 |
78,161 |
||||||
Adjusted net income attributable to |
$ |
0.33 |
$ |
0.62 |
||||
Adjusted net income attributable to |
$ |
0.33 |
$ |
0.62 |
(a) |
Reflects equity-based compensation costs primarily related to cash-settled awards. |
(b) |
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. |
(c) |
Reflects costs associated with and related to our corporate restructuring initiatives |
(d) |
Includes a combination of gain/loss related to sale of fixed assets, software implementation costs, and other individually insignificant items that are non-recurring in nature. |
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