Form 8-K PARSONS CORP For: May 05

•

Revenue of $875 million, includes $64 million of net adverse impact from COVID-19 and pass-through revenue

•

Net income of $9 million and margin of 1.0%

•

Adjusted EBITDA of $69 million and margin of 7.9%

•

Book-to-bill ratio of 1.2x, driven by Critical Infrastructure book-to-bill ratio of 1.4x

•

Total backlog increased 4.7% from the first quarter of 2020

•

Strong Q1 2021 with six contract wins over $100 million; great start to Q2 2021 with approximately $1 billion in contract wins in the quarter

•

Strong Braxton performance and integration

•

Recognized as a top employer by leading minority, women, and human rights organizations

•

Updated executive compensation policy to tie a portion to core values including diversity, integrity, safety, and sustainability

Three Months Ended

Growth

March 31, 2021

March 31, 2020

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

%

Three Months Ended

Growth

March 31, 2021

March 31, 2020

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

%

•

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.

•

Awarded a $618 million contract by the General 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 the U.S. Postal Service's (USPS) Nationwide Program Management Services (PMS) contract. Parsons’ experience in program management, architectural and engineering design, and construction management supports the USPS' ongoing modernization and Americans with Disabilities Act access efforts ensuring uninterrupted delivery of reliable and affordable mail service to our nation and expanding access to USPS facilities.

•

Awarded a $114 million contract by Ashghal, the Public 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 of Qatar’s infrastructure by improving livability for residents and advancing future development plans.

•

Awarded an $80 million contract for program management by the Architect of the Capitol, Washington D.C., ensuring the continued progress and excellence of their projects from the U.S Capitol Campus; Northern Virginia; Fort Meade, Md.; and the Blue Plains Complex located in S.E Washington, D.C.

•

Awarded a 94 million CAD (~ $75 million USD) contract for new construction management work for remediation efforts on the Giant Mine in the Northwest Territories, Canada. The amended contract, for one of the largest environmental remediation projects in Canada, 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 the U.S. Army Combat Capabilities Development Command Army Research Laboratory to develop exploratory, disruptive technology that will provide United States warfighters with the technological edge as part of the Army's future vision.

•

Awarded a $45 million contract by the Central Texas Regional Mobility Authority for design work on improvements to United 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 the Defense 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 the U.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 the Naval 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.

•

Announced that Parsons’ board of directors elected Carey Smith as chief executive officer, effective July 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 and Woman 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

Revenue

$3.85 billion - $4.05 billion

Adjusted EBITDA including non-controlling interest

$350 million - $375 million

Cash Flow from Operating Activities

$280 million - $310 million

Media:

Investor Relations:

Bryce McDevitt

Dave Spille

Parsons Corporation

Parsons Corporation

(703) 797-3001

(571) 655-8264

[email protected]

[email protected]

For the Three Months Ended

March 31, 2021

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 Parsons Corporation

$

9,039

$

12,973

Earnings per share:

Basic

$

0.09

$

0.13

Diluted

$

0.09

$

0.13

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

Three Months Ended

March 31, 2021

March 31, 2020

Net income attributable to Parsons Corporation

9,039

12,973

Convertible senior notes if-converted method interest adjustment

528

-

Diluted net income attributable to Parsons Corporation

9,567

12,973

March 31, 2021

December 31, 2020

Assets

Current assets:

Cash and cash equivalents (including $52,324 and $75,220 Cash of consolidated joint ventures)

$

398,178

$

483,609

Restricted cash and investments

1,233

3,606

Accounts receivable, net (including $215,641 and $190,643 Accounts receivable of consolidated joint ventures, net)

693,584

698,578

Contract assets (including $24,539 and $23,498 Contract assets of consolidated joint ventures)

607,676

576,568

Prepaid expenses and other current assets (including $7,260 and $3,045 Prepaid expenses and other current assets of consolidated joint ventures)

101,536

80,769

Total current assets

1,802,207

1,843,130

Property and equipment, net (including $2,528 and $2,629 Property and equipment of consolidated joint ventures, net)

115,544

121,027

Right of use assets, operating leases

204,189

210,398

Goodwill

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 $101,593 and $97,810 Accounts payable of consolidated joint ventures)

$

219,220

$

225,679

Accrued expenses and other current liabilities (including $75,606 and $68,801 Accrued expenses and other current liabilities of consolidated joint ventures)

595,058

650,753

Contract liabilities (including $35,744 and $33,922 Contract liabilities of consolidated joint ventures)

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

Contingencies (Note 12)

Shareholders' equity:

Common stock, $1 par value; authorized 1,000,000,000 shares; 146,609,288 and 146,609,288 shares issued; 26,845,697 and 25,719,350 public shares outstanding; 75,560,749 and 76,641,312 ESOP shares outstanding

146,654

146,609

Treasury stock, 44,248,626 shares at cost

(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

)

Total Parsons Corporation shareholders' equity

1,796,799

1,813,772

Noncontrolling interests

43,643

47,645

Total shareholders' equity

1,840,442

1,861,417

Total liabilities and shareholders' equity

$

3,865,001

$

3,937,704

For the Three Months Ended

March 31, 2021

March 31, 2020

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

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

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

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

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

Three Months Ended

March 31, 2021

March 31, 2020

Net income attributable to Parsons Corporation

$

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 March 31, 2021 is $30.1 million in the Federal Solutions Segment and $4.6 million in the Critical Infrastructure Segment.  Depreciation and amortization for the three months ended March 31, 2020 is $27.4 million in the Federal Solutions Segment and $5.0 million 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.

(in thousands)

Three months ended

March 31, 2021

March 31, 2020

Federal Solutions Adjusted EBITDA attributable to Parsons Corporation

$

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 Parsons Corporation

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

Three Months Ended

March 31, 2021

March 31, 2020

Net income attributable to Parsons Corporation

$

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 Parsons Corporation

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 Parsons Corporation per basic share

$

0.34

$

0.33

Adjusted net income attributable to Parsons Corporation per diluted share

$

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.