Parsons Reports First Quarter 2021 Results
CEO Commentary
"We delivered strong bookings and significant margin expansion with results in line with our internal expectations and historical seasonal patterns. We continue to win large new contracts and I credit that to our focus on technology solutions and our exceptional team," said
"We are off to a strong start to the second quarter with approximately
First Quarter 2021 Results
Total revenue for the first quarter of 2021 decreased by
Adjusted EBITDA including noncontrolling interests for the first quarter of 2021 was
Segment Results
Federal Solutions Segment
Three Months Ended |
Growth |
|||||||||||||||
March 31, |
March 31, |
Dollars/ Percent |
Percent |
|||||||||||||
Revenue |
$ |
452,069 |
$ |
477,571 |
$ |
(25,502) |
-5 |
% |
||||||||
Adjusted EBITDA |
$ |
32,057 |
$ |
31,709 |
$ |
348 |
1 |
% |
||||||||
Adjusted EBITDA margin |
7.1 |
% |
6.6 |
% |
0.5 |
% |
7 |
% |
First quarter 2021 revenue decreased
First quarter 2021 Federal Solutions adjusted EBITDA including noncontrolling interests increased by
Critical Infrastructure Segment
Three Months Ended |
Growth |
|||||||||||||||
March 31, |
March 31, |
Dollars/ Percent |
Percent |
|||||||||||||
Revenue |
$ |
422,628 |
$ |
493,422 |
$ |
(70,794) |
-14 |
% |
||||||||
Adjusted EBITDA |
$ |
36,642 |
$ |
28,787 |
$ |
7,855 |
27 |
% |
||||||||
Adjusted EBITDA margin |
8.7 |
% |
5.8 |
% |
2.8 |
% |
49 |
% |
First quarter 2021 Critical Infrastructure revenue decreased
First quarter 2021 adjusted EBITDA including noncontrolling interests increased by
First Quarter 2021 Key Performance Indicators
- Book-to-bill ratio (first quarter): 1.2x on net bookings of
$1.0 billion . Book-to-bill ratio (trailing twelve-months): 1.1x on net bookings of$4.2 billion . - Total backlog:
$8.2 billion , a 4.7% increase from the first quarter of 2020. - Cash flow used in operating activities: First quarter 2021:
$66 million , compared to cash flow used in operating activities of$119 million in the first quarter of 2020. - Net Debt: Cash and cash equivalents were
$398 million and total debt was$640 million . The company's net debt to trailing twelve-month adjusted EBITDA leverage ratio at the end of the first quarter of 2021 was 0.7x. The company defines net debt as total debt less cash and cash equivalents.
Recent Significant Contract Wins
Parsons continues to win large strategic contracts in growing and enduring markets. During the first quarter of 2021, the company won six contracts worth over
- Awarded a
$618 million contract by theGeneral Services Administration (GSA) after the end of Q1 2021 for solutions that advance C5ISR, exercises, operations, and information services (CEOIS) for global partners including the Combatant Commands,Department of State , service components and Director of National Intelligence agencies. - Booked
$140 million of work under theU.S. Postal Service's (USPS) Nationwide Program Management Services (PMS) contract. Parsons' experience in program management, architectural and engineering design, and construction management supports theUSPS' ongoing modernization and Americans with Disabilities Act access efforts ensuring uninterrupted delivery of reliable and affordable mail service to our nation and expanding access toUSPS facilities. - Awarded a
$114 million contract by Ashghal, thePublic Works Authority of Qatar (PWA), to provide program and construction management services. Parsons has been a trusted partner for the PWA for over 20 years, and this project will continue to enhance the state ofQatar's infrastructure by improving livability for residents and advancing future development plans. - Awarded an
$80 million contract for program management by the Architect of theCapitol ,Washington D.C. , ensuring the continued progress and excellence of their projects from theU.S Capitol Campus;Northern Virginia ;Fort Meade, Md. ; and theBlue Plains Complex located in S.EWashington, D.C. - Awarded a
94 million CAD (~$75 million USD ) contract for new construction management work for remediation efforts on theGiant Mine in theNorthwest Territories, Canada . The amended contract, for one of the largest environmental remediation projects inCanada , includes freeze pad construction for the highly innovative thermosyphon-based process that will freeze the arsenic trioxide waste in place at the mine improving the environment and health and safety of local residents and wildlife. - Awarded a
$69 million contract by theU.S. Army Combat Capabilities Development Command Army Research Laboratory to develop exploratory, disruptive technology that will provideUnited States warfighters with the technological edge as part of the Army's future vision. - Awarded a
$45 million contract by theCentral Texas Regional Mobility Authority for design work on improvements toUnited States Highway 183 . These improvements will advance mobility goals in the region, providing a reliable transit route for motorists and emergency response crews, while building connections for shared use, including sidewalks and paths for bicycles and pedestrians with goals of reduced carbon emissions and improved safety for motorists, pedestrians, and cyclists. - Awarded a
$12.6 billion multiple-award indefinite-delivery, indefinite-quantity (IDIQ) contract by theDefense Intelligence Agency (DIA) for the Solutions for Information Technology Enterprise III (SITE III). The SITE III contract provides managed services directed towards improving integration, information sharing, and information safeguarding through the use of a streamlined information technology (IT) approach. - Awarded a
$2 billion multiple-award IDIQ contract by theU.S. Air Force Civil Engineer Center for architecture engineering capabilities, including design, construction management, and the restoration and modernization of Air Force Bases worldwide. Parsons looks forward to bringing advances in energy efficiency, climate resiliency, and application of renewable sources to maximize each installation's potential and drive overall mission success. - Awarded a
$250 million multiple-award IDIQ contract by theNaval Information Warfare Center (NIWC) Pacific for research, development, test, and technical engineering for maritime intelligence, surveillance, and reconnaissance (ISR) and information operations. - Awarded a
$100 million multiple-award IDIQ contract by NIWC Pacific for support in the identification, implementation, development, and enhancement of Command, Control, Communications, Computers, & Intelligence (C4I) and the network-centric warfare.
Recent Additional Corporate Highlights
Parsons continues to be recognized for its long-standing industry leading Environmental, Social and Governance (ESG) initiatives. During the quarter, Parsons won distinguished awards for its hiring, diversity, and ethical business practices. In addition, the company updated its executive compensation policies to tie a portion to its core values.
- Announced that Parsons' board of directors elected
Carey Smith as chief executive officer, effectiveJuly 1st, 2021 .Ms. Smith succeeds Charles "Chuck" Harrington, who announced his retirement after nearly 40 years with the company. Harrington will continue to serve on Parsons' Board as executive chairman upon his retirement. - Recognized as a top 50 company by both
Minority Engineer Magazine andWoman Engineer Magazine . These publications select the top companies in the country for which they would most like to work or whom they believe would provide a positive working environment for minority and women engineers. - Recognized by the
Human Rights Campaign Foundation's 2021 Corporate Equality Index for its active support and inclusion of the lesbian, gay, bisexual, transgender, questioning (LGBTQ+) community. - Named by
Ethisphere as one of the 2021 World's Most Ethical Companies®. The company has been honored with this recognition for 12 consecutive years. - Parsons' Braxton subsidiary has been awarded the prestigious Tibbitts Award, which recognizes excellence in Small Business Innovation and Research (SBIR) and Small Business Technology Transfer efforts.
- Parsons Board meets quarterly to discuss its ESG initiatives and starting in 2021 the company's CEO and other named executive officers will have a portion of their annual bonuses tied to the company's core values of diversity, integrity, safety, sustainability, quality, and innovation, of which employee diversity is the largest component.
Fiscal Year 2021 Guidance
The company is reiterating the fiscal year 2021 guidance it issued on
Fiscal Year 2021 Guidance |
|
Revenue |
|
Adjusted EBITDA including non-controlling interest |
|
Cash Flow from Operating Activities |
|
Net income guidance is not presented as the company believes volatility associated with interest, taxes, depreciation, amortization and other matters affecting net income, including but not limited to one-time and nonrecurring events and impact of M&A, will preclude the company from providing accurate net income guidance for fiscal year 2021.
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 may also access a slide presentation on the website, which summarizes the company's first quarter 2021 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 6499894.
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: the impact of COVID-19; any issue that compromises our relationships with the
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 statements 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: |
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(703) 797-3001 |
(571) 655-8264 |
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
||||||||
For the Three Months Ended |
||||||||
|
March 31, 2020 |
|||||||
Revenue |
$ |
874,697 |
$ |
970,993 |
||||
Direct cost of contracts |
669,082 |
769,632 |
||||||
Equity in earnings of unconsolidated joint ventures |
7,530 |
6,114 |
||||||
Selling, general and administrative expenses |
187,522 |
183,774 |
||||||
Operating income |
25,623 |
23,701 |
||||||
Interest income |
98 |
228 |
||||||
Interest expense |
(4,541) |
(4,022) |
||||||
Other income (expense), net |
(1,791) |
(452) |
||||||
Total other income (expense) |
(6,234) |
(4,246) |
||||||
Income before income tax expense |
19,389 |
19,455 |
||||||
Income tax expense |
(5,375) |
(5,084) |
||||||
Net income including noncontrolling interests |
14,014 |
14,371 |
||||||
Net income attributable to noncontrolling interests |
(4,975) |
(1,398) |
||||||
Net income attributable to |
$ |
9,039 |
$ |
12,973 |
||||
Earnings per share: |
||||||||
Basic |
$ |
0.09 |
$ |
0.13 |
||||
Diluted |
$ |
0.09 |
$ |
0.13 |
Weighted average number shares used to compute basic and diluted EPS (in thousands) (Unaudited) |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Basic weighted average number of shares outstanding |
102,376 |
100,670 |
||||||
Stock-based awards |
573 |
230 |
||||||
Convertible senior notes |
8,917 |
- |
||||||
Diluted weighted average number of shares outstanding |
111,866 |
100,899 |
||||||
Net income available to shareholders used to compute diluted EPS as a result of adopting the if-converted |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Net income attributable to |
9,039 |
12,973 |
||||||
Convertible senior notes if-converted method interest adjustment |
528 |
- |
||||||
Diluted net income attributable to |
9,567 |
12,973 |
CONSOLIDATED BALANCE SHEETS (In thousands, except share information) (Unaudited) |
|||||||||
|
|
||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents (including |
$ |
398,178 |
$ |
483,609 |
|||||
Restricted cash and investments |
1,233 |
3,606 |
|||||||
Accounts receivable, net (including |
693,584 |
698,578 |
|||||||
Contract assets (including |
607,676 |
576,568 |
|||||||
Prepaid expenses and other current assets (including |
101,536 |
80,769 |
|||||||
Total current assets |
1,802,207 |
1,843,130 |
|||||||
Property and equipment, net (including |
115,544 |
121,027 |
|||||||
Right of use assets, operating leases |
204,189 |
210,398 |
|||||||
|
1,261,189 |
1,261,978 |
|||||||
Investments in and advances to unconsolidated joint ventures |
76,017 |
68,975 |
|||||||
Intangible assets, net |
222,451 |
245,958 |
|||||||
Deferred tax assets |
143,022 |
130,200 |
|||||||
Other noncurrent assets |
40,382 |
56,038 |
|||||||
Total assets |
$ |
3,865,001 |
$ |
3,937,704 |
|||||
Liabilities and Shareholders' Equity |
|||||||||
Current liabilities: |
|||||||||
Accounts payable (including |
$ |
219,220 |
$ |
225,679 |
|||||
Accrued expenses and other current liabilities (including |
595,058 |
650,753 |
|||||||
Contract liabilities (including |
186,028 |
201,864 |
|||||||
Short-term lease liabilities, operating leases |
54,113 |
54,133 |
|||||||
Income taxes payable |
6,248 |
4,980 |
|||||||
Short-term debt |
50,000 |
50,000 |
|||||||
Total current liabilities |
1,110,667 |
1,187,409 |
|||||||
Long-term employee incentives |
21,218 |
21,828 |
|||||||
Long-term debt |
590,346 |
539,998 |
|||||||
Long-term lease liabilities, operating leases |
175,584 |
182,467 |
|||||||
Deferred tax liabilities |
13,146 |
12,285 |
|||||||
Other long-term liabilities |
113,598 |
132,300 |
|||||||
Total liabilities |
2,024,559 |
2,076,287 |
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Contingencies (Note 12) |
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Shareholders' equity: |
|||||||||
Common stock, |
146,654 |
146,609 |
|||||||
|
(899,328) |
(899,328) |
|||||||
Additional paid-in capital |
2,667,130 |
2,700,925 |
|||||||
Accumulated deficit |
(108,720) |
(120,569) |
|||||||
Accumulated other comprehensive loss |
(8,937) |
(13,865) |
|||||||
|
1,796,799 |
1,813,772 |
|||||||
Noncontrolling interests |
43,643 |
47,645 |
|||||||
Total shareholders' equity |
1,840,442 |
1,861,417 |
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Total liabilities and shareholders' equity |
$ |
3,865,001 |
$ |
3,937,704 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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For the Three Months Ended |
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|
March 31, 2020 |
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Cash flows from operating activities: |
|||||||||
Net income including noncontrolling interests |
$ |
14,014 |
$ |
14,371 |
|||||
Adjustments to reconcile net income to net cash used in operating activities |
|||||||||
Depreciation and amortization |
34,673 |
32,409 |
|||||||
Amortization of debt issue costs |
665 |
173 |
|||||||
Loss (gain) on disposal of property and equipment |
267 |
(104) |
|||||||
Deferred taxes |
403 |
5,514 |
|||||||
Foreign currency transaction gains and losses |
2,220 |
1,383 |
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Equity in earnings of unconsolidated joint ventures |
(7,530) |
(6,114) |
|||||||
Return on investments in unconsolidated joint ventures |
13,180 |
6,551 |
|||||||
Stock-based compensation |
7,206 |
2,252 |
|||||||
Contributions of treasury stock |
13,153 |
14,871 |
|||||||
Changes in assets and liabilities, net of acquisitions and newly consolidated joint ventures: |
|||||||||
Accounts receivable |
2,597 |
(91,734) |
|||||||
Contract assets |
(31,711) |
(52,346) |
|||||||
Prepaid expenses and other assets |
(5,386) |
(3,766) |
|||||||
Accounts payable |
(6,658) |
19,788 |
|||||||
Accrued expenses and other current liabilities |
(68,928) |
(24,336) |
|||||||
Contract liabilities |
(16,086) |
11,416 |
|||||||
Income taxes |
1,268 |
(6,212) |
|||||||
Other long-term liabilities |
(19,312) |
(43,099) |
|||||||
Net cash used in operating activities |
(65,965) |
(118,983) |
|||||||
Cash flows from investing activities: |
|||||||||
Capital expenditures |
(4,449) |
(12,637) |
|||||||
Proceeds from sale of property and equipment |
164 |
485 |
|||||||
Payments for acquisitions, net of cash acquired |
1,064 |
- |
|||||||
Investments in unconsolidated joint ventures |
(22,240) |
(50) |
|||||||
Return of investments in unconsolidated joint ventures |
116 |
- |
|||||||
Proceeds from sales of investments in unconsolidated joint ventures |
14,300 |
- |
|||||||
Net cash used in investing activities |
(11,045) |
(12,202) |
|||||||
Cash flows from financing activities: |
|||||||||
Proceeds from borrowings under credit agreement |
- |
131,500 |
|||||||
Repayments of borrowings under credit agreement |
- |
(66,500) |
|||||||
Contributions by noncontrolling interests |
7 |
221 |
|||||||
Distributions to noncontrolling interests |
(8,989) |
(360) |
|||||||
Taxes paid on vested stock |
(2,242) |
(1,149) |
|||||||
Net cash (used in) provided by financing activities |
(11,224) |
63,712 |
|||||||
Effect of exchange rate changes |
430 |
(1,179) |
|||||||
Net decrease in cash, cash equivalents, and restricted cash |
(87,804) |
(68,652) |
|||||||
Cash, cash equivalents and restricted cash: |
|||||||||
Beginning of year |
487,215 |
195,374 |
|||||||
End of period |
$ |
399,411 |
$ |
126,722 |
Contract Awards (in thousands): |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Federal Solutions |
$ |
424,621 |
$ |
615,690 |
||||
Critical Infrastructure |
586,353 |
350,405 |
||||||
Total Awards |
$ |
1,010,974 |
$ |
966,095 |
||||
Backlog (in thousands): |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Federal Solutions: |
||||||||
Funded |
$ |
1,127,717 |
$ |
1,338,903 |
||||
Unfunded |
4,010,656 |
3,716,023 |
||||||
Total Federal Solutions |
5,138,373 |
5,054,926 |
||||||
Critical Infrastructure: |
||||||||
Funded |
2,956,255 |
2,707,701 |
||||||
Unfunded |
75,498 |
38,553 |
||||||
Total Critical Infrastructure |
3,031,753 |
2,746,254 |
||||||
Total Backlog |
$ |
8,170,126 |
$ |
7,801,180 |
||||
Book-To- |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Federal Solutions |
0.9 |
1.3 |
||||||
Critical Infrastructure |
1.4 |
0.7 |
||||||
Overall |
1.2 |
1.0 |
Non-GAAP Financial Information
The tables under "
Non-GAAP Financial Information Reconciliation of Net Income to Adjusted EBITDA (in thousands) |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Net income attributable to |
$ |
9,039 |
$ |
12,973 |
||||
Interest expense, net |
4,443 |
3,794 |
||||||
Income tax provision (benefit) |
5,375 |
5,084 |
||||||
Depreciation and amortization (a) |
34,673 |
32,409 |
||||||
Net income attributable to noncontrolling interests |
4,975 |
1,398 |
||||||
Equity based compensation (b) |
6,980 |
(7,721) |
||||||
Transaction-related costs (c) |
2,646 |
12,011 |
||||||
Restructuring (d) |
77 |
(33) |
||||||
Other (e) |
491 |
581 |
||||||
Adjusted EBITDA |
$ |
68,699 |
$ |
60,496 |
(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) |
||||||||
(in thousands) |
Three months ended |
|||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Federal Solutions Adjusted EBITDA attributable to |
$ |
31,982 |
$ |
31,617 |
||||
Federal Solutions Adjusted EBITDA attributable to noncontrolling interests |
75 |
92 |
||||||
Federal Solutions Adjusted EBITDA including noncontrolling interests |
$ |
32,057 |
$ |
31,709 |
||||
Critical Infrastructure Adjusted EBITDA attributable to |
31,657 |
27,357 |
||||||
Critical Infrastructure Adjusted EBITDA attributable to noncontrolling interests |
4,985 |
1,430 |
||||||
Critical Infrastructure Adjusted EBITDA including noncontrolling interests |
$ |
36,642 |
$ |
28,787 |
||||
Total Adjusted EBITDA including noncontrolling interests |
$ |
68,699 |
$ |
60,496 |
Non-GAAP Financial Information Reconciliation of Net Income Attributable to (in thousands, except per share information) |
||||||||
Three Months Ended |
||||||||
March 31, 2021 |
March 31, 2020 |
|||||||
Net income attributable to |
$ |
9,039 |
$ |
12,973 |
||||
Acquisition related intangible asset amortization |
24,524 |
22,699 |
||||||
Equity-based compensation (a) |
6,980 |
(7,721) |
||||||
Transaction-related costs (b) |
2,646 |
12,011 |
||||||
Restructuring (c) |
77 |
(33) |
||||||
Other (d) |
491 |
581 |
||||||
Tax effect on adjustments |
(8,820) |
(7,568) |
||||||
Adjusted net income attributable to |
34,937 |
32,942 |
||||||
Adjusted earnings per share: |
||||||||
Weighted-average number of basic shares outstanding |
102,376 |
100,670 |
||||||
Weighted-average number of diluted shares outstanding (e) |
102,949 |
100,899 |
||||||
Adjusted net income attributable to |
$ |
0.34 |
$ |
0.33 |
||||
Adjusted net income attributable to |
$ |
0.34 |
$ |
0.33 |
(a) |
Reflects equity-based compensation costs primarily related to cash-settled awards. |
(b) |
Reflects costs incurred in connection with acquisitions 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. |
(e) |
Excludes dilutive effect of convertible senior notes due to bond hedge. |
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