Parsons Corp at Jefferies IT Services Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Apologies for reading off such formal bios. But I'm not clever and can't like twist people's bios to make it more interesting. So Carey, maybe just to sort of start -- for those who aren't familiar with Parsons, how do you think about the differentiation of the business relative to peers? And what are aspects that are unique to Parsons?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Thanks for that, Carey. So maybe if you could talk about your different and markets within the federal business. How do you think about what the fastest growth is? We've been hearing a lot about cyber, and I have more to ask you there. Is it missile defense, is it space, is it C5ISR? Maybe if you could give us a rundown of growth for each of the verticals for 2022 and beyond.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And maybe if you could talk about the turn in organic growth to high-single digits, I believe in Q1 -- or sorry, 4% in Q1 versus a high-single-digit decline in 2021. What's driving that inflection? And what are you seeing with the funds flow? We've been curious, as we saw the April outlay numbers were not that good.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then maybe stepping back, can you talk about the biggest risks going forward to your business? $200 million range of guidance -- which is quite a big range actually, from [3.7 to 3.9] it's 1% to 7% growth. At the upper-end, what needs to occur and what happens at the lower-end in your planning?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : So you answer questions so quickly, I know I have inflation questions later on, but you brought it up anyway. So what are your inflation assumptions in terms of planning and how do you plan for that? Is it just the scope of the contract becomes shorter, because you have to pay people higher wages? How does that work for Parsons?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then, if I could sneak in another question in terms of hiring, what is your planning assumptions for headcount growth there organically?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Yes. And then there's been a lot going on in terms of what's happening in Ukraine and Russia. How do you think about the addressable market for your business, whether it's cyber or otherwise? And how do you think about that growing in the medium-term? You mentioned high-single-digit growth for your cyber business. What exactly are the parts of the business that would grow? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 01, 2022 / 12:00PM, PSN.N - Parsons Corp at Jefferies IT Services Summit

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then can you talk about what areas of the budget we should be looking to in terms of that growth? And then, in terms of Ukraine aid packages. Are there incremental opportunities for IT services companies?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : You went through those so quickly, Carey, I almost want to ask you to do it again. But can you talk about what that means? What is unexploded ordnance? Is that within your critical infrastructure business? It seems like something that's differentiated. Same thing with your cyber electromagnetic operations. Are these people going in and actually cleaning up? If you could just expand a little bit about exactly what those programs are?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : One question --.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And maybe if you could remind us on BlackHorse, what are revenues today versus when you acquired it? How is that progressing? Have there been any revenue synergies associated with it? I know I'm sticking in ones I didn't tell you I would. So, I apologize.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Okay. And then are there any opportunities for international sales, as you think about your offerings for cyber?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Can you talk about your $41 billion pipeline? How does the pipeline look different from the core business today, either from a concentration of programs? Or how are you bidding on awards and pursuits?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then, in terms of your large wins with TEAMS, how do you think about annual contribution for each of them?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : That makes sense. And then maybe you could talk about how you guys organize internally what share wins or we -- or share is or win rates are as you bid on these larger programs. How do you think of your success rate? Is it different than some of your smaller contracts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 01, 2022 / 12:00PM, PSN.N - Parsons Corp at Jefferies IT Services Summit

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : I'm going to keep throwing in questions, as you -- bring up random topics for me. What is one example of you guys as a solutions integrator?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Sorry, I am typing away, so I apologize for the seconds delay. You mentioned 100% recompete rates last year. What was it like? What's the average recompete rate for you guys? And as we look forward, what sort of contracts are coming under recompete?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then in general, is there a way to correlate book to bill to revenue growth? You mentioned you're much more conservative in the way you account for bookings. But trailing 12-month book-to-bill has been 1.3 for Federal Solutions. How do you think about that converting to revenues?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : What's an example of that market share win? I mean, I actually thought market share win would be longer conversion, because you have a protest of six months from award timing to revenue generation? But you contradicted my thought. So, how do we think about all these -- once you have a win, is it six months on average, three months for a new start or nine months for a new start? How do we think about that?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Understood. That makes sense. That makes sense. And you have some pretty differentiated technology. Maybe if you could talk about how much of the business is hardware versus software versus labor. How does that change versus maybe your peers or is it a competitive edge?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : I guess that makes sense. And then what does the multi domain mean for Parsons and the opportunities that -- I'm just thinking about acquisitions you've added to areas such as space and [RF]? How much of the business requires this for joint bids (inaudible) technology crossover that sort of helps?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : What percentage of the business crosses over? You mentioned PFAS and some other solutions between federal and critical infrastructure.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Okay. And then you mentioned Braxton in the space business. How big is the space business today. And how quickly is that growing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 01, 2022 / 12:00PM, PSN.N - Parsons Corp at Jefferies IT Services Summit

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Dave might never let you do another summit because I'm going to -- I have a lot more questions for you here. How is your space business different than others? You mentioned unique command and controls capabilities, but Matt was running IIS' command and control business. How can we think about the differences there, because I feel it that's the term we hear a lot?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Who is your competitor in this business? Is it the primes or the service providers?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then also you mentioned space and cyber are growing high-single digits. How do we think about your overall growth of [1% to the 7%]? What are the underperforming businesses within that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 01, 2022 / 12:00PM, PSN.N - Parsons Corp at Jefferies IT Services Summit

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : I like how you got me back on track, Carey, to what I was supposed to be asking. So, switching to critical infrastructure and those infrastructure bills you mentioned, Canada 2016. When do they actually start impacting results in your view?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And regionally, where can we think about the fastest growth within CI? Is it Middle East, is it US? How do we think about that?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Okay.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And just thinking about connected communities and mobility solutions, how are you thinking about the opportunities across those two businesses?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : That makes sense. And then going back to the Middle East. How is your work there different than domestic work? And then you mentioned a pickup in activity. I think you mentioned a large contract, NEOM. Is that -- I'm not sure if that's how you pronounce it. How do you think about what's going on there?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Sounds pretty neat. I apologize, I'm getting some questions from the audience too. So I'm going to blame it them, if they ask something that's not allowed. I think you have the Saudi Arabia's Vision 2030; you've talked about infrastructure domestically and in Canada. What's the typical timeline for -- sorry, I'm jumping around a little bit -- from RFI to award for the CI side of the business, especially internationally?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And switching back to hiring again, when we think about your hiring, what percentage of your workforce are you hiring with clearances? And are there hurdles to getting those clearances for the government business?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And switching over to profitability, your margins are 8.7% EBITDA margins, maybe 200 bps or so below peers. How do we think about that delta; how long it continues, that GAAP; and how you think about acquisitions potentially being accretive to that?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : How do you think about mix impacting margins? What should we think about that shift to T&M going for the overall company from where it is today? And what's the delta on cost reimbursable versus T&M and fixed price?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then maybe, Matt, if you could talk about Xator. It's a $400 million acquisition, I think Carey said it will add $300 million of revenues, if I'm not wrong. Can you provide some details about the deal, the impact of it to the balance sheet, how you think about deal sizes going forward, and how you're looking at capital allocation priorities?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : And then maybe, Carey, aside from the fact that I had you speaking for 41 minutes with only 30 questions. What are one or two takeaways you want people to walk away with today?

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Awesome. Thank you so much. Thank you, Carey, Matt, and Dave, for joining us early in the morning for our summit and supporting us once again for the third year in a row. Really appreciate it all. And congratulations on the acquisition closure. Thanks all.

Question: Sheila Kahyaoglu - Jefferies LLC - Analyst : Thanks, everyone.