Press Release Details

Parsons Delivers Strong Fourth Quarter and Full Year 2019 Results on Solid Revenue Growth

03/10/2020
Supporting Materials:
Q4 2019 Financial Highlights:
- Revenue increases 12% from Q4 2018 to $1 billion, a company record
- Strong revenue growth driven by Federal Solutions organic growth of 14%
- Net income increases 84% to $14 million and net income margin increases 50 bps to 1.3%
- Adjusted EBITDA increases 62% to $88 million and adjusted EBITDA margin expands 260 bps to 8.5%
- Achieved notable recognition for corporate social responsibility initiatives
Fiscal Year 2019 Highlights:
- Revenue increases 11% from fiscal year 2018 to $4 billion, a company record
- Net income decreases 46% to $121 million and net income margin decreases 320 bps to 3%
- Adjusted EBITDA increases 32% to $325 million, and adjusted EBITDA margin expands 130 bps to 8.2%
- Completed two strategic Federal Solutions acquisitions; OGSystems and QRC Technologies
- Trailing 12-month book-to-bill ratio of 1.1x
- Won large contracts in growing and enduring markets

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
31, 2018

   

December
31, 2019

   

Dollars/
Percent

   

Percent

   

December
31, 2018

   

December
31, 2019

   

Dollars/
Percent

   

Percent

 

Revenue

 

$

402,882

   

$

500,423

   

$

97,541

     

24

%

 

$

1,479,007

   

$

1,887,907

   

$

408,900

     

28

%

Adjusted EBITDA

 

$

21,029

   

$

42,563

   

$

21,534

     

102

%

 

$

122,295

   

$

169,542

   

$

47,247

     

39

%

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
31, 2018

   

December
31, 2019

   

Dollars/

Percent

   

Percent

   

December
31, 2018

   

December
31, 2019

   

Dollars/

Percent

   

Percent

 

Revenue

 

$

526,058

   

$

536,965

   

$

10,907

     

2

%

 

$

2,081,501

   

$

2,066,905

   

$

(14,596)

     

-1

%

Adjusted EBITDA

 

$

33,186

   

$

45,265

   

$

12,079

     

36

%

 

$

123,949

   

$

155,505

   

$

31,556

     

25

%

Adjusted EBITDA margin

   

6.3

%

   

8.4

%

   

2.1

%

   

34

%

   

6.0

%

   

7.5

%

   

1.6

%

   

26

%

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

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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Media:

Investor Relations:

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,
2018

   

December 31,
2019

   

December 31,
2018

   

December 31,
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
31, 2018

   

December
31, 2019

   

December
31, 2018

   

December
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):

 
   

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,
2018

   

December 31,
2019

   

December 31,
2018

   

December 31,
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,
2018

   

December 31,
2019

   

December 31,
2018

   

December 31,
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,
2018

   

December 31,
2019

   

December 31,
2018

   

December 31,
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

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