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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary highlights strong financial performance with increased revenue and EBITDA guidance, and positive growth outlooks for critical infrastructure and federal solutions. The Q&A section supports these positives with expectations of growth from new contracts and federal funding. The announcement of increased guidance and growth in key segments, despite some uncertainties, suggests a positive market reaction.
Adjusted EBITDA Margin Expanded by 60 basis points to 9.8%, driven by improved program performance and accretive acquisitions.
Total Revenue (excluding confidential contract) Grew by 14% year-over-year, with 9% organic growth. This was driven by double-digit growth in critical infrastructure protection, transportation, and urban development markets.
Total Revenue (including confidential contract) Decreased by 10% year-over-year, with a 14% decline on an organic basis, due to lower volume on the fixed-price confidential contract.
Critical Infrastructure Revenue Increased by $129 million or 18% year-over-year, with 13% organic growth. Growth was driven by the ramp-up of recent contract wins and growth on existing contracts in North America and the Middle East.
Critical Infrastructure Adjusted EBITDA Margin Increased by 360 basis points to 10.3%, driven by improved program performance, ramp-up of recent awards, and accretive acquisitions.
Federal Solutions Revenue (excluding confidential contract) Increased by 9% year-over-year, with 5% organic growth. Growth was driven by critical infrastructure protection, transportation, and space and missile defense markets.
Federal Solutions Revenue (including confidential contract) Decreased by 29% year-over-year, with a 31% decline on an organic basis, due to lower volume on the fixed-price confidential contract.
Federal Solutions Adjusted EBITDA Margin Decreased to 9.2%, primarily impacted by lower volume on the fixed-price confidential contract.
Operating Cash Flow Generated $163 million in Q3 2025, exceeding expectations and driving free cash flow conversion of 135% for the quarter.
Net Debt Leverage Ratio Ended Q3 2025 at 1.4x, reflecting a strong balance sheet.
Book-to-Bill Ratio (Enterprise) Reported at 1.0x for Q3 2025, continuing a streak of trailing 12-month book-to-bill ratios of 1.0x or greater since the IPO.
Book-to-Bill Ratio (Critical Infrastructure) Achieved 1.1x for Q3 2025, marking the 20th consecutive quarter with a ratio of 1.0x or greater.
Book-to-Bill Ratio (Federal Solutions) Reported at 0.8x for Q3 2025.
Backlog Totaled $8.8 billion at the end of Q3 2025, a 1% increase year-over-year. Funded backlog reached $6.4 billion, a 10% increase year-over-year.
PFAS Contracts: Awarded 3 PFAS contracts worth $23 million, expanding presence in the $40 billion PFAS market. Year-to-date, won nearly $70 million in PFAS contracts.
Water Market Acquisition: Acquired Applied Sciences Consulting, specializing in water and storm water solutions, enhancing presence in Florida's water infrastructure market.
Middle East Expansion: Awarded two multiyear defense and security contracts by Middle East governments, valued at over $100 million, for national security and border security infrastructure.
Georgia Infrastructure: Secured a $133 million contract for Georgia State Route 400 Express Lanes, expanding presence in Georgia's $20 billion infrastructure market over the next 5 years.
Revenue Growth: Achieved 14% total revenue growth and 9% organic growth, excluding a confidential contract. Critical Infrastructure revenue grew by 18%.
Adjusted EBITDA Margin: Expanded adjusted EBITDA margin by 60 basis points to 9.8%, driven by improved program performance and acquisitions.
Strategic Acquisitions: Completed acquisition of Applied Sciences Consulting, focusing on high-growth water market, marking the third accretive acquisition of the year.
FAA Air Traffic Control Bid: Positioned as a strong contender for the FAA's new air traffic control system contract, leveraging strategic partnerships and expertise.
Delays in sole-source task order awards, products, and material procurements: The company is experiencing delays in federal customer capacity constraints, impacting the timing of sole-source task order awards, products, and material procurements. This has led to a revision in revenue guidance and could affect the ability to recover in Q4 due to the extended government shutdown.
Dependence on confidential contract: Revenue from the confidential contract has decreased significantly, impacting overall financial performance. This dependency poses a risk to revenue stability.
Federal Solutions book-to-bill ratio: The Federal Solutions segment reported a book-to-bill ratio of 0.8x, which is below the critical threshold of 1.0x, indicating potential challenges in securing new contracts to replace completed work.
Timing of collections in the Middle East: The timing of collections in the Middle East has contributed to an increase in net DSO, which could impact cash flow and financial flexibility.
Extended government shutdown: The extended government shutdown has been cited as a factor that could further impact revenue recovery and operational timelines.
Integration of acquisitions: While acquisitions have been strategic, there is an inherent risk in integrating these acquisitions effectively to achieve the anticipated synergies and financial benefits.
Revenue Guidance: The company expects total revenue for fiscal year 2025 to be between $6.4 billion and $6.5 billion. This represents total revenue growth of 14% and 10% on an organic basis, excluding the confidential contract. Including the confidential contract, total revenue is anticipated to decline 4% at the midpoint of the range and 8% on an organic basis.
Adjusted EBITDA Guidance: Adjusted EBITDA is expected to remain between $600 million and $630 million. At the midpoint of revenue and adjusted EBITDA guidance ranges, the adjusted EBITDA margin is projected to increase to 9.5% from 9.3%, representing a 50 basis point expansion from 2024 and a 100 basis point increase since 2023.
Operating Cash Flow Guidance: Operating cash flow is expected to be between $380 million and $460 million for fiscal year 2025. The range has been widened to incorporate potential impacts from the extended government shutdown.
Market Trends and Growth Opportunities: The company anticipates mid-single-digit or better organic revenue growth, excluding the confidential contract, for the foreseeable future. Growth is expected in critical infrastructure and Federal Solutions segments, driven by long-term tailwinds, government spending priorities, and strategic investments in infrastructure and defense.
FAA Air Traffic Control System Contract: The company is optimistic about winning the FAA's new air traffic control system contract, with a decision expected imminently. Parsons has positioned itself as a strong contender with a transformational approach and strategic partnerships.
Critical Infrastructure Growth: The company expects continued growth in critical infrastructure markets, driven by U.S. infrastructure spending priorities, the Infrastructure Investment and Jobs Act, and ongoing discussions on the next surface transportation bill. The Middle East infrastructure market is also expected to grow due to strategic government investments and upcoming world events.
Federal Solutions Growth: Growth in Federal Solutions is expected in areas such as aviation modernization, integrated air and missile defense, space superiority, counter unmanned air systems, cyber operations, electronic warfare, industrial-based modernization, and border security. These align with the administration's priorities and budget.
Share Repurchase: During the quarter, the remaining $85 million balance on the 2025 convertible senior notes was settled with cash on hand. Additionally, we repurchased approximately 323,000 shares in Q3 at an average price of $77.36 for an aggregate purchase price of $25 million. On a year-to-date basis, we have repurchased approximately 966,000 shares at an average price of $67.28 for an aggregate purchase price of $65 million.
The earnings call summary highlights strong financial performance with increased revenue and EBITDA guidance, and positive growth outlooks for critical infrastructure and federal solutions. The Q&A section supports these positives with expectations of growth from new contracts and federal funding. The announcement of increased guidance and growth in key segments, despite some uncertainties, suggests a positive market reaction.
The earnings call summary indicates strong financial performance with record revenue and a high backlog. The Q&A section reveals positive developments such as partnerships and robust growth expectations. The guidance increase and optimistic organic growth outlook further support a positive sentiment. While there are some uncertainties, like the winding down of a confidential contract, the overall sentiment is positive due to strategic partnerships, acquisitions, and alignment with major infrastructure projects.
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