Press Release Details

Parsons Delivers Strong Third Quarter 2020 Results

11/04/2020
Strategic Accomplishments
 
- Announced Braxton acquisition that accelerates growth strategy in rapidly expanding space market
 
- Awarded a $307 million contract with a classified customer
 
- Won strategic directed energy contract
 
Q3 2020 Financial Highlights
 
- Net income of $41 million and margin of 4.0%; adjusted EBITDA of $101 million and margin of 10.0%
 
- Cash flow from operating activities of $145 million
 
- Federal Solutions book-to-bill ratio of 1.5x
 
Financial Position and Outlook
 
- Narrows FY20 adjusted EBITDA guidance range; reiterates revenue and cash flow ranges
 
- Closed $400 million convertible note which will fully fund Braxton acquisition
 
- Pro forma net debt leverage ratio of 0.8x at end of Q3 2020 post Braxton acquisition

CENTREVILLE, Va., Nov. 4, 2020 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2020.

CEO Commentary

"We delivered strong third quarter results with record adjusted EBITDA and generated outstanding cash flow. We also recently announced a significant pending strategic acquisition in the rapidly expanding space market that exceeds all our disciplined quantitative and qualitative M&A criteria, while also preserving our financial flexibility for potential future acquisitions," said Chuck Harrington, chairman and chief executive officer of Parsons Corporation.

"Our strong operational performance enabled us to win large new contracts in high-priority national security markets. We continue to execute our strategic plan and look forward to further leveraging our strong balance sheet to drive additional shareholder value."

Third Quarter 2020 Results

Total revenue for the third quarter of 2020 decreased by $19 million, or 2%, from the prior year period to $1 billion. Operating income increased 24% to $66 million primarily as a result of an increase in equity in earnings and lower indirect, general and administrative (IG&A) expenses. Net income decreased to $41 million and net income margin decreased to 4.0% from the prior year period. These decreases were driven by the nonrecurring positive tax benefit impact included in the third quarter of 2019 from elections made in connection with the filing of the company's 2018 S-Corporation tax return and associated with the company's change in tax status. Diluted earnings per share (EPS) attributable to Parsons was $0.40 in the third quarter of 2020, compared to $0.57 in the prior year period.

Adjusted EBITDA including noncontrolling interests for the third quarter of 2020 was $101 million, a 13% increase over the prior year period. Adjusted EBITDA margin increased 130 basis points to 10.0%.

Adjusted EPS increased to $0.57, compared to $0.53 in the third quarter of 2019.

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

Segment Results

Federal Solutions Segment

   

Three Months Ended

   

Growth

   

Nine Months Ended

   

Growth

 
   

September 30,
2020

   

September 30,
2019

   

Dollars/

Percent

   

Percent

   

September 30,
2020

   

September 30,
2019

   

Dollars/

Percent

   

Percent

 

Revenue

 

$

498,156

   

$

486,175

   

$

11,981

     

2

%

 

$

1,457,937

   

$

1,387,484

   

$

70,453

     

5

%

Adjusted EBITDA

 

$

45,936

   

$

50,445

   

$

(4,509)

     

-9

%

 

$

125,401

   

$

126,979

   

$

(1,578)

     

-1

%

Adjusted EBITDA margin

   

9.2

%

   

10.4

%

   

-1.2

%

   

-11

%

   

8.6

%

   

9.2

%

   

-0.6

%

   

-6

%

Third quarter 2020 revenue increased $12 million, or 2%, compared to the prior year period primarily due to an increase in business volume on new and existing contracts.

Third quarter 2020 Federal Solutions Adjusted EBITDA including noncontrolling interests decreased by $5 million, or 9%, compared to the prior year period. Adjusted EBITDA margin decreased to 9.2% from the third quarter of 2019. These decreases were primarily driven by a large technical performance incentive fee recognized in the third quarter of 2019 and an increase in volume on contracts with pass-through costs during the third quarter 2020.

Critical Infrastructure Segment

   

Three Months Ended

   

Growth

   

Fiscal Year Ended

   

Growth

 
   

September 30,
2020

   

September 30,
2019

   

Dollars/

Percent

   

Percent

   

September 30,
2020

   

September 30,
2019

   

Dollars/

Percent

   

Percent

 

Revenue

 

$

506,080

   

$

537,102

   

$

(31,022)

     

-6

%

 

$

1,496,751

   

$

1,529,940

   

$

(33,189)

     

-2

%

Adjusted EBITDA

 

$

54,865

   

$

38,545

   

$

16,320

     

42

%

 

$

127,057

   

$

110,240

   

$

16,817

     

15

%

Adjusted EBITDA margin

   

10.8

%

   

7.2

%

   

3.7

%

   

51

%

   

8.5

%

   

7.2

%

   

1.3

%

   

18

%

Third quarter 2020 revenue decreased $31 million, or 6%, compared to the prior year period. The decrease was primarily driven by lower volume on contracts with pass-through revenue.

Third quarter 2020 Critical Infrastructure Adjusted EBITDA including noncontrolling interests increased by $16 million, or 42%, compared to the prior year period. Adjusted EBITDA margin increased to 10.8%. These increases were primarily driven by higher equity in earnings from unconsolidated joint ventures and lower IG&A costs.

Third Quarter 2020 Key Performance Indicators

  • Book-to-bill ratio (third quarter): 1.2x on net bookings of $1.2 billion. Book-to-bill ratio (trailing twelve-months): 1.0x on net bookings of $4.0 billion.
  • Total backlog: $7.8 billion, a 6% decrease from the third quarter of 2019 and a 1% increase from the second quarter of 2020.
  • Cash flow from operating activities: $145 million. This strong performance was driven by healthy cash collections.
  • Net cash: Cash and cash equivalents were $614 million and total debt was $587 million for a total net cash position of $27 million as of September 30, 2020. Following the $300 million all-cash acquisition of Braxton, as of September 30, 2020, pro forma net debt was approximately $273 million, positioning the company for continued investment in the implementation of its growth strategy. The company's pro forma net debt to trailing twelve-month adjusted EBITDA leverage ratio at the end of the third quarter of 2020 was 0.8x. The company defines net debt as total debt less cash and cash equivalents.

Third Quarter 2020 Significant Contract Wins

Parsons continues to win large single-award contracts in markets of national security importance.

  • Awarded a $307 million contract with a classified customer.
  • Awarded a $115 million option year contract on the Combatant Commands Cyber Mission Support (CCMS) contract by the U.S. General Services Administration.
  • Awarded a $51 million contract by the U.S. Air Force for the manufacturing, integration and sustainment of 13 Recovery of Airbase Denied by Ordnance (RADBO) systems. RADBO employs the Parsons developed ZEUS™ directed energy system to destroy unexploded ordinance with extreme accuracy in previously denied areas and improves the safety of deployed warfighters. This program is the first Department of Defense (DoD) ground-based laser system placed into production.

Recent Additional Corporate Highlights

Parsons continues to build on its strong track record of acquiring and integrating leading-edge technology companies in high-growth markets that broaden its portfolio and customer footprint. In addition, the company was recognized for its commitment to various important military friendly programs.

  • Announced on October 29, 2020, its intent to acquire Braxton Science & Technology Group, LLC (Braxton). The addition of Braxton complements Parsons' space portfolio, increases its product offerings in high-growth markets, and adds critical intellectual property that complements and expands the company's capabilities for the U.S. Air Force, Space Force, and research laboratories. The transaction is also consistent with Parsons' strategy of acquiring high-growth, defense, and intelligence technology companies with software and hardware intellectual property that enhance its technology and transactional revenue growth and margin profile.
  • Recognized numerous times as one of the best companies for its commitment to military personnel, veterans and their families.
    • Presented with the 2021 Military Friendly® Employer Silver designation by VIQTORY Media for its comprehensive veteran and military spouse employment, transition, retention and career development programs that ultimately improve the lives of veterans.
    • Named a "Best for Vets Employer – 2020" by Military Times, as one of the country's best employers and organizations with military-connected employment programs, benefits and support efforts.
    • Recognized by the Department of Defense for its commitment to supporting employees who serve in the National Guard and Reserve in the United States.

Fiscal Year 2020 Guidance

The company is narrowing its adjusted EBITDA guidance range for fiscal year 2020 and reiterating the revenue and cash flow from operating activities guidance ranges it initially issued on March 10, 2020, based on its financial results for the first nine months of 2020 and its current outlook for the remainder of year. The table below summarizes the company's fiscal year 2020 guidance.

(in millions

Current FY20 Guidance

Prior FY20 Guidance

Revenue

$3.95 - $4.05 billion

$3.95 - $4.05 billion

Adjusted EBITDA including non-controlling interest

$340 - $360 million

$330 - $360 million

Cash Flow from Operating Activities

$230 - $250 million

$230 - $250 million

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, as well as charges to interest, taxes, depreciation, amortization and other matters affecting net income will preclude the company from providing accurate net income guidance for fiscal year 2020.

Conference Call Information

Parsons will host a conference call today, November 4, 2020, at 8:00 a.m. ET to discuss the financial results for its third quarter 2020.

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 may also access a slide presentation on the website, which summarizes the company's third 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 6876155.

A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through November 11, 2020 at +1 855-859-2056 (domestic) or +1 404-537-3406 (international) and entering passcode 6876155.

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: the impact of COVID-19; 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, 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.

financial-news

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

(In thousands, except per share data)

(Unaudited)

 
   

For the Three Months Ended

   

For the Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Revenue

 

$

1,004,236

   

$

1,023,277

   

$

2,954,688

   

$

2,917,424

Direct cost of contracts

   

788,769

     

798,552

     

2,307,725

     

2,297,512

Equity in earnings of unconsolidated joint ventures

   

16,741

     

7,274

     

26,624

     

29,305

Indirect, general and administrative expenses

   

165,937

     

178,550

     

537,351

     

581,428

Operating income

   

66,271

     

53,449

     

136,236

     

67,789

Interest income

   

88

     

427

     

512

     

1,129

Interest expense

   

(5,475)

     

(4,909)

     

(13,656)

     

(19,577)

Other income (expense), net

   

1,653

     

(3,127)

     

1,916

     

(1,580)

Total other income (expense)

   

(3,734)

     

(7,609)

     

(11,228)

     

(20,028)

Income before income tax expense

   

62,537

     

45,840

     

125,008

     

47,761

Income tax (expense) benefit

   

(16,017)

     

15,453

     

(32,992)

     

67,063

Net income including noncontrolling interests

   

46,520

     

61,293

     

92,016

     

114,824

Net income attributable to noncontrolling interests

   

(5,862)

     

(4,481)

     

(15,086)

     

(8,012)

Net income attributable to Parsons Corporation

 

$

40,658

   

$

56,812

   

$

76,930

   

$

106,812

Earnings per share:

                             

Basic

 

$

0.40

   

$

0.57

   

$

0.76

   

$

1.19

Diluted

 

$

0.40

   

$

0.57

   

$

0.76

   

$

1.19

 

Weighted average number shares used to compute basic and diluted EPS (in thousands) (Unaudited) 

 
   

Three Months Ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Basic weighted average number of shares outstanding

   

100,737

     

99,435

     

100,700

     

89,977

Equity-based awards

   

378

     

-

     

321

     

-

Convertible senior notes

   

4,458

     

-

     

-

     

-

Diluted weighted average number of shares outstanding

   

105,573

     

99,435

     

101,022

     

89,977

 

Net income available to shareholders used to compute diluted EPS as a result of adopting the if-converted method in connection with the Convertible Senior Notes (in thousands) (Unaudited) 

 
   

Three Months Ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Net income attributable to Parsons Corporation

   

40,658

     

56,812

     

76,930

     

106,812

Convertible senior notes if-converted method interest adjustment

   

1,164

     

-

     

-

     

-

Diluted net income attributable to Parsons Corporation

   

41,822

     

56,812

     

76,930

     

106,812

 

PARSONS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(Unaudited)

 
     

September 30, 2020

   

December 31, 2019

Assets

             

Current assets:

             
 

Cash and cash equivalents (including $50,585 and $51,171 Cash of consolidated joint ventures)

 

$

614,031

   

$

182,688

 

Restricted cash and investments

   

3,726

     

12,686

 

Accounts receivable, net (including $259,691 and $166,355 Accounts receivable of consolidated joint ventures, net)

   

775,060

     

671,492

 

Contract assets (including $29,054 and $26,458 Contract assets of consolidated joint ventures)

   

610,893

     

575,089

 

Prepaid expenses and other current assets (including $3,974 and $11,182 Prepaid expenses and other current assets of consolidated joint ventures)

   

77,909

     

84,454

 

Total current assets

   

2,081,619

     

1,526,409

                 
 

Property and equipment, net (including $2,649 and $2,945 Property and equipment of consolidated joint ventures, net)

   

121,486

     

122,751

 

Right of use assets, operating leases

   

212,592

     

233,415

 

Goodwill

   

1,046,453

     

1,047,425

 

Investments in and advances to unconsolidated joint ventures

   

71,289

     

68,620

 

Intangible assets, net

   

194,082

     

259,858

 

Deferred tax assets

   

130,904

     

130,401

 

Other noncurrent assets

   

60,336

     

61,489

 

Total assets

 

$

3,918,761

   

$

3,450,368

                 

Liabilities and Shareholders' Equity (Deficit)

             

Current liabilities:

             
 

Accounts payable (including $72,949 and $85,869 Accounts payable of consolidated joint ventures)

 

$

208,307

   

$

216,613

 

Accrued expenses and other current liabilities (including $141,476 and $74,857 Accrued expenses and other current liabilities of consolidated joint ventures)

   

725,867

     

639,863

 

Contract liabilities (including $44,267 and $32,638 Contract liabilities of consolidated joint ventures)

   

212,373

     

230,681

 

Short-term lease liabilities, operating leases

   

48,661

     

49,994

 

Income taxes payable

   

1,342

     

7,231

 

Short-term debt

   

50,000

     

-

 

Total current liabilities

   

1,246,550

     

1,144,382

 

Long-term employee incentives

   

21,535

     

56,928

 

Long-term debt

   

537,119

     

249,353

 

Long-term lease liabilities, operating leases

   

189,319

     

203,624

 

Deferred tax liabilities

   

9,273

     

9,621

 

Other long-term liabilities

   

145,494

     

125,704

 

Total liabilities

   

2,149,290

     

1,789,612

Contingencies (Note 12)

             

Shareholders' equity (deficit):

             
 

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,498,582 and 146,440,701 shares issued; 24,637,043 and 21,772,888 public shares outstanding; 76,090,531 and 78,896,806 ESOP shares outstanding

   

146,498

     

146,441

 

Treasury stock, 45,771,008 shares at cost

   

(934,240)

     

(934,240)

 

Additional paid-in capital

   

2,675,383

     

2,649,975

 

Accumulated deficit

   

(142,095)

     

(218,025)

 

Accumulated other comprehensive loss

   

(18,049)

     

(14,261)

 

Total Parsons Corporation shareholders' equity

   

1,727,497

     

1,629,890

 

Noncontrolling interests

   

41,974

     

30,866

 

Total shareholders' equity

   

1,769,471

     

1,660,756

 

Total liabilities, redeemable common stock and shareholders' equity

 

$

3,918,761

   

$

3,450,368

 

PARSONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
     

For the Nine Months Ended

     

September 30,
2020

   

September 30,
2019

Cash flows from operating activities:

             
 

Net income including noncontrolling interests

 

$

92,016

   

$

114,824

 

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

             
 

Depreciation and amortization

   

95,442

     

92,692

 

Amortization of debt issue costs

   

760

     

802

 

Amortization of convertible notes discount

   

1,277

     

-

 

Gain on disposal of property and equipment

   

(22)

     

1,045

 

Provision for doubtful accounts

   

54

     

(964)

 

Deferred taxes

   

(763)

     

(105,161)

 

Foreign currency transaction gains and losses

   

431

     

1,689

 

Equity in earnings of unconsolidated joint ventures

   

(26,624)

     

(29,305)

 

Return on investments in unconsolidated joint ventures

   

31,189

     

32,848

 

Stock-based compensation

   

11,044

     

9,224

 

Contributions of treasury stock

   

42,006

     

36,779

 

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

   joint ventures:

             
 

Accounts receivable

   

(106,487)

     

(31,726)

 

Contract assets

   

(34,931)

     

(59,161)

 

Prepaid expenses and current assets

   

7,649

     

2,980

 

Accounts payable

   

(8,074)

     

(6,946)

 

Accrued expenses and other current liabilities

   

48,901

     

40,186

 

Contract liabilities

   

(18,094)

     

20,703

 

Income taxes

   

(6,761)

     

(3,019)

 

Other long-term liabilities

   

(15,574)

     

13,138

 

Net cash provided by operating activities

   

113,439

     

130,628

Cash flows from investing activities:

             
 

Capital expenditures

   

(29,178)

     

(44,030)

 

Proceeds from sale of property and equipment

   

1,053

     

2,824

 

Payments for acquisitions, net of cash acquired

   

-

     

(495,690)

 

Investments in unconsolidated joint ventures

   

(7,969)

     

(11,446)

 

Return of investments in unconsolidated joint ventures

   

17

     

6,632

 

Net cash used in investing activities

   

(36,077)

     

(541,710)

Cash flows from financing activities:

             
 

Proceeds from borrowings under credit agreement

   

212,900

     

530,000

 

Repayments of borrowings under credit agreement

   

(212,900)

     

(710,000)

 

Payments for debt costs and credit agreement

   

-

     

(286)

 

Proceeds from issuance of convertible notes

   

400,000

     

-

 

Payments for purchase of bond hedges

   

(54,968)

     

-

 

Proceeds from issuance of warrants

   

13,808

     

-

 

Transaction costs paid in connection with convertible notes issuance

   

(10,307)

     

-

 

Contributions by noncontrolling interests

   

491

     

8,999

 

Distributions to noncontrolling interests

   

(4,469)

     

(35,378)

 

Purchase of treasury stock

   

-

     

(819)

 

Taxes paid on vested stock

   

(1,149)

     

-

 

Proceeds from issuance of common stock

   

1,684

     

536,879

 

Dividend paid

   

-

     

(52,093)

 

Net cash provided by financing activities

   

345,090

     

277,302

 

Effect of exchange rate changes

   

(69)

     

(953)

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

   

422,383

     

(134,733)

 

Cash, cash equivalents and restricted cash:

             
 

Beginning of year

   

195,374

     

281,195

 

End of period

 

$

617,757

   

$

146,462

 

Contract Awards (in thousands):

 
   

Three Months Ended

   

Nine Months Ended

 
   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

 

Federal Solutions

 

$

737,643

   

$

845,559

   

$

1,786,473

   

$

2,076,928

 

Critical Infrastructure

   

432,916

     

289,665

     

1,355,272

     

1,257,506

 

Total Awards

 

$

1,170,559

   

$

1,135,224

   

$

3,141,745

   

$

3,334,434

 

 

Backlog (in thousands):

 
   

September 30,
2020

   

September 30,
2019

Federal Solutions:

             

Funded

 

$

1,175,924

   

$

1,214,919

Unfunded

   

3,901,231

     

3,946,784

Total Federal Solutions

   

5,077,155

     

5,161,703

Critical Infrastructure:

             

Funded

   

2,619,454

     

3,050,525

Unfunded

   

80,001

     

38,286

Total Critical Infrastructure

   

2,699,455

     

3,088,811

Total Backlog

 

$

7,776,610

   

$

8,250,514

 

Book-To-Bill Ratio:

 
   

Three Months Ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Federal Solutions

   

1.5

     

1.7

     

1.2

     

1.5

Critical Infrastructure

   

0.9

     

0.5

     

0.9

     

0.8

Overall

   

1.2

     

1.1

     

1.1

     

1.1

Non-GAAP Financial Information

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

PARSONS CORPORATION

Non-GAAP Financial Information

Reconciliation of Net Income to Adjusted EBITDA

(in thousands)

 
   

Three Months Ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Net income attributable to Parsons Corporation

 

$

40,658

   

$

56,812

   

$

76,930

   

$

106,812

Interest expense, net

   

5,387

     

4,482

     

13,144

     

18,448

Income tax provision (benefit)

   

16,017

     

(15,453)

     

32,992

     

(67,063)

Depreciation and amortization (a)

   

30,952

     

31,027

     

95,442

     

92,692

Net income attributable to noncontrolling interests

   

5,862

     

4,481

     

15,086

     

8,012

Equity based compensation (b)

   

(991)

     

(1,657)

     

4,142

     

45,504

Transaction-related costs (c)

   

2,411

     

9,891

     

11,937

     

26,961

Restructuring (d)

   

365

     

309

     

1,475

     

2,880

Other (e)

   

140

     

(902)

     

1,310

     

2,973

Adjusted EBITDA

 

$

100,801

   

$

88,990

   

$

252,458

   

$

237,219

   

(a)

Depreciation and amortization for the three and nine months ended September 30, 2020 is $25.7 million and $80.1 million, respectively in the Federal Solutions Segment and $5.3 million and $15.4 million, respectively in the Critical Infrastructure Segment.  Depreciation and amortization for the three and nine months ended September 30, 2019 is $26.0 million and $75.1 million, respectively in the Federal Solutions Segment and $5.0 million and $17.6 million, respectively in the Critical Infrastructure Segment. 

(b) 

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.

 

PARSONS CORPORATION

Non-GAAP Financial Information

Computation of Adjusted EBITDA Attributable to Noncontrolling Interests

(in thousands)

 

(in thousands)

 

Three months ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Federal Solutions Adjusted EBITDA attributable to
Parsons Corporation

 

$

45,874

   

$

50,359

   

$

125,191

   

$

126,658

Federal Solutions Adjusted EBITDA attributable to
noncontrolling interests

   

62

     

86

     

210

     

321

Federal Solutions Adjusted EBITDA including
noncontrolling interests

 

$

45,936

   

$

50,445

   

$

125,401

   

$

126,979

                               

Critical Infrastructure Adjusted EBITDA attributable to
Parsons Corporation

   

48,856

     

33,976

     

111,732

     

102,177

Critical Infrastructure Adjusted EBITDA attributable to
noncontrolling interests

   

6,009

     

4,569

     

15,325

     

8,063

Critical Infrastructure Adjusted EBITDA including
noncontrolling interests

 

$

54,865

   

$

38,545

   

$

127,057

   

$

110,240

                               

Total Adjusted EBITDA including noncontrolling interests

 

$

100,801

   

$

88,990

   

$

252,458

   

$

237,219

 

PARSONS CORPORATION

Non-GAAP Financial Information

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

(in thousands, except per share information)

 
   

Three Months Ended

   

Nine Months Ended

   

September 30,
2020

   

September 30,
2019

   

September 30,
2020

   

September 30,
2019

Net income attributable to Parsons Corporation

 

$

40,658

   

$

56,812

   

$

76,930

   

$

106,812

Deferred tax asset recognition (a)

   

737

     

(29,309)

     

737

     

(85,672)

Acquisition related intangible asset amortization

   

20,881

     

22,143

     

65,707

     

64,438

Equity based compensation (b)

   

(991)

     

(1,657)

     

4,142

     

45,504

Transaction-related costs (c)

   

2,411

     

9,891

     

11,937

     

26,961

Restructuring (d)

   

365

     

309

     

1,475

     

2,880

Other (e)

   

140

     

(902)

     

1,310

     

2,973

Tax effect on adjustments

   

(6,660)

     

(5,025)

     

(22,251)

     

(23,091)

Adjusted net income attributable to Parsons Corporation

   

57,541

     

52,262

     

139,987

     

140,805

Adjusted earnings per share:

                             

Weighted-average number of basic shares
outstanding

   

100,737

     

99,435

     

100,700

     

89,977

Weighted-average number of diluted shares
outstanding (f)

   

101,115

     

99,435

     

101,022

     

89,977

Adjusted net income attributable to Parsons
Corporation
per basic share

 

$

0.57

   

$

0.53

   

$

1.39

   

$

1.56

Adjusted net income attributable to Parsons
Corporation
per diluted share

 

$

0.57

   

$

0.53

   

$

1.39

   

$

1.56

   

(a)

Reflects the reversal of a deferred tax asset as a result of the company converting from an S-Corporation to a C-Corporation.

(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.

(f) 

Excludes dilutive effect of convertible senior notes due to bond hedge.

 

Parsons Quest Mark Logo (PRNewsfoto/Parsons Corporation)

 

 

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SOURCE Parsons Corporation

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