Earnings call transcript: Parsons Q3 2025 EPS beats, revenue misses

Parsons Corporation reported its third-quarter 2025 earnings, revealing a notable earnings per share (EPS) beat but a revenue miss, leading to a dip in pre-market trading. The company posted an EPS of $0.86, surpassing the forecast of $0.75, marking a 14.67% surprise. However, revenue came in at $1.62 billion, falling short of the $1.67 billion forecast. The stock reacted negatively in pre-market trading, dropping 4.02% to $76.36.

Key Takeaways

• EPS exceeded expectations with a 14.67% surprise.
• Revenue fell short of forecasts by 2.99%.
• Stock price decreased by 4.02% in pre-market trading.
• Strong performance in Critical Infrastructure and Federal Solutions segments.
• Continued strategic acquisitions and expansions in defense and infrastructure.

Company Performance

Parsons Corporation demonstrated robust performance in Q3 2025, with total revenue growing by 14% compared to the previous year. The company’s adjusted EBITDA margin improved by 60 basis points, reaching 9.8%. The Critical Infrastructure segment saw an impressive 18% growth, while the Federal Solutions segment experienced a 9% organic increase. Parsons continues to leverage strategic acquisitions and partnerships, such as its recent acquisition of Applied Sciences Consulting, to bolster its position in key markets like space and missile defense.

Financial Highlights

• Revenue: $1.62 billion, up 14% year-over-year
• Earnings per share: $0.86, beating the forecast of $0.75
• Adjusted EBITDA margin: 9.8%, up 60 basis points
• Operating cash flow: $163 million

Earnings vs. Forecast

Parsons reported an EPS of $0.86, surpassing the analyst forecast of $0.75, resulting in a 14.67% positive surprise. However, the revenue of $1.62 billion missed the expected $1.67 billion by 2.99%. This mixed performance highlights the company’s ability to manage costs effectively while facing challenges in revenue generation.

Market Reaction

Despite the EPS beat, Parsons’ stock fell by 4.02% in pre-market trading, reflecting investor concerns over the revenue miss. The stock’s last closing price was $79.56, and it currently trades at $76.36, approaching its 52-week low of $54.56. This movement suggests cautious investor sentiment, possibly influenced by broader market trends and sector performance.

Outlook & Guidance

Looking ahead, Parsons maintains its adjusted EBITDA guidance for 2025 between $600 million and $630 million, with total revenue expected to range from $6.4 billion to $6.5 billion. The company anticipates mid-single-digit organic growth, excluding confidential contracts, and is optimistic about securing a significant FAA air traffic control system contract. Parsons has approximately $10 billion in contracts awaiting award, indicating a strong pipeline for future growth.

Executive Commentary

CEO Carey Smith highlighted Parsons’ success in securing high-priority projects, stating, "We continue to win some of the largest and highest priority projects in our geographies." Smith also emphasized the company’s strong program execution and delivery reputation, which provides customers with confidence in their services.

Risks and Challenges

• Potential impacts from government shutdowns on material procurement and task order awards.
• Challenges in meeting revenue forecasts despite strong EPS performance.
• Competitive pressures in the national security and infrastructure markets.
• Macroeconomic factors affecting investment in infrastructure and defense sectors.
• Uncertainties in securing anticipated contracts.

Q&A

During the earnings call, analysts inquired about the impact of the government shutdown on Parsons’ operations. Management expressed confidence in their Q4 performance despite these challenges, anticipating a surge in activity once the government reopens. Additionally, the low recompete rate for major contracts in 2026 was highlighted as a positive factor for future stability.

Full transcript - Parsons Corp (PSN) Q3 2025:

Conference Operator: Good day everyone and welcome to the third quarter 2025 Parsons Corporation earnings conference call. At this time all participants are in a listen only mode. After the speaker’s presentation there will be a question and answer session. To participate you will need to press star one and one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star then. Please note this conference is being recorded now. It’s my pleasure to turn the call over to the Vice President of Investor Relations, Dave Spille. Please proceed. Thank you.

Dave Spille, Vice President of Investor Relations, Parsons Corporation: Carmen, good morning and thank you for joining us today to discuss our third quarter 2025 financial results. Please note that we provide presentation slides on the Investor Relations section of our website. On the call with me today are Carey Smith, Chair, President and CEO, and Matt Ofilos, CFO. Today Carey will discuss our corporate strategy and operational highlights, and then Matt will provide an overview of our third quarter financial results as well as a review of our 2025 guidance. We then will close with a question and answer session. Management may also make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

Actual results may differ materially from those projected in the forward looking statements due to a variety of factors. These risk factors are described in our Form 10-K for fiscal year ended December 31, 2024 and other SEC filings. Please refer to our earnings press release for Parsons’ complete forward looking statement disclosure. We do not undertake any obligation to update forward looking statements. Management will also make reference to non-GAAP financial measures during this call and we remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures. Now we’ll turn the call over to Carey.

Carey Smith, Chair, President and CEO, Parsons Corporation: Thank you, Dave. Good morning. Welcome to Parsons third quarter 2025 earnings call. This quarter we continued to deliver strong performance in a dynamic global environment as an advanced and differentiated technology leader that’s aligned to the administration’s and global priorities in national security and infrastructure. Our portfolio is strategically positioned to continue to capitalize on long term macro environment trends. In addition, we operate with speed in delivering operationally relevant solutions at a time where our customers need companies that can deliver rapid results. During the quarter we continued to achieve industry leading organic revenue growth, excluding our confidential contract, significantly expanded our adjusted EBITDA margins, exceeded our cash flow expectations, and won strategic contracts.

In addition, our win rates and hiring retention remained strong and we completed another accretive acquisition after the quarter ended in the fast growing and profitable water market that strengthens our capabilities and enhances our Florida presence. Turning to our third quarter financial results, our adjusted EBITDA, adjusted EBITDA margin and cash flow results exceeded our expectations and our total and organic revenue growth rates excluding the impact from our confidential contract remained strong at 14% and 9% respectively. This includes 18% total revenue growth in critical infrastructure and 9% in federal solutions. This strong growth in both segments highlights the strength and synergies of our diversified portfolio, our strong hiring and retention, the successful integration of our acquisitions and our alignment to priority spending areas.

During the third quarter we also delivered 60 basis points of margin expansion to 9.8%, $163 million of cash flow from operations and reported a book to bill ratio of 1.0 times for the quarter and trailing twelve months. This continues our streak of having a quarterly trailing twelve month book to bill ratio of 1.0x or better since our 2019 IPO. Finally, we are reiterating our 2025 adjusted EBITDA and cash flow guidance ranges at the midpoint and we’re modifying our revenue outlook to reflect delays in sole source Task order awards, products and material procurements. In addition to delivering solid financial results, we won four contracts over $100 million in the third quarter with two representing new work.

Significant third quarter contract wins included a new large 10 year single award task order contract as an exclusive subcontractor for design and modernization on the Holston Army Ammunition Plant government owned contractor operated contract. We booked $50 million on this contract during the quarter. This win continues our success of winning industrial base upgrades as part of the $18 billion modernization plan and is our fourth contract win supporting the army customer that’s valued at more than $100 million, a six year $133 million authorization to continue serving as the lead designer for the Georgia State Route 400 express lanes. This project will add new express lanes and use state of the art traffic incident management and digital twin systems as a Tier 1 focused state for Parsons.

This expands our Georgia Department of Transportation presence with the State of Georgia expected to spend more than $20 billion over the next five years. We were awarded two new multi-year single award defense and security contracts by Middle East government customers. One contract valued at more than $100 million represents new work to lead the design, review, and project and construction management of national security infrastructure while the second contract is to design border security infrastructure and facilities. These contracts reflect the strength of Parsons’ synergistic portfolio and our ability to bring comprehensive national security, critical infrastructure protection, and program management capabilities to our Middle East and critical infrastructure customers, and during this quarter we booked $107 million for these two contracts.

MPA Delivery Partners, a joint venture of three companies including Parsons as the Managing Partner, was awarded a $665 million four and a half year contract extension by the Gateway Development Commission to continue managing the successful delivery of the Hudson Tunnel Project. This project will build a new two tube rail tunnel under the Hudson River and rehabilitate the existing 115 year tunnel as well as nine miles of new passenger rail track between New York and New Jersey. We were awarded an $88 million task order under the Air Base Air Defense contract, Parsons will provide integration, upgrades, procurement and training across the Europe and Africa areas of responsibility for the United States Air Force. This contract includes a one year base period and two one year option periods and we booked $82 million during the quarter.

For the first nine months of 2025, we’ve been awarded over $190 million in task orders on this IDIQ vehicle. Air Base Air Defense is increasingly important around the globe to safeguard military operations and Parsons is an industry leader in this domain with innovative solutions designed to rapidly detect, alert, deny or defeat threats ranging from low cost unmanned vehicles to sophisticated hypersonic weapons. Parsons was also awarded three PFAS contracts with a collective value of $23 million. These wins span both our Federal Solutions and Critical Infrastructure businesses and expand our portfolio in the highly strategic and rapidly growing PFAS market. Year to date, we’ve won nearly $70 million in PFAS contract awards and the PFAS market represents a $40 billion addressable market for Parsons. These wins represent revenue synergies with our TRS Group acquisition.

In addition to these large and important wins, we continued our successful track record of acquiring strategic companies in high growth markets that strengthen our portfolio and have revenue growth and adjusted EBITDA margins of 10% or more. After the third quarter ended, we acquired Applied Sciences Consulting, a Florida-based engineering firm that specializes in water and stormwater solutions for cities, counties, and water management districts across the state. Water is our fastest growing and most profitable market within our North America Infrastructure business unit. This acquisition positions us to capitalize on Florida’s significant investments in water infrastructure, resiliency, and quality. We continue to deploy capital across both business segments to take advantage of the significant tailwinds in our markets and four of our last six acquisitions have been in our critical infrastructure segment.

During the quarter the company was recognized as one of the world’s best companies by Time and one of the best led companies by Glassdoor. We’re particularly pleased with the Glassdoor rating since we were selected by our employees. Parsons also received the prestigious Diamond Award in the Structural Systems category from ACEC New York for our work on the Brooklyn Bridge Rehabilitation Project. Looking forward we are excited about our growth opportunities. Our relentless focus on strong program execution and our delivery reputation provides customers with the confidence they need to choose Parsons as their contractor of choice for their large, most complex and mission critical challenges. In addition, our unique and synergistic Critical Infrastructure and Federal Solutions portfolio which consists of six growing, profitable and enduring end markets is expected to drive mid single digit or better organic revenue growth excluding the confidential contract for the foreseeable future.

This growth outlook excludes the FAA brand new air traffic control system contract. Regarding this opportunity, we believe a decision is imminent and we felt we offered a compelling bid given we are the number one program manager in the world, offered a transformational approach, strategically partnered with IBM, have strong past performance, and assembled a team that is vendor agnostic and understands the FAA in critical infrastructure. We continue to win some of the largest and highest priority projects in our geographies and are expanding into high value adjacent markets by leveraging our entire portfolio. With long term tailwinds and 20 consecutive quarters of greater than 10 times book-to-bill, we expect continued growth into the next decade. In the United States, our focus on hard infrastructure such as roads and highways, bridges, airports, and rail and transit is aligned to spending priorities.

The Infrastructure Investment and Jobs Act provided states with the confidence they needed to move forward with major infrastructure projects and discussions on the next Surface Transportation Bill are underway. This bill is expected to provide additional budget for increased U.S. infrastructure spending. Our Middle East infrastructure business also continues to excel our more than 60 year history in the region. Outstanding reputation and Saudi joint venture capital has positioned us as a trusted partner to our customers and is a competitive advantage in the region. We see significant demand for our engineering and program management solutions across the region as governments implement their strategic visions and prepare for upcoming world events. In addition, our expansion into the defense, security, hospitality, and industrial manufacturing sectors has contributed to our recent growth and as these markets are receiving major investments in federal solutions.

Parsons has a strong position in differentiated capabilities in aviation modernization, integrated air and missile defense, space superiority, counter unmanned air systems, cyber operations, electronic warfare, industrial based modernization and border security. With a strong alignment to the Administration’s priorities and budget, Parsons is well positioned to immediately capitalize on opportunities in these areas. In summary, I am very pleased with our strong execution. We continue to deliver industry leading growth with 14% total revenue growth and 9% organic growth. Excluding our confidential contract, we expanded margins by 60 basis points, exceeded our cash flow expectations, won defense contracts in the Administration’s priority areas, and our critical infrastructure segment continues to hit on all cylinders by delivering double digit organic revenue growth and adjusted EBITDA margins. Our win rates and hiring and retention remained strong and we continue to leverage our balance sheet for strategic accretive acquisitions.

We also have total backlog of nearly $9 billion of which 72% is funded, approximately $11 billion of contract wins that we have not yet booked, a $58 billion pipeline that includes more than 115 opportunities of contracts worth $100 million or more and 15 opportunities worth $500 million or more. We believe our healthy forward-looking metrics, strong operating teams and industry tailwinds positions us to outpace industry growth rates and continue to deliver significant long-term shareholder value. With that, I’ll turn the call over to Matt to provide more details on our third quarter financial results.

Matt Ofilos, CFO, Parsons Corporation: Matt thank you Carey. Q3 financials were highlighted by strong revenue growth, adjusted EBITDA margins and free cash flow ahead of expectations. In addition, we continue to leverage our balance sheet and completed our third accretive acquisition of the year in the strategic water market. Turning to the details of our third quarter results, excluding our confidential contract, total revenue grew by 14% and 9% on an organic basis. These increases were driven by double digit growth in our critical infrastructure, protection, transportation and urban development markets. Total revenue including the confidential contract decreased 10% from the prior year period and was down 14% on an organic basis. SGA expenses for the third quarter increased 6% from the prior year period.

This increase was primarily driven by the inclusion of recent acquisitions and focused investments in bid and proposal activity and critical hires in support of our large strategic pursuits and pipeline aligned to the Administration’s priorities. Adjusted EBITDA margin expanded 60 basis points to 9.8% driven by improved program performance and accretive acquisitions. Adjusted EBITDA of $158 million decreased 5% from the prior year period driven by the revenue decline on our confidential contract. I’ll turn now to our operating segments starting first with critical infrastructure where third quarter revenue increased by $129 million or 18% from the third quarter of 2024. This increase was driven by organic growth of 13% and inorganic revenue contributions from our BCC and TRS acquisitions. Organic growth was driven primarily by the ramp up of recent contract wins and growth on existing contracts in both North America and the Middle East.

Critical Infrastructure adjusted EBITDA increased 83% from the third quarter of 2024 and adjusted EBITDA margin increased 360 basis points to 10.3%. These increases were driven primarily by improved program performance, the ramp up of recent awards and our accretive BCC acquisition moving to our Federal Solutions segment where third quarter revenue increased 9% and 5% on an organic basis excluding our confidential contract. These increases were driven by growth in our critical infrastructure, protection, transportation and space and missile defense markets. Total Federal Solutions revenue including our confidential contract decreased 29% from the prior year period and 31% on an organic basis. Federal Solutions adjusted EBITDA decreased 40% from the third quarter of 2024 with an adjusted EBITDA margin of 9.2%. The adjusted EBITDA was primarily impacted by lower volume on the fixed price confidential contract. Next I’ll discuss cash flow and balance sheet metrics.

Our net DSO at the end of Q3 2025 was 62 days, an 11 day increase from the prior year period but still favorable to historical averages. This increase was primarily driven by lower volume on our confidential contract and the timing of collections in the Middle East. During the third quarter of 2025 we generated $163 million of operating cash flow, which was better than expected and drove free cash flow conversion of 135% for the quarter. Capital expenditures totaled $13 million in the third quarter, relatively consistent with the prior year period. For fiscal year 2025, CapEx is expected to remain in line with our planned spend of approximately 1% of annual revenue. Our balance sheet remains strong and we ended the third quarter with a net debt leverage ratio of 1.4 times 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 repurchased approximately 966,000 shares at an average price of $67.28 for an aggregate purchase price of $65 million. Turning next to bookings for the third quarter, we reported contract awards of $1.6 billion representing a book to bill ratio of 1.0 times on an enterprise basis, which continued our streak with a trailing twelve month book to bill of 1.0 times or greater in every quarter since our IPO. Critical Infrastructure, we achieved a book to bill ratio of 1.1 times, which is the 20th consecutive quarter with a book to bill ratio of 1.0 or greater.

In Federal Solutions, we reported a book-to-bill ratio of 0.8 times. Our backlog at the end of the third quarter totaled $8.8 billion, a 1% increase over Q3 2024. Additionally, our funded backlog is the highest since our IPO at $6.4 billion, a 10% increase year over year. In terms of our guidance, we are reiterating the midpoint of adjusted EBITDA and operating cash flow. However, we are updating revenue guidance to reflect the impact of federal customer capacity constraints impacting timing of sole source task order awards, products and material procurements, and the inability to recover in Q4 due to the extended government shutdown. We expect total revenue to be between $6.4 billion-$6.5 billion. This guidance represents total revenue growth of 14% and 10% on an organic basis excluding the confidential contract.

Including this contract, total revenue is anticipated to decline 4% at the midpoint of the range and 8% on an organic basis. Adjusted EBITDA remains between $600 million and $630 million. At the midpoint of our revenue and adjusted EBITDA guidance ranges, our margin increased to 9.5% from 9.3%. This represents adjusted EBITDA margin expansion of 50 basis points from 2024 and a 100 basis point increase since 2023. Operating cash flow is expected to be between $380 million and $460 million, while the midpoint remains the same. We did want to widen the range to incorporate any potential impacts from the extended government shutdown. Other key assumptions in connection with our 2025 guidance are outlined on Slide 11 in today’s PowerPoint presentation located on our Investor Relations website. With that, I’ll turn the call back over to Carey.

Carey Smith, Chair, President and CEO, Parsons Corporation: During the third quarter, we delivered double digit revenue growth excluding our confidential contract, 60 basis points of margin expansion, free cash flow conversion of 135%, and we completed a strategic acquisition while maintaining our strong balance sheet which will enable us to make future accretive acquisitions. We remain optimistic about our future given our team’s proven execution and the tailwinds we have in both segments, our strong total and funded backlog, and the robust pipeline of large opportunities we have to pursue. With that, we’ll now open the line for questions.

Conference Operator: Thank you so much. As a reminder, to ask a question, simply press star 11 and wait for your name to be announced. To remove yourself, press star 11 again. Please stand by for our first question. Please, comes from Sangeeta Jain with KeyBanc Capital Markets. Please proceed.

Carey Smith, Chair, President and CEO, Parsons Corporation: Great, thank you. Good morning and thanks for taking my questions. So Carey and Matt, it looks like there was some revenue from the confidential contract in 3Q. I know it was a much smaller number than the previous run rate, so I was kind of wondering if there was some included in your 4Q guide as well or if you’re still presuming that it’s going to be zero. Yes, there was some. Sangeeta, good morning to you. Also, by the way, there was some revenue included in our third quarter guidance. At this point it’s very small and immaterial. The program is in a wind down state so we’re basically demobilizing.

Got it.

On C and I margins, it’s three quarters in a row now that you’ve done 10% plus margins. I know you were expecting a softer second half as you close out some legacy projects. I just want to get some more color on what may have driven the 3Q strength and if you should expect a 10-10.5% new run rate heading into 2026. I’ll start. Matt, I’ll jump in. I would say first and foremost, critical infrastructure has had outstanding program execution. We’d always indicated that we expected this business to be double-digit margins and we weren’t sure how quickly we could get there. Obviously, we’ve had three consecutive quarters to your point. I would say continuing that solid execution looking forward.

We’ve got some higher margin business that will be coming in as we have been winning some new bids based on the demand that’s out there both in North America as well as the Middle East. Any acquisitions that we do are going to be accretive as well.

Matt Ofilos, CFO, Parsons Corporation: Yes. To give some numbers on a year to date basis, to your point, CI is at 10.4%. Really great performance out of the CI business. Q4 we have modeled in kind of the high 9s, low 10s for a total year in kind of the low 10s as I mentioned, but again to Carey’s point, really strong margins out of the CI business north of 10% throughout the year, and really excited about the stability throughout the calendar year.

Carey Smith, Chair, President and CEO, Parsons Corporation: Got it. Appreciate you taking my questions. Thanks, Angida.

Conference Operator: Thank you. Our next question is from Andrew Whitman with Baird. Please proceed.

Great. Good morning and thanks for taking my questions. I wanted to ask about the top line here in the quarter and in the fourth quarter guidance, I think maybe it was a little bit lighter than you expected in the third quarter. I was wondering if you could, Carey, talk about what was the variance there. And then just as it relates to the fourth quarter guidance, I heard your comments. In the prepared remarks you talked about federal customers, customer capacity, some things about the material. I just thought maybe you could elaborate on some of that. When you talk about like materials procurements, was that like you could not procure because the government was shut down or was there something else behind that? When you talked about customer federal customer capacity, is that again shutdown related or is there something else behind it?

I think just understanding kind of what’s changing or what you’re seeing in the top line performance is an important topic for today.

Carey Smith, Chair, President and CEO, Parsons Corporation: Yeah, thanks Sandra, I appreciate the question. First, our challenge in this quarter was strictly due to timing. We’ve had things move to the right. These were actually on contracts that were already awarded to us. Most of the work was our Air Base Air Defense contract had a task order that was awarded later than anticipated. We’re still awaiting on some of our defensive cyber threat hunt kit awards, and that is impacted by the shutdown. We indicated in Q2 that we did. We knew we had a second half that was going to be higher than the first half and that we were optimistic, you know, that things would get moving. I would say unfortunately we are still seeing delays and we wanted to make sure that we were going to achieve our guidance.

Setting for the rest of the year, we had to assume that the shutdown may last as long as till the end of the year.

Matt Ofilos, CFO, Parsons Corporation: Yeah. Andy, I’d just add, you know, if I look at Fed and I’ll talk, excluding the confidential contract, you know, call it 9% growth for Q3, we are forecasting about 15% for Q4. To Carey’s point, some was a slide to the right from Q3 to Q4. We do expect acceleration in Q4 just with the government shutdown, the timing on task order awards, approvals on material purchases, things like that, all those things are kind of impacting our ability to recover before the end of the calendar year. Should be obviously first half next year.

Got it. Okay, great. I guess for my follow up I wanted to just drill in and get a little bit more on FAA. Obviously the government has shut down. This one notionally had an October 31st award target date. Obviously the government controls that and can slide. I was just wondering, you said imminence on the call. Are the contracting personnel at the FAA on staff? Is there dialogue happening there?

What?

Can you tell us a little bit more detail on that one in particular?

Carey Smith, Chair, President and CEO, Parsons Corporation: Yeah. Fortunately, the FAA brand new air traffic control system is not impacted by the shutdown and an award is imminent. This program again is going to use the $12.5 billion funding that was awarded under the reconciliation bill. This is a critically important program to our country. We need to improve the safety, reliability, redundancy, and efficiency of the national airspace system. In parallel, we have to transform that for the future. I feel that our team has offered a very compelling offer. Parsons again is the number one program manager ranked by Engineering News Record. This is the type of work we do for a living. We partner with IBM as our strategic technology partner. Both we and IBM have very deep system engineering expertise. We also have the right team and a team that knows the FAA and has excellent past performance with the FAA.

I mean, our motto has been right team, right time. We’re ready now. We certainly look forward to partnering with the FAA on this brand new air traffic control system and achieving the results by December 2028.

Got it. So just as an addendum to that then I think in the past you’ve talked about like the dollar amount of awards that you’re awaiting notice on. I think in the quarter, this one, among others, many others went in as awards that you’re awaiting notice on. What does that metric stand at here at the end of the third quarter?

Matt Ofilos, CFO, Parsons Corporation: Yes. Awaiting notice of award right now is just under $10 billion, Andy. That compares to prior years of an average between $4 billion and $6 billion. Obviously a big part of that is FAA, but all in all, just under $10 billion awaiting notice of awards. Bids submitted, awaiting adjudication. Yeah.

Carey Smith, Chair, President and CEO, Parsons Corporation: I’d also highlight the strength of our pipeline. $58 billion is a record pipeline for the company. The number of awards that we have, potentially greater than $500 million being over 15, is also a record for the company. We’re really seeing a lot of needs and demand for our business across both segments.

Got it.

Matt Ofilos, CFO, Parsons Corporation: Okay, thanks.

I’ll pass it on.

Carey Smith, Chair, President and CEO, Parsons Corporation: Thanks, Andrew.

Conference Operator: Thank you. Our next question is from Toby Sommer with Truist. Please proceed.

Matt Ofilos, CFO, Parsons Corporation: Thanks.

Given the slightly lower top line exiting the year, I’m just wondering how we should think about modeling next year. Based on the midpoint of the new top line guidance, it looks like consensus is around 8% total revenue growth, which I know wouldn’t necessarily be an organic number, but any color you could provide there without specific guidance of course at this stage would be helpful.

Yeah, obviously we’ll provide full year 2026 guidance during the February call. But to your solid run rate in Q4 positions us well for 2026. We’ve said previously mid single digit or better organic growth, excluding the confidential contract. So that’s the number that we’re holding to that would exclude any what I’ll call binary large items, think FAA or others that Carey mentioned, Southern Border or Golden Dome, that are obviously large items. So mid single digit or better organic, excluding confidential contract and supported by a solid Q4 run rate.

Matt, what would the total contribution this year be from confidential contracts? Just so we have that math equation squared away.

Yeah, it’s about $350 million. So just 5%ish. Thank you.

Carey, you highlighted water as an area with the recent acquisition, critical infrastructure, talked about the growth, et cetera. Are there any verticals within critical infrastructure that you would like to sort of further fortify or maybe gain exposure where you might not have it currently?

Carey Smith, Chair, President and CEO, Parsons Corporation: I would say water and environment, which is one of our six end markets, has been rapidly growing. We expect this year for that market to be around $650 million. I mentioned the water portion of that is also our most profitable. We have been kind of doubling down there. The acquisition of Applied Sciences Consulting was critical for us because Florida is spending billions of dollars in making sure that they have resiliency. This company is very well positioned to help us capitalize on it by combining our collective capabilities. It has been an area of focus for M and A.

Okay, thanks. During the shutdown, there’s been a kind of a new wrinkle with the administration halting funding of various things in states. Have you seen any impact from this particular facet of the shutdown? In particular, maybe a comment on Gateway would be interesting. We have our offices nearby and it looks like there’s plenty of equipment and workers still plugging away. Would love your perspective.

Yeah, and you’re absolutely right there, Toby. The Gateway program continues. As I mentioned on the call, we were awarded $665 million follow-on effort for that. We have five major construction projects that are underway on the Gateway program as we speak. The state funding that’s available for Gateway is $5 billion. We continue to work.

Matt Ofilos, CFO, Parsons Corporation: Thank you.

Carey Smith, Chair, President and CEO, Parsons Corporation: Thanks.

Conference Operator: Thank you. Our next question is from Gautam Chhugani with TD Cowen. Please proceed.

Matt Ofilos, CFO, Parsons Corporation: Yeah, thanks.

Good morning, guys.

Carey Smith, Chair, President and CEO, Parsons Corporation: Good morning.

Matt Ofilos, CFO, Parsons Corporation: Gautam was wondering if you could comment.

On the EBITDA contribution from the confidential contract in Q3 and for the year. Just so we have a sense for what the comp to overcome is in 2026.

Yeah, Ron, numbers got me thinking about this as a fixed price international contract. So it would be accretive to our Fed business. Think kind of low double digit margin.

Okay. And then I know on the FAA modernization opportunity, you know, there was. It sounded like there was just two bidders, yourselves and Peraton. And there’s some anecdotes that there might.

Be some risk associated with the terms of the contract.

I just wanted to get your view on, you know, how to kind of insulate the company from some risk and how you may have gone about that bid in a way that, you know, does not. Is a good thing if you win it.

As opposed to something we should be concerned about.

Carey Smith, Chair, President and CEO, Parsons Corporation: Yeah. First, as a company, we will not take bad business. The FAA brand new air traffic control system is not a bad contract. It is a good contract. There are only two bidders. There were various reasons for that. I think we got off the dime very quickly, announced our partnership with IBM back in June. We tend to be a very agile company that delivers operationally relevant solutions. We kind of got out pretty fast. I think some of the competitors were worried about that. Other competitors dropped out due to potential organizational conflicts of interest. Because if you want to provide systems, it is kind of hard to sit in an integrator role where you may be selecting and evaluating and acquiring those systems. We are very excited about the FAA contract.

It’s going to be a good contract and we look forward to an imminent announcement.

Thank you.

Thanks.

Conference Operator: Thank you. Our next question comes from the line of Mariana Perez Mora with Bank of America. Please proceed.

Carey Smith, Chair, President and CEO, Parsons Corporation: Hi, good morning, this is Samantha. Morning, Mariana.

Matt Ofilos, CFO, Parsons Corporation: Hey, Sam.

Carey Smith, Chair, President and CEO, Parsons Corporation: Or Sam, wondering if you could talk a little bit about.

Conference Operator: Mariana, I’m sorry, Mariana, to interrupt. We are—your audio is breaking up. We cannot hear your question.

Carey Smith, Chair, President and CEO, Parsons Corporation: Are you able to hear me now a little better?

Matt Ofilos, CFO, Parsons Corporation: Yes.

Conference Operator: Okay.

Carey Smith, Chair, President and CEO, Parsons Corporation: Sorry about that. You highlighted space and missile defense as a growth driver for FS. I was wondering if you could talk a little bit more about that. Yeah, you’re breaking up a little, but I think I caught the gist of it. Space and missile defense being a growth driver. First, I would start with our missile defense contract. We are the system engineer and integration contractor for the Missile Defense Agency on the TEAM contract. That work will lead into Golden Dome efforts. We are starting to ramp up in anticipation that we expect some of the Golden Dome funds. There was $25 billion in the reconciliation bill to start hitting around the December timeframe. We have been closely working with the Missile Defense Agency on areas like architecture relative to our space business.

We’re involved in space situational awareness, an area that’s seen uptick as there’s been a lot more activity going on in space. We’re also involved in space ground systems. We’ve delivered over 170 different ground systems for a variety of customers. An area of space we’re particularly excited about would be our assured position, navigation and timing solution. We’ve partnered with Global Star, we’re using their constellation and our software-defined radio capability to be able to get location information in the case that GPS is jammed. A great example is we just deployed it over in the Ukraine and European theater and our timing results and location results were better than anticipated. Additional units have now been purchased for the Indo-Pacific region. Exciting business.

We have seen growth there and that’s an area that we project to continue to be strong, particularly as it relates to the Golden Dome program. Great. Thank you so much. I’ll keep it at one. Thanks Sam.

Conference Operator: Thank you so much. As a reminder to ask the question, simply press star one one to get in the queue. Our next question is from Sheila Kahyaoglu with Jefferies. Please proceed.

Carey Smith, Chair, President and CEO, Parsons Corporation: Good morning Carey and Matt. Thank you for the time. Hey, maybe if we could talk about two questions. First, on FS growth, how do we think about the FS growth given the order decline in the quarter, how much of it was attributable to the shutdown? And I know, I think Matt, you said mid single digit growth outlook for 2026. How we could think about the order flow and the pipeline gelling together to get that growth outlook. Yes, I’ll start, Matt. I’ll jump in. So on the growth, how much attribute are the shutdown? It’s a little hard to tell because I think we’re dealing with two things at one time. One is federal contract and capacity. There’s been some delays in getting things signed off.

The second is the shutdown, which I would say the big impact there that we saw was kind of limiting our recovery in the fourth quarter, not knowing how long the shutdown is going to continue. We plan for it to continue for the rest of the year. The big issue for us has been material procurements on existing contract awards. I want to reiterate, this is not new business we have to go win. It’s not about any program losses. It’s strictly a timing issue.

Matt Ofilos, CFO, Parsons Corporation: Yeah. The only thing I’d add, Sheila, if I look at total year 2025, Fed excluding confidential contract is the outlook is, you know, high single digit growth, 11% total growth. It is a, you know, the business is performing quite well. If we can kind of maintain that run rate, it is kind of above market and taking share. We are happy with those kind of rates.

Carey Smith, Chair, President and CEO, Parsons Corporation: Got it. And then maybe if I could ask one on CI please. The performance there has been pretty good. Margins are now hitting this 10% stride. What’s driving that? How do we think about mix going forward? Yes, CI definitely has had an excellent year. I’d say on all fronts winning new business for the last year, 20 quarters. Also the strong margins throughout the year and you know, this quarter to be able to do 18% total and 13% organic is excellent. We’re seeing strong growth in both North America and the Middle East. And that growth is going to continue for as long as we can see the IIJA again. Funding has not peaked yet. It won’t peak until the 2028 timeframe. It’s going to have a six-eight year tail after that.

The next surface transportation five year bill is expected to be passed by November of 2026. That’s going to be additive to what we’re seeing in the Middle East. Our expansion there continues. We’ve had four years of double digit growth in the Middle East. We’ve not just been growing in our core market of urban development and transportation, but we’ve now moved into three new markets which are receiving significant investments. Defense, security, and tourism and hospitality. Critical infrastructure. We’ve got great long term tailwinds. We’ve been able to capitalize on it with very strong win rates both in North America and in the Middle East. When you look at split between the businesses though, I would have to say the real large jobs are in the federal business.

As you look to the near future, we talked about the $12.5 billion that the FAA is receiving for the reconciliation. As we await that imminent award. There’s $25 billion for Goldendome. We’re well positioned, not just in the area I mentioned earlier for system engineering and integration, but we also have non kinetic effects capability and command and control capacity. There’s $25 billion for Pacific deterrence or I’m sorry, $25 billion more for border security. $161 billion in total. A lot of that’s addressable to us. We do border security all over the world. We’ve got currently two very large opportunities that are in bid within the border security area. Pacific Deterrence got an additional $12 billion in new funding and we’re well positioned there with our presence on quads and Guam and that we’re able to capitalize on that from the federal group.

CI rapidly growing, I’d say the big game changer opportunities largely in federal, I should mention one that kind of passes both groups too, which would be rebuild. We expect to be involved in Syria first in eliminating the chemical weapons and then the rebuild of Syria, which being very much supported by the Gulf countries. We’re looking at the rebuild of Ukraine and also the rebuild of Israel, Gaza. A final area just to hit that I put in that game changer category is our position in critical minerals and leveraging our processing and refining capabilities as we start to onshore critical minerals in the United States. Great, thank you. Thank you.

Conference Operator: Thank you so much. Our next question is from Louis DePalma with William Blair. Please proceed.

Matt Ofilos, CFO, Parsons Corporation: Carey, Matt and Dave, good morning.

Carey Smith, Chair, President and CEO, Parsons Corporation: Morning, Louie.

Matt Ofilos, CFO, Parsons Corporation: Following up on your recent answer, it seems you’ve made significant progress with providing defense services to some of your Middle East customers. What types of solutions are gaining traction on the defense side and what’s the long term outlook there?

Carey Smith, Chair, President and CEO, Parsons Corporation: Yeah, so I’d say the areas that we’ve gotten into are kind of a combination leveraging our entire portfolio. So we’re basically doing work for the Ministry of Defense, that is infrastructure work. Due to the proprietary nature of it, I can’t go beyond that. If you think about infrastructure builds for the Ministry of Defense. Also on the security side, we’re doing more security work. You know, we’ve been involved in border security for a long time through our work with Defense Threat Reduction Agency, Armenia, Lebanon, Georgia, other locations. We do work with Customs and Border Protection down on the southern border. We’ve been involved a little bit with Immigration and Customs Enforcement and we do the counter nuclear smuggling detection and deterrence program for Department of Energy. We’ve been able to take those confidence and expand them.

We were awarded a job through the Ministry of Interior for border security in Saudi Arabia.

Conference Operator: Excellent, Carrie.

Matt Ofilos, CFO, Parsons Corporation: In addition to the FAA brand new air traffic control systems contract that you’re pursuing, you already have an existing FAA facilities contract. Should that contract also benefit from the reconciliation bill funding? Related to this, are you starting to already receive awards in October or did you receive awards in October that were funded from the reconciliation bill funding? Is that funding starting to flow? Thanks.

Carey Smith, Chair, President and CEO, Parsons Corporation: Yes, I would say to your first question, that contract will also benefit that contract’s technical support services contract. We’ve supported the FAA for 50 years as a company. We’ve been on the TSSC contract for 24 years. Excellent past performance and it will benefit from the brand new air traffic control system separate from our integrator work that we’re looking forward to receiving. As far as reconciliation funding, I would say it’s going to start to flow, we think this month and next.

Matt Ofilos, CFO, Parsons Corporation: Louis, just to put some numbers on your question around FAA, as we mentioned previously, obviously that is a growth driver for us. I mentioned transportation is a key driver. We’re expecting that FAA contract to grow, you know, 25%-30% this year in 2025. To your point, it’s a great growth driver for us with or without BNets. Excellent. Thanks everyone. Thanks. Matt, Dave, and Carey.

Carey Smith, Chair, President and CEO, Parsons Corporation: Thanks, Roy.

Conference Operator: Thank you. Our next question comes from Jonathan Siegmann with Stifel. Please proceed.

Good morning, Carey, Matt and Dave. Thanks for taking my question.

Carey Smith, Chair, President and CEO, Parsons Corporation: Good morning, Jonathan.

Just back on the shutdown, you’ve made some really helpful comments on that. Maybe if you could talk a little bit about the other side. When the government is open, can we expect a surge of activity or is the backlog so great at this point that we might still be talking about capacity problems next year assuming the government opens the next couple of weeks? Thank you.

Yeah, thanks. One thing I should mention is 50% of our business, again, is not impacted by the shutdown because 50% of our business is not federal government related work. I would say as far as when the government’s open, I do expect that we’re going to see a surge because they are backlogged with contracting actions.

Matt Ofilos, CFO, Parsons Corporation: Yeah. As I mentioned earlier, John, I think about almost $10 billion of awaiting notice of award. Typically the Middle East processes quickly, so the majority of that is within the federal groups. That being 40% or 50% above the norm is evidence that there is a building backlog and hopefully they will transact quickly so that we can get working on these jobs.

Carey Smith, Chair, President and CEO, Parsons Corporation: They almost have to. When you look at the reconciliation funds and the fact that the government would like to spend those up front over the next few years. To be able to accomplish things, you know, if you look at the brand new air traffic control system as an example, we need to achieve those milestones by December 2028, you know, with no excuses. We’ve got to deliver. When you look at a lot of the other funding that’s in that bill, there are a lot of milestones that have to be achieved. I think things are going to have to get moving.

As we think about next year, you’ve already quantified the headwind from the confidential contract. Is there anything else that you’d highlight today that we should be thinking about? Maybe larger recompetes in the classified area that we should be contemplating as we think about next year?

No, fortunately going into next year a recompete rate is about 6-7%. So it’s pretty small. And there are no major contracts that are in that recipe. We secured our four contracts that are greater than $2 billion in July of 2021 is when the last one was won. So those have been secured for the next seven to 20 years respectively. That would be the two mine jobs, the FAA TSSC job and the Missile Defense Agency System engineering and integration job. So our big recompeats are still a ways out, like 2029 timeframe.

Appreciate that. Thank you.

Thanks, John.

Conference Operator: Thank you so much. Our next question is from Noah Poponak with Goldman Sachs. Please proceed.

Hey, good morning, everyone.

Carey Smith, Chair, President and CEO, Parsons Corporation: Good morning, Noah.

Matt, can you just level set me or remind me the numbers on Federal Solutions, Organic Growth excluding Confidential. What was it in the first half? What was it in 3Q and what do you now have for 4Q?

Matt Ofilos, CFO, Parsons Corporation: Yeah, so first half we’re looking at the total is just about 10%. Second half we’re looking at 12%, driven by Q4 at almost 15%. A little bit of a ramp in Q4 but something, you know, as I mentioned, a lot of the things that slipped from Q3 are on track for Q4. That’s really what’s driving the Q3 to Q4 sequential.

Okay. Yeah, I guess. How did you think about building that? I mean it’s one quarter, but just given how that’s progressed, how did you think about building that acceleration Q4 first three Qs or first nine months in a government shutdown?

Yeah, obviously we went through, you know, we do not take lowering top line guide without a lot of effort going into exactly what the outlook is. So we went through line by line every program, material that has been ordered, timing on those deliveries, products. So I would say we are highly confident in the midpoint. I would say if we see an extended government shutdown through the end of the calendar year as an example, Noah, I would say it would be biased toward the lower end of the guide. You know, I think a lot of the story we are hearing is over the next couple weeks, it is likely to come out of the shutdown.

Okay. And Matt or Carey, I guess, you know, we’ve been in this environment with lower outlays in some of your government customer markets, but you’ve still had that 10% federal core. You know, if next year some of the things that have gummed up the system get better, can that core accelerate or is that too optimistic? Just given the overall backdrop.

I would.

Carey Smith, Chair, President and CEO, Parsons Corporation: Say we have the opportunity to accelerate. I mentioned the very large programs that we have in front of us, and I feel we’re well positioned, I guess.

Terry, if I was sort of thinking of that excluding, like putting FAA aside or maybe you have so many large opportunities that putting them aside is not a relevant question. But excluding, you know, any one large program, totally changing the growth rate. Just thinking more about the diversified core, FSX confidential.

Yes. This year we’ll deliver for federal for the full year about 8.3% organic growth, again, which is industry leading. I would say we’re in all the right markets, not even talking about any of the game changer programs. We’ve indicated that we would deliver mid single digit or better, excluding the confidential contract as we go into next year. That’s excluding game changer contracts.

Okay, can you frame for us for whoever wins FAA, approximately how large it could become on an annual revenue basis and then what the margins would look like?

Yeah, unfortunately, because we’re in a competition and the award’s imminent, I can’t share financial information at this time.

Okay, last one, Matt. Just on the FS margins, because you had talked about confidential was accretive to the margin. And then, you know, as that came out, the margins came down a bit, but back up sequentially here nicely in the third quarter despite that. As we move forward, what’s your latest thinking on where the FS margin lands?

Matt Ofilos, CFO, Parsons Corporation: Yeah, so if I look at Q3 specifically, cost type represents about 60% of the federal business. You know, in an environment where cost type is greater than 50%, there’s always going to be a little bit of pressure on the margin. We’re comfortable in kind of the high eights, low nines. NOAA acquisitions will help with long term expansion as we always target 10% plus EBITDA on our acquisitions shift to fixed price. We haven’t necessarily seen it as of yet. We’re obviously open in a lot of cases to that.

I think high 8s to low 9s is a good target based on the existing mix and you know we do have some great opportunities. Carey mentioned in our script a little bit about the joint cyber hunt kit, things like that, where a little bit more product, a little bit more materials that are accretive could also benefit. In Q3 we did have that benefit from the incentive fee that we talked about in Q2, and then Q4 will help from the product. All those things add up to kind of a high 8s-low 9s, a good number, opportunities around expanding products and acquisitions.

Okay, thanks a lot.

Carey Smith, Chair, President and CEO, Parsons Corporation: Thanks Norton.

Conference Operator: Thank you. Ladies and gentlemen, this is all the time we have for your questions. I will pass it back to Dave Spille for final comments.

Dave Spille, Vice President of Investor Relations, Parsons Corporation: Thanks again for joining this morning. If you have any questions please do not hesitate to call and we look forward to talking to many of you over the coming days.

Conference Operator: Have a great day. Thank you. This concludes our conference. Thank you for participating. You may now disconnect.

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